[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
H.R. 3995--THE HOUSING AFFORDABILITY FOR AMERICA ACT OF 2002
=======================================================================
HEARINGS
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
__________
APRIL 10, 23, 24, 2002
__________
Printed for the use of the Committee on Financial Services
Serial No. 107-64
U. S. GOVERNMENT PRINTING OFFICE
79-319 WASHINGTON : 2002
___________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice BARNEY FRANK, Massachusetts
Chair PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska MAXINE WATERS, California
RICHARD H. BAKER, Louisiana CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma KEN BENTSEN, Texas
ROBERT W. NEY, Ohio JAMES H. MALONEY, Connecticut
BOB BARR, Georgia DARLENE HOOLEY, Oregon
SUE W. KELLY, New York JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio MAX SANDLIN, Texas
CHRISTOPHER COX, California GREGORY W. MEEKS, New York
DAVE WELDON, Florida BARBARA LEE, California
JIM RYUN, Kansas FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina CHARLES A. GONZALEZ, Texas
DOUG OSE, California STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York JOSEPH CROWLEY, New York
GARY G. MILLER, California WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania
SHELLEY MOORE CAPITO, West Virginia BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
Terry Haines, Chief Counsel and Staff Director
Subcommittee on Housing and Community Opportunity
MARGE ROUKEMA, New Jersey, Chair
MARK GREEN, Wisconsin, Vice BARNEY FRANK, Massachusetts
Chairman NYDIA M. VELAZQUEZ, New York
DOUG BEREUTER, Nebraska JULIA CARSON, Indiana
SPENCER BACHUS, Alabama BARBARA LEE, California
PETER T. KING, New York JANICE D. SCHAKOWSKY, Illinois
ROBERT W. NEY, Ohio STEPHANIE TUBBS JONES, Ohio
BOB BARR, Georgia MICHAEL E. CAPUANO, Massachusetts
SUE W. KELLY, New York MAXINE WATERS, California
BOB RILEY, Alabama BERNARD SANDERS, Vermont
GARY G. MILLER, California MELVIN L. WATT, North Carolina
ERIC CANTOR, Virginia WILLIAM LACY CLAY, Missouri
FELIX J. GRUCCI, Jr, New York STEVE ISRAEL, New York
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
C O N T E N T S
----------
Page
Hearings held on:
April 10, 2002............................................... 1
April 23, 2002............................................... 44
April 24, 2002............................................... 91
Appendixes:
April 10, 2002............................................... 133
April 23, 2002............................................... 275
April 24, 2002............................................... 425
WITNESSES
April 10, 2002
Lee, Hon. Barbara, U.S. Representative from the State of CA...... 9
Sanders, Hon. Bernard, U.S. Representative from the State of VT.. 6
Brooks, Mary E., Director, Housing Trust Fund Project, Center for
Community Change, Frazier Park, CA............................. 13
Faith, Bill, Executive Director, Coalition of Homelessness and
Housing in Ohio; Chair, Board of Directors, National Low Income
Housing Coalition.............................................. 14
Gonzales, Hon. Javier, Commissioner, Santa Fe County, New Mexico;
President, National Association of Counties.................... 11
Hadley, Katherine, Commissioner, Minnesota Housing Finance
Agency, on behalf of the National Council of State Housing
Agencies....................................................... 16
Lawson, Robert, President, the Lawson Companies, on behalf of the
National Association of Home Builders.......................... 38
Lopez, Rodrigo, President, AmeriSphere Multifamily Finance,
L.L.C., on behalf of the Mortgage Bankers Association of
America........................................................ 40
Racer, Catherine, Associate Director, Massachusetts Department of
Housing & Community Development, representing the Council of
State Community Development Agencies........................... 18
Roberts, Benson F., Vice President for Policy, Local Initiatives
Support Corporation............................................ 36
Sard, Barbara, Director of Housing Policy, Center on Budget and
Policy Priorities, Washington, DC.............................. 35
APPENDIX
Prepared statements:
Roukema, Hon. Marge.......................................... 134
Oxley, Hon. Michael G........................................ 137
Grucci, Hon. Felix J. Jr.,................................... 139
Israel, Hon. Steve J......................................... 140
Rahall, Hon. Nick J.......................................... 144
Brooks, Mary E............................................... 155
Faith, Bill.................................................. 166
Gonzales, Hon. Javier........................................ 148
Hadley, Katherine............................................ 189
Lawson, Robert............................................... 230
Lopez, Rodrigo............................................... 236
Racer, Catherine............................................. 198
Roberts, Benson F............................................ 221
Sard, Barbara................................................ 207
Additional Material Submitted for the Record
Frank, Hon. Barney:
Statement regarding the need for additional resources........ 146
Brooks, Mary E.:
Written response to questions from the subcommittee.......... 165
Faith, Bill:
2,101 Endorsements of a National Housing Trust Fund.......... 242
WITNESSES
April 23, 2002
Brown, Terri H., Executive Director, Cuyahoga Metropolitan
Housing Authority, Cleveland, OH............................... 55
Byrd, Harry A., Jr., Principal, The Harkin Group, Huntersville,
NC accompanied by John Kennedy................................. 60
Dekker, Hans, Executive Director, Baton Rouge Area Foundation,
Baton Rouge, LA................................................ 58
Dowling, Telissa, President, Resident Advisory Board, New Jersey
Department of Community Affairs, on behalf of the National Low
Income Housing Coalition....................................... 50
Eisenman, Gary, Executive Vice President of Related Capital
Company, on behalf of the National Multi-Housing Council and
the National Apartment Association............................. 84
Frasier, Joan W., President, Atlantic City Residents Advisory
Board, on behalf of Ed Williams, President of ENPHRONT......... 52
Friar, Maureen, Executive Director, Supportive Housing Network of
New York; Advisory Committee Member, National Alliance to End
Homelessness, Washington, DC................................... 80
Marchman, Kevin E., Executive Director, National Organization of
African Americans in Housing, Washington, DC................... 54
Slemmer, Thomas, President and CEO, National Church Residences,
Columbus, OH, on behalf of American Association of Homes and
Services for the Aging......................................... 75
Sperling, Andrew, Deputy Executive Director, National Alliance
for the Mentally Ill, Arlington, VA, and the Consortium for
Citizens with Disabilities Housing Task Force.................. 78
Ziegler, Roy, Former Director, New Jersey Department of Community
Affairs, Section 8, on behalf of National Leased Housing
Association, Washington, DC.................................... 82
APPENDIX
Prepared statements:
Roukema, Hon. Marge.......................................... 276
Oxley, Hon. Michael G........................................ 278
Green, Hon. Mark............................................. 285
Grucci, Hon. Felix J. Jr.,................................... 288
Israel, Hon. Steve J......................................... 283
Jones, Hon. Stephanie T...................................... 280
Schakowsky, Hon. Janice...................................... 282
Brown, Terri H............................................... 357
Byrd, Harry A., Jr........................................... 346
Dekker, Hans................................................. 364
Dowling, Telissa............................................. 381
Eisenman, Gary............................................... 330
Frasier, Joan W.............................................. 376
Friar, Maureen............................................... 336
Marchman, Kevin E............................................ 371
Slemmer, Thomas (with attachment)............................ 400
Sperling, Andrew............................................. 340
Ziegler, Roy................................................. 418
Additional Material Submitted for the Record
Watt, Hon. Melvin:
Housing Authority of the City of Charlotte, NC, letter,
January 31, 2002........................................... 302
Housing Authority of the City of Greensboro, NC, letter,
February 5, 2002........................................... 297
Housing Authority of the City of Winston-Salem, NC, letter,
January 31, 2002........................................... 293
``Urban Renewal Can Be Tough On the Tenants,'' The Washington
Post, May 1, 2002.......................................... 290
Creager, Kurt, on behalf of National Association of Housing and
Redevelopment Officials, (NAHRO), submitted for the record..... 305
WITNESSES
April 24, 2002
Bernardi, Hon. Roy A., Assistant Secretary, Office of Community
Planning and Development, U.S. Department of Housing and Urban
Development.................................................... 101
Cannon, Louis P., President, D.C. State Lodge, Fraternal Order of
Police......................................................... 126
Courson, John, President, Central Pacific Mortgage Company, on
behalf of the Mortgage Bankers Association of America.......... 119
Edwards, Martin, Jr., President, National Association of Realtors 121
Kelly, Kevin, President, Leon N. Weiner & Associates, Inc.,
Wilmington, DE, on behalf of the National Association of Home
Builders....................................................... 122
Liu, Hon. Michael, Assistant Secretary, Office of Public and
Indian Housing, U.S. Department of Housing and Urban
Development.................................................... 102
McCool, Thomas J., Managing Director, Financial Markets and
Community Investment, U.S. General Accounting Office........... 104
Shapoff, Edward L., Vice President, Goldman, Sachs & Co., on
behalf of the Healthcare Financing Study Group................. 124
Weicher, Hon. John C., Assistant Secretary for Housing/FHA
Commissioner, U.S. Department of Housing and Urban Development. 99
APPENDIX
Prepared statements:
Roukema, Hon. Marge.......................................... 426
Carson, Hon. Julia........................................... 428
Grucci, Hon. Felix J., Jr.................................... 430
Israel, Hon. Steve........................................... 432
Miller, Hon. Gary G.......................................... 433
Waters, Hon. Maxine.......................................... 434
Bernardi, Hon. Roy A......................................... 447
Cannon, Louis P.............................................. 515
Courson, John................................................ 474
Edwards, Martin, Jr.......................................... 482
Kelly, Kevin................................................. 495
Liu, Hon. Michael............................................ 453
McCool, Thomas J............................................. 460
Shapoff, Edward L............................................ 504
Weicher, Hon. John C......................................... 437
Additional Material Submitted for the Record
Capuano, Hon. Michael E.:
Written questions for Hon. Michael Liu....................... 523
Frank, Hon. Barney:
Written questions for Hon. Michael Liu....................... 521
Lee, Hon. Barbara:
Ilene Weinreb, prepared statement............................ 435
Liu, Hon. Michael:
Written response to a question from Hon. Melvin Watt......... 459
H.R. 3995--THE HOUSING AFFORDABILITY FOR AMERICA ACT OF 2002
----------
WEDNESDAY, APRIL 10, 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 10:05 a.m., in
room 2128, Rayburn House Office Building, Hon. Marge Roukema,
[chairwoman of the subcommittee], presiding.
Present: Chairwoman Roukema; Representatives Kelly, Miller,
Cantor, Grucci, Tiberi, Frank, Carson, Lee, Schakowsky, Jones,
Sanders, LaFalce, and Israel.
Chairwoman Roukema. Today, we're having this hearing
obviously on H.R. 3995, the Housing Affordability Act, we hope
will be of 2002. These issues are certainly at the top of my
agenda and always have been, because I guess I come from that
old-fashioned school where my parents always taught me that
owning your own home was the American dream. It was part of
being a true American to own your own home, and I keep thinking
that every time we have a new piece of housing legislation.
Certainly the country is facing, however, despite the fact that
we have a growing number, 68 percent of the homeownership rate,
which is an amazing increase in homeownership, nevertheless, we
still have an affordability problem for low- and moderate
income families and that certainly is what this series of
hearings that Mr. Frank and I have been sponsoring or focusing
on. Our subcommittee hearings have focused on what community
activist housing experts, local and Federal Government
officials and representatives of the real estate industry and
the homebuilding industry, as well as mortgage industries.
We've had a few of those hearings already, and this is a
continuation of that.
Certainly we believe that, or I believe that H.R. 3995, the
legislation that's under consideration today, is a good one and
not necessarily perfect, but we would like to hope that we can
have a really solid piece of legislation in this Congress so
that we can get what we would I guess call mid-course
corrections in housing programs that are some are under-used,
and some are duplicative, and we want to have less regulation
if possible.
The bill includes a housing production program and
preservation program within HOME that is targeted toward low-
income families. In addition, this legislation provides
flexibility and increases opportunities for local governments
and local decisionmakers so that they can better meet the needs
of their individual communities. That's certainly what we're
hoping to do here.
There has been under FHA the program that was originally
designed to encourage lenders to make credit available, we have
been notified or recently learned that there needs to be
strength added to it and less regulation, because the needless
regulation--at least it seems to be needless in some respects--
are adding to the cost of homeownership and we would hope that
this legislation H.R. 3995 requires Federal agencies to do a
housing impact analysis of any new rule that has an economic
impact of $100 million or more.
The Homeownership Opportunities Act for Public Safety
Officers and Teachers, H.R. 3191, has also been incorporated
into this legislation to make homeownership more available to
those public servants.
Today's hearing will specifically focus on the HOME Program
Housing Production. New production of affordable single and
multi-family housing is essential to the goal of expanding
homeownership and affordable rental opportunities. H.R. 3995
creates a separate production program within HOME targeted
toward low-and extremely low-income levels. HOME is the largest
Federal block grant to State and local governments and it is
designed exclusively to create affordable housing for these
low-income households. And so we are amending the HOME program
to establish a housing production program to increase the
production and preservation of mixed income rental housing for
the very low, 50 percent of median income, and extremely low-
income families, 30 percent below the level of median income in
the area.
I won't go into more of that, I mean, of those specifics.
I'm sure they will come up in the discussion with the people
who are testifying today. But let me just say that H.R. 3995
includes a provision that establishes--and here I'm going to
ask some questions hopefully, or listen very carefully for what
is being said by our panelists concerning a thrifty production
voucher. This thrifty voucher could be used in conjunction with
the new construction or substantial rehabilitation. I don't
believe that this thrifty voucher is carefully identified and
defined as a different type of voucher, because it's based on
the property operating costs, but we're going to be asking,
exploring if not in questions today, certainly exploring
through the legislative process how those vouchers would work
and who would approve the vouchers and how they specifically
are differentiated from the other vouchers that are presently
in the law.
It has been stated that the thrifty production vouchers can
be combined with any capital subsidy program so as home or low-
income housing tax credits, but I'm not quite sure exactly how
that would work and we'll have to explore that in more detail.
We will go into a lot of these questions. They're not
insurmountable problems. They're not unanswerable questions,
but we will use this hearing today to refine some of the parts
of the program and certainly those who are here with us today
have good, practical experience in the real world with these
issues. So it's not theoretical, but it's a real world
explanation of how we can increase the American dream and
expand the American dream for all of our citizens.
And with that, I would turn to the Ranking Member
Congressman Barney Frank.
Mr. Frank. Thank you, Madam Chair. I am very pleased that
we are moving into a stage where we are actually going to be
marking up legislation. We have a housing crisis, and it's
important to note that we have a debate in this country, as to
whether or not when you get great private sector performance,
and when the level of prosperity in the private sector, as we
measure it, is fairly high. The question is does that then not
mean that Government doesn't have to do anything? I am
generally skeptical of that proposition, but nowhere is it less
valid than regard to housing. We have just come through a
period in which we have proven results, given the inevitable
unevenness of prosperity. Great prosperity, even for most
Americans, exacerbates the housing crisis for many Americans.
We have a housing crisis in many parts of this country
today for lower income people, which leaves them worse off than
they were before the great decade of economic prosperity
happened. And so it is obvious that if the Government does not
significantly increase its role, then we will not achieve that
goal of housing. And I agree very much with what the Chair
said. I was pleased when she said in the middle that we're
talking about homeownership and rental housing. I do think we
have to guard against the tendency to devalue rental housing.
Low-income people need to have good rental housing; the
American dream is a home, not homeownership. Homeownership is
good for some people, it is heavily tax favored. If we have a
subsidized rental housing for low-income people the way we
subsidize through the Tax Code homeownership, we would have
probably a surplus of low-income homes. No one is thinking
we're going to get there, but it is important to mention rental
housing.
Now there will be some specific questions that we will
have; our colleagues have got a proposal which I have
cosponsored. There are some things in the bill. We'll be
hearing from the Millennium Housing Commission. I thought that
was supposed to be this millennium, I'm not sure, they were
uncertain.
[Laughter.]
Mr. Frank. But we will hear from them at some point and all
of those specifics will be very important, and I thank the
Chair for the hearings last year and for responding, because
basically almost everybody, I think all but one witness last
year over a broad range, said you need a production program.
And the Chair and I have both over the years noted that while
the Section 8 program does some good, in some markets it is not
suitable and is not the best way to go and that you need a
range of housing programs, because not every housing market has
a one-size-fits-all.
Indeed, I think it's very clear and we ought to do a little
classic economics here. Given the voucher program as a tenant-
based-only, as long as there is no project based where it's not
an incentive to build, in tight housing markets, what you do
with Section 8 is add to demand in a way that is guaranteed not
to add supply. Now that helps equity, but it also drives up
costs. So that in tight housing markets, a voucher-only program
by classical economic supply and demand is a very insufficient
policy.
The question though that really has to be addressed if it's
not fully within our jurisdiction, but we're what, more than
ten percent of the House, so we can influence this; it's money.
You can't build bricks without straw and you can't build houses
without money. And we can all try to be efficient and we can
all talk about thrifty vouchers and cheap this and inexpensive
that, but you still need some money.
And I just want to summarize a statement. We've been having
meetings with a variety of groups, a wide variety of groups,
advocacy groups, business groups that are in the housing
business, people who are trying to get housing rented, local
officials, and I want to read the statement and particularly I
want to read the list of signers.
More than 15 million families in this country have critical
housing needs. Too many are homeless. About one in every seven
households do not have a decent affordable place to call home.
We believe that to correct this problem, a significant and
sustained commitment to increased funds for housing in both
urban and rural areas should be made at the national level. A
reasonable downpayment on that commitment would be an increase
of $15 billion in the coming fiscal year's budget for housing
and community development. This can include both tax
expenditures and outlays benefiting low- and moderate income
families which can leverage State, private and local funds
beyond the $15 billion. This is signed by the National Housing
Conference, the Mortgage Bankers Association of America, the
American Association of Homes and Services for the Aging, the
Public Housing Authorities Directors Association, National
Affordable Housing Management Association, National Alliance to
End Homelessness, the Council of Large Public Housing
Authorities, Citizens Housing and Planning Association of
Boston, the Housing Assistance Council, the National Leased
Housing Association, the National Low Income Housing Coalition,
the Council for Affordable and Rural Housing, the McAuley
Institute, the Consortium for Citizens with Disabilities
Housing Task Force, the National Community Development
Association, the Local Initiatives Support Corporation, the
U.S. Conference of Mayors, the Enterprise Foundation--I bet for
once you're glad I talk too fast--the National Rural Housing
Coalition, the Corporation for Supportive Housing, the National
Fair Housing Alliance, the Alliance for Retired Americans, the
National Association of Counties, the National Association for
County Community and Economic Development, National Association
of Local Housing Finance Agencies, Network, a National Catholic
Social Justice Lobby, National Community Reinvestment
Coalition, National Council of State Housing Agencies, the
Center for Community Change, the National Housing Trust, the
Council of State Community Development Agencies, the National
Multi-Housing Council, the National Apartment Association and
the National Association for Affordable Housing Lenders.
This is the key question that has to be part of our
deliberations. Yes we have some good proposals on the table to
go forward, but without increased resource it won't work, and
we simply cannot have a policy of cannibalizing existing
programs to support new ones. There is a need for new money and
this is part of what we have to do, but it has to be put in the
context of the need for resources.
Chairwoman Roukema. I thank the Ranking Member. I will
acknowledge the fact that Congressman LaFalce, the Democratic
leader on the Full Committee has joined us today and although
I'm going to ask unanimous consent that all other opening
statements be included in the record and that we go directly to
the panel, I would give Congressman LaFalce the opportunity as
the leader of the Committee Ranking on the Full Committee to
make his opening statement.
Mr. LaFalce. Well, I thank the gentlelady very much, and I
would like to begin by commending the Chairwoman of the Housing
Subcommittee for her diligence in developing an Omnibus Housing
Bill, H.R. 3995. The bill includes a great number of very
constructive provisions to address the issue of housing
affordability, and I think that by the time we report it out of
subcommittee, Full Committee, and the floor of the House and
get it signed into law, the Roukema Housing Bill will be a
great testament to your great congressional career.
I also personally appreciate the inclusion in the bill of a
number of individual bills that I've introduced: specifically,
H.R. 674, with respect to FHA loans for teachers, police and
firemen; H.R. 858, to permanently authorize the FHA downpayment
simplification formula; and H.R. 3926, which would prohibit the
implementation of the 50 percent hike in the fees charged by
Ginnie Mae. And I have a few others too that I think should be
included in order to make it an even better bill, Madam
Chairman, and will make an appointment with you for a cup of
coffee to perhaps discuss those in your office.
But before I close, I'd like to address the issue of
affordable housing production, which is the major focus of
today's hearing. Clearly in many parts of this country, rents
are skyrocketing, vacancies are near zero percent, and low-
income families and seniors are having an extremely difficult
time finding an apartment to rent. And in many areas, simply
having a Section 8 voucher is not enough for a low-income
tenant to be able to find a place to live. So we need to build
new affordable housing, and the provisions that are the subject
of today's hearing certainly address such needs.
But I'd also like to point out that these types of housing
conditions do not exist in every part of the country and do not
exist even in every urban area. There are a great many older
urban areas, like those I represent, where a more pressing need
is not building new housing but rehabilitating the existing
housing stock. And there are many, many parts of the country
where affordable housing preservation, in the narrower sense of
the word, is not a critical concern because it's just not that
attractive to opt out of assisted housing when market rents are
not an attractive option.
Therefore, I reiterate some of the comments that the
Ranking Member, Mr. Frank, made. As we deliberate proposals to
create new HUD programs, and as we consider proposals to revise
existing programs, we must maintain flexibility in our policies
to make sure they work for all communities nationwide. Where in
one community the highest priority may be to build new housing,
in another it may be to rehabilitate the housing we have. Where
in one community it may be the highest priority to find new
housing for the very lowest income families, in another, a
major priority may be to bring middle income families into
communities that are concentrated with poverty or to bring
individuals who are extremely low-income into middle income
communities.
We need to do a better job to facilitate a more integrated
society and I don't know that we've done a good enough job
there. One size does not fit all. In order to sustain support
for whatever we authorize, our policies have to work for all
communities, for all local market conditions. I look forward to
these hearings, and I look forward to working with you in
further subcommittee consideration of an excellent start in
H.R. 3995.
I thank the Chair.
Chairwoman Roukema. I thank Congressman LaFalce for his
insightful statements. We will have more of a discussion or a
debate whether public or private, but there are issues that we
would want to discuss. Now I would ask unanimous consent that
we go on to the panelists, but that all----
Ms. Jones. Madam Chairwoman.
Chairwoman Roukema. Excuse me. Excuse me, but I was just
going to say we're very limited in time with the votes that
will be coming up, and we do want to begin to hear the
panelists, but that all the opening statements would be made
part of the record. Yes?
[Pause.]
Chairwoman Roukema. Congresswoman Jones has a personal
point to make for all the Members of the subcommittee for their
information.
Ms. Jones. Thank you, Madam Chairwoman.
Just on behalf of the family of my staff of Rodney Pulliam,
who was killed in a car accident in Frederick, Maryland, about
3 weeks ago, on behalf of his family, I wanted to thank all of
the Members of the subcommittee who expressed their sympathy
and sent cards and the like, and just ask for a moment in
support of his family from all the staffers, just a fine young
staffer for the Banking Committee, and particularly for
Housing.
Chairwoman Roukema. Yes, there'll be a moment of silence.
Ms. Jones. Thank you, Madam Chair.
Chairwoman Roukema. Thank you, that was a terrible tragedy
and we do appreciate your bringing to the attention so that we
could properly pay homage to him and his family.
All right, the opening statements will be included in the
record, and with that I will open the hearing for our two
colleagues, Congressman Bernie Sanders from Vermont, and
Congresswoman Barbara Lee from California. From east to west,
shall we do that? East to west. Congressman Sanders.
STATEMENT OF HON. BERNARD SANDERS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF VERMONT
Mr. Sanders. Madam Chair, thank you very much for holding
this important hearing, and I am particularly grateful to you
for allowing me to testify in support of the legislation that I
introduced last June, to create a national affordable housing
trust fund and that is H.R. 2349, and I also want to
acknowledge the extraordinarily good work for many years that
Mr. Frank has done in fighting for affordable housing as well.
The legislation that I introduced currently has 172
cosponsors. It is tripartisan--162 Democrats, 9 Republicans,
and 1 Independent, and has been endorsed by more than 2,000.
Mr. Frank started reading off a long list of people. Well, if I
listed all of the people who endorsed this bill, we'd be here
all day.
Chairwoman Roukema. Please we'll include them in the
record.
Mr. Sanders. I will not. But I do want to say this. These
2000 groups represent national, State, and local organizations
from one end of this country to the other. This is an effort
that has been spearheaded by the National Low Income Housing
Coalition and the National Coalition for the Homeless, and I
want to applaud them for their grassroots efforts. But let me,
just to give you an example of the diversity of support for
this legislation, we have the AFL/CIO Housing Investment Trust
Fund, the United Way, the Silicon Valley Manufacturing Group,
the U.S. Conference of Catholic Bishops, Children's Defense
Fund, Smart Growth America, Habitat for Humanity, Charter One
Bank in Ohio, the Sierra Club's Challenge, the Sprawl Campaign,
and the National Coalition Against Domestic Violence.
As you can see, H.R. 2349 is supported not only by low-
income groups, not only by business leaders and by unions and
by religious groups, it is supported by almost every type of
organization that you can imagine. And the reason for that is
that all over this country, in urban areas and in rural areas,
people understand that we have a major housing crisis that has
been neglected for too long and that the time is now for the
United States Congress to step up to the plate and protect the
interests of millions and millions of families.
Madam Chair, it is almost unprecedented to have an
outpouring of support from such a broad array of groups, and I
am very grateful for their support. According to the accounting
firm Deloit and Touche, profits generated by the Federal
Housing Administration are expected to exceed $26 billion over
the next 7 years. Now Mr. Frank a moment ago said that if we
are serious about building housing, we've got to be serious
about putting real money into housing, and I agree. And this
legislation puts real money into housing, and it begins in a
serious way to address the national crisis that affects people
in Congresswoman Lee's district, on the West Coast, and affects
people in the State of Vermont.
HR 2349 would use the surplus to create an affordable
housing trust fund, a trust fund. And by creating a trust fund,
the United States Congress says, we are serious, there will be
a dedicated amount of money every year to address the crisis in
housing. And this trust fund allows States and non-profit
organizations to build affordable housing rental units in mixed
income locations, to construct affordable homes for low-to
middle income citizens and to provide rental subsidies to low-
income individuals. According to housing experts, if the FHA
surplus was used to build affordable housing, we could more
than triple, more than triple affordable housing construction
next year and provide accommodations to more than 200,000
families every single year. In other words, we will be taking a
serious step forward to address the housing crisis facing this
country.
Madam Chair, there is an affordable housing crisis in this
country. Millions of low-income citizens, the elderly, the
disabled, and families with children are increasingly unable to
afford decent housing. According to a study by the National Low
Income Housing Coalition, 48 percent of the renters in my own
State of Vermont are unable to afford the State median fair
market rent of $619 including utilities for a two-bedroom
apartment. What is going on in Vermont is going on throughout
the United States of America.
Nationally, the affordable housing crisis is getting worse.
According to a survey by the U.S. Conference of Mayors,
requests for emergency shelter in 27 cities increased an
average of 13 percent over the last year. In 75 percent of the
cities surveyed, request for shelter from families with
children increased by more than 30 percent. In the United
States of America, children should not be sleeping out on the
street, should not be sleeping in shelters; they should be
sleeping in safe, affordable housing.
In New York City and Boston, they are experiencing a record
number of homeless people. While homelessness is up by more
than 20 percent in Kansas City, Chicago, Denver, New Orleans,
and right here in Washington, DC.
In addition, according to a recent report by the National
Housing Conference, 13 million Americans are paying more than
half of their limited incomes on housing or are living in
severely substandard housing. And that's an important point to
reiterate. You know everyone, the TV cameras focus on
homelessness. That is a national tragedy. But what we don't pay
enough attention to is that millions of people are spending 50,
60 percent of their incomes on housing, and how do you have
money available for other needs when you're spending so much on
housing.
Madam Chair, H.R. 2349 begins to address this crisis by
providing a reliable source of funding dedicated solely to
producing affordable housing. Just as Congress provided a
commitment to fund our highways and airports by creating a
highway trust fund and an aviation trust fund, the time is long
overdue to create a national, affordable housing trust fund.
Highways are important, airlines are important, housing in
fact is more important. I should add that not only would a
national affordable housing trust fund help solve the housing
crisis, it would generate approximately $1.8 million decent
paying new jobs and nearly $50 billion in wages according to a
Center for Community Change Study.
As today's economy continues to sputter with layoffs and as
millions of Americans are paying 50 percent or more of their
limited incomes on housing, the creation of a national
affordable housing trust fund is needed now more than ever.
Madam Chair, thank you very much for this opportunity. Let
us go forward in a serious way, let's develop a national
affordable housing trust fund. Thank you very much.
Chairwoman Roukema. I thank the Congressman.
And Congresswoman Barbara Lee, be conscious of the time
limit.
STATEMENT OF THE HONORABLE BARBARA LEE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Lee. Thank you, Madam Chair, and thank you very much
for allowing us to present this morning or at least be
witnesses this morning, and also want to thank you for really
addressing the affordable housing crisis that affects millions
of all our constituents from coast to coast in a very
bipartisan fashion, and I want to thank and commend the
leadership of our Ranking Member also for making sure that both
sides of the aisle really continue to move in a bipartisan
fashion in addressing this major issue.
Like my colleagues like yourself, I believe that the
Congress must take action immediately. We just must make this
housing crisis I believe a national priority. Certainly
homeownership is key to realizing the American dream. This is
the primary way that families individuals send their children
to college, acquire some form of wealth to start a small
business, but also, like yourself, I believe that any housing
strategy must include provisions for those who may not
necessarily be able to afford or want to purchase a home, and
must include affordable rental programs as well as housing for
the homeless as part of any housing initiative.
Now I represent a portion of Alameda County, which is in
the East Bay on the sometimes I say the sunny side of San
Francisco. It includes the cities of Oakland, Berkeley,
Alameda, Emoryville, Albany and Piedmont. My district--and I
share this with you, because I think this is an example of
what's going on in California--we benefited from the high tech
boom of the 1990s, but it dramatically increased the housing
costs which spread from Silicon Valley throughout the region.
So even though the housing market now has leveled off, housing
still remains unaffordable.
According to the California Housing Law Project, one-third
of California families spend over half of their income on
housing. Data from the fourth quarter of the year 2000
indicates that nine of the ten least affordable metropolitan
areas in California, of course led by San Francisco, Oakland,
and my home city comes in at number eight. Now the housing wage
in California is approximately $18.33 an hour. That's the wage
that's required to afford the average two-bedroom apartment.
The problem of course is that in California, our minimum wage
is $6.25. So what do people who make the minimum wage? What do
they do for housing? Where do they live?
We, as policymakers, must ask these questions, and more
importantly we must come up with solutions. We have 1.45
million housing units in need of replacement in California and
60 percent of substandard housing is rental housing.
I could go on and on, but I want to save time for our
rental housing experts to testify. But I think the point of it
all is that we need a national housing production program. The
National Housing Conference is recommending a $15 billion
transfusion into our housing programs for this purpose to
build, rehab, and preserve affordable rental housing, and I
want to thank and commend my colleague from Vermont,
Congressman Sanders, for introducing H.R. 2349. We've worked
together on this and I think that he is exactly right when he
talks about the fact that we need the resources and the funds.
Using the funds from FHA and Ginnie Mae accounts that are above
the statutory requirement makes sense because these funds have
grown dramatically because of the housing boom. And it is
sensible policy to put excess funds in these accounts back into
affordable housing plans to help those who are being squeezed
out of their home neighborhoods and away from their job
centers.
On Monday of this week, the California legislature, in
fact, I believe it was the Assembly, we approved a $2.1 billion
housing bond to help deal with this issue. The Housing Trust
Fund would help leverage this money, so this is just a start.
California, like most States, is now facing serious budgetary
pressures, so it's time that the Federal Government really
helped States with this burden.
Finally, let me just say my colleague, our Ranking Member
on the Ways and Means Committee, Congressman Charlie Rangel, he
has introduced legislation making housing a constitutional
right. And I fully support this. We live in the richest country
in the world, and we should ensure that each and every person
has access to decent affordable housing. To do that, however,
Congress must put its money where its mouth is and dramatically
increase funding for affordable housing programs nationwide.
I want to thank you, Madam Chair, for this opportunity to
be with you today and thank you for the privilege of serving on
your subcommittee, and I look forward to working with you on
H.R. 3995 as well as H.R. 2349.
Chairwoman Roukema. Thank you, Congresswoman. We greatly
appreciate your insights and your contribution to this
discussion from both of the Members and we look forward to
working with you as we go through. And hopefully before this
session is concluded in the fall, we will have a bill up on the
floor. Thank you very much.
Mr. Sanders. Thank you very much.
Chairwoman Roukema. Now will the second panel come forward,
please.
Thank you, we welcome you here today, and I will introduce
each member in the order in which they are speaking, but I
would like to State to those of you the usual procedure here,
and that is that you will have 5 minutes in which to make an
opening statement. Your written statements will by unanimous
consent be introduced into the record, and your 5 minutes, of
course, will be used to summarize your full statement, and then
we will recognize Members, each of the Members of our
subcommittee who have questions for you, and we will give them
a maximum of 5 minutes to ask questions before this panel
discussion is complete.
Also, I might also note that each Member of our
subcommittee has the opportunity and the right to submit in
writing further questions so that you can submit the answers in
writing to those questions for the full record and those
responses, those questions and responses will be available not
only to the public, but to every Member of the subcommittee.
That having been said, I will now introduce you members in
the order in which you will be heard. And our first witness is
Javier Gonzales. Mr. Gonzales is the Commissioner on the New
Mexico County Board of Commissioners in Santa Fe. He is
testifying today on behalf of the National Association of
Counties and the National Community Development Association for
County, Community and Economic development. Mr. Gonzales you
have considerable experience in your State of New Mexico and
you are speaking out on behalf of counties across the country.
Mr. Gonzales.
STATEMENT OF JAVIER GONZALES, COMMISSIONER, SANTA FE COUNTY,
NEW MEXICO, ON BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES,
NATIONAL COMMUNITY DEVELOPMENT ASSOCIATION, NATIONAL
ASSOCIATION FOR COUNTY COMMUNITY AND ECONOMIC DEVELOPMENT, AND
NATIONAL ASSOCIATION OF LOCAL HOUSING FINANCE AGENCIES
Mr. Gonzales. Thank you, Madam Chair. My name is Javier
Gonzales and I'm a County Commissioner from Santa Fe County,
New Mexico. Madam Chair, as you indicated, I currently serve as
the President of the National Association of Counties. I'm
appearing before you today on behalf of the National
Association of Counties, the National Association of County
Community and Economic Development, the National Association of
Local Housing Finance Agencies, the National Community
Development Association, and the U.S. Conference of Mayors.
We applaud the subcommittee's leadership on the important
issue of affordable housing and thank you for inviting us to
speak today on H.R. 3995, the Housing Affordability for America
Act of 2002. The groups that I represent here today would like
to congratulate you, Madam Chair, on the introduction of H.R.
3995. More importantly, we appreciate the advocacy and
leadership that you have provided over the years on the issue
of affordable housing. Today, I'd like to address three themes;
the need for more affordable housing, elements of a housing
production program, and our support of homeless assistance
programs.
It is undisputed that communities are in need of more
housing that is affordable for families and individuals.
Research presented in 2001 by the U.S. Department of Housing
and Urban Development indicates that nearly five million render
households still pay more than half of their income for
housing, or live in severely substandard housing. Many of these
families are with children, the elderly, or they are disabled.
In addition, HUD data states that the number of affordable
housing units available to these households continues to
diminish. The lack of housing availability causes demands and
rents to increase. Further the report concludes that the
private market is not producing enough affordable housing to
meet demand.
It is clear that additional housing that is both affordable
and available to low-income individuals must be produced. For
this reason, we support H.R. 3995. It is an important piece of
legislation because it provides additional resources to local
governments to create affordable housing. Our organization
strongly supports provisions of H.R. 3995 that create a program
for the production and preservation of rental housing within
the Home Investment Partnerships Program. We are long
supporters of the Home Program, as you are aware, Madam Chair.
The Home Program is already targeted toward low-income
families, flexible for local jurisdictions to utilize and has a
demonstrated track record of success.
Creating a funding stream for the production of housing
within HOME makes sense, and mirrors a proposal developed
jointly by our organizations. To date, there have been a number
of bills introduced in Congress to increase housing production.
These proposals are mainly focused on creating a national
housing trust fund, a new and separate program from existing
HUD programs that targeted all of the resources directly to
just States.
In effort to avoid a situation where such a program would
compete with HOME and to provide a fair share of funds to both
local governments and States, our associations support a
housing production element within the HOME program. Our
proposal seeks to dramatically increase the production of
affordable mixed income rental housing, and relies on the
infrastructure currently in place within the HOME program. Our
proposal would provide grants and loans for the construction,
rehabilitation, and preservation of multi-family housing. All
of the resources made available under our proposal would
benefit very low-income families. Funds would be appropriated
60 percent to local participating jurisdictions, and 40 percent
to States. That is what is proposed in H.R. 3995.
We also support the creation of the thrifty production
voucher which can be used with capital subsidy programs such as
HOME, the low-income housing tax credit, and the community
development block grant program. This new voucher will work
particularly well with the new home production program by
providing a means for housing voucher recipients to access
housing units made available through the program. Our
organization also supports aspects of the bill addressing
homeless housing assistance. We believe that Federal resources
allocated toward programs that create temporary and permanent
housing as well as supportive services for the homeless will
enable local governments to better serve their communities.
We're very supportive of provisions in H.R. 3995 that shift
the renewals for the supportive housing program and the shelter
plus care program to HUD's housing certificate fund. This shift
will allow more of HUD's homeless assistance funding to be used
to create new permanent housing for the homeless as well as
provide a consistent source of renewal funds.
In conclusion, Madam Chair, I want to commend the
subcommittee for bringing attention to the issue of affordable
housing and urge you to pass H.R. 3995 as quickly as possible.
As local government leaders and community development
practitioners, we are fully aware that decent affordable
housing is crucial to the health, safety, and welfare of the
citizens whom we represent. We appreciate the opportunity to be
with you today. Thank you once again for your leadership and
for inviting our testimony. I'd be happy to answer any
questions that you or the subcommittee might have.
[The prepared statement of Hon. Javier Gonzales can be
found on page 148 in the appendix.]
Chairwoman Roukema. Thank you.
Our next member of the panel is Mary Brooks. Ms. Brooks is
with the Center for Community Change, and she directs, as I
understand it, you are the Director for the National Housing
Trust Fund Project, is that correct? Yes. And we've been
talking a lot about trust funds here so maybe you can give us
some of your insights with respect to your own experience. Ms.
Brooks.
STATEMENT OF MARY E. BROOKS, HOUSING TRUST FUND PROJECT/CENTER
FOR COMMUNITY CHANGE
Ms. Brooks. Thank you.
Chairwoman Roukema. Again, I ask you to be conscious of the
time limit.
Ms. Brooks. Yes, I will. Thank you for inviting me to
testify and I too applaud you for taking serious consideration
of addressing critical housing needs in this country. I have
been directing the Housing Trust Fund Project for nearly 20
years and have followed and worked with housing trust funds all
over the country. I have been asked to testify about the
experience of local housing trust funds, and attached to my
written testimony are maps indicating where housing trust funds
exist throughout the country.
There are few elements in life that are more pivotal than
having a decent, affordable home, and housing trust funds
address this need very directly. My intent today is to give you
a picture of what the experience has been with local housing
trust funds. There are presently more than 250 housing trust
funds across the country in cities, counties, and States. These
unique funds secure a dedicated source of public revenue to
support critical housing needs. That single factor about
housing trust funds is what is critical about their ability to
succeed in addressing housing needs throughout the country.
The earliest of these housing trust funds was created in
the 1970s, so we now have decades of experience with local
housing trust funds. Today they commit nearly $750 million each
and every year to addressing affordable housing.
In my written testimony, I've outlined the key
characteristics of local housing trust funds, but the element
that I want to focus on is indeed the dedication of a revenue
source. Identifying public revenue that can be committed to
local housing trust funds is at the core of these housing trust
funds. For most city housing trust funds they have committed
developer fees, property taxes, excise taxes, hotel/motel
taxes. County housing trust funds have relied on document
recording fees. State housing trust funds have used real estate
transfer taxes, interest from real estate escrow accounts and
also document recording fees. More than two dozen different
sources of public revenue has been committed to local housing
trust funds. These revenue sources come from businesses, from
real estate, and from citizens themselves. And in fact some
housing trust funds, while most of them are passed by a vote of
the State legislature or county commissioners or city council,
some of them have been passed by a public vote. St. Louis'
housing trust fund recently was passed by 58 percent of the
voters; St. Louis County an astounding 78 percent.
You don't need me to tell you how successful housing trust
funds are. I can let them speak for themselves. Nebraska has
awarded nearly $16 million to provide more than 800 units of
housing and created more than 1700 jobs. New Jersey has
committed almost $300 million to provide 16,000 affordable
homes. Illinois commits $16-to $20 million each and every year
from its housing trust fund. Vermont has committed more than
$38 million through its trust fund to provide nearly 2500
homes. Sacramento, California has committed more than $19
million to provide another 2,000 homes. St. Paul has put more
than $27 million into 260 affordable housing projects,
providing nearly 500 jobs. Chicago $37 million to subsidize
11,000 units. Pennsylvania has created a model program enabling
counties within that State to create their own housing trust
funds and it amounts to about $15 million a year.
We cannot do a meaningful housing program in this country
without dedicating revenue to it. Increasing dollars for these
housing trust funds has occurred over time. Their dollars are
growing rather than reducing in more than half of the housing
trust funds. We cannot solve the housing crisis without making
a serious commitment of revenue. These 250 communities
throughout the country have made a decision to dedicate
revenue. They're asking the Federal Government to do the same,
to do what they have done, to make a permanent commitment to
providing decent housing for every American. The benefits are
real, but they won't be real unless our commitment is real. If
you create a national housing trust fund with a permanent
stream of on-going revenue, we can make significant gains in
addressing the housing crisis in this country. I think it's
time to do so and I hope you do too. Thank you.
[The prepared statement of Mary E. Brooks can be found on
page 155 in the appendix.]
Chairwoman Roukema. I thank you, Ms. Brooks.
Our next panelist is William Faith. Mr. Faith is from
Columbus, Ohio, and he's the Executive Director of the Ohio
Coalition on Housing and Homelessness. And Mr. Faith it is my
understanding that you are representing the National Low Income
Housing Coalition today and speaking on their behalf. Mr.
Faith. Again, 5 minutes.
STATEMENT OF WILLIAM FAITH, EXECUTIVE DIRECTOR, OHIO COALITION
ON HOUSING AND HOMELESSNESS, ON BEHALF OF THE NATIONAL LOW
INCOME HOUSING COALITION
Mr. Faith. Thank you, Chairwoman Roukema. I want to thank
you for the opportunity to testify today. I am Bill Faith. I'm
testifying as the Chair of the Board of Directors of the
National Low Income Housing Coalition. I am, in my day job, the
Director of the Coalition on Housing Homelessness in Ohio. We
have over 600 organizational members in the State of Ohio
representing a range of organizations providing housing
assistance to our citizens. Before I get into some of the
details, I just want to acknowledge and express my gratitude to
yourself and your staff as well as members of the Ohio
Delegation, Mr. Tiberi, Ney, Oxley, Ms. Jones for your ongoing
intervention with HUD to free up the OTAG and ITAG funding. I
promised Mr. Jones I would not speak about this today in depth.
I do think, though, that your help and intervention has moved
that process along and we're hoping we're getting a lot closer
to resolving the situation.
But I want to commend you also, Ms. Roukema, for convening
this hearing today to discuss H.R. 3995 as well as H.R. 2349.
I'm pleased to follow the testimony of Mary Brooks who is
really the mother of the housing trust fund movement in the
United States. She is the nation's foremost expert on housing
trust funds and this valuable source of funding for affordable
housing across the country. She has worked with us in Ohio
where do have a State housing trust fund and several of our
cities do as well. What Mary's research validates is that the
critically important role that State and local trust funds play
to the overall inventory of housing production and preservation
that is required. However, we did a calculation over the last
few days and in Ohio, all of our housing trust funds that we
have generate about $30 million a year, which is probably
better than average in the States. But that's only about 40
percent of Ohio's total home allocation, so while it's an
important contribution, it does not come close to meeting the
need. A substantial increase in investment is also required.
The National Low Income Housing Coalition understands that
there's not a single solution to the affordable housing crisis,
but rather multiple layers of interventions are required.
First, we must preserve the viable subsidized housing stock
that we already have. Gains made in adding to the supply of
affordable housing through new production should not be offset
by losses in the existing stock. Ohio has the third highest
number of Section 8 project-based units in the country outside
of California and New York. Despite efforts by our State in
dedicating tax credits, bond financing, home dollars, housing
trust fund dollars, and other resources to preserving this
stock, we still have 58,000 units with over 150,000 elderly,
disabled, or low-income residents that are in jeopardy of being
lost to the affordable housing supply. More money's needed to
be able to purchase and renovate these buildings and to keep
them affordable over the long term. We are pleased that your
bill, as well as H.R. 2349, recognize preservation as an
eligible activity and we applaud that.
Second, we must increase low wage workers' purchasing power
in the housing market with increased housing assistance or
housing vouchers. We must improve the housing market's response
to voucher holders by breaking down barriers to successful
voucher use by low-income people.
Third, we must build new housing, and I also want to
emphasize in some markets it's equally important to
rehabilitate existing housing. In many parts of my State in the
old industrial areas, the stock is there; it's just not in a
condition that's desirable. There are housing affordability
problems for many low-and moderate income people, the data is
overwhelming. The most acute affordable housing shortage is for
households that are extremely low-income or incomes less than
30 percent of the area median. Both your bill, H.R. 3995, and
H.R. 2349 create new sources of funding for housing production
and preservation that serve the lowest income people.
Chairwoman Roukema. Mr. Faith, your time is up. Can you
summarize, please?
Mr. Faith. Well, I want to quickly, one thing I'd like to
do for the record is update the list of endorsers that Mr.
Sanders talked about for the National Housing Trust Fund
proposal.
Chairwoman Roukema. We will put them in the record. We will
put them in the record.
Mr. Faith. There's now 2101 endorsers from throughout the
United States.
Chairwoman Roukema. Don't read all of them please.
[Laughter.]
Mr. Faith. I won't read any of them, but I would like to
submit the list for the record.
Chairwoman Roukema. Thank you. Thank you. Thank you.
[The prepared statement of Willaim Faith can be found on
page 166 in the appendix.]
Chairwoman Roukema. Now, Ms. Hadley. Ms. Hadley is a
Commissioner from Minnesota Housing Finance Agency and she is
here today testifying as representing the National Council of
Housing Finance Agencies. And as you know, or as we should all
remember and be refreshed that National Council of Housing
Finance Agencies is at least 30 years old or longer and has
coordinated and has been a Federal advocate for the programs
for all of those 30 years, and we look forward to working with
you in the foreseeable future endlessly. Ms. Hadley.
STATEMENT OF KATHERINE G. HADLEY, COMMISSIONER, MINNESOTA
HOUSING FINANCE AGENCY, ON BEHALF OF THE NATIONAL COUNCIL OF
HOUSING FINANCE AGENCIES
Ms. Hadley. Thank you, Madam Chairwoman and Members of the
subcommittee. I'm Kit Hadley, Commissioner of the Minnesota
Housing Finance Agencies. I'm testifying on behalf of the
National Council of State Housing Agencies which represents the
Housing Finance Agencies in the 50 States. First I want to
thank you, Madam Chair, Congressman Frank, and the many other
Members of the subcommittee who have cosponsored H.R. 951, the
Housing Bond and Credit Modernization and Fairness Act and
encourage those of you who have not yet cosponsored to consider
supporting this important legislation.
NCSHA commends the Chair for recognizing the urgent housing
needs of the lowest income families and households, and for
proposing new Federal resources for producing rental housing
for them. My comments this morning are focused on our belief
that the HOME program is not the best mechanism for delivering
these resources.
I want to address three of the reasons why we recommend
that any new rental production program be delivered by the
States. First, States are uniquely positioned to coordinate and
target scarce resources. States are close enough to real
housing issues and needs that have enough perspective to bring
a statewide or regional focus to problems that cannot be solved
within municipal boundaries. Housing markets, labor markets,
transportation and transit systems extend beyond municipal
boundaries. Human services are funded by States and counties.
The challenge of producing very affordable housing near new
jobs and transportation, promoting economic integration in
communities throughout the metropolitan area, and coordinating
homeless prevention and assistance efforts on a metro-wide
basis cannot be addressed as efficiently and effectively by
numbers of separate local jurisdictions. State housing agencies
can bring together resources, sister stage agencies, and local
partners in ways that the Federal Government and local
governments cannot.
States are partnering now with organizations that use TANF
funds in welfare reform efforts, Medicaid waiver funding and
other types of human services funding to produce assisted
living and supported housing for people with mental illness,
chemical dependency and developmental disabilities.
The second argument in favor of State administration is
that small allocations to many jurisdictions will dilute a new
rental housing production effort. Funds available under any
reasonably anticipated budget scenario will be too scarce to be
divided among more than the 50 States. We need production at
scale. New construction and substantial rehabilitation is
expensive and small allocations of money won't get us there.
For example, in the Twin Cities' metropolitan area, four urban
counties formed a consortium to become a participating
jurisdiction for the HOME program. Given the allocation
agreement among the four of them, even if a new Federal housing
production program is funded at the $2 billion level, the
jurisdiction that receives the most money under this formula
could fully fund eight units of housing for extremely low-
income people.
Small allocations to the nearly 600 jurisdictions that
receive home funds will add to the fragmentation and cost of
affordable housing development, both in the development phase
and in the long-term compliance and oversight phase.
Finally, the third reason for State administration has to
do with capacity. Look at the biggest production financing
tools of the last 20 years, the ones that have actually
produced real housing. States have consistently been the only
parties that have delivered all three of these; the housing
credit, rental housing bonds, and certain FHA multifamily
insurance programs. States have the sophisticated underwriting
finance and asset management capability to ensure the
responsible use of scarce Federal resources. At whatever level
a new Federal rental production program is funded, it will
still be necessary to bring together multiple sources of
mortgage and subsidy funding. States already do this, and in
fact are the only point in the funding and delivery system
where all the major resources can be accessed in one place.
I appreciate the opportunity to comment on this important
proposal. NCHSA looks forward to working with the subcommittee
as it considers H.R. 3995. Thank you.
[The prepared statement of Katherine G. Hadley can be found
on page 189 in the appendix.]
Chairwoman Roukema. I thank you for your testimony, and the
focus at the State agencies.
Now, our final panelist today, at least on this panel is
Catherine Racer. Ms. Racer is the Director of the Massachusetts
Department of Housing and Community Development. I might
observe that I believe Congressman Frank thought he would be
back by this time. Perhaps he's been unavoidably delayed
undoubtedly, but perhaps he will come in as you continue to
testify. And you are testifying today not only on behalf of the
experience you've had in Massachusetts, but also on behalf of
the Council of State and Community Development Agencies, and
you certainly have worked long and hard on community
development of affordable housing with these State agencies,
yes, the State Community Councils, yes.
STATEMENT OF CATHERINE RACER, ASSOCIATE DIRECTOR, MASSACHUSETTS
DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT, REPRESENTING
THE COUNCIL OF STATE COMMUNITY DEVELOPMENT AGENCIES
Ms. Racer. Right. Thank you very much. Thank you, Madam
Chair and distinguished Members of the subcommittee. Thank you
so much for the opportunity to testify.
Chairwoman Roukema. Turn your microphone on, please? Yes.
All right, we'll start over. We'll give you a couple of extra
seconds.
Ms. Racer. Sure.
Chairwoman Roukema. Go ahead.
Ms. Racer. I used up about 15 seconds. OK. Thank you, Madam
Chair and distinguished Members of the subcommittee and thank
you so much for the opportunity to testify before you today. My
name is Catherine Racer. I'm an Associate Director of the
Massachusetts Department of Housing and Community Development.
And, as the Chair indicated, I am testifying today on behalf of
the Council of State Community Development Agencies or CSCDA
regarding H.R. 3995. It was a particular honor for me to hear
both Madam Chair's opening remarks and the opening remarks of
Congressman Frank since I live and vote in the Massachusetts
Fourth CD.
First I want to thank the subcommittee for holding this
hearing and drafting a bill that addresses many of our
country's housing problems. We appreciate your efforts greatly
and our State member agencies stand ready to work with you to
address our collective housing needs. With a strong proven
track record of successfully administering housing programs,
States are uniquely positioned to address the myriad housing
needs facing America's communities. Today, CSCDA would like to
focus its remarks on three primary components of H.R. 3995;
first, proposed changes to the HOME program, second, the need
for a separate rental housing production program, and third,
the thrifty production vouchers.
CSCDA fully supports the changes to the HOME program
proposed in H.R. 3995 with the exception of the proposed set
aside for a new production program within HOME, which I will
address in a moment. HOME is an extremely efficient and
effective housing program responsible for creating hundreds of
thousands of units across the country while leveraging nearly
four dollars for every HOME dollar invested. The flexibility in
the HOME program that allows States to address varying housing
needs is the key to its success and H.R. 3995 will enhance the
existing program. We applaud your efforts to streamline the
program and promote the flexibility necessary for States to
effectively address the unique housing needs of their
communities.
Specifically, we support your proposal allowing the use of
State or area median income for rent determinations. This
flexibility will spur the development of affordable housing
particularly in rural areas currently under served. Along the
same lines, the removal of fair market rents as the basis for
home rents will enable more housing development in the areas
where the FMR is artificially low and cannot support the
required debt service for housing projects. In addition, we
strongly support the provision allowing States to charge
monitoring fees to cover compliance monitoring costs. This will
provide States with the ability to ensure that HOME projects
remain in compliance and affordable to low-income people over
time.
Second, while HOME is an excellent housing resource, and we
greatly appreciate your focus on rental housing production, we
oppose any set asides within the existing HOME program. COSCDA
agrees there is a need for rental housing targeted to very low-
and extremely low-income people, but we believe that a set
aside within HOME is not the best mechanism for targeting
extremely low-income people. In addition, we are concerned that
this proposal would result in a set aside for production
without adequate additional funding. Instead, we strongly
support the creation of a separate, State administered rental
housing production program. COSCDA firmly believes that States
have a proven effective delivery system for producing
affordable housing, particularly rental housing for extremely
low and very low-income people. States have the resources and
tools necessary to significantly leverage other funds to
maximize Federal resources for rental housing production.
States also are uniquely positioned to develop a comprehensive
strategy for rental housing production that is fully integrated
with existing housing programs.
The creation of a separate production program administered
by States will allow for strategic targeting of significant
resources on a statewide basis. In Massachusetts we fully
commit all our HOME funds each year with a significant
percentage going to rental housing. Even so, the need for
additional housing production remains immense. We welcome a
separate production program which would complement the
production efforts already underway with HOME. We hope you will
consider endorsing a separate program as the bill moves
forward.
Third, in order to develop housing targeted to extremely
low-income people, H.R. 3995 creates thrifty production
vouchers. Capital subsidies alone generally cannot support
housing for extremely low-income people. Therefore COSCDA
believes these vouchers may serve as valuable and a cost
effective tool for reaching extremely low-income people. COSCDA
believes that any effort to create a thrifty production voucher
should assure maximum compatibility with existing production
programs as well as any new housing production initiatives.
Lastly, while the focus of this hearing is HOME and thrifty
production vouchers, because the bill contains provisions
related to the Community Development Block Grant, and the
McKinney-Vento Homeless programs, we would like to offer a few
brief comments. First, with regard to CDBG, we hope the
subcommittee will consider authorizing a dedicated stream of
funding within CDBG for training similar to the current
structure under HOME. With this training personnel from HUD,
the State and local agencies, as well as non-profits, will be
better able to effectively meet CDBG's goals.
Madam Chair.
Chairwoman Roukema. Can you summarize, please.
Ms. Racer. Yes. In addition, COSCDA urges the subcommittee
to provide States with flexibility between administrative and
technical assistance funds within CDBG. Finally, H.R. 3995
reauthorizes the existing structure of the McKinney-Vento
Homeless Assistance programs. COSCDA firmly believes that
consolidating these programs and distributing the funds by
formula allocation is a better approach.
We hope the subcommittee will reconsider its position and
we will look forward to an opportunity to testify before your
subcommittee on these issues. Thank you very much, Madam Chair.
[The prepared statement of Catherine Racer can be found on
page 198 in the appendix.]
Chairwoman Roukema. I thank you. Now we'll go through the
subcommittee questioners please. I'm going to relinquish my
question period to Mrs. Kelly from New York.
Mrs. Kelly. Thank you, Madam Chair. I am interested and
would like each one of you to respond to the problem that I've
seen happening in the areas that are represented.
Chairwoman Roukema. Mrs. Kelly, I think you'll have to push
the microphone up.
Mrs. Kelly. Does this help?
Chairwoman Roukema. Yes, that's much better. Thank you.
Mrs. Kelly. I'm interested in having you respond to the
problem that I see in the areas that I represent which involves
``NIMBY-ism.'' We can provide funding, but the problem is
people don't want affordable housing in their neighborhoods. I
would like to ask what experience you've had and if you feel
that this bill is going to help address that. I think it would
be helpful to us. I'd like to start with you, Mr. Gonzales.
Mr. Gonzales. Madam Chair, subcommittee Member thank you
for that question. I've been a county official. Currently we're
faced with those issues where people are concerned about
developments in their communities. We maintain our support for
the way the bill's allow for money to come directly to local
communities, because local communities deal with a number of
issues. We deal with planning and zoning issues.
We have the ability to sit down with communities and talk
about where should housing go, how do we integrate every social
fabric of our community so that we don't have, in one part of
our town, a lot of low-income housing, and in another part of
the town middle income housing, and then upper income housing.
We at the local community do our very best and continually do
it better and better daily to integrate the social and the
economic fabric of our communities. You can't run that from the
State. You don't have the ability to do it from the State. So
you're able at the local level to address the challenges of
NIMBY-ism, of the not-in-my-back-yard syndrome by planning, by
zoning, by conducting local hearings. In my community of Santa
Fe, affordable housing is one of our top priorities. We have
people who understand the importance of making sure that the
issues of low-income housing as well as upper income housing
need to be part of our social fabric. It needs to be part of
our planning, it needs to be part of our zoning. At the local
level, you can address it. It is a challenge, it's something
that is real, but it's best to be confronted as we're going
through our planning and zoning process.
Mrs. Kelly. Thank you very much. I'd like to ask another
question, and that has to do with the so-called surplus. The
CBO said there isn't an FHA surplus. And I think that it's
interesting about if there isn't a surplus, that we need to
think about, if we're reaching into the FHA money, how we would
replenish that pool. Would we then tax people, the people who
are getting the supported mortgages? You think that the people
borrowing should be taxed to refill and replenish the pool if
we use a pool of money that's designated for FHA?
Anyone can answer that. Anyone on the panel is welcome to
jump in here. Ms. Brooks?
Ms. Brooks. The issue of where the money comes from is
indeed important. The independent study by Deloit and Touche
certainly indicates that that fund is sound and that the
available funds would be there, so I think we can also look to
that report as some indication. I actually think this is a
quite--I mean, as you know from my testimony, I'm quite serious
about how important I think it is to find a dedicated source of
public revenue and to have an on-going commitment of resources.
And I think this is actually a good revenue source to look at
for a Federal housing trust fund.
As you know, we provide a far greater subsidy to homeowners
in this country for their opportunity to own homes than we do
in any other Federal assistance that we provide. So it seems to
me appropriate to look to this revenue source as a way to
support those who have yet been able to move into a
homeownership position.
Mrs. Kelly. Ms. Brooks, I'm running out of time here so I'm
just going to ask you another follow-up question on that. What
would you do if the default rate went up and we needed those
FHA loans? Did Deloit and Touche talk to you about that. I
mean, was that in their report?
Ms. Brooks. Well, they did not talk to me.
Mrs. Kelly. But was that in their report?
Ms. Brooks. I actually do not know. I don't think there's
any suggestion that looking at the FHA surplus as a source of
revenue for the trust fund would jeopardize. The intent is not
to jeopardize and in fact there is a protection for that fund,
and so I think the intent is to use what the surplus is.
Mrs. Kelly. Thank you. My time is over. I hope someone else
will go back to that one. Thank you.
Chairwoman Roukema. Thank you.
Now, Congresswoman Lee from California.
Ms. Lee. Thank you, Madam Chair. Let me just ask any of the
panelists really about some what-ifs. If in fact the $15
billion, if that was funded, which is based on the National
Housing Conference's recommendation, do you see that as
actually putting a dent in the homeless problem or a dent in
the affordable housing crisis, or is $15 billion too little?
And then the second question I have is if we actually moved
forward and developed a full housing production program using
whatever vehicle which was appropriate, how do you see using
these funds for creative types of housing developments such as
transit villages, land trusts, congregate housing, housing that
creates more sustainability and more of a livable communities
concept. Do you think utilizing the resources to develop
livable communities makes sense in a housing production
program?
Ms. Brooks. I can certainly speak quickly to the experience
of local housing trust funds in that regard. I am working--in
fact, I should be working right now--on completing a survey of
the 250 housing trust funds that exist around the country and
their ability to address critical housing needs in an
innovative way is really quite astounding, and so we're seeing
them not only create housing opportunities that remain
affordable for low-income people, they have supported community
land trusts, they have supported housing for people with
disabilities, and have done even homeownership for very low-
income people. So we're seeing a lot of innovative approaches
to addressing a wide variety of housing needs.
Ms. Racer. Representative, in answer to your question about
the $15 billion, COSCDA definitely believes the $15 billion
would make a dent. I can tell you that my division in
Massachusetts gives out about $100 million a year. We're able
to do about 2,000 rental production units in a very good year,
perhaps 1500 in a less good year. Therefore, just doing quick
arithmetic, $15 billion clearly could make a dent.
I also think that to the extent the subcommittee is
interested in having us behave, think very clearly about trying
to fund innovative programs through a new production program
that you certainly can direct us to do that in any statute that
gives us a new production program. The States have been very
respectful of the statute of Cranston-Gonzales and some of the
direction that was given to us in 1990 through Cranston-
Gonzales and we would be very respectful of any desire on the
part of the subcommittee to have us be particularly aware of
innovative uses of the money.
Mr. Gonzales. Just to say very briefly from a local
perspective, innovation is at its best at the local level
through our--again, I can't emphasize enough local leaders are
trying to establish strong, sustainable communities whether
through in-fill in their communities, or through new
development. And I assure you that with these types of funds,
we will see integration where it's important and communities
where people can live, work, go to school, without having to
charge many of resources that are currently placed at the local
level.
Ms. Lee. Thank you. Madam Chair, do I have one more second?
Chairwoman Roukema. OK. Just let me say, in H.R. 3995, do
any of you feel that the bill is flexible enough to provide for
this innovation or do we need Madam Chair put a provision in to
ensure that these types of creative, innovative housing
production programs would be allowed?
Ms. Hadley. Madam Chair and Congresswoman Lee, I think the
other side of the question about is $15 billion would it make a
dent, and I think the answer is yes, is the issue of this
flexibility. There are innovative production going on now,
supported housing for extremely low-income people, mixed income
housing that has some housing for extremely low-income people,
in suburbs near transit hubs. There's all kinds of new urban
village projects going on, a huge variety. With the kinds of
resources that aren't so categorical that they force you into
particular kinds of developments, I think that is a key part of
any housing production program is to have that kind of
flexibility that can really meet the local needs.
Chairwoman Roukema. I think that's an excellent question,
Congresswoman, and I would like to ask each one of the
panelists to submit in writing your own assessment as to how
strong this legislation is and if there is a loophole or a
weakness that you think should be tightened up and stressed
further. So if you'll submit that for the testimony, it's
something that we really have to look at in depth. Thank you.
Mr. Grucci, please.
Mr. Grucci. Thank you, Madam Chair and thank you for
holding these hearings today. I believe that they are very
important to the quality of life in our communities.
The question that I want to ask this esteemed panel, where
I come from it's a suburb of New York City, it's got a pretty
affluent area, it's got some very high rent areas, it's got
some very high priced homes. In fact, the average home price is
about $240,000, and in that we're a victim of our own
successes. You can imagine that means that someone earning a
sum of money at about $30,000 can't afford to buy a home. They
can't afford to find rentals because of the situation that
Congresswoman Kelly talked about, NIMBY-ism, and maybe that's
something for this panel to think about. I know one of the
things that we faced in local government, which is where I was
from, was a phrase given to a program, known I believe it was
the Low Income Housing Tax Credit Program. As soon as people
heard that, they wanted no part of the program. And even though
it was a great program that afforded great opportunities, for a
lot of young families starting out, it never had a chance to
get off the ground simply because of its name and I think the
Congresswoman pointed out very adequately and very
appropriately that NIMBY-ism is a huge problem.
My question for you is, in those areas where there's high
cost of living, again referring back to the district that I
represent, the average price of a home being at about $240,000;
the average tax paid on that home is about $10,000 a year, most
of which is school taxes. Do you think H.R. 3995 addresses the
needs of affordable housing in those types of markets? Do you
think the eligibility levels are adequate? Do you think it
should be raised?
I'd be interested in hearing you opinions on that and
anyone on the panel can certainly respond.
Mr. Gonzales. Congressman Grucci you've described, in many
respects, my own community of Santa Fe, New Mexico, where Santa
Fe, in many respects has been discovered by many people from
all over this great country and all over the world, and they've
gone into the community, they've purchased homes, and we've
seen the price of housing go up. Consequently, we've had what
we call at the local level this economic gentrification where
people from a very nice part of town had to move out to another
part of town because they couldn't afford their property taxes.
So what happened over the period of the eighties is we saw a
lot of mobil home communities go up, and once people find their
way into mobile home communities, it's difficult for them to
come out of that. Santa Fe right now has made affordable
housing their top priority, but it takes a couple elements.
One, it takes the community's will to address it. The community
needs to step up to the plate and say we want to solve this
issue of affordable housing, and it takes the political will of
the local leaders to say, through our own local jurisdiction
powers, the ability to plan and zone and be able to create
capacity so we can develop innovative public/private
partnerships, we will make sure that every individual living in
our community's going to have an opportunity and have access to
housing, no matter what form. And when they get access to that
housing, that it's quality of nature.
To answer your question specifically, yes, this bill
provides the flexibility to allow our community to be as
innovative as possible to be able to address the huge needs of
our community to make sure that citizens who can't afford to
either rent or buy a home have access to a quality home to
raise their children in a safe environment.
Mr. Grucci. What would the median income in your community
be?
Mr. Gonzales. The median income is probably about $40,000 I
believe, between $30,000 and $40,000. But the average price of
a house, which there's not a direct correlation, is somewhere
in the vicinity of about $270,000 to $280,000. So you have
people who are involved in State government jobs, people who
are involved in the tourism industry earning minimum wages that
are just not getting access. Now our own community housing
trust has been great and through their innovativeness they've
been able to provide subdivisions where people can get entry
level homes in place.
Mr. Grucci. So it's your feeling that H.R. 3995 would
address the problem of people not being able to qualify because
their income levels would be higher than say a national average
and therefore preclude them from being able to get housing
grants or be able to have municipalities access, the funding
necessary to help create affordable housing. You believe that
this bill addresses those issues?
Mr. Gonzales. Yes. And in our case in Santa Fe for someone
who is even earning $11 or $12 an hour, hopefully there'd be
taxes like this to afford some rents. It's quite expensive, the
renting in our community.
Mr. Grucci. It certainly is. Does anyone else on the panel
wish to respond?
Chairwoman Roukema. I'm afraid we're rather short of time.
You'll have to make it very brief.
Mr. Faith. Very briefly, Madam Chair, one of our concerns
about the HOME proposal that's in this bill is it relies on
recaptured Section 8 funds as its source of funding, and that's
not a very reliable source of funding. I think a key to
addressing the diverse housing needs of this country is to have
a sufficient source of funds that would provide a level of
funding that would be appropriate. I think the FHA source is a
more appropriate source. It would generate much more revenue,
and we also believe we should figure out what's wrong with the
Section 8 program to make sure that we do a better job fully
utilizing resource because that's very important. We should
look to additional sources of funds for a production program
that could work with the very diverse needs of our country
because the local needs do vary, as you point out, all across
the nation.
Mr. Grucci. Thank you, Madam Chair.
Chairwoman Roukema. All right, thank you, Congressman
Grucci.
Now we have Congresswoman Schakowsky.
Ms. Schakowsky. Thank you very much, Madam Chairman, and I
appreciate the direction of H.R. 3995 and many of its important
provisions. A couple of points I want to make before I ask a
question. One I wanted to just mention a couple, in my view, of
troubling provisions and one is that the bill, as I read it,
allows religious organizations to use taxpayer funds to carry
out religious purposes, an element that I think is
unconstitutional. The separation of church and State I believe
to be critical aspect of our first amendment and while
religious organizations often do incredibly valuable work on
affordable housing issues, they are already funded by HUD and
they're free to use their own money to carry out their
religious missions. But they shouldn't be allowed to use
Federal money for those purposes. So I hope that we can have a
discussion on that and perhaps reconsider that inclusion in the
bill.
I wanted to say one thing about where's the money going to
come from. And I'm sitting here feeling really frustrated,
because we're engaging now in a serious budget debate and
budgets aren't just about money, they're about priorities. And
we're questioning where's the money going to come from. And
we're looking, for example, at a $400 billion defense budget
with a $48 billion increase.
Now I sit as the Ranking Member on the Government
Efficiency Subcommittee. We just had a hearing where the
Inspector General of the Department of Defense said, we cannot
account accurately for $1.2 trillion, trillion, trillion
dollars in transactions at the Department of Defense. We had a
hearing on $9 billion worth of credit card bills. We've issued
1.2 million credit cards to civilian and military personnel,
and among the bills that you all are paying for are bills for
gambling debts, travel, designer bags, breast enhancement
surgery, bills at Hooters, those kinds of things, never mind
whether you think some of the more supposedly legitimate
expenditures are really going to make us safer and fight
terrorism and provide homeland security. And we are here asking
in the face of a housing crisis where in my city alone we're
short 150,000 units of affordable housing, where there's been a
37 percent increase in the number of people seeking emergency
shelters, where five million people are facing the worst
housing crisis in the United States, and we are asking you
where are we going to get the money. Is this a priority? And it
just infuriates me that we don't have our priorities straight
and that we can't find room to do it all, because I believe
that we can make our nation safer, we can fight terrorism, we
can provide homeland security, and for god sakes, we can
provide housing for people.
And the civility of this discussion, Ms. Brooks, after 20
years of fighting for affordable housing trust fund, amazes me
at some level. You know, why we're not pounding on the tables
and people trying to break down the doors to try and get a
reasonable amount of money. I've been told by the Homeless
Coalition that $1.5 billion could really make a dent in
homelessness in this country, a lousy $1.5 billion compared to
a $2.2 trillion budget for this year.
So if I sound emotional, believe me, I am, and I think that
we need to ask whether or not--you know, we're going to look at
the Section 8 recapturing that money to put it into--now maybe
there is some money available this year, but what if we were to
really use that Section 8 money?
Let me leave that as the question. And I think Mr. Faith
you answered it somewhat. Is this, is this a reasonable way or
a sufficient way, I don't want to say unreasonable, but is it a
sufficient way--let me hear from some of the others of you--to
fund a program for the next fiscal year and anything else you
might want to comment on. I've had my say, thank you.
Chairwoman Roukema. Excuse me, excuse me. But your time is
just about up, and I would suggest that you're speaking to the
choir here, they probably agree with you, they'd like to see a
higher priority given to housing. But I would just then
suggest, in terms of the last question, if you would submit
your answer to the subcommittee in writing in answer to the
last question.
Ms. Schakowsky. That's fine, thank you.
Chairwoman Roukema. There's simply not time for us now,
particularly since I'm concerned that we haven't gone through
this panel yet and we have a second panel that we're waiting to
hear from today, and hopefully we can do that before we get
over to a number of voting sessions.
All right, now we have Mr. Miller from California.
Mr. Miller. Thank you, Madam Chairwoman.
I've enjoyed your testimony today, but there will never be
an affordable housing market unless there's an affordable move-
up market and an adequate move-up market that has to be
addressed. The talk was that we need to look at these
recaptured Section 8 vouchers and that's unreliable for this
program so let's look at spending those, but I think Ms. Kelly
brought an interesting issue and I think it needs to be
expanded. If Deloit and Touche is correct, if you want to
believe that assumption that there's this pot of money from the
FHA Insurance Fund out there. We have to understand where that
money came from. It came from homeowners and it came from
homeowners who obviously are being overcharged. So if we're
overcharging homeowners through FHA insurance, then maybe we
ought to rebate those funds back to those homeowners who are
paying too much rather than just look at this redistribution of
income that we're talking about today.
You can't help one homeowner who wants to be a homeowner to
the detriment of another homeowner. And unless, like I said,
you have a move-up market where these people can move out of
affordable housing into a better home at a reasonable price,
we're never going to resolve this country's problems; we're
just going to say let's throw more Federal dollars at it, and
the Federal dollars we're throwing at it today, there's no pot
of money. It's like the Social Security Trust Fund, it's at the
Treasury. We have got to go to the Treasury and get the money
back. If we're going to take the money back, let's give it back
to the people who we're overcharging.
But you mention the ability of States in housing, Mrs.
Hadley, and I appreciate that. I think there's what, about 24
States that are involved in housing trust funds, and they
control development at the State and local level; we don't. So
the problem I have is why should the Federal Government get
involved in it when you admitted the States are much better at
it than we ever could be. Why do we need a Federal bureaucracy
involved in this housing issue and looking at Los Angeles
marketplace, probably 59 percent of Section 8 voucher
recipients aren't able to even find a home because there are no
homes out there. They're not being built because of Government
red tape as you know and this NIMBY issue that Mrs. Kelly
brought up, which was a great issue, and I guess I'd like to
ask the one question to Mr. Gonzales, you seem to be very
knowledgeable in this.
Why isn't there an adequate amount of housing being built
out there?
Mr. Gonzales. I think, Madam Chair, subcommittee Member,
there's a number of reasons and it's different in every
community. In our community, it's an issue of supply and demand
in many respects. We know that there's a need for more
affordable housing for many people in the community, but you
know, we try to the best that we can, to create an environment
through our own bureaucracy where we can creative incentives
for the development community to actually step up the supply of
housing so that we can use some of the market to adjust some of
the housing prices, so that people, and I'm talking about
homeownership.
Mr. Miller. Are you cutting red tape and fast tracking?
Mr. Gonzales. We're providing density incentives.
Mr. Miller. I applaud you for that.
Mr. Gonzales. Everything that we can possibly do to create
a positive environment. We're balancing that also with the
needs to balance our resources, to make sure that we keep a
strong quality of life. But making sure that every new
development that comes forward has an element for every member
of our community. We don't want to create exclusive communities
in our community. We want to make, and it's through innovation,
through communication up front letting the development
community know this is what we expect from you, this is what
we're going to provide from you. In the end we are creating
hopefully environments that again every member of our community
will be living in sustainable communities where they can live
and work.
Mr. Miller. I guess exclusive communities varies from city
to city and State to State. My concern is that in this country,
we focus on just the low end, people at the bottom end. Yet,
there's no place for those people to move to when their
situation increases, they become a little more affluent, yet
there's no place for those people to move so they can't get out
of the low-income housing, because no housing is being provided
to them at the local level for them to move into, because a
sales price of a home in this country, 30 percent of that cost
is Government fee directed.
Fish and Wildlife finally did something good recently. A
judge said you have to take economic impact into the analysis
when you're setting aside habitat and he overturned about a
half million acres in California for just one little bird, and
about 17 of the 25 least affordable housing areas in the
country are California. And I applaud your response and your
comments and your concern and I wish more locals would look at
providing an overall housing economy and an overall housing and
marketplace so people at the bottom end could find a place to
live. And if any others would like to respond, I think that's
an area we need to go.
Mr. Gonzales. I just want to say in closing, so they can
respond, that more locals are doing that, Congressman.
Mr. Miller. I'm glad to see that.
Ms. Hadley. Madam Chair.
Chairwoman Roukema. Yes, you'll have to make it short.
Ms. Hadley. Congressman Miller, if I could address your
point about Federal involvement. There has been a huge, in the
last 15 years, shift of capital from the Federal level in terms
of the HUD appropriation, in terms of changes made in the 1986
Tax Act with respect to tax treatment of rental housing and the
tax exempt bonds. Whatever people's politics were around this
change, it has represented a huge shift away of Federal support
essentially for both the housing industry generally and
affordable housing. And what we've seen in Minnesota is that
the private market over the last 15 years has been increasingly
unable to meet the needs of people. That people who can't buy
housing or rent an apartment with 30 percent of their income is
a bigger group of people and more middle class at the upper
end. While we feel strongly about the role of Federal funding
for the housing needs of very low-income people, we on the
State level are taking a lot of steps to try to increase the
production of privately unsubsidized housing at the low end of
the market and working with local communities to try to do
that.
Mr. Miller. That's a good issue, and I wish there were more
time, but I know she's been very generous with me to this
point. Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you.
Mr. Sanders please, from Vermont.
Mr. Sanders. Thank you, Madam Chair. Before I asked my
question, I did want to comment on something that Ms. Kelly
said and Mr. Miller said. Ms. Kelly is right about NIMBY-ism,
and I share that concern, but you are not right about whether
FHA profits can be used to create a national affordable housing
trust fund. President Bush apparently has disagreed with CBO on
this issue. The President used the projected $2.4 billion in
FHA profits in his fiscal year 2002 budget proposal to lower
the net level of funding for housing and to increase the
Federal surplus. I think if the President can use the FHA
profits for that purpose, for other purposes, we can use it for
a trust fund.
In terms of Mr. Miller, Mr. Miller raises a question about
the wisdom of tapping the source of funding that we have
tapped. He is not here, I think. I'm sorry. He may have a
point. A better source of funding may be the $500 billion in
tax breaks that the President and Congress recently gave to the
wealthiest one percent of the population, and maybe he and I
can work on diverting some of that money into affordable
housing. But given the fact that that's not likely to happen, I
think it's important that we do develop a reliable source of
funding for a significant housing program and FHA profits are
as good as any source that I can think of. I wonder if Ms.
Brooks or Mr. Faith would want to comment on the use of FHA
surplus for funding sustainable housing.
Mr. Faith. Thank you, Mr. Sanders, Madam Chair. Attached to
my testimony is actually a more recent report from Deloit and
Touche.
Mr. Sanders. Put the mike closer to you.
Mr. Faith. Attached to my testimony is a more recent report
from Deloit and Touche using data as of March 31st, and it
shows that the FHA fund is of high quality and very healthy. I
won't go into the details, but they run through a variety of
worst case scenarios back on page 7 of their executive summary,
and still show that the surplus ratio that's required, the
amount of money that'll be there far exceeds any safety for
existing homeowners. Current homeowners that use FHA will be
protected. In fact, we have to remember that current homeowners
receive a substantial subsidy, and myself as a homeowner, in
tax season, am well aware of that subsidy, in order to be able
to afford a home. What we're talking about with this bill with
your trust fund legislation is to help those who are more in
the rental side of the equation, who have no access to that
subsidy, who don't get the benefits from the FHA Fund and who
could. This is simply a scenario to identify a pot of money.
And I agree with you, Mr. Sanders, that there may be other
sources. This is just one idea. It just needs to be a
substantial source so that when we talk about addressing the
affordable housing crisis in this country, we're serious about
it.
Mr. Sanders. And the truth is that it is a strong source
and a reliable source. Ms. Brooks, your organization, as I
understand it, did a study on job creation in terms of building
a significant amount of affordable housing. Do you want to say
a few words about what this would do to the economy in creating
decent paying jobs for Americans?
Ms. Brooks. Well you make a good point and thank you for
doing that. We did study what the impact would be of a proposed
Federal housing trust fund, and you cited from that study
earlier. It clearly indicates that by making an investment in
the housing production program that we would generate
substantial jobs and wages in this country. That study is
important, but it is also important to note that most of the
housing trust funds around the country can document the same
kinds of benefits from their own trust funds. So we know from
the experience of existing housing trust funds that indeed
putting money into a housing production program generates
substantial jobs, it provides resources to a local community in
terms of increased taxes, and it also increases wages. So the
expanded economic benefit from a Federal housing trust fund
would be a substantial boost to the economy in this country.
Mr. Sanders. Thank you. Lastly, Madam Chair, I would just
say again thank you very much for this hearing. I would say in
response to Mr. Miller, the reason that low-income people
cannot afford housing is not because of the Endangered Species
Act. It is because they are low-income. And when you make $6
and $7 an hour, you just cannot afford decent housing for your
family and the Federal Government must play an active role in
making sure that all families in this country have decent and
affordable housing. Thank you, Madam Chairwoman.
Chairwoman Roukema. All right, thank you Mr. Sanders. Now
we have Congressman Tiberi from Ohio.
Mr. Tiberi. Thank you, Madam Chair. I apologize. I had two
other committee meetings to go to. My friend Bill Faith,
welcome. I wish I was here to introduce you. I apologize for
missing everyone's testimony, but I'll throw this question out.
Bill's probably most familiar with it when we talk about a
national housing trust fund.
In Columbus recently I've received some phone calls in my
office, Bill, over an issue that you're probably familiar with
that maybe came up in somebody's testimony, maybe did not, but
an issue in Columbus where money was approved by the local
housing trust fund for homeownership at a level that some
people in my neighborhood were astounded by. In my
neighborhood, housing generally runs from about $90,000 to
$150,000, a working class neighborhood in Columbus' north end,
and some of this housing trust fund money was allocated for
property that was incentives for people to move in certain
areas of the city that was double, my understanding, that
level. Is there any concern that as we move in the direction of
trying to provide more dollars for affordable housing that we
lose what I think was initially or originally the focus of
affordable housing, rather than using precious dollars--and
there's never enough to go around for everything--to subsidize
what some of my neighbors say is excessive amounts of cost in
housing.
Does that make any sense, Bill?
Mr. Faith. Yes. Madam Chair, Congressman Tiberi, it's very
good to see you today. Let me respond to the local trust fund
issue first. You have to understand this is local revenue and
had nothing to do with the Federal Government. This is a purely
Columbus, Franklin County trust fund. Also it was a loan at
above market rate terms to encourage middle income people to
move into a low-income census tract in the central City of
Columbus. So I have to defend the project even though my
eyebrows went up a bit initially. But it's purely a short-term
loan at a higher-than-market interest rate to attract middle
income homeowners back into the core central city.
And as the Chairwoman noted, the homeownership rate in the
United States is now 68 percent. However, in the central City
of Columbus, like many cities, our homeownership rate is below
50 percent. So I think we do need to look at strategies to
address that. However, local governments are doing more of
that. We already have incentives in the Tax Code to help
homeowners. As you know, in our city in Columbus, we're now
going to use tax abatements to help attract homeowners into the
central city.
What the Federal Government needs to focus, I think where
you were headed, which is, to use the precious resources that
we can identify and prioritize those of the most modest means
because that's where the need is greatest. That's where the
local governments aren't able to do as much because of the
level of subsidy involved and the need for ongoing rental
assistance to keep that housing affordable and of high quality.
I think Mrs. Kelly's point earlier about the NIMBY issue is
critically important, and if we don't have the resources to
build high quality housing, with sufficient operating funds to
manage that housing well, we're going to run into even further
NIMBY problems.
Mr. Tiberi. Yes, go ahead.
Ms. Racer. Representative, I'm not familiar with the
program in Columbus, but I wanted to make two comments. First,
while we can all be very proud of the homeownership rate, it is
not equally high among different racial and ethnic groups, and
that should remain a concern for all of us. Second, that the
State administering agencies I believe are very capable of
being careful not to over subsidize any homeowner through a
variety of qualification tests. That's extremely important to
us in Massachusetts. I'm sure it's equally important to Kit in
Minnesota and to others who administer the homeownership
programs.
Mr. Tiberi. Madam Chair, no follow-up questions, just a
comment. Bill I agree with you in terms of the precious
resources. I think however, as we move in this direction, my
only point is--and I know it's a local decision--but when you
expand programs there's always a possibility that the Federal
Government could get involved in the same thing. My only point
is, is when you have middle class advocates suddenly raise
their eyebrows and say, wait a second, I don't live in the
greatest neighborhood and someone now is getting an incentive
to purchase a house double the cost of mine. My only concern is
that we don't throw the baby out with the bath water. The NIMBY
issue is we've talked about it before. I'd like to follow up
with you on this issue as well, because I just have some
concerns about the messages it sends to those who are trying to
go from no housing or rental housing into homeownership at the
first level.
Chairwoman Roukema. Yes. The time is up now, but if you
have further comments to make in writing you can submit them
for the record and we'll all read them, but I do thank you for
those questions. Now Congressman Israel from New York.
Mr. Israel. Thank you, Madam Chair. I'd like to continue to
focus on a concept of an affordable housing trust fund and
would like to direct my question to Ms. Brooks who noted that
there are about 250 housing trust funds throughout the country.
One of those trust funds is located in my home town,
Huntington. I was a town councilman for 7 years and one of the
final acts that I engaged in before coming to Congress was to
pass legislation that created an affordable housing trust fund,
funded it with town dollars, but also imposed a requirement on
developers that to my surprise the development community
supported. And the requirement was any time they came to the
town board for a down zoning and realized a density bonus from
that down zoning, they were required to deposit into the trust
fund an amount of money equivalent to the enhanced value that
they were receiving from that density bonus, in addition to
dedicating a portion of the zoning on-site for affordable
housing. It was an innovative program, the first of its kind on
Long Island, but there were problems with its effectiveness and
I'd like you to comment on this.
Our experience was that when you're living on Long Island,
as my colleague, Mr. Grucci, said, those kinds of trust funds,
which I support, aren't as effective as you would like them to
be because we live in a high-cost, high-property value area.
Mr. Grucci's district is adjacent to mine. He gave you some
statistics. The fact of the matter is that the conventional
wisdom that affordable housing is more a crisis in New York
City than Long Island is just plain wrong. The average rental
for a two bedroom apartment in New York City is $949. The
average rental for a two bedroom apartment on Long Island is
$1,173. Monthly housing payments are consuming well over 30
percent for about 300,000 households on Long Island. So my
question to you is, as much as I support affordable housing
trust funds, I'm a cosponsor of Mr. Sanders' bill, what can be
done to ensure that in these high cost, high property value
areas, those trust funds are effective.
Ms. Brooks. It's an excellent question and thank you. The
experience with housing trust funds around the country I think
really demonstrates that there is potential for addressing
critical housing needs in virtually any housing market. You may
have noticed from the list of housing trust funds that there
are housing trust funds, for instance, in a place like Aspen,
Colorado, where they tell me the median cost of a home there is
one million dollars. Most of us can't afford that kind of
housing, yet they have created a trust fund that is making some
impact in that community where people who work in restaurants
and dry cleaning establishments and other places have to
commute great distances because they can't afford to live in
the community. So they have begun to address that issue. I'm
working with some folks in California communities where the
median price of a home is above $500,000.
And so we are seeing housing trust funds that are able to
address a wide variety of housing needs. To me that's the
beauty of the housing trust fund model is that it enables, we
do know how to provide housing for low-income people in this
country, we have the capacity to do that. What we don't have
are the resources to do it.
Mr. Israel. Would you follow up with my office? Perhaps we
can meet to talk about how those trust funds are effectively
working in those higher wealth areas.
Ms. Brooks. I'd be glad to.
Mr. Israel. That'd be great. Thank you.
Chairwoman Roukema. Well I'd like to say that I'm going to
be the cynic here and express reservations and I come from a
high income area, but I don't know, I have a problem with this
idea that somehow you're using limited trust fund money in
areas like Bergen County, New Jersey, or Long Island or Aspen,
Colorado. And I know something about Aspen, Colorado, and don't
tell me that the waitresses need housing money there. They can
just go a very short distance outside of Aspen and get all the
housing they need. This is a problem that we're going to have
to work through obviously, because I think we're really kind of
shooting ourselves in the foot if we go to very high income
areas, because then you're depriving the low-income areas and
the moderate income areas of money that they need desperately.
You put that in writing in terms of how you think that this can
be spread out, and then we'll talk about it further as we go
through the legislative process.
And now we have a final questioner is Julia Carson from
Indiana.
Ms. Carson. Thank you very much, Madam Chair. This is so
interesting and I know you have a limit on time and probably
I'm asking the right question to the wrong group of experts
here. I come from Indianapolis, Indiana. We've experienced the
highest rates of foreclosures than in any other parts of the
country. I recognize that a lot of that comes from three
things. Number one, predatory lending. I'm trying to help a
lady save her home now. They're white, retired income $1,006 a
month from Social Security, she has a mortgage payment of
$1,600 a month and the people that loaned her the money knew
there was no way in the world with her income that she was
going to be able to meet that payment and she's in the middle
of an eviction at this particular time. She's blind and she's
80 years of age. I want to know if you could write me and tell
me how does one offset that kind of abusive behavior on the
part of banking institutions when people are comfortable in
their homes and then suddenly something happens. Somebody
knocked on the door and she signed her name; that's what
happened.
Then number two, I live in a low-income community
historically, but over the years my low-income community has
become a high income community and they just did a reassessment
of property taxes. My personal property taxes on my home
quadrupled, which is something I guess that was expected, but
we got older people in that neighborhood who've been settled
and we're going to have another Hilton Head where the people
aren't going to be able to keep their homes because of this
humongous tax increase on their property. You know what I'm
saying? It's the value of the home. And there's been some
building in my neighborhood called a homeownership zones and
the empowerment zones where builders have come in and built
houses and it's elevated the value of homes in the whole
neighborhood, but we've got all these people out here who
thought they were OK now, they've got their homes bought, and
all of a sudden this high tax bill comes and they're not going
to be able to meet it. And if you could sort of share with me
what some of those experiences are in other parts of the
country so I can try to deal with those on a local level, I
would appreciate it. I'm Julia Carson from Indianapolis. We
just have a preponderance of----
Ms. Hadley. Madam Chair and Congresswoman Carson, the
rising property values in the poorest neighborhoods in the Twin
Cities and in your community are real double-edged swords. On
the one hand, it represents that there's more private
investment in this community and that it's healthier in terms
of the economics of the community. On the other hand, as you
say, it's really wiping out people who are on fixed incomes,
people who are on low incomes. At the State level, I'm not sure
this is an appropriate Federal response, but have provided some
tax relief for people against sort of multi-digit increases in
property tax, just a State tax kind of relief. We're
experiencing the same problems with predatory lending. I know
there's some legislation under consideration at the Federal
level and some States have passed laws regarding predatory
lending, and it's forced us within the State to really
strengthen our foreclosure prevention network around the State
which is having some impact.
Ms. Brooks. You correctly indicate that the predatory
lending is just an abominable factor here in our culture, and I
know Mr. Faith wants to speak to that. There are several
housing trust funds that have actually focused on the issue
that you are talking about where----
Ms. Carson. Indianapolis doesn't have one.
Ms. Brooks. Not yet. They're working on it I might say, and
have provided emergency housing assistance to enable people to
stay in their homes when they have purchased them, yet the cost
of maintaining that home becomes out of reach, and some housing
trust funds have addressed that issue in particular to address
exactly the kind of housing need that you're talking about.
Ms. Carson. I've lived in my home 35 years. When I moved
into the neighborhood it was mixed racially, income was sort of
moderate up, and then there was an abandonment of the
neighborhood. People fled, cut beautiful homes up into
apartments which were ultimately destroyed after they had bled
out all that they could out of them. And the neighborhood
became crime-ridden, etc., but I hung in there and obviously it
was worth my hanging in. But now it's in the reverse and the
people that stayed there with me, which were quite a few, are
not going to be able to even pay tax bills now.
Ms. Brooks. There is a housing trust fund proposed in
Indianapolis. In fact, it's on the books there. It has not yet
been funded, but the mayor just indicated that he intends to
fund that as a priority.
Ms. Carson. Indiana's one of the broke States, so they
don't have a lot of latitude in terms of doing----
Chairwoman Roukema. I'll give you just one minute, Ms.
Racer, because then we have to go to the second panel.
Ms. Racer. Surely. Madam Chair, thank you. Congresswoman, I
believe there are several communities in Massachusetts with
very, very high average and median sales prices where the
communities willingly are providing some degree of tax relief
to elderly homeowners. I will try to get you some information
on that. Thank you.
Chairwoman Roukema. All right. I do thank this panel, and
obviously the answers are not easy or simple answers, and we're
going to have to balance out the competing needs here. But we
do appreciate your testimony and we look forward to the added
testimony that you're going to submit to those questions that
were submitted to you for further detail. Thank you very much
and we look forward to working with you and getting this
legislation passed in record time.
If the second panel will come forward. I can't believe that
we haven't been called over for votes yet, but let's see how
far we can go now. Panel two.
Ms. Carson. I keep hearing, Madam Chair, they're going to
be voting pretty soon.
Chairwoman Roukema. I know. I've been hearing that since
11:15.
I don't know what's happened to our panelists--not the
panelists, I mean the subcommittee Members. Hopefully, they'll
be returning shortly, at least some of them. We're all
concerned about when these votes are coming up, but hopefully
we'll be able to hear your testimony before that happens.
I'd like to introduce the panel. Barbara Sard is here with
us today again from the Boston area. Massachusetts is overly
represented today, aren't they?
I'm sorry, I can't hear you.
Ms. Sard. There are very many ``housers'' per capita in
Massachusetts.
Chairwoman Roukema. Oh, I see, I see.
Ms. Sard. It hasn't solved the problem.
Chairwoman Roukema. You're reflecting yourselves as
standards for the nation, something simple like that. All
right. But Ms. Sard is from the Boston area and is the Director
of Housing Policy at the Center on Budget and Policy
Priorities, something that we're going to be very interested in
hearing about today, so we'll let you give your testimony and
then I'll introduce each of the panel members as they testify.
STATEMENT OF BARBARA SARD, DIRECTOR OF HOUSING POLICY, CENTER
ON BUDGET AND POLICY PRIORITIES
Ms. Sard. Thank you very much for inviting me to testify
today. We applaud the recognition in H.R. 3995 of the need for
additional resources for rental housing production and that a
substantial share of any new resources should be targeted on
extremely low-income households who are the families and
individuals within our country with the most severe housing
needs.
Unfortunately, because their incomes are so low, capital
subsidies do not work well alone to assist extremely low-income
people and that is the conundrum that the bill has tried to
deal with through the thrifty production voucher proposal which
you've asked me to talk about.
In the past with capital subsidies, either commonly
extremely low-income households were not admitted at all, which
has often happened in the tax credit program, because many
owners have a rule that you have to have income of three times
the rent, and if your income is very low, you don't have income
of three times the rent, so you don't get in, or you are
admitted and recent data in the HOME program shows that
extremely low-income households who don't have rental
assistance pay nearly 70 percent of their income for rent. By
my calculations using data from FHA properties, it would take
an income of about $18,000 a year on average merely to afford
the operating costs without debt service of an average rental
property in this country. H.R. 3995 attempts to deal with this
tension between the need to assist extremely low-income people
and the shallowness of a capital subsidy, by setting a rent cap
that the rent would be, under the new Production and
Preservation Program, no more than 40 percent of a household's
income.
It's a good attempt at a compromise, but like many
compromises, it's unsatisfactory to either side. It is not
going to provide enough of a rental stream to the owners when
the households are extremely low-income because 40 percent of
an extremely low-income household's income is not enough to
cover the owner's costs, and yet it's still too much of an
extremely low-income household's income to pay, and that's the
role of rental assistance to fill. That shows that in addition
to capital subsidies, you need rental assistance.
Why thrifty production vouchers, to get to the question.
The premise behind thrifty production vouchers, unlike other
vouchers, is that it is preferable to have a major infusion of
capital dollars, which is a one-time expenditure. It is easier
for the Federal Government to plan for, to budget, to be
basically heavy on the capital side in order over time for the
rental subsidy that extremely low-income households need to be
lower.
And if we look at the average costs, again the data are in
my testimony, we estimate that on average, the operating costs
without debt service for new rental housing or newly
rehabilitated rental housing would be below 75 percent of the
fair market rent. And in the regular voucher program, rents are
generally pegged to the fair market rent. The reason you can do
it for less is by paying more on the capital side. It isn't
just something for nothing. It's a choice that it is better
policy to invest once on the capital side and then lower the
on-going operating subsidy.
And, because of that approach, the rent payment, the
maximum rent for a unit would be pegged to the operating costs
of the unit without debt service. And that is different from
what has been done before. To make sure that it is cost
effective, the proposal includes a cap of 75 percent of the
local housing agency's payment standard, which is what's now
used in the voucher program and in some cases that's slightly
above the fair market rent, so that would be the cap. But the
rent itself would be pegged to the operating subsidy cost.
The proposal includes a new distribution mechanism which
makes it easier to use these vouchers in combination with new
capital money. Even though only housing authorities that run a
voucher program would be eligible to administer these
subsidies, the notion is that the vouchers ought to be
allocated if Congress funds new ones in the same way that the
capital dollars are allocated.
Now there are some complex issues and my testimony includes
some alternatives to the way the bill is drafted.
[The prepared statement of Barbara Sard can be found on
page 207 in the appendix.]
Chairwoman Roukema. Yes. Your time is up and I'm going to
have to be as strict about it. Perhaps there will be a
question, but we're really running into a conflict here. The
bell has rung and there will be a vote that we'll have to leave
for on the floor, but evidently only one. I thought there were
going to be a series of votes.
Mr. Benson Roberts, I believe we can give you 5 minutes
before we have to recess to go over to vote, and you of course
are representing the Local Initiatives Support Corporation, and
it's a creation of community leadership and it's a good example
really of forward thinking with community leadership setting
the standard. Go ahead, Mr. Roberts, please.
STATEMENT OF BENSON ROBERTS, LOCAL INITIATIVES SUPPORT
CORPORATION
Mr. Roberts.Thank you very much, Madam Chair, and good
afternoon. My name is Benson Roberts and I am with the Local
Initiatives Support Corporation. We operate low-income
community development programs in New Jersey, Indianapolis,
Cleveland, and 35 other parts of the country. Our job is to
help grassroots community organizations to rebuild their
communities. We've raised $4 billion from the private sector in
this effort and have used that money to help in community
stabilization activities. We deeply appreciate the
subcommittee's attention to housing production and the need to
add more money for housing production.
Indeed, we believe that the real issue here is money,
rather than program design. We certainly have no objection to
the proposal you've made in H.R. 3995 or to Representative
Sanders' Housing Trust Fund and we appreciate the fact that
they would generate new sources of money. But the existing
programs, particularly HOME, work just fine in terms of moving
money out to serve low-income people. If you look at HOME, 40
percent of HOME funds in rental housing serve extremely low-
income people; 80 percent serve very low-income people. So
States and localities are really exercising great stewardship
there while retaining some flexibility to meet other needs as
well.
Incidentally, about a third of the homeowners receiving
rehabilitation assistance under HOME are also extremely low-
income and two-thirds are very low-income.
Chairwoman Roukema. Would you talk a little bit more into
the microphone, please.
Mr. Roberts. So HOME is really meeting that need. The
principal limitation is money. HOME was authorized at $2
billion 12 years ago. In today's dollars that would be $2.9
billion. The current appropriation is about 35 percent short of
that. And if we really want to increase production of housing
for low-income people, we just need to find some way, any way
to get more money into the system. We'd argue that the best
delivery system for that is the existing one that works
extremely well. There's no need to create a new program, we
would say.
The one thing that capital subsidies cannot really do, as
Barbara suggests, is that they cannot address a situation where
poor tenants cannot afford to pay in rent even enough money to
cover the operating expenses of a property. Obviously it's very
important that the housing that is built be affordable to the
people whom it's intended to serve. So there are sometimes
efforts, we've seen it in both H.R. 3995 and in the Trust Fund
bill, to peg maximum rents based on the tenant's actual income.
Well, neither we nor anybody else in the private sector can
underwrite a property on that basis. Everyone has to have some
kind of certainty about how much money is going to be available
to the property, and if we just don't know until the tenants
show up and we can take a look at their income, then we can't
make the loans or the investments to begin with.
That's really where a Thrifty Voucher comes in. Because it
really says to a developer, says to a lender, says to an
investor, we know that you're going to have enough revenue on
those units reserved for extremely low-income people to cover
the operating cost of the property, and that enables you to
underwrite the property. The reason why Thrifties make sense
here in Congress is that when we go to the appropriators and
talk about additional rent subsidy, the appropriators say well,
we know that if we sign up for one year, we have to renew this
year after year and the cost is so high that we don't want to
get started. Thrifties are very explicitly an attempt to
address that concern, and they would, we believe, be at least
35 percent cheaper than existing vouchers and perhaps even
cheaper than that.That's why we think they have a great role to
play in this process.
The tenants would still pay 30 percent of their income for
rent, the same as they would with regular voucher, but the
reason Thrifties are cheaper than tenant-based vouchers is, as
Barbara says, instead of the payment standard being a fair
market rent or higher, it would be based on the actual
operating budget of the property. That tends to be
substantially lower than fair market rent. You can't do that
for existing housing, because existing owners have a debt they
have to pay.
[The prepared statement of Benson Roberts can be found on
page 221 in the appendix.]
Chairwoman Roukema. All right, thank you. We're going to
have to leave to vote, and we'll be back within 15 minutes
hopefully.
[Recess.]
Chairwoman Roukema. Let's go back on the record. I
apologize profusely. I understand as soon as we got there we
learned that there were successive votes on the floor that
delayed us. We hope our staff made the appropriate
announcement. I am terribly sorry, but we could not anticipate
that. They just had the lights on for one vote. As we got out
there, we learned that there were two 15-minute votes and two
additional suspensions, so it took quite some time. Sorry about
that.
And given my schedule and your schedule, let's complete
this. I don't know if any of the other Members are coming, but
we will see if anyone else is coming. I doubt it. I think what
we should do is get your statement on the record. Otherwise,
you wouldn't even have the chairman here.
OK? I'm sorry. I'm not avoiding you, but I have another
commitment on for another hearing. Can you believe it? My
incompetent staff scheduled me for two hearings today. I think
I'll fire them all. Yes, do I have your permission to fire them
all? I do that about every other week.
All right. Now I believe that Mr. Lawson, Robert Lawson is
next and you are representing?
Mr. Lawson. The National Association of Home Builders.
Chairwoman Roukema. Yes, yes the National Association of
Home Builders and certainly if there's one interest group that
we must hear from, it's the home builders, and we welcome you
here and we will listen to your comments, because I think we
all share the feeling that certainly housing is a national
priority. Thank you very much. Mr. Lawson.
STATEMENT OF ROBERT LAWSON, ON BEHALF OF THE NATIONAL
ASSOCIATION OF HOME BUILDERS
Mr. Lawson. Thank you very much. On behalf of the 205,000
members of the National Association of Home Builders, I want to
thank you for inviting us to speak on the Housing Affordability
Act.
My name is Robert Lawson, I'm a builder from Virginia
Beach, Virginia, and President of the Lawson Companies. For
almost 30 years, our company has been active in the financing,
development, and management of affordable and market rates
single and multi-family housing. Let me begin by thanking
Chairs Roukema and Oxley for introducing the first major
housing bill in many years. We appreciate your willingness to
address some very complex issues in order to provide more
affordable housing for low-and moderate income households.
I would like to confine my oral statement to the affordable
housing production and preservation component of H.R. 3995.
While commenting on your production proposal, I would also like
to offer a different approach for the subcommittee's
consideration as you begin your deliberations on the bill. Our
proposal would meet the needs of affordable families at all
income levels from the very low-to moderate income families.
Section 101 of Title I creates a new affordable housing
production and preservation program under HOME. The program
would provide loans and grants for the production or
preservation of existing affordable housing for very low and
extremely low-income households funded with unobligated
balances of recaptured Section 8 funds.
While we appreciate that a funding source independent of
annual home appropriation is identified, we question whether
the source of money will appropriately meet the program's goal
of increasing production for very low and extremely low-income
households. This source of funding may prove inadequate as HUD
improves the utilization rate of vouchers and reduces the
amount of unobligated funds. If funding for the new program
becomes problematic, there might be a temptation to require
participating jurisdictions to set aside regular home funds for
these purposes. NHB would oppose this unintended result.
NHB believes that the establishment of a new rental housing
product and rehabilitation program that produces 60,000 to
70,000 units annually should be a top housing priority for the
Administration and Congress in the coming year. The often-cited
reports by the Center for Housing Policy and Harvard University
document the need for a new multi-family rental housing
production program that would meet the affordable housing needs
of households with incomes between 60 and 100 percent of area
median income, America's working poor. These households are not
eligible for housing assistance for most current Federal
housing programs. NHB proposes a program to produce mixed
income housing which has proven to provide greater financial
stability and community acceptance than developments that
concentrate on very low and low-income households. The program
focuses primarily on the working poor with a portion of each
property up to 25 percent reserved for very low and extremely
low-income households.
Although there are several ways in which this program could
work, our proposal relies primarily on the low interest rates
available through Ginnie Mae guaranteed lower floater
securities which carry very low rates of interest, currently
less than four percent. These securities could be issued by a
variety of entities including developers, private lenders,
housing finance agencies, and local governments. Ginnie Mae
would guarantee the timely payment of principal and interest to
investors, which would further lower financing costs.
Underlying loans could be backed by the Federal Housing
Administration, the Rural Housing Services, or could be
conventional loans, though use of the latter would require a
change in the Ginnie Mae charter.
Interest rate subsidies or buy-downs would be employed to
achieve additional affordability. To further reduce debt
coverage, developers could also use sources of equity and soft
second such as tax credits, HOME, the Federal Home Loan Banks
Affordable Housing Program, and State housing trust funds. The
only Federal budget dollars required would be for any credit
subsidy needed for Ginnie Mae participation, interest rate
subsidies or buy-downs, and a marginal increase in the cost of
rental assistance vouchers. The program would require only a
small amount of Federal Government subsidy per development and
would provide for on-going maintenance and future capital
improvements by building in adequate reserves from monthly cash
flow at a level sufficient to rehabilitate the development in
year 2000.
Chairwoman Roukema. Mr. Lawson, I'm sorry. I don't know if
you realize that your time has run out here, but I know you
have a much more extensive report to give, and we'll go over
it. Is there one minute that you'd like to summarize with the
point that you want us most to focus on?
Mr. Lawson. I think that the big thing is it's low cost
program to the Government and it provides for incentives to the
developers in a way to create good, mixed communities that
focus on the broad range. I guess in summation, I would say if
we're helping people only at 30 percent of median, where do
they go when they hit 35 percent of median, because the market
can only serve people starting at 100 percent of median.
We've got to have a continuum to have a good, sound housing
policy.
Chairwoman Roukema. That's a point that's interesting to be
made. I don't know how we'll deal with it, but we will
certainly review it..
Mr. Lawson. Thank you very much.
[The prepared statement of Robert Lawson can be found on
page 230 in the appendix.]
Chairwoman Roukema. Mr. Lopez. Mr. Rodrigo Lopez is from
AmeriSphere, a mortgage banking company, but you're here in
Nebraska nationally or is it ?
Mr. Lopez. Nationally, but based in Nebraska.
Chairwoman Roukema. Based in Omaha, Nebraska. But you are
here today representing the Commercial Multi-Family Board of
Governors of the Mortgage Bankers Association. So we do welcome
you and we want to get your advice on how we deal with this
problem or these problems. Thank you.
STATEMENT OF RODRIGO LOPEZ, PRESIDENT, AMERISPHERE MULTIFAMILY
FINANCE, L.L.C., ON BEHALF OF THE MORTGAGE BANKERS ASSOCIATION
OF AMERICA
Mr. Lopez. Thank you. Good afternoon, Madam Chairman and
Members of the subcommittee. The MBA also applauds the Chair
and Vice Chair of this subcommittee for introducing H.R. 3995.
We believe that this legislation lays the groundwork for
increasing American's access to affordable housing, both for
those families buying their first home, and for those who are
living in rental housing.
There's no doubt that this country's facing a crisis in
affordable housing, a significant shortage in decent,
affordable housing exists in virtually every jurisdiction in
America, and this problem is growing worse. The cause of the
problem differs from region to region. In areas where housing
prices are generally lower, the problem of affordability often
stems from lack of income. The housing exists, but the rents
are simply too high for lower income families. In these areas,
income support programs, such as vouchers, are the most cost
effective means to provide assistance. In other areas, the lack
of existing rental housing has driven up rents to the point
where even moderate income families cannot afford to live in
the communities where they work.
The fact that there has been little, or in some areas no
new production has made many places virtually unaffordable for
many families, even for some two full-time workers. The
production program outlining H.R. 3995 utilizes these highly
successful home investment partnership program, HOME, for
production and preservation. MBA applauds the bill's provision
dividing the allocation of HOME funds 60 percent to localities
and 40 percent to States.
We do, however, have several concerns about rental housing
production provisions in the bill. Our first concern is with
the targeting of the production program to very low and
extremely low-income constituencies. While people in these
income groups undoubtedly have faced critical housing needs,
there's also a need for assistance for families making between
60 and 100 percent of median income.
Currently, there are no Federal programs to help renters in
these more moderate income brackets. Many of these people are
municipal employees such as teachers, police, and firefighters,
who cannot afford to live in the communities they serve.
Second, MBA does not believe that the program set out in
H.R. 3995 would generate new construction or substantial
rehabilitation of affordable housing. Therefore the program
would not address problems in high cost areas of the country
where significant new housing production is badly needed.
Finally, MBA believes that a mixed income is essential. As
currently drafted, the provisions of H.R. 3995 would not
produce mixed income developments. It is our opinion that
families would be better served and Federal housing dollars
would be better spent in properties with tenants whose income
range from less than 30 percent to 100 percent of median
income.
To address the need for new production, MBA proposes the
creation of a new Federal interest rate subsidy program. The
most successful Federal housing production programs rely
heavily on public/private partnerships that encourage the
private sector to produce housing with support provided by the
Federal Government. FHA Mortage Insurance programs have been
extremely successful in producing new and rehabilitated housing
at little or no cost to the Federal Government.
Partnering FHA Mortage Insurance with interest rate subsidy
will, in most markets, encourage private production of rental
housing at rents that would be within the reach of families at
60 to 100 percent of median income. A new production program
would reduce the cost of financing. The subsidy would reduce
the interest rate significantly below market allowing lower
rental rates. Such a program needs to work with other Federal
programs including home, tax credits, and project-based
vouchers to achieve a mix of incomes.
MBA looks forward to working with the Members of the
subcommittee and their staff to craft a new rental housing
production program that will serve a variety of income groups.
Through such a program, Government and private industry can
work together to address the crisis in affordable housing.
Thank you, Madam Chairman. We appreciate having the
opportunity to present our views to you today.
[The prepared statement of Rodrigo Lopez can be found on
page 236 in the appendix.]
Chairwoman Roukema. Thank you. Now I regret having to tell
you that we're going to have to bring this to a close, not only
because I'm the only person here, subcommittee Member here, but
also because we inadvertently and hadn't really intended to,
but because of circumstances beyond our control, I have another
hearing at 2:00 o'clock on another subject, but nevertheless a
subject under our jurisdiction. But I think that what we've
learned here today and certainly I am most encouraged--we're
concluding now; I'm sorry.
Voice. You are.
Chairwoman Roukema. Yes, we are. We have to leave here and
I was going to say that the encouraging thing here today is
that both the public groups, the community groups, the State
and local governments and community groups are very
consistently supportive of you and all that you're doing and
reverse we haven't agreed on everything, certainly how it's
going to be paid for and what the relative focus is relative to
vouchers and the tax provisions, etc., and I think we can
certainly come to agreement on how we target the low-income and
the very low-income, and then what, if anything, and I believe
Mr. Lopez, did you just mention the fact that-- was it Mr.
Lopez or Mr. Lawson--just mentioned the fact that there's too
much targeting of the very low-income and the more middle
income people are being ignored.
That would be a subject for great debate. I heard it, but I
don't know how we deal with that in terms of realistically
considering the money that is available. But we'll go over it.
I guess that subject had some up in one form or another
previously on the panel, on the previous panel.
But if there's one final word that you wanted to say, you
may make that statement now and then we'll adjourn for the day,
and again, I invite you to submit any additional material for
the record, and it will be part of the open record of the
hearing.
Mr. Lawson. Thank you very much. We will try and send
additional material forward and I guess the time might be best
utilized if I could answer any questions that you or any other
Member might have.
Chairwoman Roukema. No, as I said, I indicated that the
time is very short and I have another hearing that I'm in
charge of so I'm afraid we can't continue you it any longer.
Mr. Lawson. Thank you, Madam Chairman.
Chairwoman Roukema. Yes. Any final statement any one of the
four Members want to make?
[No response.]
Chairwoman Roukema. All right. I'm sorry, Ms. Valezquez,
you were busy in another committee hearing. I'm sorry. But I
think you will find, as you go over this information that it
was very, very helpful and very consistent both from the
community groups as well sa the business groups, the
homebuilders and the mortgage bankers. They're not in complete
agreement, but I think we're all moving in the right direction.
Thank you very much.
Mr. Lawson. Thank you.
[Whereupon, at 1:30 p.m., the hearing was adjourned.]
H.R. 3995--THE HOUSING AFFORDABILITY FOR AMERICA ACT OF 2002
----------
TUESDAY, APRIL 23, 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 2:00 p.m., in
room 2128, Rayburn House Office Building, Hon. Marge Roukema,
[chairwoman of the subcommittee], presiding.
Present: Chairwoman Roukema; Representatives Green, Ney,
Kelly, Miller, Grucci, Tiberi, Velazquez, Carson, Schakowsky,
Jones, Watt and Israel.
Also Present: Representatives Oxley and Baker.
Mr. Green. [Presiding.] Good afternoon. This hearing of the
Subcommittee on Housing and Community Opportunity will come to
order. Opening statements. Without objection, all Members'
opening statements will be made part of the record.
The Chairwoman of the subcommittee, Chairwoman Roukema, has
been detained and will be joining us shortly, but I wanted to
get things underway and I will at this time read her opening
statement and will proceed to recognize Ms. Velazquez.
This is a second in a series of hearings on H.R. 3995, the
Housing Affordability for America Act of 2002, which is
designed to increase the availability of affordable housing and
expand home ownership and rental opportunities across the
country. Our first hearing on this legislation focused
specifically on the home program, housing production, the
National Housing Trust Fund as proposed in H.R. 2349 and the
Thrifty Production Voucher as proposed in H.R. 3995.
As the Chair has stated before, new production of
affordable single and multi-family housing is essential to the
goal of expanding home ownership and affordable rental
opportunities. That first hearing was most informative. Clearly
there are different ways to address the shared goal of
increasing production. The Chair trusts as we move forward on
H.R. 3995 that we can all stay focused on the goal and keep an
open mind on how best to achieve that goal.
There are many problems that need our attention relative to
housing in this country. Certainly we need to look at ways to
increase production and we need to search for new ways to
address the increasing costs of Section 8 contract renewal. If
we do not, it will soon consume the lion's share of HUD's
budget. In light of the country's growing elderly population,
seniors are finding it harder and harder to find affordable
housing or to simply stay in their home. There are over 34
million Americans 65 years and older. By the year 2025, that
number will increase to 62 million, or one in every six
Americans. Growing numbers of seniors are suffering from worst-
case housing needs from 1991 to 1997. The number of senior low
income renters paying more than 50 percent of income toward
rent rose 8 percent. At the same time, the number of senior
low-income households receiving public rental assistance
dropped 13 percent. These factors could combine to create a
crisis level lack of affordable housing for senior citizens
within the next decade. We need to establish comprehensive
aging-in-place strategies to link affordable shelter with
compassionate services through public-private partnerships. The
reality is that solutions to these problems will not be easy.
That is precisely why Congress thought it necessary to
establish both the Millennium and Seniors Housing Commissions.
We have asked them to think outside the box and to come up with
solutions to address these growing and pressing problems. H.R.
3995 is a first step toward addressing the problems that we
could address right now in anticipation of a Millennium Housing
and Senior Housing Commission reports that are due later this
year.
This hearing today will focus on programs that provide
direct Federal housing assistance to low income Americans. We
have asked our witnesses to comment on the Section 8 program,
public housing, elderly, disabled, homelessness and HOPE IV.
The Section 8 program is the primary type of direct Federal
housing assistance to low income Americans. At last year's
hearing, we heard how in certain communities, voucher
underutilization is a significant problem. Underutilization of
vouchers has been attributed to various causes, including the
tight rental market, poor performance by public housing
agencies, targeting of a large percentage of vouchers to very
low income individuals, low fare market rents and rent caps of
40 percent of adjusted monthly income. H.R. 3995 includes
provisions that provide flexibility to public housing
authorities and tenants alike within the Section 8 program.
Some of the provisions included in this legislation would
establish a thrifty voucher production voucher to be used in
conjunction with new construction or substantial
rehabilitation, permit the 40 percent cap to be based on gross
income versus adjusted income, and allow public housing
authorities to use up to 5 percent of the funds allocated for
counseling, down payment assistance, rental security deposits
and other activities that assist families in finding suitable
housing to directly assist hard-to-house families.
Through the public housing program, HUD gives grants to
public housing authorities to finance the capital costs of
construction, rehabilitation or acquisition of public housing
developed by these PHAs. Title 5 of H.R. 3995 includes
provisions that would relieve some of the administrative
burdens for PHAs such as giving the Secretary of HUD the
ability to waive the resident commissioner requirement,
suspending the reporting requirement for small PHAs of 100 or
fewer, and granting HUD the authority to investigate the
feasibility of an alternative evaluation system to assess the
overall performance of a public housing agency.
H.R. 3995 reauthorizes HUD's homeless programs through
fiscal year 2004 and funds renewals of contracts through the
housing certificate fund for one year at a time through 2004.In
addition, it reauthorizes the Indian housing block grant
programs, housing opportunities with AIDS and HOPE VI.
Finally, H.R. 3995 includes reforms to the HOPE VI program
that will allow eligibility for small PHAs.
We are looking forward to all the witnesses' testimony
today, and I want to thank all of you for being here.
At this time, the Chair recognizes Ranking Member Velazquez
for her opening statement.
Ms. Velazquez. I just would like to note that I am not the
Ranking Member on this subcommittee. It is Congressman Barney
Frank from Massachusetts, but in light of the fact that a short
notice was given about this hearing, he had a previous
commitment. I will be reading my own opening statement. I would
like to thank Chairwoman Roukema for holding this important
hearing today and the witnesses for taking the time to share
their expertise. The programs that we will be addressing during
today's hearing are crucial safety nets for the most vulnerable
among our population and we must ensure that as we move
forward, we continue to meet the needs of the population they
are meant to serve. Rental assistance programs, be it public
housing, Section 8 or a program targeted to a special needs
community such as the elderly, disabled or the homeless, are
among the most vital programs administered by the Federal
Government. They are the difference between families having a
safe stable environment to call home and oftentimes living on
the street.
While I applaud the President's move to increase home
ownership, it is imperative that we not lose sight of the fact
that for many families it is simply beyond reach. I am troubled
by implication that home ownership is the answer for all
Americans when many of my constituents cannot afford low rent
apartments. Making the leap to home ownership is not under the
list of immediate priorities. Paying next month's rent is, and
we need to ensure that they can afford to do that today. I was
glad to see that the Chairwoman included in this bill a
proposal that I had advocated to ensure the rights of Section 8
and have voucher holders remain in their homes. I believe this
language is a good start and I look forward to working with her
to ensure language matches the legislative intent.
This bill contains several new proposals that, while aimed
at increasing the availability of affordable housing, may have
the opposite effect. Specifically I am eager to hear the
witnesses' opinion on such items as the potential conversion of
public housing to project base Section 8 and expanded ability
of PHAs to engage in joint ventures. I believe it is important
that the subcommittee knows what long-term impacts should we be
expecting from such measures.
Of particular concern to me is the fact that increases in
worst case housing needs are greatest in urban areas and among
working minority families with children. It is not enough to
say that no child will be left behind. Actions must support the
rhetoric. Yet when parents are forced to work 2 or 3 jobs to
afford safe, decent housing, both children and families are
left behind. We cannot allow this to continue. It is difficult
to imagine how the proposed shift from the current standard of
rents not exceeding 40 percent of net income to gross income
will make housing any more affordable. It may push many
families one or even two steps back.
In closing, while this bill looks to address an impressive
range of housing issues, it is my hope that we can do all of
them justice. The Chairwoman should be commended for taking
separate days to address different programs and I hope that we
will seriously consider the comments and suggestions of our
expert witnesses before rushing into a markup that does not
fully address the needs at hand.
Thank you, Mr. Chairman.
Mr. Green. Thank you.
At this time the Chair would recognize Chairman Oxley,
Chair of the Financial Services Committee, for any opening
statement he may have.
Mr. Oxley. Thank you, and I want to commend you Vice
Chairman Green and Chairwoman Roukema for your hard work on the
bill. We are here to discuss the Housing and Affordability for
America Act. Under your leadership, this subcommittee conducted
a series of hearings last year examining the affordable housing
crunch occurring in many of our Nation's areas and the
obstacles that kept too many families out of homes. The
hearings outline many of the complex issues involved in
addressing various affordable housing problems across the
Nation, and this bill makes the strong step toward addressing
those issues.
Today we will hear from many experts on public housing,
Federal role subsidies, homelessness and elderly and disabled
housing initiatives as we face what some depict as a housing
problem in high cost areas. It is incumbent we not only address
the home ownership side, but the other housing support systems
that assist families to pursue the American dream. In that
light, reinivigorated public-private partnership initiatives
provide the best opportunity for new affordable housing. Though
we can be proud that American home ownership is at a record
high of nearly 70 percent, we know there are segments of our
population that continue to face challenges to owning a home.
As well as being a community anchor, housing is a point of
strength in today's economy. Low interest rates have made home
ownership more feasible, allowing many first-time buyers to
enter the housing market. Rates have also created a boost in
refinancing, which frees up cash to go to other sectors of the
economy. The shaky state of the stock market has made real
estate investment increasingly more attractive. And on the
rental front, affordable rents for working families provides a
foundation for future home ownership and ultimately strengthens
families and communities. Not only is home ownership a good
equity investment and good for the economy, it is an investment
in our local neighborhoods. It is critical to communities that
affordable housing is within reach for all income levels and
that home ownership is an attainable goal for any working
family. Housing affordability is an opportunity that everyone
deserves, and this bill will help to ensure it is an option for
more American families.
Today I want to welcome Mr. Thomas Slemmer of Columbus,
Ohio, who represents the National Church Residences.
Approximately 6 months ago I attended a ribbon-cutting ceremony
in Mansfield, Ohio, in my congressional district for 50 homes
brought to our community by Mr. Slemmer's organization. We are
proud of your work in Ohio and look forward to your testimony
today.
And I would like to welcome another Ohioan, Ms. Terri
Hamilton Brown, who is executive director of the Cuyahoga
Metropolitan Housing Authority, which includes Cleveland. I
understand that you have made significant strides in your short
tenure.
To you and to all of the witnesses on this panel and the
next, we look forward to your testimony and expertise in
helping craft legislation that truly brings the American dream
to our constituents. And I thank the Chair and yield back.
[The prepared statement of Hon. Michael G. Oxley can be
found on page 278 in the appendix.]
Mr. Green. Chair recognizes Ms. Jones for 3 minutes for an
opening statement.
Mrs. Jones. Thank you, Mr. Chairman, Chairman Oxley,
Ranking Member on a number of my committees, Ms. Velazquez, and
to my colleagues, to the members of the panel, good afternoon.
I seek unanimous consent that my full statement be included in
the record.
Mr. Green. All opening statements will be made part of the
record.
Mrs. Jones. Owning a home is the most rudimentary element
of financial independence and the beginning of a wealth
creation process. Furthermore, purchasing a house means more
than just a place to live and a good investment. Home ownership
is an opportunity for a better life. For many Americans, owning
a house can also mean collateral for a small business loan or
be the first steps toward building a strong credit history. It
is of vital importance that we ensure the ability of all
Americans to have access to the resources that are required to
realize this basic piece of the American dream.
Chairman Oxley spoke to the fact of 70 percent of home
ownership in this country. But the reality is it is less than
50 percent for African Americans and less than 50 percent for
Hispanics. And as much as I support and push home ownership and
wealth education and the fact that predatory lending has taken
over many of our communities where home ownership used to be, I
am as much concerned about those who will never own a home,
those who want affordable housing and need the opportunity to
be able to live in affordable housing and affordable rental
housing, and that is why I am pleased to have an opportunity to
be a part of this hearing and this subcommittee.
We are here today to discuss the merits of the Housing
Affordability Act of 2002. The intention of the act is to
increase availability of affordable housing and expand home
ownership and rental opportunities. Although I support the
spirit of the legislation, we must make sure that we address
all of the issues in full. An inadequate or flawed response to
the problem will not suffice, is not enough for us just to say
that we passed a piece of legislation that might help housing
or affordable housing in our country. As legislators, it is our
job to look at all the evidence that is before us and to make
some decisions as we pass legislation that will do what we are
saying it is going to do, and the only way we can to do that is
go to the people who are in the know.
Having served in many other capacities--and I know that
sometimes you put legislation or you put an ideal at the top
and it never sinks down to the bottom, it kind of floats on the
oil. It is important that we, as we deal with this housing
crisis in this country--and we do have a housing crisis, that
we take care and make sure that we do the right thing at the
right time to save all the people who are looking for us to be
their safety net in this community.
I have some more, but I will not read it, Mr. Chairman. I
ask that the balance be included in my statement. And I need to
say from my congressional district, our executive director is
here, but I will wait until my time to introduce her, because I
do not have any time left now.
[The prepared statement of Hon. Stephanie T. Jones can be
found on page 280 in the appendix.]
Mr. Green. Mr. Miller of California, do you have any
opening statement?
Mr. Miller. Thank you, Mr. Chairman. We continue to discuss
barriers that really preclude us from providing affordable
housing, and they are so numerous. If you talk to builders who
are trying to build houses, the approval process is so slow in
many cases that they just cannot provide enough housing to meet
the demands, and that is the situation we are facing today. And
when you have more demand, as you know, than you have supply,
you artificially increase the price of housing. And this
morning I was meeting on a separate issue, which is going to
impact affordable housing, and that is Canadian soft wood
lumber. On May 2, there is a hearing on whether a 29 percent
tariff should be placed on soft wood from Canada. That equates
to about $1,500 in increased costs for housing if that happens.
And the problem we face in this country is we do not provide
enough soft wood to meet the demand. And if you look to some
groups, they want to continue to shut our forests down, but we
continue to decrease the amount of logging that occurs, thereby
decreasing the amount of lumber we have to be able to provide
housing. I commend the Chairwoman for taking this on. We have a
problem that is just growing daily, and it is not just one
sector causing it, it is an overall ballooning of problems that
the industry has to face and costs they have to absorb in
providing housing. And, therefore, we are continuing to meet
and discuss a problem that we know is probably going to be
worse next year than it is this year, and we have to get to the
root of the problem.
I know in many of your western States, Endangered Species
Act is a huge problem. When your builders go in and buy
properties that they think are reasonable to produce affordable
housing, just to find out that some spider, rat or fly lives on
them, and all of a sudden, instead of owning property that they
can provide affordable housing on, they own a habitat, and they
go through countless years of litigation and lawsuits and
spending money on attorneys just to end up, by the time they
are through, meeting exorbitant requests by agencies, and
therefore the cost of the housing is so much, it is no longer
affordable. I commend each of you for trying to provide needed
housing for people at the low-income levels who really need
housing, and it is incumbent upon us to look beyond that and
say what is causing this problem. And I agree with Mr. Green
and many other Members of this subcommittee who are looking to
that.
We are trying to figure how do we get to the root of the
problem. We continue to look at the problem and just put a
Band-Aid over it and it will get us by to the next week, but it
does not resolve the problem that is causing the sore, and the
sore is a lack of affordable housing because the demand far
exceeds the supply. And I keep repeating it, but until we have
a move-up market for people to move up to that is affordable,
there is never going to be an affordable housing market because
59 percent of the people who want affordable housing have no
place to use a Section 8 voucher especially in California. So I
am looking forward to the hearing today.
Mr. Green. Mr. Watt, opening statement?
Mr. Watt. Thank you, Mr. Chairman. In the interest of
hearing the witnesses and time, I think I will waive my opening
statement. I did, however, want to commend the Chairwoman for
having a witness that will focus primarily on the HOPE VI
program and some of the concerns that several people have
raised about that.
When we started the reauthorization process to award
reauthorization of HOPE VI, I wrote to the housing authorities
in my congressional district and asked them to submit any
comments they may have, and also wanted to ask unanimous
consent to submit the responses that I received from the
Greensboro Housing Authority, Winston-Salem Housing Authority
and Charlotte Housing Authority to my request and ask unanimous
consent to submit their responses about the HOPE VI program.
Mr. Green. Without objection, so ordered.
[The information can be found on page 293 in the appendix.]
Mr. Watt. And I yield back the balance of my time and thank
the Chair for allowing me to introduce the witness from my
congressional district, but I will do that later.
Mr. Green. Mr. Baker, opening statement?
Mr. Baker. Nothing at this time, thank you, Mr. Chairman.
Mr. Green. As we introduce our first panel of witnesses,
the Chair reminds witnesses that they will have 5 minutes to
provide an oral summary of their testimony. Their full written
statements will be made part of the record. Since we will be
having Members who will be introducing individual members of
the panel, we will introduce each speaker right before he or
she speaks.
Our first speaker is Telissa Dowling. She is the president
of the Resident Advisory Board of the New Jersey Department of
Community Affairs. The board represents 19,000 voucher holders
throughout New Jersey. Ms. Dowling also serves as a member of
the board of the National Low Income Housing Coalition.
Welcome, Ms. Dowling.
STATEMENT OF TELISSA DOWLING, PRESIDENT, RESIDENT ADVISORY
BOARD, NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS, ON BEHALF OF
NATIONAL LOW INCOME HOUSING COALITION
Ms. Dowling. Good afternoon. Thank you, Vice Chairman Green
and Members of the subcommittee. I am honored to be here today
to testify about H.R. 3995. My name, once again, is Telissa
Dowling and I am the president of the Resident Advisory Board
New Jersey Department of Community Affairs. The DCA administers
the 19,000 vouchers throughout the State of New Jersey. I am
testifying here today on behalf of the National Low Income
Housing Coalition. I am a member of the coalition's board of
directors and I am representing its members nationwide who
share the goal of ending affordable housing crises. We know
that the intent of the bill is to expand both rental and home
ownership opportunities and to make existing programs work
better.
As the subcommittee knows, housing affordability,
availability are serious problems. Vouchers do help close that
affordability gap by paying rents that would be unaffordable
otherwise. Today, 1.5 million low income families are served by
vouchers. Choice and mobility are important attributes of
vouchers but, as you know, people in many places, people with
vouchers are having a lot of trouble finding a place to live.
The bill would let PHAs use 5 percent of their funds for
improving voucher success. While we think this is a good idea,
we think it should be limited to 2 percent and to PHAs meeting
certain criteria so there is a connection between the use of
the funds and the need. And if PHAs take advantage of the new
policy, they should have to report it in their PHA plan.
We also have a problem with increasing the tenants' portion
of the rent to 40 percent of the gross income. This could make
housing accessible to voucher holders, but it comes only at the
tenants' expense. The tenant would pay even more of an already
small income on rent and really suffer trying to make ends
meet. One way to improve voucher success that does not come at
the tenants' expense is to let PHAs increase their payment
standards to 120 percent of the fair market rent without HUD's
approval if they meet certain conditions.
My written testimony includes some other suggestions for
increasing voucher success. We are very worried that some of
the changes proposed in the bill will stifle opportunities for
tenant input and participation. These opportunities became law
only 4 years ago with the enactment of the Quality Housing and
Work Responsibility Act of 1998, known as QHWRA, where PHAs
were given more flexibility, but were also made accountable to
their tenants and communities.
We stand firmly against the proposed waiver of the tenant
resident commissioner requirement. Exceptions already exist to
this requirement and the Secretary should not have broad waiver
authority for this requirement.
We also oppose the 3-year suspension of the filing of PHA
plans by PHAs with less than 100 units. Without the planning
process, PHAs are under no obligation to include tenants in
their decisionmaking process.
In addition, depending how the terms small public housing
agency is interpreted, the 3-year suspension could include PHAs
with fewer or no public housing units, but significant numbers
of vouchers. For example, my PHA administers approximately
19,000 vouchers, but has no public housing units. There are
also PHAs around the country with fewer than 100 public housing
units, but many more vouchers.
In my own experience as a voucher tenant and as the
president of the RAB, the planning process has made the PHA
take tenants into account. The PHA has been making changes
without understanding their effect on tenants. But the PHA
planning process requires PHAs to consider tenants and their
needs.
And we also have serious misgivings about the development-
based subsidy proposal in the bill. We worry that an untested
concept for private financing will not be able to make up a big
budget gap in an already underfunded program area.
We are also very concerned about the loss of actual public
housing units permitted through this program. My written
testimony describes our concerns about the HOPE VI program and
provides our proposal for reauthorization. We think that the
loss----
Mr. Green. If you could wrap up your testimony, I would
appreciate it.
Ms. Dowling. We think that the laws of the public housing
unit will help big in the development-based subsidies for
public housing and will undercut the goals of the production
program in the bill and will put even more pressure on the
voucher program. And my written testimony addresses some
additional issues that I did not have time to discuss today,
including expanding the ROSS and the FSS program, improving
enhanced vouchers and other issues.
Thank you again for the opportunity to speak with you
today.
[The prepared statement of Telissa Dowling can be found on
page 381 in the appendix.]
Mr. Green. Thank very much for your testimony. And you did
well rushing at the end. Do not worry.
Our next witness is Ms. Joan Walker Frasier. She is the
President of the Atlantic City Residents Advisory Board in
Atlantic City, New Jersey. She also serves as a State delegate
for the National Organization of Public Housing Residents,
ENPHRONT. Did I get that right?
STATEMENT OF JOAN WALKER FRASIER, PRESIDENT, ATLANTIC CITY
RESIDENTS ADVISORY BOARD, ATLANTIC CITY, NEW JERSEY, ON BEHALF
OF ED WILLIAMS, PRESIDENT OF ENPHRONT
Ms. Frasier. Good afternoon. My name is Joan Walker
Frasier. I am a disabled resident of public housing in Atlantic
City, New Jersey; President of the Atlantic City Housing
Authority Advisory Board and, as you state, a State delegate of
the National Organization of Housing Residents, and we are
affiliated with 46 members around this country.
I am testifying this afternoon on behalf of Mr. Ed Williams
who is president of that organization and unable to be with us
today.
I would like to first say greetings to Members of the
subcommittee.
ENPHRONT believes that the basis for well run public
housing is not only about sound brick and cement, but also
deep, sustained and meaningful participation by residents in
shaping all aspects of a public housing agency's policies. To
this end, ENPHRONT strongly opposes the provisions of H.R. 3995
that will waive the requirement that housing authorities
appoint residents to their governing boards if they make their
best efforts to do so, but fail to comply.
When the Resident Commission Mandate was enacted in 1998,
residents nationwide celebrated. The requirement marked a
fundamental shift from the Federal Government's earlier policy
of simply encouraging housing agencies to appoint resident
commissioners. The requirement was also thought to be a
necessity, given the fact that the Nation's 2200 housing
agencies have been deregulated by the 1998 Public Housing
Reform Act. And it is against this backdrop that we believe the
provision in H.R. 3995 to be both harmful and unnecessary.
Housing agencies have already been granted significant
regulatory relief from the requirement.
First, under current law, housing agencies can be exempted
from the requirement if they first satisfy a few basic
conditions.
Second, when HUD released its proposed rule on resident
commissioners in June of 1999, the draft rule required housing
agencies to appoint resident commissioners within a set
timeframe. Housing agencies immediately fought against the
implementing schedule of the requirement, citing the complexity
of local, political environments as the reasons for not being
able to appoint resident commissioners within that timeframe.
In response, HUD later published a final rule allowing
housing agencies to appoint resident commissioners without a
set deadline. Though the resident commissioner mandate remained
intact, the final rule allowed the Nation's housing agencies to
move at different speeds in complying with the requirement.
It has been over 3 years since the enactment of the law on
resident commissioners. ENPHRONT believes that by now the
majority of the Nation's housing agencies should have done all
necessary to make residents serve on governing bodies a
reality.
ENPHRONT also opposes an H.R. 3995 that would exempt small
housing agencies from having to submit annual plans for the
next 3 years. ENPHRONT questions the need for such a waiver
provision. Under current rules, small housing agencies already
submit to HUD's streamlined annual plans.
Furthermore, HUD has the power to further simplify the
format of planned submission. Why eclipse this provision and
the relief provided by it with a 3-year waiver provision?
Indeed, ENPHRONT does oppose the waiving of the annual plan
requirement for small housing agencies, but on the other hand,
we are willing to discuss ideas for further simplifying the
process. In discussing these ideas, we are in no way in support
of stripping away or watering down on resident participation
policies currently in place. These policies include Resident
Commissioner Mandate as a requirement that the housing
authorities establish and provides support to resident advisory
boards.
On behalf of ENPHRONT and the millions of public housing
residents nationwide, I thank you for this opportunity to
testify before this subcommittee and look forward to working
with you in the future. Thank you.
[The prepared statement of Joan Walker Frasier can be found
on page 376 in the appendix.]
Mr. Green. Thank you very much for your testimony.
Our next witness is Mr. Kevin Marchman, who is the
Executive Director of the National Organization of African
Americans in Housing, a non-profit organization here in
Washington, DC. He has over 24 years of experience in the
public housing field, having served as Assistant Secretary for
the Office of Public and Indian Housing at HUD and as Executive
Director of the Denver Housing Authority. Welcome.
STATEMENT OF KEVIN E. MARCHMAN, EXECUTIVE DIRECTOR, NATIONAL
ORGANIZATION OF AFRICAN AMERICANS IN HOUSING, WASHINGTON, DC.
Mr. Marchman. Thank you. Members of the subcommittee, my
name is Kevin Marchman and I am the executive director of
NOAAH. I want to thank you for the opportunity to comment upon
this bill. Like you, NOAAH is a champion of affordable housing
opportunities for all people, especially people of color.
NOAAH's membership is a unique combination of public housing
agencies, including executive staff, housing professionals,
consultants, contractors, industry trade groups and resident
groups and other advocates. Indeed, as a former public housing
resident and public housing director and assistant secretary, I
have the vast pleasure of leading an organization that has the
diversity and the experience to look at issues, programs and
legislative initiatives from many perspectives. And while the
subcommittee is interested in NOAAH's views on certain public
housing issues relative to this bill, I would like Members to
be aware that NOAAH's advocacy extends beyond simply those
issues highlighted today and includes initiatives and programs
targeting environmental and health issues, specifically lead,
mold and pests, expanded home ownership for minorities,
economic development for the low income, fair housing,
especially increased penalties for predatory lending, the
aggressive disposition of the FHA portfolio, the HOME program
expansion and other opportunities on behalf of our diverse
membership. And while our members often find themselves on
competing sides of the same issues, all are committed to
expanding opportunities for African Americans and other
disenfranchised minorities.
Four things with respect to public housing: The leveraging
of public funds. This proposal in the bill will allow housing
authorities mixed use of private and public financings to
rehabilitate and modernize public housing developments. We
believe this is a good thing, but there are some kinks. We have
to make sure that this particular proposal safeguards the
public housing stock in this country.
The waiver of the resident commissioner requirement. NOAAH
supports this waiver, but only in terms of where State laws
preclude the requirement.
The HOPE VI program. The HOPE VI program is probably one of
the more successful programs that HUD offers, and for the last
10 years in the majority of the cases, it worked well in
communities in which it has been implemented. It is not
perfect, and I believe between working with Congress and the
Administration and members of the public, this particular
program can be made much better.
Fourth, the suspension of the filing requirements for
public housing authorities for 3 years. Good idea, but it is a
bit short. We believe it should be at least 250 units. However,
any suspension of the requirement must not preclude the active
involvement and participation of public housing residents.
There are others, but I will let my written statement
stand.
As I said, NOAAH is a housing advocate for all people of
color. Our members are assisting NOAAH staff with identifying,
creating and developing programs to increase affordable housing
stock in this Nation. NOAAH's membership is constantly
documenting best practices, designing initiatives using
technology to improve the quality of life in identifying
opportunities, public and private, for expanding availability
of the affordable housing stock and improving the quality of
life for the low and moderate income.
Thank you very much.
[The prepared statement of Kevin E. Marchman can be found
on page 371 in the appendix.]
Mr. Green. Thank you for your testimony.
At this time the Chair recognizes Ms. Jones for an
introduction.
Mrs. Jones. Thank you, Mr. Chairman. It gives me great
pleasure to be able to introduce to this subcommittee and other
members of the panel and those listening to this testimony the
Executive Director of the Cuyahoga Metropolitan Housing
Authority, Terry Hamilton Brown. Prior to becoming the
executive of one of the largest public housing authorities in
this Nation, Ms. Brown served as the Director of the Department
of Community Development for the City of Cleveland, and it was
under her leadership that the Housing Construction Office was
created. As well as under her leadership in the City of
Cleveland we have built more housing in the City of Cleveland
in the last 12 years than there was built in the City of
Cleveland from the Korean War. And it was under her leadership
that that was done. She is responsible for more than 1,100
employees as director of CMHA. In addition to all the work that
she does, she serves on the boards of the Urban League, Shore
Bank, University Hospitals of Cleveland and the Greater
Cleveland Roundtable. She is a graduate of MIT and the
University of Chicago, is a native Clevelander, and resides
down the street from me. So it is a great pleasure that I
introduce the Director of the Cleveland Metropolitan Housing
Authority. And just one liberty to all the other witnesses as
well as the second panel, this event was scheduled for another
day and I am in the midst of strategic planning with my
congressional staff, and we do not get that opportunity very
often. So if I slip out, it is not that I am not concerned
about what you are doing. I can read very well and I will keep
up, and I thank you, Mr. Chairman, for the opportunity.
Mr. Green. Ms. Hamilton Brown, welcome.
STATEMENT OF TERRI HAMILTON BROWN, EXECUTIVE DIRECTOR, CUYAHOGA
METROPOLITAN HOUSING AUTHORITY, CLEVELAND, OHIO
Ms. Brown. Good afternoon, Vice Chairman Green, Members of
the subcommittee, and to my neighbor and Congresswoman,
Stephanie Tubbs Jones, thank you for the kind introduction and
thank you for the opportunity to testify before you today on
behalf of the Council of Large Public Housing Authorities.
In the time allotted I would like to highlight four points
of my written testimony, and key to my comments and of most
concern is adequate funding. No program or provision in this
bill can be successful without adequate funding.
First, thank you for proposing the reauthorization of the
HOPE VI program. HOPE VI has proven to be successful at
transforming distressed public housing and having a substantial
impact on the surrounding communities. I support the provision
of the bill to facilitate redevelopment needs of small housing
authorities, but stress that targeting distressed properties
must remain a primary focus of the program. Coming from
Cleveland, being one of the first housing authorities created
in the country, CMHA has a housing stock that was built in the
1930s and early 1940s. It is functionally obsolete and in some
cases beyond modernization. In Cleveland we estimate that 21
family units are or will be eventually candidates for HOPE VI
grants.
As to the HOPE VI, my recommendation is to create a two-
track grant-making system, one track that continues to provide
large grants to the most severely distressed properties and a
second track that would focus on smaller redevelopment projects
that require other grants and work with small housing
authorities.
Next, related to the private debt financing strategy for
public housing included in this bill, it appears that it is
proposed that the expense of full funding of the capital fund
program could limit the potential of private investment and
could lead to opt-outs in public housing.
As I see it, a successful private debt financing strategy
needs to do three things. It needs to ensure adequate Federal
funding, leverage private resources, and protect public housing
units. This bill accomplishes only one of these. The provisions
giving HUD the authority to remove low income use restrictions
on public housing property in the event of foreclosure is of
particular concern as it places public housing units at risk
and in danger. This could result in additional loss of low
income housing in many communities like Cleveland that have
already experienced numerous HUD-insured property foreclosures.
The debt financing model included in this bill takes away
resources from the capital fund and does not necessarily
recognize that public housing authorities are already using
capital funds to leverage millions of dollars. While we
appreciate additional development tools, we do not ask for it
at the cost of capital funds and the loss of public housing.
Third, the supportive housing for elderly provision in the
bill does not include the conversion of public housing into
assisted or supported housing. With nearly 700,000 seniors
living in public housing, public housing authorities serve more
seniors than any Federal housing program and should be included
in this bill.
In Cleveland we created a program called the Manor at
Riverview. It includes 69 units of supportive housing and a
health clinic through modernization efforts of a large elderly
highrise. Our experience shows that it takes a huge investment
in capital improvements and significant operating dollars to
keep the ongoing personal care and health services as well as
to fund social service coordinators. It is quite challenging
finding the resources to make this affordable to very low
income families. Additional Federal assistance is needed if we
are going to support seniors and public housing, avoid
premature shifts to nursing homes and save Medicaid funds.
To that end, CLPHA is renewing its Elderly Plus proposal.
This initiative would create a demonstration of $100 million of
competitive awards for public housing authorities, both large
and small, for innovative conversions of obsolete buildings.
This would allow our seniors through Elderly Plus to remain and
age in place and create equal access for supportive living
environments.
Lastly, related to the Section 8, the provisions in the
bill we support. However, there would be an additional comment
to add flexibility and improve utilization in tight real estate
markets. While CMHA has moved from a troubled to a high
performer and we have high utilization, that is not always the
case for my colleagues in tight real estate markets. Despite
good program management, people are having difficulty using the
vouchers if there is a shortage of rental and affordable
housing in their marketplace. We believe many of the Section 8
enhancements in H.R. 3995 will provide for better utilization,
especially the provision that would assist hard-to-house
families, and the simplification of rent calculations. The
details of my recommendations related to that is included in
the testimony.
In conclusion, CLPHA members remain committed to providing
quality housing for low income families. H.R. 3995 provides
opportunities and tools to assist public housing authorities in
carrying out our work but, I repeat, no program can be
successful unless it receives adequate funding. Your efforts to
provide policy guidance and increased resources for public and
assisted housing is critical to ensuring that low income
Americans can have access to safe, even affordable housing,
both rental and home ownership.
[The prepared statement of Terri Hamilton Brown can be
found on page 357 in the appendix.]
Chairwoman Roukema. [Presiding.] Thank you. I did not hear
your whole testimony, but I am sure this whole panel is very
constructive, and we will move along together to be
constructive to get a good bill. But I do want to apologize to
everyone for not being here on time, although I was on a
delayed AMTRAK train from New York and New Jersey, not,
however, the one that I understand was crashed this afternoon.
No. We were just delayed and I am sorry for that and I regret
it, and I do thank Congressman Green for sitting in for me and
helping me, and I can assure you that we will go over in great
detail all your testimony, and I thank you all.
I understand that you all have been very compliant about
conceding to the time limits here, because we not only have
this panel, but a second panel to go through. And with that, I
believe Mr. Baker would like to introduce his friend and
colleague and authority from Louisiana.
Mr. Baker. Thank you, Madam Chairwoman. I appreciate that
courtesy and do wish to extend a welcome to Mr. Hans Dekker,
who is not only a constituent, but a very distinguished leader
in our community and State in bringing innovative thought to
providing housing to those who need it. I think his experience
in directing the Baton Rouge Area Foundation, which is one of
the top 10 in the country as far as generating assets for
quality housing, is very admirable.
Prior to that 3-year stint, he, of course, was the director
of the local initiative support corporation, known as LIST to
most of us, for some number of years. So I am particularly
pleased to have his testimony before the subcommittee, Madam
Chairwoman. I think you will find him to have particular good
insight and helpful recommendations.
STATEMENT OF HANS DEKKER, BATON ROUGE AREA FOUNDATION, BATON
ROUGE, LOUISIANA
Mr. Dekker. Thank you, Madam Chairwoman, and I would like
to recognize and thank Congressman Baker for his commitment to
housing in neighborhoods in East Baton Rouge Parish. He has
been a true leader in building a community-wide strategy to
address our most pressing needs.
HOPE VI is one of the most important community tools in the
Nation. It represents one of the only very large focused
investments available to revitalize distressed public housing
and its surrounding neighborhoods. The private market, to a
large extent, has left America's toughest neighborhoods and it
is an important and vital role for the Federal Government to
serve as a source of funding for revitalization. HOPE VI has
and should continue to do this. The changes to the HOPE VI
program proposed in H.R. 3995 are needed and timely. HOPE VI
has always devoted most of its resources to help the most
largest, most troubled public sites in the country. This policy
has meant that much of the HOPE VI funding has benefited only
the largest cities in the Nation.
In fact, almost 50 percent of the HOPE VI funding for the
year 2000 has gone to 13 different housing authorities. While
targeting the largest, most troubled public housing sites was a
deliberate policy objective at the beginning of HOPE VI, since
1996 the program has supposed to have been available to a wider
swath of authorities. Unfortunately the bias for large cities
and large public housing sites has continued in the program. It
is biased in two fundamental ways.
First, the way the funding is allocated greatly benefits
large public housing authorities with large housing sites.
Second, the funding and selection criteria that HUD uses are
biased to large cities. This bias is ironic, because HOPE VI is
really intended to reduce our Nation's stock of distressed not
necessarily large public housing units. The fact is that in
each of Baton Rouge three HOPE VI applications, they were
awarded the maximum points for the distressed nature of their
units for which they were applying. However, because of the
bias in the allocation of funds toward larger public housing
sites and, by extension, large cities, the distressed nature of
sites is overwhelmed in the scoring process by the size of the
complexes and the units. This bias exists despite the fact that
in small and medium sized cities, especially in the southern
United States, we have some of our Nation's highest rates of
poverty and neighborhood distress.
Let me use Baton Rouge as an example. The median household
income in the 5 census tracts that make up the immediate
neighborhood around the sites targeted in our HOPE VI
application is between $5,000 and $11,000. The average net
income for public housing residents in our HOPE VI application
is $3,400. 25 percent of the land in the immediate neighborhood
is vacant and/or abandoned. This poverty and abandonment
translates directly into high levels of crime and disease
concentrated in our most distressed neighborhoods. For the year
2000, Baton Rouge was ranked sixth in the Nation for crime
rate. Our level of violent crime was twice the national average
and Baton Rouge has the twelvth highest AIDS case rate per
capita in the Nation among our major metropolitan areas.
Simply put, we have great need, too. The 2001 HOPE VI
awards exemplified the bias to large cities or public housing
sites. Of the $540 million HOPE VI budget, 225 million was set
aside for projects with 300 or more units at one site. If these
large site applications were not funded from the site, they
were automatically placed in the application pool for the
remaining 265 million. A smaller applicant like East Baton
Rouge with 171 units totaled between two sites could only
compete in the second highly competitive pool of funds. As a
result, only three sites in 2001 with less than 300 units were
funded. These sites received just under 12 percent of the HOPE
VI funding in 2001. Additionally, more awards were made in 2001
to housing authorities which have recently appeared on HUD's
troubled housing authority list. This support for troubled
housing authority has had predictable results, many of them
being unable to execute their HOPE VI grants successfully.
The support for troubled housing authorities is especially
exasperating when you look closely at the scoring criteria for
HOPE VI applications. One of the areas for which East Baton
Rouge's most recent application lost points is the lack of
experience and capacity of our housing authority to implement
the grant. However, our housing authority is not classified as
troubled; has acquired high quality assistance in the
preparation and implementation of its grants and has
successfully managed large scale HUD modernization grants; and
has obligated funds in a timely and effective manner as
required.
There are numerous other technical aspects of the program
that perpetuate a bias against small public housing sites that
I have detailed in my written testimony, but the major point I
would like to leave with you is that it is needed and timely
for the HOPE VI program to open its funding and selection to
all public housing authorities on an equal footing.
Thank you.
[The prepared statement of Hans Dekker can be found on page
364 in the appendix.]
Chairwoman Roukema. I thank you. That was a very excellent
testimony, right to the point, and you did it within the
timeframe. Thank you.
Mr. Harry Byrd. I believe, Congressman Watt would
appreciate introducing you as one of his North Carolina
representatives.
Mr. Watt. Thank you, Madam Chairwoman. I want to thank the
Chair for allowing two witnesses to talk about the HOPE VI
program and for also giving me the opportunity to introduce Mr.
Harry Byrd, our final witness on this panel, who is currently a
Principal in The Harkin Group, a project management and
consulting firm, and previously the Senior Vice President and
chief Operations Officer of the Housing Authority of the City
of Charlotte, North Carolina. In that capacity, he had a number
of things under his supervision. Most important for our purpose
today was the HOPE VI program at the Charlotte Housing
Authority. And since he has left the Charlotte Housing
Authority and formed his own consulting group and project
management group, he has continued to consult not only with the
Charlotte Housing Authority, but with other housing authorities
which are implementing HOPE VI grants. He knows the successes
and the shortcomings of HOPE VI, and I think it is important
for us to hear both successes and problems, and we welcome him
here today from my congressional district, Mr. Harry Byrd.
STATEMENT OF HARRY A. BYRD, JR., PRINCIPAL, THE HARKIN GROUP,
LLC, HUNTERSVILLE, NORTH CAROLINA, ACCOMPANIED BY JOHN KENNEDY
Mr. Byrd. Thank you. Good afternoon, Chairwoman Roukema and
other Members of the Subcommittee on Housing and Community
Opportunity. My name is Harry Byrd, principal of The Harkin
Group. With me today is John Kennedy, also a principal.
On behalf of the company, I thank you for the privilege of
addressing this subcommittee today and sharing with you some of
our experiences and what we have learned as a result of working
with the HOPE VI program over the last 9 years. The Harkin
Group has been involved with the HOPE VI program since it was
first introduced in 1993. Currently we associate it with HOPE
VI as private consultants.
Obsolete public housing sites that are redeveloped under
the HOPE VI program are transformed from communities of
isolation and hopelessness into viable self-sustaining
neighborhoods of opportunity and vitality. The true intent of
HOPE VI can be accomplished. However, we have recognized that
there are strategic areas of this program that should be
improved to afford housing agencies the opportunity to better
accomplish the overall goals established by the program.
Of major concern to us as well as to proponents and
opponents of HOPE VI alike are a number of original residents
of the public housing site who returned to the revitalized
community. There are a number of reasons that this number may
be lower than desirable. The design of HOPE VI communities
seeks to decrease the concentration of poverty in a specific
geographic region by decreasing density on the public housing
site, resulting in decreased public housing inventory. Fewer
units result in fewer residents that can be accommodated. Based
on our experience, housing agencies are replacing from 35 to 50
percent of HUD-subsidized housing units lost through HOPE VI
demolition revitalization.
To combat this impact, it is necessary to strengthen the
requirement for the development to ensure increased financial
commitment on the part of the public and private sectors. This
action would provide necessary resources to increase the
boundaries of the revitalization area beyond the mere footprint
of the public housing site itself, thus allowing an increase in
the number of units developed.
Currently, there is no requirement for one-for-one
replacement of public housing units lost to HOPE VI
development. While we realize that one-for-one replacement is
difficult to achieve, a greater commitment toward achieving
this goal should be emphasized in the requirements of the
program.
Typically, public housing residents living in a development
targeted for HOPE VI revitalization are relocated prior to
commencement of demolition and construction. It has been our
experience that the timeframe between residents being relocated
from the site and new housing units being developed that allows
them an opportunity to return can be anywhere from 3 to 5 years
or longer. Specific examples are cited in our written
testimony. This time span alone can cause residents to be
become frustrated and disillusioned with the program and choose
not to return.
Reducing the period between the time residents are
relocated and the time they can return to the site can have a
positive effect on the number of residents returning. One way
to accomplish this is through comprehensive, up-front planning
that ensures the housing agency is ready to begin immediately
upon grant award. The greater degree to which all components
are developed and in place, the greater degree of speed and
efficiency in which they can be implemented.
Along with involvement of residents at the outset, it is
imperative that public housing agencies provide good tracking
and monitoring of residents during redevelopment. PHAs must
provide adequate follow-up and supportive services to keep
residents involved in the redevelopment process and working
toward their eventual return. In instances where this is
lacking, many original residents who were displaced from the
site are lost.
Of foremost consideration in the HOPE VI programming and
implementation are the residents for whose benefit the program
was conceived and designed. Community and supportive services
must be in place early on that include activities designed to
help residents make smooth transitions into their new living
environment. It is incumbent upon housing agencies to develop
comprehensive transitional housing programs that provide the
necessary support, training and resources through case
management in assisting families to be prepared to return and
to move toward self-sufficiency.
Design and programming for build-out of the site should
include economic strategies that will provide sustainability of
these communities going forward. If the mix that is typically
recommended by HUD can be achieved, then the economics of the
project will define the level of private sector participation
required to ensure sustainability.
Another important element is the attraction of market-rate
development and reinvestment back into the community by
fostering public/private initiatives to change long-standing
perceptions.
Just as critical is the level of participation and
commitment from local government. Although the program is
funded through local housing agencies, local government buy-in
and commitment of resources are essential to securing HOPE VI
funding and to the long-term success of the program. The return
on investment for these stakeholders is realized in the form of
an increased tax base and elimination of revenue distressed and
revenue-draining communities. Moreover, HOPE VI revitalization
serves as a catalyst for economic and other development efforts
in the city that may not otherwise occur.
Chairwoman Roukema. Mr. Byrd, can you summarize and
conclude please?
Mr. Byrd. HOPE VI programs are very complicated and quite
different from other capital improvement programs that many
housing agencies have undertaken. Earlier program requirements
call for housing agents to have program management in place to
enhance capacity and to protect the interest of the PHAs as
necessary. That requirement has been dropped. As a result, many
housing authorities are left without capacity.
If we can implement HOPE VI programs consistent with the
requirements and guidelines established by HUD, we will build
better communities that include senior housing, homeownership
and family housing--neighborhoods that have been targeted into
the broader community and include a true mixture of affordable,
market rate and subsidized housing.
In our opinion, the HOPE VI program was well-conceived and
has provided many opportunities to public housing agencies and
the residents they serve. We strongly feel this program should
be continued. And I apologize for extending my time.
[The prepared statement of Harry A. Byrd Jr. can be found
on page 346 in the appendix.]
Chairwoman Roukema. That is all right. Fine. I thank you
for everyone's cooperation, and recognizing that I was late to
begin with, but I will ask all my colleagues, in consideration
of the number of people that we have here, that we are able to
get through this first line of questioning. We will begin with
Mr. Green.
Mr. Green. Thank you, Madam Chairwoman.
Let me begin with Ms. Dowling and Ms. Walker Frasier. You
both expressed some concerns over the suspension of planning
requirements for small PHAs and the waiver of the resident
commissioner requirements. Can you offer some thoughts on how
we can achieve the goal of regulatory relief for small PHAs and
sort of ease the regulatory burden and the paperwork burden
while still maintaining tenant access?
Ms. Dowling. Yes. That is very simple. Because when the
CORA went into place back in 1998, when it was mandated, all
the hurdles that we had working out the PHA plan was addressed;
and most of the housing authorities that are in good standing
actually are allowed to submit a streamlined version of the PHA
plan. So it is not like you would have to go every year and
reinvent the wheel. It is just that you are going to plug in
different components throughout the year.
So that's why it is very difficult for us to understand why
would small PHA plans--housing authorities have problems with
submitting this plan when HUD gives it to you over the web, HUD
gives you the opportunity to even have it streamlined from the
beginning? So it is already there. We are just asking to use
it.
Mr. Green. So you don't see a need for regulatory relief I
guess is what you are saying?
Ms. Dowling. Maybe I am not clear what you are asking me
about regulatory relief.
Mr. Green. I guess what I am taking from your response is
that you don't believe that PHAs do have a problem with onerous
paperwork requirements they are filing.
Ms. Dowling. No, not at all.
Mr. Green. Ms. Walker Frasier.
Ms. Frasier. I don't understand myself what the particular
small housing agencies are telling you what their problems are.
Because of the 18 components, then why not look at streamlining
those requirements that they have to face? If they are talking
about there is too much information being asked from them, then
the requirements made by HUD need to be looked at.
Mr. Green. I guess, Mr. Marchman, I would like to get your
response. I know that your organization is in favor or at least
supports the resident waiver--commissioner requirement being
waived.
Ms. Frasier. No, I am sorry.
Mr. Marchman. On the onset of public housing authorities
developing these plans, I think it was about 4 or 5 years ago,
perhaps in a hearing like this, the then secretary of HUD, in
response to a question from a subcommittee Member, talked about
the lack of strategic planning for public housing authorities.
We spoke about it a lot, and the criticism was that PHAs simply
did not do a good job in planning for the future.
The PHA plan was created, I submit to you, for large,
medium and small--it is too much information, information that
HUD does not read and does not have the capacity to do anything
meaningful with. If you look at even the smallest housing
authorities, some of which I work with, those 18 points just
don't get to the issues of how to run and plan for a well-run
public housing agency.
That does not preclude, however, the very strong need to
have involvement of residents and other community members in
the planning of that housing authority. I think that is
crucial. Indeed, I would say that public housing agencies have
become much more well managed in the last 10 years,
particularly in the last 5 years, and due to residents being on
boards of commissions.
But the PHA plan is too much for smaller housing agencies,
and they spend too many of the resources in putting those
things together, giving it to HUD, HUD's simply approving it
and filing it away.
Mr. Green. Do you have other ideas for easing the paperwork
and regulatory burdens that you might want to share?
Mr. Marchman. I think there are probably four or five
crucial areas that smaller public housing agencies could submit
to HUD that would suffice for the 18 they currently submit. I
think they can be submitted either over the web or paper into
the local offices; and they will simply cover the areas of
operation, management, relationships with residents of the
community, exactly what you plan to do with the funds that you
are receiving from the Federal Government. Not much more needs
to happen, but it has to have the involvement of everybody,
specifically residents who sit on the board.
Mr. Green. I would invite you to supply some written
information to us on that. That would be very useful as we go
about this process. Thank you. Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you, Mr. Green.
Congresswoman Velazquez.
Ms. Velazquez. Thank you, Madam Chairwoman.
Ms. Hamilton Brown, I agree with the concerns voiced in
your testimony regarding the project-based private debt
financing strategies. Specifically, I am concerned about the
potential to cause long-term problems through the gradual
phasing out of publicly assisted rental housing.
You mentioned the need to ensure the preservation of these
units for low-income families. Would you please expand upon
this, and also what strategy would you advocate? Do you believe
it is possible to maintain this housing while leveraging
private funds?
Ms. Brown. My concern as the provisions are laid out in the
bill that it would give HUD a lot of authority to waive the use
restrictions. So while we believe that we should be able to use
capital funds to leverage private dollars to expand the amount
of financing and development, more production, my concern is,
in the case of foreclosure, if the authority goes to HUD that
we could lose public housing units to the market and that the
housing authorities, whether directly or through partnerships,
should have more control in developing that financing
structure.
The other concern that I have is that this is too strict,
and it sort of implies that all markets are the same and that I
think we need to learn more how financial markets across the
whole country, not just in certain tight real estate markets,
will respond to that and that additional study needs to be
looked at in other ways to generate private dollars.
However, the point is that, as a tool, we need to provide
leveraging. We certainly know that Federal funds by themselves
won't do it, but the security measures and the structure need
more work.
Ms. Velazquez. Thank you. I was happy to hear you address
the issue of PHAs getting back into the housing production
business. I believe that, at the very least, we need to create
an exemption from the prohibition on public housing production
for high-performing authorities in tight markets. Would you
support such a proposal, and what effect do you believe such a
proposal would have on housing affordability in these markets?
Ms. Brown. Absolutely, I would support it. In fact, in
Cleveland, though it's not with public housing moneys, we have
received upgrade grants for foreclosed properties in the past,
and we are using those in a partnership with a local non-profit
to produce more affordable housing units. In effect, the
housing authority is creating product that the market will not
create. So I think it will enhance our ability to serve more
low-income families in those markets.
Ms. Velazquez. Thank you.
Ms. Dowling, the house voucher right to remain language is
of particular interest for me. In fact, the language, as it
currently exists, was an initial draft of a bill that I
intended to introduce. However, the language was not quite as
tightly drafted as I would like. We have held off. For this
reason, I appreciate your concern about the drafting of the
language as it exists in the bill. How specifically would you
want to see it altered?
Ms. Dowling. Can I give you that more in writing? Because
we did sit down and come up with a proposal and I wouldn't want
to not give you all that we have right now. We do have it in
writing.
Ms. Velazquez. So I will work with you and my staff. Thank
you, Chairwoman.
Ms. Dowling. Thank you.
Chairwoman Roukema. Yes. I hear your concern about that,
and certainly my intention is to go into this in more depth.
Certainly your goal is a proper one, and we should be able to
work this out, but we don't have all answers here.
So, Ms. Dowling, we New Jersey people should be able to
resolve this problem. I should acknowledge the fact that both
Ms. Dowling and Ms. Frasier are from New Jersey, and we
appreciate their leadership.
Ms. Velazquez. So we should work with the Low Income
Coalition on the language. Thank you.
Chairwoman Roukema. Yes. Thank you.
Mr. Ney, Congressman.
Mr. Ney. Thank you, Madam Chairwoman.
By the way, I want to welcome all the panelists, especially
those of you from Ohio.
HOPE VI was enacted to provide relief to severely
distressed public housing authorities where developments were
beyond repair, and the hope was that new development funds
could be used to revitalize community neighborhoods. We all
know that purpose. Do you think it has met its objectives?
Also, how do we address displacement where public housing money
is used to redevelop, that maybe less than 50 percent of the
tenants would return? Anybody on the panel? I was just curious
what you think.
Ms. Brown. I will start. Yes, I think HOPE VI is showing
that it is successful. There is just not enough funds to
address all the severely distressed properties, as I noted in
my testimony. The age of our housing, too.
While we have received three grants and we have completed
some components and are under construction with others so it is
very fluid, the three grants don't begin to really address all
of our needs. Cleveland is a little different in that, for the
grants we have received, we are replacing almost all of the
housing. The only areas we haven't is where we had efficiencies
or one bedrooms where we already have that kind of inventory,
but the real need for us are the three and larger bedrooms, and
we have replaced them maybe not always on site, but using other
land in the community. Working with the city, we have replaced
it with off-site development. So that's not exactly our
condition.
Mr. Ney. The same within my area in eastern Ohio, we
haven't had a particular problem.
Is there anybody on the panel who has had a similar
situation?
Ms. Dowling. Yes. Telissa from New Jersey.
With the HOPE VI, one of the major problems is finding out
exactly what do you mean by severely distressed. Because now
you have housing authorities that are allowing the property to
really become terrible in order to qualify for the HOPE VI
funding, and that is not the intent of what HOPE VI was
supposed to be about.
Also, under the HOPE VI, the problems that we are having,
the housing authorities even adhering to the Uniform Relocation
Act, as far as helping the residents that are being relocated
pending the new apartments that are coming, find decent and
affordable, safe housing, they are giving them the vouchers
that are not being able to be utilized and are just throwing
them over to the voucher program and saying, do what you got to
do until we are able to build something. But, in the meantime,
they are building it, and they are building it not for that
resident in mind. Because that could be an extremely low-income
resident, but now they are building mixed-income residences
where that extremely low-income resident cannot return with
HOPE VI the way it is now.
We understand intent, and that is why we also have
something in writing to submit to the panel in reference to
strengthening the HOPE VI program to really make it more
effective for everyone and not just displace poor people and
put mixed-income people in there. I know they have a problem
finding rent, also, but I can give you an example in the State
of New Jersey that we have an executive director of a housing
authority making $90,000 and living in public housing. That is
a problem. That is a problem.
Mr. Ney. I would agree with that.
If I have the time left, one quick question. There has been
some concern that the Section 8 contract renewal situation will
eat up the HUD budget. I just wondered, and if I run out of
time, any creative ideas you can submit. I know you can tell
Congress the answer is to put some more money in, but maybe
there are some things we are missing.
In Ohio, we try to do some housing trust programs and come
up with creative ways, and I am sure there are examples around
the country, but we are missing something as a Federal
Government. So if you have any ideas--I don't want to take the
chairperson's time, but I would appreciate it.
Chairwoman Roukema. You have one more minute. Go ahead.
Ms. Frasier. One of the biggest problems I am finding, at
least even in New Jersey with the HOPE VI program in Atlantic
City itself, is that they are building these houses under HOPE
VI, but they are not all designated for public housing
residents. So now you have got 600 units you are building, and
you are displacing 214 people, but they are not all coming
back. You have not built anything to put them into, so where
are they going?
It is easy to say we will give them vouchers, but if you
know the area of Atlantic City, affordable housing with
vouchers is not always possible, and everyone cannot just
relocate.
Ms. Dowling. I am sorry. I will give you that in writing in
reference to how to make the Section 8 work better.
Mr. Ney. I would appreciate it, and also if there are any
stats that you could give the Chair.
Ms. Dowling. Yes, we do.
Mr. Ney. Also, if anybody has done post interviews, where
these individuals have gone to that they could not get back
into the system.
Ms. Dowling. Oh, yes.
Mr. Ney. Thank you.
Chairwoman Roukema. Congresswoman Jones, I believe you were
the next to arrive.
Mrs. Jones. Thank you, Madam Chairwoman. In your absence,
we all complimented you on hosting this series and bringing us
an opportunity to address this.
Ms. Hamilton Brown, in your written testimony at the last
page you said that, despite the important role of public
housing and serving the neediest families, there is also a
statutory bar to the development of incremental or replacement
public housing. Can you speak to that issue briefly for me,
please?
Ms. Brown. Right. This is the requirement or the inability
to do one-for-one replacement housing, and it is really lack of
funding. As the two persons speaking before me are saying,
there really is a need to replace public housing as you are
doing HOPE VI to return residents to their home. And without
having adequate funds or tools to leverage more dollars,
maintain the units as public housing, we really are not
creating more housing. We are just shuffling, I imagine, and
putting people in other places. So not every property maybe
requires one for one. So you have to find what is the
appropriate mix for the locality.
As I answered before, we don't have a strong demand for
efficiency so as we demolish any of our units that were of that
size, we don't replace them. But for the larger bedrooms, three
and more, there is absolutely a need to replace each unit in
the market, at least in our area, as you well know.
Mrs. Jones. Talk to us about some of those programs that
you worked on with the City of Cleveland and other private
ownership as some innovative ways to replace some of the
housing that is lost as a result of the inability to replace
units.
Ms. Brown. In Cleveland, we use block grant dollars as well
as home dollars for housing production, affordable housing,
whether it is in a housing trust fund that is locally
established to provide gap financing with developers as well as
non-profits. In effect, this past year was the first time the
public housing authority has received a grant of moneys from
the City of Cleveland.
We are using home dollars with one, our Carver Park HOPE VI
to help us meet the need for the number of units that we want
to replace. We are also using moneys through the city's
empowerment zone to help make housing more affordable in our
mixed-income development. So those are the ways that our city
is using moneys for affordable housing.
Mrs. Jones. Let me ask you one additional question or a
couple until my time runs out.
In H.R. 3995, as proposed, I believe it allows for only 2
years of assistance for families. Can you tell me, based on
your experience, whether a 2-year period of time is a
sufficient time for families to be able to--rental assistance
dollars, are they able to adjust? What have you found to be the
appropriate period of time for them?
Ms. Brown. Related to? I am sorry.
Mrs. Jones. That is a good question. I don't know all the
background on it, but----
Chairwoman Roukema. Excuse me. I am wondering what the 2-
year period is that you are referencing.
Mrs. Jones. I am using a question that somebody wrote for
me, and I don't know. So I am going to withdraw that question
and go on to something else.
Chairwoman Roukema. All right. Withdraw it, and then if you
review it and if you want to come back later.
Mrs. Jones. I appreciate it.
Can you tell me what are the dangers of basing rent
calculations on the average median income versus utilizing the
now standard fair market rent equivalent? Can you help me with
that?
Ms. Brown. By using the SMR we believe we will be able to
provide more choice, housing options to families and to also
move people out of areas of concentrated poverty and that they
will have more choice in the rental market.
Mrs. Jones. Are you, as a housing authority, able to do
mixed-income housing under the current standards that are set
forth, regulations set forth by HUD?
Ms. Brown. Actually, using the capital fund, you are able
to do mixed-income financing. Perhaps there needs to be greater
rules that HUD should put forward, regulations to really
describe the range, but housing authorities are able to do that
now. I believe Atlanta is one of those that has been very
successful at using public funds for mixed-income financing.
Mrs. Jones. I want to thank you again, Madam Chairwoman.
I am in the midst of a staff retreat, so I am going to try
to do some strategic planning myself. I thank you all for
coming and please excuse me.
Chairwoman Roukema. Thank you.
Congressman Miller.
Mr. Miller. It is so nice you have you here, Ms.
Chairwoman. I am sorry that train wasn't on time.
Chairwoman Roukema. I am glad I wasn't on the other one
that crashed.
Mr. Miller. I know the one in my district has a lot of
people hurt.
Ms. Brown, thank you for elaborating on that. Your
statutory bar--I had no idea what type of housing you were
talking on this. It was my question, so I am glad you did
respond to that.
Mrs. Dowling, I always looked at homeownership as a way for
individuals to create wealth and stability within communities,
especially in volatile housing markets where home values
increase rapidly. Why don't you think Section 8 vouchers should
be used for down payment assistance in those areas?
Ms. Dowling. We didn't say it should not be used. It should
be used, but not 5 percent. Two percent. Because then you are
giving the housing authority the opportunity to say we are
going to use the whole 5 percent toward a down payment for
homeownership, so that cuts out the security deposit, cuts out
even helping to utilize the voucher activities. We don't
totally disagree.
Mr. Miller. You don't oppose that.
Ms. Dowling. No. We just said not the whole 5 percent
unless you are going to give me strong language that clearly
states that the housing authority cannot use the whole 5
percent. Because that is a substantial amount of money when you
start looking at the budget. I am telling you it will be as
true as this table that the housing authority will take that
money and just use it for pushing the homeownership program,
and then we are going to lose out on getting those vouchers
utilized in the first place.
Mr. Miller. Because I look at it as, if you can get people
into housing, in a few years they won't need Section 8
vouchers. They will have equity built up.
I think that is a great opportunity for us, but we have
neglected that for years not taking advantage of that
opportunity.
Ms. Dowling. But even in my written testimony you will see
we want to tie the self-sufficiency program into the
homeownership program, and that is exactly what we are doing at
the New Jersey Department of Community Affairs. Those residents
are moving through from the self-sufficiency program and
actually own homes.
Mr. Miller. Mr. Marchman, I don't think you were asked the
question, but you support a third-party public housing
assessment. What type of issues should be a prototype
examination on that, and what kind of local or regional issues
should be factored into that assessment, do you believe?
Mr. Marchman. Yes, I do agree there needs to be a third-
party assessment system. We have been through two or three at
HUD, and it simply has not been able to characterize or to take
a snapshot of a well-run housing authority. Like any industry,
I believe a third-party assessment would be a good thing. I
think it should look at areas with respect to how well the
management is run, the physical condition of the building; and,
because public housing agencies throughout the country are in
different climates, they are in different locales, that has to
be a part of it.
I think once you begin to independently assess public
housing authorities, they will continue to improve, knowing
that those standards are fair standards in which they can
manage toward.
Mr. Miller. There is one project that I applaud an Orange
County developer for processing. He is building about a
$400,000 home community, but he is also mixing in low-income
apartments into that process, which to me is the direction of
the future, to be able to create neighborhoods, that you don't
focus just totally on people from one income level which, as
you know, in Government housing has caused problems sometimes,
but to integrate people in different income levels. But the
problem that he faced was he had to go through about 30
agencies just to get that low-income project approved and get
it through HUD and everything.
What would you recommend that we do to avoid that in the
future to encourage individuals who want to do this, who are
trying to provide housing for those in need, yet the
bureaucracy and the red tape they are going through is just
overriding sometimes?
Mr. Marchman. Having been a former municipal employee
working for a mayor, I know how difficult that could be. I
would simply suggest usually developers are profit motivated,
although they may have very good intentions. Perhaps we could
look at extension of tax credit programs to give them an
incentive and to give the city the incentive in order to
support such a thing. I would support any developer who was
looking at mixed-income, mixed-financed housing as the goal.
It is certainly the goal of a HOPE VI program. There is no
reason why it couldn't be the goal of a city or town. But they
need ways to get around the multilayers of approvals that you
need and, sometimes, as you know, heavy resistance.
I have known developers who are looking to do exactly this,
but some segments of the community say we just don't want that
low of an income here. But I think there have been some
examples, and I am sure people here can tell you of mixed-
income housing under the HOPE VI programs and others that have
worked and perhaps they can share that with you.
Mr. Miller. In this particular case the developer had the
zoning. He could have taken and built apartments that would
have rented for considerable money that he decided to use them
for. But just the process of going through the HUD process for
low-income--I mean, he had 30 agencies he had to deal with, and
it was just a bureaucratic nightmare, based on the testimony I
have heard him give to individuals, which would put other
individuals in a situation where they might not want to go
through the hassle to try to help people really in need. That
is scary, and I think we need to address that.
I yield back.
Chairwoman Roukema. Thank you, Congressman Miller.
I might observe, having been on this subcommittee for a
long time and gone through a few secretaries of Housing and
Urban Development, I think it might be well for us to readdress
that question to Secretary Martinez--I think we need some
direction from the HUD Secretary--and put ourselves together
with him to make that a primary goal of these programs. So we
have had him before this subcommittee, but I think, following
the numbers of panels we have had, including this one, I think
we will have to take that issue up with Secretary Martinez
again.
With that, Ms. Carson, Congresswoman Carson.
Ms. Carson. I will be very brief.
I want to first thank you, Madam Chairwoman, for convening
this matter here regarding the dearth of housing available to
low-income Americans. You are to be highly commended for that,
and I appreciate it very much.
I don't know if the panel will be able to respond. I am
from Indianapolis, Indiana; and we have a major HOPE VI
program. Unfortunately, in my district, my district has the
highest rate of home foreclosures anywhere in the Nation; and I
am trying to figure out what happened.
You know, we pushed homeownership. Then we got over a
thousand people right now that are in a foreclosure situation
within my congressional district, and it is not considered a
poor district, a lot of low-income housing and stuff like that.
That is my one question, to see if you have any idea what
perpetuates these loss of homes once you move these families
into a housing environment.
Number two, a very delicate, delicate question. We are
doing a lot of revitalization, historic preservation, that kind
of thing in my district; and I sort of work with the
neighborhood to say it is OK for low-income people to move in,
relax, it is really OK. We closed down a mental facility in
Indiana. A major mental health facility was shut down. Those
people were supposed to go to group homes, but instead they got
Section 8 vouchers. And I guess that is not your first time at
the rodeo. You have heard that before. And we are just having
all kinds of problems.
When you try to get the mix and then you have people that
truly need mental health services who are out with Section 8
vouchers, living next door to somebody that has got a $400,000
residence, what do you do about that?
Then the mix of elderly with people of those circumstances,
people who have drug addictions. We have had major senior
citizen housing complexes that were integrated with Section 8
vouchers.
Of course, poor people aren't all----
Ms. Dowling. First of all, with reference to your
foreclosures on the housing, that is done because there is no
follow-up. What we do at the New Jersey Department of Community
Affairs, the residents go through an extensive training so
that, when they do purchase their homes, they are just not left
out there to not understand what that private market is all
about and if there is a lot of foreclosures going on there is
no follow-up.
That is where social services--where we were encouraged,
even through the HUD training that we got as residents, to form
partnerships within the communities, even though we might not
be receiving Section 8, because we are homeowners. We forged
partnerships with the social services in the neighborhood,
local non-profits that specialize in following through and
helping people build skills that they will need to live in the
private sector. Maybe that is something that might need to be
done there or something that could correct that problem.
But also what we did with a lot of the mental housing we
have had closed, we are now pushing for supportive housing like
Ms. Brown was talking about. We took the vouchers and allowed
private developers to develop and bring in social services and
build in supportive housing, but there are components within
the voucher program that allows for the housing to be taken
care of.
But through the partnership the social services actually
come in and give the medication when they need to follow
through. Are they keeping their apartment the way they are
supposed to be? So that you can actually go into affluent
communities and you would never know that there was a house
full of mentally ill people there. That is what we did in New
Jersey.
Ms. Carson. What happens when you are in a city in a State
that is in a financial crisis, where they are having to cut
back on major social services and supportive service for people
who are in need of services?
Ms. Dowling. But there is other funding, like Ms. Brown had
mentioned. There is also funding like CBG moneys.
We are also looking into--I am sure you could elaborate
more than I could.
Ms. Brown. Right. I would add that, in Cleveland, we have a
group of social service providers. We call it the Gateway
Group, and we issue our vouchers for special need population
working with this group of providers. They work with the County
Board of Mental Health, which is funded through the State. They
also get moneys from local foundations as well as using the
city's block grant or home dollars. I imagine there are other
Federal funds also that go through some of these social service
providers.
On the point of foreclosures that you were mentioning, when
I worked with the City of Cleveland we used private investment
by negotiating with bankers, our entire community, using the
Community Reinvestment Act to get lenders to commit moneys for
education, buyer education, counseling as well as foreclosure
prevention counseling.
So I think that is a way to get additional moneys into your
community, hopefully working with your local banks. Because
foreclosures are not good for their business, either.
Ms. Carson. I think we have a lot of predatory lending that
goes on that is subprime.
Ms. Brown. So we have to do things to get the other lenders
to do counseling. What we are finding when I was working with
for sale housing predominantly is that it would take a while to
get buyers ready for ownership. It can't always happen
immediately. So that kind of education is really what must be
stressed.
Chairwoman Roukema. I am going to close this line of
questioning at this point in time, but it is an excellent line
of questioning. I would ask that each member of the panel here
please submit your own observations on that question of
predatory lending, because it is an important issue, and we
haven't really gone into it in any depth. But we would
appreciate your experience and your understanding, if indeed
the predatory lending is a problem.
Mr. Baker.
Mr. Baker. Thank you, Madam Chairwoman. I appreciate very
much your calling this hearing on this important subject.
I am going to move through a couple of points rather
quickly, because I have one thing I want to focus on with a
little more time.
Mr. Dekker, I want to express my appreciation to you for
appearing here and also bringing to light the analysis of the
distribution of the funds. I quote from the statement, ``of the
$4 billion already invested through fiscal year 2000 in HOPE
VI, nearly half has been awarded to 13 large housing
authorities.''
Looking at the appropriations reports through 2001, that
figure moves to an excess of $4.8 billion--in congressionally
accurate terms, we would say almost $5 billion has been
allocated through 2001, almost half of which has gone to 13
particular authorities around the country, which is not
distressing in itself, unless, of course, you are not one of
the 13.
Ms. Brown, I noticed in your statement ``I endorse,'' and
I'm skipping a little language, ``creating a two-track system
for HOPE VI. One track continues to provide grants to the most
severely distressed and a second track that would focus on
smaller redevelopment projects that require smaller grant
amounts. Such a system would provide housing authorities of all
sizes with greater access to funds.''
I wanted to get that statement emphasized on the record
because, as I understand it, the top tier of housing
authorities now compete in the first grant of money. If you are
unsuccessful in pot one, you then move into pot two with all of
the smaller authorities and compete a second time, I think a
point worth making at this hearing.
Ms. Frasier, I have read part of your statement which was
not part of your oral remarks. For a number of reasons, your
organization believes that HOPE VI has hurt more than helped
low-income residents living in public housing. ``one of our
primary concerns about HOPE VI is the lack of comprehensive and
objective information revealing how the program is actually
performing. HUD has published glossy, colored publications full
of pictures that examine select HOPE VI sites and select
elements of HOPE VI within those sites. However, the public has
yet to see any broad data on how the program is truly
operating.'' .
Which leads to me to my next point, Madam Chairwoman.
Mr. Marchman, you were HUD's Assistant Secretary of Public
and Indian Housing under Secretary Cisneros for some time, is
that correct?
Mr. Marchman. That is correct.
Mr. Baker. In that capacity, you engaged in a discussion
with the Housing Authority of New Orleans, Tulane University,
and HUD for the purpose of creating a cooperative endeavor
agreement, which you served on the board of the commissioners
to which Mr. Ron Mason, the executive monitor, reported.
Subsequent to that and subsequent to your departure--I want
to make the record clear that there was some controversy with
regard to the PHMAP score for the HUD office using a particular
type of factors to certify that HANO had, in fact, reached a
satisfactory non-troubled score of 60.
Madam Chairwoman, in 1995, HANO, by objective measure, had
a PHMAP score of 28.7. Somehow, magically, without a coat of
paint or structural modifications, it reached a PHMAP score of
85.1.
Subsequent to that period of time, Mr. Marchman, I
understand that you have been engaged at least at some point by
Mitchell & Titus to do additional consulting work to HANO or to
HUD on the HANO project. I am not clear exactly how that works.
My point is to establish you have ongoing and intimate
knowledge of HANO's unfortunate circumstance.
You may not recall that, since 1992 through the year 2000,
public funds amounting to $800 million have been spent at the
Housing Authority of New Orleans. I can absolutely tell you
from personal observation the conditions are at least as bad if
not worse than they were before we spent the first nickel. Tell
me it is working.
Mr. Marchman. Well, as you know, I have been out of HUD now
for 4 years. Let me say I think there are several issues with
respect to the Housing Authority of New Orleans.
Yes, it was among the worst-run housing authorities in the
country for a long, long time; and there are a lot of folks who
had something to do with that, among them city administration,
management of the housing authority, private managers of the
housing authority and the Department itself. It seems as if in
some cases people treated HANO differently, and standards were
not adhered to. That is very clear.
Two issues with respects to HANO. The management of the
housing authority, I would submit, has improved in the last 4
to 5 years. There is no question about that. Their ability to
attract good individuals to work at that housing authority is
still limited, and I understand the Department is working on
that as well.
In terms of the buildings themselves, for many reasons,
none of which I do know, the redevelopment of the desired
property, the redevelopment of other properties has been
unusually slow, but I understand things are moving. I
understand that HUD has acknowledged some of that. But even
though they are----
Mr. Baker. If I may interrupt, because I know the
Chairlady's time is limited to have another panel, I want to
point out that things are moving. They are knocking buildings
down. We are not necessarily replacing it with new housing. I
am not convinced that the poor who are now without housing are
being afforded any more opportunity today after spending $800
million of taxpayer money. I am very concerned about the
independent certification of those PHMAP scores, which look,
from the outside, look to have been manipulated for some
reason.
We don't have time here today to get the full advantage of
your knowledge. I am not in any way asserting that you had
involvement in any of this. I am simply trying to pursue
someone who is knowledgeable in the matter to get the benefit
of his thinking.
At some appropriate time, Madam Chairwoman, I would like to
follow through on this, because it is an enormously significant
problem that has no positive resolution in over a decade of my
work in this area.
Mr. Marchman. I would be absolutely pleased and look
forward to the opportunity of sitting down with you and your
staff to review the long and sometimes painful history of the
Housing Authority of New Orleans. There are many, many factors
that should be discussed and looked at and perhaps----
Chairwoman Roukema. That is what I was going to recommend.
How it applies now to a reform in this legislation.
Mr. Baker. I really appreciate the Chairlady's interest in
this matter, and I appreciate your courtesy.
Mr. Marchman. I am deeply, deeply interested in the
improvement of the New Orleans Housing Authority.
Chairwoman Roukema. Mr. Dekker, of course you are not New
Orleans, you are Louisiana, but I don't think we have any time
for you to go into this now. Do you want to take----
Mr. Dekker. We are the Albany to their New York City.
Chairwoman Roukema. I see. All right. But you don't have
anything to contribute at this point in time to that particular
subject?
Mr. Dekker. No, I don't.
Chairwoman Roukema. Congressman Grucci.
Mr. Grucci. Madam Chairwoman, I have no questions at this
time, but I do have an opening statement that I would ask be
made part of the record.
[The prepared statement of Hon. Felix J. Grucci Jr. can be
found on page 288 in the appendix.]
Chairwoman Roukema. Thank you. That will be included.
Chairwoman Roukema. I do thank the panel. You have been
very helpful and very constructive.
Again, not only those items that you have publicly offered
to submit information to for the permanent record, but if there
is been anything else that has been covered here and not
completely covered in terms of the responses, please, we
welcome your written responses. We will add to them to the
record, and every Member of the subcommittee will be--that
information will be shared with them, and we will take it under
consideration as we move down this legislative track. Thank you
very much.
The second panel will move forward, please. Hopefully, we
will get the second panel before the Members leave. We had such
a wonderful turnout of Members with interest. Let's keep this
moving.
We welcome our second panel here today, and I must ask
unanimous consent to, under the subcommittee's rules, insert
into the record the written statements from the National
Association of Realtors, who did not have anyone on the panel
today, and the National Association of Housing and
Redevelopment Officials.
[The information can be found on page 305 in the appendix.]
Chairwoman Roukema. With that having been said, let me
introduce people in the order in which we have them appearing
and giving testimony: Mr. Thomas Slemmer, President and CEO of
the National Church Residences in Columbus, Ohio; and I believe
Congressman Tiberi would like to present an introduction since
he is very familiar with the work you are doing.
Mr. Tiberi.
Mr. Tiberi. Thank you, Madam Chairwoman. It is an honor for
me to introduce a man from Columbus, Ohio, where I hail from,
Thomas Slemmer, who is President and CEO of National Church
Residences, which is located in Columbus, Ohio.
National Church Residences was founded in 1961 as one of
the country's leading non-profit organizations specializing in
the development, construction and management of over 14,000
units of affordable designed to service the elderly, the low-
income families and persons with disabilities through Federal
and State grants, loans and tax credit programs.
Mr. Slemmer serves on the Board of Directors of the
American Association of Homes and Services for the Aging. He is
past chairman of the Elderly Housing Task Force, the Long-Range
Committees on Aging, the House Committee and the Ad Hoc
Committee on Aging in Washington, DC., here. Mr. Slemmer has
served as Vice President of the Board of Directors for the Ohio
Association of Philanthropic Homes and Housing for the Aging.
He is a former Director of the Board of Directors for the Ohio
Capital Corporation and is currently on the board of the
National Affordable Housing Trust.
He has testified before the House and Senate Appropriations
Committees on senior housing needs in 1990, 1996, 2000, and
July of 2001. In 1994, Mr. Slemmer received the Commissioner's
Award for the U.S. Department of Housing and Urban Development
and the Excellence in Housing Award from the Ohio Association
of Philanthropic Homes and Housing for the Aging. In 1995, he
received the Distinguished Service Award from the American
Association of Homes and Services for the Aging.
Madam Chairwoman, I had the opportunity to visit the
headquarters in Columbus, and it is an organization that is
doing some outstanding things in housing, and I am pleased,
Tom, that you are here today. Welcome.
Chairwoman Roukema. I thank the Congressman.
Mr. Slemmer, we are anxious to hear your testimony.
STATEMENT OF THOMAS SLEMMER, PRESIDENT AND CEO, NATIONAL CHURCH
RESIDENCES, COLUMBUS, OHIO, ON BEHALF OF AMERICAN ASSOCIATION
OF HOMES AND SERVICES FOR THE AGING
Mr. Slemmer. Thank you very much. Congresswoman Roukema,
Members of the subcommittee, we are pleased to be presenting a
unique perspective we think to your subcommittee today, and
that is the perspective of affordable senior housing.
I am pleased here to be representing the American
Association of Homes and Service for the Aging 5,600 providers
and not-for-profit services, and lots of those are providing
low-income housing to the elderly.
I also would like to commend you, Chairwoman Roukema, and
Members of your subcommittee for introducing H.R. 3995. I am
particularly pleased, since I was here last summer to help you
with some of the hearings you had last summer to identify some
key issues, and one of those key issues that we are grateful is
included in this bill is your recommendation under Title III to
address modernization needs for older federally assisted
elderly housing. We are pleased that is in there, and we urge
your continued attention to what we think is a critical problem
facing affordable senior housing.
You have identified in the preamble to this proposed
legislation that a growing number of seniors are suffering from
worst-case housing needs; and I think, in the interest of time,
I want to talk quickly about some of what we see as critical
issues facing affordable senior housing.
Chairwoman Roukema, we operate a facility in West Orange,
New Jersey--I see that is your birthplace--called Wood Valley
Manor. Just to give you an idea of the crying demand for this
kind of housing, that facility was built 5 years ago, 57
apartments. Forty-five of the original residents are still
there. We have shut off, with the permission of HUD, the
waiting list. As 95 people are on the waiting list to get in
there, we are not accepting any more. That is about two-and-a-
half people turning over a year; and, as you can see, it is a
40-year wait to get into that facility.
There is a crying need for that kind of housing, and the
situation is getting worse. That is because the production of
affordable senior housing is not keeping pace with the loss of
it, and the loss of affordable senior housing is primarily
coming from existing housing facilities opting out to market
rate housing and to other housing really becoming functionally
obsolete because of lack of funds for modernization. We believe
that the most critical need that faces us in terms of senior
housing is to halt and replace those units that are opting out.
Now the National Housing Trust developed this list of
150,000 units of federally assisted housing. This is a loss
over the last 5 years. That is more than we are creating.
In my testimony last summer I talked about some of the
strong cooperation, relationships we developed with the local
communities, trying to preserve senior housing like in
Pacifica, California; Manhattan, Kansas. But, unfortunately,
over the last 6 months since I spoke with you last, I had my
eyes opened to some really serious problems, especially as it
relates to the 236 portfolio that is housing lots of elders in
this country.
In northeastern Ohio--and I can't tell you the exact
project because of a confidentiality agreement--there is a 200-
unit 236 project that has been serving as affordable senior
housing for the last 20 years. That project is now offered for
sale. The selling price is less than half of what it would cost
to develop that project new. Those 200 units are about the same
amount as the entire allocation for the State of Ohio under the
202 program. Those units are going to be lost and sold to
market rate housing unless somebody can step in and figure out
how to buy those. There is a building side by side that was
already sold and was opted out of the program.
You ask, how can that happen? We are concerned that it is
not even on anyone's radar screen, because the residents in
that building will get enhanced vouchers. They will be able to
stay there during their lifetime but, as they leave, market-
rate folks will be replacing those people in that housing. The
problem is the preservation effort cannot keep pace with the
kind of the market factors facing this 236 portfolio.
We are, frankly, concerned at AAHSA that we are going to
lose every single affordable senior housing project that is in
one of the better market areas, and I call your attention to
that. We think that is the most serious problem facing us. We
have made some suggestions, and we would love to have a
dialogue with your subcommittee on how we can address this very
serious problem.
One of the recommendations we have made as a kind of focal
point is to develop an Office of Preservation at the Department
of Housing and Urban Development. They still have lots of tools
available to help with this process. They have HUD insurance,
they have various programs that can help streamline the process
of acquiring these, and we urge you to gives some thought to
leadership at the national level to focus on this preservation
effort.
We have covered lots of other points in your H.R. 3995
proposed legislation. One of the best ideas that you have is
social service coordination. We urge you expand that to the 811
program and also to not-for-profit sponsored tax credit
projects. We think that is the best idea that Congress has had
in a long time, and we thank you for that, and we thank you for
allowing us to testify. We think there are serious problems
happening with affordable senior housing.
Thank you.
[The prepared statement of Thomas Slemmer can be found on
page 400 in the appendix.]
Chairwoman Roukema. Thank you, Mr. Slemmer.
I should have notified each member of the panel that you do
have in front of you, if you can see it, the timer that will
turn yellow to alert you that your time is running out and red
when your time is out. So just be aware of that.
We won't go into the West Orange deal, but I am sure--
although I haven't been in West Orange for many years, my
classmates were mayors and councilmen, and my uncle was the
leading councilman. I would like to think that my uncle was the
one that got that West Orange housing initiated. I am going to
look at that. I wouldn't be surprised if he did.
Now we have Andrew Sperling. Mr. Sperling and I have dealt
together on other issues. The issue that he is bringing up
today relating to housing is with affordable housing for the
severely mentally ill.
Mr. Sperling is the Deputy Executive Director of the
National Alliance for the Mentally Ill, an organization which
is very meritorious and which I take great pride in working
with them and following their leadership.
Mr. Sperling.
STATEMENT OF ANDREW SPERLING, DEPUTY EXECUTIVE DIRECTOR,
NATIONAL ALLIANCE FOR THE MENTALLY ILL, ARLINGTON, VIRGINIA,
AND THE CONSORTIUM FOR CITIZENS WITH DISABILITIES HOUSING TASK
FORCE
Mr. Sperling. Thank you, Madam Chairwoman. I am here
representing NAMI, the National Alliance for the Mentally Ill,
and also the Consortium for Citizens with Disabilities, the
Consortium for Citizens with Disabilities Housing Task Force,
which is made up of major national disability organizations
including United Cerebral Association, Paralyzed Veterans of
America, the Arc, Easter Seals and NAMI as well. Before moving
into the body of my testimony, I would be remiss if I did not
note, Madam Chairwoman, the other priorities we work on, and I
want to, from NAMI's perspective, congratulate and thank you
for your years of leadership in the House in ending insurance
discrimination against people with mental illness and their
families, and pledge NAMI's support to get your parity
legislation through Congress this year and to the President's
desk.
Let me talk about the housing needs of people with
disabilities before I jump into some suggestions and comments
on H.R. 3995. HUD's most recent worst case housing needs report
in 1999 reported that 1.3 million adults with disabilities
receiving SSI had worst case housing needs. CCD believes that
this estimate is very low because it, in fact, does not count
individuals with severe disabilities, non-elderly adults with
severe disabilities who are residing in institutions, be they
nursing homes or psychiatric hospitals or institutions for
people with mental retardation. And we believe that estimate is
actually much higher. Last year, we at CCD published data
comparing SSI income levels to fair market rents and found
people with severe disabilities are 18 percent of median income
and that people with disabilities on SSI needed to pay on
average the national level 98 percent of their SSI benefits to
rent even a modest one-bedroom apartment leaving, in many
cases, less than $10 or $15 a month to pay for food,
transportation, telephone, rent, and so forth. And in 2000
there was not a single housing market in the country where a
person with a severe disability on Supplemental Security
Income, SSI, could afford to rent an efficiency or a one-
bedroom apartment. This is obviously an affordability crisis.
There are also some other issues that affect this, the
first being the impact of some changes that Congress made a
decade ago to allow private owners of assisted housing and
public housing authorities to restrict occupancy on the basis
to elderly only. This has had a tremendous impact in terms of
people with disabilities getting access to affordable housing
in the community.
Number two, the Section 811 program was almost double what
it was a decade ago. It has crept back up again, but there is a
growing burden on the Section 811 program to handle more and
more things, a new tenant-based program, tenant-based rental
assistance program that was authorized a decade ago, the
growing burden of renewals for that tenant-based rental
assistance program within Section 811, creating a growing
burden.
Number three, we see the lack of programs such as HOME and
CDBG, the mainstream programs within HUD providing assistance
to people with severe disabilities. This is largely because
many jurisdictions find it very, very hard to do an operating
subsidy when they do production in HOME or CDBG in order to
reach people below 20 percent of median income.
And, finally, we also see discrimination. It still exists
out there. There is the Fair Housing Act, Section 504, the
Rehab Act, and the ADA that are designed to serve as civil
rights protections that are designed to end discrimination. But
unfortunately we see discrimination that still exists in the
marketplace and, in fact, lack of adherence to the
accessibility guidelines for people with severe disabilities in
programs such as CDBG and HOME and the low income housing tax
credit.
Let me turn now briefly and talk about some of the really
important provisions that CCD believes would be a major step
forward in H.R. 3995, the first being the homeless programs,
the reauthorization there. My colleague, Ms. Friar, is going to
talk in more detail about that, but we would note the programs
that are emphasized on the homeless programs in H.R. 3995 are a
major step forward for people with disabilities, given their
disproportionate representation among the chronically homeless
population.
CCD strongly supports the 30 percent permanent housing set-
aside and the shift of the Shelter Plus Care and SHP renewals
to the housing certificate fund. We support the new production
program.
CCD also supports the Low Income Housing Coalition,
National Low Income Housing Coalitions, national housing trust
initiatives as well as H.R. 2349, Mr. Sanders' legislation. We
support the thrifty voucher program and the voucher success
fund. We believe those are major steps forward. And with the
thrifty voucher program, we urge the subcommittee to consider
allowing site-based waiting lists for those developments built
with thrifty vouchers.
Finally, on Section 811, I know my time is running out,
there is a full recitation of our recommendations on Section
811, including our testimony that we urge the subcommittee to
take a look at. But the program really needs to be streamlined
and simplified to make it much easier for non-profit disability
organizations to operate and do production under Section 811.
Thank you very much, Madam Chairwoman.
[The prepared statement of Andrew Sperling can be found on
page 340 in the appendix.]
Chairwoman Roukema. I thank you.
Ms. Friar, is that the way you pronounce it? Thank you, Ms.
Friar. I believe Ms. Velazquez would like the opportunity to
introduce her.
Ms. Velazquez. Thank you, Madam Chairwoman. It gives me
great pleasure to introduce a friend from New York City, Ms.
Maureen Friar. Ms. Friar earned her BA at Brown University and
a Master's in Public Policy at the University of California at
Berkeley. Since 1993, she has served as Executive Director of
the Supportive Housing Network of New York, a coalition of not-
for-profit agencies that develop and manage affordable housing
with on-site supporting services with low-income and formerly
homeless single adults. Over the past 9 years she has led the
growth of the coalition from a membership of 40 agencies,
managing 4,000 units of housing, to over 150 agencies operating
over 18,000 units of housing statewide. In 1998, the network
launched the New York City Housing Network, now a prominent
voice in the city, advocating for the housing needs of persons
living with HIV, AIDS. She continues to lead the network at the
forefront of the Blueprint to End Homelessness in New York City
initiative. She is a member of the National Advisory Group for
the National Alliance to End Homelessness. Ms. Friar, thank you
for your outstanding work in our fight to end homelessness in
New York City. Welcome.
STATEMENT OF MAUREEN FRIAR, EXECUTIVE DIRECTOR, SUPPORTIVE
HOUSING NETWORK OF NEW YORK, AND ADVISORY COMMITTEE MEMBER OF
THE NATIONAL ALLIANCE TO END HOMELESSNESS, WASHINGTON, DC.
Ms. Friar. Madam Chairwoman and Members of the
subcommittee, I am honored that you have invited me as a
representative of the National Alliance to End Homelessness to
testify today, and I would like to thank my friend,
Congresswoman Velazquez, for your leadership on behalf of New
Yorkers, especially low income and homeless New Yorkers with
acute housing needs.
The Supportive Housing Network represents 150 non-profit
agencies that have developed permanent housing with on-site
services for over 18,000 low income and formerly homeless
individuals and families in New York State. The National
Alliance to End Homelessness is committed to ending
homelessness, a goal that we are all convinced is well within
our reach as a Nation.
Today, speaking about H.R. 3995, the Housing Affordability
Act for America of 2002 includes several items that are
critical to the goal of ending homelessness. To end
homelessness, several important steps have to be taken. One is
to prevent people from becoming homeless. H.R. 3995 begins to
address this by targeting flexible housing resources to people
with extremely low incomes below 30 percent of the area median
income. This is especially important, considering that the
amount of housing affordable to low income households has been
steadily declining for several decades. In New York City, 27
percent of households pay over 50 percent of their income in
rent, and we have over 200,000 households on the waiting list
for public housing and subsidized Section 8. So the need is
critical.
Indeed, homelessness also requires that we open the back
door out of homelessness by providing the housing and
supportive services needed for families and individuals to move
into permanent and stable homes. The dimensions of the homeless
problem are sizable. In New York City alone, each night we have
over 33,000 men, women, and children sleeping in our shelter
system, which is the largest census since 1987, with homeless
children the largest growing population. Roughly 80 percent of
people who become homeless enter this homeless system and exit
it again relatively quickly. They have a crisis that affects
their housing and they typically address their immediate
problem. And despite the shortage of affordable housing for
people, they find housing. Of the over 5300 families in our
shelters each night, half would leave tomorrow if we had
affordable housing for them to go into. What we should be doing
is have a homeless system that facilitates the move to housing
and making the homeless episode as brief and least traumatic as
possible. When services are needed they should be delivered
while the family or individual is in stable permanent housing.
We should try to decrease the amount of time that families,
especially children, are in transition in shelters.
While the majority of homeless people do not need
specialized housing, about 20 percent have more significant
barriers to ending their homelessness. They have one or more
chronic disabilities, including mental illness or substance
abuse, and live in shelters and on the streets, and the
episodes of homelessness can last months or years. Many are
also veterans. We would think that sheltering would not cost as
much as housing homeless people, but that is not the case.
Homelessness costs us tremendously.
A recent groundbreaking study by the University of
Pennsylvania, which was vast and released last year, they
looked at the 4,000 people who had been placed in supportive
housing in New York, homeless people with chronic and
persistent mental illness, and looked at how much they cost us
2 years before they entered housing and 2 years after. And the
average cost to taxpayers is $40,000 per individual per year.
And this is so expensive because these individuals use high
cost public services such as emergency and psychiatric
hospitals, veterans services and shelters, and they are just
cycling through and costing us a lot.
But we have a solution and that solution is supportive
housing. Supportive housing combines permanent stable housing
with on-site services. What we like about the bill is that 30
percent of the funds provided under HUD's homeless assistance
grants will be used for permanent housing which will get
localities focused on the permanent housing as opposed to the
transitional and emergency care. Also that the Shelter Plus
Care and Supportive Housing Program, permanent housing renewals
will go through the housing certificate fund. This will free up
money for new supportive housing. And in New York we would use
up all our McKinney funding just for renewals if we were not
able to shift those renewals to a different fund. I know my
time is running out.
The answer to homelessness is not just HUD, but we feel
very strongly that HUD's leadership and HUD money should be
focused on housing. And the more that is done federally with
the legislation to get localities to do that, to focus on the
permanent housing that then often leverages the HUD money--the
rental subsidies will leverage other investment, corporate
equity investment as well as State investment into more
housing. So it is really the best use of HUD money.
And I commend this subcommittee for caring about homeless
people and the affordable housing needs of New Yorkers and the
rest of the Nation, and would be glad to work with you in any
way possible to make our goal of ending homelessness a reality.
Thank you.
[The prepared statement of Maureen Friar can be found on
page 336 in the appendix.]
Chairwoman Roukema. Thank you for your attention to time
and for your specific contribution to this discussion.
Our next panelist--I do not know whether we arranged it
this way that we have so many from New Jersey or we are just
outstanding leaders in the country, but I do want to welcome
Roy Ziegler. He was a Director of the State of New Jersey
Section 8 Housing Program for I think almost 20 years; isn't
that correct? And now you are currently President of Assisted
Housing Services and work with a consulting company in New
Hope, Pennsylvania. So we are happy to have you here for all
your practical experience and insights, and we look forward to
working with you.
STATEMENT OF ROY ZIEGLER, FORMER DIRECTOR, NEW JERSEY
DEPARTMENT OF COMMUNITY AFFAIRS, SECTION 8, ON BEHALF OF
NATIONAL LEASED HOUSING ASSOCIATION, WASHINGTON, DC.
Mr. Ziegler. Good afternoon, Chairwoman Roukema and
distinguished Members of the subcommittee. I have to say that I
was on an earlier train than you were and I guess we are both
lucky today.
I want to thank you for the opportunity to speak today on
behalf of the National Leased Housing Association. Over the
years, the housing voucher program has made remarkable
improvements because of the consolidation of regulations and
elimination of certain barriers to landlord participation as
well as giving us flexibility to help families become self-
sufficient and even become homeowners with the housing
vouchers. Your bill will go a long way toward leveling the
playing field and we support it, because the housing vouchers
really need the additional flexibility that your bill provides.
PHAs and administering agencies around the country and many
communities are faced with rising rents and tight rental
markets, and this rising rental rate in many of these areas has
far outpaced the housing voucher of fair market rents. Often
there are more vouchers in the community than there are
landlords willing to accept the voucher. So you find that the
public housing agencies are sending out like three or four or
more vouchers for every slot they have available because so
many families are unsuccessful and cannot use their vouchers in
their communities. This is really frustrating for families who
have waited a long time for their voucher and see it just go up
in smoke. And it increases the agency's work load. It costs
more money when you have to spend more time getting more
vouchers out on the street.
HUD has already taken an important step in the direction in
resolving this issue by giving 50th percentile rents in many
communities across the country. And we are requesting that
Congress urge HUD to expand that 50th percentile fair market
rent to all the communities in all the markets in the United
States.
Congress can also take steps to improve the family's
ability to use vouchers. For example, housing authorities can
set their payment standard. The payment standard determines how
much a family gets for a subsidy. PHAs can set that standard
between 90 and 110 percent of the fair market rent to address
the immediate needs of their area. And this is without HUD
approval. We are supporting the ability for public housing
agencies to raise that from 90 to 120 percent rather than 90 to
110 percent. This will give us a dramatic increase in the rents
that we need to address the actual market in our areas. Fair
market rents are not fair unless they compete with market, at
least the average rents for the community.
Now it is our understanding that the initial draft of H.R.
3995 did not have this provision included and we are asking
that it be restored by the subcommittee.
Now in regard to the 40 percent cap, the amount that a
participant pays in Section 8 is limited by the 40 percent cap,
that is the family cannot pay more than 40 percent of its
adjusted income for rent. We have supported this in the past,
but our PHAs have told us that there are many circumstances
where a higher rent is sensible.
Just as an example, an elderly person who has lost a spouse
immediately becomes, because of the decrease in income for that
household, becomes eligible for a voucher. Here is a family who
has been living in this unit for many years. The spouse who is
alone faces the fact that she is going to have to pay 43
percent of her income for rent. The program only allows 40
percent. That elderly person would have to leave that housing
that she has been in for many years because she is 3 percent
over the 40 percent of adjusted income. And if she loses the
voucher, she is probably going to pay 60 to 70 percent of her
income for rent.
So we are asking that the PHAs are given this opportunity
to give a waiver to that 40 percent to adjust to situations
like this. Section 402 of the bill would do that. And we are
asking that this cap be available to PHAs as another tool in
their arsenal to help families stay in place, not just elderly,
but families who are in place who lose it because of that 40
percent threshold.
And with regard to administrative costs, the current fee
for administering the program is often inadequate to allow
effective tenant counseling, landlord outreach and addressing
special populations like the homeless we just heard about it.
And this often contributes to the success rate being very low
for voucher usage. We applaud this subcommittee recognizing
this problem by allowing the PHAs to tap unused budget
authority to use for services to help families find decent
housing and provide mobility services for families looking for
housing.
NLHA also supports the bill's revision to provide incentive
fees for high performing agencies. But there is one other area
we would like you to look at and that is the fact at one time
there were preliminary fees for housing agencies getting new
vouchers. Doing tenant briefings, finding apartments,
negotiating with landlords and trying to get housing for
families is very difficult. It takes 4 to 6 months in some
cases, but there are no fees for the program until you actually
lease somebody up. So we are asking that the provision be
allowed to restore the preliminary fees so that housing
agencies get the ball rolling and get families into housing
faster.
With regard to enhanced vouchers, we approve all of the
things that you have said and we are very happy that you have
addressed the issues with regard to the enhanced vouchers.
We ask that you look at the HQS requirements for
inspections. If there is an inspection done within 12 months,
we would like to see that the HQS be unnecessary for that
particular year.
And we also support the Section 505. We have keen interest
in 505 which would give an asset-based approach to public
housing, and we will send you our comments later.
Just one other thing. We oppose the thrifty vouchers. We
think there is a very difficult problem with administering the
thrifty voucher program and we have sent you an awful lot of
information about how we feel--about how our members feel, that
thrifty vouchers are perhaps unnecessary.
[The prepared statement of Roy Ziegler can be found on page
418 in the appendix.]
Chairwoman Roukema. We will look at that material that you
are advancing to us.
Now, our final panelist is Mr. Gary Eisenman, who brings a
distinct contribution here to the panel. He is Executive Vice
President of Related Capital Company, a financier of real
estate properties, as I understand it, so you are representing
the private sector here today. However, your background gives
you extensive experience as General Deputy, as Assistant
Secretary for Housing, and Deputy Federal Housing Commissioner
for HUD and the FHA, so that you come with Government
experience as well as experience in the private sector. We
welcome you here today, Mr. Eisenman.
STATEMENT OF GARY EISENMAN, EXECUTIVE VICE PRESIDENT, RELATED
CAPITAL COMPANY, ON BEHALF OF THE NATIONAL MULTI-HOUSING
COUNCIL, WASHINGTON, DC.
Mr. Eisenman. Chairwoman Roukema and distinguished Members
of the Housing and Community Opportunity Subcommittee. My name
is Gary Eisenman and I am executive vice-president of Related
Capital Company, a developer, manager and financier of real
estate properties that oversee over 1100 properties in 47
States in the United States. I am speaking on behalf of
National Multi-Housing Council, a trade association
representing the Nation's larger and most prominent apartment
firms. NMHC operates a joint legislative program with the
National Apartment Association, a trade group representing over
30,000 apartment executives and professionals. It is my
pleasure to testify on behalf of both organizations.
I have been asked to speak today about the Section 8
housing choice voucher program. NMHC and NAA commend you,
Chairwoman Roukema, for your leadership and we thank the
Members of the subcommittee for their valuable work in
addressing the important issue of affordable housing in America
today. We too believe that it is critical to meet the housing
needs of low and moderate income families. We also believe the
Section 8 program can be one of the most effective means of
doing so.
However, the program's potential has been constrained and
its success should be greater. We support the provisions of
H.R. 3995 aimed at improving the voucher program. However, even
with those important reforms, the proposed legislation falls
short of increasing supply of housing which voucher holders may
choose by broadening market accessibility. Without a sufficient
supply of housing, voucher holders do not have choice, which is
precisely what the Section 8 program aims to accomplish. We
believe that the chief reason for the lack of housing available
to voucher holders is the program's burdensome structure and
administration which discourages private owner participation
and makes it difficult for voucher holders to compete with
unsubsidized residents for vacant apartments. NMHC and NAA
support greater owner participation, which should not be at the
expense of the property owners. Rather, the program should be
as similar as possible to providing housing to market rate
residents.
Therefore, it is essential that the subcommittee's efforts
to improve the Section 8 program support broader owner
participation. To increase owner participation, the program
must be more transparent to the market. And what we mean by
transparency is that we need to minimize the differences
between a holder of a voucher and a non-voucher-holding market
rate tenant who approaches an owner for a vacant unit.
We recommend the following toward that goal. Owners should
be able to turn vacant and subsidized units over within a
reasonable time that is comparable to the time period required
to turn over market rate units.
Owners should expect timely rent payments for subsidized
residents and they should have the right to expect timely
compensation if those payments are delayed.
All residents, including voucher holders, should be held
accountable to common standards and laws established by States
and localities.
In addition, the program should only include Federal laws
that are applicable to both voucher and non-voucher residents.
I will now discuss some specific proposals along those
lines. First, improve the housing quality standards unit
inspection process. Currently, before a apartment is eligible
to lease to a Section 8 voucher holder, the administering PHA
must inspect that unit for compliance with HUD-prescribed
housing quality standards. And we agree voucher holders should
reside in decent, safe, and sanitary environments, but we also
believe that this can be achieved without conducting lengthy
individual unit inspections. Unit-by-unit inspections delay
resident occupancy even if the PHA conducts its inspection
within the required timeframes, and some apartment owners
report delays of 30 days or longer.
Given that the professional apartment industry relies on
seamless turnover to meet its overhead costs, the financial
implications of such delays to owners are significant. We
propose speeding up the move-in process by allowing PHAs to
conduct individual unit inspections within 30 days after the
resident moves in and payment commences.
We also suggest that PHAs advise voucher holders they
should not accept a apartment in significant disrepair and they
should report those apartments to the PHA.
Second, we need to improve the subsidy payment system. Just
as owners would not accept a late payment from a market rate
tenant, they should not be forced to accept late payments from
voucher holding tenants. Requiring all PHAs to make automated
electronic fund transfers would assure that the timely payment
of the subsidies would be made. HUD has made great improvements
to the financial management systems of its other housing
programs, including the HOME program. It should do the same for
Section 8.
Third, increase the payment standard. And I am not going to
reiterate what my colleague Mr. Ziegler said, but we support
those positions on 40 to 50 and greater latitude to go from 120
percent of FMR to 150 percent of FMR.
Finally, we support amending the lease addendum. HUD's
standard lease addendum is many times incompatible with State
and local landlord tenant laws and disregards industrywide
model lease language developed by NAA. This inconsistency
causes difficulties for owners who must comply with one set of
lease requirements for voucher holders and another for non-
voucher holding residents. This creates a disincentive to
accept someone who is coming with a voucher.
In summary, we support the Section 8 program and wish to
engage more fully in it. However, such participation is not
economically maximized without reforming the program to reduce
the significant costs and burdens it imposes on apartment
owners.
I thank you for the opportunity to testify on behalf of the
National Multi-Housing Council and the National Apartment
Association and wish to offer our assistance as the
subcommittee continues its important work.
[The prepared statement of Gary Eisenman can be found on
page 330 in the appendix.]
Chairwoman Roukema. I thank you very much.
Before I call on Mr. Grucci, I am going to just ask the
panel here, you have heard me make reference before the
previous panel and I would like to offer you all the
opportunity not here now, but in written form, to submit to me
and the subcommittee your recommendations as to how we can
reduce the bureaucracy and the overwhelming HUD dictatorship
here. By the way, I do not mean that in a negative way. I just
want to be constructive as to how we all work together to
improve HUD and get more housing for people and we cannot
possibly afford all this unless we are able to improve the
delivery system and the HUD responsibility and that regulatory
relief that we need from HUD, while not opening up loopholes
for corruption, and so forth. So I would like to have on the
basis of your experience on this panel your recommendations on
how HUD should be reforming its procedures here in order to get
more housing at less cost. If you would do that.
Mr. Grucci.
Mr. Grucci. Thank you, Madam Chairwoman. I do not have any
questions of this panel at this time. Thank you.
Chairwoman Roukema. All right, thank you very much.
Ms. Velazquez.
Ms. Velazquez. Thank you, Madam Chairwoman.
Mr. Ziegler, I was interested in the part of your testimony
which addressed the proposal to add flexibility to the 40
percent rent cap by permitting that the 40 percent cap be based
on gross income versus adjusted income. It seems that you have
conflicting feelings about this proposal. And while I support
the idea you put forward of increased flexibility in helping
tenants remain in their homes, I am forced to wonder if this
could open the door to further price gouging by unscrupulous
landlords. Do you believe there is cause for legitimate
concern.
Mr. Ziegler. I think it is important that we look at what
we are proposing is in-place tenants. These are families or
elderly folks who have been in place sometimes for 20 or 30
years and have been paying rent all along and they lose
somebody in the household who was an income earner, wage
earner, and no longer have that income available to them. Here
they are living in the same apartment with the same rent with
much less income. What we are asking for is some flexibility so
if we have that additional 40 percent beyond the adjusted to
the gross that perhaps that particular elderly person could
stay in place and avoid being displaced. When you are displaced
you are out in the community where there is no cheap housing
available, in the first place.
Ms. Velazquez. Ms. Friar, would you please discuss what use
your organization has made of rental subsidies in providing
permanent housing options for the homeless. How do you think we
could better target these funds to address the needs of the
communities targeted by programs such as Shelter Plus Care?
Ms. Friar. Both programs have been critical to developing
supportive housing in New York because it provides the
operating funding to manage the buildings. It provides the
rental subsidies so that the tenants will only pay a third of
their income in rent, but managing the buildings, operating the
buildings is more than that, and that difference is the Shelter
Plus Care. With that funding, there has been investment made by
both the city and State toward capital to renovate these
buildings, to purchase and renovate old hotels as well as do
new construction. And there has also been a tremendous amount
of corporate equity investment through the low income tax
credits, historic tax credits program. And, because there is
the rental voucher, the funds are guaranteed over a period of
time so that other investment is leveraged. And so it then
makes what our priorities in terms of spending money is not
just on the emergency needs constantly sheltering people, but
we have places where they can go and it is actually most cost-
effective to have them in the permanent housing than in our
shelter system.
Ms. Velazquez. Mr. Slemmer, when this subcommittee last
took up the issue of senior housing, I put forth a proposal to
ensure that any application for 202 funding that did not meet
HUD's debt line due to the fault of a third party would not be
deemed ineligible. Would you please discuss what sort of impact
this will have on groups facing difficulties getting the
required paperwork out of local bureaucracies? Would you
support inclusion of such language?
Mr. Slemmer. For sponsors that did not submit what?
Ms. Velazquez. When a community group submits an
application for 202 housing and they did not meet HUD's debt
line, not because of their own fault, fault of their own, but
because of the third party. Like in New York, if a community-
based organization is going to build in a vacant lot and they
need to get site control and they have everything in place, but
they do not have that letter coming from the locality, we
should not penalize that organization from getting the
application approved.
Mr. Slemmer. I am not familiar with your recommendation,
but it is certainly true that in areas like New York and
California where there are terrific amounts of land use
restrictions and regulations, it does take longer to put
together an application. The 202 program gives you 60 days to
get together an application with site control. So I think it is
a good idea. I think some areas you have to have more time
available to get through the land use process. I think it is a
good idea.
Ms. Velazquez. Thank you, Madam Chairwoman.
Chairwoman Roukema. Yes. Congresswoman Carson, no
questions?
Ms. Carson. No questions.
Chairwoman Roukema. Congresswoman Schakowsky.
Ms. Schakowsky. Thank you very much, Madam Chairwoman, and
I really appreciate this day of witnesses. Just been an
excellent, excellent panel and I thank you very much for that.
I also wanted to run by a proposal. I am sure a lot of
units that you had on that list are in my district, senior
housing that is operating out--and a lot of seniors in crisis
right now. When the apartments go--stay as rental apartments
and the enhanced voucher does allow people to stay there. But
if it goes condo, then whatever voucher loses its enhanced
status and therefore there is absolutely no way that they can
stay in the community. And what I would like to suggest is that
residents of units in that situation would be able to--that the
vouchers would be able to maintain their enhanced status in
order for them to seek housing within the same community. And I
wanted to just run that by any of you that would like to
comment on it. Maybe Mr. Slemmer.
Mr. Slemmer. I had forgotten about the condo situation.
What we are seeing mostly is the senior housing in more
affluent areas. Great locations are being lost forever simply
because they have more value because there are higher rents in
the market situation. But the concern I have about the enhanced
voucher is that it is designed to help the existing residents.
But what it does is it takes the pressure off the problem. And
so I think we are going to wake up 5 years from now and have
lost a lot of senior housing that might have been kept if the
community had known about the problem.
In other words, if a building is going to opt out and the
community knows about it, sometimes they will go to great
extremes trying to figure out a way to preserve that housing.
It kind of maxs the problem or inoculates the situation. That
is the only concern I have about enhanced vouchers. I think it
is quietly creating a problem for us down the road because it
is making the problem less visible and taking it off of
peoples' radar screens.
Ms. Schakowsky. I hear you, but at the same time I think
those people--in our situation, it is a lot of condo
conversions and then there is just nowhere to go with that.
Anybody else want to comment on the use of enhanced vouchers
beyond just in place, but in the community?
Mr. Eisenman. One thing you might need to consider when you
are doing that is when you have the enhanced voucher, it is
enhanced to the property that has been opted out so that the
measuring stick is the market for the units that are in that
property. If you are going to make those vouchers enhanced on a
portable basis, you are going to need to define the limits of
the market that it will be enhanced within, because then you
are getting into, well, what properties are you saying are
comparable and what is the absolute high range that you would
take that enhancement to? Because when you are doing it in
place, you have that limit built in by the limits of the
property that is being opted out.
Ms. Schakowsky. That is an important consideration. Thank
you for that.
Mr. Eisenman. One thing I might offer that you consider
similarly in the markup to market program in the project-based
Section 8 program, you have a limit at 150 percent of FMR
capping the markup to market, which can be liberated when there
are certain criteria such as concentration of elderly and
valuable resource for the community, local government
involvement. Those are the criteria in the statute that allow
you to exceed the 150 percent FMR cap, but it is an act of
discretion that allows that.
Mr. Ziegler. One other thing you may want to do is research
the statute in New Jersey, which helps essentially after the
fact of enhanced vouchers being created that there is a very
aggressive stance with regard to the State that the owner of
the property may be required to market the unit that leaves the
enhanced voucher inventory to voucher holders in the community.
That might be helpful for you.
Ms. Schakowsky. Thank you.
Ms. Friar, I wanted to ask you, the Coalition to End
Homelessness I understand has put a dollar figure on what it
would really cost to effectively address homelessness, if not
to end it. And as I recall, it is a pretty modest $1.5 billion.
Is there a dollar figure that----
Ms. Friar. Well, I do not know that specifically. We have a
whole Housing First campaign going on in New York around
affordable housing and investing $1 billion in new affordable
housing from homeless to middle income. And that is for New
York actually--the capital budget. I think in some ways we see
a lot of this, the cost savings experienced when you house
someone versus the cost of sheltering them or having them cycle
through homelessness and using emergency services virtually
pays for the solution itself. One unit of supportive housing,
to develop it, operate it and provide the social services is
about $17,000 a year. And the cost savings experienced for a
person who is housed--I said they cost $40,000 a year, you save
in the first year $16,000 in tax dollars because they are using
the hospitals less and other services. So it is not so much
just pour new money into it, but in a way, I guess it is
putting money that is going to result in less use of dollars
and other areas. And, unfortunately, this subcommittee goes
beyond, you know this, addressing more the housing. Some of
this is bringing in service dollars or in coordination, which
is why we like the bill--has the interagency council being
recommended, because in that way it is bringing in other
players who are involved in homelessness. Often the homeless
system is taking individuals who are being discharged from the
criminal justice system, the mental health system, and so
forth, and then we call them homeless, and it is a long road to
getting them being housed again, and so the coordination is an
important piece also.
Ms. Schakowsky. If I could, Madam Chairwoman, say one
more--and I realize my time is up. I wanted to respond to a
comment that you made. I think we do have the money to do the
kinds of things that your bill has suggested, and that when we
set priorities in this country, there are the dollars and, as
you pointed out, if we take a broader view and not just a
narrow budget-by-budget-by-budget view, that in many cases the
kinds of good suggestions you are making may really save us
money, not just down the road, but in the following year. And
so it really is just a question of will and a question of
priorities. And I think that it is so important as each of you
talk about this crisis that we are facing that it be
acknowledged as that and that we have an aggressive can-do
attitude about solving these problems that you all have so
articulately not only laid out, but the solutions that you have
proposed are all very, very doable, and that has to be our
attitude, that we can achieve the goals that you have set out
for us. So thank you very much.
Chairwoman Roukema. Thank you. And I think we have
concluded here. But I have one last question.
Mr. Eisenman, forgive me if you were explicit on this in
your testimony, I know you referenced it and you discussed it,
but could you focus just for a minute or two on what more we
should be doing with the private sector? Because, as I
stressed, you are here not only with your public experience
with HUD and FHA, but also as a representative of real estate
property interests. How can we improve that partnership, the
public-private partnership here, and enhance more private
sector involvement?
Mr. Eisenman. Well, I will speak particularly with respect
to my testimony that this is an important point, because I
think that the statistics that we are seeing--and we took a
look at some things for this hearing--that the number of
available units that are coming vacant, which are at the FMR or
below are quite substantial and more than enough to cover the
lack of success. There was a recent HUD study that showed that
the success rate in voucher use by residents had dropped
substantially over the last several years. And so what voucher
holders are finding, particularly in high markets, is that they
cannot go out and use those vouchers. And part of what we are
suggesting here is that this might be a no-cost type of change
where a little less regulation and little smarter regulation,
using technology as opposed to paper, seamless payment systems,
using an inspection process which puts a little less burden on
the landlord will encourage more landlords to come into the
program and therefore create a greater supply for the holders
of the vouchers.
Chairwoman Roukema. Is that more expanded and documented in
your testimony?
Mr. Eisenman. Yes, it is in the written.
Chairwoman Roukema. All right. Thank you very much. I will
be more than happy to explore that and study it carefully. We
thank all of you for your contributions here today, and please
continue to work with us as partners. We must find a way of not
only improving and making a more efficient delivery of these
services, but also expanding in an economic way for the people
in this country. Thank you very much.
[Whereupon, at 4:40 p.m., the hearing was adjourned.]
H.R. 3995--THE HOUSING AFFORDABILITY FOR AMERICA ACT OF 2002
----------
WEDNESDAY, APRIL 24, 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 2:00 p.m., in
room 2128, Rayburn House Office Building, Hon. Marge Roukema,
[chairwoman of the subcommittee], presiding.
Present: Chairman Roukema; Representatives Ney, Kelly,
Miller, Grucci, Rogers, Tiberi, Frank, Velazquez, Lee,
Schakowsky, Capuano, Waters, Sanders, Watt and Israel.
Chairwoman Roukema. I am going to call this hearing to
order, although it is more than a little embarrassing here.
Unfortunately, this hearing is in conflict with legislation
that is on the floor from this committee, the CARTA, the
Corporate and Auditing Accountability Responsibility and
Transparency Act. And many of our Members are over on the floor
now as we speak--oh, good, we have one more Member anyway. As
we speak, they are currently, as a matter of fact, debating
Congressman LaFalce's substitute on the floor as we speak, and
we may be interrupted shortly with some roll call votes.
But I do want to welcome our panel here today and assure
them--and, fortunately, Mr. Frank, our Ranking Democrat is
here, and that is a welcome contribution, but I can assure the
panel that even though there are few Members here today, there
has been an intense interest throughout these hearings. This is
the third of three hearings, and there has been an intense
interest on the part of our Members, and I can assure you that
all of your testimony will be forwarded and presented to each
of the Members individually, and I am sure that they will be
paying close attention, because we fully expect that this is
going to be a priority piece of legislation hopefully before
the Congress adjourns this fall.
But I welcome Mr. Frank and our other Members here, and I
will simply say that for the panelists that--I am sorry, first,
of course, we know that all the opening statements will be
included in the record, and we will see if there are any
opening statements, but that each of the panelists will be
introduced, and you should know that you will be limited to 5
minutes, and the little recorder in front of you or clock in
front of you will tell you about your time and we'll try to
keep you as close to 5 minutes as possible. But I will
introduce each one of you individually.
But now I ask my colleagues, are there any opening
statements? I do not have one. Is there an opening statement?
All right.
Mr. Frank.
[The prepared statement of Hon. Marge Roukema can be found
on page 426 in the appendix.]
Mr. Frank. Madam Chairwoman, I appreciate the chance to
talk with the Administration officials who have responsibility
here. I will be interested in their comments on the
legislation. I want to use this opportunity, though, to
reiterate some questions that I will further elaborate on.
First, to Mr. Weicher, I had gotten a letter from the----
Chairwoman Roukema. Excuse me, is this your opening
statement?
Mr. Frank. Yes.
Chairwoman Roukema. This is not the questioning period. All
right.
Mr. Frank. It is the opening statement in which I will ask
some questions.
[Laughter.]
I may make a statement during the question period. I got a
letter from the Massachusetts Legislative Leadership on Housing
over the whole question of risk sharing, FHA 202, in which they
were not getting from the regional office permission to go
forward with risk sharing under 202. Now, your office appeared
to have intervened and allowed that to go forward. The law
clearly calls for it to be able to happen, and your office did
intervene, and one of the projects is going through, but one of
the things I hope you will be able to address is giving
guidance to all the regional offices on this. Again, Congress
spoke very clearly that risk sharing should be allowed with
202, and I would hope that we could get that one cleared up.
Second, the Ranking Member of the full committee and I, Mr.
LaFalce, sent a letter to the Secretary on March 26, so this is
not something that we are complaining about since it is only a
few weeks ago, having been accepted as a matter that has
already been holding off, and that is the ability of people to
benefit from a provision that we had in a previous report from
the 105th Congress allowing recaptured interest reduction
payment subsidies to be used for rehab grants for properties
for deferred maintenance. And those are two very important
issues.
And I mention these, Madam Chairwoman, in my statement,
because my statement is basically to lament a condition over
which this panel has no control and that is the absence of
money to do new things. You presided over and basically
structured a very useful set of hearings last year in which we
had virtual unanimity. I think there was literally one witness,
whether from the Democratic or Republican side, who didn't
agree that we needed a new production program. There is clearly
the need for increased production. Now I know you have got
legislation which tries to address that need, and we will deal
with that in another context. But, part of the problem is of
trying to do a new housing production program without money is
like making bricks without straw. And many people tried that,
and it wasn't much fun. I don't want to have to go through that
again.
So, I really have to say there is this problem that we
have, I think, a budget allocation, thanks to other decisions
that were made that leaves us with too little money. But that
is why I asked the two questions that I did. Both of those deal
with our ability to do the best we can with existing resources
and at a time when money is clearly inadequate for the kind of
production program we need, that makes it all the more
important that whatever we can do we do and without a great
deal of delay. So 202 risk sharing, recapture of interest
payments under the interest reduction, those are very important
programs. And I stressed them in my opening statement, because
they are the best we can do in the current context. I would
like to change the current context, but as long as we are in
that context, we have to focus on those.
And so I am hoping that I can talk further with the
witnesses about them, and I meant by this, in part, to give
them some notice so that when we get to the question period
there won't be kind of surprise answers, and maybe there are
some of those diligent people who came over with them for the
ride sitting behind them who can work on some of these things,
and by the time we get to the question period we won't have to
have the usual whispered conferences, they will have already
written it out. Not that these individuals aren't capable of
doing it on their own, but not everybody can remember
everything at all times, which is why my chief staff person is
sitting behind me, and they all make our conversations more
fruitful. Thank you.
Chairwoman Roukema. Thank you. Are there any other opening
statements?
Mr. Grucci.
Mr. Grucci. Thank you, Madam Chairwoman. I do have a formal
statement that I would like to have entered into the records,
but I would just like to make a few brief remarks if I may
about the crisis of affordable housing in the district that I
represent, which is eastern Long Island, New York, an area that
has seen pockets of extraordinary wealth, but more commonly are
pockets of middle-class America and pockets of poverty. And
what I am very concerned about, with the CDBG block grant
reallocation of the formula, is what kind of an effect will it
have on my community, and I will certainly be interested in
hearing that if it does come up in the testimony here today.
Most assuredly, it will come up in the question section.
But, I wanted to bring out another point that I think, that
I would like the Administration to be considering, as it is
helping to forge forward in creating affordable housing.
Affordable housing is kind of like art: It is in the eye of the
beholder. In a community where you have very high cost of real
estate, you have high tax burden on the people, you have high
cost of energy, you have high cost of transportation, high cost
of living, what is affordable by us, or I should say is what is
affordable in other areas of the country is poverty level in
certain areas of my district. And I just encourage you all to
think about how we can make affordable housing a reality in
suburban America.
I represent the County of Suffolk where the median income
is high, but the cost of living is higher, and therefore the
ability to access the affordable housing subsidy programs are
out of the reach of the people who earn greater than $30,000 or
$40,000 for a family. But in my area, if you earn that kind of
money, you are certainly not living in the lap of luxury. You
are struggling to get by, you are working two or three jobs in
order to be able to put food on the table, and certainly
affordable housing, housing of any kind, including rental
housing, is just completely out of their reach.
I would encourage you to think about that in the crafting
of any regulations or policies. I would like you to consider
ways to widen that net so we can capture more people who are
truly in need of affordable housing. And I thank you, Madam
Chairwoman, and I will yield back the remainder of my time, but
ask that my official comments be entered into the record.
[The prepared statement of Hon. Felix J. Grucci Jr. can be
found on page 430 in the appendix.]
Chairwoman Roukema. So moved. Are there other opening
statements? Yes, Ms. Sanders? Well, I was going in the order in
which you came, but all right, if you want to yield to Ms.
Schakowsky, fine. It is up to you.
Mr. Sanders. Yes.
Ms. Schakowsky. I thank the gentleman, and I thank you,
Madam Chairwoman, and Ranking Member Frank for convening this
hearing. The lack of affordable housing has a tremendous impact
on families in my home State of Illinois. One out of five
renters in Illinois spends more than 50 percent of their income
on rent, and in Chicago we are short over 150,000 units of
affordable housing for extremely low-income households. Thirty
thousand units of project-based housing are going to be
expiring within the next 5 years, many of them in my district,
and the problem will grow worse if we don't do something about
it now.
Low- and moderate-income families face several barriers to
finding a safe and affordable place to live. I wanted to
emphasize one of those barriers, and that is discrimination.
Landlords across the country discriminate against Section 8
holders. Back in my home city of Chicago, the City Council
passed ordinance that prohibits landlords from rejecting a
tenant based on source of income, yet I have talked to too many
tenants who were rejected despite this law. And I am concerned
that our efforts to address the affordable housing crisis will
be fruitless or at least hampered if we don't address the
widespread discrimination in our housing markets.
Unfortunately, the Administration wants to provide only $46
million for fair housing enforcement and investigations. Fair
housing programs have received flat funding during the past 2
years, which, actually, if you index it for inflation,
represents a significant cut, and that is really unacceptable.
Our committee needs to this issue.
Toward that end, I am going to ask the General Accounting
Office to conduct a study to investigate the problem of housing
discrimination and HUD's response. I hope that all of my
colleagues on this subcommittee, at the very least, will join
me in this request, and I hope very much that Chairwoman
Roukema will call a hearing to investigate this problem of
housing discrimination. Thank you very much, Madam Chairwoman.
Chairwoman Roukema. Thank you. Are there other statements,
Mr. Miller or Ms. Tiberi? No opening statements?
Mr. Miller. I would submit a statement in the record. I
prefer to hear the witnesses today. Thank you.
[The prepared statement of Hon. Gary G. Miller can be found
on page 433 in the appendix.]
Chairwoman Roukema. All right. Yes. I think we would all
like to get to that, especially with the votes coming up. Yes,
Mr. Sanders. Excuse me, Mr. Sanders.
Mr. Sanders. Thank you, Madam Chairwoman, and thank you
very much for holding this important hearing. And I would like
to submit my full statement for the record. And I look forward
to dialoging with Mr. Weicher and Mr. McCool later on.
As you know, Madam Chairwoman, I have introduced H.R. 2349,
which is the National Affordable Housing Trust Fund. Just this
morning we had a press conference where over 200 prominent
religious leaders signed a letter to the President urging
support for this legislation. It currently has 174 co-sponsors,
including a number of Republicans. And most interestingly,
because of the severity of the housing crisis in this country,
over 2,000 national, State and local groups, from business
groups to religious groups, to trade unions, to low-income
groups are supporting this bill.
Others have already talked about, and I don't need to go
into great depth, there is, gentlemen, as I hope you know, a
severe housing crisis in this country. In the United States of
America, children should not be sleeping out on the streets.
That is a national disgrace. In the United States of America,
millions of working families should not be force to pay 50 or
60 percent of their limited incomes on housing. That is a
national disgrace. People are working in my State of Vermont,
they are working in California, in the Midwest. They are
working incredibly hard, and in many parts of this country,
because of the limitation in terms of affordable housing, they
are paying a large chunk of their paycheck for rent of for
their mortgages.
The bottom line is that the housing crisis is not caused,
in all due respect, by the Endangered Species Act, it is not
caused by overregulation; that may be a problem here or there.
It is caused by the fact that the cost of housing for a variety
of reasons is high and millions and millions of people are
earning inadequate wages. Millions of people are earning below
what we consider to be a living wage for the American worker.
So you have got a crisis, and there is no other way that that
crisis is going to be solved, to my view, unless the Federal
Government puts in substantial sums of money.
Now, I believe very strongly that we have got to step up to
the plate and put in real money, which is what the National
Affordable Housing Trust Fund is about. It is my view that
given the fact that Congress and the White House are not
addressing this crisis, it is appropriate that there be a trust
fund. It is appropriate that that money come from the Mutual
Mortgage Insurance Fund.
Now, I will later on dialogue with you, but I understand
that the White House is very concerned that that money now,
which would be some $26 billion over a 7-year period, is now
being used for deficit reduction, which raises a very
fundamental issue. This is an Administration which apparently
thinks it is OK to give hundreds of billions of dollars in tax
breaks for the richest 1 percent of the population, people who
are earning $375,000 a year minimum, but somehow when some of
us want to use money which is now going into the general fund
to build affordable housing, and by the way, put millions of
American workers to work at decent wages, my goodness, we are
impacting deficit reduction.
Chairwoman Roukema. Mr. Sanders, can you conclude, please?
You are well over the 5-minute time limit.
Mr. Sanders. I conclude. Thank you.
Chairwoman Roukema. Thank you.
Mr. Miller, Congressman Miller.
Mr. Miller. Thank you, Madam Chairwoman. There are varying
opinions. To begin with, nobody at the top levels of the tax
bracket gets a cut for another 4 years. So I am tired of
listening to the rhetoric on the Minority side about all this
money being spent on rich people who did not get a tax cut.
Mr. Sanders. Will a friend yield?
Mr. Miller. No, I will not yield. You had your time, you
had your moment, sir. Endangered Species Act some believe not
to be an issue. There was a project in Colton, California that
I am just dealing with today that Fish and Wildlife set aside
33,000 acres of habitat for a rat that just wiped out 2,500
units of affordable housing that were approved after a 6-year
project and process through the county that was approved 5-0 by
the Board of Supervisors. And now, because of Federal law, rats
are more important than people. You know, there was a time in
this country when we used to swat flies and poison rats. Now we
set aside habitat for them on private property, and Government
is too stingy to pay the cost of the private land. We want
taxpayers who pay for that property to take and foot the bill
for habitat for flies, rats, mosquitos, frogs, lizards, snails,
everything you can imagine, and I am tired of hearing the
rhetoric from socialists about Government not being the
problem. If the builders could----
Mr. Sanders. Who is the gentleman referring to?
Mr. Miller. I don't think I am speaking to you, and I
prefer you hold your speech till you have time, sir. I am tired
of individuals talking about Government not being the problem
when builders in this country are trying to provide housing for
people who need it, yet, because of the red tape and the
process they have to go through, it is almost impossible to
keep up with the demand, that when you don't meet the demand,
as you all know, what happens to the prices? When the demand
outproduces the supply, when there are more people wanting to
live in a home than we have houses for, prices artificially
increase, and that is what is happening in California. And I
applaud the Chairwoman, and I applaud the Bush Administration
for trying to deal effectively with the housing crisis in this
country.
But, we are dealing with another issue that I talked about
yesterday, and that is Canadian lumber. Forty percent of all
the softwood coming into this country that is needed on the
West Coast comes from Canada, because of a bunch of wackos who
don't want us to cut down any trees in this country, so we
can't go out and provide lumber to build houses. We have to buy
it from Canada or other countries who are willing to sell it to
us. So I am tired of us blaming the private sector for
Government interference and Government mandates and Government
restrictions when we are the problem for affordable housing,
and we would need to resolve it. And I applaud the Chairwoman
for making that effort, and I yield back what time I had left.
Chairwoman Roukema. Thank you. Thank you. We didn't set the
time correctly, but I think you were very mindful of your time
limitation.
Now, we do have a vote on the floor, but Congresswoman
Schakowsky--I am sorry, Velazquez or Schakowsky, who would like
to be next, and would you like to take your time now? Yes, yes,
Velazquez.
Ms. Velazquez. I could do it now.
Chairwoman Roukema. Yes.
Ms. Velazquez. Well, thank you, Chairwoman. I would like to
thank you and Ranking Member Frank for holding this hearing.
The home ownership opportunities afforded by the Fair Housing
Administration are important cornerstones of our national
housing policy. I am eager to hear the testimony of our two
panels on the various proposals put forth in this bill. Title
II of the Housing Affordability for America Act deals with the
FHA authorizing and qualifying a number of very important
proposals which have long been advocated by Members from both
sides of the aisle. I was glad to see that it included such
provisions as downpayment simplification, incentives for
teachers and public safety officers to purchase homes and
increases in the loan limits for high-cost areas. I strongly
support each of these provisions and commend the Chairwoman for
including them in this bill.
In fact, my concerns with Title II lie not as much with
what it includes as with what it excludes. It is a well-
established fact that unfortunately a large percentage of FHA
loans are targets of predatory lending, yet there is no attempt
to take simple steps to ensure this issue is dealt with
effectively. Specifically, in my district, this has become an
increasing scourge. Twenty years ago, we couldn't get lenders
to invest in much of central Brooklyn. Today, the investment
exists. But it is frequently in the form of loans that have
unfair and unrealistic terms.
More alarming still is the growing pattern of foreclosures
on FHA-insured properties in this area. Nationwide, default
rates on federally insured mortgages are up more than 100
percent in the last decade alone. This year, in the New York
region, default rates on these same loans are three times the
national average. Of particular concern for me is the fact that
three-fourths of the FHA-insured mortgages in this region are
located in Brooklyn and Queens and centered in minority
communities.
From property flipping of FHA-insured homes to inflated
appraisal prices on these properties, to the recent 203(k)
crisis in New York City, we are seeing a growing number of
predatory lending scandals in minority communities. In many of
these, HUD and FHA reveal their quiet complicity simply through
their lack of aggressive action. One thing that has been
consistent among all of these problems has been the realization
that when HUD or FHA delegates any obligation imposed upon it
to an interested party in a loan, we are asking for trouble.
The bill before us today gives us an opportunity to fix
some of the problems that have been plaguing our communities,
but we need to take additional steps, perhaps aggressively, to
stop the growing practice of predatory lending. I look forward
to working with Chairwoman and the Ranking Member to put an end
to these troubling practices. I commend the Administration for
its commitment to increasing minority home ownership. However,
equally important must be insuring that those who enter the
ranks of homeowners have the ability to remain there. I hope
that before this bill moves forward, we take a few simple steps
to ensure this goal becomes a reality. Thank you.
Chairwoman Roukema. Thank you. Now I must apologize to the
panelists. You have heard that the lights are on and the 5-
minute vote rang. We are having a series of votes on the floor,
and Congressman Frank and I agreed that we should adjourn this
hearing until the three votes are voted upon. There is a 15-
minute vote, a motion to recommit and final passage. So we will
adjourn this hearing until those three votes are concluded. And
I would simply ask please to have the Members return as soon as
possible so that we can give the courtesy to our distinguished
panelists here. At that point in time, I think we will have
uninterrupted time. Thank you so much.
[Recess.]
Chairwoman Roukema. Our votes are concluded on the floor so
there should be no more interruptions. And I would specifically
outline to the panelists the rules of engagement, so to speak.
Your written statements will be made a part of the record, your
full written statements. But your testimony will have to be
limited to 5 minutes. I will recognize each of you individually
for your statements, and of course every Member who is here
will be able to ask questions, and they will also be limited to
5 minutes for their questioning period.
With that, I would like to introduce each of our panelists
individually, as you are speaking and testifying. And with
that, I will introduce our first panelist, and I hope I am
pronouncing his name correctly. Is it Weicher?
Mr. Weicher. Yes.
Chairwoman Roukema. John Weicher. Mr. Weicher is the--
excuse me, excuse me, you do know, I think I outlined to you
earlier the time limit and the timers that are on the desk up
there on the table so that you will be alerted to the time
constraints. John Weicher is the Assistant Secretary for
Housing and the Federal Housing Commissioner at HUD. And we
certainly appreciate the fact that he has just recently been
appointed, within the past year, by President Bush, and he at
that time--prior to this appointment he was director of Urban
Policy at the Hudson Institute. I believe, Mr. Weicher, also
you held a policy position when Jack Kemp was Secretary,
correct?
Mr. Weicher. That is correct. I was the Assistant Secretary
for Policy Development and Research.
Chairwoman Roukema. And with that, I will welcome you here
today and look forward to your testimony.
STATEMENT OF JOHN C. WEICHER, ASSISTANT SECRETARY FOR HOUSING/
FHA COMMISSIONER, U.S. DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
Mr. Weicher. Thank you, Chairwoman Roukema. I was the
Assistant Secretary for Policy Development and Research with
Secretary Kemp. I appreciate the opportunity to testify on
behalf of the Department and the Office of Housing concerning
the Housing Affordability for America Act of 2002. The bill
contains 23 sections on housing programs, which works out to 13
seconds apiece to discuss them. And in your letter of
invitation, you also asked me to discuss several specific
questions about FHA programs. So I will confine my answers to
those questions and comment on just a few of the corresponding
sections in the bill. My full statement talks about all of the
bill in detail.
I'll begin with FHA's basic Section 203(b) Home Mortgage
Insurance Program. As you know, the President and the Secretary
have made promoting home ownership a cornerstone of domestic
policy, especially for minority households. FHA is very much a
part of this policy. About 80 percent of our mortgages serve
first-time home buyers and about 35 percent serve minority
households. The national home ownership rate and the minority
home ownership rate both set new records last year.
FHA's business this year is running well ahead of
expectations. If the second half of the year matches the first,
we will need to seek an increase in our $160 billion commitment
limitation for the MMI Fund. The fund had a net worth of 3.75
percent at the end of Fiscal Year 2001, and having been
personally involved in developing the FHA reform legislation,
as was Chairwoman Roukema and Ranking Member Frank 12 years
ago, I am very pleased to report this.
The bill contains several provisions to improve FHA's
ability to operate our single-family programs. Section 221
would make permanent the 1998 Downpayment Simplification Act.
Secretary Martinez supported this proposal during his testimony
before the Appropriations Subcommittee last month. Similarly,
Section 227 should help FHA establish our hybrid ARM Program as
the Administration proposed last year.
Sections 229 to 231 will help us prevent a recurrence of
the 1998/1999 Section 203(k) fraud problem in New York City
where a number of unqualified non-profits were persuaded by
unscrupulous lenders to buy small, multi-unit buildings in
Harlem and Brooklyn, supposedly to rehab them for owner
occupancy. This fraud will cost the taxpayer some $268 million.
And may I say in response to Ms. Velazquez' opening statement,
we did not countenance fraud, we have prosecuted it. Moreover,
we have worked closely with the City to develop a plan that
will fix that housing, make it livable, and protect the tenants
and the neighborhoods in which they live.
The committee has asked about our single-family REO
activities. Since the introduction of the management and
marketing contracts in March of 1999, the Department has
greatly improved our disposition process. As of March 2002, the
inventory of HUD-owned homes is at its lowest level since 1996,
28,000 homes compared to a March 1999 inventory of 42,000.
Moreover, the inventory has been stable during the recession
instead of rising, as has been typical in the past.
Currently, homes remain in inventory an average of 183 days
compared to 221 days for this same period in 1999, and losses
per claim have been reduced from 39 cents to 29 cents on the
dollar. That loss rate is the lowest in at least 20 years. With
this record, we do not think that additional statutory
authority for property disposition is required.
FHA's basic multifamily insurance program, Section
221(d)(4), has required credit subsidy ever since credit reform
was enacted in 1990. Three times in the last 8 years, the
program was closed down because the available credit subsidy
was exhausted. To end this stop and start cycle and place the
program on a breakeven basis, the Department raised the premium
from 50 basis points to 80 for Fiscal Year 2002. There were
concerns that the program would be hamstrung by this increase.
That has not happened. Already in this Fiscal Year, FHA has
insured over $1.5 billion worth of (d)(4) projects, more than
we did in all of last year. Moreover, with the 25 percent
increase in mortgage limits that was proposed by the Secretary
and enacted by Congress, we are seeing the first applications
in years from several high-cost metropolitan areas, including
at least one in New Jersey.
In addition, we have conducted the first systematic
analysis of the premium and credit subsidy since credit reform
was enacted. We concluded that (d)(4) can be operated on a
breakeven basis at a much lower premium--57 basis points. The
President's budget contains an announcement of this premium
reduction, effective in October. We are also reducing either
the premium or the credit subsidy for nearly every other
multifamily program.
Sections 201 and 202 address the question of who should be
served by the programs. FHA generally serves moderate-income
renters. Most FHA-insured projects are affordable to families
in the lower half of the income distribution. And about half
are in underserved areas. These are important markets. These
families and these communities need FHA. To state our views
very briefly, we favor Section 201, indexing the multifamily
mortgage limits. We would prefer to wait on Section 202,
analyze our experience with the new limits and the future
effects of indexing before proceeding with any additional
increase.
I just want to mention in conclusion that we support the
housing impact analysis proposed in Title VIII. This was
advocated by President Bush during the campaign 2 years ago.
And then thank you for the opportunity to testify, and I will
answer any questions.
[The prepared statement of John C. Weicher can be found on
page 437 in the appendix.]
Chairwoman Roukema. Thank you, Secretary Weicher.
Our second panelist here today is Mr. Roy Bernardi. Mr.
Bernardi currently serves as HUD Assistant Secretary for
Community Planning and Development, and with that kind of
experience we welcome you here today, but I also understand
that you served as Mayor of Syracuse, New York, elected at that
time and re-elected, served--you were obviously a very popular
elected representative and a Republican at that, as I
understand. We are not making this partisan, but for Syracuse
it is my understanding that that was a rather renowned tribute
to the party. All right. And with that, Mr. Bernardi, we give
you your 5 minutes of testimony.
STATEMENT OF ROY A. BERNARDI, ASSISTANT SECRETARY, OFFICE OF
COMMUNITY PLANNING AND DEVELOPMENT, U.S. DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT
Mr. Bernardi. Thank you, Madam Chairwoman, for your
efforts, and Minority Member Frank, for all of your efforts to
bring the issue of affordable housing this attention through
legislation. We thank you for your leadership and your
compassion for the less fortunate among us.
H.R. 3995 proposes some significant changes to many
programs in the Office of CPD. I have addressed these changes
fully in my prepared statement, but I would like to summarize
for you this afternoon these proposed changes. Starting with
the HOME Program, the HOME Program has demonstrated remarkable
success in developing affordable housing, particularly in
producing rental units to serve extremely low-income families.
We believe reforms of this program should build on its notable
successes. I can indicate to you that of the number of units
that are produced, 41 percent are for extremely low-income
individuals, who pay up to 30 percent of median income in rent.
We have a concern that the proposed Production and
Preservation Program and other significant proposed changes for
the HOME Program will have consequences that will not help the
worthy objective of H.R. 3995 which is to provide affordable
housing for extremely low-income families. Abandoning the FMR
standard and adopting the State median income as a floor for
determining rents could actually, in many instances, increase
rents generally across the country and have unintended
consequences.
Production results as well as feedback that we received
from housing providers indicate the changes made over the 10
years to this program to improve its effectiveness have been
largely successful. One hallmark of the HOME Program has been
the close and continuing communication between HUD and the
recipients of HOME funds and their representatives. Certainly,
we are receptive to further improvements and when the report of
the Millennial Housing Commission is published next month, HUD
will be eager to work with this subcommittee to build on your
efforts and those discussed by the Commission to expand
affordable housing opportunities under the HOME Program.
I would also like to address our Homeless Assistance
Program. The McKinney-Vento homeless assistance provisions of
the bill are carefully crafted and correctly recognize the
important elements of current law that should be retained.
Specifically, we support the goal of reauthorization for the
support of housing, Shelter Plus Care, Section 8 moderate
rehabilitation and the emergency shelter grants. However, the
Department will propose the consolidation of these programs
into one that is needs-based and performance-driven. We also
are pleased with reauthorization of the Interagency Council on
the Homeless and the transfer of the Emergency Food and Shelter
Program to CPD.
In the 2003 budget process, the Department reviewed
proposals, now in the bill's language, to transfer the costs of
renewing expiring Shelter Plus Care projects and projects
funded under the permanent housing component into the
Certificate Housing Fund. We believe they would be better
addressed as part of a consolidation of homelessness funding.
Now, I have comments on the community and development block
grants, and the CDBG Program provisions of H.R. 3995. Section
902 on housing counseling programs would require the Secretary
to consolidate housing counseling under a single HUD office.
The cornerstone of the CDBG Program is local discretion of
program design and implementation. We would caution against
adopting a one-size-fits-all approach that would take away
discretion from the CDBG grantees. We would rather urge support
for the Administration's request of $35 million for a new
categorical counseling program, nearly doubling the current
level of funding and removing the program from the home block
grant.
Section 905 concerns the funding eligibility for secular
activities carried about by religious organizations. HUD
strongly supports the involvement of faith-based organizations
in our programs. HUD supports Section 906, adding a new
eligibility criteria category to the CDBG Program to authorize
the construction of tornado or storm-safe shelters in
manufactured housing and parks. We do that in public property
right now. We support this new eligibility category; however,
we do not want to see it as a set-aside.
Now, Section 907, CDBG renewal communities. CDBG right now
does provide assistance to empowerment zones, and we agree that
there should be assistance to renewal communities through the
CDBG Program. And HUD also supports reauthorization of the
self-help ownership opportunities Program (SHOP). The
President's request to triple to $65 million for SHOP in Fiscal
Year 2003 reflects its popularity and success in helping low-
income families become home owners.
I think I am within two seconds of my time being up, so I
want to thank you for the opportunity, and I will be happy to
answer any questions.
[The prepared statement of Roy A. Bernardi can be found on
page 447 in the appendix.]
Chairwoman Roukema. Thank you. I appreciate your
cooperation.
Our next panelist is Mr. Michael Liu, Assistant Secretary
for Public and Indian Housing at HUD. It is my understanding
that you have had considerably experience as a member of the
Federal Home Loan Bank of Chicago; is that correct?
Mr. Liu. Yes, ma'am.
Chairwoman Roukema. But I hope you can help us give us some
insights of yours during the time period in which you are
serving at HUD on this subject of Section 8 rental housing and
assistance for Native American programs at HUD. I thank you.
STATEMENT OF MICHAEL LIU, ASSISTANT SECRETARY, OFFICE OF PUBLIC
AND INDIAN HOUSING, U.S. DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
Mr. Liu. Thank you, Madam Chairwoman. We appreciate you and
your co-sponsors developing and introducing the Housing
Affordability for America Act of 2002. The bill contains many
proposals that will allow us to do a better job of providing
the most effective low-income housing assistance possible with
the funds available. With respect to vouchers, Section 401 of
the bill proposes a new Thrifty Production Voucher Program.
This program is patterned after the current project-based
voucher program, but assumes that the capital for production
will be found from other programs or sources and provides for
reduced subsidy designed to cover only operating costs. HUD
generally supports additional tools that may help public
housing authorities (PHAs) meet their community's housing
needs, and in that context will work with the subcommittee to
develop a means of offering vouchers that can be combined
easily with capital subsidies.
The current proposal, however, seems rather complex and
differs from the project-based voucher program in ways that may
not be necessary, such as waiting list administration and
development of requirements by location, to name just a few. I
look forward to further discussions on this matter.
The bill also contains several initiatives designed
directly or indirectly to increase the successful use of
appropriated voucher program funds. HUD supports the increase
in allowable rent to 40 percent of gross income, but believes
PHAs also need flexibility to address compelling situations.
For example, where a family already in the program would like
to move into a significantly less expensive unit, they cannot
do so because the family still would be paying more rent than
the current limit.
HUD would consider allowing the use of some program funds
to help increase voucher utilization for PHAs that are
effectively using their administrative fees solely for the
Section 8 Program. However, at the proposed maximum limit of
five percent, this could translate into $500 million which may
affect the administration of the core program. Any such
reauthorization should be substantially narrower and structured
to include appropriate oversight.
With respect to administrative fees, HUD recommends that it
be given broader guidelines, not just to provide a bonus for
high performers, but also to restructure the fees to promote
performance in general and the accomplishment of specific
program priorities, including families' movements to self-
sufficiency and home ownership.
With respect to public housing, HUD appreciates that Title
V contains the Administration's Public Housing Reinvestment
Initiative, because that initiative can provide a new and
effective means of improving public housing. The Public Housing
Reinvestment Initiative provides a means of addressing this
problem with the dollars available. The Public Housing
Reinvestment Initiative allow PHAs that choose to participate
to trade their public housing subsidies for project-based
vouchers on a property-by-property basis. PHAs could then
borrow money for capital improvements on the same individual
property basis now used for Section 8 developments and
multifamily housing generally. The bill contains a proposal to
suspend the PHA plan requirement for 3 years for the smallest
PHAs, up to 100 units. HUD has provided some streamlining of
PHA plan requirements for these PHAs, but we need to go
further, and we are developing a regulation that we believe
will accomplish this. This bill's proposal is certainly along
the same lines.
The bill would also require HUD to develop and test a third
party system for public housing performance evaluations through
an outside contractor. This year, HUD has implemented a binding
public housing management assessment that contains an
independent inspection of physical conditions. However,
experience with the Public Housing Assessment System (PHAS),
during its extended advisory period raised so many questions
regarding the adequacy of its physical inspection and finance
components that HUD has substantially simplified and in some
respects pared back these components prior to implementation.
HUD is committed to working with public housing groups in an
effort to revise the system, and this includes research into a
third party system that would be accepted as appropriate by all
stakeholders and parties concerned.
The bill provides for a 2-year reauthorization of HOPE VI
and for measures to ensure that a broader group of communities
in terms of size and location have a realistic possibility of
receiving HOPE VI awards. HUD supports reauthorization and the
effort to promote broader program participation. Title VII
reauthorizes both the Native American Block Grant Program and
its related Loan Guaranty Program, and HUD supports the
reauthorization of both of these.
I look forward to working closely with the subcommittee as
you continue to develop this important legislation.
[The prepared statement of Michael Liu can be found on page
453 in the appendix.]
Chairwoman Roukema. I thank you very much.
Now our final panelist is Mr. Thomas McCool. Mr. McCool is
the Managing Director of Financial Markets and Community
Investment at the General Accounting Office, which analyzes
cost factors in the legislative branch of our Government, and
we are happy to have you here today, because you had
considerable responsibility and experience in analyzing Federal
housing and financial matters and their relationship. With
that, Mr. McCool, for you.
STATEMENT OF THOMAS J. McCOOL, MANAGING DIRECTOR, FINANCIAL
MARKETS AND COMMUNITY INVESTMENT, U.S. GENERAL ACCOUNTING
OFFICE
Mr. McCool. Thank you, Madam Chairwoman, Members of the
subcommittee. We are here today to discuss H.R. 3995, the
Housing Affordability for America Act, and in particular we are
here to discuss Section 226, which would establish risk-based
capital requirements for the Mutual Mortgage Insurance Fund of
the Department of Housing and Urban Development's Federal
Housing Administration.
We first presented the results of our analysis last year
and suggested ways to better evaluate the financial health of
the fund, so I won't go into details as we presented those last
year. I will sort of cut to the chase, as it were. When we did
our work last year, we concluded in our report that 2 percent
capital ratio appeared sufficient to withstand moderately
severe economic downturns that could lead to worse than
expected loan performance. Some more severe downturns that we
analyzed also did not cause the estimated capital ratio to
decline by as much as two percentage points. However, in the
three most severe scenarios that we used in that particular
analysis, an economic value of 2 percent would not have been
adequate. Nonetheless, because of the nature of such analysis,
we urge caution in concluding that the estimated value of the
fund implies that the fund would necessarily withstand any
particular economic scenario under all circumstances.
Determining an appropriate capital ratio depends in part on
the level of risk Congress wishes the fund to withstand, as
well as the composition and performance of the portfolio and
the way the fund is managed in the future. We believe that to
evaluate the actuarial soundness of the MMI Fund, one or more
scenarios that the fund is expected to withstand needs to be
specified. As a single, static capital ratio, does not measure
actuarial soundness.
Once the scenarios are specified, it would be appropriate
to calculate the economic value of the fund or the capital
ratio under the scenarios. As long as the scenarios result in a
positive estimated economic value, the fund could be said to be
actuarially sound. However, it might be appropriate to leave a
cushion to account for factors not captured by the model,
especially those related to managing the fund and the inherent
uncertainty attached to any forecast.
Our view is that Section 226 of H.R. 3995 will permit FHA
to develop capital standards that more adequately reflect the
risk the fund faces. By establishing what it calls a minimum
risk-based capital ratio based upon economic scenarios that
could adversely affect defaults and prepayments, the act would
more fully capture the credit risk the fund faces. By
establishing a 1 percent minimum basic capital ratio, the act
recognizes the unknown risk, such as operational risk, that the
fund faces.
Overall, Section 226 of H.R. 3995 seeks to provide a method
for determining whether the fund has capital adequate to cover
its credit risk under defined conditions and provides a cushion
to cover continuing operational risk, thus clarifying what is
meant by actuarial soundness and helping FHA manage the fund to
achieve that goal.
Madam Chairwoman, this concludes my statement. We would be
pleased to respond to any questions.
[The prepared statement of Thomas J. McCool can be found on
page 460 in the appendix.]
Chairwoman Roukema. I thank you for your testimony. And I
have a couple of questions, and they may relate to a number of
the testimonies here, but I did note that Mr. Roy Bernardi
talked about, and I wasn't quite sure the exact connection that
you were making, about the unintended consequences that might
be out there in terms of actually raising rents. And I guess
you were talking about the HOME Program or what was the
connection? Would you amplify that, please, for me?
Mr. Bernardi. Right now, rent is determined by either the
fair market rent or the median--30 percent or 60 percent of the
median income by county. And the proposal, as we read it,
indicates that the substitute would be the statewide median
income, which would be higher and would make the maximum rents
higher for the people that is intended to serve. And I think
the chart here gives some examples as to what would occur if
the State median income were used as opposed to the present
fair market rent.
Chairwoman Roukema. Staff is telling me that it was
recognized in our preliminary discussion, and this should be
something that we will have to go back and look at, but I would
appreciate your help in specific terms as to how you think we
should be addressing this to correct the legislation. Yes?
Mr. Bernardi. We would be more than happy, obviously, to
work with your staff.
Chairwoman Roukema. Please.
Mr. Bernardi. And we know there are areas where there is a
production difficulty. And if we can identify those areas,
maybe we can work within the fair market rent in those areas
and tweaking that, if you will, so that we can have more
productivity in the areas that presently don't have as much
production.
Chairwoman Roukema. Is there any other member of the panel
that has had some experience with this or insight, a
perspective on it? If you do, please contact us by phone, e-
mail or even in written form.
But I do have another question, and that is Ms. Velazquez
is not here, but she had asked earlier today or in her
introductory statement, and I acknowledge that that was an
important issue, and I didn't hear, but maybe some of you
referenced the predatory lending question. Do any of you have
any comments or help or observations to give us about the
questions raised regarding predatory lending? Yes, Mr. Weicher?
Mr. Weicher. Madam Chairwoman, we have been concerned at
HUD about predatory lending in this Administration and the
previous Administration. Efforts go back at least to 1997, to
my knowledge, to address the concerns. We have done a number of
things with respect to FHA programs, and we can really only
deal with FHA. But Ms. Velazquez mentioned her concerns about
FHA in her district in central Brooklyn. We have issued, this
fall, a proposed rule to prevent flipping in FHA programs. If
the rule becomes final, you will not be able to obtain
insurance on the second transaction involving a home within a
6-month period, unless there is a case to be made that this is
a legitimate second transaction. We issued that, I believe, in
November. We received a number of comments, and we are in the
process of putting a final rule together.
We have established a program that we call Credit Watch
where we i dentify the FHA lenders with high early default and
early claim rates on the loans that they have originated for
FHA. We know that early defaults and early claims within the
first year to 2 years in large numbers is evidence that
something is fundamentally wrong. Anybody can have a default, a
claim or two, and anybody will have claims as time goes on. But
a lot of claims right after the loans have been made is a
warning sign.
We have conducted Credit Watch investigations of lenders on
a quarterly basis, those lenders with these high rates. We have
sanctioned, removed from our roster, over 100 lenders over the
space of 4 years. We have another 100 lenders who have been
given warnings that we are particularly concerned about their
performance. We are now extending that same approach to
appraisers in something that we call Appraiser Watch that the
Secretary mentioned, I believe, in his Senate appropriations--
Senate-authorizing testimony last month. Again, this involves
looking at the early default and claim rates on loans based on
who the appraisers were on the loan.
Finally, for loans which are in default, we have
established a loss mitigation program. We expect lenders to
take any of several steps to try to help families who are
delinquent on their loans from going into foreclosure. Our
National Loan Servicing Center in Oklahoma City works with
lenders all over the country and tracks the performance of the
loans by lender to see which lenders have been successful in
keeping people in their homes and which have not. Last year, we
cut our claims by 10,000 loans at the same time that we
increased our loss mitigation activities by 20,000 loans around
the country. We are working in a lot of ways to prevent
predatory lending and to help people who are the victims of
predatory lending.
Chairwoman Roukema. Well, we have no more time now, but for
you or any other member of the panel, if you have any
recommendations as to how the law can be improved to make it
more effective in terms of dealing with predatory lending,
please forward that to us, and I am sure that there will be
others that have questions regarding predatory lending. With
that, I will yield to Mr. Frank.
Mr. Frank. Let me begin by asking on the two points I
raised before, Mr. Weicher, on the availability of risk sharing
FHA under 202, have we got a definitive Department policy on
that?
Mr. Weicher. Yes. The Department is working on specific
instructions to our mortgagees for the process of implying
that. We expect to have a revised letter out in 60 to 90 days.
Mr. Frank. And that will go to the regional offices.
Mr. Weicher. That is right. In Massachusetts, I know we
have had one project which has been under consideration for 18
months, and we are giving specific instructions regarding that
project.
Mr. Frank. I appreciate that, but we can tell them that is
a harbinger of good news to come.
Mr. Weicher. Yes. And we know MHFA has other projects that
they want us to move forward.
Mr. Frank. Yes. They have changed their name now to Mass
Housing.
Mr. Weicher. I know, but it is still----
Mr. Frank. Yes, I agree with you.
[Laughter.]
Now, on the interest reduction payments being made
available for maintenance, where are we on that?
Mr. Weicher. Well, we have been discussing that with OMB
for the last 2 months.
Mr. Frank. Ah, the magic words; we know what the problem
is.
Mr. Weicher. And those discussions are continuing, and we
do expect that we will be able to advise you in the not very
distant future.
Mr. Frank. But this is a congressional mandate. We are not
talking about an option here.
Mr. Weicher. I understand that.
Mr. Frank. I know they do. Does OMB understand it?
Mr. Weicher. Yes. I think the Administration understands
this, Mr. Frank.
Mr. Frank. OK.
Mr. Weicher. And if I may say, I think there are some
technical issues here, because we are dealing with money which
was originally a stream of payments, and the legislation turns
it into a capital grant to avoid scoring, and you were talking
about that problem in your opening statement. You can't spend
the capital grant any faster than you can spend the original
payment, and it is complicated.
Mr. Frank. Let me just say this, because I think this is
important. Again, it is important for us to have maximum
flexibility. Is it a possibility that some statutory change is
needed or do you think you can work this all out when you say
technical problems?
Mr. Weicher. I think we will either get the technical
problems resolved reasonably quickly or we will tell you we
can't.
Mr. Frank. In which case, I hope you will do it in time,
and I think--you know, I would be prepared to go to our
friends, the appropriators, and ask them if they can clean it
up there. But this really, obviously, is important to get it
forward. I thank you for that.
Let me ask now, Mr. Liu, in your comments, you talked about
thrifty vouchers. We are agreed in this room most of the time
that we need a production program. Thrifty vouchers can't vote.
Here is what you said in your written statement about thrifty
vouchers: ``The current proposal seems rather complex and
differs from the project-based voucher program in ways that may
not be necessary. I look forward to further discussions on this
matter.'' I guess I would put you leaning against if I was
whipping this. So that sounds fairly negative about the thrifty
vouchers. What are your problems with them and what could we do
to make them less complex and less not necessary?
Mr. Liu. Congressman Frank, my comments should not be an
indication of a negative stance toward the proposal. It is a
tool.
Mr. Frank. Well, Mr. Liu, could I ask you a question?
Mr. Liu. Yes, sir.
Mr. Frank. When you do feel negative, can I see that? That
will be great reading.
Mr. Liu. Sure, sure. It will be----
Mr. Frank. If these aren't negative, I want to see when you
are negative what you say.
Mr. Liu. Absolutely, sir.
Mr. Frank. No swearing is allowed.
Mr. Liu. Absolutely, absolutely, absolutely. No, it should
not be viewed as a negative statement. It really is a
statement, on its face, that we would like to work with the
subcommittee to develop another tool to try and deal with the
issue.
Mr. Frank. I understand, but you--I mean, did something
happen between the time you wrote this and now? You say it
doesn't--I shouldn't take it as negative. ``It seems rather
complex and differs in ways that may not be necessary.'' There
is nothing favorable in here. Oh, and you also say, ``It
assumes that capital will be found from other programs and
sources and provides for reduced subsidies.'' I mean what is
good in here?
Mr. Liu. Well, I think the good part is that we are saying
that we are willing to work with the subcommittee to make the
tool, at least in our view, workable.
Mr. Frank. So, what is good in there is that the American
Constitution has not been suspended, and you will continue to
work with Congress. But I must say this is not a very ringing
endorsement of the program.
The next question I have has to do with Section 505, and in
particular on the public housing. I understand the flexibility,
but what bothers me is about every fourth line there is an
ability of the Secretary to waive restrictions. And what
bothers me is that if you had a Secretary who was not too happy
with public housing, you could wind up with a lot fewer units.
And the fear that many of us have is that the best units will
be put to a use which is good as far as it goes, but if you
waive all these use restrictions, then they go out of the
stream of being affordable. Some of them could be, and we all
know housing developments in public housing that could, in
fact, be very desirable. And I am concerned. Do you
contemplate--what do we do to prevent under this, if we enact
505, a loss over time of some of the best public housing units
on into the future?
Mr. Liu. Well, we believe that there is an adequate dynamic
at the local levels, in combination with HUD approval, that
will prevent an abuse of the situation. On the other hand, if
there are specific ideas that your staff or that the
subcommittee might have so that we might inject some balance,
if there is need for that, we are willing to discuss those.
Mr. Frank. Just to finish up, in other words, to quote a
phrase, you look forward to further discussions on this matter
too.
Mr. Liu. That is a nice phrase, sir. Thank you.
Mr. Frank. Thank you. Thank you.
Chairwoman Roukema. That is the purpose of these hearings,
I believe, at least I hope so. I hope so. Yes, Congressman
Miller.
Mr. Miller. Thank you, Madam Chairwoman. I have a phrase I
would like to use. I call it the ``new homeless.'' And it is
not people who are unemployed, it is people who, husband and
wife, are out there working very hard. One might be a school
teacher, one might be a fireman. And there is a lack of
affordability for those people too. I mean, I like good
examples. I had one of my staffers that happened to put in a
bid for a small condo over here in Arlington yesterday. It was
an 874 square foot condo for $199,000. So we would consider
that a move-up home for people getting out of affordable, low-
income house being able to move up. The problem was in 2 days
they received 26 bids and that $199,000 listing sold for
$260,000, because we are just not providing enough units to
meet the demand out there. And I am just firmly convinced if
there is no place for people to move up to, there is never
going to be affordable housing in this country.
Now, in L.A. County, 59 percent of the Section 8 voucher
holders have no place to use that voucher because there is no
place for them to move because there is no place people can
reasonably afford to move up to and buy a home. And in my
comments earlier, I got a little excited. I talked about a
builder in Colton that because of a ESA, Endangered Species
Act, application for a rat on 33,000 acres, it is going to wipe
out a 600-acre development that was going to provide 2,500
affordable units that would have been probably from $120,000 to
$150,000 price range, the first move up for people from low-
income Section 8 affordable housing. The first place they can
go to buy a home. And that is what I think is wrong with this
Government, and I have a real problem with that.
But on your status report of select programs, your note
that public housing is ineffective. What could be done from the
Federal perspective to create an effective program for Federal
housing? That may be a difficult question, and maybe you will
require more time than you have.
Mr. Liu. Well, specifically, Congressman Miller, we have
been spending a lot of time addressing this issue--and I think
the comments that you read are really based on a lot of
managerial issues that we have within HUD and within Public and
Indian Housing. We must do a better job of working with the
housing authorities to ensure that there is both timely and
effective use of their dollars, both operating and capital fund
dollars. We have seen an improvement, but things could
certainly be a lot more effective.
For instance, in our HOPE VI Program, which comes up for
reauthorization this year, we have allocated for the life of
the program over $4.3 billion, close to $4.4 billion. Less than
$1.6 billion has been actually spent on hard units coming up.
Now, there are dollars that are ostensibly obligated, there are
dollars which are ostensibly in the pipeline working on very
complex financing. When we look at the promises that these
types of dollars hold for the program, we have to revisit that
as we look at it going forward. And, again, we were heartened
to see a comment made in this bill that attempts to address one
of the fundamental issues of our program for HOPE VI. Take for
example, the housing stock, and is it today the same that we
talked about 10 years ago? So it gives you an idea of the type
of challenge that we have in getting these dollars out the door
and dollars used to benefit the people out there.
Mr. Miller. See, a lot of the problem I have is a lot of
individuals who care about housing are well-intended. I am not
an attorney and I could read all the books associated with law
that I could gather. And for me to stand up here and debate
trial procedure having never been an attorney would be rather
ridiculous. I have spent 30 years in the development industry
from when it was a process 30 years ago that was very
simplistic and you could rapidly gain permits and approvals to
build. And I have many friends that are in that industry, and I
talk to them repeatedly about the process they are going
through and the difficulties. The 2,500 units I talked about
were proposed by personal friends of mine, I know what they
have gone through for 5 years.
Another issue on the FHA charge that we have borrowers
insurance premiums. We are running a surplus on that. We have
an excess of funds on that, which some Members believe that
money should be taken and used for other programs. To me it
means people who are paying that premium to buy homes are being
overcharged, and perhaps we need to refund some of that money
back to them or drop those rates in the premium so they are not
paying more than they should be. Maybe you can address that.
Mr. Weicher. Well, Mr. Miller, we certainly think that the
FHA funds should be used for FHA purposes.
Mr. Miller. Yes.
Mr. Weicher. For the purposes of the home buyer.
Mr. Miller. Of the fee.
Mr. Weicher. The premiums that they are charged a fee for
are charges we levy on individuals for their benefit and not
charges that we levy to finance other activities.
Mr. Miller. But if they are not needed for that, some
Members, I have heard, want to use that money for another
purpose.
Mr. Weicher. Yes.
Mr. Miller. Rather than taking that money that belongs to
somebody who paid it and giving it back to them, because it is
their money, it is not our money, and then going in the future
and saying, ``Let us drop that rate to an amount we need.'' Is
there something to be done in that line?
Mr. Weicher. As I mentioned in my opening statement, the
Congress spent a great deal of time 12 years ago establishing a
set of premiums and policies for FHA to prevent the fund from
going the way of the S&L industry, which there was some concern
about in 1989 and 1990. And we have built up the fund to the
point where our net worth is higher than the levels that
Congress mandated back in 1990. There is a question-- and Mr.
McCool's testimony goes into this in some detail-- whether the
capital standards that Congress established in 1990 are
adequate to protect the fund against serious economic downturns
of a kind we have not seen in the last 10 years and more, but
of a kind we have seen once or twice in the past.
Mr. Miller. So you think they should be applicable to the
service they were----
Chairwoman Roukema. Excuse me. We are much over time.
Mr. Miller. Thank you, Madam Chairwoman, and I hope Mrs.
Kelly will address the issue on appraisals.
Chairwoman Roukema. Let Mr. Weicher finish his response to
you, and then we will move on.
Mr. Weicher. I think that does finish it, Madam Chairwoman.
Mr. Miller. Thank you for your graciousness, Madam
Chairwoman.
Chairwoman Roukema. Thank you. Thank you. I am going to try
to go in the order in which people arrived, and I think Mr.
Sanders was one of the early arrivals.
Mr. Sanders. Thank you, Madam Chairwoman. Let me start off,
if I might, with Mr. Weicher. Mr. Weicher, according to
Deloitte & Touche, over the next 7 years the FHA Fund balance
is projected to grow from over $18 billion in Fiscal Year 2001
to $44 billion in Fiscal Year 2008. If Deloitte & Touche is
correct, the FHA surplus will exceed $26 billion over the next
7 years. And I just wanted to ask you, and most of us are not
actuaries or accountants here, but in English is that roughly
correct, would you agree with that?
Mr. Weicher. I would not call it a surplus, Mr. Sanders. It
is the net worth of the MMI Fund. It is the----
Mr. Sanders. But is that figure from Deloitte & Touche
correct?
Mr. Weicher. That is the best estimate that Deloitte----
Mr. Sanders. OK. So we agree on that.
Mr. Weicher. We----
Mr. Sanders. Excuse me. I will ask you questions. If I
might, sir, OK? You do not call it a surplus but others might.
I understand where you are coming from; you have made your
point before. It is a fair question as to what we do with that
money. Now, the President, as I understand it, and the
Administration believe that that money should be used to
counter the deficit, that it is a surplus, I call it a surplus,
to be used to counter the deficit. Other people have different
ideas. But, in fact, what we are looking at is $26 billion more
that some people believe that, in fact, we need to protect that
fund. It is an honest debate as to what we should do with that
money. I understand that there are different points of view on
that issue. I would strongly suggest that given an--and I will
use the word ``surplus''-- that we have that surplus, that this
comes, in fact, from housing transactions. Given the fact that
this Administration, and, in fact, previous Administrations,
have not adequately dealt with the crisis in affordable
housing, given the fact that some are proposing and have
supported huge tax breaks for the wealthiest people in this
country, I believe that it is appropriate in order to address
the housing crisis that I think almost everybody in this room
perceives to exist, to put that money into affordable housing.
And I would like you to tell me if there is anything
extraordinary--you may not agree with it, but there has been
some confusion on this issue--if the United States Congress
decided, as I hope that they will, and we have 174 co-sponsors
on this legislation, to create an affordable housing trust fund
using this surplus, dedicating this stream of money for
affordable housing if it passed the House of Representatives,
if it passed the Senate, if the President signed the bill, am I
correct in saying that we would have a National Affordable
Housing Trust Fund with that money, sir?
Mr. Weicher. I think what you are asking is will the
Department of Housing and Urban Development abide by
legislation that is passed by the Congress and signed by the
President.
Mr. Sanders. That is right. And I hope the answer is----
Mr. Weicher. You can hardly expect any of us to say, ``No,
we will reject the decisions of the Congress and the
Administration that we serve.''
Mr. Sanders. Of course, and I appreciate that answer, and I
knew that would be your answer. But I did ask you that because
we have heard some discussion in the past from various
authorities that suggest that somehow this can't be done. And
the answer is if the Congress deems it and the President signs
it, that is, in fact, what can be done.
And, Madam Chairwoman, let me just suggest that what this
issue really comes down to, in one sense it is very complicated
and so forth, in the other sense it is really pretty simple.
And that is you have a pot of money and honest people have
honest differences of opinion what you do with that money. My
feeling is that that money should be directed into dealing with
the affordable housing crisis, that one of the spin-offs of
that will be the creation of large numbers of decent paying
jobs and that children will not have to sleep out on the
streets of this country, and millions of people will not have
to pay 50 or 60 percent of their income in housing. So I would
hope that we will use that money for affordable housing, and we
look forward to moving that bill forward. Thank you.
Chairwoman Roukema. All right. I thank the congressman from
Vermont. Now we have Congresswoman Kelly from New York.
Mrs. Kelly. Thank you, Madam Chairwoman. Mr. Liu, a little
while ago, I went to New Orleans and held an oversight hearing
in New Orleans. That was a situation where the New Orleans
Housing Authority had over $800,000 available to them. They had
knocked down a huge amount of housing and they had not had a
HOPE VI grant since 1994. There were people who were displaced,
but there was no new housing being built. And yet there was
$800,000 available to that housing authority that wasn't being
utilized. Now not all of that was HOPE VI money, but I noticed
that you have talked just quickly about HOPE VI in your
testimony, and, again, Mr. Miller brought up some things. I
would like you to address what exactly you are doing, and if
you are not able to do that, perhaps you could work with my
office. I would like you to address what is happening with the
availability of a public housing authority to move money that
is available into that HOPE VI rebuild program if they have
this need to rebuild housing.
In addition to that, that flexibility I hope would happen,
but I also am thinking about a timeliness, and you addressed
that a bit. Are you thinking about time certain after something
is knocked down? And I am not talking about one-for-one
replacement, but just simply the fact we are dislocating
families, we need to rebuild something, and I, in New Orleans,
found it appalling that all that money was there and yet we had
people living in such terribly substandard housing. Could you
address that for me, please?
Mr. Liu. Yes, Congresswoman. You have touched on a subject
which is of great concern to the Department, and as we move
forward in looking at the issue of reauthorization of HOPE VI,
we welcome ideas and suggestions and certainly welcome the
chance to work with you and other Members of the subcommittee
on that. Project readiness is an issue. For instance, currently
under the HOPE VI Program, under the 2001 NOFA, and prior
NOFAs, a ``successful housing authority'' need not have put in
as part of its application a project schedule. I will repeat
that again. You could win a HOPE VI grant and not have a
project schedule. And most of our HOPE VI awardees proceeded in
that fashion. After they get the award, we would then negotiate
or work with them to develop a project schedule.
Now sometimes that could take years so that we have
projects today 2 or 3 years after the award where the housing
authorities don't even have a developer partner. We have
situations where grants were made in 1995, and not a dollar has
been spent, nor a subsequent revitalization plan, which is also
not necessarily required under the current NOFA, is there. So
these are issues that we hope to address as we talk about
reauthorization, because you are absolutely right, it is a
shame to have these dollars available and not used.
Mrs. Kelly. I thank you very much, and I know that this
subcommittee will work with you on this. One other thing, Mr.
Weicher, I heard you mention quickly about going back and
looking at what the appraisers have done and so forth. I am
very interested in pursuing that a little bit with you simply
because appraisal can often not necessarily mean the same thing
from one appraiser to the next, and I wish you would elaborate
a little bit on what controls you are thinking about with
regard to appraisals. Could you do that for me, please?
Mr. Weicher. Certainly, Ms. Kelly. In the last 2 years, we
have insured 1.8 million loans that have appraisals on them. We
are looking at our early default and claim experience on those
loans, classified by who the appraiser was on the loan. And we
have the name of the individual appraiser, John Weicher, if I
were an appraiser. We would have the name of the individual
appraiser. We then look at those appraisers whose default rates
and claim rates are high compared to the default rates and
claim rates of the field office area, which is either a State
or part of a State in the larger States, and we look at those
who are high relative to the markets in which they are working.
Those give us a group of appraisers who are creating risks for
the FHA Fund and putting people in houses where they are not
able to sustain the mortgage. We then will go in and look at
the appraisers on an individual field review basis and see
whether this is bad luck, whether this is incompetence, or
whether it is something worse.
Mrs. Kelly. How long does that process take?
Mr. Weicher. Well, in the----
Chairwoman Roukema. Excuse me. I am sorry. I am sorry, but
let us conclude this. Give a short answer and conclude, please.
Mr. Weicher. In the first 3 months of the year, we have
identified 24 appraisers for field office review.
Mrs. Kelly. Thank you. Thank you, Madam Chairwoman.
Chairwoman Roukema. All right. Thank you. I am sorry. I
don't like to be forcing people to comply with the 5-minute
rule, but I will tell you it is my opinion that we are going to
have conclude this hearing at five o'clock, so that if we are
going to get through this next panel, we are going to have to
use some discretion here and adhere to the 5-minute rule.
Otherwise we will never get through to the second panel. Yes.
And with that, Congresswoman Lee.
Ms. Lee. Thank you, Madam Chairwoman. Let me just ask Mr.
Weicher with regard to the HUD's budget, it is my understanding
that it does not include any funding for rehab of federally
assisted housing programs. And I wanted to find out if that is
so, and if it is, what do you think in terms of your
recommendations to address this need? And then also, in your
response to our Ranking Member, Congressman Frank, with regard
to Section 236, if all of the difficulties and issues are
worked out with, is it OMB, would you actually go back to the
drawing board and put a request in for those funds for Section
236?
Mr. Weicher. The answer to the latter question is, yes, if
we can work out the complications with this, then we would
expect to have funds which we would be able to make available
through the usual process. We would need regulations, and we
need a NOFA if these were to be made available competitively,
which they probably would be. But the short answer is, yes, we
would make those funds available. With respect----
Mr. Frank. Would the gentlewoman yield, because she asked a
very good question? Would that have to be reflected in
appropriation or have you got sufficient authority to do that
now without any further appropriation?
Mr. Weicher. It is a question of the timing. The 236, the
interest reduction payments have already been scored as a
stream of payments over time, and the OMHAR legislation in 1997
established that these funds could continue to be spent but on
the same basis. And that, as I think I mentioned, is part of
the problem. What was a stream of payments needs to be somehow
handled as a capital grant, and if the timing of the outlays
changes, the scoring would change, and that is part of the
complication.
Mr. Frank. But if necessary, you would then request the
authority to spend it if that were necessary.
Mr. Weicher. Yes.
Ms. Lee. OK. Thank you very much, Madam Chairwoman. So then
is it safe----
Chairwoman Roukema. Your time is not yet concluded if you
have a follow-up.
Ms. Lee. OK. Thank you.
Chairwoman Roukema. Brief, brief.
Ms. Lee. Very quick. With regard to the proposed rule, with
regard to predatory lending, in conjunction with FHA insurance,
it would generally prohibit the use of FHA to finance homes
that were resold within the 6-month period. And I just wanted
to know if you plan on issuing a final rule on this or what is
the status of that?
Mr. Weicher. Yes. We do plan on issuing a final rule. We
are reviewing the comments now, and we expect to have a final
rule out this summer.
Ms. Lee. This summer.
Mr. Weicher. If not sooner.
Ms. Lee. OK. Thank you very much, Madam Chairwoman.
Chairwoman Roukema. I thank you. And now Congressman Watt.
Mr. Watt. Thank you, Madam Chairwoman. Mr. Liu, I confess a
little concern about your approach to one or two things that
suggest that the subcommittee should be making proposals to
HUD. I think maybe we got this backward, and we are trying to
write a piece of legislation, and we are having trouble getting
input from the Department that we are trying to be responsive
to in writing that legislation. We write the legislation over
here.
And so I want to, first of all, without asking for a
response from any of you, just ask you all to please encourage
Secretary Martinez to respond to a list of questions that this
subcommittee sent to him after he testified on February 13 that
have never been responded to. If we don't get the responses to
the questions we ask, then we can't be sensitive to the
concerns or how you as a--how HUD would like to have this done.
So please take that message back to him. I had three questions
that I still haven't gotten the answers to. The subcommittee
asked a bunch of questions that the subcommittee has not gotten
answers to, and it is just very difficult to be responsive to
concerns that HUD has.
Now I am going to segue into your testimony----
Chairwoman Roukema. Excuse me. Mr. Watt, I just want to
concur with you, because I also, as Chairwoman of the
subcommittee, have, on two occasions, requested those responses
from Mr. Martinez and we haven't gotten them.
Mr. Watt. I am aware of that. And Mr. Frank was making the
same point here. If this is not your position, then what is
your position, and your position seems to be, well, let us have
some more discussions, and the problem with that is very soon
now we are going to be marking up legislation that really
doesn't have your input in the process. And this is the
opportunity to give that input. One thing in particular, and
this will drive home the point, and Ms. Kelly made it, if you
look at page 5 of your testimony, you say about HOPE VI, ``More
discussion of concepts ion regard to reauthorization of HOPE VI
will be constructive.''
And then you say a report on HOPE VI lessons learned is due
to Congress on June 15, 2002. This bill may be gone by June 15,
2002 somewhere else out of this subcommittee, and we have
nothing other than, yes, the two things that we do that the
Chairman's bill does with regard to HOPE VI you think are good,
but we don't know what else you would like to have, other than
that you want to have some more discussions about concepts in
regard to the reauthorizations which you think would be
constructive inputs right now.
So having said that, and I don't mean to lecture you on
this, but we had a hearing yesterday in this subcommittee about
HOPE VI, and we had some people who have actually been out
there in the field dealing with HOPE VI and they raised several
things. And what I would like to do is get kind of a general
response about whether you think these are good ideas. Is this
part of the constructive discussion that we are having?
You give points now to applicants for HOPE VI funding, and
then you rank them according to points. Would you think it
would be helpful to have some provision in this legislation
which says that HUD would reward an application that has a
project schedule already in place, that minimizes displacement
or provides for one-for-one replacement of housing--because
yesterday our witnesses said that is a serious problem in HOPE
VI communities--that addresses the issue of timeliness? What
would you think about us writing some criteria into the HOPE VI
reauthorization that addressed some of those points that seem
to be lacking now?
Mr. Liu. First, Congressman, let me say that under the----
Chairwoman Roukema. Excuse me, I want you to note that the
time has been concluded, so, Mr. Watt, I am sorry, but given
our limited----
Mr. Watt. Are you going to ask him to give us our response
90 days from now?
Chairwoman Roukema. No. I am going to ask them that they
give the response within a time period of a week or two.
Mr. Watt. But Madam Chairwoman, you did take about 45
seconds of my time, so at least give him 45 seconds to----
Chairwoman Roukema. I already gave you 42.
Mr. Watt. No, the red light just went on as I got through
asking my question.
Chairwoman Roukema. All right. We will conclude this,
please, and now we will go on to--if you will please get the
responses back ASAP, which I think, from our point of view, Mr.
Watt's and mine, means within the next 2 weeks.
Mr. Frank. Madam Chairwoman, under the category that hope
springs eternal, I ask unanimous consent that Members be
allowed to ask further questions of HUD in this hearing so we
will have a longer list that we are waiting for.
Chairwoman Roukema. I am sorry?
Mr. Frank. I would ask unanimous consent that Members would
be allowed to submit questions in writing.
Chairwoman Roukema. Oh, of course. Absolutely, absolutely.
You understand that we will each submit questions in writing if
we have them.
Mr. Watt. But, Madam Chairwoman, I hope that that doesn't
mean that I have got to submit my question.
Chairwoman Roukema. Oh, no. No, your question is on the
line there, but Mr. Frank is talking about additional
questions. And with that, we will conclude with Ms. Velasquez.
I already did ask your question if you want to have a follow-up
on the subject of predatory lending.
Ms. Velazquez. I was watching on TV.
Chairwoman Roukema. All right.
Ms. Velazquez. And I was in a meeting, so please excuse me.
But I wasn't satisfied with your response, Secretary Weicher. I
just want to say that I do appreciate HUD's recent actions to
address the 203(k) crisis in New York City. However, my
statement was meant to address the fact that HUD's response to
predatory lending, in this case and others, has been
reactionary rather than preventative. For this reason, I was
happy to see the proposed rule issued by HUD this fall to
prohibit the resale of FHA-insured homes within 6 months. I
understand we can expect a final rule this summer; is that
correct?
Mr. Weicher. That is correct.
Ms. Velazquez. Furthermore, I think the situations I
outlined in my statement highlight the need for this rule and
further preventative measures: Steps such as mandatory home
buyer counseling for first-time home buyers in high foreclosure
neighborhoods or allowing a good-faith challenge to FHA
appraisal values. Would you be willing to consider these
proposals?
Mr. Weicher. Ms. Velasquez, we have requested in the budget
a separate categorical counseling program funded at $35 million
in place of the $20 million set aside within HOME, which has
been the practice in the past. And if Congress approves this,
this will be the first free-standing counseling program in HUD
in 30 years. We very much hope you will support that.
With respect to 203(k), may I say that as soon as Secretary
Martinez came in, he was aware of this problem. The loans were
originated in 1998 and 1999. They began to default in 2000. I
do take exception, if I may, to the suggestion that we have
been reacting to this. We have been working very hard for a
year with the people in New York to address the problem. We
have reached a solution in which we are putting up $268 million
of the taxpayers' money for 514 properties in New York, and the
City is putting in another $125 million.
Ms. Velazquez. Well, what we had in New York was a real
mess.
Mr. Weicher. It was indeed, and I think we have also been
prosecuting. The government of the United States and the
government of New York have been prosecuting lenders and other
participants there, and we are continuing that as well.
Ms. Velazquez. You mentioned in response to Representative
Kelly's question that when identifying appraisers and lenders
who are less than scrupulous, you compare their foreclosure
rates with others in the region. How are you dealing with this
in the New York region where the foreclosure rate in last
year's--it was three times the national average?
Mr. Weicher. The comparison is to other appraisers in the
HUD field office area, which is the New York Metropolitan Area
in your case, and so we are looking not at the fact that
foreclosure rates are three times as high in New York as they
may be in the country as a whole, but on whether the
foreclosure rate on the loans you have appraised is three times
as high as the foreclosure rate in the New York Metropolitan
Area.
Ms. Velazquez. So it is acceptable that we have more
unscrupulous appraisers?
Mr. Weicher. I don't think all the foreclosures in New York
relate to unscrupulous appraisals or unscrupulous lenders.
There was a large volume of adjustable rate loans that were
underwritten in 1996 and 1997 under what turned out to be lax
ARM's underwriting procedures and which were changed in 1998.
But the loans that were underwritten under the earlier
procedures are reaching the stage at which they are most likely
to default.
Mr. Frank. If the gentlewoman would yield, I wonder if Mr.
Liu now--we have a couple of minutes left--could respond to Mr.
Watt.
Mr. Liu. The answer, Congressman Watt, is we would be open
to working with you on those concepts, as I mentioned in my
answer to the congresswoman. Project readiness and all of the
issues that you mentioned are certainly issues that we want to
have addressed. Now we can address them----
Mr. Watt. But do you think it is a good idea for us to
write it into the statute?
Mr. Liu. We think that it can be done in an effective way.
We also think that we can implement by rules and regulations to
the NOFA under a strict reauthorization.
Mr. Watt. But you haven't done that, and HOPE VI has been
around for a while.
Mr. Liu. The 2002 NOFA is not yet out.
Mr. Watt. Is there any way to get a heads up or a
preliminary draft of this HOPE VI lessons learned report?
Because by June 15 I don't think we are going to be still
dealing with this?
Mr. Liu. We will do our best to get it done before the
deadline.
Chairwoman Roukema. I thank Mr. Watt and all our colleagues
here. We do appreciate your testimony here, and we will be
submitting to you follow-up questions, I am sure, but you will
be presenting to us your quick responses. I hope Mr. Watt is
accurate in predicting when we are going to have this
legislation up. I would like to think we would have it up that
soon. But in any case, we are going to try to expedite
consideration of this legislation by the House of
Representatives. We do thank you for your testimony here today.
And with that, we call up the second panel.
Mr. Watt. Madam Chairwoman, while they are coming forward,
I would just say to you that I wasn't projecting that we would
deal with it on the floor, but I think these kinds of
considerations really need to be dealt with in the subcommittee
and in the full committee. And if we don't get the information
we need, it is hard to deal with it.
Chairwoman Roukema. I would like to--that is right, in the
subcommittee, and then I would like to think that that
foundation would be laid so that we could take it up and
conclude it on the floor of the House before the Congress goes
into election recess.
Very good. I am going to give a short introductions so
that we will permit more time for you to testify and less time
for me to discuss your backgrounds. But each of you are very
well-qualified to represent the private sector in terms of how
the private sector is relating to Federal legislation. And you
have heard the rules. We are going to try to limit you and
ourselves each to 5 minutes. And the yellow light goes on,
which is the sum up warning light before the red light goes on
after 5 minutes.
And with that, I will introduce Mr. John Courson, who is
president and CEO of Central Pacific Mortgage Company, and he
is here today as the Chairman-elect of the Mortgage Bankers
Association of America, and we greatly appreciate your being in
attendance here today and look forward to working with you as
the Chairman of the Mortgage Bankers Association as we move
through this process. Mr. Courson.
STATEMENT OF JOHN COURSON, PRESIDENT, CENTRAL PACIFIC MORTGAGE
COMPANY, ON BEHALF OF THE MORTGAGE BANKERS ASSOCIATION OF
AMERICA
Mr. Courson. Madam Chairwoman, thank you very much. You
obviously have my statement, and so in the interest of time I
am going to just summarize, and I would like to talk just
briefly about three key principles of FHA, as both a
representative of the mortgage lenders, mortgage bankers and a
practitioner who makes FHA loans. Really there is three things
that guide FHA, in our mind. It needs to be sound, it needs to
be consistent, and it needs to be innovative. And as you have
heard earlier today, obviously, FHA, 80 percent last year of
the first-time home buyers were--80 percent of FHA's business
were first-time home buyers, 40 percent were minorities, and 80
percent of the FHA loans that were made were made by members of
the Mortgage Bankers Association. In my own company that is a
retail mortgage banker with retail branches, over 40 percent of
our business was FHA business. And so the idea that FHA needs
to be sound, fiscally sound and viable, is key to me personally
and to our members to keep it viable to be there in the times
that it is needed.
Which brings me to talk a little bit about FHA must be
consistent. You know, FHA is always and has always been there.
It is there for creditworthy borrowers in challenging times
when the private industry may exit certain markets. I had the
experience, and quite an experience it was in 40 years, of
being in Texas in the energy crisis days of the mid-1980s, and
we saw private mortgage insurance companies exiting the State,
exiting a number of States that had the economic distress that
was related to the energy crisis. And as they exited or as they
increased their underwriting requirements, who was there for
those borrowers? FHA. They were there with a consistent
premium, they were there in a counter-cyclicle role to help
first-time home buyers and those who needed housing at the
time. So the consistency is key in those marketplaces.
Having left Texas, I went to California. Maybe it is me,
maybe it is not the marketplace. I go to California and we have
an economic distress situation in the early nineties. A key
part of our business is FHA. The same repeat thing, even in
California, a different marketplace than Texas. FHA is
consistently there. So we believe that the soundness, the
consistency, the level of premium that is counter cyclical to
help those borrowers that need the help are key.
And, of course, thirdly, FHA must continue to be innovative
if it is going to be viable to serve the marketplace, first-
time home buyers, minority home buyers that it helps, it has to
innovate to give those borrowers the same tools that are
available in the conventional marketplace. We applaud H.R.
3995; it has those tools: downpayment simplification.
We were in Alaska at the time this program was there in a
demonstration program about 5 years ago and substantially saw
our ability to qualify people who have the biggest challenge of
cash to buy a home in Alaska. We also saw the problem of when
that program started to sunset and not being able to help
borrowers for a period of 30, 60 days not knowing what their
downpayment or cash requirement was going to be. We need to
make that permanent. Clearly, the 5/1 hybrid ARMs, which were
authorized last year, we need to deal with that issue on one
segment of those, the 5/1 ARM, which was treated differently
than the 7/1 or the 10/1s and give that tool to these
borrowers.
And thirdly, of course, the FHA multifamily loan limits,
which were also enacted last year, and they need to be put on
the same par as the single family. Let us not have to go
through every 3 years coming back to get a multifamily loan
limit. Let us index it so that it can move as the market moves,
just as we do in the single family.
Outside of innovation the third thing that I would like to
mention very quickly is the Ginnie Mae guaranty fee. Obviously,
there was passed in 1998 a 50 percent increase in that fee.
Ginnie Mae is a viable program, it is profitable, and if that
is not rolled back, somebody is going to have to pay for that,
and the fear is that somebody will be the American borrower
from FHA. Thank you very much.
[The prepared statement of John Courson can be found on
page 474 in the appendix.]
Chairwoman Roukema. I thank you very much, Mr. Courson.
Now, Mr. Martin Edwards, who is a realtor from Memphis,
Tennessee, but you are here representing the National
Association of Realtors as the new President of the National
Association of Realtors?
Mr. Edwards. I wouldn't say new, 3 months old, yes.
Chairwoman Roukema. No? All right.
Mr. Edwards. 2002 president. Thank you, Madam Chairwoman.
Chairwoman Roukema. All right. Thank you. Thank you and we
appreciate your attendance.
STATEMENT OF MARTIN EDWARDS, JR., PRESIDENT, NATIONAL
ASSOCIATION OF REALTORS
Mr. Edwards. Thank you, Madam Chairwoman, and I will try to
be as brief and stay with our time limit. On behalf of more
than 800,000 realtors, I want to take this opportunity to thank
you and Ranking Member Frank to appear and testify on this
bill.
We believe it takes a creative approach to reducing
barriers to affordable housing while stimulating much needed
housing opportunities for American families. As you well know,
there is a housing crisis, and I have heard this several times
today, in this Nation, and it will not go away. That is why
this legislation is both timely and appropriate. It is why the
National Association of Realtors has joined in a fight to make
affordable housing one of our national priorities. Realtors are
in a unique position to champion this cause, because we can
make a difference at the local level. We are extremely
committed to ensuring that every American has the opportunity
to live in a safe, decent and affordable home, because we want
to see our communities that we serve survive.
Which is why last year the National Association of Realtors
began working on a comprehensive housing opportunity of
initiatives to identify and find three ways to do things
better: One, stimulate affordable housing, which is what we
have been talking about, improve access to housing and close
the home ownership gap. Through a Presidential Advisory
Commission of the National Association of Realtors, we have
started working on those in a comprehensive plan. Our focus is
geared toward meeting some of the greatest needs and unmet
needs of the housing market, keeping in mind minority outreach,
rental housing opportunities, immigrants, the disabled, low-
and moderate-income citizens and senior housing. While the
Nation's home ownership rate is at 68 percent, the highest
level ever, the gap between those who can and those who cannot
afford decent housing has grown.
Going forward, the biggest source of household growth in
this decade will come from minorities and immigrants.
Minorities will account for 64 percent of all new households.
Between 1993 and 2000, minorities accounted for a 44 percent
increase in home ownership. By 2010, African Americans will
account for 19 percent of home ownership growth; Hispanics, 38
percent of home ownership growth; and non-whites, 37 percent of
home ownership growth. This creation of additional housing
households will require some more construction, more innovative
ideas and favorable economic conditions to move forward. We
believe that the real estate industry and the Federal
policymakers have responsibility, all of us, and really an
obligation to ensure that groups are not ignored in this
plight.
Again, Madam Chairwoman, I want to commend you and this
subcommittee for your outstanding leadership. Specifically, the
National Association of Realtors strongly advocates language
under Title II of H.R. 3995, Section 8 that seeks to index FHA
multifamily home limits and allow maximum high-cost percentage
to be increased in high-cost markets. We believe these
provisions ensure FHA multifamily loan limits will not be
outpaced by inflation or growing construction costs and make
multifamily programs more favorable in the Nation's worse-case
scenarios.
There are other provisions we strongly endorse in H.R.
3995, and they fall under the single-family area. Specifically,
we back provisions that would, as John mentioned, make
permanent the FHA downpayment plan, simplification calculation
plan, reduce FHA downpayments for teachers and public safety
officers as well as permit them to purchase HUD-foreclosed
homes at a discount in neighborhoods that they work in,
eliminate the cap on the FHA 5/1 hybrid adjustable rate
mortgages, create a 3-year pilot program for no downpayment FHA
loans to qualified public service officers if they buy homes in
designated high crime areas.
In conclusion, Madam Chairwoman, let me say that real
estate has been one of the pillars of American prosperity. It
provides the capital that makes it possible for families to
build and own their own homes. We discovered much last year
when Federal Reserve Chairman Alan Greenspan asked us and urged
us to examine the wealth effect of housing. We found that home
equity is the largest source of wealth for three out of four
homeowners. Housing is also important to our national economy.
Its overall share of GDP is 14 percent. Between 15 and 24 cents
of every dollar realized in capital gains from home sales goes
into goods and services or savings. Plus 40 percent of
disposable income is spent in housing-related goods and
services. These are all benefits of home ownership that cannot
be ignored, and I appreciate the opportunity to visit with you
this afternoon.
[The prepared statement of Martin Edwards Jr. can be found
on page 482 in the appendix.]
Chairwoman Roukema. I thank you, Mr. Edwards.
Now Kevin Kelly, President of Leon Weiner Associates in
Wilmington, Delaware, and he is testifying on behalf of the
National Association of Home Builders. Mr. Kelly.
STATEMENT OF KEVIN P. KELLY, PRESIDENT, WEINER & ASSOCIATES,
WILMINGTON, DEL, ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME
BUILDERS
Mr. Kelly. Thank you, Madam Chairwoman, for this
opportunity to speak to the subcommittee today. I will confine
my remarks, per your letter to the association, to Title II of
the Housing Affordability for America Act. I am speaking, as
you indicated, on behalf of the 205,000 members of the National
Association of Home Builders.
Specifically, Title II of the bill contains important
reforms to both multifamily and single family FHA programs.
Together these proposals will increase the availability of
affordable housing and expand home ownership and rental housing
opportunities across the country. The FHA multifamily mortgage
insurance programs are a critical component in addressing the
Nation's affordable housing needs. Last year, Congress took the
first step in making the FHA multifamily insurance programs
more workable in most markets in the country by passing
legislation to increase multifamily loan limits by 25 percent.
The limits had not been adjusted for 10 years; however, NAHB's
analysis indicates that there are high-cost urban centers where
these increases simply are inadequate and that costs exceed the
current limits. We believe we can and should do more.
Two provisions in Title II would make the necessary
adjustments so that programs can be fully utilized throughout
the country. First, we would strongly support the inclusion of
Section 201 of Subtitle A, which would require HUD to index FHA
mortgage loan limits each year beginning in 2003. The index is
the annual construction cost published by the Bureau of the
Census of the Department of Commerce. Indexation will help
stabilize the programs, give builders and lenders the
confidence that they will be able to use the programs in their
communities every year despite increases in construction and
land costs.
NAHB also strongly supports Section 202 of Subtitle A,
which addresses the need for high-cost markets where the base
loan limits are still too low. Current law permits the HUD
Secretary to increase base limits by up to 110 percent in
geographic areas where construction costs are very high and up
to 140 percent on individual projects. Section 202 would give
the Secretary greater latitude to raise mortgage limits in
areas where construction costs are high. It further provides
the Secretary of HUD the discretion to increase high-cost
factors from 140 to 170 percent on a project-by-project basis.
These provisions, allowing for indexation and adjustment upward
for high-cost areas, will make the FHA multifamily programs
more workable throughout the entire country.
On the single family side, NAHB supports the provisions of
H.R. 3995 that are aimed at improving the FHA single family
mortgage insurance programs by making permanent the simplified
downpayment calculations, the revisions to the hybrid ARM as
well as the proposal to facilitate to home ownership
opportunities for teachers and public safety workers. With
regard to what is referred to as the downpayment
simplification, this actually offers a simplified method to
arrive at a maximum mortgage calculation. The simplified method
results in a greater loan to value than currently permitted
under current programs and will ultimately expand home
ownership opportunities.
NAHB also supports Title II, making of a hybrid adjustable
rate ARM available at competitive rates and terms for FHA
borrowers who otherwise would be unable to obtain funding in
the conventional ARM programs. The bill amends current law to
shorten the allowable timeframe for the first adjustment of the
FHA hybrid adjustable rate mortgage to 3 years from its present
5.
In closing, Madam Chairwoman, I would also applaud Chairman
Oxley, yourself and Congressman Green for including Title VIII
in H.R. 3995. Title VIII, as you are aware, requires the
Federal Government to conduct housing impact analyses for any
new proposal or final rule if that rule has an economic impact
of $100 million or more on housing affordability. This measure
will help raise awareness to the extent to which regulatory
barriers impede housing.
That concludes my remarks, Madam Chairwoman, and we thank
you for the opportunity to speak.
[The prepared statement of Kevin P. Kelly can be found on
page 495 in the appendix.]
Chairwoman Roukema. Thank you very much. Everyone is being
very considerate of the time constraints here.
Mr. Shapoff, Vice President and senior member of the Health
Care Group at Goldman, Sachs & Company. And Mr. Shapoff is here
today, I guess, representing your company and the Health Care
Group at Goldman, Sachs. And giving us some insight with your
experience of 13 years in the health care--as a manager in the
Health Care Group. Thank you for coming here today, and we are
happy to have you.
STATEMENT OF EDWARD L. SHAPOFF, VICE PRESIDENT, GOLDMAN, SACHS
& COMPANY, ON BEHALF OF THE HEALTHCARE FINANCING STUDY GROUP
Mr. Shapoff. Good afternoon, Madam Chairwoman and
distinguished Members of the subcommittee. I thank you for the
opportunity to testify in support of H.R. 3995. In addition to
being a member of Goldman, Sachs, I am also here on behalf of
the Healthcare Financing Study Group, an association of
national and regional investment bankers and municipal bond
insurers. We welcome and appreciate your support and thank you
for including in H.R. 3995 legislative provisions which are so
important to America's aging and ill populations.
Sections 203 through 206 of H.R. 3995 would amend the FHA
health care and assisted living programs of the act to
modernize and make them more consistent with today's methods of
delivering quality affordable health care service to rural and
urban American communities, which have been unable to enjoy the
benefits of the act in its present form and, importantly, where
conventional financing may not be readily available. The Study
Group, whose members have worked with FHA programs for three
decades, strongly support these amendments.
As you know, two sections of the National Housing Act,
Section 232, for nursing homes, and Section 242, for hospitals,
provide mortgage insurance for health care projects. Enacted
over 30 years ago, these two sections have netted hundreds of
millions of dollars to the Treasury from FHA fees and mortgage
insurance premiums. Furthermore, these programs do not compete
with private sector financing but have fostered a sound working
relationship between Government and private industry, which has
materially reduced the cost of financing, thereby helping to
assure repayment of the insured loan and reducing FHA's
insurance risk. Debt service savings realized under these
programs have also resulted in lower Federal and State Medicare
and Medicaid reimbursements.
At the same time, FHA insurance is available to fill a void
left by the conventional private sector, which traditionally
has preferred to lend only to the very best investment grade
credits. That is not to say, however, that all health care
projects should or do have free entitlement to FHA. Indeed, few
high-risk mortgage insurance applications would survive FHA's
rigorous underwriting process.
Enacted over 30 years ago, Section 232 and 242 have been
modified only slightly so that the act does not entirely
reflect or accommodate today's methodology and regulation of
health care and assisted living delivery. For example, the
narrow definition of eligible facilities fails to reflect the
continuum of care now commonly provided within an individual
facility or in a campus environment for the purpose of
operational and cost efficiency and continuity of care. This is
a shortcoming that would be corrected by the amendments.
Another important element deals with Certificates of Need.
Mortgage insurance under the hospital and nursing home programs
require receipt of Certificates of Need. In fact, many States
have eliminated all or part of their certificate of need
programs or the agencies that would, in fact, issue these
certificates. Examples of these States are Arizona, California,
Colorado, Iowa, Kansas, New Mexico, Oregon, Texas and Wyoming
and others. While the act contains alternative requirements for
such States, and while well-intended, these alternative
requirements have proven unworkable or difficult to implement.
This impediment has made it difficult for FHA to diversity its
own loan portfolio geographically and made it difficult, if not
impossible, for critical-access hospitals and rural hospitals
to modernize facilities, which may date back to the mid-1900s.
The amendments would solve this problem as well.
Without in any way intending to slight or diminish the
stature of any portion of the amendments, all of which we
support, I would like to summarize the more important
accomplishments of the amendments. Mortgage insurance is
authorized for integrated service facility projects for the
sick, injured, disabled, elderly or infirm or which provide
services for the prevention of illness. Such projects may
furnish outpatient services, including community health,
clinical services and medical practice facilities to serve
those people and achieve that purpose through individual
facilities, which may incorporate a continuum of care. The
alternative Certificate of Need procedures of Section 232 and
242 would be updated to make them more workable and would help
to assure that States without CON laws or implementing agencies
would not be excluded from the programs.
Third, under current law an assisted living facility does
no qualify for FHA insurance if it is located in a State or
political subdivision which does not issue licenses for such
facilities. The amendments authorize FHA to formulate
alternative underwriting standards in such cases so that the
benefits of mortgage insurance will be available.
In conclusion, Madam Chairwoman, this concludes my
testimony. I thank you very much for your time.
[The prepared statement of Edward L. Shapoff can be found
on page 504 in the appendix.]
Chairwoman Roukema. I thank you.
And now our final panelist is Mr. Lou Cannon. Mr. Cannon is
an inspector with the United States Mint Police here in the
District of Columbia, but he is here today testifying on behalf
of the National Fraternal Order of Police and its more than
300,000 members. We welcome you here today.
STATEMENT OF LOUIS P.CANNON, PRESIDENT, DISTRICT OF COLUMBIA
STATE LODGE, FRATERNAL ORDER OF POLICE,
Mr. Cannon. Thank you. Good afternoon, Madam Chairwoman,
Ranking Member Frank. I am an inspector with the United States
Mint Police and president of the DC. Lodge of the Fraternal
Order of Police. I am here today on behalf of National
President Steve Young and the more than 300,000 members of our
organization in support of Sections 222 through 224 of H.R.
3995, the ``Housing Affordability for America Act.'' This
legislation contains a three-pronged approach to increasing
home ownership among our Nation's public safety personnel, and
we appreciate the opportunity to appear before you here today.
The FOP is no stranger to this issue. Since 1997, our
organization has been proud to support and work with HUD on the
Officer Next Door Program. In the 106th Congress, the FOP also
supported the inclusion of public safety officer home ownership
assistance language in the ``American Home Ownership and
Economic Opportunity Act of 2000.'' And last year, we joined
Representative LaFalce and Leach for the introduction of H.R.
674, the ``H.O.U.S.E. Act.''
As we begin this new millennium, it is more important than
ever to find innovative ways to improve the ties between
America's law enforcement officers and the communities they
serve. Like most Americans, police officers and other public
safety employees work hard to realize the dream of owning their
own home. But, because these men and women often sacrifice
higher-paying jobs in the private sector to serve our
communities, it is often difficult to make this dream a
reality. And while the high cost of living in many areas does
affect officer morale, it also has a noticeable impact on the
ability of local governments to recruit and retain public
safety personnel and on the ability of the individual officer
to make a difference in his or her community. Most officers who
have chosen to make a career of law enforcement also become
involved in the life of the neighborhoods they serve.
The three programs contained in H.R. 3995 are designed to
facilitate these goals and activities, and all represent a
tremendous tool for local communities to recruit and retain
public safety personnel. The first initiative provides for the
establishment of reduced downpayment requirements through the
National Housing Act for mortgage loans to law enforcement
officers and other public safety personnel to purchase homes
within the jurisdiction that employs them. This provision will
serve to encourage officers to continue to work in their local
communities.
The second initiative, entitled, the Community Partners
Next Door Program, provides discount and downpayment assistance
for teachers and public safety officers. Like HUD's Officer
Next Door Program, this provision authorizes a 50 percent
discount for those law enforcement officers purchasing certain
homes designated as eligible assets, and who agree to use the
home as their primary residence for at least 3 years. Section
223 further authorizes the sale of these properties to units of
local government and non-profit associations who can then
resell or transfer that property directly to the officer,
again, improving their ability to recruit and retain these
vital public servants.
The third and final program under this legislation
authorizes a 3-year pilot program to assist Federal, State and
local public safety officers purchase homes in locally
designated high crime areas. Like Section 223, this provision
requires officers to agree to use the home as their primary
residence for at least 3 years. Eligible law enforcement
personnel would then qualify to purchase a home in one of these
communities with no downpayment required. Like the other two
initiatives, this will not only help law enforcement officers
achieve home ownership, but by purchasing homes in troubled
neighborhoods, it will also assist communities to begin the
process of reclaiming distressed areas from the effects of
crime.
In light of the positive impact this legislation will have
in cities across the Nation, I would also like to point out a
provision which the FOP believes should be amended during the
future markup of H.R. 3995. Under the definition of ``public
safety officer'' found in Section 222, the term is defined as
specifically excluding Federal law enforcement officers from
participation. Although these officers would qualify for home
ownership assistance to purchase property located in high crime
areas, they would be ineligible for the other two programs. The
current Officer Next Door initiative operated by HUD allows
Federal, State and local enforcement officers to participate.
Therefore, we request that the definition in Section 222 be
amended to ensure that nothing will affect the participation of
Federal law enforcement officers in any program authorized by
this legislation.
All three of these programs contained in the ``Housing
Affordability for America Act'' are designed to strengthen
local communities and assist public safety officers and their
families achieve the dream of home ownership. This legislation
builds on the success of the Officer Next Door Program and will
enhance our ability to protect our neighborhoods from crime and
violence.
On behalf of the membership of the Fraternal Order of
Police, let me thank you again, Madam Chairwoman, for affording
us the opportunity to testify before the subcommittee. I would
be pleased to answer any questions you may have at this time.
[The prepared statement of Louis P. Cannon can be found on
page 515 in the appendix.]
Chairwoman Roukema. Thank you very much. I must tell you
that I am very glad that my staff was intelligent enough to put
Mr. Edward Shapoff here on the panel, because he opened up a
component of this discussion that I was not at all aware of.
And I am not going to ask you a specific question at this point
in time, but I am not quite sure why FHA insurance is needed
under those circumstances. But I will go through your
testimony, but I do appreciate the fact that they have
recognized and you have recognized that there would be a
problem here if we weren't to make that connection and
understand its relationship, Section 232 and Section 242. All
right. So I appreciate your being here today. But that was new
information for me, I must tell you.
What I am concerned about, and one of the previous
panelists, Mr. Bernardi, made the point that there were
unintended consequences that some of this legislation was going
to add to increase in rents. Now, three of our Members here
deal with rental production and home building and so forth. Can
you address that? Do you think that this is a potential
problem, that it is really going to increase the rents? And at
the same time, the contingent question that I have, and that
others have said, there really isn't enough incentive here for
new housing production. How would you address those two
components of the issue? Who would like to be first? Mr. Kelly?
Who wants to be first? And keep your responses short, because I
would like to hear from all three if they each have a comment
to make. Yes?
Mr. Kelly. Madam Chairwoman, I am not sure what the
previous speaker was alluding to in terms of the issue of the
unintended consequences of increasing rents. I mean our
position is that the production and the supply of housing will
have the reverse effect, be it in the arena of home ownership
or rental housing, and that is why we strongly advocate some of
the positions taken here in Title II of the legislation.
Chairwoman Roukema. Will that provide enough housing
production to meet those needs?
Mr. Kelly. I am not sure that----
Chairwoman Roukema. Because they are related. I mean they
are definitely related. Go ahead.
Mr. Kelly. Yes. It is certainly a very positive step
forward. On the multifamily side, I think the most significant
step taken in the last decade was the increase in the FHA
mortgage insurance limits. That program was encountering
problems across the country. We view the availability of rental
housing as the first step on the ladder to home ownership, and
increasing the supply is critical.
In addition, where many, many significant shortages occur
in major metropolitan areas where the cost is so high to
develop housing, we think that giving the Secretary the
discretion, first of all, to raise the limits first and,
second, to give the Secretary discretion to approve projects up
to 170 percent of those mortgage limits is critical to ensure
that there is supply in those communities.
Chairwoman Roukema. Mr. Courson, what is your perspective
as a mortgage banker? What is your perspective on this?
Mr. Courson. Well, and I certainly agree with the
gentleman. The key is, and obviously being from close to the
San Francisco area, as we see in Boston and certainly in areas
in New Jersey and the east, the new FHA loan limits are
helpful, but not in those marketplaces. We still can't produce
enough housing.
There are two components here. One is there is the
affordability issue, and the affordability index we have all
talked about, and the other is the lack of supply. And until
you solve both of those, particularly the supply is going to
help the affordability issue, we have got to have the
affordability and we have got to get the program into those
high-cost areas.
Chairwoman Roukema. But, you don't have any specific as to
how we could improve this bill to deal with that question.
Mr. Courson. Well, we actually--I know you had a hearing
and we did testify on a production program about 2 weeks ago, I
believe.
Chairwoman Roukema. Yes, it was.
Mr. Courson. And, frankly--and at that time what we said
was we think that there needs to be a mixed use program.
Certainly, there are programs, and there need to be programs to
address those renters and those people who are below the 60
percent of median. But there also needs to be production
program there to talk to those folks and provide housing for
those who are the 60 to 100 percent of median, and our
production program recommendation, as we testified to in the
previous hearing, was that there needs to be a mixed use. We
have examples of successful mixed use projects, and we would
advocate that.
Chairwoman Roukema. I am glad you referenced that to me,
because that was helpful in that first hearing that we had. Mr.
Edwards, do you want to add anything?
Mr. Edwards. I don't think I can add anything to what the
gentlemen on my right and left said, other than the fact that
it is a crucial issue. When you think that there are 7.5
million renters in this country that have a critical housing
need and that 7.5 million people pay up to 50 percent of their
income toward their housing costs. Not included in your bill,
but you are going to have to someday face the issue that you
are going to have to renovate and retain existing housing,
whether it be rental or home ownership in existing
infrastructures. We keep continuing to go out and build new,
new, new. America's cities are going to have to retain the
existing infrastructure and we are going to have to come up
with some solution to retain existing housing where people
work, where people live, where people want to go to school and
church, and that is the issue that you are really--that is one
of the issues you are really talking about. Thank you.
Chairwoman Roukema. Thank you. One that we may not be able
to deal with completely, but it is important for us to
recognize that as a component of this discussion. Mr. Frank?
Mr. Frank. This has been very useful, because I think we
want to be very clear. Affordability at the low end requires
money, and I think this country can afford it. That is a value
question. I think one of the things we have learned is
prosperity is a very good thing, but it is not equal in its
effects on everybody. And in areas, Mr. Courson alluded to
that, in the San Francisco Bay area, in the Boston area, New
York Metropolitan area, increasingly in some other areas, for
many people prosperity was bad news. Law enforcement officers,
their incomes have not gone up proportionately with economy so
that as the economy, as a whole, prospers and as land values go
up in particular areas, people who are not benefiting, they are
not only not benefiting they are worse off. The rising tide has
swamped their boat, it hasn't lifted it, and the question is do
we have the social responsibility in this society to take some
small part of that wealth that is created and help out?
But the fact is that is no reason not to go forward with
the FHA. And the issues of affordability and supply are
obviously linked. Yes, for some people there is going to need
to be subsidy, but we are also talking about a spectrum. We are
talking about a housing market, and supply and demand do
function, and at whatever level of income people have, if there
is a short supply, we are going to have higher prices. I mean
that is one of the most important reasons for a production
program, frankly, is in the absence of a production program a
very well-intentioned program that does some good from the
equity standpoint probably overall exacerbates things in other
ways. That is the voucher program. Because if all you have is a
voucher program in some areas, you have got a program that adds
to the demand for housing in a way that is guaranteed not to
increase the supply. Because if you have got annual vouchers,
no one can build housing based on a year-by-year voucher. No
one would lend to them. No one is going to commit to them. So
what you are doing with the vouchers is you are increasing the
demand, but in a way that does not increase the supply and the
price goes up.
Now that has got an equity justification. So it does seem
to me we then have a responsibility to couple it with a
production program. And the FHA is one production program. FHA
is a production program for moderate-income and even upper-
income people. And am I correct there are some of you who study
this more closely than we do, that, in fact, the more you raise
the FHA limits, the more money the FHA Fund makes. Isn't that
correct, Mr. Courson?
Mr. Courson. Yes, that would be correct.
Mr. Frank. Yes. I mean sometimes you have these difficult
decisions, but the FHA is priced to make a little bit of a
profit, more of a profit than it ought to, in fact. And we have
had the testimony, once again, that the FHA Fund is
significantly in surplus. It is in surplus beyond what is
needed for an economic disaster. And as we have raised the
limit on the FHA, what we get is more money. So unlike other
situations where you have to choose, raising the FHA limits is
very reasonable.
So let me ask, to follow up Ms. Roukema's question, should
we, in the judgment of particularly the first three of you,
raise the FHA limits not just incrementally, but fully to the
point where they could be operational, the FHA, in the highest
cost housing markets? Let me put it to you this way: Knowing
what you know about public policy, can you think of any
negative, any downside, to raising the FHA limits so they are
fully operational in San Francisco and Boston and Manhattan?
Let us start with you, Mr. Courson.
Mr. Courson. Well, Congressman, if in fact, and I think the
bill is going to address, if we go to 140 percent, which is
from the 110----
Mr. Frank. That is not what I asked. What about going
above--why 140 percent?
Mr. Courson. The question really becomes on the
production--for our production program, for example, there was
a utilization of dollars that we are talking about in this
mixed use project that would be an interest rate subsidy. We
use an example in there. So the question becomes then what is
the authorizers, the Congress and public policy is how high do
you want to authorize that subsidy right now?
Mr. Frank. But I am asking you can you see any negative
from any important value that we ought to be concerned about if
we got to the level that make it usable in Boston, San
Francisco and in Manhattan?
Mr. Courson. No. As a matter of fact, we recommend really
the Secretary has the right to raise those limits to the same
as right now they are in Alaska and Hawaii for the single
family. So we don't see any negative to that.
Mr. Frank. And that would then accommodate the rest of the
country if you got to Alaska and Hawaii?
Mr. Courson. As far as I am aware.
Mr. Frank. All right. Mr. Edwards.
Mr. Edwards. I agree.
Mr. Frank. Mr. Kelly.
Mr. Kelly. I agree.
Mr. Frank. Well, I think we ought to--that means that if we
just pass the bill, the bill is an improvement, but it is not
enough of an improvement, and we shouldn't be--we have allowed
people--let me put it this way: We have allowed the general
sort of rules that apply to restrain us. In general, the higher
you go in eligibility, the more it costs the Government. But
the FHA is different. The higher you go in eligibility, the
more you help housing get built less expensively than it might
otherwise and the Government makes money. So what I am saying
is that the bill doesn't go high enough. And you heard what the
GAO said, you listened to his testimony, we ought to go up even
further. And so I am all for that.
One other question now to the inspector. I am all in favor
of this, and I voted for it before on the floor, on the
question of certain people who have decided to dedicate
themselves to public service. I would point out we have a
particular problem, because in some cities we have residency
requirements, and then the police officers and the fire
fighters and the teachers are caught in a bind. They are
legally required to live in a city where they can't afford on
the salary they are getting paid to buy a house. The one
concern I have is, I think it is mentioned somewhere, that
there be a 3-year minimum. That seems kind of little to me. If
we had a 7-year minimum, would that be a problem? Or maybe you
could have less of a minimum if people have emergency
situations, but then there ought to be some sort of a
recapture. I mean the notion of getting a very significant
subsidy, but only living there for 3 years seems to me
insufficient. Do you think that would be a problem if we tried
to raise it?
Mr. Cannon. I think that you might want to go halfway and
do about a 5-year mimimum. To be honest with you, if you look
at your national averages, most people, after 5 years, start to
look at turning over their home and moving up. So I would say 5
years would probably be more----
Mr. Frank. I think that is a reasonable point. All right.
Thank you. My time is expired. I thank the witnesses, because I
agree with them.
Chairwoman Roukema. I thank Mr. Frank. You agree with them.
I agree with them in principle as well, but I am not quite sure
about the particulars. But I think we see here, both on this
panel, the previous panel and certainly with Mr. Frank and I
and the questions that have been asked that we have a lot of
common understandings and mutual goals here. But we have made
it sound a little too simple, I think, right at this point in
time to deal with it and how we can correct it. But with the
sincerity of purpose that I think we all have, I think we can
work with you and with HUD and other consumer groups and
housing groups to get a good bill out and really improve not
only the production, but the availability of home ownership and
we will deal with it and hopefully it will be a great
accomplishment in this Congress. Mr. Frank, you want to
conclude?
Mr. Frank. Well, only just again to say--and it is not
really a quip, but it is important--it is not home ownership,
it is home, because we do want to--rental housing is every bit
as important as home ownership.
Chairwoman Roukema. Well, that too.
Mr. Frank. And we are talking about people having homes
that are decent and affordable.
Chairwoman Roukema. That is, of course, also true. But I
think it is a combination of things here, and if we can get
that question of home ownership more properly addressed and
appropriately addressed, maybe we have been putting in our own
impediments against it, I don't know.
Mr. Frank. Well, again----
Chairwoman Roukema. I don't know.
Mr. Frank. I would object. We will lose the consensus if we
try to kind of put home ownership ahead of a home, because
there are different segments of the population and different
needs, and I think, in fact, when we talk about multifamily
housing, I think we are talking about residences that people
live in. Some will want to own, and if people can own, fine.
But I am afraid that we will stint people at the lower end if
we focus it only on home ownership.
Chairwoman Roukema. all right. We shall deal with this, and
I appreciate the panel here because it has been very
constructive. And I know that one way or another Mr. Frank and
I are going to come to agreement. You just stand by and watch.
Thank you very much.
[Whereupon, at 5:17 p.m., the hearing was adjourned.]
A P P E N D I X
April 10, 2002
[GRAPHIC] [TIFF OMITTED] 79319.001
[GRAPHIC] [TIFF OMITTED] 79319.002
[GRAPHIC] [TIFF OMITTED] 79319.003
[GRAPHIC] [TIFF OMITTED] 79319.004
[GRAPHIC] [TIFF OMITTED] 79319.005
[GRAPHIC] [TIFF OMITTED] 79319.006
[GRAPHIC] [TIFF OMITTED] 79319.007
[GRAPHIC] [TIFF OMITTED] 79319.008
[GRAPHIC] [TIFF OMITTED] 79319.009
[GRAPHIC] [TIFF OMITTED] 79319.010
[GRAPHIC] [TIFF OMITTED] 79319.011
[GRAPHIC] [TIFF OMITTED] 79319.012
[GRAPHIC] [TIFF OMITTED] 79319.013
[GRAPHIC] [TIFF OMITTED] 79319.014
[GRAPHIC] [TIFF OMITTED] 79319.015
[GRAPHIC] [TIFF OMITTED] 79319.016
[GRAPHIC] [TIFF OMITTED] 79319.017
[GRAPHIC] [TIFF OMITTED] 79319.018
[GRAPHIC] [TIFF OMITTED] 79319.019
[GRAPHIC] [TIFF OMITTED] 79319.020
[GRAPHIC] [TIFF OMITTED] 79319.021
[GRAPHIC] [TIFF OMITTED] 79319.022
[GRAPHIC] [TIFF OMITTED] 79319.023
[GRAPHIC] [TIFF OMITTED] 79319.024
[GRAPHIC] [TIFF OMITTED] 79319.025
[GRAPHIC] [TIFF OMITTED] 79319.026
[GRAPHIC] [TIFF OMITTED] 79319.027
[GRAPHIC] [TIFF OMITTED] 79319.028
[GRAPHIC] [TIFF OMITTED] 79319.029
[GRAPHIC] [TIFF OMITTED] 79319.030
[GRAPHIC] [TIFF OMITTED] 79319.031
[GRAPHIC] [TIFF OMITTED] 79319.032
[GRAPHIC] [TIFF OMITTED] 79319.033
[GRAPHIC] [TIFF OMITTED] 79319.034
[GRAPHIC] [TIFF OMITTED] 79319.035
[GRAPHIC] [TIFF OMITTED] 79319.036
[GRAPHIC] [TIFF OMITTED] 79319.037
[GRAPHIC] [TIFF OMITTED] 79319.038
[GRAPHIC] [TIFF OMITTED] 79319.039
[GRAPHIC] [TIFF OMITTED] 79319.040
[GRAPHIC] [TIFF OMITTED] 79319.041
[GRAPHIC] [TIFF OMITTED] 79319.042
[GRAPHIC] [TIFF OMITTED] 79319.043
[GRAPHIC] [TIFF OMITTED] 79319.044
[GRAPHIC] [TIFF OMITTED] 79319.045
[GRAPHIC] [TIFF OMITTED] 79319.046
[GRAPHIC] [TIFF OMITTED] 79319.047
[GRAPHIC] [TIFF OMITTED] 79319.048
[GRAPHIC] [TIFF OMITTED] 79319.049
[GRAPHIC] [TIFF OMITTED] 79319.050
[GRAPHIC] [TIFF OMITTED] 79319.051
[GRAPHIC] [TIFF OMITTED] 79319.052
[GRAPHIC] [TIFF OMITTED] 79319.053
[GRAPHIC] [TIFF OMITTED] 79319.054
[GRAPHIC] [TIFF OMITTED] 79319.055
[GRAPHIC] [TIFF OMITTED] 79319.056
[GRAPHIC] [TIFF OMITTED] 79319.057
[GRAPHIC] [TIFF OMITTED] 79319.058
[GRAPHIC] [TIFF OMITTED] 79319.059
[GRAPHIC] [TIFF OMITTED] 79319.060
[GRAPHIC] [TIFF OMITTED] 79319.061
[GRAPHIC] [TIFF OMITTED] 79319.062
[GRAPHIC] [TIFF OMITTED] 79319.063
[GRAPHIC] [TIFF OMITTED] 79319.064
[GRAPHIC] [TIFF OMITTED] 79319.065
[GRAPHIC] [TIFF OMITTED] 79319.066
[GRAPHIC] [TIFF OMITTED] 79319.067
[GRAPHIC] [TIFF OMITTED] 79319.068
[GRAPHIC] [TIFF OMITTED] 79319.069
[GRAPHIC] [TIFF OMITTED] 79319.070
[GRAPHIC] [TIFF OMITTED] 79319.071
[GRAPHIC] [TIFF OMITTED] 79319.072
[GRAPHIC] [TIFF OMITTED] 79319.073
[GRAPHIC] [TIFF OMITTED] 79319.074
[GRAPHIC] [TIFF OMITTED] 79319.075
[GRAPHIC] [TIFF OMITTED] 79319.076
[GRAPHIC] [TIFF OMITTED] 79319.077
[GRAPHIC] [TIFF OMITTED] 79319.078
[GRAPHIC] [TIFF OMITTED] 79319.079
[GRAPHIC] [TIFF OMITTED] 79319.080
[GRAPHIC] [TIFF OMITTED] 79319.081
[GRAPHIC] [TIFF OMITTED] 79319.082
[GRAPHIC] [TIFF OMITTED] 79319.083
[GRAPHIC] [TIFF OMITTED] 79319.084
[GRAPHIC] [TIFF OMITTED] 79319.085
[GRAPHIC] [TIFF OMITTED] 79319.086
[GRAPHIC] [TIFF OMITTED] 79319.087
[GRAPHIC] [TIFF OMITTED] 79319.088
[GRAPHIC] [TIFF OMITTED] 79319.089
[GRAPHIC] [TIFF OMITTED] 79319.090
[GRAPHIC] [TIFF OMITTED] 79319.091
[GRAPHIC] [TIFF OMITTED] 79319.092
[GRAPHIC] [TIFF OMITTED] 79319.093
[GRAPHIC] [TIFF OMITTED] 79319.094
[GRAPHIC] [TIFF OMITTED] 79319.095
[GRAPHIC] [TIFF OMITTED] 79319.096
[GRAPHIC] [TIFF OMITTED] 79319.097
[GRAPHIC] [TIFF OMITTED] 79319.098
[GRAPHIC] [TIFF OMITTED] 79319.099
[GRAPHIC] [TIFF OMITTED] 79319.100
[GRAPHIC] [TIFF OMITTED] 79319.101
[GRAPHIC] [TIFF OMITTED] 79319.102
[GRAPHIC] [TIFF OMITTED] 79319.103
[GRAPHIC] [TIFF OMITTED] 79319.104
[GRAPHIC] [TIFF OMITTED] 79319.105
[GRAPHIC] [TIFF OMITTED] 79319.106
[GRAPHIC] [TIFF OMITTED] 79319.107
[GRAPHIC] [TIFF OMITTED] 79319.108
[GRAPHIC] [TIFF OMITTED] 79319.109
[GRAPHIC] [TIFF OMITTED] 79319.110
[GRAPHIC] [TIFF OMITTED] 79319.111
[GRAPHIC] [TIFF OMITTED] 79319.112
[GRAPHIC] [TIFF OMITTED] 79319.113
[GRAPHIC] [TIFF OMITTED] 79319.114
[GRAPHIC] [TIFF OMITTED] 79319.115
[GRAPHIC] [TIFF OMITTED] 79319.116
[GRAPHIC] [TIFF OMITTED] 79319.117
[GRAPHIC] [TIFF OMITTED] 79319.118
[GRAPHIC] [TIFF OMITTED] 79319.119
[GRAPHIC] [TIFF OMITTED] 79319.120
[GRAPHIC] [TIFF OMITTED] 79319.121
[GRAPHIC] [TIFF OMITTED] 79319.122
[GRAPHIC] [TIFF OMITTED] 79319.123
[GRAPHIC] [TIFF OMITTED] 79319.124
[GRAPHIC] [TIFF OMITTED] 79319.125
[GRAPHIC] [TIFF OMITTED] 79319.126
[GRAPHIC] [TIFF OMITTED] 79319.127
[GRAPHIC] [TIFF OMITTED] 79319.128
[GRAPHIC] [TIFF OMITTED] 79319.129
[GRAPHIC] [TIFF OMITTED] 79319.130
[GRAPHIC] [TIFF OMITTED] 79319.131
[GRAPHIC] [TIFF OMITTED] 79319.132
[GRAPHIC] [TIFF OMITTED] 79319.133
[GRAPHIC] [TIFF OMITTED] 79319.134
[GRAPHIC] [TIFF OMITTED] 79319.135
[GRAPHIC] [TIFF OMITTED] 79319.136
[GRAPHIC] [TIFF OMITTED] 79319.137
[GRAPHIC] [TIFF OMITTED] 79319.138
[GRAPHIC] [TIFF OMITTED] 79319.139
[GRAPHIC] [TIFF OMITTED] 79319.140
A P P E N D I X
April 23, 2002
[GRAPHIC] [TIFF OMITTED] 79319.141
[GRAPHIC] [TIFF OMITTED] 79319.142
[GRAPHIC] [TIFF OMITTED] 79319.143
[GRAPHIC] [TIFF OMITTED] 79319.144
[GRAPHIC] [TIFF OMITTED] 79319.145
[GRAPHIC] [TIFF OMITTED] 79319.146
[GRAPHIC] [TIFF OMITTED] 79319.147
[GRAPHIC] [TIFF OMITTED] 79319.148
[GRAPHIC] [TIFF OMITTED] 79319.149
[GRAPHIC] [TIFF OMITTED] 79319.150
[GRAPHIC] [TIFF OMITTED] 79319.151
[GRAPHIC] [TIFF OMITTED] 79319.152
[GRAPHIC] [TIFF OMITTED] 79319.153
[GRAPHIC] [TIFF OMITTED] 79319.154
[GRAPHIC] [TIFF OMITTED] 79319.155
[GRAPHIC] [TIFF OMITTED] 79319.156
[GRAPHIC] [TIFF OMITTED] 79319.157
[GRAPHIC] [TIFF OMITTED] 79319.158
[GRAPHIC] [TIFF OMITTED] 79319.159
[GRAPHIC] [TIFF OMITTED] 79319.160
[GRAPHIC] [TIFF OMITTED] 79319.161
[GRAPHIC] [TIFF OMITTED] 79319.162
[GRAPHIC] [TIFF OMITTED] 79319.163
[GRAPHIC] [TIFF OMITTED] 79319.164
[GRAPHIC] [TIFF OMITTED] 79319.165
[GRAPHIC] [TIFF OMITTED] 79319.166
[GRAPHIC] [TIFF OMITTED] 79319.167
[GRAPHIC] [TIFF OMITTED] 79319.168
[GRAPHIC] [TIFF OMITTED] 79319.169
[GRAPHIC] [TIFF OMITTED] 79319.170
[GRAPHIC] [TIFF OMITTED] 79319.171
[GRAPHIC] [TIFF OMITTED] 79319.172
[GRAPHIC] [TIFF OMITTED] 79319.173
[GRAPHIC] [TIFF OMITTED] 79319.174
[GRAPHIC] [TIFF OMITTED] 79319.175
[GRAPHIC] [TIFF OMITTED] 79319.176
[GRAPHIC] [TIFF OMITTED] 79319.177
[GRAPHIC] [TIFF OMITTED] 79319.178
[GRAPHIC] [TIFF OMITTED] 79319.179
[GRAPHIC] [TIFF OMITTED] 79319.180
[GRAPHIC] [TIFF OMITTED] 79319.181
[GRAPHIC] [TIFF OMITTED] 79319.182
[GRAPHIC] [TIFF OMITTED] 79319.183
[GRAPHIC] [TIFF OMITTED] 79319.184
[GRAPHIC] [TIFF OMITTED] 79319.185
[GRAPHIC] [TIFF OMITTED] 79319.186
[GRAPHIC] [TIFF OMITTED] 79319.187
[GRAPHIC] [TIFF OMITTED] 79319.188
[GRAPHIC] [TIFF OMITTED] 79319.189
[GRAPHIC] [TIFF OMITTED] 79319.190
[GRAPHIC] [TIFF OMITTED] 79319.191
[GRAPHIC] [TIFF OMITTED] 79319.192
[GRAPHIC] [TIFF OMITTED] 79319.193
[GRAPHIC] [TIFF OMITTED] 79319.194
[GRAPHIC] [TIFF OMITTED] 79319.195
[GRAPHIC] [TIFF OMITTED] 79319.196
[GRAPHIC] [TIFF OMITTED] 79319.197
[GRAPHIC] [TIFF OMITTED] 79319.198
[GRAPHIC] [TIFF OMITTED] 79319.199
[GRAPHIC] [TIFF OMITTED] 79319.200
[GRAPHIC] [TIFF OMITTED] 79319.201
[GRAPHIC] [TIFF OMITTED] 79319.202
[GRAPHIC] [TIFF OMITTED] 79319.203
[GRAPHIC] [TIFF OMITTED] 79319.204
[GRAPHIC] [TIFF OMITTED] 79319.205
[GRAPHIC] [TIFF OMITTED] 79319.206
[GRAPHIC] [TIFF OMITTED] 79319.207
[GRAPHIC] [TIFF OMITTED] 79319.208
[GRAPHIC] [TIFF OMITTED] 79319.209
[GRAPHIC] [TIFF OMITTED] 79319.210
[GRAPHIC] [TIFF OMITTED] 79319.211
[GRAPHIC] [TIFF OMITTED] 79319.212
[GRAPHIC] [TIFF OMITTED] 79319.213
[GRAPHIC] [TIFF OMITTED] 79319.214
[GRAPHIC] [TIFF OMITTED] 79319.215
[GRAPHIC] [TIFF OMITTED] 79319.216
[GRAPHIC] [TIFF OMITTED] 79319.217
[GRAPHIC] [TIFF OMITTED] 79319.218
[GRAPHIC] [TIFF OMITTED] 79319.219
[GRAPHIC] [TIFF OMITTED] 79319.220
[GRAPHIC] [TIFF OMITTED] 79319.221
[GRAPHIC] [TIFF OMITTED] 79319.222
[GRAPHIC] [TIFF OMITTED] 79319.223
[GRAPHIC] [TIFF OMITTED] 79319.224
[GRAPHIC] [TIFF OMITTED] 79319.225
[GRAPHIC] [TIFF OMITTED] 79319.226
[GRAPHIC] [TIFF OMITTED] 79319.227
[GRAPHIC] [TIFF OMITTED] 79319.228
[GRAPHIC] [TIFF OMITTED] 79319.229
[GRAPHIC] [TIFF OMITTED] 79319.230
[GRAPHIC] [TIFF OMITTED] 79319.231
[GRAPHIC] [TIFF OMITTED] 79319.232
[GRAPHIC] [TIFF OMITTED] 79319.233
[GRAPHIC] [TIFF OMITTED] 79319.234
[GRAPHIC] [TIFF OMITTED] 79319.235
[GRAPHIC] [TIFF OMITTED] 79319.236
[GRAPHIC] [TIFF OMITTED] 79319.237
[GRAPHIC] [TIFF OMITTED] 79319.238
[GRAPHIC] [TIFF OMITTED] 79319.239
[GRAPHIC] [TIFF OMITTED] 79319.240
[GRAPHIC] [TIFF OMITTED] 79319.241
[GRAPHIC] [TIFF OMITTED] 79319.242
[GRAPHIC] [TIFF OMITTED] 79319.243
[GRAPHIC] [TIFF OMITTED] 79319.244
[GRAPHIC] [TIFF OMITTED] 79319.245
[GRAPHIC] [TIFF OMITTED] 79319.246
[GRAPHIC] [TIFF OMITTED] 79319.247
[GRAPHIC] [TIFF OMITTED] 79319.248
[GRAPHIC] [TIFF OMITTED] 79319.249
[GRAPHIC] [TIFF OMITTED] 79319.250
[GRAPHIC] [TIFF OMITTED] 79319.251
[GRAPHIC] [TIFF OMITTED] 79319.252
[GRAPHIC] [TIFF OMITTED] 79319.253
[GRAPHIC] [TIFF OMITTED] 79319.254
[GRAPHIC] [TIFF OMITTED] 79319.255
[GRAPHIC] [TIFF OMITTED] 79319.256
[GRAPHIC] [TIFF OMITTED] 79319.257
[GRAPHIC] [TIFF OMITTED] 79319.258
[GRAPHIC] [TIFF OMITTED] 79319.259
[GRAPHIC] [TIFF OMITTED] 79319.260
[GRAPHIC] [TIFF OMITTED] 79319.261
[GRAPHIC] [TIFF OMITTED] 79319.262
[GRAPHIC] [TIFF OMITTED] 79319.263
[GRAPHIC] [TIFF OMITTED] 79319.264
[GRAPHIC] [TIFF OMITTED] 79319.265
[GRAPHIC] [TIFF OMITTED] 79319.266
[GRAPHIC] [TIFF OMITTED] 79319.267
[GRAPHIC] [TIFF OMITTED] 79319.268
[GRAPHIC] [TIFF OMITTED] 79319.269
[GRAPHIC] [TIFF OMITTED] 79319.270
[GRAPHIC] [TIFF OMITTED] 79319.271
[GRAPHIC] [TIFF OMITTED] 79319.272
[GRAPHIC] [TIFF OMITTED] 79319.273
[GRAPHIC] [TIFF OMITTED] 79319.274
[GRAPHIC] [TIFF OMITTED] 79319.275
[GRAPHIC] [TIFF OMITTED] 79319.276
[GRAPHIC] [TIFF OMITTED] 79319.277
[GRAPHIC] [TIFF OMITTED] 79319.278
[GRAPHIC] [TIFF OMITTED] 79319.279
[GRAPHIC] [TIFF OMITTED] 79319.280
[GRAPHIC] [TIFF OMITTED] 79319.281
[GRAPHIC] [TIFF OMITTED] 79319.282
[GRAPHIC] [TIFF OMITTED] 79319.283
[GRAPHIC] [TIFF OMITTED] 79319.284
[GRAPHIC] [TIFF OMITTED] 79319.285
[GRAPHIC] [TIFF OMITTED] 79319.286
[GRAPHIC] [TIFF OMITTED] 79319.287
[GRAPHIC] [TIFF OMITTED] 79319.288
[GRAPHIC] [TIFF OMITTED] 79319.289
A P P E N D I X
April 24, 2002
[GRAPHIC] [TIFF OMITTED] 79319.290
[GRAPHIC] [TIFF OMITTED] 79319.291
[GRAPHIC] [TIFF OMITTED] 79319.292
[GRAPHIC] [TIFF OMITTED] 79319.293
[GRAPHIC] [TIFF OMITTED] 79319.294
[GRAPHIC] [TIFF OMITTED] 79319.295
[GRAPHIC] [TIFF OMITTED] 79319.296
[GRAPHIC] [TIFF OMITTED] 79319.297
[GRAPHIC] [TIFF OMITTED] 79319.298
[GRAPHIC] [TIFF OMITTED] 79319.299
[GRAPHIC] [TIFF OMITTED] 79319.300
[GRAPHIC] [TIFF OMITTED] 79319.301
[GRAPHIC] [TIFF OMITTED] 79319.302
[GRAPHIC] [TIFF OMITTED] 79319.303
[GRAPHIC] [TIFF OMITTED] 79319.304
[GRAPHIC] [TIFF OMITTED] 79319.305
[GRAPHIC] [TIFF OMITTED] 79319.306
[GRAPHIC] [TIFF OMITTED] 79319.307
[GRAPHIC] [TIFF OMITTED] 79319.308
[GRAPHIC] [TIFF OMITTED] 79319.309
[GRAPHIC] [TIFF OMITTED] 79319.310
[GRAPHIC] [TIFF OMITTED] 79319.311
[GRAPHIC] [TIFF OMITTED] 79319.312
[GRAPHIC] [TIFF OMITTED] 79319.313
[GRAPHIC] [TIFF OMITTED] 79319.314
[GRAPHIC] [TIFF OMITTED] 79319.315
[GRAPHIC] [TIFF OMITTED] 79319.316
[GRAPHIC] [TIFF OMITTED] 79319.317
[GRAPHIC] [TIFF OMITTED] 79319.318
[GRAPHIC] [TIFF OMITTED] 79319.319
[GRAPHIC] [TIFF OMITTED] 79319.320
[GRAPHIC] [TIFF OMITTED] 79319.321
[GRAPHIC] [TIFF OMITTED] 79319.322
[GRAPHIC] [TIFF OMITTED] 79319.323
[GRAPHIC] [TIFF OMITTED] 79319.324
[GRAPHIC] [TIFF OMITTED] 79319.325
[GRAPHIC] [TIFF OMITTED] 79319.326
[GRAPHIC] [TIFF OMITTED] 79319.327
[GRAPHIC] [TIFF OMITTED] 79319.328
[GRAPHIC] [TIFF OMITTED] 79319.329
[GRAPHIC] [TIFF OMITTED] 79319.330
[GRAPHIC] [TIFF OMITTED] 79319.331
[GRAPHIC] [TIFF OMITTED] 79319.332
[GRAPHIC] [TIFF OMITTED] 79319.333
[GRAPHIC] [TIFF OMITTED] 79319.334
[GRAPHIC] [TIFF OMITTED] 79319.335
[GRAPHIC] [TIFF OMITTED] 79319.336
[GRAPHIC] [TIFF OMITTED] 79319.337
[GRAPHIC] [TIFF OMITTED] 79319.338
[GRAPHIC] [TIFF OMITTED] 79319.339
[GRAPHIC] [TIFF OMITTED] 79319.340
[GRAPHIC] [TIFF OMITTED] 79319.341
[GRAPHIC] [TIFF OMITTED] 79319.342
[GRAPHIC] [TIFF OMITTED] 79319.343
[GRAPHIC] [TIFF OMITTED] 79319.344
[GRAPHIC] [TIFF OMITTED] 79319.345
[GRAPHIC] [TIFF OMITTED] 79319.346
[GRAPHIC] [TIFF OMITTED] 79319.347
[GRAPHIC] [TIFF OMITTED] 79319.348
[GRAPHIC] [TIFF OMITTED] 79319.349
[GRAPHIC] [TIFF OMITTED] 79319.350
[GRAPHIC] [TIFF OMITTED] 79319.351
[GRAPHIC] [TIFF OMITTED] 79319.352
[GRAPHIC] [TIFF OMITTED] 79319.353
[GRAPHIC] [TIFF OMITTED] 79319.354
[GRAPHIC] [TIFF OMITTED] 79319.355
[GRAPHIC] [TIFF OMITTED] 79319.356
[GRAPHIC] [TIFF OMITTED] 79319.357
[GRAPHIC] [TIFF OMITTED] 79319.358
[GRAPHIC] [TIFF OMITTED] 79319.359
[GRAPHIC] [TIFF OMITTED] 79319.360
[GRAPHIC] [TIFF OMITTED] 79319.361
[GRAPHIC] [TIFF OMITTED] 79319.362
[GRAPHIC] [TIFF OMITTED] 79319.363
[GRAPHIC] [TIFF OMITTED] 79319.364
[GRAPHIC] [TIFF OMITTED] 79319.365
[GRAPHIC] [TIFF OMITTED] 79319.366
[GRAPHIC] [TIFF OMITTED] 79319.367
[GRAPHIC] [TIFF OMITTED] 79319.368
[GRAPHIC] [TIFF OMITTED] 79319.369
[GRAPHIC] [TIFF OMITTED] 79319.370
[GRAPHIC] [TIFF OMITTED] 79319.371
[GRAPHIC] [TIFF OMITTED] 79319.372
[GRAPHIC] [TIFF OMITTED] 79319.373
[GRAPHIC] [TIFF OMITTED] 79319.374
[GRAPHIC] [TIFF OMITTED] 79319.375
[GRAPHIC] [TIFF OMITTED] 79319.376
[GRAPHIC] [TIFF OMITTED] 79319.377
[GRAPHIC] [TIFF OMITTED] 79319.378
[GRAPHIC] [TIFF OMITTED] 79319.379
[GRAPHIC] [TIFF OMITTED] 79319.380
[GRAPHIC] [TIFF OMITTED] 79319.381
[GRAPHIC] [TIFF OMITTED] 79319.382
[GRAPHIC] [TIFF OMITTED] 79319.383
[GRAPHIC] [TIFF OMITTED] 79319.384
[GRAPHIC] [TIFF OMITTED] 79319.385
[GRAPHIC] [TIFF OMITTED] 79319.386
[GRAPHIC] [TIFF OMITTED] 79319.387