[Senate Hearing 107-979]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-979


                          PROPOSALS TO IMPROVE
                      THE HOUSING VOUCHER PROGRAM

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

 PROPOSALS OUTLINED IN THE HOUSING VOUCHER IMPROVEMENT ACT OF 2002 TO 
          IMPROVE THE SECTION 8 HOUSING CHOICE VOUCHER PROGRAM

                               __________

                             APRIL 11, 2002

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  PAUL S. SARBANES, Maryland, Chairman

CHRISTOPHER J. DODD, Connecticut     PHIL GRAMM, Texas
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
ZELL MILLER, Georgia                 CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware           RICK SANTORUM, Pennsylvania
DEBBIE STABENOW, Michigan            JIM BUNNING, Kentucky
JON S. CORZINE, New Jersey           MIKE CRAPO, Idaho
DANIEL K. AKAKA, Hawaii              JOHN ENSIGN, Nevada

           Steven B. Harris, Staff Director and Chief Counsel

             Wayne A. Abernathy, Republican Staff Director

                    Jennifer Fogel-Bublick, Counsel

                  Jonathan Miller, Professional Staff

            Sherry Little, Republican Legislative Assistant

                  Mark Calabria, Republican Economist

   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator

                       George E. Whittle, Editor

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                        THURSDAY, APRIL 11, 2002

                                                                   Page

Opening statement of Chairman Sarbanes...........................     1

Opening statements, comments, or prepared statements of:
    Senator Miller...............................................     2
    Senator Corzine..............................................     2
        Prepared statement.......................................    20
    Senator Akaka................................................     3
        Prepared statement.......................................    20
    Senator Stabenow.............................................    13
        Prepared statement.......................................    21

                               WITNESSES

Ophelia B. Basgal, Executive Director, Housing Authority of 
  Alameda County and Dublin, California on behalf of the National 
  Association of Housing and Redevelopment Officials.............     4
    Prepared statement...........................................    21
    Response to written question of Senator Akaka................    39
Scott Gardner, President, National Apartment Association and 
  Crosshaven Properites, Inc.....................................     6
    Prepared statement...........................................    26
    Response to written question of Senator Akaka................    39
Ann O'Hara, Associate Director, Technical Assistance 
  Collaborative
  on behalf of the National Low Income Housing Coalition.........     8
    Prepared statement...........................................    28
    Response to written questions of Senator Akaka...............    40
Benson F. Roberts, Vice President for Policy, Local Initiatives 
  Support
  Corporation....................................................    10
    Prepared statement...........................................    34

              Additional Material Supplied for the Record

Letter from Sheila Crowley, President, National Low Income 
  Housing Coalition to Chairman Paul S. Sarbanes, dated May 24, 
  2002...........................................................    43

                                 (iii)

 
                          PROPOSALS TO IMPROVE
                      THE HOUSING VOUCHER PROGRAM

                              ----------                              


                        THURSDAY, APRIL 11, 2002

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.

    The Committee met at 2:50 p.m., in room SD-538 of the 
Dirksen Senate Office Building, Senator Paul S. Sarbanes 
(Chairman of the Committee) presiding.

         OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES

    Chairman Sarbanes. The hearing will come to order.
    I would like to apologize to my colleagues and the 
witnesses for the delay. I was held up in the Capitol, and I 
just could not get out of the situation in which I found 
myself.
    Since November of last year, we have had three hearings in 
the Committee to discuss the increasing demand for affordable 
housing throughout the country. The testimony at these hearings 
has shown pretty conclusively that housing for many working 
families, as well as the poor, is becoming less and less 
affordable. Indeed, the data shows that it is working families 
who are increasingly feeling the pinch of rents that increase 
faster than their wages.
    A number of the witnesses we have heard from in the past 
several months have made proposals to address this growing 
need, for example, the National Housing Trust Fund. Many of us 
in the Congress support additional funding for the construction 
of new affordable housing. Others would take a different 
approach. Senator Jack Reed of Rhode Island, who chairs our 
Subcommittee on Housing and Transportation, has been exploring 
these issues and will continue to do so.
    There does seem to be widespread agreement that housing 
vouchers are an important and invaluable part of our Nation's 
housing policy. Both the previous and the current 
Administrations have consistently included an increase in the 
number of housing vouchers in their budget requests for the 
Department of Housing and Urban Development, and I and many 
others have strongly supported these efforts.
    However, we have also heard from housing authorities, low-
income families, housing advocates, and landlords that there 
are a number of difficulties in making the vouchers work, 
particularly in low-poverty areas. The Housing Voucher 
Improvement Act of 2002, the subject of our hearing today, is 
designed to respond to these difficulties and to make vouchers 
a more effective tool for providing affordable housing to 
American families who need help.
    The legislation, amongst other things, provides funds to 
finance outreach by program administrators to landlords in an 
effort to broaden housing choices; to help voucher holders 
search for housing, particularly in lower poverty neighborhoods 
by, for example, providing transportation services; and to help 
with application and credit check fees for voucher holders.
    The bill would also: allow housing authorities to increase 
their payment standards where there is strong evidence that 
this is needed to improve voucher utilization; and, to make it 
easier to pair vouchers with existing tax credit and HOME 
projects, so that the families with the most severe housing 
problems can have some 
access to this housing.
    In addition, the bill proposes a new kind of voucher, 
called Thrifty Production Vouchers. These are project-based 
vouchers designed to be used in newly constructed housing that 
also receive capital subsidies, such as HOME funds or tax 
credits, thereby seeking to enable these new developments to 
serve very low-income families. Thrifty Vouchers would seek to 
encourage the development of new affordable housing in areas 
that are more accessible to jobs, shopping, better schools, and 
transportation. No more than 25 percent of the units in any new 
development would be able to have these vouchers attached, so 
that we can ensure that the new developments are mixed-income 
developments.
    We, in fact, passed important public housing legislation in 
this Committee a few years ago, designed to encourage a greater 
mix of income in public housing.
    I have asked my staff to distribute a discussion draft of 
this legislation to Members of the Committee, to the 
Administration, HUD, and to outside groups who have had 
experience with a voucher program. And our intent, of course, 
is that this hearing be the beginning of a process that will 
result in real improvements in this very important program.
    Now to begin the conversation, first, I will turn to my 
colleagues and then I will present the members of the panel.
    Senator Miller.

                COMMENTS OF SENATOR ZELL MILLER

    Senator Miller. Thank you, Mr. Chairman, but I think I will 
pass for the time being.
    Thank you.
    Chairman Sarbanes. Senator Corzine.

               COMMENTS OF SENATOR JON S. CORZINE

    Senator Corzine. Mr. Chairman, I appreciate your holding 
this hearing. I have a formal statement that I would like 
included in the record.
    This is an issue that is extraordinarily important to my 
State. We have many people on waiting lists to get access to 
vouchers. We have a problem that really isn't the heart of this 
bill--low-income housing availability to apply the vouchers.
    Plenty of people want them. Plenty of people qualify, and 
not much place to go because of the lack of available housing. 
I hope we will be able to address some of that as well.
    Thank you, Mr. Chairman.
    Chairman Sarbanes. The full statement will be included in 
the record. Thank you.
    Senator Akaka.

              STATEMENT OF SENATOR DANIEL K. AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman, for 
holding this hearing and for your bill that we hope will 
alleviate the housing situation.
    We know that we have a terrible housing problem facing low- 
and moderate-income families. This appears to be a way of 
helping these people. We know that there needs to be some 
changes, which you seem to try and address with this 
legislation.
    To alleviate this problem, some States, including the State 
of Hawaii, have expanded their rental assistance programs. The 
purpose of the program is no longer solely to provide qualified 
landlords with rental assistance subsidies which assist 
eligible tenants to make their payments. Rather, the State of 
Hawaii has expanded the program to offer interim construction 
financing for rental projects and to provide qualified 
landlords with incentives to participate in the Section 8 
program. The State of Hawaii has also partnered with nonprofit 
organizations in privatizing public housing units.
    Hawaii is not the only State that is expanding its Section 
8 program. Many States are trying to stretch valuable and 
limited housing resources to provide eligible families with 
affordable housing.
    In looking at your bill, it is an answer to this problem. I 
look forward to working with you and the Committee in ensuring 
that the Section 8 housing voucher program meets these new 
challenges.
    I ask that my full statement be placed in the record.
    Thank you, Mr. Chairman.
    Chairman Sarbanes. The full statement will be included in 
the record.
    I am always struck, actually, as I was listening to you, 
about the Hawaii experience and how many different areas Hawaii 
has taken initiatives and instituted policies that really 
should command our attention. I know in the health care field, 
Hawaii has done a number of very innovative things as well.
    Let me turn to the panel. I will introduce each witness one 
at a time.
    Our first panelist is Ophelia Basgal, Executive Director of 
the Housing Authority of Alameda County and Dublin, California. 
She has 26 years of experience--she began as a mere child--in 
affordable housing development and management, including public 
housing and Section 8 programs, use of community development 
block grants and redevelopment loans and grants and various 
other HUD programs.
    In addition to her work with housing authorities, Ms. 
Basgal has also completed several private consulting contracts 
on housing issues and she is also a member of the Millennial 
Housing Commission which will be reporting in the not too 
distant future.
    We are very pleased that she is here with us today. We 
would be happy to hear from you.

                 STATEMENT OF OPHELIA B. BASGAL

            EXECUTIVE DIRECTOR, HOUSING AUTHORITY OF

             ALAMEDA COUNTY AND DUBLIN, CALIFORNIA

                        ON BEHALF OF THE

              NATIONAL ASSOCIATION OF HOUSING AND

                    REDEVELOPMENT OFFICIALS

    Ms. Basgal. Thank you, Chairman Sarbanes.
    I would like to express my gratitude to you and the other 
distinguished Members of the Senate Committee on Banking, 
Housing, and Urban Affairs for inviting me to testify on the 
draft proposal to improve the Section 8 Housing Choice Voucher 
Program.
    I am testifying today on behalf of the National Association 
of Housing and Redevelopment Officials, the acronym of NAHRO, 
which you probably know is one of the Nation's oldest and 
largest organizations that represents housing and community 
development agencies and their issues. Today, we are focused 
primarily on local housing agency and the administration of the 
Section 8 programs, since that is the primary issue in this 
bill draft.
    We certainly acknowledge, and I think the bill does also, 
that the program has been quite successful. But clearly, there 
are areas of concern. And we also are concerned about the full 
utilization of funding and the appropriated units to address 
the housing needs that many of you have spoken to. We believe 
that this draft bill certainly outlines a number of proposals 
that will go a long way toward improving the utilization rate 
and the program effectiveness, and many of the recommendations 
parallel recommendations that the NAHRO membership's itself has 
put forward to help broaden the housing choices for many low-
income families and yield more economic development 
opportunities for those who participate in the program.
    Specifically, we certainly see the Section 8 program as 
only one tool in the toolkit that the Nation has to address 
housing needs. And the aspect of the thrifty production 
vouchers, we clearly, as Senator Akaka indicated, and also 
Senator Corzine, the vouchers are of no use if there is no 
units where they can be used. Anything that also helps increase 
the supply of units we believe is very important and we believe 
that the thrifty production vouchers is one possible way to do 
that. We believe that it probably should start as a 
demonstration program, given the fact that it is not fully 
defined and modeled yet as to how it might work out in the 
field, and we may want to start slowly and see how that goes.
    We heartily support the bill's recommendations on ways to 
improve housing search activities by providing funding. While 
it is true that housing authorities' administrative fees 
certainly anticipate that housing search assistance is part of 
that fee, in difficult rental markets, we simply cannot provide 
the kinds of services that families really need to be able to 
improve their chances when they locate landlords willing to 
rent to them, and particularly to go into low-poverty 
neighborhoods and areas where there are jobs and opportunities 
for them to improve their economic opportunities as families.
    The provisions in the bill that address the fair market 
rents and how voucher payment standards are set is also very 
welcome by increasing the discretion that housing authorities 
have to respond quickly, as rental markets change and rents 
increase, rather than having to go through a process of waivers 
with HUD and authorization to increase voucher payment 
standards. The discretion that this bill would provide would 
help housing authorities to respond quickly to changing rental 
markets.
    What appears to be a very simple recommendation in this 
bill, which is actually very valuable is just providing 
information to housing authorities in one central location of 
where low-income housing tax credit projects are and HOME funds 
so that we can refer our families to those, is critical. And 
actually, what we need to know is when they are close to 
opening those projects because that is when families have an 
opportunity to rent units. Certainly, after the fact is 
valuable, but even earlier in the development of the units is 
even more important to us.
    Also the reallocation issue of underutilized vouchers we 
believe is critical. There is no question that NAHRO supports 
the reallocation of the vouchers to where they can be used. And 
we do have some concerns that the reallocation seems to also be 
attempting to use regionalization of the Section 8 program as a 
way to achieve an efficient use of the vouchers that are 
reallocated.
    We have some questions about that and believe it raises 
administrative difficulties that perhaps the bill does not 
fully consider.
    We also support the expansion of the self-sufficiency 
efforts that are in the bill. We believe that those are needed 
and welcome those giving families further opportunity to seek 
jobs, have incentives to do so, and we support the bill 
provisions.
    And finally, the proposals on inspections which really go a 
long ways to addressing some of the issues that landlords have 
concerns about, and delays in inspection processes in getting 
the units under contract, as I am sure my co-testifier here 
will say, is that having to hold units off the market while you 
are waiting for an inspection, while we would certainly like to 
believe that the delays are limited, certainly, as a private 
landlord, most of them are not in the business of holding units 
off the market when they are ready to rent. And this bill does 
address some of those.
    I would be happy to amplify on that testimony and answer 
any questions as we proceed.
    Thank you.
    Chairman Sarbanes. Good. Thank you very much.
    Our next presenter is Scott Gardner, who is the President 
of the National Apartment Association; and the President of 
Crosshaven Properties, a property management company based in 
Tulsa, Oklahoma, which actually specializes in Federally 
subsidized and tax credit properties.
    Mr. Gardner has been in property management for over 20 
years and has managed residential properties, including 
subsidized apartments, conventional multifamily housing, 
homeowners' associations, as well as commercial and retail 
properties.
    Mr. Gardner, we are pleased to have you with us today, and 
we would be happy to hear from you.

                   STATEMENT OF SCOTT GARDNER

           PRESIDENT, NATIONAL APARTMENT ASSOCIATION

                AND CROSSHAVEN PROPERTIES, INC.

    Mr. Gardner. Thank you, Mr. Chairman.
    Mr. Chairman, distinguished Members of the Banking, 
Housing, and Urban Affairs Committee, my name is Scott Gardner. 
I am President of Crosshaven Properties, a privately operated 
apartment management company headquartered in Tulsa, Oklahoma. 
And as the Chairman said, I am also President of the National 
Apartment Association. The National Apartment Association 
operates a Joint Legislative Program with the National Multi-
Housing Council, a trade association representing the Nation's 
largest apartment firms. It is my pleasure to testify on behalf 
of both organizations.
    First, we commend the Committee Members for your valuable 
work in addressing affordable housing in America. We, too, 
believe that meeting the housing needs of low- and moderate-
income families is critical. We agree with those on the 
Committee and in the housing community who believe that the 
Section 8 Housing Choice Voucher Program can be one of the most 
effective means of expanding assets to decent and affordable 
housing. But we also believe the program must be improved to be 
more transparent, and to be less costly and burdensome in order 
to attract greater participation by private property owners. 
Without this, the Section 8 purpose of assisting low-income 
people cannot be realized.
    Chairman Sarbanes, we appreciate your leadership on this 
issue and we support many of the provisions of the proposed 
Housing Voucher Improvement Act, particularly the proposed 
provision to improve the unit inspection process. But, even 
with that important reform, the proposed legislation falls 
short of creating transparency and fully incorporating the 
reforms necessary to generate a broader private owner 
participation in the Section 8 program.
    My statement today will focus on four key proposals that we 

believe would improve owner participation and voucher 
utilization: One is improving the Housing Quality Standards 
Unit Inspection Process; two, improving the Subsidy Payment 
System; three, 
increasing the payment standard; and the fourth, amending the 
lease addendum.
    First, improving the Housing Quality Standards Unit 
Inspection Process. Currently, before an apartment is eligible 
to lease to a 
Section 8 voucher holder, the administrating Public Housing 
Authority, or PHA, must inspect that unit for compliance with 
HUD-prescribed Housing Quality Standards, or HQS. We agree the 
voucher holder should reside in a safe, sanitary environment, 
but we believe that this can be achieved without conducting 
individual unit inspections.
    Although we strongly support Section 9's proposed intent, 
we advocate the total elimination of individual unit 
inspections. Instead, we would encourage the PHA's to rely on 
previously conducted property-level inspections by HUD or the 
property lenders. These alternative inspections would eliminate 
duplication of effort and reduce occupancy delays caused by 
untimely unit inspections.
    Second, improving the Subsidy Payment System. One key 
element of program administration that would improve 
participation in the marketplace is improving the Subsidy 
Payment Structure. Just as owners would not regularly accept 
late rental payments from non-Section 8 tenants, they must not 
be forced to accept late subsidy payments. Although HUD's 
regulations allow for sanctions against PHA's for untimely 
payments, such sanctions are nominal and are not an incentive 
for prompt payment.
    One way to achieve the goal of transparency would be to 
require that all PHA's make automated electronic fund 
transfers, thereby assuring timely subsidy payments and 
substantially reducing costs for both owners and the PHA's.
    Third, increasing the payment standard. Both the payment 
standard generally and the Fair Market Rents, or FMR's, 
specifically are far too low to support widespread owner 
participation. FMR's must be high enough to encourage owner 
participation and, in turn, create a sufficient supply of 
apartments.
    It is for this reason that NAA and NMHC recommend that the 
FMR be based on at least the 50th percentile of area median 
rents. We urge that the payment standard be raised to 120 
percent of the FMR in high-cost areas and the PHA's be allowed 
to raise them to 150 percent in areas where the voucher 
utilization rate is less than 80 percent, and where 95 percent 
available apartments are already occupied.
    We also propose that such increases be authorized where 
voucher utilization rates were less than 80 percent for the 
previous 6 months, not the proposed 12 months. We feel that 6 
months is an adequate period to determine the need for higher 
utilization rate, and 12 months will only serve to discourage 
owner participation by keeping the subsidy payments too low.
    And finally fourth, amending the lease addendum. The 
proposed bill does not address amending the lease addendum. HUD 
requires owners to increase its standard addendum in each of 
the Section 8 leases.
    The addendum contains numerous provisions that may override 
local practice and even landlord-tenant laws--by the way, NAA 
and NMHC prefer owner-resident--and/or necessitate additional 
costs that we do not ordinarily expend on our standard, 
nonsubsidized leases.
    We propose the elimination or modification of this lease 
addendum to reflect the standards used with the market leases, 
thereby reducing administrative burdens and other costly 
procedures. Alternatively, we propose establishing pilot 
programs to test alternatives with the current lease addendum.
    In summary, we support the Section 8 program and wish to 
engage more fully in it. However, such participation is not 
economically feasible without reforming the program to reduce 
its significant costs and burdens on some apartment owners. I 
thank you for the opportunity to testify on behalf of the 
National Apartment Association and the National Multi-Housing 
Council, and wish to offer our assistance as the Committee 
continues with its important work toward creating a more 
efficient program.
    Thank you.
    Chairman Sarbanes. Thank you very much, sir.
    Our next presenter is Ann O'Hara, Cofounder and Associate 
Director of Technical Assistance Collaborative, and Director of 
TAC housing center for people with disabilities.
    The Technical Assistance Collaborative has offices in 
Boston, Sante Fe, and New Albany, Ohio. It is a national 
organization that advocates on behalf of people with 
disabilities or other special needs by providing information 
and technical assistance to organizations in the areas of 
mental health, substance abuse, human services, and affordable 
housing.
    Before joining TAC, Ann O'Hara served as Assistant 
Secretary for Housing and Director of Rental Assistance for the 
Commonwealth of Massachusetts, and was responsible for the 
administration of 12,000 Section 8 certificates and vouchers.
    Ms. O'Hara, we would be happy to hear from you.

          STATEMENT OF ANN O'HARA, ASSOCIATE DIRECTOR

               TECHNICAL ASSISTANCE COLLABORATIVE

                        ON BEHALF OF THE

             NATIONAL LOW INCOME HOUSING COALITION

    Ms. O'Hara. Thank you.
    Chairman Sarbanes and Members of the Committee, I am 
honored to testify today on proposals to improve the voucher 
program. And I appreciate the opportunity in particular to join 
the other witnesses on this panel to discuss a subject that is 
very important to our Nation's housing policy.
    I am here today on behalf of the National Low Income 
Housing Coalition, representing its members nationwide who 
share the goal of ending the affordable housing crisis.
    For the next few minutes, I would like to focus mainly on 
addressing the problems of voucher utilization, which have been 
well documented in various reports and studies. With 3.8 
million extremely low-income families facing worst-case housing 
needs, it is critically important that the full benefits of the 
voucher program be realized. Otherwise, the promise of a 
voucher turns into a cruel reality for low-income households 
who have been on waiting lists for years and years.
    The problems which this bill helps to address can be 
illustrated by one man that I know who would not have been able 
to use his voucher without the intervention of national 
disability organizations. Matthew Bausch is a 28-year-old man 
who was injured in a diving accident. He is now a quadriplegic 
and uses a wheelchair. Matthew needed a voucher when he moved 
to South Florida for treatment at the Spinal Cord 
Rehabilitation Center. Because new vouchers for people with 
disabilities have been appropriated by Congress, Matthew got a 
voucher within a year. But after a 90-day search, Matthew had 
not identified any units, whether accessible or not, that could 
fit within the program guidelines. Finally, we helped Matthew 
obtain a list of Federal low-income housing tax credit 
properties in Florida and a vacant, partially accessible unit 
was located for him. However, that is when Matthew's problems 
really began.
    First, the management company refused to accept the voucher 
until disability advocates contacted the State's tax credit-
allocating agency to intervene with the owner. Once that 
problem was solved, another one emerged. The tax credit rent 
was higher than the PHA's voucher payment standard and the PHA 
initially refused to approve an exception. That decision was 
eventually overturned, but not before Matthew almost lost the 
unit to another prospective 
tenant.
    The National Low Income Housing Coalition believes that the 
policy changes in the proposed Housing Voucher Improvement Act 
would help all low-income families, not just people with 
disabilities, to successfully use vouchers. These changes 
include using up to 2 percent of Section 8 funding for housing 
counseling and related activities, and a new voucher success 
fund.
    The proposed flexibility to increase the payment standard 
and strengthen the linkage of vouchers to Federal home and tax 
credit finance units, as mentioned by Ms. Basgal, will also 
help expand the supply of good quality units that accept 
vouchers, which is an important strategy since most 
jurisdictions do not have voucher antidiscrimination policies.
    Given the tools that would be provided in this legislation, 
the Coalition also supports the reallocation of vouchers when a 
PHA, after receiving appropriate notice, is unable or unwilling 
to make improvements.
    However, we recommend that a broader public notice to 
tenant organizations and other concerned members of the 
community should be provided by HUD so that these groups could 
try to work with the PHA's when they are first alerted to their 
inadequate utilization rate. Because of the importance of 
linking housing and TANF policies, we also support the 
provisions which would help tenants achieve greater economic 
well-being, including permitting voucher-holders to participate 
in the Resident Opportunity Self-Sufficiency program, 
additional service coordinators for family self-sufficiency, 
and authorizing employment and family reunification incentives 
through income disregard policies.
    Finally, we would like to express our support for the 
Thrift Voucher Production Program, and the policy-linking 
vouchers to production strategies for people with the lowest 
incomes.
    We recommend that the siting and owner waiting list 
provisions of this bill also be applied to the project-based 
voucher legislation that was passed in the year 2000. However, 
we also want to make known that protections need to be in place 
for people on housing authorities' tenant-based lists if we are 
going to also advocate for owner- and project-based lists.
    Again, I would like to thank you for the opportunity to be 
here today and also to answer any questions that you may have.
    Chairman Sarbanes. Thank you very much.
    Our closing panelist will be Benson ``Buzz'' Roberts, who 
directs the Local Initiatives Support Corporation--LISC--and 
its public policy and Government relations activities.
    LISC, as we well know, is a national nonprofit organization 
that has provided over $3 billion in financing and 
organizational support to nonprofit community-based development 
corporations through 40 local offices and the national rural 
program.
    Mr. Roberts has been involved in the creation of such 
policies as the Low-Income Housing Tax Credit, the New Markets 
Tax Credit, and the HOME Housing Development Program.
    He is a Board Member of the Center for Community Change, 
the National Association of Affordable Housing Lenders, and the 
National Housing Conference, and co-author of several books and 
articles on affordable housing and community development.
    Buzz, we are pleased to have you here. We would be happy to 
hear from you.

                 STATEMENT OF BENSON F. ROBERTS

                   VICE PRESIDENT FOR POLICY

             LOCAL INITIATIVES SUPPORT CORPORATION

    Mr. Roberts. Thank you very much, Mr. Chairman, and good 
afternoon to you and to the Committee Members as well. I am 
very pleased to be here today to speak particularly on behalf 
of the Thrifty Production Voucher proposal that is contained in 
the bill.
    Through our work, we have helped nonprofit community 
development groups to build or rehabilitate well over 110,000 
units of housing, and we use resources like the Low-Income 
Housing Tax Credit and HOME in that effort. They are excellent 
programs. But there is a limitation to what they or any other 
capital subsidy program can do to serve people at the lowest 
end of the income ladder.
    Extremely low-income people with incomes under 30 percent 
of median simply cannot afford to pay rents high enough to 
cover the basic costs of operating a property. That means that 
even if you were to provide a subsidy to cover the entire cost 
of development and there were no mortgage that you needed rent 
revenues to pay off, the housing would still be unaffordable. 
And that is really what Thrifty Production Vouchers are 
designed to address. It is a very important gap in our housing 
system.
    Now, the obvious solution to this would be to provide some 
kind of project-based rent subsidy targeted toward these 
families. And the problem we have had in getting the Congress 
to provide funds for that is that the cost of renewing those 
subsidies year after year after year is daunting. Even the cost 
of renewing a tenant-based voucher is $6,000 a year and the 
appropriators are reluctant to do too much of that. And so, the 
Thrifty Production Voucher approach is designed to address this 
cost issue.
    What makes Thrifty Production Vouchers thrifty is that they 
would use a different payment standard. Now, most tenant-based 
vouchers are based on a fair market rent or some small 
increment above that. Let us say that that level would be a 
$700 payment standard. A low-income tenant can afford $200. 
That gap of $500 is what it would cost for the rent subsidy.
    A Thrifty Production Voucher is different because instead 
of being based on that fair market rent, the payment standard 
would be based on the actual operating cost of the property, 
not including the mortgage. In most cases, that is going to be 
a much lower payment standard and that gap is going to be much 
smaller to fill.
    And that is why the Thrifty Production Voucher can cost 
less. It is not that the tenant is paying more, but it is that 
the payment standard is lower. It is a simple math problem and 
a simple math solution. There would be a cap set on the total 
eligible operating expenses equal to 75 percent of the tenant-
based voucher payment standard, and that is designed to make 
sure that thrifties live up to their name. And if the operating 
cost is below that cap, then the savings are going to be even 
greater.
    We estimate that at least there will be about a one-third 
savings below the cost of a regular tenant-based voucher, and 
in high fair market rent areas, like Newark, for instance, or 
the Bay area, or Boston, the savings would be dramatically 
greater.
    We are looking carefully at some low fair market rent 
areas, particularly rural areas, to see that this approach is 
going to work. It may need some modification in those areas. 
But we think the basic approach will work in the vast majority 
of areas.
    A key element here, as Mr. Chairman, you mentioned, is that 
these vouchers would generally be limited to 25 percent of the 
units in a property. And that is important for several reasons.
    First, as you suggest, it will promote mixed-income 
housing. We want to avoid the overconcentration of very poor 
people all in the same buildings.
    Second, it will make sure that the properties remain 
disciplined by the private market. Most of the units in that 
property will not have project-based subsidies attached to them 
and landlords will have to make sure that those properties are 
competitive in the market. We think that is a very important 
and healthy aspect.
    And third, this approach would enable the owners to submit 
their own actual operating budgets and for those to be 
generally acceptable for purposes of setting the subsidy level. 
That makes sense because owners would have no motivation to be 
wasting money on an entire property if they are only going to 
get reimbursed for the costs on up to a quarter of the units in 
that property. They will be encouraged to manage costs, we 
think appropriately. And they won't have to worry about some 
governmental entity coming in and second-guessing their 
operating practices or budgets. Again, they would have to stay 
under that cap, at least.
    In summary, Thrifty Vouchers would really meet a need no 
other part of the housing programs currently meet. That is why 
they have already won the support from several national 
organizations, including the National Low Income Housing 
Coalition, the Center for Budget and Policy Priorities, the 
Council of State Community Development Agencies, the Enterprise 
Foundation, the National Association of Counties, the National 
Association for County Community and Economic Development, the 
National Association of Local Housing Finance Agencies, the 
National Community Development Association, the National 
Council of State Housing Agencies, and the U.S. Conference of 
Mayors.
    That concludes my testimony, and I thank you very much for 
your time.
    Chairman Sarbanes. Thank you very much. It is a very, very 
helpful panel.
    As penance for my delayed arrival, I am going to defer my 
questioning to the end and yield to my colleagues first.
    Senator Corzine.
    Senator Corzine. Well, I have to tell you that I am not 
sure I can fully understand how this Thrifty Voucher Program 
works in these high-cost areas, and how do you feel the 
incentive for the local private producer or production would 
work.
    I would ask Mr. Roberts to comment on that, and Mr. 
Gardner.
    Mr. Roberts. There are two kinds of developers. Some are 
nonprofit developers and they will have a mission motivation to 
work these Thrifty Production Vouchers into their properties, 
and will be happy to do so.
    Many profit-motivated developers who are seeking 
allocations of low-income housing----
    Senator Corzine. You are talking about HOPE 6 project kinds 
of----
    Mr. Roberts. They might be. But they might be low-income 
tax credit properties.
    Chairman Sarbanes. Mr. Roberts, if you could pull that 
microphone closer, it would be helpful.
    Mr. Roberts. They could be HOME-assisted properties. A wide 
range of properties, really. Everyone who competes for 
allocations of low-income housing tax credits does so according 
to a State's 
allocation plan.
    There is a Federal requirement that one of the allocation 
criteria is the commitment to serve especially low-income 
people. So the Thrifty Production Voucher is going to permit 
applicants for housing credit allocations to address that 
priority. And that is going to be a very attractive tool for 
anybody who wants to compete effectively. In many States, there 
are two and three times as many applicants for housing credit 
allocations as can be accommodated. I believe there will be a 
strong motivation,
    Mr. Gardner. I believe the Thrifty Voucher Program probably 
would be a good thing for new production of units.
    However, the key here is to get participation by existing 
unit landlords. The broader participation by landlords is going 
to address the problem I believe more quickly and more 
efficiently than the production of the new units, which can be 
held up as long as 6 months from the time it begins.
    Our position is that if we can make the program more owner-
friendly, then that would encourage more owners to participate 
in the program and even in the high-cost areas, if you can 
raise the FMR's to a sufficient level, then you are going to be 
able to get participation from these owners.
    Senator Corzine. It is really a different issue, though, 
than how you utilize these Thrifty Production Vouchers, if I 
understand it right. Can you give me a specific example? In 
Newark, you cited, and it sounded like you had thought about 
that question. And I might follow up on the pursuit of the 
specifics of this to be able to understand it a little more 
clearly on the specific application.
    Mr. Roberts. Sure. Let us say that you are in the central 
ward of Newark and you were building a 100-unit apartment 
complex. You are assembling your financing at that time, so you 
would go to the State for an allocation of housing credits. You 
would probably go to the city because you will probably need 
some HOME funds. You would go to a bank because you will 
probably need a first mortgage. And you would go to the public 
housing authority to get an allocation of Thrifty Production 
Vouchers.
    Now under the bill, the housing authority has to coordinate 
with other administrators of capital subsidies so that it will 
be easy for you to, in effect, do one-stop shopping for the 
resources you need to assemble your project.
    You would underwrite the property according to what the 
overall rents would be. The Thrifty Voucher would be available 
for, say, 20 units, 25 units, maybe. They would not generate 
any revenue available to pay a mortgage.
    But it also means that if you are a nonprofit community 
development group and part of the purpose for developing this 
housing is to serve the residents of your neighborhood, 
including the poor residents, that now, you no longer have to 
jump through hoops in order to figure out how you are going to 
serve those people because you will have these vouchers that 
will ensure that you can cover your operating expenses for 
those units. And then you could use the other 75 units in the 
property to help pay off the mortgage. That is basically how it 
would work.
    Senator Corzine. Thank you, Mr. Chairman.
    Chairman Sarbanes. Senator Stabenow.

              STATEMENT OF SENATOR DEBBIE STABENOW

    Senator Stabenow. Thank you, Mr. Chairman.
    First, I appreciate the opportunity to place an opening 
statement in the record.
    Chairman Sarbanes. Certainly.
    Senator Stabenow. And I want to thank you for your 
leadership and the proposals that you have put forward.
    I wonder if I might speak for a moment on Section 8 and ask 
you about the Section 8 rule which prohibits a family from 
paying more than 40 percent of their income for rent. This has 
been raised by a number of people involved in housing in 
Michigan. There is a growing concern that the 40 percent rule 
is impeding families from being able to get a Section 8 
voucher.
    If PHA's are experiencing an underutilization of the 
vouchers, and in jeopardy of losing them, do you think that 
amending the 40 percent rule would enable a significant number 
of families to be able to secure housing and obligate their 
voucher, or do you think that that is not a direction that we 
should go in? I am wondering if you could speak a little bit 
about the pros and cons of the concerns that have been raised?
    Ms. Basgal. Certainly. I understand that the reason the 40 
percent cap was put in originally was the thought that families 
really should pay a reasonable amount of their income for rent. 
And it is 40 percent now based on the adjusted income, so this 
is after we go through our income calculations and arrive at 
the deductions and all of that. It is a problem.
    In our area, the number of units that we turn down on a 
monthly basis, we track the reasons for those. A full 20 
percent of the units that we have to deny in the period of time 
that we have been tracking them have been because families 
exceed the 40 percent of income. And I would say that we are 
one of the MSA's that has the higher rents. Our rents are at 
the 50th percentile and, in fact, of the twelve cities that we 
serve, nine of those are set at 120 percent of the 50th 
percentile rents. So it is not because our payment standards 
are too low.
    It is very hard to explain to a family who is currently 
paying 60 or 70 percent of their income for rent, that they 
have found a place that results in them paying 42 percent of 
their rent and we cannot approve the unit.
    We certainly try to negotiate with landlords and do 
everything that we can and there are ways to do it. But simply, 
we believe that a change, even as simple as making it 40 
percent of gross income, would make many families eligible who 
currently cannot meet the test.
    Senator Stabenow. Is that something that you would support?
    Ms. Basgal. Yes.
    Senator Stabenow. Would anyone else like to address that?
    Ms. O'Hara. I would. I think those of us who have been 
around the Section 8 program as long as I have can remember 
when tenants paid 25 percent of their income for rent. And the 
current standard of 30 percent, the National Low Income Housing 
Coalition believes, is really the correct amount in terms of 
tenants being able to comfortably afford, particularly 
extremely low-income tenants.
    So, we would not support the 40 percent, but feel that, 
really, at that point, the subsidy needs to be increased rather 
than the share of the tenant's rent.
    Senator Stabenow. Anyone else?
    [No response.]
    Okay. Another question. We are going to be dealing with 
welfare reform coming up in the next several months. And I am 
wondering if any of you would like to offer your thoughts on 
the connection between TANF and housing.
    Ms. O'Hara, you discussed a little bit about this in your 
testimony, but I wondered if any of you would like to talk 
about the role of Section 8 as it relates to what we are going 
to be having to address related to TANF.
    Ms. Basgal. We work relatively closely with our social 
service agency in their efforts to meet the requirements of 
welfare reform, and are actually one of their more successful 
community-based 
organizations that they contract with. We only work with our 
particular clientele, but we have found that the combination of 
housing assistance with activities aimed toward getting people 
to work are very successful.
    We see clients much more often than our social service 
agency does, and have a more established relationship with 
them. They also have a long-standing family self-sufficiency 
program and those efforts seem to come together in a way to be 
very effective working with this particular population.
    Peculiarly, for us, the area that I am from, we have an 
extremely large Afghan population. We are one of the few social 
service agencies that has people who speak the language that 
they speak. And so, we are able to serve that population and 
have been very effective in getting those families to work when 
other agencies have not been able to.
    Clearly, there is a link we would encourage in the TANF 
efforts that you seriously consider requiring closer kinds of 
consultation of social service agencies with housing 
authorities, and that those services be better linked than they 
are now because it took me almost 2 years to get the social 
service agency to realize we could partner with them.
    Senator Stabenow. Yes.
    Ms. O'Hara. I would just like to add that the coalition is 
currently working right now with several groups on specific 
proposals * for better linkage between TANF and housing 
programs, and we would be happy to submit those to the 
Committee.
---------------------------------------------------------------------------
    * Held in Committee files.
---------------------------------------------------------------------------
    Mr. Roberts. The only thing I would add is that there is 
some research that shows that welfare recipients who do have 
housing subsidies have an easier time getting off the welfare 
rolls and staying off the welfare rolls. So there is a link 
between housing stability and family self-sufficiency.
    Senator Stabenow. And if I might just ask one more 
question, Mr. Chairman.
    Senator Mary Landrieu and I have begun a process of working 
on the issue of grandparents raising grandchildren. We have 
about 2 million grandparents right now raising grandchildren. 
There are very unique obstacles that they have in raising 
grandchildren.
    We are beginning to look at the administration of Section 
202 and Section 8 to see what barriers there are for what is 
called grandfamilies. We are finding that Section 202 
properties do not allow children and Section 8 properties may 
not be tailored to the unique needs of these families. And I am 
wondering if any of you would want to speak to that since it is 
a growing challenge in a family unit that we believe that we 
need to recognize.
    Ms. O'Hara. We have a wonderful program in Boston, 
actually, that was developed a number of years ago. Perhaps we 
will talk about the same project. It is a program that links 
debt-free capital funding with project- and tenant-based 
Section 8's, along with support services for the grandparents.
    Senator Stabenow. I am wondering if we were to do some kind 
of pilots that allowed grandparents and children to be in our 
housing, if that kind of thing is something you would support.
    Mr. Roberts. Absolutely. As you just heard, we were very 
deeply involved in this Boston pilot and we are working now in 
Chicago and other places on other similar grandfamilies 
projects, and we would love to work with you on that.
    Ms. Basgal. Let me suggest one thing you might consider. If 
they are in project-based units, which is 202's and Section 8 
project-based, unless they are on a housing authorities wait 
list, there is no way that we could provide them a voucher. And 
they would not meet the regulatory requirements as being a 
special admission.
    It may be that you might want to consider on a test basis 
or a demonstration basis. If someone's in an assisted property, 
and they find themselves in a situation that they be allowed at 
least to get on a housing authority wait list or possibly be 
considered a special admission, it might be one way to come at 
it.
    Senator Stabenow. Thank you.
    Thank you, Chairman Sarbanes.
    Chairman Sarbanes. Thank you very much, Senator Stabenow.
    First of all, I wanted to ask about the inspection of the 
units that you made reference to, Mr. Gardner. I can understand 
that the current arrangement creates problems because if you 
are an owner and you have a unit that is waiting to be moved 
into because of an inspection, you are losing money.
    It is not quite clear to me why what is in the draft bill, 
and of course, we have put this out as a discussion draft in an 
effort to get the benefit of comments and try to improve it. 
But this is really designed to allow you to continue to rent 
the unit on a very timely basis, but still provide some 
assurance that we would get an inspection so we do not find 
tenants in a unit that doesn't meet safe and decent standards, 
and if that starts happening, then you have a big ``scandal on 
your hands.''
    So why doesn't the proposal meet your main concern without 
then opening us up to the possibility, because you, as I 
recall, said totally eliminate unit inspection, which would 
then open us up to the possibility of having some bad units.
    Mr. Gardner. Well, when I said totally eliminate unit 
inspections, that doesn't mean that the unit will never be 
inspected.
    For instance, on the complexes I have that have both tax 
credit, Section 8, maybe HOME funds, maybe three or four layers 
of financing, every one of those agencies wants to inspect the 
unit and audit the books every year. So it may be that I go 
through three to five inspections on a 60-unit complex in a 
year. Plus the inspection issued by the local housing 
authority. I have a case where I get either inspections from 
the Oklahoma Housing Finance Agency or the Tulsa Housing 
Authority, where you have two different authorities that have 
purview. So to say that it would eliminate inspections 
altogether, I do not believe that is the case.
    Most even conventional complexes have inspections done by 
their mortgage lenders on a fairly regular basis. Perhaps, and 
do not get me wrong, I believe that certainly the provisions in 
here would certainly streamline the process.
    If I had some confidence that they would be administered 
just like I see here--sometimes between here and the real world 
gets a little confused, as you may know--I read a lot of 
regulations and I am often baffled that what I am seeing is not 
what is happening. But I think that the basic premise here is 
that these units are being looked at, I believe. And if the 
unit is not being looked at, you are right. It does leave that 
open for scandal.
    However, the difference between the tenant voucher program 
as it is today and the project-based program as it has been in 
the past, these vouchers are portable. They can leave. They do 
not have to live somewhere where it is not habitable. I would 
have to give the residents some credit for being able to make 
up their mind that this is not a place they would like to live.
    On a project-based subsidy, sure, it was a big problem 
because they were trapped, more or less, because they were 
stuck there because the subsidy was with the unit and not with 
the individual.
    The portability of the vouchers allowed them to move, 
provided there are the units available, which means there has 
to be bigger participation by the landlords.
    So, I would say, yes, I am going to ask for more than I 
get.
    Chairman Sarbanes. Does anyone else want to comment on 
that, any of the other panelists?
    Ms. Basgal. As Mr. Gardner had talked briefly before the 
hearing had started, I think he is probably in a different 
rental market than we experience.
    For example, most of our owners do not own multiple units. 
So, we have to inspect the property, the single-family house or 
the fourplex, where this may be the first voucher that we go 
in.
    These provisions are actually very helpful for us, even 
though our record is that we inspect usually within 3 days of 
the owner requesting the inspection. And I think that most 
housing authorities try to be responsive.
    As to the issue of the families can vote with their feet if 
the unit is not satisfactory, his qualification is most true, 
which is if you are having a hard time finding a unit, and a 
family is going to take whoever is willing to rent to them even 
if the unit doesn't meet the standard that the family might 
like or their issues.
    I believe that there has to be an inspection. I think the 
provisions that are here in the bill are reasonable. I do think 
that there is probably some liability questions that we would 
have to address that somebody sign something that says, the 
unit is habitable. It is standard and subject to an inspection 
or something, so we would not take on any liability for the 
family going under contract before we have actually seen the 
unit.
    Chairman Sarbanes. Does anyone else want to add anything?
    [No response.]
    Okay. Mr. Gardner, the provisions in the draft discussion, 
you would like in some respects to go further. But they do 
represent a significant improvement over the current situation, 
I take it.
    Mr. Gardner. Yes, sir.
    Chairman Sarbanes. Now, Ms. Basgal, you expressed some 
concern about the regionalization of the recapture. I am not 
quite clear what your concerns are.
    Ms. Basgal. Well, the housing authority A, let us say, who 
has vouchers that are to be reallocated, then they would go to 
housing authority B. But remember, housing authority A 
continues to administer the program for the vouchers that they 
still have. So then you end up, if you have a regional 
authority, with two housing authorities administering vouchers 
in the same geographic area.
    You could conceivably have two housing authorities in the 
same building because, depending on where the families go, 
because the original housing authority continues to administer 
the rest of their program. We believe that that creates the 
potential for confusion for landlords because they either have 
to sit down and get their standards the same.
    Chairman Sarbanes. Do you recapture the unused allocations?
    Ms. Basgal. Yes, we would recapture.
    Chairman Sarbanes. Who would recapture them?
    Ms. Basgal. We would recommend that the first step that the 
housing authority for whom the units are being recaptured have 
an opportunity to enter into some voluntary arrangement with 
the housing authority in probably the same jurisdiction, or an 
adjacent jurisdiction, to administer those.
    Because one of the things that is important that is not in 
this bill, although I think it probably will ultimately end up 
in there is that there needs to be some preference for the 
individuals who were originally on the wait list of the housing 
authority who is losing those vouchers, that those families get 
some opportunity to have access to those reallocated vouchers.
    So if there is this arrangement, at least, between the 
housing authorities who say, ``Okay, you are going to get my 
vouchers because, for whatever reason, I cannot use them, but 
we would like for you to give preference to the people on our 
wait list for those reallocated vouchers,'' and we would 
actually go further and say, if those reallocated vouchers go 
to families who choose to come back into that jurisdiction 
where they were reallocated from, that they be administered as 
a portable voucher in the way that they would with any other 
voucher that goes out. This is complex. It would be better if I 
had a graph to show you how they move.
    Chairman Sarbanes. Yes. But then what is the sanction on 
the housing authority that is failing to utilize its vouchers? 
This bill gives them certain breaks to try to use them up, but 
they still fail to do so.
    Your approach suggests, there is no blame. There is no 
falling short of the standard. The assumption in the bill is 
that there is something of a falling short of the standard and, 
in effect, you are saying to the housing authority, well, you 
haven't really been able to do the job, and so you are going to 
lose these things. And conceivably, that will then create a 
dynamic that will force them to reform, so that that doesn't 
happen to them.
    Ms. Basgal. We are still in agreement with that. They 
should lose them if they cannot use them. No question about it.
    Chairman Sarbanes. But if you are going to take their 
people off the list, and as I understand it, if someone comes 
back into their geographic area, they are going to end up 
administering it again. Is that right?
    Ms. Basgal. That is what we would recommend as the first 
alternative.
    Chairman Sarbanes. What is the sanction, then, on the badly 
performing housing authority?
    Ms. Basgal. First of all, they do not own the full 
administrative fee for those units that they would end up 
administering under the affordability contract.
    Second, presumably, if they have management problems and 
they would probably have difficulty in getting the units back 
to go under contract, anyway. I mean, there is that aspect of 
it.
    It is the consumer who would be able to say, ``I am not 
going back there with a voucher because either I won't find a 
landlord willing to rent to me, or whatever.'' They would be 
free to go elsewhere. But I think the problem, Senator, is that 
families who choose to come there without reallocated vouchers, 
they would be administered as portable vouchers. These vouchers 
somehow would take on a different nature.
    Chairman Sarbanes. Does anyone else want to comment on 
this?
    Ms. O'Hara. Yes, I would, thank you.
    I think we need to acknowledge the reality that many 
States, Massachusetts, where I worked, New Jersey, Michigan, 
Hawaii, and Colorado, just to name five, already have dual 
administration of the Section 8 voucher program because the 
State operates a statewide program with regional agencies, 
along with the local housing authority program.
    The system has been successfully dealing with this issue of 
dual administration for a number of years. I think while the 
initial transition from one entity to another needs to be well 
managed, it is possible and entirely feasible to take vouchers 
from a housing authority that is not performing after a good 
period of corrective action and give those to a regional agency 
for administration because that is happening in a number of 
States already--not the reallocation, but the fact that there 
are both regional and local PHA's.
    Chairman Sarbanes. Anyone else?
    [No response.]
    Well, I am going to have to draw the hearing to a close 
because a vote has just begun.
    Your statements are very helpful. I would invite you, if 
you have additional suggestions with respect to the draft, to 
send them to the Committee because we hope to refine this 
product.
    We think that there are some beneficial and important 
changes suggested here. And we are hopeful that we will be able 
to arrive at a consensus, and although this is a difficult time 
for affordable housing, we hope we can move this Voucher 
Improvement Act along and at least get the benefit of some of 
these provisions. Any additional suggestions beyond those that 
are contained in your statements and your testimony today that 
you might have, we would really welcome those very much. We 
appreciate greatly the obvious thought and effort that went 
into the statements that you have submitted as we try to 
address this question.
    There is a growing body of research that shows that housing 
assistance is an important element in the success of moving 
people on welfare into work and self-sufficiency. In fact, 
there is a study out in Minnesota that having housing 
assistance made a rather significant impact on the employment 
rates of people and increased their earnings in a very 
substantial way. So it really has them across the divide, so to 
speak.
    In some respects, that is a very encouraging finding 
because it really means that if we can move on the affordable 
housing issue, it will have a broader repercussion in terms of 
changing people's lives. And obviously, that is what we are 
seeking to do.
    Thank you all very much.
    The hearing is adjourned.
    [Whereupon, at 3:50 p.m., the hearing was adjourned.]
    [Prepared statements, response to written questions, and 
additional material supplied for the record follow:]

              PREPARED STATEMENT OF SENATOR JON S. CORZINE

    I would like to thank the Chairman for holding this hearing to 
discuss needed reforms to the Section 8 housing voucher program.
    Today, over 1.5 million low-income households nationwide receive 
Section 8 housing assistance. The program serves at least 60,000 low-
income families in my State of New Jersey. Despite the large number of 
families the Section 8 program serves, thousands of families remain on 
waiting lists of up to 3 years for these vouchers because of a lack of 
funding. Funding, however, is not the only obstacle to improving the 
success of the Section 8 program.
    In fact, securing a Section 8 voucher does not guarantee that a 
family will actually find housing. Nationally, only 68 percent of 
families that receive these vouchers are able to find suitable housing. 
In many areas, particularly in New Jersey, where vacancy rates are very 
low, there is a severe shortage of Section 8 units. For instance, in 
Gloucester County, New Jersey, there are 3,300 families on the Section 
8 waiting list, but there are only 2,400 Section 8 units in the county. 
Furthermore, New Jersey has the second highest housing costs in the 
Nation, which makes it more challenging for families to afford housing 
even with a voucher.
    Mr. Chairman, in addition to reforming the Section 8 program, we 
need to significantly invest in the production of new low-income 
housing as outlined under the National Affordable Housing Trust Fund 
Act. I know that this issue is outside the realm of this hearing, but I 
do think that increasing production will improve the success of the 
voucher program.
    Mr. Chairman, I want to commend you for putting forth a 
comprehensive proposal that will no doubt improve the success of the 
housing voucher program. Allowing Public Housing Authorities (PHA's) to 
increase their voucher payment standard to 120 percent of the Fair 
Market Value will help voucher holders who live in high cost areas. 
This proposal will also expand opportunities for disabled voucher 
holders who generally have higher housing costs.
    Mr. Chairman, I am very pleased that your proposal also authorizes 
the Welfare to Work vouchers program. Though small, this program has 
been very successful in helping families transitioning from welfare to 
work find affordable housing. The Welfare to Work vouchers program has 
also sparked collaboration between public housing authorities and 
welfare and workforce agencies and has lead to very important 
partnerships.
    Mr. Chairman, in addition to helping low-income families secure 
housing, your legislation will also provide public housing authorities 
with the tools they need to help these families become self-sufficient. 
Allowing voucher holders to participate in the Family Self-Sufficiency 
Program, which helps families save for educational activities and 
homeownership, will help more low-income families attain these goals.
    Mr. Chairman, I look forward to working with you to make these 
goals achievable.

                               ----------
             PREPARED STATEMENT OF SENATOR DANIEL K. AKAKA

    I wish to thank Chairman Sarbanes and Senator Gramm for holding 
this oversight hearing today on proposals to improve the Section 8 
Housing Choice Voucher program. In addition, I would like to thank our 
distinguished guests here today for taking the time to share their 
thoughts on critical housing needs facing low- and moderate-income 
families.
    The Section 8 tenant-based rental assistance program was 
established in 1974 to provide eligible families with affordable 
housing through rental subsidies. Economic changes occurring in local 
housing markets over the last 28 years, however, have resulted in rents 
increasing, lower vacancy rates, and landlords opting out of the 
program. These changing circumstances have adversely impacted 
utilization of the vouchers.
    Public Housing Authorities are also facing long waiting lists of 
qualified applicants seeking to join the program. Without any housing 
units to accept these vouchers, individuals on waiting lists or 
receiving vouchers are left without options for housing under the 
program.
    If the program is left unchanged, the housing situation for low- 
and moderate-
income families does not look good. Beginning next year, Public Housing 
Authorities that do not meet the 95 percent utilization rate for 2 
consecutive years will lose unused vouchers. While I believe that we 
should capitalize on all housing vouchers, it is my understanding that 
low utilization rates do not adequately reflect the housing demands for 
low- and moderate-income families. In many localities, Public Housing 
Authorities are unable to secure housing units because of low fair 
market rents and landlords who opt out of or refrain from entering the 
Section 8 program. For many landlords, the incentives for participating 
in the program are outweighed by payment delays or low fair market 
rents.
    To alleviate this problem, some States, including the State of 
Hawaii, have expanded their Rental Assistance Programs. The purpose of 
the program is no longer solely to provide qualified landlords with 
rental assistance subsidies which assist 
eligible tenants to make their payments. Rather, the State of Hawaii 
has expanded the program to offer interim construction financing for 
rental projects and to provide qualified landlords with incentives to 
participate in the Section 8 program. The State of Hawaii has also 
partnered with nonprofit organizations in privatizing public housing 
units.
    Hawaii is not the only State that is expanding its Section 8 
program. Many States are trying to stretch valuable and limited housing 
resources to provide eligible families with affordable housing.
    I am pleased to work with Chairman Sarbanes and this Committee in 
ensuring that the Section 8 housing voucher program meets these new 
challenges. I look forward to hearing from our witnesses this 
afternoon.
    Thank you Mr. Chairman.

                               ----------
             PREPARED STATEMENT OF SENATOR DEBBIE STABENOW

    Thank you, Mr. Chairman. The Section 8 tenant-based housing program 
is the largest subsidized housing program our Government runs and for 
many Americans it is critical to ensuring that their most basic housing 
needs are met. While it will never be the sole solution to our housing 
problems, it is an essential component of our larger national housing 
policy and I support efforts to strengthen its reach and effectiveness. 
I believe a review of the voucher program has a great deal of merit and 
I look forward to working with my fellow Senators.
    In order to make the program more effective we must begin to ask 
some key questions, such as what accounts for the varying success rates 
around the country in getting people placed in Section 8 housing? 
According to HUD, in 2000, success rates varied widely from one public 
housing authority to the next. Some had rates as low as 37 percent 
while others were at 100 percent. It is too simplistic to attribute low 
success rates simply to tight rental markets. It is also clearly an 
unfair overstatement to blame the problem on mismanagement at some 
local housing authorities.
    I hope that in today's hearing we can delve into the voucher 
success rate question and get some feedback from our witnesses about 
ways to improve the success rate numbers. I believe we must also 
examine ways to tailor the voucher program better to the needs of 
different communities and different eligible Section 8 participants.
    Chairman Sarbanes has suggested a Thrifty Production Voucher to 
make a certain percentage of units in new construction projects 
affordable to extremely low-income families. This is an interesting 
idea aimed at some of the neediest families. And, I look forward to 
exploring this idea further.
    Affordable housing remains a great challenge for our country. As 
previous hearings have shown, it is not enough to work hard and play by 
the rules. People are continually being priced out of the rental 
markets around the country. Improving the Section 8 program will be a 
positive step forward in alleviating the housing challenge so many 
working people face.
    I hope that we can work together to move legislation forward 
quickly and I commend the Chairman for his legislative proposal.
    Thank you.

                               ----------
                PREPARED STATEMENT OF OPHELIA B. BASGAL

        Executive Director, Housing Authority of Alameda County
                         and Dublin, California
                            on behalf of the
      National Association of Housing and Redevelopment Officials
                             April 11, 2002

    Good afternoon, my name is Ophelia Basgal. I am the Executive 
Director of the housing authorities of the County of Alameda and the 
City of Dublin in California. I am testifying on behalf of the National 
Association of Housing and Redevelopment Officials (NAHRO). NAHRO is 
the Nation's oldest and largest organization that represents the 
interests of housing and community development agencies seeking 
adequate and affordable housing and strong communities. Today, we are 
focused on our local housing agency (LHA's) members that administer 
approximately 93 percent of the Nation's Section 8 tenant-based housing 
choice vouchers.
    I would like to express my gratitude to Chairman Paul Sarbanes, 
Ranking Minority Member Phil Gramm, and the other distinguished Members 
of the Senate Committee on Banking, Housing, and Urban Affairs for 
inviting me to testify today, on proposals to improve the Section 8 
Housing Choice Voucher Program.
    The Housing Choice Voucher Program provides housing assistance to 
over 1.7 million low-income families in privately owned rental units. 
Over the last 27 years, the program has been effective in providing 
decent quality units at affordable rents to very low-income families in 
communities across the country. The mobility aspect of Section 8 
assistance (the Section 8 voucher travels with the family as opposed to 
being tied to a unit) has given low-income families the opportunity to 
gain access to better jobs, better schools, and safer neighborhoods.
    Although the program has been quite successful overall, there are 
areas of concern. Full utilization of funding and appropriated units is 
one concern that has moved to the forefront. Currently the average 
program budget utilization rate stands at a 94 percent and we 
understand this Committee's concern in finding ways to increase that 
rate. NAHRO believes that the utilization rate and program 
effectiveness can be increased through some small and large changes. 
These changes would all be aimed at serving the maximum number of 
families possible, providing broad housing choices to low-income 
families and yielding more economic development opportunities for the 
participating families.
    NAHRO would like to comment specifically on the proposals that are 
outlined in the Housing Choice Voucher Improvement Act of 2002.

Thrifty Production Vouchers (TPV)
Supports
    NAHRO supports the creation of additional affordable housing 
production tools that encourage local involvement and decisionmaking, 
which the Thrifty Production Voucher (TPV) proposal would do. While we 
have yet to see the financial models of the unit operating cost 
formulas and, therefore, are unable to assess the specific market 
conditions affecting the program's feasibility, the proposal makes 
conceptual sense. NAHRO would support a limited demonstration of the 
TPV proposal, so long as it is voluntary, is carried out with 
additional funding, and does not divert funds from HUD's existing 
assisted housing programs.
    NAHRO also supports the proposed program's recognition of the 
importance of 
decisionmaking at the local level. Community revitalization, for 
example, may be a desirable goal in some low-income communities. The 
opportunity to use the TPV funds in qualified census tracts based upon 
these local determinations of need is a positive option.

Recommendations
    (1) NAHRO recommends further review of the tenant-selection process 
for TPV local housing agencies' owner waiting lists. Presumably, the 
wait list process would comply with the project-based assistance (PBA) 
guidelines regarding a separate waiting list for the TPV projects. The 
initial PBA guidance requires full notification of every applicant on 
an LHA's existing waiting list, which could number in the thousands. 
TPV projects are likely to have a small number of units. Notification 
of the full wait list would be administratively inefficient and costly 
for LHA's. It would be more logical to notify a smaller number of 
applicants, reflecting the size of the project. If the project has 
twenty units, for example, perhaps notification of forty or sixty 
applicants would be sufficient.
    (2) The bill proposes that families who are denied a unit by an 
owner be entitled to an informal review by the LHA. This could 
potentially create confusion for both the owner and tenant as to who 
controls tenant selection, which is a critical property management 
task. Tenant selection decisions should properly remain under the 
purview of the owner. The owner should have clearly defined tenant 
selection criteria, perhaps approved in advance by the LHA. If the 
tenant believes criteria have been improperly applied, there are other 
remedies that can be pursued. If the LHA finds a pattern of 
noncompliance by an owner, it should have the authority to deny the 
owner participation in the TPV program.
    (3) The bill requires that the LHA have an agreement with the 
agency that will administer the funds for the construction or 
rehabilitation of the TPV housing that will allow the prospective 
developer to submit a single application. While the language is 
intended to ease the application burden for a prospective developer, it 
is written in a way that could preclude a developer from using a 
private lender. It is unlikely that a private lender will want to enter 
an agreement with the LHA and conform its underwriting application to 
TPV proposal requirements and vice versa.

Housing Search Assistance and Voucher Success Fund
Supports
    Under the current fee structure, LHA's receive no payment for any 
administrative time devoted to voucher applicants that cannot find 
housing. While the administrative fee anticipates some of the cost of 
housing search assistance, a difficult rental market can require the 
extensive type of counseling and assistance that is necessary to assist 
extremely low-income families effectively locate and secure private 
rental housing. This is especially true in low-poverty neighborhoods.
    This type of assistance simply cannot be supported with the current 
fee structure. In the past, voucher administrators were provided 
special fees to offset initial lease-up costs. Those fees have been 
eliminated, forcing some LHA's to scale back their outreach and 
counseling efforts. NAHRO supports the bill's proposal to allow use of 
unutilized housing assistance funds to assist families in their housing 
searches.

Recommendations
    (1) The LHA eligibility criteria, which states that the agency 
``serves an area in which a large share of the voucher holders live in 
a small percentage of census tracts,'' should be further defined to 
match specificity given to the success rate criteria, for example 85 
percent.
    (2) LHA's who used administrative fees in the previous year to 
support housing-related activities should not be penalized in the 
determination of funding eligibility. Rather, the bill should make 
clear that the funds must be used for a maintenance effort and 
additional services and activities.
    (3) NAHRO also recommends authorization for use of a small 
percentage of annual contribution contract project reserves for housing 
search assistance for LHA's that have the following characteristics:

         a success rate in excess of 85 percent;
         a unit utilization rate of less than 95 percent and;
         a budget authority utilization rate at or in excess of 
        100 percent.

Expanding Housing Opportunities
Supports
    NAHRO supports the bill's proposal to allow LHA's the discretion to 
raise their voucher payment standards to 120 percent, without HUD 
approval, so long as they have been at the 110 percent payment standard 
for 6 months and provide an initial housing search period of at least 
90 days or as a reasonable accommodation for a person with 
disabilities.

Recommendations
    (1) NAHRO recommends that the success rate eligibility criteria be 
reduced from 85 percent to 75 percent in order to maintain consistency 
with HUD's current standards for ``success rate'' payment standards, 
which currently requires a HUD waiver.

Consolidated Planning
Supports
    NAHRO supports the proposed requirement to consult and the comments 
of agencies or boards administering programs under Title IV of the 
Social Security Act and the Workforce Investment Act. NAHRO presumes 
that this is a plan requirement only and not a project-by-project 
requirement.

Recommendations
    (1) The draft bill would require community development agencies to 
specifically address voucher utilization in the consolidated plan. This 
would be redundant with a number of current consolidated planning 
requirements, including consultation with local housing authorities \1\ 
and the housing market analysis,\2\ which requires an assessment of the 
rental housing market and how that market will influence the use of 
funds made available for rental assistance. Further, it would mandate 
that community development departments assess a program over which they 
have no jurisdiction or control.
---------------------------------------------------------------------------
    \1\ 24 CFR Part 91.100(c).
    \2\ Cranston-Gonzales National Affordable Housing Act, Section 
105(b).
---------------------------------------------------------------------------
    (2) The draft bill's section on consultation with social service 
agencies is also redundant with current consultation requirement,\3\ as 
well as the requirement that agencies specifically look at the housing 
needs of "families who are participating in an organized program to 
achieve economic independence and self-sufficiency.'' \4\ This section 
basically repeats the citizen participation requirement \5\ that 
instructs that all public comments be provided along with the agency's 
response.
---------------------------------------------------------------------------
    \3\ Cranston-Gonzales National Affordable Housing Act, Section 
105(e).
    \4\ Cranston-Gonzales National Affordable Housing Act, Section 
105(b)(1).
    \5\ Cranston-Gonzales National Affordable Housing Act, Section 
105(c).
---------------------------------------------------------------------------
Access to Home and LIHTC Developments
Supports
    NAHRO supports the bill's language. LHA's will be able to access 
information on these rental units and use it in their housing search 
assistance programs. Currently there is no easy place to find this 
information and housing choice voucher holders miss opportunities to 
rent in these developments.

Reallocation of Chronically Underutilized Vouchers
Supports
    NAHRO supports the reallocation of chronically underutilized 
vouchers. Long-term underutilization of appropriated units and funding 
because of market conditions or unsatisfactory program management hurts 
the communities and families that should be assisted. NAHRO agrees that 
the reallocation of unused budget authority should occur first within 
the same metropolitan statistical area (MSA) from which funds were 
dereserved and then within the State of the agency whose voucher 
allocation has been reduced.

Recommendations
    Before making recommendations on the proposals it would be useful 
to consider why LHA's have specified jurisdictions and how 
regionalizing the administration of the reallocated units will possibly 
impact the Section 8 program. Almost all the State-enabling public 
housing authority legislation was created before there were any rental 
assistance programs. The initial focus was on construction and 
operation of actual units, which were place-based. Consequently, the 
LHA's area of operation was usually defined as the boundaries of the 
jurisdiction that established it.
    HUD has historically assumed that jurisdictional limitations apply 
to Section 8 program administration as well. To start a Section 8 
program in a community, an LHA must establish, to HUD's satisfaction, 
its operational area based on the State-enabling legislation and a 
legal opinion as to that fact. The very existence of portability in the 
Section 8 program further underscores HUD's acceptance of juris-
dictional limits. It should also be noted that elected officials of the 
jurisdiction that created the agency often appoint boards governing 
LHA's. In some cases the elected officials themselves serve as the 
governing body.
    For metropolitan areas, this bill proposes that a regional 
administrator will be appointed for the entire MSA where vouchers will 
be reallocated. In nonmetropolitan areas, a State agency or public 
housing agency or other entity that serves a ``large'' nonmetropolitan 
areas will be appointed to serve the same area where the vouchers will 
be reallocated. While the Quality Housing and Work Responsibility Act 
of 1998 (QHWRA) certainly gives HUD the authority to preempt local 
administration in instances of nonperformance and appoint a new 
administrator, the question certainly arises whether this is the best 
way to handle the problem of chronically under-
utilized vouchers. In addition, the legislative proposal before us 
preempts the local administration only for the reallocated vouchers. 
The original LHA with the underutilized vouchers will continue to be 
the prime administrator of the units in that jurisdiction.
    Imagine the confusion among landlords and tenants who could be 
dealing with two different administrators providing Section 8 
assistance in the same building. These two administrators could easily 
have established different voucher payment standards, arrive at 
different ``reasonable rents,'' use different utility allowances, etc. 
This kind of variance cannot possibly help the families or encourage 
landlord participation.
    Furthermore, if a citizen wants to complain about a Section 8 
problem unit that is administered by the regional administrator, 
instead of going to the board that is appointed or elected by residents 
of his/her jurisdiction, he/she would go to a board appointed or 
elected in another community. That situation would hardly seem to 
engender community support for the program. It should also be noted 
that past surveys of Section 8 owners show that they tend to be small 
local landlords who reside in the community where they own units. These 
owners may prefer working with a local agency that understands the 
local rental market and is also locally accountable for its decisions, 
rather than a regional entity that is removed from the community.
    Therefore, NAHRO recommends a focus on solutions to chronic 
underutilization, while giving due consideration to the administrative 
complexities and community support issues that are involved.

Recommendations
    (1) LHA's should be allowed to first, arrive at voluntary 
reallocation arrangements with other LHA's or alternate administrators 
in surrounding jurisdictions within the MSA. A minimum level of 
performance standards should be required for any alternate 
administrators. It is expected that a preference for applicants on the 
original LHA's waiting list the reallocated vouchers will be a product 
of such a voluntary agreement. In addition, the governing bodies of the 
two jurisdictions can reach agreement on administrative arrangements 
that will ensure that the vouchers are used in a way that is mutually 
acceptable to both communities.
    (2) If the LHA is unable to reach a voluntary arrangement with 
another LHA or alternate administrator, then HUD should appoint an 
administrator for those particular vouchers only. They can be used in 
the alternate LHA's jurisdiction and the original LHA's jurisdiction 
unless the families choose to exercise portability under the existing 
portability regulations.
    (3) The proposed legislation requires appointment of a regional 
administrator for vouchers for an entire MSA. This means that the 
regional administrator would operate not only in the jurisdiction of 
the LHA with the reallocated vouchers but could also operate in the 
jurisdiction of any LHA in the MSA regardless of their performance. In 
short, this proposal would preempt jurisdictional boundaries of LHA's 
that have no performance problems. If this is permitted, which it 
should not be, it would require extensive coordination among all the 
LHA's to address the types of operational differences mentioned briefly 
above.
    (4) In addition, the proposal requires that the designated regional 
administrator receive all the vouchers in the region. For MSA's that 
cover large geographic areas, it is quite possible that no single 
entity will want to administer all the reallocated vouchers. Given the 
potential geographic distances, the coordination that will be required 
and the additional administrative requirements, that is preferences for 
families in the original jurisdiction, etc., it may not be 
administratively cost-effective. Therefore, LHA's interested in 
applying for the reallocated vouchers should be allowed to apply for as 
few or as many reallocated vouchers as they are interested in 
administering. In addition, QHWRA allows for consortia of LHA's and 
they should also be allowed to apply for the reallocated vouchers.
    (5) As to the selection criteria proposed for administrators of 
reallocated vouchers, the criteria should follow those used in the 
``fair share'' NOFA process without the need determination since this 
was already addressed in the original allocation to the MSA. There is 
nothing special about these reallocated vouchers that requires a 
different selection criteria.
    (6) Finally, any reallocation system should provide some mechanism 
to ``return'' the vouchers to the original community if and when they 
are able to demonstrate the market conditions or administrative 
capability that will result in full utilization.

Self-Sufficiency
Supports
    NAHRO supports expanding authorization of existing self-sufficiency 
housing programs to other forms of assisted housing, including 
privately owned project-based assisted families. NAHRO also supports 
the proposal to allow use of Resident Opportunities and Self-
Sufficiency (ROSS) funds to serve Section 8 families and disregards of 
payments made for purpose of offsetting increases in rents resulting 
from increases in family earned income.

Recommendations
    (1) More than twice as many families with children live in Section 
8-assisted housing than public housing. NAHRO recommends that the ROSS 
appropriation be increased so that services to public housing families 
are not reduced because of services provided to Section 8 families.
    (2) NAHRO also recommends that funds for the authorized income 
disregards for Section 8 participants be appropriated.

Section 8 Inspections
Supports
    NAHRO supports all of the proposed improvements to the Section 8 
inspection requirements.

Recommendations
    NAHRO recommends discontinuing the 100 percent rent abatement 
requirement in cases where a HQS violation exists that does not effect 
the entire unit. NAHRO believes that LHA's should have the discretion 
to abate partial payment since the unit is livable aside from the HQS 
deficiency. This is a simple measure that could help agencies encourage 
landlord retention by eliminating inflexible bureaucratic requirements 
that do not end up achieving the intended objective.

                               ----------

                  PREPARED STATEMENT OF SCOTT GARDNER
 President, National Apartment Association and Crosshaven Properties, 
                                  Inc.
                             April 11, 2002

    Chairman Sarbanes, Senator Gramm, and distinguished Members of the 
Banking, Housing, and Urban Affairs Committee, my name is Scott 
Gardner. I am President of Crosshaven Properties, a privately operated 
apartment company headquartered in Tulsa, Oklahoma. I am also President 
of the National Apartment Association (NAA), a trade group representing 
over 30,000 apartment executives and professionals. NAA operates a 
Joint Legislative Program with the National Multi-Housing Council, a 
trade association representing the Nation's larger and most prominent 
apartment firms. It is my pleasure today to testify on behalf of both 
organizations. Our combined memberships are engaged in all aspects of 
the apartment industry, including ownership, development, professional 
management, and finance. Together, the NMHC/NAA members own and manage 
over five million apartment homes nationwide.
    NMHC and NAA commend the Members of the Committee for your valuable 
work addressing the important issue of affordable housing in America. 
We, too, believe it is critical to meet the housing needs of low- and 
moderate-income families. And we believe the Section 8 Housing Choice 
Voucher Program can be one of the most effective means of doing so; 
however, the program's potential has been limited and its utilization 
should be greater. We believe that the chief reason for this is that 
the program's structure and administration discourage private owner 
participation and make it difficult for voucher holders to compete with 
unsubsidized residents for vacant apartments. For Section 8 to realize 
its purpose, the program must be improved to be more ``transparent,'' 
which would then result in greater apartment owner participation.
    Mr. Chairman, we appreciate your leadership on this issue and we 
support many provisions of the proposed Housing Voucher Improvement 
Act, particularly the ones aimed at improving the unit inspection 
process. We wholeheartedly thank you for addressing those issues. 
However, even with this important reform, the proposed legislation 
falls short of fully incorporating reforms necessary to generate 
broader market support for the Section 8 program.
    The best way to increase voucher utilization rates is to address 
the problems that have traditionally caused private property owners to 
either not participate or to withdraw from the program. My statement 
today will focus on four key proposals that we believe would improve 
the program and increase owner participation and voucher utilization: 
(1) Improving the Housing Quality Standards Unit Inspection Process; 
(2) Improving the Subsidy Payment System; (3) Increasing the Payment 
Standard; and (4) Amending the Lease Addendum.
Improving the Housing Quality Standards Unit Inspection Process
    Currently, before an apartment is eligible to lease to a Section 8 
voucher holder, the administering public housing authority (PHA) must 
inspect that unit for compliance with HUD-prescribed housing quality 
standards (HQS) prior to lease and then annually thereafter. PHA's 
handling 1,250 or fewer units must complete the initial unit inspection 
within 15 days of a tenancy approval request. Those with more than 
1,250 units must conduct the initial inspection within 15 days or 
within a ``reasonable'' time after the request. Apartment owners agree 
that voucher holders should reside in safe, sanitary environments, but 
we believe that this can be achieved without conducting individual unit 
inspections.
    Unit-by-unit inspections delay resident occupancy even if the PHA 
conducts its inspection within the required timeframe. Further, because 
of the limited resources available to PHA's for inspections, and the 
difficult logistics that accompany inspections, they are infrequently 
conducted in a timely manner. 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.
    Not only do unit-by-unit inspections cause intolerable delays in 
leasing units, they do not satisfy HUD's objective of protecting 
residents and assuring owner compliance with the agency's health and 
safety criteria. They do not accurately assess the property's regular 
property management practices or HQS compliance. They only reveal the 
status of a unit at a particular moment in time.
    NMHC/NAA applaud the intent of Section 9 of the proposed 
legislation that would speed up the move-in process by allowing 
individual unit inspections to take place within 30 days after the 
resident moves in and payment commences. This Section would also allow 
PHA's to conduct building-wide, rather than unit-by-unit, inspections 
in certain cases. It would reward professionally managed properties 
that participate in the program and allow PHA's to focus their scarce 
resources elsewhere.
    Although we strongly support Section 9's proposed intent, we 
advocate the total elimination of individual unit inspections. Instead, 
we would encourage PHA's to rely on property-level inspection reports 
previously conducted for the HUD/Federal Housing Administration (FHA) 
or on routine lender inspections. These alternative inspections include 
a review of the property's maintenance procedures and maintenance 
history. More importantly, relying on these alternatives would 
eliminate the current duplication of effort by the PHA's and HUD/FHA, 
and would reduce occupancy delays caused by untimely unit inspections.
Improving the Subsidy Payment System
    Another aspect of program administration that would improve private 
owner participation is improving the Subsidy Payment System. PHA's are 
required to make prompt, direct subsidy payments to apartment owners. 
Unfortunately, subsidy payments are often not timely, which discourages 
owners from participating. Yes, HUD's regulations allow PHA's to be 
sanctioned for untimely payments, but these sanctions are nominal 
because they must be paid from a PHA's limited administrative fees. As 
a result, they do not serve as an incentive for prompt payment.
    NMHC/NAA believe more apartment owners would participate in the 
Section 8 program if the costs of renting to voucher residents were 
more comparable to the costs of serving unsubsidized residents. 
Therefore, it is essential to overhaul Section 8's costly payment 
structure. Just as owners would not regularly accept late rental 
payments from market-rate residents, they should not be forced to 
accept late subsidy payments.
    One way to achieve the goal of transparency between subsidized 
residents and market-rate residents would be to require that all PHA's 
make automated electronic fund transfers, thereby assuring timely 
subsidy payments. While some PHA's already use automated funds transfer 
systems, making this uniform among all PHA's would substantially reduce 
costs for both owners and PHA's.

Increasing the Payment Standard
    The current payment standard to owners typically ranges between 90 
and 110 percent of an area's fair market rent (FMR). Both the payment 
standard generally, and FMR levels specifically, are far too low to 
support owner participation. FMR's, set annually for each metropolitan 
area, must be high enough to encourage owner participation and, in 
turn, create a sufficient supply of apartments.
    The shortage of affordable housing is a true example of market 
supply and demand at work. Private owners must receive sufficient rents 
to cover the costs of developing and operating an apartment property or 
the property will not be built. If the FMR's are too low, the owners 
will not be able to rent to subsidized residents because they will not 
generate enough income to operate and maintain the property.
    The current FMR level is the 40th percentile rent, or the dollar 
amount below which 40 percent of the standard-quality rental housing 
units are rented. Establishing the FMR at the 40th percentile is a 
primary reason many apartment owners do not participate in the voucher 
program. These rents are simply too low to support the property's 
operations. NMHC/NAA recommend that the FMR be based on at least the 
50th percentile.
    We further recommend that the payment standard be raised to 120 
percent of FMR in high-cost areas, and that PHA's be given the 
flexibility to raise the level to 150 percent in areas where the 
voucher utilization rate is less than 80 percent and the market 
occupancy rate is greater than 95 percent. It should be noted that in 
high-cost areas, even that increase would still be well below market 
rents.
    We appreciate that the proposed legislation recognizes the 
importance of this issue. In Section 5, the proposal would allow 
payment to be increased to 120 percent of the FMR where it had been set 
at 110 percent or higher for the previous year and voucher utilization 
rates were less than 95 percent for the 12 months prior to establishing 
the new standard. As previously stated, NMHC/NAA propose a higher 
increase, and we advocate that such increases be authorized where 
voucher utilization rates were less than 80 percent for the previous 6 
months, not the proposed 12 months. We strongly believe that 6 months 
is an adequate period after which to determine the need for a higher 
utilization rate, and 12 months will only serve to further delay 
expanded owner participation in the program.

Amending the Lease Addendum
    The proposed bill does not address this issue. HUD requires every 
lease to a Section 8 voucher holder include its standard addendum. The 
addendum itself requires that the lease include, word-for-word, all of 
the addendum's provisions. If there is a conflict between the addendum 
and another lease provision, the addendum preempts the lease.
    The addendum contains numerous provisions that may override local 
practice and even landlord-tenant (NMHC/NAA prefer ``owner-resident'') 
laws, putting owners in a very untenable situation. Differences between 
Section 8 and market leases also require owners to specially train 
their staffs to administer Section 8 leases. This is particularly 
difficult in an industry where employee turnover averages 50 percent.
    In short, HUD's lease addendum is many times incompatible with 
State and local landlord-tenant laws and disregards industrywide model 
lease language developed by NAA. This inconsistency creates confusion 
among apartment owners and causes difficulties for owners who must 
comply with one set of lease requirements for voucher residents and 
another for nonvoucher residents residing within the same property. 
Apartment owners have told us time and time again that the lease 
addendum creates obstacles that discourage their participation in the 
program.
    We propose the elimination or modification of the lease addendum to 
reflect standards used with market leases, thereby reducing 
administrative burdens and other costly procedures. Alternatively, 
NMHC/NAA propose establishing pilot programs to test alternative, less 
conflicting and burdensome lease addendums or the NAA model lease.
    NMHC/NAA support the addendum's intended purpose, which is to 
ensure the safety of Section 8 residents. However, residents are 
already protected by existing local laws. The addendum does not add 
anything to these protections, it only adds costly burdens to the 
owners, which, in turn, discourages their participation in the program.
    In summary, NMHC/NAA support the Section 8 program and wish to 
engage more fully in it. However, such participation is not 
economically feasible 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 Apartment 
Association and the National Multi-Housing Council, and wish to offer 
our assistance as the Committee continues with its important work 
toward 
creating a more effective and efficient program. Thank you.

                               ----------
                    PREPARED STATEMENT OF ANN O'HARA

         Associate Director, Technical Assistance Collaborative
                            on behalf of the
                 National Low Income Housing Coalition
                             April 11, 2002

    Chairman Sarbanes and Members of the Committee, I am very honored 
to be asked to testify today on proposals to improve the voucher 
program. I appreciate the chance to join the other witnesses on this 
panel to discuss a subject that is very important to our Nation's 
housing policy.
    My name is Ann O'Hara and I am the Associate Director of the 
Technical Assistance Collaborative (TAC), a national organization that 
provides information, capacity building, and technical expertise to 
organizations and policymakers in the areas of mental health, substance 
abuse, human services, and affordable housing. I have experience with 
the development and administration of rental assistance programs at the 
local, State, and national levels. Prior to joining TAC, I directed 
Massachusetts's rental assistance program.
    I am here on behalf of the National Low Income Housing Coalition, 
representing its members nationwide who share the goal of ending the 
affordable housing crisis. My fellow members of the Coalition include 
nonprofit housing providers, homeless service providers, fair housing 
organizations, State and local housing coalitions, public housing 
agencies, housing researchers, private property owners and developers, 
State and local government agencies, faith-based organizations, 
residents of public and assisted housing, and other people concerned 
about low-income housing.

Housing Need and the Role of Vouchers
    As the Committee is aware, housing affordability and availability 
are serious problems. According to HUD, 3.8 million unassisted, 
extremely low-income families faced worst-case housing needs in 
1999.\1\ These families, with incomes of less than 30 percent of area 
median income (AMI), spend more that half of their income on rent or 
lived in substandard housing. These families are forced to pay too much 
or live in poor quality housing because there are two million fewer 
affordable units than there are extremely low-income families, while a 
substantial proportion of the units that are affordable to extremely 
low-income people are occupied by families in higher income ranges.\2\ 
As tenant-based subsidies that provide assistance in the payment of 
rent for units already in the market that would otherwise be unafford-
able, vouchers are vital in addressing these affordability and 
availability problems.
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    \1\ U.S. Department of Housing and Urban Development, A Report on 
Worst Case Housing Needs in 1999: New Opportunities Amid Continuing 
Challenges (2001), available at http://www.huduser.org/publications/
affhsg/wc99.html.
    \2\ Cushing N. Dolbeare, Low Income Housing Profile (2001), 
available at http://www.nlihc.org/pubs/index:htm#profile.
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    Currently, 1.5 million low-income families are served by 
vouchers.\3\ Choice and mobility are important attributes of vouchers, 
as tenants can choose where to use their vouchers, and can take the 
vouchers with them if they move. Such mobility gives families with 
vouchers the opportunity to move to neighborhoods where poverty is less 
concentrated and where they may find improved economic and education 
opportunities for themselves and their children.
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    \3\ Meryl Finkel and Larry Burton (Abt Associates, Inc.), U.S. 
Department of Housing and Urban Development, Study of Section 8 Voucher 
Success Rates: Volume I, Quantitative Study of Success Rates in 
Metropolitan Areas (2001), available at http://huduser.org/
publications/pubasst/sec8success.html.
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    But if families with vouchers are finding it overly difficult to 
use their vouchers, then the full benefits of the voucher program are 
not being realized. A study recently released by HUD found that the 
national success rate for vouchers was 69 percent in 2000 for large 
metropolitan public housing agencies (PHA's). This means that 31 
percent of all families issued vouchers were not able to use those 
vouchers. Since 1993, there has been a marked decline in voucher 
holders' success in large metropolitan PHA's, as the 1993 success rate 
was 81 percent.\4\ Given the length of time a family receiving a 
voucher may have waited on the PHA's waiting list for that voucher,\5\ 
this substantial problem with success turns cruel in the life of an 
individual family hoping for a real housing opportunity.
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    \4\ Id.
    \5\ According to a summary of a 1999 HUD report, Waiting in Vain: 
An Update on America's Rental Housing Crisis, waiting lists were as 
long as 10 years in Los Angeles and Newark, 8 years in New York City, 6 
years in Oakland, and 5 years in Washington, DC, Cleveland, and 
Chicago. U.S. Department of Housing and Urban Development, Waiting 
Lists Grow While Affordable Housing Shrinks, Recent Research Reports, 
May 1999, available at http://huduser.org/periodicals/rrr/
rrr5__99art1.html.
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Increasing Voucher Success
    If the voucher program is to make good on its promise of a mobile 
and flexible subsidy to help poor families pay for housing, then the 
success rate of those families in using the vouchers issued to them 
needs to increase. The National Low Income Housing Coalition believes 
that the policy changes in the proposed Housing Voucher Improvement Act 
of 2002 would allow more families to find success with their vouchers.
    One way to improve voucher success is to allow PHA's with voucher 
success problems to use resources they already have, if available, or 
provide them with additional resources to aid voucher holders in their 
search for housing. The recent HUD study on voucher success found that 
PHA's can intervene in ways that increase success, such as providing 
one-on-one briefings to voucher holders on the search process and 
reaching out to prospective landlords.\6\ We are pleased that the 
Housing Voucher Improvement Act of 2002 proposes two useful ways to 
make funds available for search assistance activities.
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    \6\ Finkel and Burton.
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    First, the bill would allow the use of unutilized Section 8 funds 
to assist families in finding housing. A PHA with voucher success rates 
of 85 percent or lower or with a concentration of voucher holders in 
certain areas (leading to a presumption that voucher holders are having 
difficulty using their vouchers throughout the PHA's 
jurisdiction) would be able to use funds that it does not anticipate 
using for rental subsidies for a variety of activities to help families 
secure housing. The PHA could not use more than 2 percent of its funds 
for this purpose. Alternatively, for PHA's that have utilized a high 
percentage of their budget authority but still have voucher success 
rates of 85 percent or less or have geographic concentration of voucher 
holders, the bill would establish a voucher success fund, subject to 
appropriations.
    In the case of both initiatives, the eligible activities include 
housing and mobility counseling, assistance in paying a security 
deposit and credit check and application fees, and landlord outreach 
and education. The PHA would need to show progress in the overall 
utilization of its voucher funds, increased voucher success or 
decreased geographical concentration of voucher holders to continue to 
use or receive funds in subsequent years, until its utilization, 
success, or deconcentration levels improve to the point that the PHA is 
no longer eligible. A PHA participating in 
either of these programs would also need to include information in the 
PHA's plan about the efforts being taken to increase voucher 
utilization and success and how the PHA plans to use the funds 
available.
    Another policy change that would be authorized by the Housing 
Voucher Improvement Act relates to the inspection of units. Units 
rented by voucher holders must meet the Federal Housing Quality 
Standard, but voucher holders may lose the chance to rent units while 
waiting for the PHA's inspection to give the green light for the unit. 
While it is important that Federal resources are spent on housing that 
meets a standard of habitability, the requirements regarding the timing 
of that inspection can be changed to make sure that a housing 
opportunity is not lost to the voucher holder. The bill would allow a 
building owner to begin receiving payment for the unit prior to an 
inspection if the PHA has inspected the building and a reasonable 
number of units without finding major problems within the prior 6 
months. The PHA then must inspect the unit within 30 days and the owner 
must have already agreed to make repairs within 30 days after the 
inspection.

Increased Payment Standards
    NLIHC has also advocated for PHA's to have more flexibility in 
increasing the payment standard for vouchers. HUD's 2000 study 
determined that 39 percent of voucher holders were unsuccessful in 
tight rental markets and that successful voucher holders needed 93 days 
on average to find a unit in tight markets.\7\ If rents tend to be 
higher in tighter markets, then PHA's would need greater flexibility to 
increase what they pay--the payment standard--to make vouchers work. 
Currently, PHA's can increase their payment standard to 110 percent of 
the HUD-determined fair market rent (FMR) without HUD's approval.
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    \7\ Id.
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    The bill would allow PHA's to increase payment standards up to 120 
percent of FMR, subject to certain conditions. The payment standard 
must have been at 110 percent or above for the prior year, and the 
PHA's voucher success rate is 80 percent, or a significant number of 
voucher holders have been given at least 90 days to search for a unit, 
or vouchers have been concentrated in high poverty neighborhoods. All 
of these conditions would indicate that voucher holders have had 
trouble taking advantage of their vouchers. The National Low-Income 
Housing Coalition recommends, however, that the voucher success rate 
criterion for increasing the payment standard to 120 percent of FMR 
should be 85 percent or below (rather than 80 percent). This would 
provide consistency with the success rate of 85 percent that serves as 
the threshold for taking advantage of the Voucher Success Fund and 
using unutilized funds to improve voucher utilization, success, and 
deconcentration elsewhere in the bill.
    The bill would also give PHA's the authority to increase the 
payment standard for properties in lower poverty areas that were 
developed with Federal resources through the Low-Income Housing Tax 
Credit or the HOME Program. It makes no sense that properties developed 
with Federal resources with the goal of providing low-income housing 
should be inaccessible to people holding a Federal rent subsidy 
intended to give them mobility and choices; the bill would correct this 
predicament.
    My own work has made me acutely aware of the additional challenges 
faced by people with disabilities. Accessible units tend to be located 
in newer properties, which are in better condition and more expensive 
to rent. As a result, some people with disabilities may find it more 
difficult than other voucher holders to successfully use their vouchers 
if the payment standard is insufficient. The bill would allow PHA's to 
set the payment standard at up to 120 percent of FMR without HUD 
approval as a reasonable accommodation to people with disabilities. 
This new authority would restore a policy in effect before the prior 
Section 8 certificate and voucher programs merged to become the Housing 
Choice Voucher Program.
    The need for improvements in the voucher program is illustrated by 
the experience of Matthew, a young man in his late 20's who was injured 
in a swimming accident and is now a quadriplegic. Matthew moved to 
Florida to obtain treatment from the Spinal Cord Injury Center in 
Miami. After obtaining a voucher from the Section 8 Mainstream Program 
for people with disabilities, Matthew was unable to locate an 
accessible unit. Finally, with the help of disability advocates, 
Matthew obtained a list of tax credit properties from the State 
allocating agency and was able to find a vacant unit built in the 
1980's with some--but not all--of the accessible features he needed. 
The owner initially refused to accept the Section 8 voucher, and once 
again, disability advocates were required to intervene to inform the 
owner of his obligations under the tax credit rules.
    Matthew's problems were still not over, however. The PHA that had 
issued the 
voucher initially declined to grant a rent exception, which was needed 
because the tax credit rent exceeded the PHA's Section 8 payment 
standard. Fortunately, disability advocates again intervened--this time 
with the PHA--and an exception rent was finally granted. Just one 
example shows how several provisions in the bill would have made 
Matthew's search for a place to live with his voucher less onerous.

Improving Planning and Information About Housing Opportunities
    Local policymakers are required to evaluate and plan for their 
housing needs and involve tenants and concerned community members in 
the planning process. Vouchers are an important housing resource and 
should be part of this planning. We are pleased that the bill would 
require PHA's using funds to improve voucher success report on voucher 
issues in their PHA's plans. Under the bill, communities' consolidated 
plans also would need to describe the barriers to better voucher 
utilization and strategies for overcoming those barriers. The proximity 
between a community's job opportunities and housing opportunities for 
people receiving welfare assistance would be included in the plan. The 
community's development of its housing strategies would require 
consultation between welfare and housing agencies.
    The recent HUD study verified that voucher holders are more 
successful in areas where discrimination is illegal.\8\ While a few 
jurisdictions around the country have prohibited landlords from 
discriminating against voucher holders as prospective tenants, that is 
the exception rather than the rule, so other tools are necessary to 
assist tenants in effectively using their vouchers. Owners of 
properties developed with funds from the Low-Income Housing Tax Credit 
or HOME, regardless of location, are not allowed to discriminate 
against tenants because their source of income. But what good is this 
policy if voucher holders do not know where these properties are 
located? The bill would require the HUD Secretary to provide PHA's with 
an updated list of these properties in the area on an ongoing basis. 
The PHA's, in turn, have to provide the list to families receiving a 
voucher from the PHA.
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    \8\ Id.
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Reallocation of Vouchers
    While there are a variety of factors affecting voucher utilization, 
the end result of low voucher utilization is the same: fewer families 
are assisted than could be, given the resources available. In an effort 
to address this situation, HUD issued a notice in the Federal Register 
in November 2001 that it would take unutilized vouchers from areas 
where utilization is low and permit reallocation to other areas.\9\ 
Were HUD certain that low utilization only reflected a lack of need, 
then this policy would make sense. But in many cases, low utilization 
means that markets are tight, PHA's are having difficulties, and low-
income people need more help, not less.
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    \9\ Housing Choice Voucher Program: Notice of Funding Availability 
for Reallocated Baseline Units and Annual Budget Authority and for 
Reallocated Baseline Welfare to Work Units and Annual Budget Authority, 
66 Fed. Reg. 55,524 (November 1, 2001), available at http://
hudclips.org/sub__nonhud/cgi/pdf/27415.pdf.
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    Under the Housing Voucher Improvement Act, PHA's having low 
utilization are at risk of losing their unutilized vouchers, but 
reallocation would favor agencies that would serve the same geographic 
areas as the original PHA. If a PHA fails to utilize 90 percent of its 
tenant-based subsidies or budget authority during the fiscal year, the 
PHA would receive a notice to that effect. If, after another 16 months, 
the PHA has not yet achieved 95 percent utilization of vouchers or 
budget authority, the PHA's unutilized vouchers can be reallocated. The 
HUD Secretary would reallocate the vouchers to a regional 
administrator, with a preference for an agency that already has the 
authority to serve the area that had been served by the PHA whose 
voucher allocation is being reduced. Should the Secretary determine 
that the primary cause of underutilization is a lack of eligible 
families in the geographic area, the Secretary can establish a process 
for reallocating vouchers outside the geographic area, but with 
priority for reallocation given to a regional administrator or public 
housing agency in the same State.
    Given the other tools that would be provided by the legislation to 
improve voucher utilization and success rates, it seems reasonable to 
reallocate vouchers when a PHA is unable or unwilling to make 
improvements after receiving notice of a problem, since vouchers not 
utilized means families not served. The National Low Income Housing 
Coalition supports the balanced approach suggested by this legislation, 
but recommends a broader public notice when PHA's are first alerted to 
its inadequate utilization rate under the legislation. It would be 
valuable for tenant 
organizations and other concerned members of the community to know when 
their PHA's have been put on notice, so that they can try to work with 
the PHA's to improve utilization, rather than having the vouchers moved 
to a possibly unknown agency abruptly. Community members and tenant 
organizations may have developed relationships with officials at the 
local PHA's and prefer the opportunity help the existing PHA's improve 
utilization.
Helping Tenants Achieve Greater Economic Well-Being
    Debate about the reauthorization of the 1996 welfare law is now in 
full swing. The housing circumstances of current and former recipients 
of Temporary Assistance to Needy Families can affect those families 
ability to make a successful transition off welfare. Inadequate, 
unstable housing makes it hard to achieve stable work for parents and 
stable schooling for children.\10\
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    \10\ See Barbara Sard, A Housing Perspective on TANF 
Reauthorization and Support for Working Families (2002), available at 
http://www.cbpp.org/3-12-02hous.htm.
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    The eligibility for programs that provide services to HUD tenants 
with the goal of improving their economic well-being could be expanded. 
HUD's Family Self-Sufficiency (FSS) program provides subsidized savings 
and case management for public housing and voucher tenants seeking 
better employment opportunities, while the Resident Opportunities and 
Self-Sufficiency (ROSS) program is a funding competition that provides 
grants to PHA's, tribal authorities, and tenant groups for projects 
that would help tenants improve their economic situation. The bill 
would permit voucher holders to participate in the ROSS program. 
Currently, the program is limited to public housing tenants.
    Under FSS, tenants participate in case management with the goal of 
achieving better employment. As the participants' earnings rise, PHA's 
take the value of the reduction in the PHAs' portion of the tenants' 
rent--which is reduced because the tenants can cover more of the rent 
themselves--and put it into escrow accounts for the tenants. The funds 
in the accounts are available after 5 years to participants who 
successfully complete the program. But all PHA's are limited by law to 
one full-time service coordinator for the FSS program, regardless of 
the size of the program; the Housing Voucher Improvement Act would 
allow for the more than one coordinator, if the funds were available.
    Project-based Section 8 tenants, who live in privately owned, 
publicly subsidized properties, cannot participate in the FSS program 
currently. The Housing Voucher Improvement Act would extend the reach 
of this program to project-based tenants. The program could be 
administered by the owners of the project-based property, if they 
choose, or interested project-based tenants whose landlords do not set 
up the FSS program at the building could participate in the local PHAs' 
programs.
    In general, assisted tenants may not experience the benefits of 
increased earnings or other new resources because, as long as they 
remain eligible for assisted housing, they pay 30 percent of their 
income in rent. But some public housing, voucher and project-based 
tenants are authorized to receive a disregard of increased earnings, if 
that family participated in a self-sufficiency program, or if an 
unemployed member of the household finds a job, or if the family 
receives or has received TANF in the prior 6 months. Unfortunately, 
there has not been sufficient funding appropriated to support the 
earned income disregard for voucher holders or project-based tenants, 
which is not an issue for this Committee but rather for the 
appropriators. This Committee can, however, authorize a disregard of 
any employment incentives that a family receives from another source--
such as a State, other public entity, or private entity--specifically 
to offset an increase in rent. The bill includes such an authorization, 
which also applies when the incentives are paid to a parent or spouse 
who has more recently joined the family in assisted housing, to avoid 
discouraging the reunification of a family on financial grounds. The 
bill provides that if a PHA or owner of assisted housing receives funds 
from a State or local agency to provide employment incentives to 
tenants, those funds should not count as revenue for the PHA or owner.
    The flexibility and mobility provided by vouchers ideally allow 
voucher holders to live near jobs or transportation to jobs. Vouchers 
can provide a particularly valuable support to current or former 
recipients of TANF as they move from welfare to work. The Housing 
Voucher Improvement Act would authorize ``Welfare to Work'' vouchers. 
These vouchers would be available to PHA's through competition and 
would be limited to PHA's that operate FSS programs. The PHA's would 
issue the vouchers to families who receive TANF or had received TANF in 
the prior 2 years and who need the voucher to find a place to live 
closer to jobs or transportation, to keep an existing job or increase 
hours, or to participate in a program to overcome barriers to work.

Thrifty Production Vouchers: An Important Experiment
    Housing policy would not improve if new ideas were never tested. 
The Thrifty Production Vouchers (TPV's) that would be authorized by the 
Housing Voucher Improvement Act present an opportunity to learn whether 
we can subsidize more units with fewer resources if the right 
incentives are built into the program. The TPV's would provide an 
operating subsidy to support units for extremely low-income tenants, 
where those units have received full capital funding. With some 
exceptions, the units subsidized by TPV's would constitute only one-
quarter of a project's total units. Rents for the TPV units would be 
based on operating costs. The mix of subsidized and unsubsidized 
tenants at the property would help keep overall operating costs down, 
and consequently, TPV rents down.
    The TPV projects could have a site-based waiting list or a waiting 
list with the PHA. The building owner would enter into a contract of up 
to 15 years, with extensions required at least until the 40th year 
(subject to appropriations). The TPV tenants would have the same 
mobility as tenants in units with regular vouchers that have been 
project-based.
    Though we have some concerns around the waiting list procedures, 
the National Low Income Housing Coalition supports TPV's. We also urge 
the extension of the TPV policy permitting an owner list--as an 
alternative to a list with the PHA--to properties where regular 
vouchers are project-based by the PHA under the project-based voucher 
legislation passed in 2000. This would improve the access of homeless 
people and people with special needs to housing opportunities, because 
they may find it daunting to navigate the PHA's waiting list. 
Currently, lists for regular project-based vouchers are kept only by 
the PHA.
    An issue remains about notice, regardless of whether waiting lists 
are kept by the owner or the PHA. Under the Housing Voucher Improvement 
Act, when new TPV units become available and a waiting list is 
established, whether there is an owner list or a PHA list, the PHA 
provides notice to tenants of the opening of the list similar to the 
opening of the waiting list for tenant-based assistance and notifies 
extremely low-income families that are newly applying for assistance. 
The PHA will monitor that an owner maintaining a site-based list gives 
preference to families on the PHA's tenant-based list and cooperates 
otherwise.
    But the National Low Income Housing Coalition has some concerns 
that the method for managing waiting lists for TPV's may fail to alert 
adequately eligible people on the existing tenant-based list of a new 
opportunity. At the same time, a requirement to alert the entire 
existing list--that may, in some cases, include thousands of 
prospective voucher tenants--about the availability of only a few new 
TPV units could be a waste of resources. We hope that a compromise 
might be developed as the bill moves forward that would make TPV units 
better known and available to people on the PHA's existing waiting 
list, without undue burden on the PHA.

Enhanced Vouchers
    The National Low Income Housing Coalition has had an ongoing 
concern about the displacement of tenants as the result of the 
termination of project-based housing assistance, either through the 
prepayment of a HUD-subsidized mortgage or an opt-out from a Section 8 
contract, or both. Tenants whose buildings undergo such a conversion 
are entitled to ``enhanced'' vouchers, with a payment standard that 
will cover a new and higher rent at the property following the 
conversion, subject to a rent reasonableness evaluation by the PHA.
    The point of providing enhanced vouchers is to prevent 
displacement, but not all property owners appreciate that tenants have 
the right to remain in their units following the conversion. PHA's can 
also cause displacement when they insist on rescreening enhanced 
voucher tenants for eligibility for tenant-based assistance, even 
though the tenants were presumably suitably eligible for assistance as 
project-based tenants and the opportunity for rescreening is available 
only because of the conversion. This rescreening should not be 
permitted.
    In addition, enhanced voucher tenants--often elderly--may find 
themselves ``overhoused'' at the point of conversion, in a unit that 
was once the right size but is no longer because family members have 
moved away or died. If there is no appropriately sized unit in the 
property, an overhoused tenant must make a good-faith effort to find a 
unit elsewhere. A tenant who cannot find a unit elsewhere may stay in 
the existing unit for a year and pay rent as if on an appropriately 
sized unit. But after a year, the tenant's portion of the rent will 
increase to reflect the larger unit and the tenant may need to move 
from the property and will receive a voucher at the PHA's regular 
payment standard, rather than an enhanced voucher. Overhoused tenants 
should not be forced to move until an appropriately sized unit becomes 
available at the property, especially as these tenants are likely to be 
older and more frail.
    As the bill moves forward, we hope that the Committee will consider 
improving upon the enhanced voucher protections for assisted tenants 
facing a conversion action. Enhanced vouchers are meant to prevent 
displacement, not provide an opportunity for displacement simply 
because the administration of the subsidy shifts from project-based 
administration by the property owner and the local HUD office or 
contract administrator to tenant-based administration by the local PHA. 
The shortcomings of the notice issued by HUD late last year on its 
enhanced voucher policies make it clear that legislation is 
necessary.\11\
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    \11\ U.S. Department of Housing and Urban Development, Notice PIH 
2001-41, Section 8 Tenant-Based Assistance (Enhanced and Regular 
Housing Choice Vouchers) For Housing Conversion Actions--Policy and 
Processing Guidance (November 14, 2001), available at http://
hudclips.org/sub__nonhud/cgi/pdfforms/01-41p.doc.
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The Importance of Voucher Improvements
    The Housing Voucher Improvement Act of 2002 proposes a number of 
policy changes that would increase voucher success and utilization. 
Vouchers are an important piece in our Nation's housing puzzle. We 
waste resources, diminish confidence in the program, and dash people's 
hopes for housing stability if PHA's hand out vouchers and recipients 
are unable to use them. The provisions in the bill make it more likely 
that these hopes will be realized in the future.
    Thank you again for the opportunity to discuss these issues with 
you today.

                               ----------

                PREPARED STATEMENT OF BENSON F. ROBERTS
    Vice President for Policy, Local Initiatives Support Corporation
                             April 11, 2002

    Good afternoon, Mr. Chairman and Members of the Committee. My name 
is Benson Roberts. I am Vice President for Policy at the Local 
Initiatives Support Corporation. I appreciate the opportunity to 
comment on the Housing Voucher Improvement Act of 2002.
    LISC helps neighbors build whole communities in over 300 cities, 
towns, and rural areas though 38 offices nationwide. In 21 years, LISC 
and its affiliates have raised from the private sector and provided $4 
billion to help over 2,000 nonprofit low-income community development 
corporations (CDC's) across the country to produce over 110,000 
affordable homes and over 14 million square feet of commercial and 
industrial space. We also invest major resources in jobs and income 
programs, childcare facilities, youth programs, crime and security 
initiatives, and many other programs that directly benefit low-income 
neighborhoods and their residents. The CDC's have used LISC's funding 
to raise over $7 billion in investment. We are deeply involved in and 
deeply committed to meeting the needs of low-income families and 
communities.

The Need for Thrifty Production Vouchers
    The Housing Voucher Improvement Act would create a new kind of 
project-based ``Thrifty Production Voucher'' in conjunction with new 
construction or substantial rehabilitation. Thrifty Production Vouchers 
could be combined as necessary with any capital subsidy program, such 
as Low-Income Housing Tax Credits, HOME, or CDBG, or the proposed 
affordable housing trust fund. Thrifty Production Vouchers would be 
limited to 25 percent of units in a property (with exceptions for 
single-family properties and properties serving elderly and disabled 
residents and, in some locations, supportive housing for families and 
other singles).
    LISC strongly supports the Thrifty Production Voucher proposal.
    Low-Income Housing Tax Credits and HOME are both excellent capital 
subsidies for affordable housing production. Both are flexible 
resources administered by States and localities (HOME only). Both reach 
genuinely low-income families. Both are cost-effective. Both are 
popular among nonprofit and for-profit developers, private financing 
sources, and State and local government.
    However, there is a limit to how far any capital subsidy program 
can go to serve extremely low-income (ELI) families with incomes below 
30 percent of median. Most ELI families cannot afford to pay rent high 
enough to carry the operating expenses of housing, even if the 
development cost is fully subsidized and there is no mortgage to be 
repaid from rents. As a result, it is not surprising that a recent HUD 
study found that while nearly half of all HOME-funded rental housing 
serves extremely low-income households, those households in this 
category who lack rental assistance paid an average of 69 percent of 
income for rent. This finding should not be read as a criticism of 
HOME, but a simple and unavoidable math problem. The same issue would 
arise for any capital subsidy program.
    The solution would be to provide some form of project-based rental 
assistance in conjunction with capital subsidies so that housing that 
is produced could serve extremely low-income tenants at rents they can 
afford over the long term. However, Congress has been reluctant to 
support project-based rental subsidies.

 Unless restricted to a modest portion of a property--that is, 
    25 percent--these subsidies could insulate properties from the 
    healthy discipline of having to compete for tenants in the private 
    market. Moreover, extremely low-income tenants could be excessively 
    concentrated within certain properties, instead of participating in 
    more mixed-income housing. These concerns can be easily addressed 
    by limiting the share of a property that can receive subsidies. The 
    project-based Section 8 amendments that Congress approved in 2000 
    followed this approach.
 The more difficult problem is the cost of renewing rental 
    subsidies. Appropriators understand that they will be expected to 
    renew rental subsidies each year for an indefinite period. Even 
    tenant-based Section 8 vouchers are expensive to renew--about 
    $6,000 per voucher every year. As a result, appropriators are 
    reluctant to fund incremental vouchers to begin with.

The Cost-Effectiveness of Thrifty Production Vouchers
    Thrifty Production Vouchers are designed to address this cost 
problem.
    What makes a Thrifty Production Voucher cost-effective is that the 
``payment standard'' would be the property's operating cost, instead of 
the housing authority's payment standard based on the fair market rent 
(FMR) that is used for regular vouchers. Like regular project-based 
vouchers, tenants' share of the rent and utilities would be limited to 
30 percent of adjusted income. Operating expenses would not include 
mortgage debt service, but would include owner-paid utilities, 
contributions to reserves, an asset management fee, and a modest 
cashflow allowance.
    Since these operating costs are generally substantially below the 
FMR, a Thrifty Production Voucher would cost at least about one-third 
less than a regular voucher. If the operating cost is below the 
maximum, which is particularly likely in areas with high FMR's, the 
savings will be greater. A cap on the amount of operating expenses that 
could be covered would be set at 75 percent of the regular voucher 
payment standard, to ensure that Thrifty Production Vouchers live up to 
their name.
    Based on data from properties insured by the Federal Housing 
Administration, HUD consultants estimated that the average per unit 
operating cost in 1998-2000 was $242 (in 2000 dollars). Larger units 
will have somewhat higher costs, but newly produced units and units in 
partially assisted developments will have lower costs. These data do 
not include taxes, utility costs, a replacement reserve, or a cashflow 
allowance. Even if these additional expenses were to increase the 
average operating cost by $200, however, this average would still be 
substantially less than 75 percent of the average national fiscal year 
2002 FMR for a 2-bedroom unit, which is $522.

                                Example

          If the housing authority's payment standard, set at 100 
        percent of the FMR, is $700 monthly and the tenant's share of 
        the rent and utilities is $200, a regular voucher costs $500. 
        If the operating cost allowable, or $525, then a Thrifty 
        Production Voucher would cost $325, or 35 percent less than a 
        voucher. If the operating cost is below the maximum, the 
        savings will be greater.

    Thrifty Production Vouchers may cost as little as 36-60 percent of 
the cost of regular project-based vouchers in areas with high FMR's, 
such as the San Francisco, Boston, Denver, and Newark metropolitan 
areas.\1\
---------------------------------------------------------------------------
    \1\ These estimates are based on a comparison of the expense level 
estimated for public housing units in these areas by the Harvard 
Graduate School of Design (see http://www.gsd.harvard
.edu/research/research__centers/phocs/news.html), increased by $200 per 
unit to account for taxes, utility costs, an asset management fee, a 
replacement reserve, and a modest cash flow allowance, with 110 percent 
of the applicable FMR. (This comparison is used because project-based 
vouchers can pay up to 110 percent of FMR even if this subsidy level 
exceeds the PHA's payment standard, so long as the amount is reasonable 
for the particular units.
---------------------------------------------------------------------------
    Since subsidies would generally be limited to 25 percent of the 
units in a property, the owner could set the property's overall 
operating budget, limited only by the cost cap noted above. Owners 
would be strongly motivated to minimize operating 
expenses, since they would have to bear at least 75 percent of any 
unnecessary expenses.
    The ability to set the operating budget should enable owners to 
make a long-term commitment to participate in the Thrifty Production 
Voucher program. Owners would not have to worry that another entity 
would arbitrarily set the operating budget at an unworkably low level.
How Thrifty Production Vouchers Would Work
 New Thrifty Production Vouchers would be distributed under the 
    formula used for HOME funds. This could work as follows: if 
    Congress appropriates funding for 10,000 Thrifty Production 
    Vouchers, the total amount appropriated would be divided among the 
    States based on the share of HOME funds that the State and any 
    participating jurisdictions within the State receive. Eligible, 
    interested PHA's within the State would apply to HUD for a portion 
    of the State's allocation, just as PHA's now do with ``fair share'' 
    allocations for regular Section 8 vouchers. (If the housing trust 
    fund or other new production initiative were enacted, the 
    distribution formula could be modified to be consistent with the 
    new subsidy stream.)
 New allocations would go to current Section 8 administrators. 
    PHA's that do not also administer capital subsidies would be 
    required to coordinate allocations with administrators of capital 
    subsidies and would be eligible for new Thrifty Production Vouchers 
    only if they demonstrate such an agreement.

          This would allow for one-stop shopping for housing sponsors, 
        facilitate implementation of tenant mobility as described 
        below, and respect the current roles that different public 
        agencies play.
          Section 8 administrators that already project-base 20 percent 
        of their 
        existing voucher portfolios could exceed the cap with new 
        allocations of Thrifty Production Voucher assistance.

 Thrifty Production Vouchers would be provided only for ELI 
    households. The subsidy would cover the gap between the actual 
    operating expenses (or the rent cap, if lower) and 30 percent of 
    tenant income. Families would not lose their subsidies if their 
    incomes increase above the ELI level. Ordinary voucher rules would 
    apply: families would remain eligible for assistance until 30 
    percent of their adjusted income equals the allowable rent and 
    utilities.
 Limiting Thrifty Production Vouchers to 25 percent of the 
    units in a property would prevent the overconcentration of poor 
    tenants and instill market discipline. For 1-4 unit properties, 
    elderly, disabled, or supportive housing with project-based 
    subsidies on more than 25 percent of the units, the Section 8 
    administrator could review the project's operating budget to 
    determine if operating costs are less than the maximum payment 
    standard permitted.
 The initial rent subsidy term would be 15 years, with renewals 
    through the Section 8 Housing Certificate Fund at least through 
    year 40.

          Subsidies would be subject to appropriations after the first 
        year, in recognition of Congressional budget rules. If Congress 
        does not fund the rental subsidy, then sponsors would be 
        subject only to the income targeting and rent limits required 
        under other programs assisting the property (that is, Housing 
        Credits, HOME, CDBG, public housing capital funds, or a future 
        housing trust fund). It should be noted, however, that Congress 
        has always renewed all Section 8 subsidies.
          Sponsors would have to agree to accept rental subsidies for 
        40 years, subject to appropriations.

 The Thrifty Production Voucher cannot support debt service on 
    assisted units. This means that a full capital subsidy will be 
    needed for the ELI portion of a property. Even with Thrifty 
    Production Vouchers, some projects may need a larger capital 
    subsidy to serve ELI tenants. However, many sponsors are already 
    using capital subsidies to reduce rents below market on some units. 
    In addition, rents on at least 75 percent of the units would be 
    available to support a mortgage.
 Properties located in lower-income neighborhoods could use 
    Thrifty Production Vouchers if the PHA determines it would be 
    consistent with the goal of deconcentrating poverty and expanding 
    housing and economic opportunities or revitalizing a low-income 
    community, or will prevent the displacement of extremely low-income 
    families. Fair housing requirements would apply. The lower-income 
    neighborhoods would be the same as Qualified Census Tracts in the 
    Low Income Housing Tax Credit program: they have a poverty rate of 
    at least 25 percent or at least one-half of the households have 
    incomes below 60 percent of the area median income.
 Thrifty Production Voucher landlords could use a site-specific 
    waiting list if the Section 8 administrator agrees and if the 
    agency and owner comply with certain procedures to ensure fairness 
    to applicants on the PHA's waiting list and to meet fair housing 
    concerns.
 Thrifty Production Vouchers would have most other features of 
    the current project-based voucher program, including mobility, but 
    would not replace the current project-based program, as they cannot 
    compete in the market for existing housing and cannot cover debt 
    service. Mobility provisions give departing tenants priority access 
    to Section 8 vouchers.

The Attraction of Thrifty Production Vouchers
    We believe that Thrifty Production Vouchers should be attractive to 
the various participants in the affordable housing production system.

 Housing sponsors could use Thrifty Production Vouchers to 
    serve at least some extremely low-income families at affordable 
    rents that will contribute to project stability. Serving these 
    tenants will help sponsors to compete more effectively for 
    allocations of Low-Income Housing Tax Credits, a scarce resource 
    rationed in part based on serving especially low-income tenants.

          The requirement that PHA's coordinate with capital subsidy 
        administrators offers developers a streamlined way to assemble 
        a viable financing package.
          The ability to set the operating budget should enable owners 
        to make a long-term commitment to participate in the Thrifty 
        Production Voucher 
        Program.
          Owners would not have to worry that another entity would 
        arbitrarily set the operating budget at an unworkably low 
        level.
          In the unlikely event that Congress does not renew Thrifty 
        Production Vouchers, owners would have to meet only the income 
        targeting requirements of other housing subsidies they receive. 
        This provision would protect the property's financial 
        stability.

 Private investors and lenders should be comfortable with 
    Thrifty Production Vouchers. Although Thrifty Production Vouchers 
    would not add to the cashflow available to pay debt service, they 
    should add financial stability to properties that serve extremely 
    low-income tenants, thereby reducing risks. The initial 15-year 
    term equals the recapture period for Low-Income Housing Tax 
    Credits.
 Public housing agencies could use the Thrifty Production 
    Vouchers to grow their 
    Section 8 programs, without increasing costs or reducing the number 
    of families receiving tenant-based vouchers.

          Section 8 administrators would be permitted to convert 
        existing voucher authority to Thrifty Production Voucher 
        assistance and assist more households in light of the lower 
        cost. PHA's that use this flexibility could exceed the usual 20 
        percent limit on the total number of vouchers that may be 
        project-based, without reducing the number of families 
        receiving regular tenant-based Housing Choice Vouchers.
          For example, a PHA that administers 1,000 vouchers is 
        permitted to project-base up to 200 of these vouchers. For the 
        equivalent cost of 200 regular project-based vouchers, it could 
        serve about 266 households using Thrifty Production Vouchers 
        (or more, if the payment standard is below the 75 percent cap). 
        Without a budget increase (except for a small increase in 
        administrative fees), it could serve 1,066 households; 800 
        families would still receive tenant-based vouchers, and 266 
        households receive project-based assistance.

    Once allocated to properties, PHA's should find it convenient that 
Thrifty Production Vouchers would follow virtually all the same rules 
as other vouchers, except that PHA's would have to follow relatively 
simple steps annually to consider increases in the payment standard. 
Thrifty Production Vouchers also offer PHA's an opportunity to 
participate more fully in housing production efforts.

 State and local agencies that administer HOME, Housing 
    Credits, or other capital subsidies should welcome the availability 
    of Thrifty Production Vouchers as a valuable tool to serve 
    extremely low-income tenants in new and rehabilitated housing. 
    PHA's would have to coordinate the use of Thrifty Production 
    Vouchers with capital subsidy administrators.
Conclusion
    This concludes my testimony. I would be pleased to answer any 
questions you may have.

 RESPONSE TO WRITTEN QUESTION OF SENATOR AKAKA FROM OPHELIA B. 
                             BASGAL

Q.1. Ms. Basgal, in your testimony, you also mentioned Section 
3 in the proposed legislation that would authorize ``Thrifty 
Production Vouchers.'' You recommend that Public Housing 
Authorities notify a small number of applicants rather than 
everyone on the list. While this would be more cost efficient, 
would the practice lead to complaints against Public Housing 
Authorities, citing discriminatory selection methods?

A.1. Senator Akaka, my recommendation envisions the Housing 
Authority notifying families who are at the top of the waiting 
list of the availability of the ``Thrifty Production Voucher'' 
units. There would be no skipping of families on the list and 
families would be notified in order. If families indicated they 
were not interested in the Thrifty Production Voucher units, 
the Housing Authority would move down the list notifying the 
next families until a sufficient number had indicated an 
interest and been selected as tenants. Therefore, there should 
be no complaints about discriminatory selection practices since 
these families would be offered the units in order of their 
placement on the wait list.
    My recommendation was in response to lack of clarity in the 
Thrifty Production Voucher proposal, which seemed to require 
the Housing Authority to notify everyone on the waiting list of 
the availability of the units. As you know, Housing Authorities 
often have thousands of families on their waiting lists. To 
notify all of them of the availability of a small number of 
Thrifty Production Voucher units is not only costly and 
inefficient, but it is also unfair to the families since there 
would likely to be some preference for families at the top of 
the wait list.
    I would also note that my recommendation follows the 
Housing Authority practice for Section 8 Moderate 
Rehabilitation units, which are also project-based units like 
the proposed Thrifty Production Vouchers. We begin at the top 
of the wait list, moving down until families indicate an 
interest in the units and are selected for the Mod Rehab Units.

   RESPONSE TO WRITTEN QUESTION OF SENATOR AKAKA FROM SCOTT 
                            GARDNER

Q.1. Mr. Gardner, in your testimony, you discuss Section 9 in 
the proposed legislation regarding the unit inspection process 
that landlords are required to follow. Under this section, 
payments may be made to a landlord prior to the inspection of a 
unit if a building inspection has been conducted by the Public 
Housing Authority in the last 6 months, the unit inspection is 
completed within 30 days, and the Public Housing Authority and 
the landlord have an agreement that any repairs on the unit 
must be made within 30 days of the unit inspection. According 
to your testimony, inspections of each unit would delay 
resident occupancy and would be costly to Public Housing 
Authorities to implement. As you may know, some housing units 
available to low- and moderate-income families do not meet what 
most of us would consider suitable living conditions. If 
individual unit inspections were not required, how would such 
health and safety issues be addressed?

A.1. The portion of my testimony regarding the delays 
experienced by owners waiting for inspections was concerned 
mainly with the way the system is currently administered. This 
is one reason that owners may not choose to participate in the 
voucher process. In my testimony I expressed support for the 
provisions in Section 9 that would streamline or eliminate 
repetitive inspections. However, Section 1 allows the PHA to 
decide if they will inspect a reasonable number of units and 
waive inspection if no major deficiencies are found. This would 
permit a wide variation in the inspection policies from PHA to 
PHA and undermine the consistency that you are trying to 
accomplish. If an owner is participating in the program and 
consistently provides units that meet the HQS standards, then I 
believe an occasional property level inspection should be 
adequate.
    The bigger issue is that, by improving the transparency of 
the program, you will have wider acceptance of the voucher 
program by owners that had previously been unwilling to 
participate due to the perception of the additional effort 
needed to accept the voucher. I believe that the very reason 
that some of the units available to low-income families do not 
meet what most of us consider suitable living conditions is 
that the pool of owners that are willing to accept the vouchers 
is not as large as it needs to be. Owners with units that 
compete in the conventional markets are more likely to have 
fewer health and safety issues than those who have chosen to 
only cater to those eligible for vouchers. The whole purpose of 
making the voucher process as seamless as possible is to 
broaden the spectrum of units available to low-income families.
    As I stated in the question and answer portion of my 
testimony, these residents are not ``trapped'' as they were 
with the old project-based subsidy programs, they are free to 
move if the unit proves unsuitable and, in fact, are forced to 
move now if the owner is unwilling to make the necessary 
repairs. I believe that we have to give the residents some 
credit to be able to determine if a unit is suitable for them. 
As with any prospective resident, the voucher resident can 
preview the unit before signing the lease. Perhaps the local 
PHA could provide them with a basic checklist so they can do 
their own inspections.
    There are approximately 6.4 million apartment units that 
qualify within the Fair Market Caps for the voucher program. 
Given a conservative turnover rate of 40 percent, that would 
provide well over 2.5 million units that would be available in 
a given year if all owners participated in the program. 
Facilitating participation by all owners will give the 
prospective resident an even greater choice 
of housing options and also empower the resident to make their 
own choices about where and how they wish to live and raise 
their families.

 RESPONSE TO WRITTEN QUESTIONS OF SENATOR AKAKA FROM ANN O'HARA

Q.1. Ms. O'Hara, in your testimony, you discuss increasing the 
voucher success rate to 85 percent for Section 5 in the 
proposed legislation. Under Section 5, Public Housing 
Authorities would be allowed to increase their voucher payment 
standard to 120 percent of the Fair Market Rent if certain 
criteria are met. The voucher success rate reflects the 
proportion of families who are issued vouchers and lease a unit 
within the specified timeframe. You also mentioned the study 
released by the Department of Housing and Urban Development 
which found ``that the national success rate for vouchers was 
69 percent in 2000 for large metropolitan public housing 
agencies.'' In light of this information, would increasing the 
80 percent voucher success rate to 85 percent prevent some 
Public Housing Agencies from taking advantage of this provision 
to expand housing opportunities for voucher holders?

A.1. In our testimony, we recommended a voucher success rate of 
85 percent or below as one of the eligibility criteria for a 
public housing agency (PHA) to be able to increase its payment 
standard to 120 percent of the fair market rent. For this 
purpose, a voucher success rate of 85 percent or below would 
permit more, rather than fewer, PHA's to increase their payment 
standards. Only those PHA's with success rates above 85 
percent, rather than 80 percent (and those without a payment 
standard already at 110 percent of FMR) would not be able to 
take advantage of the increased payment standard. This 
recommendation would achieve consistency with the eligibility 
threshold for provisions that would allow the use of unutilized 
funds for voucher success activities and would create the 
Voucher Success Fund. We are not firmly wedded, however, to the 
standard of 85 percent as the threshold for increasing the 
payment standard to 120 percent and could be persuaded that 
such a standard would allow too many PHA's, including 
relatively successful PHA's, increase their payment standards.

Q.2. Ms. O'Hara, in your statement, you discuss Section 3 in 
the proposed legislation that would authorize ``Thrifty 
Production Vouchers.'' These vouchers would be used by 
developers who receive tax credits or HOME funds to expand 
housing and economic opportunities to low-income families. 
Under this section, Public Housing Authorities and owners would 
be responsible for maintaining and managing separate waiting 
lists. You stated that Public Housing Authorities may fail to 
inform participants of any openings. What steps should Public 
Housing Authorities take to ensure the proper dissemination of 
this information to low- and moderate-
income families?

A.2. As you have noted, we believe that it is important that 
existing tenants on a PHA's waiting list learn of and have 
access to new Thrifty Production Voucher (TPV) Units that 
become available. The bill requires that a PHA provide 
notification of the availability of the TPV Units in the same 
manner as it would for the opening of its overall waiting list 
for new applicants generally. HUD's ``Housing Choice Voucher 
Guidebook'' provides the following guidance for the opening of 
the waiting list:

          PHA's must affirmatively further fair housing 
        opportunity. Before opening the waiting list, the PHA 
        must advertise in a local newspaper of general 
        circulation and also through minority media and other 
        suitable means. A PHA's advertising or outreach plan 
        must be included in the PHA's administrative plan. The 
        announcements must include information on the time and 
        place of application taking. If the application period 
        is limited, the announcement must provide clear 
        information on the end of the application period. The 
        public notice must also state any limitation on who may 
        apply for the available slots in the program.

    There are a variety of ways that a PHA could follow this 
general guidance so that more low-income families would learn 
of this new opportunity, such as advertising in several 
outlets, providing the information to community-based 
organizations that work with eligible families, and permitting 
application in a manner that does not require applicants to 
miss work, among others.
    We believe that the legislation could ensure that families 
already on a PHA's waiting list--who may have been waiting for 
a housing opportunity for several years--have the opportunity 
to take advantage of newly available TPV units. We understand 
and very much hope that the legislation may be changed from the 
draft available prior to the April 11 hearing to accomplish 
this outcome.



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