[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                         THE SECTION 8 HOUSING
                          ASSISTANCE PROGRAM:
                      PROMOTING DECENT AFFORDABLE
                        HOUSING FOR FAMILIES AND
                          INDIVIDUALS WHO RENT

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

                                HEARINGS

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                   MAY 22, JUNE 10, 17, JULY 1, 2003

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-31


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          CHARLES A. GONZALEZ, Texas
    Carolina                         MICHAEL E. CAPUANO, Massachusetts
DOUG OSE, California                 HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois               RUBEN HINOJOSA, Texas
MARK GREEN, Wisconsin                KEN LUCAS, Kentucky
PATRICK J. TOOMEY, Pennsylvania      JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut       WM. LACY CLAY, Missouri
JOHN B. SHADEGG, Arizona             STEVE ISRAEL, New York
VITO FOSSELLA, New York              MIKE ROSS, Arkansas
GARY G. MILLER, California           CAROLYN McCARTHY, New York
MELISSA A. HART, Pennsylvania        JOE BACA, California
SHELLEY MOORE CAPITO, West Virginia  JIM MATHESON, Utah
PATRICK J. TIBERI, Ohio              STEPHEN F. LYNCH, Massachusetts
MARK R. KENNEDY, Minnesota           ARTUR DAVIS, Alabama
TOM FEENEY, Florida                  RAHM EMANUEL, Illinois
JEB HENSARLING, Texas                BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey            DAVID SCOTT, Georgia
TIM MURPHY, Pennsylvania              
GINNY BROWN-WAITE, Florida           BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director
           Subcommittee on Housing and Community Opportunity

                     ROBERT W. NEY, Ohio, Chairman

MARK GREEN, Wisconsin, Vice          MAXINE WATERS, California
    Chairman                         NYDIA M. VELAZQUEZ, New York
DOUG BEREUTER, Nebraska              JULIA CARSON, Indiana
RICHARD H. BAKER, Louisiana          BARBARA LEE, California
PETER T. KING, New York              MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          BERNARD SANDERS, Vermont
    Carolina                         MELVIN L. WATT, North Carolina
DOUG OSE, California                 WILLIAM LACY CLAY, Missouri
PATRICK J. TOOMEY, Pennsylvania      STEPHEN F. LYNCH, Massachusetts
CHRISTOPHER SHAYS, Connecticut       BRAD MILLER, North Carolina
GARY G. MILLER, California           DAVID SCOTT, Georgia
MELISSA A. HART, Pennsylvania        ARTUR DAVIS, Alabama
PATRICK J. TIBERI, Ohio
KATHERINE HARRIS, Florida
RICK RENZI, Arizona


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearings held on:
    May 22, 2003.................................................     1
    June 10, 2003................................................    25
    June 17, 2003................................................    73
    July 1, 2003.................................................   113
Appendixes:
    May 22, 2003.................................................   151
    June 10, 2003................................................   173
    June 17, 2003................................................   279
    July 1, 2003.................................................   467

                                WITNESS
                         Thursday, May 22, 2003

Liu, Hon. Michael, Assistant Secretary, Public and Indian 
  Housing, Department of Housing and Urban Development...........     6

                                APPENDIX

Prepared statements:
    Ney, Hon. Robert W...........................................   152
    Oxley, Hon. Michael G........................................   155
    Clay, Hon. Wm. Lacy..........................................   156
    Harris, Hon. Katherine.......................................   157
    Sanders, Hon. Bernard........................................   158
    Liu, Hon. Michael............................................   161

              Additional Material Submitted for the Record

Velazquez, Hon. Nydia M.:
    Letter to the Appropriations Subcommittee on Veterans 
      Affairs, Housing and Urban Development, May 21, 2003.......   166

                               WITNESSES
                         Tuesday, June 10, 2003

Ceaser, Terri, Section 8 Tenant, Hopewell, VA....................    28
Dowling, Telissa, President, Resident Advisory Board, New Jersey 
  Department of Community Affairs, Guttenberg, NJ................    29
Duncan, R. E., Chairman, Board of Commissioners, Topeka Housing 
  Authority, Topeka, KS..........................................    50
Garrelts, Craig A., Executive Director, Hocking Metropolitan 
  Housing Authority, Logan, OH, on behalf of National Leased 
  Housing Association............................................    31
Henriquez, Sandra, Executive Director, Boston Housing Authority, 
  Boston, MA on behalf of Council of Large Public Housing 
  Authorities (CLHPA)............................................    52
Hernandez, Tino, Chairman, New York City Housing Authority, New 
  York, NY.......................................................    54
Inglis, James M., Executive Director, Livonia Housing Commission, 
  Livonia, MI and Senior Vice President, National Association of 
  Housing and Redevelopment Officials, Washington, DC............    55
Marchman, Kevin, Executive Director, National Organization of 
  African Americans in Housing, Washington, DC...................    57
Molloy, Neil, Executive Director, St. Louis County Housing 
  Authority, St. Louis, MO, on behalf of Public Housing 
  Authorities Directors Association (PHADA)......................    58
Showe, Andrew, Vice President, Showe Management Corporation, 
  Columbus OH, on behalf of National Multi Housing Council, 
  National Apartment Association, and Columbus, Ohio Apartment 
  Association,...................................................    34
Thompson, Barbara, Executive Director, National Council of State 
  Housing Agencies, Washington, DC...............................    36

                                APPENDIX

Prepared statements:
    Ney, Hon. Robert W...........................................   174
    Clay, Hon. Wm. Lacy..........................................   175
    Waters, Hon. Maxine..........................................   177
    Ceaser, Terri................................................   179
    Dowling, Telissa.............................................   183
    Duncan, R. E.................................................   189
    Garrelts, Craig A............................................   198
    Henriquez, Sandra............................................   203
    Hernandez, Tino..............................................   210
    Inglis, James M..............................................   216
    Marchman, Kevin..............................................   239
    Molloy, Neil.................................................   243
    Showe, Andrew................................................   260
    Thompson, Barbara............................................   265

              Additional Material Submitted for the Record

Dowling, Telissa:
    Written response to questions from Hon. Gary G. Miller.......   271
National Association of Realtors, prepared statement.............   272
National Affordable Housing Management Association, prepared 
  statement......................................................   276

                               WITNESSES
                         Tuesday, June 17, 2003

Crowley, Sheila, President, National Low Income Housing 
  Coalition, Washington, DC......................................   105
Egan, Conrad, President and CEO, National Housing Conference, 
  Washington, DC.................................................    75
Husock, Howard, Alfred Taubman Center for State and Local 
  Government, John G. Kennedy School of Government, Harvard 
  University, Cambridge, MA......................................    77
Katz, Bruce J., Director, Center on Urban and Metropolitan 
  Policy, The Brookings Institution, Washington, DC..............    80
Khadduri, Jill, Principal Associate, Abt Associates Inc., 
  Bethesda, MD...................................................    81
Marraffa, Henry Jr., Councilmember, Gaithersburg, MD, appearing 
  on behalf of the National League of Cities.....................   107
O'Hara, Ann, Associate Director, Technical Assistance 
  Collaborative, Boston, MA on behalf of the Consortium for 
  Citizens with Disabilities Housing Task Force..................   108
Olsen, Ed, Professor of Economics, University of Virginia, 
  Charlottesville, VA............................................    84
Sidor, John, Principal, The Helix Group, Harpers Ferry, WV.......   110
Turner, Margery Austin, Director, Metropolitan Housing and 
  Communities Center, The Urban Institute, Washington, DC........    86

                                APPENDIX

Prepared statements:
    Ney, Hon. Robert W...........................................   280
    Clay, Hon. Wm. Lacy..........................................   282
    Crowley, Sheila..............................................   284
    Egan, Conrad.................................................   310
    Husock, Howard...............................................   313
    Katz, Bruce J................................................   319
    Khadduri, Jill...............................................   329
    Marraffa, Henry Jr...........................................   335
    O'Hara, Ann..................................................   343
    Olsen, Ed....................................................   351
    Sidor, John..................................................   388
    Turner, Margery Austin.......................................   400

              Additional Material Submitted for the Record

Crowley, Sheila:
    The State of the Nation's Housing............................   411
Husock, Howard:
    ``Let's End Housing Vouchers''...............................   455
Olsen, Ed:
    Follow-up response to questions from Hon. Nydia M. Velazquez.   463

                               WITNESSES
                         Tuesday, July 1, 2003

Burger, Eugene, Eugene Burger Management on behalf of the 
  National Leased Housing Association, Washington, DC............   123
Farber, Jeff, Chief Operating Officer, L.A. Family Housing 
  Corporation, Los Angeles, CA...................................   140
Franklin, Matthew O., Director, California Housing and Community 
  Development, Sacramento, CA....................................   116
Gross, Larry, Executive Director, Coalition for Economic 
  Survival, Los Angeles, CA......................................   137
Jackson, Carlos, Executive Director, Los Angeles County Community 
  Development Commission and Housing Authority of the County of 
  Los Angeles....................................................   119
Jackson, John, Head Organizer, Los Angeles ACORN.................   138
Martin, Beverly, voucher program owner...........................   136
Peters, Chanda, voucher recipient................................   132
Schwartz, Ruth, Executive Director, Shelter Partnership, Inc.....   142
Shelton, Thomas K., Partner, Greystar Real Estate Partners and 
  President of the National Apartment Association National Multi 
  Housing Council Joint Legislative Program......................   125
Smith, Donald J., Executive Director, Housing Authority of the 
  City of Los Angeles............................................   118
Thompson, Leona, voucher recipient...............................   134
Triesch, Larry, Assistant Deputy Director, Long Beach Housing 
  Authority......................................................   121

                                APPENDIX

Prepared statements:
    Ney, Hon. Robert W...........................................   468
    Burger, Eugene...............................................   470
    Farber, Jeff.................................................   474
    Franklin, Matthew O..........................................   478
    Gross, Larry.................................................   482
    Jackson, Carlos..............................................   488
    Jackson, John................................................   500
    Martin, Beverly..............................................   504
    Peters, Chanda...............................................   505
    Schwartz, Ruth...............................................   507
    Shelton, Thomas K............................................   512
    Smith, Donald J..............................................   518
    Thompson, Leona..............................................   546
    Triesch, Larry...............................................   548

              Additional Material Submitted for the Record

Franklin, Matthew O.:
    Governor Gray Davis, letter, June 27, 2003...................   551
Waters, Hon. Maxine:
    Letter from James K. Hahn, Mayor of Los Angeles, July 1, 2003   553

 
                         THE SECTION 8 HOUSING
                          ASSISTANCE PROGRAM:
                      PROMOTING DECENT AFFORDABLE
                        HOUSING FOR FAMILIES AND
                      INDIVIDUALS WHO RENT--DAY 1

                              ----------                              


                         Thursday, May 22, 2003

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:03 p.m., in 
Room 2128, Rayburn House Office Building, Hon. Robert Ney 
[chairman of the subcommittee] presiding.
    Present: Representatives Ney, Green, Tiberi, Harris, 
Waters, Velazquez, Carson, Lee, Sanders, Watt, Clay, Miller, 
and Davis.
    Chairman Ney. [Presiding.] Today, the subcommittee will 
hold the first in a series of hearings to examine the current 
operation and administration of the Section 8 housing choice 
voucher program and to review various proposals intended to 
make the program more efficient and cost-effective.
    The Section 8 housing assistance program was authorized 
under Section 8 of the U.S. Housing Act of 1937. It is a major 
vehicle providing rental assistance to low-income families and 
individuals commonly referred to as the Section 8 voucher 
program. It is the largest program in the Federal government 
that subsidizes the housing costs of low-income households. It 
is administered Federally by HUD, but is managed locally by the 
public housing authorities, also known as PHAs.
    For fiscal year 2003, over $12 billion was provided for the 
voucher program, accounting for more than one-third of the HUD 
discretionary budget. Through the housing choice voucher 
program, eligible families can receive subsidies called 
vouchers to reduce their rent in housing units owned by private 
landlords. This is different from the public housing program 
which allows eligible families to move into low-rent housing 
units owned by the Federal government. Over the years, the 
program has often been criticized for its inefficiency. More 
than $1 billion are recaptured from the program every year 
despite long waiting lists for vouchers in many communities. 
The rising cost of the Section 8 program and some of the 
administrative concerns have caused many in Congress and the 
Administration to conclude that the program is in need of 
reform. The omnibus appropriations bill for 2003 adopted 
proposals to address the rising costs of the Section 8 program. 
Provisions were included that for the first time base the 
appropriation for Section 8 renewal program on the total amount 
necessary to renew all housing units currently under lease, 
rather than on the baseline number of units allotted to each 
public housing authority. The rationale for this change was 
that there have been no significant improvements in the 
utilization rate of these funds for the last five years. The 
omnibus bill also created a central reserve fund that the PHAs 
can use to supplement the rental subsidy costs of vouchers not 
reflected in their annual financial statements. This will allow 
the PHAs to lease up to their baseline levels if possible.
    In its fiscal year 2004 budget proposal, the administration 
proposed converting the Section 8 housing choice voucher 
program into a State-administered block grant. This legislation 
would dramatically change the way the Section 8 voucher program 
is funded and operated. The administration's proposal would 
convert the Section 8 tenant-based voucher program and the 
Section 8 project-based voucher program to a State-run block 
grant called Housing Assistance for Needing Families, HANF. 
While I recognize, as the administration does, that we have to 
constantly seek ways to improve America's communities and 
strengthen housing opportunities for all citizens, particularly 
for our poor, I also recognize the issue of reforming Section 8 
is a contentious one.
    However, it is an issue that I do believe deserves debate 
and a sustained debate, so all interested parties should and 
shall be heard. To that end, beginning today, I intend to hold 
a series of hearings on the overall Section 8 program and the 
administration's HANF proposal, receiving testimony from groups 
and individuals across the spectrum. This is a very important 
discussion and is one that I will be fully engaged with in the 
days ahead.
    With us today to discuss the administration's view is Mr. 
Michael Liu, Assistant Secretary for Public and Indian housing 
at HUD. The administration has put forth a sweeping proposal, 
and without objection I would like to be lenient with the 
allotted amount of time for testimony today to give the 
assistant secretary the opportunity to explain the 
administration's proposal. I have also introduced a bill by 
request in the administration on dealing with the issue.
    With that, I would see if we have comments from our ranking 
member.
    Ms. Waters. Thank you very much, Mr. Chairman. I certainly 
appreciate this hearing that you have organized.
    The housing choice voucher program, commonly referred to as 
Section 8, named after the section of the U.S. Housing Act that 
authorized it, is the largest Federal low-income housing 
assistance program. The Section 8 voucher program currently 
serves about two million families at an annual cost of over $12 
billion. Some 2,600 housing agencies, mostly local, administer 
the program. H.R. 1841, HANF, Housing Assistance to Needy 
Families, your bill, would convert the Section 8 voucher 
program to a block grant, transferring its administration to 
the 50 States, and giving them discretion over allocation of 
funds.
    Directly or indirectly, Section 8 supports over four 
million apartments. Roughly one in seven renters nationwide 
benefit from some form of Section 8 assistance. Of the four 
million Section 8 households, about 35 percent, 1.4 million, 
have portable vouchers. The HANF proposal would fundamentally 
change the Federal funding systems for tenant-based housing 
assistance from one based on actual cost to a block grant that 
simply distributes Federal appropriations among States. One of 
the Stated goals of the administration for HANF is to improve 
the under utilization of the Section 8 program. However, with 
the recent passage of HUD's funding year 2003 budget, block 
granting the program to States for this reason is unnecessary, 
as the problem of under utilized vouchers has already been 
addressed. The budget provides only enough funds to ensure that 
every family currently assisted under the program will continue 
to be assisted, rather than continuing the policy of funding 
all vouchers, even if they are not being used.
    Senate VA-HUD Appropriations Subcommittee Chairman Kit 
Bond, in a Statement at a March 6, 2003 subcommittee hearing, 
said, and I quote, in my opinion, HANF is premature. The VA-HUD 
funding 2003 appropriations bill created a new funding 
structure for Section 8. Vouchers where public housing 
authorities receive the funding for all vouchers in use and for 
any vouchers that can be used up to a PHAs authorized level. 
This funding approach should result in a more realistic 
assessment of Section 8 funding needs, and reduce the need to 
go through the annual ritual of rescinding large amounts of 
unused excess Section 8 assistance. I think it will take 
several years to ensure the reliability of this new funding 
system, but I am optimistic that will become a good gauge of 
both the actual cost and the use of vouchers.
    A January, 2002 GAO report compared the six active Federal 
housing programs and found that Section 8 vouchers were the 
most cost-effective. Historically, funding for block grants 
such as HANF has failed to keep pace with inflation. Under 
HANF, funding levels would be based on inflation-adjusted 
figures, as opposed to current policy which bases renewal 
funding on actual housing costs. Between 1998 and 2003, rents 
rose by 25 percent. Over the same period of time, the consumer 
price index increased by 12 percent. Even at inflation-adjusted 
levels as suggested by the administration, housing assistance 
is likely to erode steadily under HANF.
    If funding levels fall behind the program's needs, as 
likely will occur, States will either have to contribute their 
own funds to the program or reduce assistance to low-income 
families and elderly and disabled individuals in one or more of 
the following ways: reduction of the number of families that 
receive housing vouchers, despite the fact that three out of 
four low-income families eligible for vouchers already go 
without assistance because of funding limitations. A reduction 
in the number of vouchers would make the shortage of affordable 
housing even larger by cutting costs, by shifting assistance to 
higher-income families. Such families need smaller subsidies to 
be able to afford housing. As a result, the average cost of 
providing housing vouchers to these families is smaller than 
the cost of serving poor families. Also cutting costs by 
shifting rental burdens to families participating in the 
program. This can be accomplished by requiring families to pay 
more than 30 percent of their income for rent, or reducing the 
total amount of rent that a voucher could cover, thereby making 
fewer housing units accessible to voucher families.
    There is a lot more here, but I think that which I have 
shared with you basically describes my concerns about HANF. I 
am very, very worried about this program, Mr. Chairman. This is 
one of the most significant programs to assist poor people that 
we have in this country. I come from a State where we have a 
$35 billion deficit. If you block grant that money to my state, 
they are going to take some of it and use it for other things. 
Or if they needed to subsidize it in any way, they could not do 
it because we just do not have the money. So I would like to 
hear from others today about your legislation, but I think that 
this would be one of the greatest shifts in a program that I 
have seen certainly since I have been in the Congress of the 
United States, and maybe historically.
    I yield back the balance of my time.
    Chairman Ney. The gentlelady yields back the balance. Does 
the gentleman have a written statement?
    Mr. Green. No public statement, thank you.
    Chairman Ney. We will send you a bill for that. The 
gentlelady from New York?
    Ms. Velazquez. Thank you, Mr. Chairman.
    I would like to thank the chairman and ranking member for 
holding this important hearing today. I would also like to 
thank Assistant Secretary Liu for testifying.
    The Section 8 program is a vital safety net for our most 
at-risk families. It provides vouchers that allow families the 
flexibility to receive government-subsidized rental housing in 
the private market. The tenant-based program gives low-income 
families the opportunity to move into housing they could not 
otherwise afford. This gives parents more say in what schools 
their children attend and more opportunity to live closer to 
their place of employment and public transportation.
    However, the Section 8 program is struggling. As a result 
of chronic underfunding, only one-fourth of low-income 
households that are eligible for vouchers receive any Federal 
housing assistance. Additionally, landlords are opting out of 
the project-based program and many more are refusing to rent to 
new voucher tenants. The President says he has the solution; 
the Housing Assistance for Need Families block grant. President 
Bush expects us to believe that block granting the Section 8 
program will not reduce the number of families assisted. He 
expects us to believe that it will not shift burdens to low-
income families. Mr. Chairman, I believe the President has made 
his lack of commitment to Section 8 abundantly clear.
    In fiscal year 2001, 79,000 new vouchers were appropriated. 
That was the last year of the Clinton administration. As soon 
as President Bush took office, the number of new vouchers 
dropped to 18,000. In fiscal year 2003, no new vouchers were 
appropriated. The current HUD budget proposal calls for a mere 
5,500 new vouchers. Mr. Chairman, there are hundreds of 
thousands of families on waiting lists. While the rhetoric 
coming out of the administration is that they are creating new 
housing opportunities for low-income communities, the reality 
is that they have systematically ignored them for the past two 
and a half years. HANF will seriously undermine the financial 
and moral integrity of Section 8. It creates an unnecessary and 
costly new layer of bureaucracy, and eliminates flexibility in 
the program. It will result in no new housing opportunities, 
and potentially limit the length of time tenants can receive 
Section 8 benefits.
    For these reasons, I authored a letter with my colleague 
from New York, Mr. Nadler, asking appropriators to fund 79,000 
new Section 8 vouchers this year. This letter was signed by 66 
members of Congress, including every Democrat on this panel. I 
will ask unanimous consent, Mr. Chairman, that this letter be 
inserted in the record today.
    Chairman Ney. Without objection.
    [The following information can be found on page 166 in the 
appendix.]
    Ms. Velazquez. I understand the chairman intends this to be 
the first in a series of hearings on this topic, and I commend 
him for this decision. We must consider the suggestions of a 
full range of expert witnesses before rushing to a markup. I 
believe that the current proposal will not only fail to address 
the needs at hand, but will make our housing crisis even worse, 
leaving more families out of assistance and out in the cold.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Chairman Ney. I want to thank the gentlelady. Also, without 
objection, all members' opening statements will be made part of 
the record.
    The gentlelady from California?
    Ms. Lee. Thank you, Mr. Chairman. I want to also thank you 
and Ranking Member Waters for convening this hearing, and to 
the assistant secretary, thank you for being here.
    Today, we all know that our nation is facing an affordable 
housing crisis; 4.9 million families across the nation pay over 
50 percent of their income or rent often for substandard 
housing. Even when the economy was strong, rising housing 
prices kept safe, decent, affordable housing out of the reach 
of millions of American families. The combination now of a weak 
economy and rising housing and rental prices has created a 
situation for low-income families that is very untenable.
    The Section 8 voucher program has been the principal form 
of assistance for low-income families, the elderly, and we 
cannot forget the disabled also. Only 15 percent of Section 8 
voucher recipients live in high-poverty neighborhoods, as 
compared to approximately 54 percent of public housing 
residents. Clearly, showing the success of integrating 
communities through the Section 8 voucher program is what we 
are beginning to see.
    So I recommend that we look at how the Section 8 program 
performs after the changes that were made during last year's 
appropriations cycle. We should also look at the issue of 
recaptures and bring in our local housing leadership and 
tenants to talk about the real problems with local housing 
affordability and potential solutions. Block granting will not 
work. This proposal I believe goes in the wrong direction. Most 
importantly, I think we must increase the flexibility and 
funding for vouchers in order to eliminate our long waiting 
lists, recruit more landlords, and broaden our pool of 
affordable rental units. That is the direction I think we need 
to go in.
    The Housing Assistance for Needy Families fails to 
effectively address the needs of the Section 8 voucher program 
and would compound our nation's growing challenges with our 
housing and state budget crisis. So I think that we do, as the 
ranking member and Congresswoman Velazquez indicated, I think 
we need to look at this. We need to have more discussion and we 
need to try to come up with a bipartisan approach to this. I 
look forward to working with members of the administration, 
HUD, and with members of this committee on, really, I believe 
what amounts to saving our Section 8 program, because I think 
going in this direction truly will possibly eliminate it for 
many of our communities.
    Thank you, Mr. Chairman, and I yield the balance of my 
time.
    Chairman Ney. I thank the gentlelady, who yields back the 
balance of her time.
    The gentleman from North Carolina, do you have an opening 
statement?
    Mr. Watt. Thank you, Mr. Chairman. I will not take the full 
time, but I would just thank the witness for being here, and 
for being available to answer questions.
    I am all in favor of improving the Section 8 program. In 
parts of my congressional district, it works; in other parts, 
it does not work. But I am not sure that I understand how 
simply passing the problem along to the States addresses that. 
I do not necessarily view that as an improvement in the Section 
8 program. I suspect what you will get are some improvements in 
some places and some substantial un-improvements in other 
places. One thing we know for sure is that there will not be 
the body of information and experience that has been built up 
about the Section 8 program by HUD over all of these years, 
because in effect what we are doing is telling States to start 
doing something that they have not been doing in the past. I am 
not sure I understand how that improves the situation. It gets 
it off of HUD's plate. It passes the buck, but somebody has got 
to do the hard work.
    So I am looking forward to hearing how we think this 
improves the Section 8 program, not just moves it from one 
location to another location. So if I can get some answers to 
that, either in your opening statement; I was looking at your 
opening statement and it is just kind of like we assume that 
this movement somehow improves the program. I do not see the 
structural definition of how that occurs, other than just the 
assumption. So I hope you can address that as we move along, 
and I will yield back the balance of my time.
    Chairman Ney. The gentleman yields back the balance of his 
time.
    We want to welcome Mr. Liu to the committee; the Assistant 
Secretary for Public and Indian housing. Without objection, 
your written statement will be made part of the record. 
Welcome.

STATEMENT OF HON. MICHAEL LIU, ASSISTANT SECRETARY, PUBLIC AND 
 INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, 
                         WASHINGTON, DC

    Mr. Liu. Thank you very much, Mr. Chairman, Ranking Member 
Waters, and members of the committee. I appreciate the 
opportunity to appear before you today to discuss H.R. 1841.
    The purpose of the Housing Assistance for Needy Families, 
or HANF proposal, is to improve the delivery of tenant-based 
assistance to very low-income families. We believe that it will 
accomplish this objective by retaining the core elements of the 
tenant-based assistance program, while stripping away the 
unnecessary requirements and regulations that are not central 
to the program's fundamental mission. The current program's 
basic concept is still sound. However, there are serious 
shortcomings with its design and effectiveness. This is 
evidenced by two very troubling figures. Over $1 billion of 
tenant-based assistance have been annually recaptured by 
Congress; and two, HUD pays upwards of $1 billion in over-
subsidy due to errors resulting from the current complicated 
restrictive program rules which we do have. So on the one hand, 
money goes unused and thousands of eligible low-income families 
do not receive subsidies. On the other hand, the government is 
paying too much for what is used. Reforming and simplifying the 
program can eliminate both of these staggering problems and 
provide more, not less housing, to those in need.
    In addition, HUD must administer the voucher program 
through rules and regulations in a one-size-fits-all mode to 
over 2,500 entities throughout the nation, half of which 
administer only 250 or fewer vouchers. The sheer number of 
local administrative entities has significantly diminished 
HUD's ability to provide quality assistance to the program and 
to monitor and accurately measure performance. Under H.R. 1841, 
HUD would be authorized to make grants available to States to 
provide tenant-based rental and homeownership assistance, 
either directly or through local entities, to eligible 
families. I repeat, we are authorized to make grants to the 
States. We are not mandating that the States take on this 
program. States who want to take on this program would have to 
apply with a plan, and we would have to approve that plan.
    We believe the States, those who accept this challenge, 
would be able to make more timely and informed policy and 
funding decisions based on local need and market conditions, as 
compared to administrators back here in the beltway in 
Washington, D.C. These decisions include moving unused funding 
to heavy demand areas of the State at any given time during the 
fiscal year; something that takes HUD many weeks, if not 
months, to attempt to implement; and then tailoring the program 
to better address the practices of the local market and needs 
of the community.
    States would have the ability to contract with the most 
effective entities to manage the program in any given area of 
the State, fostering greater accountability and competition in 
the program. State administration would reduce the 
administrative burden associated with running the program by 
consolidating many of the administrative duties currently 
replicated by every single PHA in a single state, such as 
reporting and budget. HANF would retain and expand portability 
of tenant-based assistance to all areas of the country, 
including those few areas not currently covered by the voucher 
program. State administration would eliminate the burden of 
portability moves within a State which account today for over 
three-fourths of all moves between PHA jurisdictions. Moves 
between States would also be easier to accomplish. The number 
of vouchers available to the State at a given time through 
normal turnover would permit the State to absorb the family 
into its own program and eliminate the cumbersome billing 
process which currently exists among PHAs across state lines.
    Some concerns have been raised that the HANF grants may be 
more susceptible to budget cuts as a block grant or that 
increases in rents would out-pace inflation. We believe just 
the opposite would be true. Because the changes brought about 
by HANF would facilitate greater utilization, the funding 
levels would be more sustainable and justifiable compared to 
the current program which Congress just this year adjusted 
funding levels to account for under utilization. Some assert 
that block grants have been more vulnerable to cutting in the 
annual appropriations process than others. In fact, the funding 
history of the very similar affordable housing type of program, 
the HOME block grant program, just does not support this 
suggestion. In the President's fiscal year 2004 budget, the 
requested appropriation for the HOME program is 14 percent 
higher; that is adjusted for inflation; than in the program's 
very first year. The program has in fact received regular 
annual increases since 1993.
    We believe that support in the budget and appropriations 
process for programs does depend in good part on their 
performance. By strengthening the performance of the housing 
choice voucher program, the administration's proposal would 
increase the chances that future funding increases will be 
provided by Congress. I want to point out that our 2004 
requests for HANF is over $900 million than our fiscal year 
2003 proposal. Under 1841, annual funding would be adjusted by 
a formula that would take into consideration data specifically 
tied to housing costs, not just inflation in general, as well 
as the number of the families assisted, extent of poverty, 
state performance, and funding utilization.
    Another misconception is that States would be able to 
divert HANF funds for other purposes. Our legislation is clear 
that the program would be limited to tenant-based rental and 
homeownership assistance and the costs of administering those 
grants. Conversion to the HANF program would maximize the 
number of families receiving housing assistance, without 
shifting assistance away from those families with the most 
need. The initial amount of the HANF grant would be equal to 
the sum of all voucher funding currently provided to public 
housing agencies in the State. The States would be required to 
maintain assistance for at least as many families as are 
currently served, and families under the voucher program at the 
time of the conversion to HANF would continue to receive 
tenant-based rental assistance under the current regulations 
through fiscal year 2009. In addition, any family participating 
in the homeownership voucher program at the time of the 
transition to HANF would continue to receive homeownership 
assistance under the same terms and conditions as the current 
program. Lenders can continue to underwrite loans with the full 
assurance that the rules under which they base those loans 
would not be impacted by the conversion of the program.
    A major goal of 1841 is to simplify and reduce the 
administrative burden on the program providers. For instance, a 
significant problem plaguing the voucher program is the 
unacceptable error rate of approximately $1 billion a year on 
the calculation of adjusted incomes and rental subsidies. One 
of the root causes of the problems is the myriad of different 
rules covering what qualifies as annual and adjusted income, 
coupled with numerous temporary full and partial exclusions and 
income disregards. There are even rules which talk about 
capitalization of indebtedness; rules involving depreciation of 
assets; hard to believe when we are talking about a population 
that really we are not considering those types of issues when 
we are looking at them.
    These policies, however well intended, and many of them 
directed by past Congresses, have simply made income 
determinations a far too complicated process. Under HANF, all 
income determinations would be based on gross incomes. States 
would have the flexibility to set the percentage of gross 
incomes that families would be required to contribute as their 
share of the rent, but that percentage could not exceed 30 
percent. Under the current voucher program, families may choose 
to pay more for higher-priced rental units if they wish.
    In summary, 1841 offers us an opportunity to make 
significant improvements to the housing voucher program. It 
moves administrative decisionmaking out of Washington, closer 
to the communities and families affected, along with program 
flexibility to address local needs. States would have the means 
to take actions that may be necessary so that program funds are 
expended promptly and most effectively. Importantly, the HANF 
program provides government support of self-sufficiency efforts 
for assisted families, efforts to reduce homelessness, and to 
help the disabled live independently. It does this by 
facilitating greater coordination with state-administered 
programs relating to education and job training and child care 
and health care, inclusive of programs like TANF and One-Stop 
Career Centers.
    I thank you again for this chance to testify, and I look 
forward to answering any questions you might have. Thank you, 
Mr. Chairman.
    [The prepared statement of Hon. Michael Liu can be found on 
page 161 in the appendix.]
    Chairman Ney. I want to thank you for your testimony. They 
have also called two votes, but we will try to get some 
questions in and then vote and then return.
    I just wanted to give you an example, and I do not know if 
you have looked at this or how it would be written, but in my 
own state there was a grab of TANF monies, and those monies 
which should have gone into, in my opinion, the work program 
went into supplement Head Start. Now, it is not legal and I did 
not think it was then, but it was done based on the fact that 
somehow they did education for parents; there was some clever 
way to remove, or as I used to say, appropriate or steal those 
funds over, whichever way you want to put it. I did not agree 
with what they did. If you do this, how do you craft this so 
you make it crystal clear that funds cannot be used for any 
purpose but exactly what traditionally the PHAs have used them 
for?
    Mr. Liu. Mr. Chairman, we fully anticipate that in review 
of the plans from the States that we will be obviously looking 
to ensure that their plans to make clear that the funds will be 
used for a tenant-based voucher program. Secondly, in the 
initial phases of the program, we believe that it is very 
likely that we will monitor more than just one a year, probably 
at six-month intervals, again just to ensure that there is 
compliance with the program requirements, compliance with their 
plans, so that these types of intrusions on the intent of the 
program are mitigated and certainly are prevented to the extent 
that we can.
    Chairman Ney. Just to follow up on that, because again I 
think that we would have to look at other options or what 
options would be out there, if the governor of a State would 
not in fact comply and somehow said, look, I think these monies 
could be shifted and supplemented for; I cannot think of an 
example right now, but the Head Start was the best example. Do 
you sue the governor if the State is running a program? Because 
technically, you cannot use Federal dollars. HANF money, in my 
opinion, cannot be used to supplement Head Start money that the 
State of Ohio, for example, should have put in. So what 
happens, I guess; has anybody thought that out?
    Mr. Liu. We have a range of options in the event that a 
State oversteps its bounds or is not compliant with the program 
outlines. We can take back the program administration. There is 
no question in the legislation that the Secretary has the power 
to do that. We can withhold funds until we are satisfied that 
the State has righted its ways or assured us that it will not 
proceed down the wrong path. We have the ability to penalize 
the administrators involved through civil as well as 
potentially criminal actions. So we think that we have an array 
of tools that we can use to prevent those things from 
happening, Mr. Chairman.
    Chairman Ney. The gentlelady from California, do you have a 
question?
    Ms. Waters. Thank you very much, Mr. Chairman.
    This may be a question that is easily answered and 
everybody else may understand except for me. What if a State 
decides it does not want to take the block grant?
    Mr. Liu. Then HUD will administer the program under the 
guidelines as outlined in 1841. In other words, we will 
administer the program with the entities within the State that 
we feel are good performers, know how to manage the program, 
and with the flexibility and simplicity which we feel the State 
was intended to at the start to be managed by.
    Ms. Waters. Obviously, the administration of this program 
demands a large number of personnel to do it. So if all of the 
States decided they were going to take the block grant and 
administer the program, that means you would have to kind of 
get rid of this part of HUD. Is that right?
    Mr. Liu. Absolutely not, Ranking Member Waters. The history 
of HUD over the past, prior to this administration, because we 
have increased our personnel at HUD.
    Ms. Waters. What are you going to do with all these people 
who used to administer Section 8?
    Mr. Liu. Right now, these people are basically looking 
through paper, doing rote type of work. We want to free these 
people to provide the type of quality assistance, technical 
assistance, qualitative thinking that right now we have to go 
outside the agency to get and to pay millions of dollars for. 
We want to use our staff to do the type of qualitative work 
with the State entities and their partners in making this 
program more efficient and better.
    Ms. Waters. We are going to have to go, but I am concerned 
about all of this monitoring that you are going to do that you 
cannot do now. What you are basically saying is that HUD cannot 
do it now. But then you tell us, you are going to make sure the 
States do it because you are going to set up all these 
monitoring systems. Now you are trying to tell me you are going 
to take all of these employees and you are going to use them to 
do something related to the program, while my state and other 
States are going to be using part of this block grant to put up 
whole new systems by which to administer the program, which is 
extreme duplication. What are you doing and why are you doing 
this? Don't answer now, we have to leave. We will come back.
    Mr. Liu. I will answer you, Ranking Member Waters.
    Chairman Ney. If the gentleman will hold, we will be back.
    [RECESS]
    Chairman Ney. We will begin again, and we will go for 
questioning to Mr. Green.
    Mr. Green. Mr. Liu, I guess the biggest question I have is 
what do you see as the main barriers to increased participation 
in the Section 8 rental program? What is it that we should be 
doing to attack those barriers?
    Mr. Liu. The main barrier is, as I have outlined, 
congressman, one, simplification; getting back to the basics of 
what the program was intended to do, to help people with low 
income so that they do not pay more than 30 percent of their 
gross income; very simply. We have over the years created layer 
upon layer of different directions, many well intended, where 
in fact we have problems now in figuring out just who qualifies 
and does not qualify for the program. We end up, as I stated, 
paying $1 billion more than we should for those vouchers that 
we use, and then for the vouchers that we do not use, we lose 
$1 billion on the back end.
    Number two, we have a very inefficient system currently in 
trying to make use of these precious dollars; over 2,600 
entities, over half of them manage fewer than 250 vouchers. We 
spend $10 million extra just to take care of so-called troubled 
agencies. Those administrative, as well as programmatic in 
terms of policy, are the biggest barriers.
    Mr. Green. You have in both your written testimony and your 
response just now, you have put some dollar figures on 
inefficiencies and anecdotes and examples. Do you have any idea 
program-wide what kind of savings we are talking about? 
Obviously, you must believe that there are savings. I think 
that is the philosophy behind what you are trying to do or what 
you are proposing to do. Do you have any idea what those 
numbers would mean, and therefore what the increased 
participation could mean?
    Mr. Liu. Very, very roughly in terms of cost savings, from 
a very conservative estimate of anywhere from $150 million 
upwards to; the difficult part is how do you value the type of 
quality assistance that we are not giving now that we could 
give to managers of the program. That is difficult to quantify, 
so that could be another $100 million, maybe more.
    Mr. Green. Okay, thank you. Mr. Chairman, I have no more 
questions.
    Chairman Ney. The gentlelady from New York?
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Liu, I am disturbed by what I believe to be a large 
number of misleading statements in your testimony. To cite two, 
on page three you said, ``some assert that block grants have 
been more vulnerable to cutting in the annual appropriation 
process than others, so that block-granting vouchers means that 
funding is less likely to keep pace with inflation in the 
future. The funding history of HUD's HOME block grant for 
housing does not support this argument.'' However, provisional 
data from the CBO indicates otherwise, and I have it right 
here. During the current administration, funding for HOME and 
CDBG has increased by only 4 percent, while inflation has been 
6.1 percent.
    Then, additionally, on page four, you said, ``States will 
have the flexibility to set the percentage of gross income that 
families would be required to contribute as their share of the 
rent, but that percentage could not exceed 30 percent.'' Yet 
the language in H.R. 1841 clearly says that, and I quote, 
families may choose to pay more to secure better quality 
housing. To me, this indicates that HUD will expect, and as the 
budget crisis gets worse, HUD will encourage any family who 
wants safe, decent housing as opposed to just a roof over their 
head, to pay more. Yet that is not what you imply in your 
testimony.
    How do you respond to these contradictions, and how can we 
believe your testimony?
    Mr. Liu. First of all, they are not contradictions, 
congresswoman. The number you gave from CBO is the combined 
CDBG and HOME figure. The HOME figure is in fact adjusted for 
inflation at 14.7 percent since the start of the program. For 
the specific fiscal years you mentioned, the increase is at 
10.7 percent. Secondly, in regards to what the legislation 
States, the legislation clearly States the maximum that the 
State could impose. Currently, as the program exists now, that 
any one family could pay is 30 percent of gross income. Excuse 
me; in terms of the ability of a family to pay more if they 
wanted to, that is the status quo right now. If a family wants 
to pay more than 30 percent more, they can. So there is no 
contradiction, congresswoman.
    Ms. Velazquez. You said that block grants are not 
susceptible to inflation; eroded due to inflation. But when you 
look to the block grants, big block grants----
    Mr. Liu. There has been an increase in CDBG. I did no 
mention CDBG in my testimony. I mentioned HOME as the program 
that we feel is most comparable because HOME program; I said 
HOME program. That is very specific. The example that we used 
in our testimony is the HOME program.
    Ms. Velazquez. Someone said that block grants have been 
more vulnerable. I think that is clear English.
    Sir, how will owners respond to the fact that vouchers will 
no longer be permanently awarded to participating families? How 
do you respond to arguments that they will be worried about 
renting to voucher holders because they know that they could be 
terminated at any time, even if they have always paid the rent, 
and they are still income-eligible?
    Mr. Liu. Congresswoman, the program currently is based on 
annual contracts, annual leases, by and large, in the various 
communities that have the program. Landlords are not promised 
now lifetime commitments on the part of the agencies, nor would 
they be permitted to be counting on lifetime contracts or 
leases with tenants in the future. The program will be managed 
as it is now. Private sector landlords would sign leases with 
tenants. Those tenants will be by and large on an annual basis.
    Ms. Velazquez. What about if there is a change in family 
income during the year?
    Mr. Liu. Currently, if there is a change in family income 
and the family goes over income, the housing authority is 
supposed to make adjustments to the rent paid by that family. 
If they are in fact ineligible, if they become ineligible, then 
the housing agency does have the right to terminate that lease. 
That is under the current program.
    Ms. Velazquez. And if their income goes down?
    Mr. Liu. And if their income goes down, the housing agency 
has the ability and they have the responsibility to adjust the 
rent paid by that family accordingly.
    Ms. Velazquez. How will that happen if the block grant has 
already been distributed?
    Mr. Liu. The block grant will be in terms of the sums 
provided to the States. The State will still have to administer 
the program through leases made with private landlords, just as 
they are done right now.
    Chairman Ney. The time has expired, but I would note we can 
go into a second round afterwards. What I would like to do at 
this time is I had yielded part of my time to the gentlelady 
from California so we could both get a question in. So I have 
got one more and then we will go on to the gentleman from North 
Carolina.
    The question I have, if this was a recapture problem, did 
the omnibus fiscal year 2003 bill, did it take care of the 
recapturing?
    Mr. Liu. The omnibus bill took care of the recapture issue, 
but it did not take care of the programmatic issues, nor did it 
take care of effective utilization issues. Through the reserve 
fund and through the ability to reallocate, it took care of the 
recapture issue, but it did not take care of the complexity 
issue. It did not take care of the over-subsidy issue. It did 
not take care of the administrative issue that we have to deal 
with all these very small entities, thousands of different PHAs 
that we have to work with now, Mr. Chairman.
    Chairman Ney. The reason I asked that, most of the thrust 
of what I have always heard of why this is needed is because of 
the recapture issue; the money has come back to Washington and 
did not get out to the people. So naturally, I was thinking if 
the omnibus bill took care of the recapture issue, why would we 
have to proceed? But you are saying there are other factors 
that would cause the block-granting beyond the recapture issue, 
correct?
    Mr. Liu. Absolutely, Mr. Chairman, absolutely.
    Chairman Ney. That makes a whole difference; I will do a 
second round of questions. If it was just an issue of 
recapture, one would think that what a housing authority does 
not use within a State it could automatically shift back to the 
State, so it does not come back to Washington to be decided 
whether it was recaptured or not. That could be corrected in a 
measure.
    Mr. Liu. Yes.
    Chairman Ney. You are saying that it is issues of 
utilization, and what else was it?
    Mr. Liu. Administration, a better delivery system, 
complexity of the program so that we can do away with the 
current problem of for the vouchers we do use, we essentially 
end up paying $1 billion more than we should be.
    Chairman Ney. How much more?
    Mr. Liu. Over $1 billion.
    Chairman Ney. For?
    Mr. Liu. For over-subsidies. In other words, we have found 
out that our agencies have such a difficult time in calculating 
income requirements, whether it is for new tenants or 
recertifications, that we end up paying more than we should be. 
And then finally, the ability to, from a case management 
standpoint for providing the best social service playing field 
for these families, we believe that working with the States who 
also have primary responsibilities in so many of these programs 
relating to education, job training, the TANF programs, career 
training programs, that it only makes sense, good sense, to 
combine the housing component; not the resources, but the 
program delivery alongside these other programs.
    Chairman Ney. At this time, we will move on to the 
gentleman from North Carolina.
    Mr. Watt. Thank you, Mr. Chairman.
    Mr. Liu, how much is HUD now spending to administer the 
Section 8 program?
    Mr. Liu. The full total amount of the program has 
fluctuated over the past few years between $12 billion and $14 
billion for the tenant-based program.
    Mr. Watt. That is the administration cost?
    Mr. Liu. That is the overall program. For the 
administration, we have----
    Mr. Watt. I am looking for the administration. Has HUD done 
a calculation of what it costs now to administer the program?
    Mr. Liu. $1.2 billion.
    Mr. Watt. $1.2 billion, Okay. And how many employees is 
that? How many employees do you have administering the Section 
8 program?
    Mr. Liu. That $1.2 billion is what we----
    Mr. Watt. I did not ask you whether that; I assume the 
employees, the salaries are included in that, but how many 
employees administer the Section 8 program?
    Mr. Liu. I could not give you that figure because the 
number----
    Mr. Watt. If you can get that for me later.
    Mr. Liu. I can get that for you.
    Mr. Watt. Okay, alright. As I understood what you said in 
response to Ms. Waters's question, you are not going to cut any 
of those employees.
    Mr. Liu. I need to clarify that. The $1.2 billion is what 
we provide to the housing authorities currently to pay for 
their administrative costs.
    Mr. Watt. That is not the question I asked, though, Mr. 
Liu. I want to know how much; has HUD done a calculation of 
what it costs HUD to administer the program?
    Mr. Liu. It is about $15 million.
    Mr. Watt. $15 million, okay. And you still do not know, I 
assume, how many employees HUD is using to do that? If you will 
get that information for me.
    Mr. Liu. I can get that for you, sir.
    Mr. Watt. Okay. Let me just raise some concerns that I have 
based on your testimony, which I think is very conclusory in 
the way it is presented, but raises more questions than it 
answers. First of all, starting at the end, with the comment 
that you just made in response to Mr. Ney's question, you say 
that this is more efficient because it does this by 
facilitating greater coordination with state-administered 
programs related to education, job training, child care and 
health care, inclusive of other state-administered Federal 
programs like TANF and One-Stop Career Centers. Yet there is no 
mixing of resources, and for the life of me I cannot understand 
how this process makes it more efficient if there is not going 
to be any mixing of resources.
    Number two, you say on page four of your testimony that 
there is an unacceptable error rate of approximately $1 billion 
in the calculation of adjusted incomes and rental subsidies. I 
assume that those errors are not being made by HUD; they are 
being made at the local level. Is that correct?
    Mr. Liu. Yes, sir.
    Mr. Watt. Okay. So it is not HUD that is incompetent; it is 
whatever agencies are administering the program in local 
communities that are doing incompetent monitoring, and you are 
still going to have some income criteria, so somebody in the 
local community is still going to have to administer those, I 
assume.
    Mr. Liu. Yes, sir.
    Mr. Watt. Okay. And so do you have discretion now; does HUD 
have discretion now to contract with somebody other than 
housing authorities to administer Section 8?
    Mr. Liu. If the housing authority falls into what we call 
``troubled status.''
    Mr. Watt. Okay. And then you would have to snatch it back 
and administer it yourself, not contract with somebody else, 
right?
    Mr. Liu. We would probably, through a contract, then 
administer the program with potentially----
    Mr. Watt. Are you doing that anywhere?
    Mr. Liu. Yes, we are.
    Mr. Watt. Okay. So you have found some places where they 
were just so inept that you had to get somebody else to do it. 
You are saying the State is more likely to be able to find 
somebody else than the Federal government is?
    Mr. Liu. We think the States are closer to the action.
    Mr. Watt. I understand that the State is closer to the 
action, but this is Federal money that we are administering, 
and if we are going to cut all the strings that are attached to 
it, it seems to me we ought to get out of the housing business 
and let the States collect the money and we would not be 
involved in the process at all. The Federal objective here, I 
take it, of Section 8 is to provide decent; we have a national 
policy to provide decent and affordable housing to people 
throughout the country. I think me and Mr.--what is the guy's 
name who ran against Hillary Clinton in New York? Mr. Lazio and 
I had about a two-hour debate on the floor of the House where 
he was trying to eliminate that from the housing bill. Finally, 
he relented. Our national objective still is to provide safe 
and affordable housing to every American citizen; not a right, 
but an objective. What I hear you saying is we are going to 
pass that objective to the States and rely on them to achieve 
the national objective that we have set. If we have a national 
objective, it seems to me, and we are going to use national 
money, it seems to me that we ought to be ultimately 
accountable for the use of this money. I just do not see that 
this block granting approach either adds efficiency; we are 
going to keep the same number of employees and the States are 
going to come up with a new infrastructure at the State level. 
They may contract with new people at the local level to 
administer the program who have no experience in doing it. So 
we are likely, it seems to me, to end up with an inordinately 
more inefficient program than we have now. I am just having a 
lot of trouble understanding that.
    Chairman Ney. The time has expired.
    Mr. Watt. I thank the gentleman.
    Chairman Ney. We will have another round of questions. I 
want to move on, and then we can come back, so if you could 
hold that. Can you answer that?
    Mr. Liu. Very quickly. I would just point out that in fact 
today 34 States have experience with the program and manage 
some form of the Section 8 program. We have national objectives 
for many areas of domestic policy; in agriculture, in health, 
in education; and the States manage many parts of those 
programs.
    Chairman Ney. Thank you.
    Mr. Tiberi?
    Mr. Tiberi. Thank you, Mr. Chairman. I apologize for coming 
in late.
    Mr. Liu, I was dealing with a HUD constituent matter, you 
can appreciate that. Just kind of following up on Mr. Watt's 
thoughts, he and I are agreeing more and more lately, which I 
am not sure is scarier for me or scarier for him. But in terms 
of the States, if you could share with us your thoughts 
regarding States' roles in this issue. Let me give you an 
example and have you respond.
    The chairman and I have served in the State legislature in 
Ohio. Ohio right now is going through, like many other States, 
a budget crunch. One of the things that the State does not do 
right now is really deal with housing. They have an agency 
within the Department of Development that deals with housing 
from a macro standpoint in terms of bonds. But in terms of 
actually administering a housing program like the Columbus 
Metropolitan Housing Authority does today, they simply are not 
capable of doing it and do not do it.
    So my question is two-fold, if you could give me your 
thoughts on the theory behind the program, if it became the law 
of the land. How would States like Ohio have to structure and 
beef up and provide a bureaucracy for such a program and 
oversight for such a program? And number two, what would happen 
to housing authorities today as we know it, in terms of their 
right to exist, as well as the employees that they have today? 
I know they are concerned, at least in Ohio, that they would be 
put out of business.
    Mr. Liu. Thank you for your question, congressman. I, too, 
have served in a State legislature. My home state is Hawaii, 
where it has a very active housing program, where it does 
administer a very active loan program. As I mentioned earlier, 
the legislation in our proposal is not a mandatory program on 
the part of the States. If the States did not feel that this is 
the right time for them; if they felt that this was, for 
whatever reason, not the right program for them to come in for, 
they need not be part of the application process. In which 
case, HUD would manage the program.
    Mr. Tiberi. Let me share with you, though, my concern. 
Maybe I did not express it very well. Ohio is going through a 
budget crunch, and they look, wow, here is some money that 
maybe we can put into the Department of Development and try to 
do what HUD is trying to do, maybe for even less money. Many 
argue that the system is already balkanized. Could this 
balkanize it worse, when you do not have, really, in some 
States a bureaucracy, and States would be attracted to the fact 
that there is this pot of money coming from HUD, let us grab it 
and try to deal with this issue?
    Mr. Liu. The program, first of all, would have to be used 
for a tenant-based program. There would not be the ability, and 
it is written into the law; there would be monitoring to that 
effect that they could not use these funds for other than a 
tenant-based voucher program. The easiest way for a State, and 
we think a logical way for a State to deal with the issue of a 
quick ramp-up to be able to administer the program, would be to 
contract with those entities within their States which are 
doing a good job now; those larger entities that have 
substantial programs which are in fact meeting many of the 
requirements of even the current complicated situation that we 
have.
    In Ohio, 34 percent of the agencies there are of the small 
category. That is not an insignificant number. Very easily, the 
State could contract with those housing agencies that do well, 
such as the one in the town that you mentioned, in Columbus, to 
continue managing the program.
    Mr. Tiberi. Excuse me, Mr. Chairman, one last question. If 
that is the case, then under the scenario today, under the 
theory that you have provided to us under this bill, that let 
us push it back to the State level, why not just push it back 
to the local level to start with under that theory?
    Mr. Liu. Because we believe the States right now are 
uniquely situated because of the other types of social service 
self-sufficiency programs that they are a key player in, in 
order to manage the program on a regional basis. Local entities 
are very local in their outlook, in their city or town. The 
voucher, because we want to give the portability aspects the 
greatest amount of flexibility and because most of the 
portability which we see in the voucher program lies within 
specific States, really sets itself up as the States are in 
fact the best entities that we see to manage this program.
    Mr. Tiberi. Just to follow up, Mr. Chairman, you do not 
have any concern with respect to States who do not have that 
ability in abusing that right, that effort?
    Mr. Liu. We believe that we will have enough of a 
monitoring presence to mitigate those concerns, sir.
    Chairman Ney. I thank the gentleman. Do you want to co-
author that bill with me? Okay.
    Mr. Davis from Alabama?
    Mr. Davis. Thank you, Mr. Chairman.
    Mr. Liu, good afternoon to you. Let me, if I can, pick up a 
little bit on Mr. Tiberi's questions and maybe go in a slightly 
different direction. There is one layer of concerns, I suppose, 
that States strapped for cash as they are, will take money that 
should go to housing and use it for other purposes. There is a 
more subtle concern that I have got. It is that a lot of States 
have significant disparities in their urban and rural housing 
needs, or at least the people who are sitting in state capitals 
have a perception of that. As you know, in most States, State 
Legislatures are affected by the population. They are 
determined by the population, so the urban areas have a lot of 
votes; the rural areas do not.
    I am concerned about the fact that if this program were 
transferred to the States as you and the administration want, 
that it would give the States an enormous amount of flexibility 
to discriminate, if you will, between urban and rural areas. 
Are there any particular strictures or provisions in place that 
would prevent States from reallocating funding in ways that 
might discriminate against rural areas, or even in some cases 
against urban areas?
    Mr. Liu. Congressman, the legislation would require us 
within 12 months of enactment to come up with a formula that 
looks at the number of families being served, extent of poverty 
within the State, cost of housing within the State, the 
performance of the State in administering grant amounts under 
this Act or others, the extent to which the State has any funds 
previously appropriated under the Act, and other measurable 
items. To the extent that there may be a concern and issues 
regarding rural versus urban, the Secretary has indicated that 
is certainly something that we can work on with this committee 
and others in developing that formula once this is enacted.
    Mr. Davis. And just if I can follow up on that, Mr. Liu, 
that I think is a point worthy of being followed up on because 
as you know, once this is down-loaded and sent to the States 
with all the things that HUD is doing, monitoring what the 
State of Alabama does with respect to York and with respect to 
Birmingham is not exactly going to be high on the priority 
list. So the concern that I think some of us would have is 
whatever changes are made, there need certainly to be some 
provisions in place. For example, Medicaid right now has 
certain rules and provisions that require States to allocate 
funding in ways that do not discriminate across regions.
    Let me move to one other area. It is my understanding that 
under the changes that you have proposed, that some of the 
income-targeting would also be changed. Right now, it is my 
understanding that about three-fourths of the money under 
Section 8, or three-fourths of the vouchers, I should say, have 
to go to what are classified as low-income tenants; people that 
fall within a certain median range. As I understand it, that 
could be reduced to as low as 55 percent. Is my understanding 
accurate, first of all?
    Mr. Liu. We would have the ability to waive the 75 percent 
requirement down to 55 percent, which still preserves the 
majority of the vouchers going to those at 30 percent or below 
of median income. But currently under the program, under the 
current targeting requirements, we find housing authorities 
having a difficult time providing vouchers to seniors who do 
not qualify because they may be getting more under Social 
Security; to those under the TANF program who because of their 
new work involvement are earning more than the required, or 
just above the 30 percent level. So while we preserve the basic 
parameters of the program as they exist today, we believe that 
the flexibility to allow the States to request waivers from HUD 
that could not do it on their own, is a reasonable one because 
we do preserve that a majority; at a minimum 55 percent; would 
still have to be at that level.
    Mr. Davis. Let me cut you off just in the interests of 
time. My concern with that, Mr. Liu, is that may be a fairly 
noble goal to get more seniors involved in the program, and of 
course there is nothing that would require States to reallocate 
the money to seniors. My concern is that at a time when the 
economy is in such dire straits, we are potentially singling 
out the most vulnerable people for cuts. That leads to my last 
area of questions. Right now, as I understand it, States can 
impose a minimum rent requirement of $50 a month, which doing 
the math, is $600 a year. Now, it strikes me as being somewhat 
curious public policy at a time when unemployment is rising and 
when poverty is rising in some parts of this country to raise 
the rents on people who are in this program, because of their 
limited ability to pay rent in the first place. That certainly 
does not strike me as good policy, and it does not strike me as 
a good selling point for the administration either.
    Mr. Liu. Fewer than 8 percent of the families would be 
affected by the $50 rent requirement.
    Mr. Davis. But it would be the poorest 8 percent, though, 
would it not, Mr. Liu?
    Mr. Liu. No, no. Our analysis shows that those who would be 
affected by the $50 are those that right now are claiming 
certain exclusions from income; exclusions that would not be 
available because we are simplifying that whole formula to 30 
percent of gross income.
    Mr. Davis. Mr. Chairman, I think my time has expired.
    Chairman Ney. I want to thank the gentleman.
    Mr. Clay of Missouri?
    Mr. Clay. Thank you, Mr. Chairman.
    Thank you, Mr. Liu, for being here today. You know, if 
block grants follow their historical pattern and the funding 
levels erode over a period of years, why would you consider 
this approach for Section 8 vouchers? Are you interested in 
sustaining the program or letting it erode over a period of 
years? We already know that most States would not have the 
funds to take over the slack caused by the Federal reduced 
funding. Is this a method of eventually killing the program?
    Mr. Liu. Absolutely not, congressman, although I appreciate 
your concern. Our intent here is to put the program back on a 
much more sound footing, so that it can perform at a level that 
we would all be comfortable with so that in fact we can ask for 
more dollars in the future. Our proposal for 2004 is over $900 
million more than our request in 2003. I think that is a 
specific sign that we are not looking to erode or kill this 
program.
    Secondly, as I mentioned earlier and it was included in my 
testimony, we cite the HOME program, a block grant program for 
affordable housing, as indicative of a block grant program that 
has in fact increased since its inception; increased to the 
tune of 14 percent since the first year of its coming into 
play. The administration's 2004 proposal is significantly 
higher than the 2003 proposal.
    Mr. Clay. Well, predicting an increase would indicate that 
you predict an increase in the number of people qualifying for 
the Section 8 program.
    Let me also get back to the line of questioning by Mr. 
Davis, along the States administering the block grant program. 
I come from Missouri, a Midwestern state. What entity in 
Missouri do you envision being able to administer the Section 8 
funds? I mean, I am sure your staff maybe can help you answer 
that, but just give me an example of who you would look to, 
what entity would you look to in Missouri to do this?
    Mr. Liu. We would look to see in a State like Missouri, 
which I do understand the history there, that we would think 
they would be wise to look toward housing agencies now that are 
doing a good job in your State of administering the program, 
and by contract having them do the work for that, and combining 
the inefficient operators in the State of Missouri with the 
larger and better-operated programs, which solves many of the 
issues of delivery. If there were a concern and Missouri 
decided they did not want to get into the program, they do not 
have to.
    Mr. Clay. Oh, it is optional?
    Mr. Liu. It is not a mandatory program. Yes, sir.
    Mr. Clay. Optional.
    Let me also point to a tenant management-run group in St. 
Louis called Carr Square Village. Representative Waters grew up 
in that community. It is run by a tenant management group. It 
is a troubled site. Yet, no action has been taken on that site. 
Do you have any background information on it? Could you let me 
know what you plan to do there? Can you shed some light on it?
    Mr. Liu. Are you specifically mentioning Carr Square?
    Mr. Clay. Yes, I am mentioning Carr Square Village, yes.
    Mr. Liu. Yes, Carr Square, we have taken action, sir. We 
have moved in court to take over that tenant management 
association. They have challenged us and we are now in a court 
battle with that TMC group.
    Mr. Clay. So that is a pending court case?
    Mr. Liu. It is in court right now.
    Mr. Clay. And if you prevail in court, then you will 
contract out with an agency that takes over troubled sites?
    Mr. Liu. We will have to find a unique way to deal with 
that because that is actually an old HOPE I site.
    Mr. Clay. Yes.
    Mr. Liu. It is a very complex situation.
    Mr. Clay. And it is very troublesome for us in the 
community who had so much hope for the project and would like 
to see some action taken in the very near future on it.
    Mr. Liu. We have. We have, through our enforcement center.
    Mr. Clay. I thank you very much, and that concludes my 
questioning. Thank you.
    Ms. Carson of Indiana. Mr. Chairman?
    Chairman Ney. Does the gentlelady have a question?
    Ms. Carson of Indiana. Thank you very much, Mr. Chairman.
    Chairman Ney. I am sorry. Would the gentlelady yield?
    Ms. Carson of Indiana. I am sorry.
    Chairman Ney. I am sorry. Mr. Sanders is next, and then the 
gentlelady.
    Mr. Sanders. Thank you, Mr. Chairman.
    Mr. Chairman, I would ask unanimous consent that my 
statement be placed in the record.
    Chairman Ney. Without objection.
    [The prepared statement of Hon. Bernard Sanders can be 
found on page 158 in the appendix.]
    Mr. Sanders. Okay. Mr. Chairman, I was also very pleased to 
hear everybody's respect for the role that States play in our 
national system. I would hope that that respect would remain 
when we deal with the Fair Credit Reporting Act, and I look 
forward to widespread support from your side of the aisle to 
not preempt States from passing stronger consumer protection, 
because I will use the record to show how much we respect 
States' rights and how good States do things. We will look 
forward to your support when we move to the Fair Credit 
Reporting Act on that.
    Mr. Liu, thank you very much for being with us today. My 
first question is a pretty simple one, and again because of 
time constraints, I am going to ask you to be brief. I 
apologize for that. We have about four million American 
households who are paying over half of their limited incomes on 
housing. We have in the course of a year in terms of 
homelessness in the United States, we are going to have about 
1.3 million children at one time or another living out on the 
streets. Do we have a housing crisis in the United States of 
America?
    Mr. Liu. We have a concern with all families of low income, 
sir.
    Mr. Sanders. Do we have a housing crisis in America, in 
your judgment?
    Mr. Liu. What we have, sir, is in regions, in certain areas 
of our country, we certainly do have very difficult housing 
situations, but it does not stretch across the country in all 
areas.
    Mr. Sanders. Boy, that was a good answer; very impressed by 
that. Let the record show that I think we have a serious 
housing crisis, which is why among other things we have 195 
cosponsors on legislation called the National Affordable 
Housing Trust Fund, which would build 1.5 million affordable 
units over the next 10 years. The point is, I do not think the 
administration does think we have a crisis, which is why I 
think we are not getting the kind of support that we need for 
affordable housing.
    Mr. Liu, my deep impression is that this administration is 
not strongly supportive of affordable housing. In the year 
2001, 79,000 new Section 8 vouchers were appropriated. That was 
in 2001. But in the year 2002, despite what I consider to be a 
major housing crisis, that number dropped to only 18,000, and 
for 2003, no new Section 8 vouchers were appropriated. Can you 
tell me why in the midst of what I consider to be a severe 
housing crisis, we have seen a drop to zero in terms of new 
housing Section 8 vouchers?
    Mr. Liu. Congressman, our budget from 2000 to 2003, and 
inclusive and then adding on 2004, has increased our request by 
over $2 billion for the Section 8 program.
    Mr. Sanders. But Mr. Liu, you know that is a bit 
disingenuous as an answer, because you have not added new 
housing vouchers, unlike previous administrations, but more 
importantly what you are saying is you are obligated by law to 
pay the rent for a certain number of vouchers. Rents have 
soared, and you have paid those rents. Isn't that why we have 
seen an increase in expenditures?
    Mr. Liu. Congressman, we have made requests of upwards of 
34,000 for new incremental vouchers, and we did not get them 
funded.
    Mr. Sanders. From whom?
    Mr. Liu. From this Congress.
    Mr. Sanders. The administration has requested 34,000; okay, 
Mr. Chairman, I would just note for the record that Mr. Liu has 
told me something that I did not know, that he says that the 
administration has requested 34,000 new Section 8 vouchers, 
which the Congress did not----
    Mr. Liu. This was in 2003.
    Mr. Sanders. This was in 2003. Mr. Chairman, if I could, 
Mr. Liu made that presentation. I do not know; I am assuming it 
is accurate. We would hope that you would; is that accurate?
    Chairman Ney. I am told it is accurate.
    Mr. Sanders. I would hope that you would use your influence 
or have the chairman of this committee help us with those 
34,000 new Section 8 vouchers.
    The other question that I want to ask, Mr. Liu, is that my 
understanding; and please correct me if I am wrong here; but 
the requirement that 75 percent of vouchers go to extremely 
low-income families could be reduced to as low a number as 55 
percent. And the limitation that no vouchers can go to families 
with incomes over 80 percent of local area median income is 
modified to permit elderly and disabled families with incomes 
of over 80 percent of median income to receive assistance. 
Doesn't this create a situation where some of the lowest income 
people in our country might be denied Section 8 vouchers, while 
some upper income people will receive those vouchers? Isn't 
that a problem?
    Mr. Liu. Our current program allows for the exceptions for 
seniors and disabled, as you read there, congressman. The 
legislation does permit HUD to grant waivers to the States, 
with justification, to lower the 75 percent requirement down to 
55 percent. However, I do point out that we can currently 
provide waivers for that requirement for housing agencies under 
the current program.
    Chairman Ney. The time has expired.
    Mr. Sanders. One last question?
    Chairman Ney. Let us move on to Ms. Carson.
    Mr. Sanders. Okay. Thank you.
    Chairman Ney. The gentlelady from Indiana?
    Ms. Carson of Indiana. Yes, sir, thank you very much, Mr. 
Chairman. I will not take a moment. I was really learning a lot 
from Congressman Sanders.
    In Indianapolis, as in St. Louis, we have a major project 
there that just is not working. Unfortunately, it is not 
anybody's fault. Designed as a senior citizens complex and 
because of the rules, they began to integrate everybody into 
that system; people that were recently released from mental 
institutions, people that were released from prisons were 
integrated into this senior citizens complex, and just created 
havoc. At this point, the Wye Baker Terrace is I think being 
consumed by HUD. I have been begging HUD for years to let us do 
something. My question is, when you have to pull back out of a 
project like that, what do you do? Do you put it on the market 
for sale? Or do you seek out new management?
    Mr. Liu. It depends on the program, congresswoman, and I am 
not specifically up to speed on that site that you mentioned. 
If it is a troubled public housing site, we can mandate that 
housing agency to get new management. We can take over the 
agency.
    Ms. Carson of Indiana. This is a Section 8 operation.
    Mr. Liu. If it is a Section 8 complex, we can take over 
that property; HUD can take over that property to manage it 
itself, if need be. We can take it over. Is it a multi-family 
insured----
    Ms. Carson of Indiana. It was designed specifically for 
senior citizens. That was the origin of it, and then it just 
turned out into----
    Mr. Liu. HUD has the power to take over and manage that 
site.
    Ms. Carson of Indiana. I think you are going to take it 
back, but I was wondering; well, we can talk about that later.
    In your Statement, I was trying to find it right quick, are 
you integrating both vouchers for Section 8 and homeownership 
as well into this project?
    Mr. Liu. We mentioned homeownership because currently for 
the last year and a half, we have had a homeownership option 
with our Section 8 program, where qualified Section 8 holders 
in certain agencies that provide this option can use their 
voucher to go to the bank, find a home that they can afford and 
purchase, and that voucher, the monthly voucher value can be 
used to write-down the monthly mortgage expense for periods of 
between 10 and 20 years.
    Ms. Carson of Indiana. Okay. So if I am on Section 8, I can 
take my Section 8 voucher and replace that with a down payment 
on a home?
    Mr. Liu. Not a down payment, but it can help to defray your 
monthly mortgage costs. It can help underwrite the mortgage.
    Ms. Carson of Indiana. Okay, question. If I am in a Section 
8 qualified unit that is being provided for by Section 8, and I 
want to buy that unit, I can use that voucher to buy the unit 
that I am in?
    Mr. Liu. If the owner wants to sell it to you; if you can 
come up with an agreement with the owner.
    Ms. Carson of Indiana. I do not want to belabor the point. 
I was just trying to understand it. But it does not apply to 
somebody that is not a current Section 8 recipient. For 
example, this high rate of unemployment in my district; high 
rate of foreclosures in my district in Indianapolis remain 
unabated, and people are losing their homes through no fault of 
their own. The jobs are vanishing.
    Mr. Liu. I see.
    Ms. Carson of Indiana. Could they become instantly eligible 
for Section 8 to use the money for a mortgage payment?
    Mr. Liu. No.
    Ms. Carson of Indiana. It would be a damned good idea.
    Thank you, Mr. Chairman, I yield back.
    Chairman Ney. Would you like to ask another question?
    Ms. Carson of Indiana. I am through. Thank you, Mr. 
Chairman. I yield back. Thank you very much.
    Chairman Ney. Ms. Waters?
    Ms. Waters. No, I suppose that my question was answered in 
my absence, about the administering of the program. If not, I 
will talk with you about it at a later date. But let me just 
say this, even though my chairman is sitting here and he is 
carrying the bill, this bill is scaring the living daylights 
out of a lot of people. We do not know what it means. Some of 
us are afraid that this is the first step toward the 
dismantlement of HUD, and that worries us an awful lot. And so, 
we are going to have to fight and oppose the direction of my 
good friend's legislation. It will be a friendly fight, but it 
is going to be a tough one. We just do not think that a change 
of this magnitude is in the best interests of the folks who 
need the program out there.
    Chairman Ney. I thank the gentlelady. I would note there 
are going to be 50 minutes worth of votes, so the chair would 
note that some members may have additional questions for the 
panel, which they wish to submit in writing. Without objection, 
the hearing record will remain open for 30 days for members to 
submit written questions, and for the witnesses to place their 
response in the record.
    The hearing is adjourned.
    [Whereupon, at 3:50 p.m., the subcommittee was adjourned.]


                         THE SECTION 8 HOUSING
                          ASSISTANCE PROGRAM:
                      PROMOTING DECENT AFFORDABLE
                        HOUSING FOR FAMILIES AND
                      INDIVIDUALS WHO RENT--DAY 2

                              ----------                              


                         Tuesday, June 10, 2003

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2128, Rayburn House Office Building, Hon. Robert W. Ney 
[Chairman of the subcommittee] presiding.
    Present: Representatives Ney, Green, Bereuter, Miller of 
California, Hart, Tiberi, Waters, Velazquez, Carson, Lee, Watt, 
Clay, Miller of North Carolina, Scott, and Davis. Also present 
was Representatives Ryun and McCotter.
    Chairman Ney. I want to welcome you. Today the subcommittee 
holds the second in a series of hearing to examine the Rental 
Vouchers Program and the various proposals intended to make the 
program more efficient and cost effective.
    The Housing Choice Voucher Program is HUD's largest 
program, both in terms of annual budget authority and units 
under contract, and it is currently administered by 
approximately 2,600 State and local agencies.
    While the costs of the program remains sound, the program 
has often been criticized for its inefficiency. More than a 
billion dollars is recaptured from the program every year 
despite long waiting lists for vouchers in many communities. I 
think, frankly, that recapture probably is what has stirred 
this debate.
    The rising costs of the Section 8 program and some of the 
administrative concerns have caused many in Congress and the 
administration to conclude that the program is in need of 
reform. Last month the administration appeared before this 
subcommittee to discuss the housing assistance for needy 
families, or HANF, proposal as outlined in its fiscal year 2002 
budget proposal.
    On May 2, 2003, HUD Assistant Secretary Michael Liu 
testified that States would be able to make more timely and 
informed policy funding decisions based on local need and 
market conditions as compared to administrators in Washington, 
D.C. These decisions include moving unused funding to heavy 
demand areas of the State at any given time during the fiscal 
year and tailoring the program to better address the practices 
of the local market and needs of the community.
    Our two panels today, and I want to welcome the panels, 
consist of tenants, local public housing authorities, the 
industry groups directly affected by Section 8 programs. I look 
forward to hearing the different perspectives, and would like 
to welcome all of our distinguished witnesses as we continue to 
discuss the ways to improve America's community and strengthen 
housing opportunities for all of its citizens.
    I also want to note that I have done a bill by request to 
the administration to get the whole issue out there for 
discussion purposes, without a conclusion frankly on my part in 
either direction. Also it is the goal of the subcommittee, and 
we have talked with the ranking member, Ms. Waters of 
California, to have a thorough discussion and debate on this 
issue and to have hearings not only here in the U.S. Capitol, 
which we appreciate you all coming the distance that you have, 
but also take the hearings out to communities both large and 
small, in varied parts of the United States to also receive 
input so that more people will be able to attend that hearing 
process, and our ranking member will be here.
    Right now I will defer for an opening statement to Mr. 
Scott of Georgia.
    [The prepared statement of Hon. Robert W. Ney can be found 
on page 174 in the appendix.]
    Mr. Scott. Thank you very much, Chairman Ney. I appreciate 
this opportunity. Let me commend you for your continuous hard 
work on this issue, and thank you for holding this important 
hearing today regarding the Section 8 program and the 
administration's proposal to change this important program.
    I also wanted to thank the distinguished panel of witnesses 
that we have today. Thank you for coming and giving your 
testimony.
    First, let me say, Chairman Ney, that I believe that no 
Federal program should be sacrosanct. From time to time 
Congress should ask if a particular policy is working and if it 
can be improved. Now, with that being said, I cannot understand 
how block granting the Section 8 program will help or improve 
the current system which provides housing opportunities for 
needy families.
    In my State of Georgia, nearly 200,000 low income people 
are served under the Section 8 program through approximately 
200 local housing authorities. These officials understand at 
the local level the local real estate markets, the local 
housing issues far better than our good friends, the good folks 
at the State Capitol.
    And, finally, I am concerned about the effect that changes 
to the Section 8 program would have on residents who are moved 
out of communities as part of the HOPE VI Revitalization 
Project. Several questions certainly need to be addressed here 
today, and one of which to housing authorities is this: How 
would the hypothetical block granting of the Section 8 program 
affect the overall operation of your housing authority?
    That to me is the fundamental question we have got to 
answer today. It just seems to me that this process is working. 
We have to really answer the question, why these changes, and 
will our local communities be better impacted for this.
    I have some serious questions on that, Mr. Chairman, and I 
look forward to this very interesting discussion this morning. 
Thank you.
    Chairman Ney. I want to thank the gentleman from Georgia 
for his statement, and I will defer now to Mr. Green of 
Wisconsin.
    Mr. Green. No opening statement.
    Chairman Ney. Thank you. Mr. Miller.
    Mr. Miller of North Carolina. No.
    Chairman Ney. Mr. Bereuter.
    Mr. Bereuter. No.
    Chairman Ney. With that, I also I would like to submit for 
the record a Statement, without objection, the Statement from 
the National Association of Realtors and the Institute of Real 
Estate Management, to the subcommittee. Hearing no objection, 
it is part of the record.
    [The following information can be found on page 272 and 276 
in the appendix.]
    Chairman Ney. I would also note to the witnesses there is 5 
minutes allotted time. When the clock turns yellow, you have 
got about a minute left. When it turns red, it will conclude 
your testimony. But we would also accept, without objection, 
hearing no objection, all of your written testimony for the 
record.
    So the 5 minutes is basically just to summarize, and then 
it will be open to questions from the Members. On Panel I, I 
want to welcome Panel I, Terri Ceaser is the first Section 8 
voucher tenant appointed to serve on the Board of Directors of 
the Virginia Housing Development Authority. She is enrolled 
full time in a Master's program for career and community 
counseling with an expected graduation date of December 2004. 
Early congratulations on your graduation.
    Ms. Telissa Dowling is the President of the Resident 
Advisory Board of the New Jersey Department of Community 
Affairs. The board represents 19,000 voucher holders throughout 
New Jersey. Ms. Dowling also serves as a member of the Board of 
the National Low Income Coalition.
    Craig Garrelts has been the Executive Director of the 
Hocking Metropolitan Housing Authority--great county I would 
note in the State of Ohio, and a great district in the 18th--
for over 19 years. He received the 1997 National Award of Merit 
and Program Innovation in Affordable Housing from the National 
Leased Housing Association, on whose behalf he is appearing 
today. Also, Secretary Martinez recently paid us a visit down 
to Hocking County.
    Andrew Showe, Vice President of Showe Management 
Corporation based in Columbus, Ohio, where he works with 60 
projects in a Section 8 program. He is an Ohio licensed real 
estate broker and a certified assisted housing manager. He also 
serves on the Board of the Ohio Apartment Association.
    Barbara Thompson is the Executive Director of the National 
Council of State Housing Agencies.
    I want to welcome all of the people here to testify today. 
Appreciate you coming to the United States Capitol. We will 
begin with Ms. Ceaser.

     STATEMENT OF TERRI CEASER, TENANT, HOPEWELL, VIRGINIA

    Ms. Ceaser. Chairman Ney, Ranking Member Waters, other 
members of the subcommittee. I am Terri Ceaser, and I live in 
Prince George County, Virginia. Thank you for your invitation 
to address you this morning.
    I am here today as a Section 8 tenant, not representing an 
organization or agency. I have had the good fortune to be a 
recipient of the Section 8 voucher issued by Prince George 
County Housing Authority since 1994. I was first approved for a 
voucher and was placed on a waiting list for a voucher in 1990. 
I had separated from my husband and was employed as a secretary 
at Prince George High School. I was not receiving any child 
support and did not earn enough money to afford rents on decent 
housing.
    We lived in a house that was too small, in poor condition, 
exposed electrical wiring, dangling pipes and an unsafe porch. 
When my name came up to the top of the list and I was issued a 
housing voucher, I was able to move my children to a decent, 
affordable home in a safe neighborhood.
    This is the home at which I have raised my children. My 
oldest graduated from college this May. My middle child has 
finished his second year in college, and my youngest is in high 
school now.
    Not only are my children busy with their studies, but I am 
also hitting the books. I just completed a lifelong dream of 
obtaining a Bachelor's Degree, and am enrolled full time in a 
Master's program preparing myself for a career in community 
counseling. I will complete graduate school in December 2004.
    While still in undergraduate school, I did a class project 
on the Section 8 housing voucher. Mrs. Hampton Wade, the 
Director of the Prince George Housing Authority was very 
helpful with this program. Sometime after I had completed my 
project, Ms. Wade recommended me for the position on the 
Virginia Housing Development Authority Board of Commissioners. 
I was honored to be chosen by Governor Warner to serve.
    My family's story is an example of the success of the 
Section 8 voucher program, but I did not want to give the 
impression that our life has been easy. Completing my education 
and making sure that my children do well in school requires 
choices and sacrifices. We must adhere to a very strict budget 
with no cushion, but the sacrifice is worth what we will 
achieve. Section 8 has afforded me the opportunity to provide 
my family with a stable and safe environment. So I consider 
this a hand up, not a handout.
    I face each day with the determination to succeed, to 
improve my life and to continue to make a better life for my 
children. Section 8 continues to make this possible, because 
decent affordable housing in a decent neighborhood is 
available. Knowing that I do not have to make a choice between 
feeding my family and paying rent is a tremendous weight that I 
bypass, all because of Section 8.
    I am not an expert on Federal housing policy, but I am 
expert on my family and my community. As such, I have very deep 
concerns about HUD's proposal to take the Federal Section 8 
housing program that has a proven track record of success and 
currently helps 2 million families and turn it over to States 
that may not be able to do as well, much less even want to 
administer the program.
    Under the program's current structure, the Prince George 
Housing Authority administers 175 vouchers and has 100 percent 
utilization rate since 1989. The Prince George Housing 
Authority has never turned back any voucher funds. Further, 
there are 110 families on the waiting list in Prince George. We 
do not need to dismantle our program and start over. What we 
need is more vouchers.
    I want to call attention to three problems that I see in 
the HANF proposal. The first idea is that the housing voucher 
program needs to be to changed so it will be more like the 
welfare program TANF. This seems to be based on the mistaken 
notion that most people who receive Section 8 vouchers are also 
on TANF. In fact, the income of most households that rely on 
vouchers to be able to afford housing comes from employment, 
pensions or disability income.
    Other concerns is one that will not affect me directly 
since the Governor has already made a commitment to ensuring 
tenant representation on the State board. But some governors 
may not be interested in the perspective of tenants and may do 
away with the current requirement as far as Section 8.
    My single largest worry is that there is no assurance that 
the program will continue to be funded at a level that will 
keep up with rising housing costs. The point of the Section 8 
housing voucher program is to make sure that low income housing 
people can afford to live in a decent house. If you approve 
this proposal, Section 8 vouchers could end up with their 
current homes being unaffordable and having to move to poor 
quality housing in unsafe neighborhoods, causing disruption in 
jobs and schooling.
    I hope that each of you will take a careful look at this 
proposal and what it could do to our community. Once you do 
this, I am sure you will agree that this is a bad idea.
    Thank you for the opportunity to share my thoughts.
    [The prepared statement of Terri Ceaser can be found on 
page 179 in the appendix.]
    Chairman Ney. I want to thank you. Next witness.

  STATEMENT OF TELISSA DOWLING, PRESIDENT, RESIDENT ADVISORY 
       BOARD, NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS

    Ms. Dowling. Good morning, Chairman Ney, Ranking Member 
Waters and members of the subcommittee. I am very honored to 
testify about the Section 8 program. I am testifying today on 
my own behalf. I will not be telling you that the voucher 
program is perfect, but I know from personal experience how the 
voucher program can help low income people find stable housing 
and better their lives.
    I first received a voucher in 1996 from the New Jersey 
Department of Community Affairs through its transitional 
housing program. I now reside in Guttenberg, where both my 
daughter and I were able to improve our educational 
opportunities. My daughter is 14 years old now and is already 
talking about going to college.
    When I first received my voucher, I was on public 
assistance and homeless. But within a year I was able to leave 
the welfare program with the help of the Section 8. It gave my 
life the stability I needed to be able to attend school, and my 
studies helped my community work service at the Public Housing 
Authority into a job. So I was able to leave welfare.
    I received my associate's degree in public policy and urban 
studies in 2000. I recently became a program manager of a 
housing resource center. Without a voucher I would not have 
been able to get my degree. I might not have a job, and my 
daughter and I would still be homeless.
    My studies also gave me the knowledge and confidence to 
participate as a tenant. When the New Jersey Department of 
Community Affairs announced the formation of a resident 
advisory board as required by the Quality Housing and Work 
Responsibility Act of 1998, I understood that this would be the 
opportunity for me to provide input. I was elected as President 
of my RAB in 2001 and serve now on behalf of 19,000 voucher 
holders. I now serve on the boards of the National Low Income 
Housing Coalition and ENPHRONT, a national public housing 
residents' organization.
    From my experience the proposal to change the voucher 
program into a block grant to the States is a bad idea, to say 
the least. First, I do not want States to have that kind of 
flexibility that the block grant proposal will allow. I know 
that it is important to hold on to rules that the Federal 
Government has established so that taxpayers and Congress will 
know that the money is being used well to help those most in 
need. Turning the program into a block grant would give States 
so much flexibility that it will be detrimental to the very 
people that the Federal housing assistance is supposed to help.
    Another problem with the block grant is its effects on the 
opportunity for tenants to provide input. Under the block 
grant, States would not be required to have a resident advisory 
board. My State has obviously done the right thing already, but 
other States may not be as enlightened as mine.
    I also do not believe that having States administer both 
TANF and the block grant will guarantee good coordination. 
Additionally, only approximately 13 percent of the people 
receiving vouchers are even on welfare.
    One program that helps voucher tenants improve their 
economic circumstances is the Family Self-Sufficiency Program. 
FSS provides subsidized savings in case management for voucher 
tenants seeking better employment opportunities. But States 
will not be required to continue this program under the block 
grant.
    My experience has shown me that the poorest people have the 
most trouble affording housing, but the block grant would allow 
States to reduce the percentage of extremely low income people 
admitted to the program from the current 75 percent to 55 
percent.
    It is also very important to me and other voucher holders 
that we do not have to pay too much of our limited income in 
rent. But the block grant would change the general rent 
standards, and tenants could be required or would be required 
to pay significantly more than 30 percent of their income for 
rent.
    Another problem is whether tenant based rental assistance 
under the block grant would be able to help people live in 
better neighborhoods. The subsidy that the States would pay 
might not be enough to let tenants live in neighborhoods that 
have better housing, schools, and job opportunities.
    My biggest worry is that the funding of the block grant 
will not keep up with the need over time, and that could cause 
States with even good intentions to have to make changes that 
would hurt tenants in the program. The block grant will divorce 
Congress from direct responsibility for individual vouchers, 
making it easier for Congress to avoid keeping up with the real 
increases in housing costs.
    For all of these reasons, I respectfully and strongly 
recommend that Congress continue the current system of 
allocating specific numbers of vouchers to local and State 
housing agencies under the general framework that exists today.
    There are some ways to improve the voucher program without 
turning it into a block grant, and I testified about some of 
these improvements last year. I hope that you will consider 
improvements to the program that are not as radical, risky and 
insensitive as the block grant.
    Thank you.
    [The prepared statement of Telissa Dowling can be found on 
page 183 in the appendix.]
    Chairman Ney. I want to thank you. Next, Mr. Garrelts.

  STATEMENT OF CRAIG A. GARRELTS, EXECUTIVE DIRECTOR, HOCKING 
 METROPOLITAN HOUSING AUTHORITY, LOGAN, OHIO, ON BEHALF OF THE 
              NATIONAL LEASED HOUSING ASSOCIATION

    Mr. Garrelts. Mr. Chairman, and the members of the 
subcommittee, my name is Craig Garrelts. I am the Executive 
Director of Hocking Metropolitan Housing located in Logan, 
Ohio. I am representing the National Leased Housing 
Association, whose members include owners, managers of Section 
8 housing, as well as public housing agencies that administer 
the Section 8 voucher program.
    We appreciate the opportunity to testify on H.R. 1841, the 
administration's block grant, or HANF program, which is 
proposed as a replacement for the Section 8 voucher program.
    We urge the subcommittee to reject this proposal. It is a 
rash proposal, advanced under the guise of reform, that can 
damage a form of housing assistance that has had decades of 
bipartisan support.
    The Section 8 subsidy has been a powerful and versatile 
tool for almost 30 years. It can serve the very poorest who 
need substantial help, to helping those who only need shallow 
assistance to live in affordable and decent housing.
    Among its specialized functions, Section 8 has been used to 
replace older forms of subsidies that are less flexible, and in 
the process has preserved older projects and improved 
affordability for tenants. All told, over 1.9 million families 
receive rental assistance from the Section 8 certificate 
program.
    The Section 8 program has been the most successful housing 
assistance program of any housing program at any time. The 
major problem we have with the program is we just don't have 
enough of it. Recently, it became quite a common complaint that 
not all of the funds appropriated each year have been used.
    Until this year, appropriations were sized based on an 
assumption that every authorized voucher would be used for a 
full 12 months. No one expected this to occur, and the funds 
were routinely recaptured and rescinded. The recisions reduced 
the cost of each year's appropriations to the amount actually 
used for the program. So there was no ongoing adverse fiscal 
impact from this method of calculating appropriations.
    When a problem did arise it was the result of disagreements 
with the appropriation committees and taking the recisions to 
offset nonhousing appropriations. For fiscal year 2003, and 
presumably beyond, the appropriators have taken actions to 
minimize recaptures, and therefore the potential loss to 
housing programs of the Section 8 recisions being allocated for 
other uses.
    But today we are more interested not in the recaptures or 
the recisions, but trying to help as many families as possible 
use the authorized level of vouchers assigned to each 
community. Here, action by the voucher administrator and HUD 
has steadily improved utilization rates. Industry groups and 
HUD have encouraged administrators, primarily local housing 
authorities, to take aggressive steps to increase leasing 
rates. National utilization rates have risen from 91 percent 2 
years ago to 95.3 percent as of this January.
    We look forward to improving upon this in the future. By no 
means is this current program a failure. However, we believe 
the proposed HANF program, if enacted, would be a failure. HUD 
says the Section 8 program has grown too complex and that by 
block granting the program to the States it would be simpler. 
On the contrary, if this proposal is enacted, the current 
Section 8 program would remain the major program for several 
years, with all of the so-called complexity. And one or two 
additional programs with different rules would coexist with the 
program. How would this be simpler?
    To illustrate, all tenant-based voucher holders would be 
grandfathered for 5 years under the terms and conditions of the 
Section 8 program. Holders of project based vouchers and those 
receiving home ownership assistance would be grandfathered for 
10 or more years under the old rules. Assuming 1.9 million 
families are grandfathered and the annual turnover rate is 10 
percent, at the end of the first year 1.71 million voucher 
holders would still be covered under the current system, while 
190,000 vouchers would be turned over to the States for the 
block grant program. At the end of year 5 we would still have 
1.1 million vouchers under the current program, and about 
800,000 that have gone over to the block grant program.
    HUD complains that the Section 8 program requires it to 
deal with a large number of local public housing agencies. 
These are the local hands on administrators who, among their 
many duties, screen and select tenants, check their incomes, 
find a deal with landlords who agree to participate in the 
program. They inspect the unit for housing quality standards 
and lead-based paint requirements, determine maximum subsidies 
within the HUD established parameters, and select and negotiate 
with owners who wish to participate in the project-based 
program.
    The Section 8 program as it currently exists requires that 
public housing authorities be the administrators. The language 
of H.R. 1841 would result in the continuation of this 
administrative structure for the grandfather vouchers, with the 
exception that an additional layer with associated costs would 
be added.
    The movement of funds from HUD to the State to a new 
administrator and then the landlords would extend the process. 
We are then more really worried what is going to happen to the 
families.
    Mr. Green. [Presiding.] Mr. Garrelts, if you could 
summarize your testimony. The red light has gone on. We will, 
of course, be reading your full written testimony as well.
    Mr. Garrelts. Our final concern is with the families, 
because the change within the program, changing from the basic 
rent of 30 percent of adjusted income to 30 percent of gross 
income would have a tremendous impact upon the individual 
families. And an example cited in our testimony, the net result 
would be a 25 percent increase in rent to the families.
    We are also concerned about making sure that we have 
landlords participate in the program.
    Mr. Green. Mr. Garrelts, I need you to wind your testimony 
up. We have other witnesses we need to get to as well.
    Mr. Garrelts. Thank you. On behalf of National Leased 
Housing, we appreciate the opportunity to testify today.
    [The prepared statement of Craig A. Garrelts can be found 
on page 198 in the appendix.]
    Mr. Green. Great. Thank you. I apologize for having to cut 
you off.
    Before I turn to Mr. Showe, I would like to turn to the 
ranking member of the subcommittee, Ms. Waters, for her opening 
statement at this time.
    Ms. Waters. Thank you very much, Mr. Chairman.
    I appreciate the opportunity to get my statement on the 
record. I do know that you want to move on with the testimony. 
However, it is important that as we move into this very, very 
difficult area and address the proposal of the administration 
that everyone is clear on how we stand on this.
    The housing choice voucher, commonly referred to as Section 
8, named after the section of the U.S. Housing Act that 
authorized it, is the largest Federal low income housing 
assistance program. The Section 8 voucher program currently 
serves about 2 million families at an annual cost of over $12 
billion. Some 2,600 housing agencies, mostly local, administer 
the program. H.R. 1841, the Housing Assistance to Needy 
Families legislation, would convert the Section 8 voucher 
program to a block grant, transferring its administration to 
the 50 States, and giving them discretion over allocation of 
funds, directly or indirectly.
    Section 8 supports over 4 million apartments. Roughly 1 in 
7 renters nationwide benefit from some form of Section 8 
assistance. Of the 4 million Section 8 households, about 35 
percent, or 1.4 million, have portable vouchers. The HANF 
proposal would fundamentally change the Federal funding system 
for tenant based housing assistance, from one based on actual 
cost to a block grant that simply distributes Federal 
appropriations among States.
    With the passage of HUD's funding year 2003 budget, block 
granting the program to States for this reason is unnecessary 
as the problem of under utilized vouchers has already been 
addressed. If funding levels fall behind the program's needs, 
as likely will occur, States will either have to contribute 
their own funds to the program or reduce assistance to low 
income families and elderly and disabled individuals.
    A National Association of Redevelopment Officials report 
shows States would face a 1.1 billion to 1.8 billion in costs 
to close the funding gap created by the administration's block 
grant proposal. California represents a large component of the 
Section 8 program, with 14 percent of the Nation's vouchers and 
16 percent of the Nation's leased vouchers. I am concerned that 
assistance to families currently participating in California's 
Section 8 programs would be jeopardized under the new proposal.
    Under the current Section 8 Housing Choice Voucher Program 
in California, the average per family rental assistance cost 
per year is approximately $8,364. The funding shortfall for 
California to cover 87,018 low income families is at $8,364 per 
family, and for over a 5-year period would equal $727,878,552.
    My question to this administration is, what happens to 
working families who cannot afford decent apartments under this 
proposal if States implement a time limit? Only 20 percent of 
housing choice voucher holders receive welfare benefits. The 
other 80 percent rely on earned income, pensions or disability 
income. The need for housing assistance is driven by local 
housing market conditions and rental housing cost inflation. So 
using the TANF model is inappropriate.
    The uncertainty of block grant funding could have a greater 
impact on the use of vouchers to support home ownership. 
Vouchers can only be used to support home mortgages to the 
extent that mortgage lenders are confident that funding will 
continue to be available for the length of the mortgage.
    Again, I do not believe that a block grant to the States is 
the best way to realize improvements in Section 8 program, and 
we need to continue this dialogue to find solutions that work.
    I thank you for the opportunity to put that on the record, 
Mr. Chairman. I will yield back the balance of my time.
    Mr. Green. I thank the gentlelady for her opening 
statement. And we would turn to Mr. Showe to resume testimony 
from the panel.

  STATEMENT OF ANDREW SHOWE, VICE PRESIDENT, SHOWE MANAGEMENT 
 CORPORATION, COLUMBUS, OHIO, ON BEHALF OF THE NATIONAL MULTI 
 HOUSING COUNCIL, NATIONAL APARTMENT ASSOCIATION, AND COLUMBUS 
                     APARTMENT ASSOCIATION

    Mr. Showe. Thank you, Mr. Chairman, Ranking Member Waters 
and distinguished members of the subcommittee. My name is 
Andrew Showe. I am Vice President of Showe Management 
Corporation, past President of the Columbus Apartment 
Association, and current member of the board of Ohio Apartment 
Associations, and a member of the National Apartment 
Association.
    I am also a member of the National Multi Housing Council, a 
national association representing the Nation's larger and most 
prominent apartment firms, and NMHC operates a joint 
legislative program with the NAA, an industry group 
representing over 30,000 apartment executives and 
professionals. It is my pleasure to testify today on behalf of 
both organizations.
    NMHC and NAA commend you, Chairman Ney, for your 
leadership, and we thank the members of the subcommittee for 
your valuable work in addressing affordable rental housing in 
America. We also commend the U.S. Department of Housing and 
Urban Development Secretary, Mel Martinez, and the 
administration for their interest in improving the Section 8 
Housing Choice Voucher Program.
    We too believe it is critical to meet the housing needs of 
low and moderate income families and believe that improving the 
Section 8 program is a central part of meeting these needs. 
However, we urge Congress and HUD to enact reforms to the 
existing Section 8 program that will encourage apartment owner 
participation and in turn increase housing availability to 
voucher holders.
    Although it is well intentioned, we think HANF will not 
reduce the administrative costs to participating property 
owners and will not maximize program benefits for residents. 
Instead, the proposed legislation could create new obstacles to 
apartment owner participation without alleviating existing 
burdens. The net result can be fewer available apartments for 
voucher residents.
    We wholeheartedly support the Section 8 program as a means 
for private housing owners to provide affordable rental housing 
for families who need it. We believe that more apartment owners 
would participate if the cost of renting to voucher residents 
were more comparable to the costs of serving unsubsidized 
residents. We propose the following recommendations to achieve 
this goal.
    First, we urge continued funding for the existing program 
structure administered by HUD. Historically many criticized the 
Section 8 appropriation structure because too much funding 
remained unused each year. Effective this year, Congress 
enacted changes to minimize recaptures, and, moreover, national 
utilization rates have risen to nearly 96 percent. We believe 
that the existing successful appropriations structure should be 
supported, and we have considerable concerns about a proposed 
State level funding structure in HANF.
    Next, we propose speeding up the move-in process by 
amending the inspection procedures. We propose allowing PHAs to 
conduct unit inspections within 60 days after the resident 
moves in. PHAs could also conduct building-wide rather than 
unit by unit inspections in certain cases, and rely upon recent 
inspections.
    Alternatively, PHAs initially could inspect a 
representative sample of units in order to certify that the 
building and communities are eligible. This would reward well 
managed properties and allow PHAs to focus their scarce 
resources elsewhere.
    The apartment industry relies on seamless turnover, and 
delays caused by unit by unit inspections deter participation. 
As proposed, Section 11 of the bill would extend the existing 
inspection requirement to HANF, and do nothing to fix the lost 
revenue problem.
    Finally, we urge HUD to enact a more efficient process for 
PHAs to apply for higher fair market rents that are more 
reflective of submarket rents. We also propose program changes 
that will allow PHAs to raise the payment standard to 120 
percent of FMR without HUD approval and afford PHAs an 
increased flexibility to request higher payment standards when 
necessary. FMRs must be set high enough to encourage owners' 
participation, and in turn create a sufficient supply of 
apartments and choices for voucher holders.
    We thank HUD for raising the current FMR level to the 50th 
percentile in 39 high cost areas, but that level is 
insufficient in areas with outdated FMRs and in certain high 
cost submarkets. In many areas of my home State of Ohio, FMRs 
have not been updated in years and are well below market rent 
in both high cost and moderately priced areas.
    In summary, we believe that the existing Section 8 program 
with improvements I have just noted will make affordable 
housing more affordable to more Americans. Thank you.
    [The prepared statement of Andrew Showe can be found on 
page 260 in the appendix.]
    Mr. Green. Thank you for your testimony. Ms. Thompson, 
welcome.

STATEMENT OF BARBARA J. THOMPSON, EXECUTIVE DIRECTOR, NATIONAL 
               COUNCIL OF STATE HOUSING AGENCIES

    Ms. Thompson. Thank you, Representative Green, Ranking 
Member Waters, and members of the subcommittee. Thank you for 
the opportunity to testify on the administration's proposal to 
block grant Section 8 voucher funding to the States. I am 
Barbara Thompson, Executive Director of the National Council of 
State Housing Agencies.
    Mr. Chairman, NNCSHA is grateful to Chairman Ney for 
stepping forward in defense of the low income housing tax 
credit when it was threatened by the administration's dividend 
tax relief proposal. Thanks to his intervention and that of 
Representative Frank and many other members of this 
subcommittee, housing credit apartment production is protected 
under the recently enacted tax bill.
    Now, we ask your help in enacting the Housing Bond and 
Credit Modernization and Fairness Bill, H.R. 284. This bill 
repeals the MRB 10-year rule, updates MRB purchase price 
limits, and makes housing credit development viable in very low 
income communities. We thank the Chairman and the 20 other 
members of this subcommittee who have cosponsored H.R. 284. If 
you have not cosponsored this legislation, we urge you to join 
the 253 House Members who have and urge your House leaders to 
enact it in tax bill this year.
    NNCSHA also is grateful to Chairman Ney for introducing the 
Housing Assistance for Needy Families Act. NNCSHA neither 
supports nor opposes this legislation, but we believe it 
deserves Congress' full consideration. NNCSHA supports a 
voucher block grant in concept. However, we have taken a 
neutral stance on the administration's plan because of our 
serious concerns about the adequacy of the program funding and 
flexibility it proposes.
    Section 8 vouchers are one of our most important affordable 
housing tools, but the voucher program is not meeting its 
potential. Its complex rules and regulations block innovation, 
drive up costs, discourage private sector involvement, and 
confuse customers and administrators.
    The decentralization of funding to more than 2,500 PHAs 
complicates program administration, increases costs, prevents 
maximum utilization of funds and frustrates regional and 
statewide housing strategies. If implemented with sufficient 
funding and flexibility, HANF could resolve many of the current 
program's problems and create new opportunities for voucher 
use.
    States have the capacity to administer the voucher program. 
States possess a multi-decade record of responsibility, 
effectiveness, and accountability in administering tens of 
billions of dollars in housing assistance. They possess 
statewide sophisticated financial asset management and 
administrative oversight capability. Many States already 
administer Section 8.
    States are uniquely positioned to administer Federal 
housing resources. They understand local housing needs and 
markets, while bringing a State and regional perspective to 
problems that cannot be solved within municipal boundaries. 
States can ensure housing funding is applied where it is most 
needed and integrated with other public investments in their 
communities.
    Moreover, States have the ability to bring together State 
agencies and resources. State agencies are partners, for 
example, with welfare agencies to coordinate TANF funds with 
housing assistance. The voucher program, adequately funded and 
rationally regulated, would benefit from State administration.
    States' knowledge of local housing markets, access to other 
housing and nonhousing resources, ability to respond to 
changing local circumstances and prioritizing needs across 
States would overcome many of the voucher program's current 
limitations.
    Federal oversight would be more efficiently concentrated on 
50 entities. However, HANF must not be an underfunded mandate. 
We urge Congress to safeguard vouchers and the low income 
families who depend on them by authorizing mandatory voucher 
spending in an amount at least adequate to finance all 
currently authorized vouchers. Authorizing legislation must 
also specify that funds would be adjusted annually to cover 
cost increases.
    To work HANF must be a flexible program. It must be free 
from unnecessary and burdensome Federal requirements. HUD 
regulation must be limited to that necessary to assure 
nondiscrimination and accountability for the use of funds to 
achieve goals Congress sets. Performance standards must not 
compel States to respond to Federal priorities rather than 
their own.
    In conclusion, exploring ways to improve the Section 8 
voucher program is timely and appropriate. A block grant to the 
States merits Congress' examination and NNCSHA is available to 
assist you in that effort.
    Thank you.
    [The prepared statement of Barbara Thompson can be found on 
page 265 in the appendix.]
    Mr. Green. And thank you, and thank all of the members for 
their testimony. I will begin with questions.
    Ms. Thompson, you indicated that your organization supports 
voucherizing in concept, but you were neutral on this 
particular proposal. What would your organization support? What 
is it that you would like to see in a voucher program that you 
would support?
    Ms. Thompson. We believe this proposal, the idea of block 
granting the voucher program at least deserves a serious look. 
We feel, however, that this proposal, the administration's 
proposal, fails to do two essential things: One, to assure 
States that they would have adequate funding. We share the 
concerns of all of the panelists here that what the 
administration has proposed would not protect States from 
funding cuts over time, and that is unacceptable.
    In addition, it does not give States the flexibility they 
would truly need to achieve the efficiencies that the 
administration believes a voucher block grant would achieve. So 
we would need to see guaranteed funding, mandatory spending, 
which has been done under other programs like the TANF program, 
for example. States would need to know from year to year that 
they were going to get sufficient funds, not only to provide 
for the families who currently receive them, but to cover 
increased costs over time. And, frankly, we would like to see 
new voucher program money in this program. No new vouchers have 
been appropriated by Congress for several years, yet only one 
in four families qualified to receive voucher help gets it.
    So our view is let's fund the program, not only at a level 
that will cover families who currently receive the assistance, 
but let's grow this program to meet the need.
    Mr. Green. So to summarize, you are looking for more money 
and more flexibility?
    Ms. Thompson. Lots more money and lots more flexibility.
    Mr. Green. You added the lots into that.
    What I would invite you to do is take a look at the 
specifics of the proposal from the administration, and if you 
could supply to us some written suggestions and language 
suggestions, I think that would be useful as we go through this 
process.
    Ms. Thompson. I would be pleased to do that.
    Mr. Green. Thank you. Mr. Garrelts, what recommendations 
would you have with respect to the current program that would 
make it more effective, more cost effective and more efficient 
in its administration?
    Mr. Garrelts. Well, the current program, the housing 
authorities are the primary administrators, and we are the 
local--being the local administrators, we have to work day to 
day with the landlords and the tenants. There is a basic cost 
there to the program that can't be avoided. We do have the 
management of the actual case for each individual client.We do 
have to do all of the contracts with the landlords. We have the 
requirements to maintain updated computer systems that 
communicate data to the Federal Government. Our basic program, 
especially in my area, which is a very rural area, there is not 
a whole lot of fat in the program to be done.
    There is a discussion within the HANF program to reduce the 
number of inspections, and I understand that landlords may like 
that but our experience has been that we especially work with a 
lot of mom and pop type landlords. And if they can avoid 
repairs, they will do so.
    But our annual inspections assure that those properties are 
maintained. That is a cost to the program, but we need to 
continue forward for doing annual inspections of those units if 
we want to keep good housing stock. So the basics of the 
program, at least at the local level, there is not a whole lot 
of fat to be cut out.
    Mr. Green. I am not necessarily suggesting that cutting fat 
is what we are looking at as much as making the program operate 
more smoothly. Is it your testimony that we can't enact reforms 
that make it operate more efficiently and more cost 
effectively?
    Mr. Garrelts. If we would allow, again at the local level, 
the individual communities to address the variances in the 
markets at the local level with some HUD oversight for doing 
variances for, as was mentioned about fair market rents, that 
is an issue. In my case we have experienced a very tight market 
where we have an inadequate supply of housing, allowing us to 
adjust our fair market rents high enough to generate new 
construction because we are not--I will use our example--in the 
last 10 years we had an 11 percent growth of our population. 
During that period of time, that amounted to 1,100 families 
added to our community. During that period of time we only had 
47 new apartments built. The fair market rent in our area was 
not high enough to generate enough interest from local 
developers to build any more rental housing. Then we throw in 
the overall economic status of our community is that 48 percent 
of our county are eligible for the program. Now, that is very 
typical in rural areas, is that we have--our median income is 
low. We do not have a lot of job opportunities available. 
Therefore, the rent burden is very high for families. So the 
flexibility needs to be at the local level so we can adjust, 
either by increasing our fair market rents so that new 
development can occur, or reducing it if we have plenty of 
housing stock available, reducing the fair market rent in order 
to fill the vacancies that exist.
    Mr. Green. Thank you.
    Ranking Member Waters, questions?
    Ms. Waters. Thank you very much, Mr. Chairman.
    How many panelists can tell me what their waiting lists are 
for Section 8 in that area? Do you have any idea?
    Ms. Dowling. Good morning. I can give you an approximate 
number. Because we are a Statewide agency, we have roughly 
about at least 8- to 9,000 in different areas throughout the 
State. We roughly, I would say, have a good 17,000 on the 
waiting list as a total throughout the whole State.
    Ms. Waters. That is what State?
    Ms. Dowling. New Jersey.
    Ms. Ceaser. Yes, ma'am. As far as Prince George County, 
Virginia is concerned, right now there are 110 families that we 
have on our waiting list.
    Ms. Waters. 110 families?
    Ms. Ceaser. Yes, ma'am.
    Mr. Garrelts. In our community, because of the very tight 
market condition, when I say we have no waiting list it is a 
little misleading, is because we are issuing vouchers upon 
demand when people walk in the front door. We have a hundred 
families every month searching for units. That is how we are 
able to maintain our hundred percent utilization, that although 
we are not maintaining a waiting list, that is because we put 
every one on the street to search.
    Ms. Waters. Thank you.
    Ms. Thompson, do you have any information about waiting 
lists for Section 8 vouchers?
    Ms. Thompson. No specific information on specific States. I 
can tell you we constantly hear there is simply not enough 
assistance to meet the needs of families eligible for it. That 
is why we think it is so important to get beyond this 
discussion of simply maintaining funding for the current 
families served. Why aren't we also talking about trying to 
meet the needs of the many families who are not served?
    Ms. Waters. How many of you believe that if this is block 
granted that your well-funded States with all of their balanced 
budgets are going to reduce the number of folks waiting for 
Section 8? How many believe that?
    Okay. Just to add to what you think, the State of 
California, we have a $350 billion deficit. Not only can we not 
take care of the many services, many of those services we have 
done well with over the years, I believe that that legislature 
would be looking to cut, reduce, do whatever they could to get 
that budget down. So I would not--so I certainly would not want 
this to be block granted to my State.
    Ms. Thompson. I would agree with that concern. And 
California, as you know, Congresswoman, is not the only State. 
Many States are facing very severe budget deficits. So we share 
your concern. Many, many States confront that. That is why we 
feel it is so essential, and we could only support something 
like this if the funding was truly mandatory, funding that was 
guaranteed to flow from the Federal Government to the States in 
a sufficient amount to cover the needs of families in the 
program, new families getting into the program, and to cover 
increased costs over time.
    Otherwise, you are absolutely correct. The States could 
never assume this. They cannot pay for this program. This would 
only work if the Federal Government continues to support it 
adequately, just administer it through the States. So we agree 
with you. That is one of the major reasons, Congresswoman, we 
have not endorsed this proposal.
    Ms. Waters. Well, I want you to oppose it because--for 
everything that you have said. I understand you are wanting to 
have a debate, but you know, I am afraid that this 
administration is trying to literally get rid of too many 
programs that the people really rely on and that the States--we 
cannot count on the States to really continue these programs 
and administer these programs. In some cases, even through 
maybe not Section 8, but Head Start and others, they would 
actually siphon off the dollars from these programs to help 
reduce those deficits.
    I was reminded from a Californian I said 350. But it is $38 
billion rather than 350.
    Ms. Velazquez. 350 was the tax cut.
    Ms. Waters. Mr. Chairman, just one more thing. Everybody 
that I have listened to, and I haven't heard everyone, talked 
about the fact that the vouchers are not keeping up with the 
real market rates out there, and I suspect that is true. Again, 
you know, California is off the scale. I mean, the rents have 
just exploded. The cost of housing is just off the scale. So 
unless we increase the value of these vouchers, I don't know 
how apartment owners are going to make it. I think it is very 
important for everyone to continue to say that.
    It doesn't matter whether they remain with the Federal 
Government or, God forbid, if it you know transferred to the 
State, the fact of the matter is we need to increase the value 
of those vouchers. Does everyone agree on that?
    Mr. Miller of California. [Presiding.] The gentlelady's 
time has expired.
    Thank you. Ms. Thompson, you commented that you expected a 
guarantee from the administration, and that is very difficult 
because that is our responsibility. We can set a program up but 
it has to be funded through the appropriators, and an example 
would be the Buyer Down Payment Assistance Program. We enacted 
a program, but it has never been appropriated, so we have never 
been able to benefit from this program.
    Looking at the things that were mentioned, I mean the 
concern about the program, the shortages, I know, Ms. Waters, 
when we had a hearing last year, Los Angeles County came 
forward and said their vacancy factor was 3 percent, which 
meant that they were a hundred percent occupied. The conclusion 
I drew at that point was you have got X amount of vouchers 
chasing a limited amount of units.
    And Barney Frank and I introduced a bill, H.R. 1985, which 
increases the FHA loan limits for multifamily, hoping in some 
way to move people into a place they own. And I think I like 
the Down Payment Assistance Program, the concept of taking a 
person who is reliant upon renting a unit and knowing that 
their rents continue to increase--as you stated, they have in 
the marketplace year after year--if we can give those people a 
voucher and let them buy a home, then their rents are capped at 
a certain limit until they own that unit. That is how I think 
you create more Section 8 housing out there, if you can get 
people to a situation, whether we do it with FHA limits, and we 
can help them with vouchers through the HUD program to go out 
and buy their own home, that they can take pride in and say 
this is mine until I die and leave it to my kids.
    But it gets them off the system, because if you look at a 
person who is relegated to Section 8 for 5 years or 10 years, 
you look at what they were paying originally, and 10 years 
later you look at what they are paying in rent. The concept of 
having that person's rent remain consistent from the day they 
buy it, that is really interesting to me, to be able to get 
somebody in a home.
    I was a developer for years. It is tough, and you talked 
about building units. The problem we have in many communities, 
I have seen, I know so many developers who try to do it, when 
they go a community and they say they want to build Section 8 
housing there is an outcry from the neighbors in many cases. 
Yet when you have communities that would accept them, there is 
generally no vacant land. We passed a bill out of this 
committee on brownfields, allowing the local communities to 
take these polluted sites, to clean them up and we can build 
affordable housing within communities who want them and need 
them. But it appears to be a circle conversation here that we 
are trying to put people in units that just aren't available.
    But I would like to hear your opinion on the vouchers for 
people getting in new homes, be able to buy them.
    Ms. Dowling. The only reason I say that is because this 
bill doesn't even mention anything about the Section 8 home 
ownership component at all. That was my question. What happens 
to that? Because last year we came and we spoke about that. How 
do we improve it? And now we have got people actually doing 
what they need to do as far as paying, cleaning up their credit 
reports, getting into schools, and because we are under the 
impression that we are going to take the Section 8 voucher and 
now become a home owner. We understand that it was for 15 
years, but at least my mortgage would be paid. Now that is even 
taken off the table.
    Mr. Miller of California. I hope the appropriations 
committee funds that this year. I think it is an extremely 
important program to get people into a home that they own. I am 
on the advisory board for a group called Hart, it is a 
nonprofit. They put about 50,000 families, first time home 
owners, into homes. It is 100 percent private dollars. They 
give them the down payment to help them get in the home.
    Ms. Dowling. You know, God forbid if you block grant this 
program, I can't get a mortgage from anywhere if they don't 
know if my funding is going to be paid the following year. So 
now you take my dream back from me.
    Mr. Miller of California. I have to back up to what Ms. 
Waters said. There are some States I wouldn't mind block 
granting, but it would scare me to death in California today.
    We have some funding in the Federal programs for seniors as 
an example that the last 2 years didn't get passed through, 
because they didn't have a budget on time, they get capped 
basically for cash flow purposes for the State. When the State 
finally passed a budget, some of these dollars tended to 
disappear, and that bothers me. But you know when we are 
looking at a program that almost 10 percent is eaten up in 
administrative costs, that bothers me. That is a concern, 
because that seems like an excessive amount.
    And, yes, I know there is some people who own units need a 
little oversight. But I don't believe everybody is a bad 
renter. There is not everybody out there who owns units that 
when they get a call from their tenant will not acknowledge 
that there is a problem and fix it.
    Ms. Dowling. But that is only being done because tenants 
are not allowed to be at the table, because you cannot tell
    me--in my area, that is what helped me a lot in the State 
of New Jersey. I am very fortunate because we have a State law 
that protects our Section 8 voucher holders where people can't 
discriminate if they are renting to them.
    But our biggest thing was getting the word out to the 
residents. We had so many vouchers, and we need to hit the 
street to utilize these vouchers or the Federal Government is 
going to take the money back. And we went up from 78 percent 
utilization to 98 percent overnight. And that----
    Mr. Miller of California. My time has expired.
    Ms. Dowling. I was so excited about the fact that we had 
the law that gave us the opportunity to be at the table, and I 
think that is why we don't need to block grant this program. We 
just need to go back to what we put on the table. We worked 2 
years to put some very good suggestions on the table about the 
Section 8 program and all of the changes that have occurred, 
and we never even got the opportunity to see one of those 
changes implemented, and now you just want to do away with the 
program.
    Mr. Miller. Thank you. Mr. Scott from Georgia.
    Mr. Scott. Thank you very much, Mr. Chairman. I appreciate 
this. This is just a terrible, terrible idea, and it is my hope 
that we will not move forward with this effort.
    Mr. Scott. I served for, well, over 20-some years in the 
State legislature as Chairman of the Rules Committee and on the 
Budget Committee, and I can assure you that Ms. Waters is 
absolutely right, States will use this money any way they can, 
for anything other than for block granting. States are not 
equipped to handle this. We do not even have a Housing 
Department in the State of Georgia. Taking it and moving it 
away from the local communities is not the right thing to do. 
There are just so many areas; it reduces assistance to low-
income, it weakens the low-income protections, it curtails 
tenant protections. It is just a bad, bad, bad piece of 
business.
    I certainly am sympathetic to your concerns, Ms. Thompson. 
I am glad to see that you are at least neutral on this issue. 
But I would say that the major argument of HUD, in terms of 
having to deal with 2,600 more entities, is really flimsy. That 
is what they are there for. They are a Federal agency. They are 
equipped to handle. They handle hundreds of thousands of 
contacts with other folks, 13,000 subcontractors with Section 8 
already, nearly 4,000 public housing units. And just to say 
that they are having difficulty with another 2,600 is sort of 
superfluous.
    Let me ask a couple of questions for the local housing, if 
you could just give me very briefly what changes, 
hypothetically, would be in place if we were to go forward with 
this. I think it is important for you to get on the record what 
impact that would have on these local housing authorities if 
such a thing would go forward.
    Mr. Garrelts. Well, I think one of the things that may 
occur is there is no mandate to the States to distribute the 
funding in the manner in which we are currently receiving it. 
So in our case, in Ohio, and probably in Georgia, where you 
have many rural housing authorities serving small populations, 
we may end up in a competitive process in order to retain the 
housing resources we have within our State. I have already had 
discussions with my peers in Ohio that if that opportunity was 
available, the larger cities would go after every dollar they 
could to bring into the cities, which after all is where a 
larger population center is, and they would like to take all 
the dollars into their coffers. So that would certainly have an 
impact upon the rural housing authorities throughout the 
country if the State would allow that type of process to occur. 
I think that is certainly a concern that we would have from a 
small housing authority.
    Ms. Dowling. But also, with this new bill, if you block 
grant it, it goes from helping 75 percent of the extremely low-
income people to only 55 percent. And then if you block grant 
it, that means the housing authorities are now going to look 
for people that are making well above the extremely low-income 
people to actually bring them on board to help offset that 
voucher. Because once you give them the vouchers, what the 
State will do locally is set. If a voucher at a certain amount, 
like $500, then you will have to find someone where their 30 
percent will offset the $500.
    So now my extremely low-income people are still homeless, 
yet HUD keeps saying they want to do away with homelessness. 
This will create a cycle of even more homelessness and now 
touch on families that become homeless. It is just not a good 
thing at all. It is just going to be terrible, really terrible.
    Mr. Garrelts. She brought up an interesting issue about the 
80 percent of median and the very low-income target population 
we have now. I think that, within the guise of this HANF 
proposal, there is a thought that you would reach a higher 
income group through this proposal. But, actually, if you look 
at the payment standard and you do the actual mathematical 
calculations, in many markets, and this is not going to be true 
of all markets because this is a market-driven issue, certainly 
this would not necessarily be the case in Connecticut that has 
very high rents, but in Ohio, Georgia, Indiana, Illinois, where 
you have a mix of rents, when you do the mathematical 
calculations for the family, if you have a family approaching 
80 percent of median, and you do 30 percent of their income 
requirement for their housing cost, more than likely it will 
exceed the payment standard established by the State.
    It does that now under the fair market rent schedule that 
we have. In my county, in Hocking County, Ohio, if I have a 
family at 80 percent of median and I do the mathematical 
computations, 30 percent of their family income is greater than 
my fair market rent standard, so they get no assistance.
    Mr. Miller of California. [Presiding.] The gentleman's time 
has expired.
    The language in the bill does clearly state that the same 
amount of people have to be helped through block granting, you 
cannot decrease it from 75 to 50 percent. So that statement is, 
in fact, not accurate based on the language of the bill itself.
    Ms. Dowling. But when you go back and use----
    Mr. Miller of California. No, that wasn't open for a 
response.
    Ms. Hart is recognized for 5 minutes.
    Ms. Hart. Mr. Chairman, I'm interested in a response, 
actually, from Mr. Garrelts and Mr. Showe, if that is correct, 
regarding how you would envision, considering that you are now 
dealing with housing projects where 20 percent of the voucher 
system's funds are connected to the specific units themselves 
under the project-based voucher program, when a PHA enters into 
an assistance contract with an owner for those units, it is for 
a specified unit, a specified term. Do any of you, first of 
all, deal in project-based vouchers? I'm assuming you do, but 
maybe I'm wrong.
    Mr. Showe. I can respond to that. Our organization does 
have project-based rental assistance, however, it was contracts 
entered into directly with HUD. I realize there are those 
tenant-based vouchers that can be assigned to privately-owned 
houses, but my company does not have any of those units 
available to be assigned to our company. In our experience, we 
have solicited trying to get those types of permanent tenant-
based assistance assigned to our apartment units and we have 
found, in dealing with the different housing authorities, that 
they did not have sufficient funding to go do that. So that is 
our experience.
    Ms. Hart. Okay.
    Mr. Garrelts. In our experience, we attempted to try 
project-based programs on a couple of occasions. But working in 
a tight marketplace, where we are trying to obligate the owners 
for a 10-year contract, they just were not interested because 
they had a line out their front door, and they could lease as 
many units as they wanted to. So having a project-based 
certificate just had no value to them. So we could not interest 
them at all.
    Then again, with our fair market rents----
    Ms. Hart. Could you not interest them because of----
    Mr. Garrelts. They had so many folks. if you have a unit in 
my community, you would have five people wanting to rent that, 
and you do not need to have any assistance to get those clients 
in there because they will pay the rent.
    Ms. Hart. Okay.
    Mr. Garrelts. It may be unique--well, it is not unique when 
you go around the country. There are many marketplaces that are 
like this right now, where the demand for units exceeds the 
supply. And in those types of circumstances, project-basing is 
really of no use because the owner doesn't need that. Project-
basing works in those weak markets in which the marketplace has 
too many units for clients. And then in those types of cases, 
the owners really like that because then they are guaranteed 
some money for their units whether or not they are occupied.
    I shouldn't say this, whether or not they are occupied or 
not, because that is not totally true, but they are at least 
guaranteed they are going to get someone referred to them to 
fill that unit within a reasonable time.
    Ms. Hart. Do you envision any change to that under the new 
HANF block grant proposal? Do you think that would change the 
situation at all?
    Mr. Garrelts. Under the new HANF program, they have not 
defined anything as it relates to project-based vouchers or 
certificates. And as I understand it, there is a new HUD rule 
that is coming out on project basing that is going to be 
implemented, and certainly that would have, or HANF would have 
a negative impact on that new rule. I have not seen the new 
rule, but I understand that the industry is pretty happy with 
that.
    Ms. Hart. Okay. Mr. Showe, anything additional?
    Mr. Showe. I guess from our perspective we feel the public 
housing authorities do a terrific job in administering the 
Section 8 vouchers, and as far as the ownership of these 
different properties are concerned, the most important thing to 
do is to allow it to be transparent whether they are a Section 
8 renter or whether they are a conventional renter. And the 
ways to make that happen is to eliminate the lease addendum in 
order to allow our managers to work off of one lease agreement. 
Because it causes tremendous confusion in training and 
administration of the lease rules and policies when you have to 
have two separate leases for the Section 8 voucher holders as 
compared to a conventional rental unit.
    The other factor is we lose a lot of money trying to get 
the inspections scheduled for the individual apartment units. 
Sometimes it takes up to 30 to 45 days to schedule those 
inspections when in fact the family is ready to move in 
immediately. So not only do we lose but the voucher holder 
loses too because they are anxious to move in and find housing.
    Ms. Hart. So is that red tape experienced by both of you as 
far as the whole system itself?
    Mr. Garrelts. No, I think that is a market-driven issue. In 
our community we are able to respond very rapidly. Within 
basically 10 days of a request to go out and do an initial 
inspection, we are able to do that quickly. But if you go into 
large population bases, and again this gets back into the basic 
staffing requirements in order to do the program, in large 
population bases where you may have 5,000 or 6,000 units in an 
area, they do not have 5,000 or 6,000 inspectors. So it is a 
little tough to get the inspectors around to inspect. If they 
are leasing out 400 units in a month, and that is not an 
unusual number that could occur, you just physically cannot 
have enough people around to go do those inspections.
    Mr. Gary Miller. The gentlewoman's time has expired. Miss 
Velazquez is recognized for 5 minutes.
    Ms. Velazquez. Mr. Garrelts, you state in your testimony 
that you believe H.R. 1841 has the potential to have a 
dampening effect on landlord participation in the Section 8 
program. You make specific mention of potential for problems 
with the project-based Section 8 program.
    Would you please expand on this conclusion and indicate if 
you believe this effect is likely on both the tenant and 
project-based program or only one of the two?
    Mr. Garrelts. For the project-based program, it is of great 
importance, in order to attract an owner to participate in the 
program, that it is an easy process for them. Any extra 
administrative burden thrown at them is an extra cost for them, 
and they have that operating cost to be concerned with. So if 
under the HANF program we would go forward and we would still 
have the old existing project-based certificates in place, they 
are grandfathered, you would have the problem that that 
management company would be faced with two different sets of 
rules. So you have just violated the basic principle of keeping 
it simple. The management company would be real reluctant to 
continue participating in project-based units if they have 
different rules to follow.
    The same would occur within just the regular tenant-based 
program where the tenant is going out and searching. You have a 
tenant that has a grandfather voucher. They go out and call on 
a landlord, walk up to the landlord and say I would like to 
rent your unit. The landlord is accustomed to our program, they 
rent him up, they know the paperwork and everything is just 
fine. The next tenant comes along and says I have a new voucher 
under the proposed rule and I have all these different things I 
have to do. Suddenly the landlord is saying, I don't want to 
learn anything new.
    Most of the landlords want to be able to keep their 
management relatively easy to do. They have staff they have to 
train. The process of keeping everything standardized is very 
important.
    Ms. Velazquez. Thank you. Ms. Thompson, in your testimony 
you cite approximately $1 million in annual Section 8 
rescissions as one of the most significant symptoms of problems 
with the current Section 8 system. Yet in the fiscal year 2003 
appropriations bill steps were taken to better account for 
Section 8 funds and ensure fewer rescissions. Given these new 
changes to the Section 8 program, doesn't it make sense to see 
the results of those changes before authorizing a complete 
overhaul of the program?
    Ms. Thompson. Certainly steps were taken in the most recent 
appropriations bill to avoid those kinds of large recaptures in 
future years, but that doesn't solve the under utilization 
problem.
    We don't think an answer to under utilization is to simply 
take back the money you gave to PHAs. That's effectively what 
Congress is trying to do. They are trying to identify just how 
much money is really being used, and in case we are wrong we 
will create this little contingency fund. But our answer is, 
wait a minute, we want to see all authorized vouchers used. And 
we think a way to do that is to create the program flexibility 
that will lead to higher utilization as the HANF proposal could 
do.
    Ms. Velazquez. So tell me, how is rescission issue answered 
through the proposed changes?
    Ms. Thompson. I don't think the rescission or recapturing 
or avoiding recaptures solves the problems that vouchers cannot 
be used in all communities. We think a program that has more 
flexibility to move those vouchers around the State so they can 
be used to change payments standards where necessary to 
increase usage--we think this is what needs to happen, not just 
taking the money back if it doesn't get used.
    Ms. Velazquez. How do you respond to concerns that State 
flexibility will make it harder for voucher holders to move 
between States?
    Ms. Thompson. To move from State to State? We have many 
housing programs now where the rules are different from State 
to State and the housing industry manages those rules fine. You 
already have portability issues, even within States, under the 
current program. So I don't see that as a barrier. In fact, we 
think it is an advantage that States with very different local 
conditions can design a program that meets their needs, not one 
that looks like every other State.
    Ms. Velazquez. Thank you. Thank you, Mr. Chairman.
    Chairman Ney. Thank you. Ms. Lee.
    Ms. Lee. Thank you, Mr. Chairman.
    Let me just thank you again for this hearing, and I want to 
associate myself with the remarks of our Ranking Member from 
California, Ms. Waters, who kind of laid out what many of the 
issues are in California as it relates to Section 8 housing.
    Me, coming from northern California, for example just in 
Oakland alone, we have 8,000 people on the waiting list for 
Section 8 housing. Section 8 housing is such an important 
instrument for affordable housing. I hate to see it going in 
the opposite direction, which I think this bills takes it. I 
don't think this will strengthen Section 8 and provide for more 
adequate housing for those who are on waiting lists, but, in 
fact, provide less housing for less individuals.
    A couple of things I just wanted to ask, I guess Ms. 
Thompson and Ms. Dowling. One is this new legislation allows 
now for the State to contract with or to designate any agency, 
whether it is a public housing authority or not, just any 
agency, to act on behalf of the Feds in terms of providing 
Section 8 housing. How do you see this in terms of, one, the 
political ramifications of this, and, two, in terms of just the 
discriminatory or the possible discriminatory ramifications of 
allowing any agency that has not been involved with housing to 
become part of this process in terms of administering the 
program?
    Quite frankly, this provision really does scare me to 
death. Ms. Thompson, then Ms. Dowling, please.
    Ms. Thompson. We think the flexibility that the legislation 
gives States to work with partners, both existing PHAs and 
other entities, is important. We know that the States would 
impose standards, high standards, on who would qualify to do 
that work. We believe that many PHAs currently operating, good 
PHAs, and the vast majority of them are very effective, would 
continue to be the States' partners in this program.
    Ms. Lee. How do you know that, though?
    Ms. Thompson. In talking with our State agencies, they 
report to us that the vast majority of PHAs in their States are 
very effective. They see themselves stepping more into the role 
of HUD, hopefully, with a lot less regulation and bureaucracy, 
than stepping into the role of the PHAs.
    Ms. Lee. You don't see any politicizing of this as a 
possibility?
    Ms. Thompson. Certainly, there will probably be some PHAs 
that States will prefer not to work with, based on their track 
record, but we think, on the whole, the very effective network 
will be preserved and the partnership between the States and 
the local PHAs would be an effective one, much more effective.
    Ms. Lee. Then why wouldn't we just use existing public 
housing authorities, if they are so effective?
    Ms. Thompson. I think it is important to give States the 
ability to decide whether or not to work with them. There may 
be entities in some localities that would be more effective 
than the existing PHA. We all know there are some, though 
limited in number, ineffective PHAs. So that flexibility is 
important.
    But, remember, what we are trying to do here is create a 
program where States can come up with different requirements so 
it is not a Washington-driven program. And HUD can't oversee a 
program like that, 2,600 different programs around the country. 
But, States can, and we think they can do it well. But, again, 
I want to stress only with adequate resources and flexibility, 
which this proposal does not provide.
    Ms. Lee. What about standards and requirements?
    Ms. Thompson. We think----
    Ms. Lee. And nondiscrimination?
    Ms. Thompson. We think certain standards are appropriate. 
This legislation contains a lot of them already. If you were to 
go in this direction, we would want to work closely with you to 
determine what are the appropriate standards. Certainly Federal 
standards, in terms of who is served under this program, would 
be appropriate. We would just hope that they would not be 
extensive, such as the requirements under the existing program.
    Ms. Lee. Ms. Dowling, what do you think in terms of the 
questions I asked?
    Ms. Dowling. Well, first of all, I know straight off, I can 
keep it simple, there is going to be a lot of discrimination 
going on. That's why we had to implement a law within the State 
of New Jersey to protect our voucher holders.
    And as far as the other, there is no mechanism within any 
State I know, other than the State of New Jersey. The residents 
come out and participate. We will fight and, hopefully, it will 
be done properly within the State of New Jersey, but that is 
not going to happen across this country. You're going to have 
the ``good old boy'' network getting back in charge, and 
saying, you know what, we're going to take care of you if you 
can get me some votes coming up out of your area.
    So we are going to have even more discrimination. It's 
going to be worse than what it ever was before. Everything we 
fought to get here within the last 30 years with civil rights 
is going to go right out the window, and I can't make it more 
simple than that.
    Ms. Lee. Thank you very much.
    Finally, let me just say that I find it very ironic that 
generally those pushing this, the Republicans especially, this 
type of initiative, support local control. But in this instance 
now, we are going to another form of State control, I guess, 
and taking really away the local control aspect of Section 8. 
For me, this is backwards and will hurt us in the long run.
    Ms. Dowling. But you know what, I think great minds think 
alike, because that was the first thing when I read the bill, 
it was like, ``oh, you know what, this is going to break up a 
lot of strongholds across this country.'' And that's exactly 
what they're going to do with it.
    Ms. Lee. Thank you.
    Chairman Ney. Thank you. We appreciate the witnesses on the 
panel, appreciate your testimony, and thank you for coming to 
the U.S. Capitol.
    We will move on to Panel II, and we will have a couple of 
introductions.
    Mr. R.E. ``Tuck'' Duncan, Chairman, Topeka Housing 
Authority, Topeka, Kansas; Ms. Sandra Henriquez, Administrator, 
Boston Housing Authority, Boston, Massachusetts, appearing on 
behalf of Council of Large Public Housing Authorities (CLHPA); 
Mr. Tino Hernandez, Chairman of the New York Housing Authority, 
New York, New York; Mr. James Inglis, Executive Director, 
Livonia Housing Commission, Livonia, Michigan, and Senior Vice 
President, National Association of Housing and Redevelopment 
Officials, Washington, DC; Mr. Kevin Marchman, Executive 
Director, National Organization of African-Americans in 
Housing, Washington, DC; and Mr. Neil Molloy, Executive 
Director, St. Louis Housing Authority, St. Louis, Missouri, 
appearing on behalf of Public housing Authorities Directors 
Association (PHADA).
    We now will defer to Mr. Ryun for an introduction of Mr. 
Duncan.
    Mr. Ryun. Well, first of all, I want to thank the Chairman 
for allowing me the opportunity address this subcommittee. I am 
grateful that you have scheduled a series of hearings on this 
important subject and specifically applaud you for the balanced 
set of witnesses you have selected.
    I will be very brief, but I am extremely pleased to have 
the opportunity to welcome a constituent of mine to the 
subcommittee, Mr. Tuck Duncan. He is the Chairman of the Board 
of Commissioners for the Topeka Housing Authority in my 
district. Tuck truly is working on the front lines of this 
issue we are discussing, and his commitment is not only 
signified by his appearance here, but it shows as to how 
significant he believes this is.
    I believe that you will benefit tremendously from the 
experience and expertise that Tuck has acquired from his 
services in Topeka. This is an excellent opportunity to hear 
from someone who knows, firsthand, the issues surrounding this 
debate.
    Tuck, thank you for being here, and thank you for the work 
you do for everyone in Topeka, and I return my time to the 
Chairman.
    Chairman Ney. Mr. McCotter, for an introduction.
    Mr. McCotter. Thank you, Mr. Chairman, and the entire 
subcommittee for kindly allowing me to welcome and introduce 
one of my constituents and one of your panelists this morning.
    Since 1977, Mr. Jim Inglis has been the Executive Director 
of the Livonia Housing Commission, which tirelessly and 
effectively serves approximately 1,500 low and moderate-income 
Livonia families through a wide range of State, local and 
Federal programs. In fact, under Jim's leadership, the 
Commission has been rated a high performer by HUD's Public 
Housing and Section 8 Voucher Assessment Systems. Further, his 
peers have recognized his outstanding achievements, and Jim 
currently serves as Senior Vice President of the National 
Association of Housing and Redevelopment Officials.
    Jim, welcome, and thank you for appearing before this 
committee to testify on the issue of affordable housing. And 
good luck on the flight back, because I know you like to fly 
about as much as I do. Northwest will be kind to you, and tell 
my mother I am behaving out here.
    Thank you, Mr. Chairman.
    Chairman Ney. I thank our two members for their 
introductions, and with that we will go straight into the 
testimony, starting with Mr. Duncan.

   STATEMENT OF ROBERT E. ``TUCK'' DUNCAN, CHAIRMAN, TOPEKA 
                 HOUSING AUTHORITY, TOPEKA, KS

    Mr. Duncan. Thank you, Mr. Chairman.
    First, as a former miler and cross-country runner, I must 
say I am humbled to have Congressman Ryun introduce me. It has 
placed me in seventh heaven. And if my spouse of 29 years heard 
that I said I was humbled, she would probably find that 
amazing, but nonetheless.
    Mr. Chairman and Ranking Member, I am greatly pleased to be 
here this morning. The committee has already accepted our 
remarks for part of its record, and I am not going to read my 
remarks. I have a few notes and comments I would like to make, 
and I would like to try to briefly respond to some issues that 
have been raised by some of the questioning of the other 
committee members.
    As Congressman Ryun noted, I am a volunteer. I am one of 
those uncompensated persons on the front line of the Board of 
Commissioners throughout the country and those 2,600 housing 
authorities, save one or two larger housing authorities. We 
were a troubled agency in Topeka, Kansas, in 1999, as so 
declared by HUD when I went on to the advisory board. We, for a 
couple of years, worked to get ourselves extracted from under 
the aegis of the city government and became an independent 
governmental entity under our municipal housing laws in 2001, 
and it has been my pleasure to serve as Chairman ever since.
    The first thing I would note is that I think if there are 
housing authorities out there that are in trouble, I think HUD, 
quite candidly, has been slow to recognize them and, therefore, 
slow to act. So if I have one recommendation it is, the first 
thing is that the sooner we identify those local housing 
authorities that are in difficult times, the sooner we get in 
and try to provide them with assistance.
    I congratulate HUD in working with us, and I guess I am one 
of the few who perhaps feel that we have had some really great 
Federal-local partnerships. But for the work of the TARC office 
out of Cincinnati and the work of the Kansas City area office, 
I am not sure we would be as good a housing authority as we are 
today.
    In my comments, I noted that when we started we had a 
vacancy rate of almost 20 percent in public housing, and we 
were only using 60 percent of our vouchers. So we were one of 
those housing authorities that had under utilized vouchers and 
you were recapturing money, and we were accruing those funds 
and having to pay it back in the following year, because we 
were getting the money, were spending it, et cetera. So what 
did we do? Well, we simply applied some very lean management 
principles of business in order to try to make ourselves 
effective landlords in public housing and effective 
administrators of a Section 8 program. Today, my vacancy rates 
are less than 3 percent in public housing, and we have 100 
percent utilization of our vouchers.
    The point of that is, that by applying public sector 
management principles, you can run an effective program. Now, I 
was here at your first hearing, I happened to be in business, I 
listened to the Secretary's comments. I guess my difference is 
that I see housing as a national problem that requires national 
solutions. I don't see how 50 different approaches for solving 
this problem and 50 different slowly dwindling, patched-
together funding stream combinations are going to be an 
improvement. I guess I have more faith that the Congress and 
the Federal agencies can address these issues than perhaps some 
others do.
    I notice that Congress and HUD have already enacted a 
number of reforms, such as the Quality Housing and Work 
Assistance Act in 1998, the final rule received in 1999, the 
notices received in 2000. I guess what I see is that merely 
creating the States in the in between is creating a series of 
50 or 60 mini-HUDs. We don't need a series of mini-HUDs. We 
already have them; they are called the regional offices, and we 
can work with the regional offices just as effectively as we 
can with the State governments.
    Additionally, I think you should, as Congress, give it some 
time before the reforms take place. In essence, before we 
reform the reforms, let's see if the first set of reforms are 
having some impact. Like any investment, you don't expect your 
profits or your return quickly. You try to take a long-term 
approach. Based on HUD's own March 2000 Section 8 reports I 
think there already is an awareness, both nationally and at the 
front line, that we must improve performance. If we hear 
nothing else today, we must improve performance if for no other 
reason than the participants of this program deserve our best 
efforts.
    The question's been asked, how many are on waiting lists? I 
checked this morning before I came in, and I have 1,525 on the 
waiting list. I have about 1,100 vouchers. Part of the problems 
that we are having are there are no incentives for landlords to 
get involved in this program. If you want to have housing, you 
have to have landlords under Section 8. And you want to have 
quality, good neighborhoods, because one of the problems is 
mobility; move people out of areas where the fair market rents 
allow you to rent into areas where the fair markets otherwise 
wouldn't allow you to rent. And we have difficulty there. That 
is one of the goals. I don't see that the State is going to 
know any more about that than I do.
    Well, 5 minutes goes fast. I will be glad to respond to any 
questions that the committee may have, and I have some specific 
recommendations if you are so interested.
    Thank you, Mr. Chairman.
    Chairman Ney. I thank the witness. And, again, the 
testimony can be submitted for the record that you have in 
writing, without objection, and we will go on to the next 
witness.
    [The prepared statement of Robert E. Duncan can be found on 
page 189 in the appendix.]

 STATEMENT OF SANDRA HENRIQUEZ, ADMINISTRATOR, BOSTON HOUSING 
AUTHORITY, BOSTON, MA, APPEARING ON BEHALF OF COUNCIL OF LARGE 
               PUBLIC HOUSING AUTHORITIES (CLHPA)

    Ms. Henriquez. Good morning, Mr. Chairman, Ranking Member 
Waters, and members of the subcommittee. My name is Sandra 
Henriquez, and I am the Executive Director of the Boston 
Housing Authority. Today, I am here representing the Council of 
Large Public Housing Authorities, CLHPA, whose members manage 
over 30 percent of the Nation's Section 8 tenant-based 
assistance, primarily in large urban areas. Thank you for 
allowing me to testify before you on the Section 8 Rental 
Assistance Program and the administration's proposal to block 
grant Section 8 rental vouchers to the States.
    The Section 8 Rental Assistance Program is a great success 
by any measure. Not only is there no evidence that block 
granting voucher funds to States will improve the program, 
there are indications that this proposal will undermine Section 
8 success. National utilization rates have increased 6 percent 
over the past year, from 89 percent to slightly now over 95 
percent. If this trend continues, the average national lease-up 
rate could reach 97 percent by July of this year. And in Boston 
our success rate increased from 85 percent to its current 100 
percent. This success indicates strongly that we will not 
continue to see large amounts of unspent funds as in recent 
years, and the program does not need significant reform. 
Devolution to the States, however, will undermine this success.
    Section 8 rental vouchers are an important resource for 
families with extremely low incomes. It has been estimated that 
less than a quarter of those eligible for vouchers and other 
forms of low-income housing assistance actually receive any 
form of aid. The remainder live in substandard housing, double-
up with family and friends, pay more than 50 percent of their 
income for housing or are homeless. Section 8 rental vouchers 
help solve this problem for nearly 2 million households.
    Unfortunately, this proposal would result in the program's 
serving fewer of the neediest families. The block grant 
proposal includes changes in income-targeting requirements and 
the evaluation factors for the program that will push States to 
serve higher-income families and support the lowest quality 
housing in poorest neighborhoods because this is all the 
program will be able to afford.
    The current legislative proposals would enable States to 
divert voucher funds to State programs and possibly, depending 
upon how HUD defines supporting activities, could enable States 
to divert voucher funds to a range of nonhousing programs. 
States block grants would also add an additional layer of 
bureaucracy and cost to what is essentially a local program.
    The block grant proposal erroneously argues that States 
will be more responsive to local markets than HUD, even though 
it is the local housing authorities that currently administer 
the program and develop and maintain relationships with local 
landlords. The cost of the additional layer of bureaucracy 
cannot be ignored. The evolution of the Massachusetts State 
Rental Housing Assistance Program, called the Mobile Rental 
Voucher Program, is illustrative of my concern with block 
granting the Section 8 voucher program. The administration's 
budget calls for $100 million of Section 8 funds to be set 
aside for start-up costs, which instead should be used to 
support 15,000 vouchers for families in need.
    The bill also adopts a most disastrous provision from the 
2003 Omnibus Appropriations Bill that caps the amount of earned 
administrative fees a public housing authority can maintain to 
use for low-income housing purposes. The Boston Housing 
Authority currently uses this earned administrative fee to fund 
a variety of low-income housing programs, including a security 
deposit program for homeless families, lease-up counselors who 
assist homeless families in Boston to find housing; bridge 
loans for HOPE VI and redevelopment activities to support 
operating costs of public housing, since these funds have been 
severely cut in recent years.
    There is interconnectedness among these housing programs. 
The flexibility to use this earned fee for a variety of low-
income housing program is crucial to maintaining a cost 
effective, low-income housing strategy that meets local needs. 
Limits and caps on this funding, coupled with splitting the fee 
between two layers of bureaucracy, States and localities, will 
make it even more difficult to administer the program 
effectively.
    And even though Section 8 is successful, we agree with the 
administration that the program could be even better if HUD 
were to provide localities with more regulatory flexibility to 
meet the changing needs in the local real estate markets. HUD 
already has the authority under the current law to make the 
program less complicated, enabling local housing authorities to 
use Section 8 funds more creatively, for things such as tenant 
counseling enhanced security and deposits improvements to 
ensure the quality of the Section 8 stock.
    Another proposal that would help housing authorities better 
use Section 8 would be greater flexibility regarding the 
location of project-based units, the process of procuring 
project-based developers, and the number of units that can 
receive project-based subsidy in a building. All of those would 
go a long way towards creating more housing choices for needy 
families.
    For all these reasons, CLPHA strongly encourages Congress 
to reject the proposal to block grant Section 8 rental vouchers 
to the States and, instead, please encourage HUD to grant more 
flexibility to housing authorities administering the Section 8 
program so that we can better address the local housing needs 
in our communities. Thank you.
    Chairman Ney. Thank the witness for her testimony.
    [The prepared statement of Sandra Henriquez can be found on 
page 203 in the appendix.]
    Chairman Ney. Mr. Hernandez.

 STATEMENT OF TINO HERNANDEZ, CHAIRMAN, NEW YORK CITY HOUSING 
                    AUTHORITY, NEW YORK, NY

    Mr. Hernandez. Chairman Ney, Ranking Member Waters, members 
of the committee, I am Tino Hernandez, Chairman of the New York 
City Housing Authority. On behalf of Mayor Michael R. 
Bloomberg, thank you for this opportunity to testify about the 
housing assistance for needy families block grant proposal.
    New York City has much at stake in your deliberations. The 
New York City Housing Authority is the largest public housing 
agency in North America, providing housing and direct-rent 
subsidies to 633,000 low- and moderate-income residents in the 
five boroughs of New York City. Our conventional public housing 
program comprises 345 developments, encompassing 2,702 
buildings and 181,000 apartments which provide housing for 
419,000 residents.
    NYCHA's Section 8 program currently has 85,928 vouchers 
under contract. New York City administers one of the Nation's 
most extensive Section 8 programs. New York City is the 
Nation's third largest, after the entire States of California 
and Texas. In New York City total, we have approximately 
105,000 Section 8 vouchers. NYCHA contracts 85,928 vouchers 
serving 214,000 residents, and we have 27,694 participating 
landlords. Our sister agency, Housing Preservation and 
Development, oversees 19,000 vouchers, with 5,300 participating 
landlords.
    New York City's Section 8 program is among the most 
successful in the United States. NYCHA's voucher utilization 
rate is currently at 98 percent, and HPD is now at 100 percent. 
Local control, at the local level, is the key reason for New 
York City's success in administering the Section 8 program. 
Housing conditions vary widely from city to city and localities 
best understand their housing needs. No State agency can know a 
local market as a city or locality can.
    In New York City, we have been able to tailor the Section 8 
programming to meet the unique needs of our real estate market. 
We are able to set fair market rent levels by neighborhood, 
acknowledging the varying rents within New York City 
communities. We are able to be responsive to the needs of 
landlords with the goal of gaining greater participation in the 
Section 8 program. We have streamlined the processing of rent 
payments to landlords. We have shortened the approval process 
for Section 8 transfers and rentals. We have automated 
inspections, introducing technology. We have automated rent 
calculation systems, minimizing errors. And we pay holding fees 
to landlords for apartments for processing time.
    The scarcity of affordable housing in the New York City 
market is dramatic. The New York City vacancy rate is among the 
lowest in the country. Within the context of local control, 
NYCHA has been able to work closely with Mayor Bloomberg and 
its sister housing agencies to ensure that the City's 
priorities are addressed. NYCHA's Section 8 program is an 
integral part of the New York City's strategy to deal with 
special populations, such as victims of domestic violence and 
homeless families, and we do that on a regular basis.
    New York City, working in collaboration with the Mayor's 
office and also with HPD, has also unveiled an important major 
housing program which will result in the production of 65,000 
additional units of affordable housing over the next 4 years. 
The Mayor's program will preserve existing housing stock, 
produce additional housing, and identify development 
opportunities, all of which are supported by the Section 8 
program's role in preserving the existing housing stock.
    Under the Section 8 block grant proposal, we have concluded 
that we would be adding an unnecessary and costly third-party 
administrative layer. HANF will not improve the delivery of 
tenant-based housing assistance. It would only complicate it, 
and the distribution of Section 8 vouchers will become more 
problematic. We believe that this particular proposal could 
disrupt the success of New York City's program, and we strongly 
believe that the Section 8 program should be administered at a 
local level.
    Thank you.
    Chairman Ney. I thank the witness.
    [The prepared statement of Tino Hernandez can be found on 
page 210 in the appendix.]
    Chairman Ney. We will move on now to Mr. Inglis.

   STATEMENT OF JAMES M. INGLIS, EXECUTIVE DIRECTOR, LIVONIA 
  HOUSING COMMISSION, LIVONIA, MI, AND SENIOR VICE PRESIDENT, 
 NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS, 
                         WASHINGTON, DC

    Mr. Inglis. Good morning, and thank you for the opportunity 
to testify before the committee, Mr. Chairman and Ranking 
Member Waters. It is a pleasure to be before the committee. My 
name is Jim Inglis, and I am Executive Director of the Livonia, 
Michigan Housing Commission.
    The Livonia Housing Commission assists approximately 1,500 
families with affordable housing and community development 
programs. I am here today representing the National Association 
of Housing Redevelopment Officials, and I currently serve as 
their Senior Vice President. NAHRO is the oldest housing 
community development organization in the United States, having 
over 19,000 members.
    There are several concerns I have regarding the HANF 
proposal which we would like to outline today. First of all, 
the funding shortfalls. The major concern in this program is 
that in the out years, the next 5 years, housing assistance 
payments will be reduced by $1.1 billion to $1.8 billion over 
the next 5 years. The reason is that the Consumer Price Index 
rate of inflation and HUD's automatic adjustment factors will 
not keep up with rents increasing in the Section 8 market. In 
addition, the administrative fees are proposed to be capped at 
10 percent of the housing assistance payments. It is our 
concern that would represent a 13 percent cut for most housing 
agencies across the country, thereby reducing their ability to 
provide needed housing assistance and counseling to Section 8 
clients. That would reduce the landlord outreach, housing 
counseling, and support for local residents.
    What would happen if these funding shortfalls take place in 
the funding out years is that the States will be faced with 
several very serious questions. First of all, how would they 
increase rent burdens or reduce the value of the voucher to 
make sure they are assisting a sufficient number of families? 
Two, will they use State revenue to make up that shortfall? I 
doubt it, given the situation now in most States. Or, three, 
which is likely the most palatable option for the States, would 
be to reduce assistance to low- and moderate-income families 
under the Section 8 program, which these charts provide 
information on.
    The issue of cost containment has always been one Congress 
has been concerned about, and one thing that should be 
acknowledged is in the 2003 appropriations bill, we now have a 
way of making sure we reflect the actual cost of housing and 
the number of units that are leased in the market based on 
quarterly information we are providing to the Department of 
Housing and Urban Development. This has, in fact, eliminated 
the large recapture issue that Congress was concerned about in 
the past. So in terms of cost containment, I applaud Congress 
for that work they did in the appropriations bill to now 
accurately reflect the cost to administer the program.
    There is one other concern we have, relative to 
grandfathering, if it goes to the States. The States are 
required to administer the program under the current rules. 
However, there are provisions within HANF that say if there is 
insufficient funds to operate the program, there is a loophole 
for the State to reduce that assistance, which no longer 
provides a safety net for residents but basically a trapdoor. 
These residents will no longer be able to receive assistance 
under the program.
    The current Section 8 Housing Choice Voucher program is 
highly successful, and I think that is one point that needs to 
be made. The Millennial Housing Commission Report, mandated by 
Congress, indicates the program is flexible, cost-effective and 
successful. Housing choice voucher leasing rates have continued 
to increase. In the year 2000, it was 92 percent, year 2002 it 
went up to 94, and HUD's own projection is by the year 2004, it 
will go up to 96 percent, and the charts being put up reflect 
this. The concern we have is that 96 percent is an excellent 
utilization rate and leasing rate, and only in Washington does 
HUD determine that to be insufficient or a failure by the local 
housing agencies. Again, this is a highly successful rate under 
the voucher program.
    Basically, the program is already a block grant. It is a 
block grant to the local unit of government, the lowest local 
unit of government, which really is the most practical 
administrative agency within the State. The local unit of 
government is involved in local planning. They have 
relationships with landlords, local decision-making, local 
accountability, they can actually address local issues relative 
to the market, and so really we have a block grant program that 
goes to the local unit of government which is most effective.
    The under utilization issue is really not an issue. As you 
can see, since the initiation of QHWRA, leasing rates have 
continued to go up along with voucher utilization and the 
number of families being served in the program. Under HANF, we 
expect these numbers will continue to go down in the future.
    Flexibility? The members of the committee have asked about 
flexibility. We believe HUD has the tools now to provide 
regulatory relief to smaller agencies. There was an August 2002 
interim proposed rule that has not been released by the 
Department, we encourage them to do that for smaller agencies. 
Also, complete the project-based voucher rule, which has been 
recently withdrawn. Timely reallocation of unused vouchers. 
There are some agencies that can't use vouchers, and if they 
would timely reallocate those to other agencies, that would 
greatly assist the program. And, lastly, give us the 
flexibility to work within a changing market condition, to 
adjust fair market rents to make the program work.
    Again, the biggest recommendation that I have from my 
agency is we have 752 vouchers, we have a waiting list of 6,000 
people, and there is just not enough supply for the demand 
people have for the Section 8 Housing Choice Voucher program. 
So I encourage more resources that would go to the local 
communities to assist in the program.
    Thank you very much.
    Chairman Ney. I thank the witness for his testimony.
    [The prepared statement of James M. Inglis can be found on 
page 216 in the appendix.]
    Chairman Ney. The next witness.

   STATEMENT OF KEVIN MARCHMAN, EXECUTIVE DIRECTOR, NATIONAL 
  ORGANIZATION OF AFRICAN AMERICANS IN HOUSING, WASHINGTON, DC

    Mr. Marchman. Chairman Ney, Ranking Member Waters, my name 
is Kevin Marchman, and I am the Executive Director of the 
National Organization of African-Americans in Housing.
    This morning, we have heard from voucher users, local 
program administrators, industry leaders, apartment owners, 
resident leaders. All have said this proposal is not needed and 
perhaps unwise. All have said improvements need to be made. HUD 
agrees. I suggest over a year's time that the administration 
convene a representative group, as they have recently done with 
this HOPE VI Program, and discuss and suggest needed changes 
and improvements to the program.
    The Section 8 Voucher Program is the bedrock of the 
Nation's affordable housing program, not the States'. Each 
administration seeks to make improvements to this program, to 
make it more flexible, more responsible. Indeed, when I was 
responsible for the administration of this program, we 
preliminarily explored the option or the possibility of block 
granting this program. We rejected it for some of the same 
reasons you have heard this morning. Again, I believe that HUD 
is earnest in wanting to improve the Section 8 Voucher Program. 
I believe the way to do that is to convene a group, perhaps a 
Secretary's task force, for the improvement of the Section 8 
Voucher Program and report back to this committee in a year's 
time with administrative solutions.
    Thank you very much.
    Chairman Ney. I thank the gentleman for his testimony.
    [The prepared statement of Kevin Marchman can be found on 
page 239 in the appendix.]
    Chairman Ney. Mr. Molloy.

STATEMENT OF NEIL MOLLOY, EXECUTIVE DIRECTOR, ST. LOUIS COUNTY 
HOUSING AUTHORITY, ST. LOUIS, MO, APPEARING ON BEHALF OF PUBLIC 
       HOUSING AUTHORITIES DIRECTORS ASSOCIATION (PHADA)

    Mr. Molloy. Thank you, Mr. Chairman, my name is Neil 
Molloy. I am the Executive Director of the St. Louis County, 
Missouri Housing Authority.
    Today I am representing the Public Housing Authority 
Directors Association, PHADA. PHADA represents over 1,900 men 
and women who serve as the executive directors of America's 
local housing authorities. We wish to go on record, and I will 
try not to repeat what everybody else has said, and that will 
make it a little bit difficult, but first you heard from a 
former member of this body, Representative Susan Molinari of 
the Millennial Housing Commission that the Housing Choice 
Voucher program is a success, and it is the linchpin for low-
income families in the private housing market. The second 
recommendation from the Millennial Housing Commission asked for 
more funds on an annual basis. That is what is really needed to 
make the program work.
    I want to talk specifically about one of the proposals in 
HANF. PHADA represents many of the smaller agencies that run 
programs of 250 units or less in the voucher program. There are 
some assumptions in this proposal about cost. These programs 
represent about 7 percent of the total program but they are 
very critical to the local market in these small towns and 
rural America. These programs were specifically designed to 
deal with many problems with senior housing, people who are on 
fixed incomes, receive small pensions or small Social Security 
payments. And if the local rural community and that housing 
authority did not have these vouchers, you would have a 
terrible housing crisis in these communities. HUD should just 
deregulate the small housing authorities, stop calling them a 
burden, because they are not, they are a very valuable asset to 
the small towns of America.
    As a former member of the Missouri General Assembly, with 
nine years of service on the Appropriations Committee, I served 
with Representative Clay, I have a little experience dealing 
with State bureaucracies and their capacity. In Jefferson City, 
bureaucrats like to treat legislators like mushrooms, keep them 
in the dark and feed them lots of manure. I imagine it's the 
same here. I think this proposal for HANF came out of a 
mushroom farm in the basement of HUD instead of the tenth 
floor. But what really scares me about HANF is the absolute 
chaos it would create in the program. Can you imagine having 50 
different policies for a national housing program? This program 
has developed incrementally over three decades, and it works. 
It needs some fine-tuning, some minor adjustment, but the 
program really does work.
    In his testimony before this committee, Secretary Liu 15
    essentially told you that HUD is going to spend $15 million 
a year to continue the program, even if they switch it to the 
States, and they are not going to cut any employees. I think 
this is just creating a new level of bureaucracy and 
administration that is not needed, and I think it is a really 
poor use of taxpayers' money. As previously mentioned, the $100 
million to ramp up the States could house almost 16,000 
families for a year. That would be, in my opinion, a sin and a 
shame.
    Finally, if the program is a block grant, it States 
specifically in Section 6(d)(2) that if there is not enough 
money, the States will have to make their best efforts to fund 
all the current voucher holders. Well, in my State, Missouri, 
the General Assembly is meeting today to cut teachers, to cut 
State employees, to cut social programs, health programs, 
education programs. They do not have the capacity. What will 
happen if this grant goes forward, if HANF goes forward, States 
will use the money like they have used the tobacco money, they 
will substitute it for declining general revenues whenever they 
have a problem. Housing is not the first priority in the State 
of Missouri, and I don't believe it is the first priority in 
any of the States.
    Finally, HANF will mean a real rent increase for residents. 
What I am talking about is when you go from adjusted income to 
gross income to base your rent on and you go from $25 to a 
minimum of $50, that affects the people who are on the fixed 
incomes and the very lowest income, and it also affects people 
who went to work. Because a TANF check or a Social Security 
check is gross income. A paycheck is not gross income, it's net 
income. So we are going to set our rents on the gross income, 
which is unfair to these working families.
    Finally, if the program is not broken, please don't break 
it. When HUD came to you and said, we can't regulate this 
program, it's too complicated, it reminds me of the old cartoon 
character Pogo, and his famous words, ``We have met the enemy, 
and it is us.'' when this body, in 1998, with the former 
Chairman of the committee, Representative Lazio, passed QHWRA, 
the preamble it said the purpose of the bill was to deregulate 
well-run housing authorities. Quite frankly, that has not 
occurred. It should be the responsibility of this committee to 
ensure that HUD does that.
    We know how to do the programs. If we could make things a 
little simpler, a little less complicated, the program would 
work fine, but it definitely needs more appropriations. We have 
6,000 vouchers, we are at 102 percent utilization and we have 
6,000 people currently on our waiting list. And we only open up 
our waiting list about every 2-1/2 years to allow people to 
come on to the list on a lottery system.
    So there is a great demand out there, and it is time for us 
to do something. Thank you.
    [The prepared statement of Neil Molloy can be found on page 
243 in the appendix.]
    Chairman Ney. I want to thank the witnesses.
    I am just going to make one statement, and then I will 
yield to members who will want to ask questions, and we have a 
time factor here.
    I am torn on this now. At one point in time, I think 
everybody was running to the Capitol and saying it's broke, the 
money is being taken back by the Congress, and we have to do 
something about it. Now, all of a sudden the money is not 
necessarily brought back through the appropriations process. 
But that doesn't mean that some things aren't, I don't want to 
say maybe two broken legs, but maybe a broken arm along the 
line.
    I apologize for having to come in and out, I had two 
commitments, but I have the testimony, and some of the things 
I'm interested in hearing are what you think are some problems. 
I will get away from the word broke, but there are some 
problems. I think at the end of the day, if individuals, for 
whatever reasons, the States, suspicion of the States, whether 
it will work or not, whether a State will opt in, the housing 
authorities go away and all of a sudden the States say, here, 
take it back, and now, you recreate it. I can give you a whole 
bunch of scenarios that are alarming. On the other hand, HUD 
itself has pointed out that monies were returned, they weren't 
used. Now, because of an act of Congress they aren't returned, 
but does that mean the system doesn't need some type of repair?
    I hope as this progresses, that advocacy groups, the 
housing authorities, tenants, the large housing authorities, 
the small, the medium-sized, the rural, the urban can get 
together. And if there are admitted problems out there, could 
come together with some consensus of how those are repaired or 
fixed. So maybe the patient doesn't need open heart surgery, 
but maybe you need to do some exploratory. So I understand 
where you are all coming from, but I hope down the road a lot 
of ideas can be jelled around to see what happens at the end of 
the day.
    So I appreciate your testimony, and with that, I will defer 
to the Ranking Member, Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    We were just talking about what we could possibly do to 
offer some alternatives to this block granting. I am opposed to 
it certainly, but I think as we move to fight this idea, we do 
have to come up with a few things that we could do.
    Let me just raise these questions. First of all, I think 
there needs to be more money. I personally would like to see 
money to help offset the capital cost, particularly small 
landlords with certain number of units, et cetera. It seems to 
me that when you have to put on a new roof or do some capital 
repairs, that perhaps we should try and offset those costs in 
some way. I don't know.
    Someone mentioned here today, the question about the 
inspections process and some other things. I think we have to 
keep in mind that we cannot and we should not have slum 
properties, and we have to make sure that they are inhabitable, 
they are livable, they are a good environment to raise children 
and families. Is there anything in this area that you consider 
unreasonable, that could be changed or that could be looked at 
in a different way as it relates to the inspection process?
    I don't know what is required after each family moves out, 
what the landlord is required to do. Is that reasonable? Are 
there complaints of any of the landlords relative to the 
amounts of monies that they are mandated to spend? I guess that 
would be for so-called rehab, upkeep, et cetera? Is there any 
room there for discussion?
    Mr. Inglis. Yes, through the HOME program there is a rental 
rehabilitation, where they can take low-interest loans to 
assist in the rehabilitation of the property so we can 
facilitate working with landlords in that area. We have done a 
lot of work with our landlords on lead-based paint issues, 
asbestos issues, and we continue to work with our landlords on 
local housing inspection ordinance issues. So there are a lot 
of different programs that we can work with our landlords to 
mitigate some of the issues relative to housing quality.
    I concur, housing quality is the key to the program. We 
want to make sure we are housing people in safe and affordable 
housing, but we need to make sure we work with our landlords, 
we have good partnerships with our landlords. We meet with them 
on a regular basis to make sure we understand their needs and 
what we can do for them. And I believe there are Federal 
programs at our housing agency, because we are a housing and 
community development program.
    Ms. Waters. Do cities set aside any CDBG or HOME or any of 
those monies for the upkeep of any of these properties? I don't 
even know if that is appropriate.
    Mr. Inglis. I don't think the Department has set aside, but 
we, as a local agency, in putting together our consolidated 
plan or our agency plan could do so in making sure that we look 
at these resources and make some programs available for the 
local landlords, especially the smaller landlords, as you are 
concerned with.
    Ms. Waters. Any other thoughts? Thank you.
    Ms. Henriquez. If I might. In Boston, we have been talking 
with other housing agencies who also administer Section 8 
vouchers when we do orientations with our landlords about what 
is expected, what are the housing quality standards they have 
to hit, we then array for them programs they might go after if 
they want to get into the program but need a little help on the 
capital side. And, in addition, we have been working with the 
States to try to pilot a program to provide an incentive for 
particularly smaller landlords to come into the program.
    For instance, a repair that needs to be done to a hot water 
heater. Is that worth a $300 advance? Is there something we can 
do in the short-term that gets them over the hump to meet the 
quality inspection they have to do through? So we are looking 
at those kinds of incentives to help people come into the 
program who might otherwise be on the fence?
    Mr. Molloy. Some of the comments from the gentleman from 
the Multifamily Council about streamlining the process could 
work. You have to be careful on how it is done. You have to 
make sure the quality is there in the inspection process.
    One of the other problems that comes up, we are a 
jurisdiction, in St. Louis County, with 93 municipalities, and 
we have Section 8 vouchers all over the county. A number of the 
municipalities have local occupancy permits and their own 
inspection programs. So sometimes it becomes onerous for 
landlords at that level to go through our inspection and a 
municipal inspection. And if something is not fixed, and 
depending on the severity of the item, they have 24 hours to 
fix emergency items, or up to a further period of time to fix 
nonemergency items. We could do that.
    I think the Millennial Housing Commission also had some 
recommendations.
    Ms. Waters. Could we look at memorandums of understanding 
where you have several jurisdictions that have various laws 
relative to inspections, upkeep, et cetera, so that if you get 
memorandums of understanding, one, hopefully ours, HUD could be 
the lead agency to determine?
    Mr. Molloy. I think it would be very difficult for HUD to 
negotiate with the local communities because most of them are 
very suspicious of HUD for a lot of good reasons. But I believe 
you could probably do that on a local area. Maybe try to have 
joint inspection programs, try to coordinate that. But it does 
become a hassle for the landlords, and we try to speed that 
process up as much as we can.
    Ms. Waters. Well, that may be an area that we could take a 
look at.
    Let me tell you what my concerns are. With the housing 
market being what it is, and landlords able to get market rents 
for their properties, I don't know why many of them are going 
to want to be in Section 8 at the rate that the market is 
performing. So I want to do something to give a little bit of 
an incentive.
    So if each of you would think about that and feed that 
information back to us, I would be very grateful. Thank you.
    Chairman Ney. Thank you.
    Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman. I would like to 
take this opportunity to welcome my Chairman from the New York 
City Housing Authority. Mr. Chairman, I am just really amazed 
to see that here in Congress some people are always advocating 
about flexibility and local control, but--and they have been 
good at staying on message. But it seems that on this 
legislation they lost that page.
    I would like to ask the Chairman of the New York City 
Housing Authority, were you consulted when this legislation was 
being put together?
    Mr. Hernandez. No.
    Ms. Velazquez. So they didn't consult with any of the 
people that are running this local authority?
    Mr. Hernandez. I always have to check with my staff. I was 
not personally consulted.
    Ms. Velazquez. But we continually say that you people at 
the local level, you know best what works and what doesn't 
work. But when it comes to drafting legislation that supposedly 
makes the reforms that are needed for Section 8, we do not 
consult with you.
    So let me consult with you, Mr. Chairman. The bill now 
pending before the committee will limit the fee to 10 percent 
of an agency's allocation. Can you tell me what uses the city 
puts to the fee, whether you believe a 10 percent ceiling on 
the fee is appropriate and whether you favor greater 
flexibility regarding the use of the fee by the local agency?
    Mr. Hernandez. We have been able to use the administrative 
fee really for a variety of purposes. One is that we have had--
since I have been Chairman, one of the things that we have done 
is that we have put a lot of emphasis on the Section 8 program 
because we believe it is probably one of the best vehicles to 
be able to provide housing for low- and moderate-income New 
Yorkers.
    So through the fees, we have been able to do all of the 
improvements that I have articulated earlier. We were able to--
because I thought that it was important to really deal 
internally to create efficiencies that would--as business 
practices, pay landlords on time, to be able to facilitate the 
inspections, we moved to handheld computers so that we would be 
able to do inspections in a very timely or expeditious basis. 
We have used that.
    In New York City we have always used administrative fees 
for other housing purposes. They have been tied to being able 
to round off a financial package for new developments or 
substantial rehab so that we would be able to put project-based 
Section 8 certificates within new housing as a way of expanding 
affordable housing in New York City.
    So we think it is a key component of the program.
    Ms. Velazquez. Would any of the other witnesses like to 
comment?
    Mr. Duncan. Briefly, if you cap fees on reserves, all you 
are going to do is make people spend money that they would not 
otherwise spend, because they are not going to be able to 
accumulate funds for some other, greater purpose.
    I expect the fees with 85,000 vouchers in New York is 
considerably more than the fees for 1,200 vouchers in Topeka, 
Kansas. It is going to take me a little more time to collect 
those reserves. So capping is really contrary to any type of 
entrepreneurship that you want to put into the program.
    Ms. Velazquez. Thank you.
    Mr. Duncan, in your testimony you said that HUD already has 
within its existent framework the ability to improve Section 8 
through regulatory reform.
    Given this, do you believe any legislative changes are 
necessary at this time?
    Mr. Duncan. Well, one--in the real world, I am an attorney. 
One of the things I do is I represent wholesalers, so I am 
familiar with attempting to try to have business practices that 
reduce the number of points of contact. I understand HUD's 
desire to want to limit the number of points of contact that it 
has when it is dealing with housing authorities that have less 
than 250 vouchers.
    But I don't think the State is the way to do it. I do think 
Congress should consider, maybe there is a de minimis level of 
vouchers, which in light of, if you looked at my testimony, I 
mean, you have got to have a law library to know what the heck 
to do to run these programs.
    So there may be cooperatives between small housing 
authorities or contracting with other housing authorities that 
may be more effective and reduce the number of points of 
contact. But I suspect that Congress is going to have to set 
that limitation, whether that is 50, 100 or 249, I don't know.
    But when I was on the school board in Topeka, Kansas we had 
interlocal agreements with other school boards to operate a vo-
tech school. We couldn't have done it on our own, but with 
eight or nine other school boards, we were able to operate a 
vo-tech school. I think that is something that helps accomplish 
what HUD wants, reducing points of contact, makes things more 
efficient and yet keeps us on a local level with knowing local 
market conditions.
    Mr. Molloy. Thank you.
    In Missouri, one of our local housing authorities has 
gotten affected by this new rule and the cap on admin fees. 
They are over the 105 percent level, so they won't earn any 
fees. They have been saving up money for 25 years. They are 
planning to use the money to build a homeless shelter in 
Joplin, Missouri. Then the city would take that area where the 
old homeless shelter was, redevelop it for economic 
development, they would have a new shelter, you would have 
economic development in the city. But this rule that HUD 
imposed has really sort of put that on hold.
    I think if you look at other Federal programs, and when 
they deal with indirect costs, a lot of Federal programs have 
indirect costs that are way in excess of 15 percent, and they 
don't have provisions for recapturing funds or requiring people 
to administer programs and not get paid for it. I think that 
provision that was put in the law last year was a mistake. It 
needs to be repealed.
    We have used admin funds to build community centers in 
communities that have Section 8 tenants and public housing 
tenants, to provide education programs and sports programs. 
Housing authorities have used the money wisely. If they don't, 
there should be a local responsibility, and the appointing 
authority can appoint a new board and, you know, change the 
management.
    Chairman Ney. The time has expired.
    Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman.
    Mr. Marchman, you made my ears perk up when you said that 
HUD has a working group working on revising HOPE VI.
    Mr. Marchman. Yes.
    Mr. Watt. That is news to me. I asked the HUD officials 
about it when they came over to testify, what they were doing 
to look at HOPE VI. The only thing I was aware of was that the 
President has recommended terminating HOPE VI.
    Tell me what--I know this has nothing to do with Section 8, 
but do you know something I don't know?
    Mr. Marchman. I can't say that. But, I think it is 2 weeks 
ago or so, the assistant secretary convened a group of 
individuals to talk about the HOPE VI program and/or 
alternatives to the program.
    It came as a surprise to many, inasmuch as public housing 
residents weren't invited or participated or were involved in 
that decision-making; that, in large part, the industry groups 
did not know. And while I don't speak for a----
    Mr. Watt. Who was on the working group?
    Mr. Marchman. I can't tell you. I believe that there were 
individuals representing developers, people representing people 
in the tax credit markets, people representing, I believe, 
housing authorities, or at least one.
    But, I believe--and as I said, I don't speak for HUD any 
longer--I think it was their attempt to be responsive to 
Congress in terms of looking at the HOPE VI program and 
alternatives to the program.
    And my suggestion and my testimony is, a more----
    Mr. Watt. I understood what you were saying. You were 
saying a working group for Section 8 vouchers would be 
appropriate too. So maybe they will follow that recommendation 
since we recommended a working group about 6 months ago for 
HOPE VI. So maybe they listen to these things.
    Mr. Hernandez, one of the things that Mr. Martinez 
testified--or maybe it wasn't him, whoever came over to testify 
about this block grant approach on Section 8--was that it was 
going to give more flexibility to the States to contract with 
different providers to administer the Section 8 voucher 
program.
    Did I understand you to say that New York City has two 
different providers, your department and something called 
Housing Preservation, and you have some Section 8 vouchers and 
they have some Section 8 vouchers?
    Mr. Hernandez. Correct. We have two housing agencies, the 
New York City Housing Authority, which is my agency, which is 
an agency that essentially manages all of the property of 
conventional public housing and, in addition to that, has a 
Section 8 program of over 85,000 vouchers.
    We have another agency, our sister agency, the Department 
of Housing Preservation and Development, which is really the 
development arm of New York City. They handle a lot of the 
affordable housing development and they also have a program, a 
Section 8 program.
    We work collaboratively. The HPD tends to have an approach 
with Section 8----
    Mr. Watt. Well, let me--I just want to be clear on what you 
said, to clarify. So HUD is now contracting with two separate 
agencies in New York City?
    Mr. Hernandez. Correct.
    Mr. Watt. Would there be any value, in your estimation, 
to--well, first of all, before I get to that, I assume they 
have some flexibility now to do that; otherwise they wouldn't 
be able to do that?
    Mr. Hernandez. Sorry? That HUD----
    Mr. Watt. That HUD has flexibility to contract with 
different agencies to administer the Section 8 program now?
    Mr. Hernandez. Correct.
    Mr. Watt. Would there be value, in your estimation, to 
having the State come in and have you and Housing Preservation 
start to bid against each other to run the Section 8 voucher 
program, so that one agency in New York would do it all?
    Mr. Hernandez. Congressman, I would essentially be echoing 
most of the concerns that have been expressed here already.
    It has already been indicated that in New York State, for 
instance, the State is facing a major budget deficit. The 
language is uncertain about how the State would formulate this 
program. We would be concerned that resources could be diverted 
for other purposes, as well as that Section 8 assistance could 
be diverted within the State.
    Moreover, it is our contention that it is really the 
locality of the City of New York that has the relationships 
with the landlords and that understands really the marketing 
trends within New York City.
    Mr. Watt. My time is about up. I want to ask one more 
question. We have asked two panels now. I haven't heard anybody 
say they favor this. Even the State housing authority agency 
organization on the last panel said that they were indifferent 
about it. I guess they would be the beneficiaries of State 
administration. And they didn't even advocate.
    Is there anybody on this panel who supports this?
    Mr. Hernandez. I would say that--as my esteemed colleague 
indicated, I do believe that HUD may have some legitimate 
concerns that need to be looked at, points of contact, and the 
regulatory environment, which I think, by the way, they can 
reform without this bill.
    Mr. Watt. How do you administer a Section 8 program 
anywhere without points of contact? I mean, you have got to 
have points of contact. Someone is going to have to have points 
of contact with them, either the State has got to have points 
of contact with them----
    Mr. Duncan. Congressman, you can streamline the number of 
points of contact.
    Mr. Watt.--as between HUD and the number of points of 
contact. But somebody down the line is still going to have 
points of contact; otherwise, you are not going to have any 
supervision.
    Mr. Duncan. You would have it. As long as you end up with a 
cooperative, or somebody who is close to the customer. Let us 
not forget, it is the customer, the tenant, the working poor, 
that we need to be most concerned about; start there and work 
back up the line. And once we do that, then we can have an 
effective, streamlined process by which to get these funds into 
place.
    Mr. Hernandez. For New York's City's purposes, we have an 
effective, viable model being the point of contact for HUD in 
New York City.
    Mr. Watt. Thank you.
    Mr. Miller of California. [Presiding.] Mr. Davis.
    Mr. Davis. Thank you, Mr. Chairman. Let me welcome all of 
you all, and I associate myself with a lot of the comments that 
frankly all of you have made, and the panel before you.
    One of you made the observation that if the program is not 
broke, don't break it. It appears that this program is joining 
the long list of Head Start, Medicaid, and several other 
programs, including HOPE VI, that don't appear to be broken in 
a lot of ways, but that the administration wants to reexamine.
    Let me focus on one specific problem that some of us are 
concerned about. It is what is going to happen to the money 
behind Section 8 if it is block-granted. Most of us have the 
old experience from our political science classes that when you 
block-grant a program, that typically the funding does not keep 
pace with, in this instance, rental costs, for example.
    Can any of you address that? What do you expect to be the 
financial consequences in terms of a lot of States, in that 
they have this new burden thrust upon them, given the fiscal 
crisis a lot of States are facing now.
    Ms. Henriquez. If I might, I would like to talk a bit about 
what happened in Massachusetts. About 20 or so years ago the 
State of Massachusetts had the foresight, and should be 
commended for starting its own State-like Section 8 program. 
And, it is now called, the Mobile Rental Voucher Program.
    And at the time, it was keeping pace with the marketplace, 
vouchers were being used by residents; and over time, as the 
pressures on the State budget were beginning to catch up and 
the rental market in Boston, particularly, was heating up, 
those vouchers then no longer kept pace with their fair market 
rent.
    The State then tried to contain the costs in a number of 
ways. First, they changed eligibility so that higher-income 
people could get vouchers, therefore, diminishing the amount of 
subsidy hit to the State. When that didn't work, because the 
rental market kept heating up and heating up, the State then 
decided that they would charge--would increase the percent of 
one's income one paid for rent from 30 percent to 35 percent.
    And so numbers of people were then leaving the program. 
When that didn't contain costs, they then flatly decided to cap 
the program, so there was no growth opportunity at all. As real 
estate prices began to continue to escalate, more and more 
landlords were opting out of the program because they couldn't 
get the rents they wanted. Landlords wanted to help, they 
wanted these stable, ongoing incomes that came in from the 
program, but they could clearly make more in the marketplace or 
make more in the Section 8 program.
    My agency went from 604 such vouchers several years ago, 
now down to just a little over 250 vouchers, or a decrease of 
62 percent in the number of families that I can serve under 
that program.
    Massachusetts now faces a projected $3 billion deficit. I 
hear 38 billion for California, so I think--but it is all 
relative; it is all local. So 3 billion for us is huge in the 
State. I am fearful that with block-granting Section 8 to 
Massachusetts, or to any State having the same sorts of hot 
real estate markets and deficit spending in their budgets, this 
program will also then die. It will help less and less people 
because it will not keep pace.
    If I could just add one more thing--I am sorry. Fundamental 
to all of this is that there has always been historically a 
commitment on the part of the Federal Government for housing 
programs, especially to support low- and moderate-income 
families and individuals. We continue to take a walk from that 
Federal commitment on a moral and ethical level.
    Mr. Davis. One of the things that I am hearing from all of 
you is that there is no significant support in the housing 
community for this kind of wholesale change in Section 8. A lot 
of you who work on these programs on the ground say there is no 
empirical need to make this kind of a wholesale change.
    So it would seem fairly clear to me that what the 
administration is doing in some sense is trying to undercut the 
attractiveness of the program and trying to really lessen the 
political commitment to the program.
    All of you kind of agree with that, that it is the 
underlying agenda? Nod your heads to that.
    Mr. Duncan. I can't read that into it. I would assume that 
there is some effort to try to streamline and become more 
efficient and apply some more efficient principles. I think it 
is misleading, though, to use the term HANF, because it seems 
to imply something closely akin to TANF, and only 13 percent of 
my voucher participants are welfare recipients.
    So this is not a welfare program and should not be viewed 
as such. It is a program to assist working poor, elderly who 
are on fixed incomes, and SSI persons, and particularly in my 
community, when we close State hospitals, persons who are 
mentally challenged that have no place to live.
    Mr. Davis. Mr. Chairman, if you would indulge me for 30 
seconds, I do want to pick up one area and get Mr. Inglis to 
focus on this.
    One of the things that I have noticed with the Section 8 
program is that it is disproportionately concentrated in urban 
areas, and that is a matter of common sense, I suppose, to some 
extent because of the lack of housing stock in rural areas.
    But can you talk for a second about what strategies might 
exist to increase the rural penetration of Section 8?
    Mr. Inglis. I think the major concern with going to the 
State is how are the resources going to be allocated in the 
future? Are they going to get to the rural areas? Are they 
going to get to the communities where the local housing 
authority is the main housing provider in the area?
    They are the one-stop shopping agency for public housing 
and for Section 8, and they have a variety of housing tools to 
address the needs in rural communities.
    It is a concern of ours that with this allocation, 
reallocation of funding, some of the States may play politics 
with the reallocation, and they may end up going more to urban 
areas and not to some of the suburban and rural communities 
that have a high amount of need.
    So your point is well taken, in that we are very concerned; 
especially, we believe that the rural agencies are probably 
going to suffer most with this proposal.
    Mr. Davis. Let's assume a current baseline for a minute. 
Let's say for whatever reason we keep the program exactly as it 
is. What can be done within the context of the current program 
to increase the rural penetration?
    Mr. Inglis. I think the basic thing is getting back to the 
flexibility, using the tools that were provided by the Quality 
Housing and Work Responsibility Act of 1998 and implementing 
those.
    Project basing is one. We still do not have a final rule on 
project basing.
    We also do not have a deregulation final rule on small- and 
medium-sized agencies, which was proposed in August of 2002, 
and had very strong support by the Department. They reduced the 
comment period to 30 days because they wanted to get it on the 
street. It is still not on the street today. So there is no 
deregulation.
    Mr. Miller of California. The time has expired. Thank you.
    Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman. Let me also thank all of 
the witnesses for being here to help us do our work. I really 
wish that Secretary Martinez was here; he was here a couple of 
months ago. And perhaps someone from HUD is here; they can 
report back as far as the transcripts of this testimony, and 
let him know that his testimony has been refuted.
    He told us a couple of months ago that the reasoning behind 
turning over Section 8 voucher programs to the States is 
because of local housing authorities' deficiencies and 
inefficiencies in administering the programs. He said--claims 
that now almost half of the States administer Section 8 through 
vouchers. And so I find this testimony in contrast to his.
    Let me ask, Mr. Molloy, who also hails from Missouri and 
who--we served together in the State legislature in Jefferson 
City. You made an interesting analogy of mushrooms and 
politicians. Can you go over that again for me?
    Mr. Molloy. Well, I think most members of this committee 
have served in legislative bodies or in local government and 
have had that experience of a lack of information to make a 
policy decision.
    And I think this current HUD administration has not been 
forthright with sharing that information with policymakers on a 
timely level. You need that information to make the correct 
decisions.
    And I think HUD needs to share that information with this 
committee.
    Mr. Clay. With both of us having served in Jefferson City, 
how would you envision this program--this block grant being 
administered out of Jefferson City, the State capital of 
Missouri? What agency would get it? How would decisions be 
made? How do you envision that?
    Mr. Molloy. Most likely it would be the Missouri Housing 
Development Commission, which has headquarters in Kansas City. 
They do the tax credit program.
    To give you an example, about 4 or 5 years ago, they 
administered a Tenant-based Section 8 program. They gave it to 
local housing authorities, because they weren't doing an 
adequate job on their lease-up rates.
    So they turned the Tenant-based program over to the local 
housing authorities. I think it would be chaos. I appreciate 
the competency of our local State housing finance agency, but I 
still think changing this program from the current Federal 
model to a State model would be an absolute disaster.
    I think we would lose thousands of landlords if they had 
the prospect of having 50 different sets of rules, particularly 
the landlords that operate in a multi-State environment. It 
would just drive them absolutely crazy.
    And I think it would also drive the tenants nuts with 
coming up with a new set of rules, and then having this overlap 
period of 6 years where you have the existing current voucher 
program and this new voucher program, having two different sets 
of rules.
    We have gone through that before, when we switched the 
certificate program to the voucher program. I think everybody 
on this panel who has a Section 8 staff can tell you the 
headaches the staff went through during that conversion 
process.
    Starting up a new program would be a disaster.
    Mr. Inglis. This proposal is what is best for HUD, in terms 
of administrative ease. That is not what it is about. It is 
about assisting people and do we want to continue with the 
Federal commitment of assisting low-income working families and 
elderly and disabled persons in our country. And this should 
not be about administrative ease for the Department.
    This should be a well-thought-out program that continues to 
assist low-income people in this country and also looks at 
assisting more people in the future.
    Mr. Clay. That is a great point.
    Mr. Duncan. May I comment very briefly? The irony is, HUD 
is still going to deal with us as a public housing agency. And 
there has been a lack of consideration about the 
interrelationship. I may have two lists, one for public housing 
and one for Section 8, but I am dealing with the same 
constituency. So I may be able to put them in public housing 
until they work themselves up the Section 8 line.
    It is going to be less productive for the person of 
economic--who is in economic distress, needing housing, and HUD 
is still going to deal with us.
    Mr. Clay. Mr. Hernandez, tell us, does New York have a 
waiting list for Section 8 vouchers?
    Mr. Hernandez. About 146,000 people are currently on our 
waiting list.
    Mr. Clay. How do you envision the State of New York, if 
they were to get the block grant, how would they alleviate that 
waiting list through this program?
    Mr. Hernandez. I have expressed concerns about that. Part 
of what New York City does is, through our Section 8 program, 
we provide a priority preference to homeless families and 
victims of domestic violence as well as disabled individuals. 
And in addition to that, as part of our plan to expand 
affordable housing, we use Section 8 to deal with development 
of new affordable housing in substantial rehabilitation of 
buildings, which is part of the Mayor's plan moving forward.
    Mr. Clay. I thank you all for your answers, and thank you.
    Chairman Ney. Ms. Velazquez.
    Ms. Velazquez. I would like for--Mr. Hernandez, for you to 
expand on your Statement to--your answer to Mr. Clay. The 
65,000 units of housing that the City of New York envisioned, 
how do you think it will be impacted by the block-granting of 
Section 8?
    Mr. Hernandez. The Mayor released a vision of a housing 
plan to create 65,000 units of affordable housing really by 
doing two things; one is to preserve housing, the other one is 
to expand housing throughout the city.
    Part of the way that our sister agency, HPD, has done 
development in the past, and will continue to do it, is by 
utilizing Section 8 and being able to really round off the 
economic package to be able to deal with housing.
    Moreover they use it for mortgage--to help with mortgage 
payments. They also help to really do--to do housing for people 
they move into apartments.
    We are working--we have a revolving solicitation right now 
to offer Section 8 vouchers for anyone that is doing new 
construction or substantial rehabs as a way of being able to 
expand our Section 8 pool as well.
    So it is an integral part of our plan, moving forward, as 
we do this.
    Ms. Velazquez. Thank you.
    Thank you, Mr. Chairman.
    Chairman Ney. [Presiding.] I want to thank you. Any further 
questions?
    I would note that some members may have additional 
questions for this panel which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions to the 
witnesses and to place their responses in the record.
    I want to thank both panels for your time and indulgence 
and your time here in Washington. Thank you.
    [Whereupon, at 12:30 p.m., the subcommittee was adjourned.]


                         THE SECTION 8 HOUSING
                          ASSISTANCE PROGRAM:
                      PROMOTING DECENT AFFORDABLE
                        HOUSING FOR FAMILIES AND
                      INDIVIDUALS WHO RENT--DAY 3

                              ----------                              


                         Tuesday, June 17, 2003

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:07 p.m., in 
Room 2128, Rayburn House Office Building, Hon. Robert Ney 
[chairman of the subcommittee] presiding.
    Present: Representatives Ney, Tiberi, Waters, Velazquez, 
Watt, Clay, Scott and Davis.
    Chairman Ney. [Presiding.] The subcommittee will come to 
order.
    I want to welcome the witnesses to the Hill and appreciate 
your testimony on this important issue. I also would just 
remind you that the lights will be activated. When you begin to 
speak, it will be green. Yellow means you have about a minute, 
and then red, we would ask you to summarize and complete your 
Statement. Also without objection, hearing no objection, any 
written statements you have will be part of the record.
    Today, the subcommittee holds its third in a series of 
hearings to examine the current operation and administration of 
the Section 8 housing choice voucher program and review various 
proposals intended to make the program more effective and cost-
efficient.
    Since the 1970s, rental vouchers have been a mainstay of 
the Federal housing policy. Currently, the Section 8 housing 
voucher program supplements rent payments for approximately 1.5 
million individuals and families. While the concept of the 
program remains sound, the program has often been criticized 
for its inefficiency. More than $1 billion is recaptured in the 
program every year, despite long waiting lists for vouchers in 
many communities.
    Michael Liu, Assistant Secretary of Public and Indian 
housing at the Department of Housing and Urban Development, 
testified at the first hearing on May 22, 2003. His testimony 
focused primarily on the Administration's proposal entitled 
``Housing for Needy Families,'' or HANF. HANF would reform the 
Section 8 housing choice voucher program into a State-
administered block grant program.
    I will dispense with the rest of my written statement, and 
without objection make them part of the record because we are 
going to have a vote and I want to make sure you get your ample 
time. Then we will come back. I just want to say this is a very 
serious issue, obviously a contentious issue. I have introduced 
a bill at the request of the Department. We are having hearings 
in the Capitol and we fully intend to have hearings in 
different parts of the United States on this issue.
    So with that, I will see if there are any opening 
statements.
    [The prepared statement of Hon. Robert W. Ney can be found 
on page 280 in the appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman.
    I am glad to be here for this third in a series of hearings 
on the administration's Section 8 block grant proposal. This is 
an important issue that must be fully vetted from all angles. I 
thank the Chairman and Ranking Member for the thorough review 
of HANF and look forward to the testimony of today's witnesses. 
Over the course of these hearings, we have heard many concerns 
raised about the block grant proposal, and the indications are 
that there are more to come.
    The history of these hearings has reminded me of Secretary 
Rumsfeld's discussion of known knowns, known unknowns, and 
unknown unknowns. By using the Secretary of Defense's words, I 
am not trying to compare housing block grants to the war on 
terrorism. But for tenants with nowhere else to go, this is 
very much a matter of survival. We began with the known knowns, 
the concerns which we agree are likely to come to pass. HANF 
will likely result in lifetime limits on benefits. It will 
create an unnecessary and costly extra layer of bureaucracy, 
severely limit the number of new families brought into the 
program, and splinter the Section 8 program into 50 individual 
State programs.
    Then, we heard from witnesses on some of the known 
unknowns, the concerns for which there are no answers. Will 
HANF reduce the number of families currently receiving 
benefits, due to the eroding value of block grants? Will it 
eliminate the flexibility of vouchers? Today, I am interested 
in hearing about two more of these known unknowns. First, will 
block granting dampen landlord participation in the program? 
Currently, HANF includes no assurance of continued funding of 
existing vouchers from year to year. It also gives States the 
authority to cut the subsidy level of vouchers and place 
lifetime limits on benefits, leaving Section 8 families with 
nowhere to live. Wouldn't this force landlords to undergo 
lengthy and expensive legal eviction processes for each of 
their tenants, and thereby discourage their participation in 
the program? The Administration has failed to adequately weigh 
in with answers.
    Second, how do we know that in a time of fiscal 
constraints, the Section 8 block grant will actually be used 
for housing? What is to prevent a governor from playing 
favorites with the vouchers and rerouting them to different 
neighborhoods, opening the door to corrupt mismanagement of the 
program? Are there safeguards to prevent such an occurrence? 
The unknown unknowns are out there waiting to throw additional 
barriers in the paths of tenants and landlords. By the time 
they are discovered, they will have already done their damage. 
Is that a risk we want to take, or should we just accept the 
one thing I know for sure: HANF will not work.
    When looked at from this point of view, this hearing begins 
to take on the feeling of a work of Dr. Seuss. And as happens 
in all of his work, I fear this proposal has the potential to 
end with a move from the sublime to the ridiculous.
    Thank you, Mr. Chairman.
    Chairman Ney. I thank the gentlelady for her statement.
    Mr. Scott of Georgia?
    Mr. Scott. Mr. Chairman, we have so many panelists, I will 
just move on to the panel.
    Chairman Ney. I want to thank the members and introduce the 
panel. Conrad Egan is the Executive Director of the National 
Housing Conference, having previously served as Executive 
Director of the Millennial Housing Commission. He is currently 
the Chairman of the Fairfax County, Virginia Development and 
Housing Authority. Howard Husock is the Director of Case 
Studies, Public Policy and Management at Harvard University's 
Kennedy School of Government. He is also a research fellow at 
the Kennedy School Taubman Center for State and Local 
Government. Currently, he is the Director of the Manhattan 
Institute Social Entrepreneurship Initiative.
    Bruce Katz is a Vice President and Senior Fellow at the 
Brookings Institution here in Washington, D.C. He is the 
founding director of the Brookings Center on Urban and 
Metropolitan Policy. Prior to his appointment at Brookings, Mr. 
Katz was chief of staff to Henry Cisneros, former secretary of 
HUD. Jill Khadduri is a principal associate at Abt Associates, 
Incorporated, a social science research firm based in 
Cambridge, Massachusetts and Bethesda, Maryland. From 1988 to 
2000, she was the Director of Policy Development at HUD's 
Office of Policy Development and Research.
    Dr. Ed Olsen is a professor of economics at the University 
of Virginia in Charlottesville, Virginia. He has been involved 
in housing policy analysis since the late 1960s and has served 
as a consultant to HUD during five administrations. Dr. Olsen 
has published extensively on the effects of public housing, 
housing allowances and rent control. The last panelist is 
Margery Austin Turner. She directs the Urban Institute's 
Metropolitan Housing and Community Center here in Washington, 
D.C. She is a nationally recognized expert on urban policy and 
neighborhood issues, with much of her current work focusing on 
the Washington metropolitan area.
    I want to welcome all the panelists and we will start with 
Mr. Egan.

   STATEMENT OF MR. CONRAD EGAN, PRESIDENT AND CEO, NATIONAL 
               HOUSING CONFERENCE, WASHINGTON, DC

    Mr. Egan. Thank you, Mr. Chairman. It is a pleasure to be 
here today. As you indicated, I am the former Executive 
Director of the Millennial Housing Commission, and I will speak 
principally today from that standpoint. The Millennial Housing 
Commission was created by Congress a short while ago, which 
appointed its 22 Commissioners and its co-chairs, former 
Representative Susan Molinari and Dick Ravitch, and asked the 
commission to come back no later than May 30 of last year with 
a report on how particularly this Congress, but also other 
parts of the Federal government could do a better job to 
support good housing for all Americans. We did produce our 
report on time and within budget. I hope that the comments I 
will make today will be some indication of the return on 
investment that the Congress made in the commission.
    One of the things that the Commission was asked to do and 
which I will focus on today is to examine whether the existing 
programs of the Department of Housing and Urban Development 
work in conjunction with one another to provide better housing 
opportunities for families, neighborhoods and communities, and 
how such programs can be improved with respect to such purpose. 
I am quoting, Mr. Chairman, from the statute. The Commission 
responded in many ways to that charge.
    One of the programs that they focused on was the Section 8 
housing assistance program. I will repeat the recommendation 
that the Commission put forward. It is under the title ``Expand 
and Strengthen the Housing Choice Voucher Program to Improve 
the Access of Extremely Low-Income Households to the Private 
Housing Stock.'' If I could quote from the introductory part of 
that recommendation: Since the 1970s, the housing voucher 
program has effectively assisted millions of lower-income 
renters, particularly extremely low-income households, who were 
most likely to have severe affordability problems and/or live 
in inadequate housing.
    Because the program is flexible, cost-effective and 
successful in its mission, the Millennial Housing Commission 
believes housing vouchers should continue to be the linchpin of 
a national policy providing very low-income renters access to 
privately owned housing stock. In addition to that, the 
Millennial Housing Commission recommends appropriation of 
additional funds for substantial annual increments of vouchers 
to address the housing problems of extremely low-and very low-
income families who lack access to other housing assistance. 
The Commission also pointed out the important relationship 
between the Section 8 housing assistance program and 
homeownership.
    The Commission did go on, though, to recommend some 
improvements to the program. I will just briefly list them. The 
detail is in my statement and my colleagues I am sure will also 
have additional detail in addition to those who preceded this 
panel here today. First of all, it is important to improve 
utilization and success rates. Secondly, it is important to 
increase landlord participation, and I particularly appreciate 
Representative Velazquez's question in that area and I hope we 
can explore it when we have an opportunity. Thirdly, it is 
important to link the Section 8 program to housing production 
programs. It is important to link vouchers to work opportunity 
and self-sufficiency initiatives. It is also important to link 
vouchers to non-housing programs. As you can see the Commission 
liked this word ``link.'' They used it a lot.
    Finally, the Commission recommended allowing a more 
flexible use of Section 8 project-based units. I realize this 
hearing is not the subject of that particular item, but I would 
hope that the subcommittee could at some point devote some time 
and attention to that. This is what I call the mobility option 
for project-based subsidies in order to keep them in the 
housing portfolio and to provide for better preservation and 
revitalization of project-based properties assisted by the 
Section 8 program.
    In conclusion, Mr. Chairman, let me summarize the 
Commission's position on the Section 8 housing assistance 
program thusly. First, the program works well in its current 
form. Second, it could be improved by implementing the above 
recommendations. And third, substantial annual increments of 
additional funds should be appropriated to better address the 
housing problems of extremely and very low-income families, and 
to increase opportunities for homeownership.
    Thank you, Mr. Chairman.
    [The prepared statement of Conrad Egan can be found on page 
310 in the appendix.]
    Chairman Ney. I want to thank you.
    Mr. Husock?

STATEMENT OF MR. HOWARD HUSOCK, ALFRED TAUBMAN CENTER FOR STATE 
  AND LOCAL GOVERNMENT, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, 
               HARVARD UNIVERSITY, CAMBRIDGE, MA

    Mr. Husock. Thank you very much, Mr. Chairman. It is a 
privilege to address the subcommittee once again.
    The proposal to rename and restructure the Section 8 
housing choice voucher program as housing assistance for needy 
families or HANF should be considered among the most promising 
housing proposals in many years. Its promise lies in the 
potential it holds for considering housing policy not in a 
vacuum, but in the context of domestic social policy more 
broadly, and thereby potentially encouraging long-term 
improvement in the life choices and prospects of those 
households whose rent is paid for by a housing voucher.
    HANF, of course, sounds a lot like TANF, the core public 
assistance program, and well it should. For although largely 
unacknowledged in our recent focus on physical improvements to 
public housing or the drive to increase the number of housing 
vouchers actually utilized, the fact of the matter is that 
there are demographic overlaps, significant ones, between the 
public assistance population and the housing assistance 
population, such that common supervision at the State level is 
a logical new step. HUD reports, for instance, that among non-
elderly, non-disabled heads of households receiving housing 
vouchers, 28 percent, that is 219,000 households nationwide, 
are also current recipients of TANF. Like TANF recipients, they 
are predominantly comprised of single-parent families. HUD 
reports that of 1.01 million non-elderly, non-disabled Section 
8 households, 783,000, that is 78 percent, are headed by single 
parents.
    Indeed, it is important to keep in mind when considering 
housing policy that although we hear frequent alarms, it is an 
exaggeration to say that we have a general housing 
affordability crisis in the United States. Affordability, 
rather, is a problem for the elderly, poor, and the disabled, 
and particularly single-parent families with children. HUD has 
reported indeed that only 8 percent of voucher holders are two-
parent families with children.
    Section 8 vouchers, moreover, are a means through which new 
single-parent families prone to long-term poverty, headed 
primarily by young mothers, can be established in the first 
place. Indeed, between April 2002 and April 2003, 13,600 new 
voucher holders, 6 percent of all new admissions to the 
program, were under 21 years of age. Such households are 
typically the focus of a wide range of social service 
interventions from job training to nutrition programs.
    It is common sense, then, for our housing voucher policy to 
be considered and administered in the same context as our 
larger social policy. That is a policy which could be 
summarized since the welfare reform act as one of short-term 
assistance meant to enable long-term self-improvement and self-
reliance. To that might be added discouraging those who are not 
economically ready to start their own households from starting 
them. The centerpiece change of the HANF proposal, the creation 
of the housing voucher block grant, and a shift in program 
administration from the local to the State level, may help us 
achieve those goals.
    Local public housing authorities, which have historically 
administered Section 8, have a narrow mandate to provide safe 
and sanitary housing. But given who lives in our subsidized 
housing, the programs must be more broadly considered and 
aligned specifically with the goals which state governments are 
asked to implement, not just through TANF, but through other 
social programs as well, including the administration's current 
efforts to encourage marriage and two-parent families.
    A block grant and state administration of Section 8 can set 
the stage for a period of housing policy innovation, much as we 
saw state governments experiment, many successfully, for 
instance HHS Secretary Thompson in Wisconsin when he was 
Governor there, with welfare-to-work programs in the early 
1990s, even before the passage of TANF and in fact presaging 
that passage. Not that all States will move in new directions. 
Some may prefer the current approach and they will be allowed 
to continue it. But other jurisdictions may choose otherwise 
and seek to craft new housing policies in conjunction with 
broader state transitional assistance policies.
    Such policies could indeed involve a time limit, or they 
could involve a declining public share of rent payment over the 
fixed lifetime of a voucher, as well as a combination with 
social services such as financial counseling and household 
management. Such approaches are not merely hypothetical. They 
have been in use effectively, for instance, by the Charlotte, 
North Carolina housing authority since 1993, in Congressman 
Watt's district, for some of its public housing tenants. State 
government, however, is more likely to have the capacity to 
undertake such policy innovations and far more likely to be 
inclined to do so if those considering social policy broadly 
are also those reviewing housing policy.
    It is a mistake, in my view, to see the problems with 
Section 8 to date as lying mainly in the high turnback of 
unused appropriations or in the need to convince more property 
owners to accept more voucher holders. It is highly likely that 
most property owners in areas of reasonably strong demand will 
choose and continue to choose to avoid the complications that 
Federal program participation brings with it. It is far more 
likely for voucher holders to become concentrated in areas of 
weaker demand, and indeed program data from HUD again shows 
that in 11 of 25 cities that HUD surveyed, there are 
neighborhoods in which voucher holders constitute 25 percent or 
more of the population. I believe Senator Mikulski has called 
these ``horizontal ghettos.''
    The southern suburbs of Chicago where Section 8 has been 
particularly controversial, I would hope that this committee 
might have hearings in that area if possible, have absorbed for 
instance 58 percent of the Cook County Housing Authority's 
vouchers. The majority of the voucher holders who have moved 
from the District of Columbia to its suburbs have moved to 
Prince George's County. In Philadelphia, 45 percent of voucher 
holders inhabit just two of the city's five major 
neighborhoods, South Philadelphia and Northeast Philadelphia. 
If you visit the south suburbs of Chicago, you will meet local 
elected officials and residents, many of them African American, 
who will express grave concern about this phenomenon, fearing 
the effects of such concentration on the social fabric of their 
communities.
    As I wrote in the Manhattan Institute publication City 
Journal, in south suburban Chicago, with one of the highest 
concentration of voucher holders in the country, lower middle 
class African American residents complained. They thought they 
had left bad neighborhoods behind, only to find the Federal 
government is subsidizing bad neighborhood effects to follow 
them. Vikkey Perez of Richton Park, Illinois, owner of Nubian 
Notion Beauty Supply, fears that the small signs of disorder 
she sees with voucher tenants, un-mown lawns, shopping carts 
left in the street, are symbols of potential neighborhood 
undermine. ``Their lifestyle does not blend with our suburban 
lifestyle,'' she told me. Kevin Moore, a hospital administrator 
and homeowner in nearby Hazelcrest, Illinois, complained that 
children in voucher homes went unsupervised and that boom-boxes 
played late in the night. ``I felt like I was back on the west 
side,'' he said, referring to the neighborhood where he grew up 
and had worked hard to leave behind.
    If voucher concentration is probable for economic reasons, 
it is important for program guidelines to encourage voucher 
beneficiaries to take steps to end or reduce over time their 
assistance. In fact, such encouragement is just as important in 
areas where voucher concentrations are low as where they are 
high.
    [The prepared statement of Howard Husock can be found on 
page 313 in the appendix.]
    Chairman Ney. I am sorry to have to interrupt. We have got 
5 minutes left on a vote, so what we need to do is to go over 
and vote. We have two 5-minute votes after that, which will be 
10 minutes, and we will be back. I apologize for the 
unpredictability of the votes, but we will be back. The 
committee will be in recess, returning upon the call of the 
Chair.
    Thank you.
    [RECESS]
    Chairman Ney. The committee will come back to order. I 
think we had finished the time of Mr. Husock, and we will move 
to Mr. Katz.

 STATEMENT OF MR. BRUCE J. KATZ, DIRECTOR, CENTER ON URBAN AND 
  METROPOLITAN POLICY, THE BROOKINGS INSTITUTE, WASHINGTON, DC

    Mr. Katz. Thank you, Mr. Chairman, for the opportunity to 
testify today on the performance and potential of housing 
vouchers. I will just make four basic points drawn from my 
written testimony.
    First, housing vouchers are a critical and generally 
successful component of Federal housing policy. They are unique 
among Federal housing programs in that they allow the recipient 
rather than the developer to decide where a family lives. This 
gives families greater choice in metropolitan rental markets, 
and by so doing enables them in theory to move to areas of 
growing employment and quality schools. Vouchers are therefore 
the only Federal housing program that recognizes the radical 
decentralization of labor markets that has taken place over the 
past 30 years, and they are the only Federal housing program 
that tries to replicate for low-income renters what all middle-
class households enjoy, the ability to make decisions on 
housing in connection with decisions on jobs and schools.
    Second, vouchers and the administration of vouchers are not 
perfect and need improvement. I emphasize four shortcomings in 
my testimony. Success and utilization rates are not where they 
should be. Landlord participation remains a constant challenge, 
as Conrad mentioned. Central city recipients, minority 
recipients, elderly recipients and recipients with disabilities 
all face special challenges in exercising choice in the market. 
And administration of the voucher program remains highly 
fragmented and insular: too much devolution in a sense, and too 
little accountability and competition.
    My third main point is that the Administration's proposal 
to block grant vouchers to the States is not the right reform. 
I think this proposal has multiple fatal flaws. In my view, 
States are not the place to vest administration of the program. 
The voucher program is about markets and housing markets for 
the most part are metropolitan and in many parts of the country 
actually cross state lines. I believe block granting for the 
States would actually complicate, rather than streamline 
voucher administration, given the absence of an adequate 
delivery system in most States. The proposal would require the 
creation of a new layer of governance that does not now exist 
and could be a recipe for administrative chaos in the short 
term. I am also concerned that the shift to a block grant could 
substantially alter the method by which Congress determines 
funding for the voucher program. In the real world, rents rise, 
and any program that wants to leverage private sector 
participation needs to reflect that simple fact. In the event 
that block grant funding is not sufficient to cover the 
program's needs, States would probably take one of several 
actions: shift assistance to households with more moderate 
incomes; require recipients to pay a higher share of their 
income for rent; or limit the ability of households to use 
vouchers in low-poverty areas. All these funding scenarios 
could have a profound impact on which landlords participate in 
this program, since in the end what landlords want is certainty 
and predictability in program rules and funding levels.
    Finally, I believe the effort to model voucher 
administration after welfare reform is misguided. The simple 
fact is that vouchers serve a much broader universe of 
households than welfare recipients. Only 13 percent of voucher 
recipients receive a majority of their income from welfare 
benefits. The preponderance of voucher holders either work or 
are elderly or have disabilities. The voucher program is in 
essence not simply the housing equivalent of welfare. If we 
want housing to work with welfare, we need a strong voucher 
program.
    Fourth, I believe the voucher program does need reform. I 
recommend that Congress give voucher recipients the tools they 
need to exercise choice in the market. Information is one such 
tool. Why shouldn't every voucher recipient have ready access, 
easy access to information about rental housing vacancies, 
school performance and employment accessibility so that they 
can make informed housing decisions, essentially, the rental 
market equivalent of the multiple listing services used for 
homebuyers? I specifically recommend that Congress authorize 
and fund HUD to test the feasibility of making information on 
metropolitan housing markets and school performance transparent 
and accessible.
    I also recommend that Congress try to match the 
administration of vouchers to the real geography of housing 
markets in metropolitan areas. I think Congress should 
experiment with a continuum of metropolitan approaches to 
voucher administration that include collaborative activities 
among local PHAs, the competing-out of administrative 
responsibilities to private sector entities both for-profit and 
nonprofit, as well as in some places the actual consolidation 
of separate agencies. I discuss this further in my written 
testimony. Again, I believe metropolitan areas, not States, are 
the right geography for thinking about housing policy and 
rental assistance.
    So in conclusion, the voucher program has been a mainstay 
of Federal housing policy for the past 30 years. More than any 
other Federal housing program, it places power and resources 
where it belongs, in the hands of low-income renters. By so 
doing, it enables them to make decisions about housing, jobs 
and schools in a unified way. The program, and particularly the 
administration of the program, does need some improvement, but 
reform needs to proceed in a measured and responsible way to 
avoid making the cure worse than the disease.
    Thank you very much.
    [The prepared statement of Bruce J. Katz can be found on 
page 319 in the appendix.]
    Chairman Ney. I thank the gentleman for his testimony.
    Ms. Khadduri?

    STATEMENT OF MS JILL KHADDURI, PRINCIPAL ASSOCIATE, ABT 
                 ASSOCIATES INC., BETHESDA, MD

    Ms. Khadduri. Thank you, Mr. Chairman. I appreciate the 
opportunity to be on this panel.
    My name is Jill Khadduri and I work at Abt Associates, a 
national social science research firm. My company has done most 
of the basic program evaluation on the voucher program from the 
1970s until now. We also provide technical assistance to 
voucher program administrators. Examples of research we have 
done recently that may be of particular interest to this 
committee include a study of voucher utilization rates, a study 
of voucher success rates, and a study of the circumstances that 
may bring a voucher program into conflict with residents of the 
neighborhood.
    Mr. Chairman, the voucher program is not flawed. Its basic 
design is sound and it is an effective program for meeting the 
housing needs of low-income households, particularly families 
with children, the poorest households, and people with 
disabilities. At the same time, the idea of consolidating 
administration of the voucher program at the State level is 
very attractive. It would overcome some of the relative 
shortcomings of the voucher program.
    However, it is essential that any such consolidation into a 
State block grant should have four features. First, the choice-
based character of the voucher program must be preserved. 
Second, any flexibility for States to alter the structure of 
the subsidy formula, impose time limits, or alter the housing 
quality inspection should be carefully tested and evaluated 
before all States have such flexibility. Third, the program 
should have clear performance goals and reporting requirements, 
including preservation of the requirement to report household 
level data in standard format. Finally, the annual 
appropriation of funds for the program should be tied to 
maintaining current numbers of families assisted at adequate 
assistance amounts for each household, and a steady program 
growth to reduce the unmet need for rental housing assistance.
    Let me turn to the results of some of our recent studies to 
tell you why I believe the voucher program is not in crisis. 
The utilization problem is well on its way to being solved. 
What we found when we did intensive case studies at 48 housing 
authorities is that many of the programs that had been using 
their voucher funds at low rate made substantial improvements 
once they got the word from HUD that funds not used would be 
taken away. We also found that many of the housing authorities 
with low utilization rates had staffing problems. The voucher 
program director had left and basic program functions such as 
issuing new vouchers had ground to a halt. An important finding 
of that study is that while it is relatively more difficult for 
housing authorities in difficult market conditions to use all 
their voucher funds, good program administrators find ways of 
doing so.
    Success rates for families, as I am sure this committee 
knows, are not the same as utilization rates for local 
programs. Not all families who are issued vouchers succeed in 
using them, but a large fraction does so. Our study of voucher 
success rates at urban PHAs found an overall success rate of 69 
percent in 2000. Success rates were high for all types of 
households. They were high for all racial and ethnic groups. 
They were high for people with disabilities and they were 
especially high for those households with the lowest incomes.
    Vouchers are not harmful to neighborhoods. The isolated 
cases of neighborhood conflict that we studied in 1999 and 2000 
showed that neighborhood concerns about vouchers can be avoided 
by program administrators who are alert for possible over-
concentration of vouchers in small areas. They can be overcome 
when administrators act quickly when a complaint arises to find 
out the facts of the case and work actively with neighborhood 
groups. A common theme of this study is that good program 
administration is at the heart of the distinction between 
excellent and inadequate program results. The voucher program 
design is sound.
    Having said that, there are some very good reasons to 
consolidate program administration at the State level and to 
give the States greater discretion over some features of the 
design of the program. The advantages of state-level 
administration are, first, States would be in a position to 
rationalize the administration of the program which now is 
fragmented into more than 2,500 entities. Many administer very 
small numbers of vouchers and are inefficiently staffed. 
Overlapping jurisdictions confound good program administration.
    Our utilization study found that there were often not two, 
but three programs operating in the same geography, to the 
confusion of low-income families and owners of rental housing. 
Our neighborhood relations study found that overlapping 
jurisdictions made it difficult to avoid and to solve 
neighborhood conflict. It was hard for a housing authority to 
tell where another administrator's vouchers were being used. It 
was hard for a neighborhood group to know who was in charge.
    Second, state administration would help overcome the 
barriers that currently exist to the use of vouchers across 
jurisdictional lines. Third, States would be in a good position 
to coordinate the voucher program with other programs that 
serve needy populations, welfare reform and services for people 
with disabilities, for example. Finally, if we are to 
experiment with changes to the basic design of the voucher 
program, States are the right level for this to happen. States 
have more freedom than the Federal government to experiment 
with controversial changes such as time limits. At the same 
time, they have more ability than local housing authorities to 
create carefully designed and evaluated experiments.
    I am not going to respond directly to the Administration's 
proposal for a block grant called HANF, Housing Assistance for 
Needy Families. Instead, I will elaborate on the four features 
that I said at the outset were essential to any proposal that 
Congress might decide to enact in a consolidated administration 
at the State level. First, the choice-based nature of the 
program should be preserved. We already have a housing block 
grant. It is called the HOME program. Permitting States to 
attach vouchers to housing developments would make a voucher 
block grant no different from HOME and would threaten the 
budgets for both programs.
    Second, while state administrators of a voucher block grant 
should have immediate flexibility in some features of program 
design, features that go to the heart of the program such as 
time limits and the program's housing quality standard and also 
the structure of the subsidy formula should be permitted only 
after being very carefully tested and evaluated rigorously. I 
recommend modeling this feature of any voucher block grant on 
the AFDC state waivers that preceded welfare reform. Individual 
States should be permitted to implement such changes only with 
careful experimental design and evaluation of results.
    Third, legislation enacting a voucher block grant should 
include performance goals and measures and should mandate the 
continuation of the collection of household-level data on 
income levels, demographic characteristics, subsidy amounts and 
the location of housing units. This is essential so that 
Congress and the American public know what they are paying for. 
It is also essential for estimating budget levels for the 
program, what is needed to sustain the current program level, 
and what is needed for the program to grow.
    Finally, the legislation enacting a voucher block grant 
should include explicit statutory language relating the 
program's funding level to housing needs. Only such a 
congressional declaration of intent and good data on households 
served and subsidy levels will overcome the fears of those who 
believe that a voucher block grant would mean the loss of the 
Federal commitment to meeting the housing needs of low-income 
renters.
    Thank you, Mr. Chairman.
    [The prepared statement of Jill Khadduri can be found on 
page 329 in the appendix.]
    Chairman Ney. Thank you. I thank the witness for your 
testimony.
    Mr. Olsen?

 STATEMENT OF MR. ED OLSEN, PROFESSOR OF ECONOMICS, UNIVERSITY 
                OF VIRGINIA, CHARLOTTESVILLE, VA

    Mr. Olsen. Thank you, Mr. Chairman. I welcome this 
opportunity to talk with you and the members of your committee 
about reform of the housing choice voucher program. I speak 
from the perspective of a taxpayer who wants to help low-income 
families, albeit a taxpayer who has spent the last 30 years 
studying the effects of low-income housing programs.
    Given the current economic slow-down and the added expense 
of fighting international terrorism, it is clear that little 
additional money will be available for low-income housing 
programs over the next few years. The question is how can we 
continue to serve the families who currently receive housing 
assistance and serve the poorest families who have not been 
offered assistance without spending more money. The answer is 
we must use the money available more wisely. Research on the 
effects of housing programs provides clear guidance on this 
matter. It shows that tenant-based housing vouchers provide 
equally desirable housing at a much lower total cost than any 
type of project-based assistance under any market conditions. 
My written testimony summarizes the evidence.
    These results imply that we can serve the current 
recipients equally well that is, provide them with equally good 
housing for the same rent and serve many additional families 
without any increase in the budget by shifting resources from 
project-based to tenant-based assistance. The magnitude of the 
gain from this shift would be substantial. The smallest 
estimates of the excess cost to project-based assistance imply 
that a total shift from project-based to tenant-based 
assistance would enable us to serve at least 900,000 additional 
families with no additional budget.
    These findings have important implications for how the 
Federal budget for housing assistance should be spent. First, 
the money currently spent on operating and modernization 
subsidies for public housing should be used to provide tenant-
based vouchers to public housing tenants as proposed by the 
Clinton Administration and by Senator Dole during his 
Presidential campaign. If housing authorities are unable to 
compete with private owners for their tenants, they should not 
be in the business of providing housing.
    Second, contracts with the owners of private subsidized 
projects should not be renewed. Instead, we should give their 
tenants portable vouchers and force the owners to compete for 
their business.
    Third, the construction of additional public or private 
projects should not be subsidized. No additional money should 
be allocated to HOPE VI, there should be no new HUD production 
programs, and the indexing of the low-income housing tax 
credits for inflation should certainly be rescinded until a 
careful analysis of the cost-effectiveness of this program 
overturns the results of the recent GAO study.
    Fourth, Congress should declare a moratorium on further 
project-based assistance under the housing choice voucher 
program until it can consider the results of a study that 
compares the cost-effectiveness of already committed project-
based vouchers with tenant-based vouchers.
    Finally, if Congress decides to convert the housing choice 
voucher program to a housing block grant to the States, it 
should require that the entire budget for the program be used 
for choice-based assistance. Evidence indicates clearly that 
States will devote the bulk of an unrestricted housing block 
grant to project-based assistance.
    These reforms will give taxpayers who want to help low-
income families more for their money by greatly increasing the 
number of families served, without spending more money or 
reducing support for current recipients.
    The usual objections to exclusive reliance on tenant-based 
vouchers have little merit. Tenant-based vouchers get 
recipients into adequate housing faster than production 
programs, even in the tightest housing markets, and they are 
more cost-effective than production programs in all market 
conditions. Production programs do not have a perceptibly 
greater affect on neighborhood revitalization than tenant-based 
vouchers, and we do not need production programs to increase 
the supply of adequate housing.
    Unlike other major means-tested transfer programs, housing 
assistance is not an entitlement, despite its stated goal of a 
decent home and a suitable living environment for every 
American family. This feature of housing assistance is a 
historical accident, and it is not defensible given the methods 
currently available for delivering housing assistance. It is 
impossible to justify providing assistance to some families, 
while denying it to other families with the same 
characteristics. If we provide housing assistance at all, it 
should be an entitlement to everyone who is eligible. If anyone 
is eligible, it should be the families with the lowest incomes.
    Contrary to popular opinion, this does not require spending 
more money on housing assistance. It can be achieved without 
additional funds by shifting money from less cost-effective 
methods for delivering housing assistance to choice-based 
vouchers as soon as current contractual commitments permit, and 
reducing gradually the large subsidies received by current 
voucher recipients.
    I urge the committee to take the bold steps necessary to 
serve the poorest families who have not been offered housing 
assistance, and I appreciate the willingness of the members of 
the committee to listen to the views of a taxpayer whose only 
interest in the matters under consideration is to see that tax 
revenues are used effectively and efficiently to help low-
income families.
    [The prepared statement of Ed Olsen can be found on page 
351 in the appendix.]
    Chairman Ney. Thank you.
    Ms. Turner?

STATEMENT OF MS. MARGERY AUSTIN TURNER, DIRECTOR, METROPOLITAN 
     HOUSING AND COMMUNITIES CENTER, THE URBAN INSTITUTE, 
                         WASHINGTON, DC

    Ms. Turner. Thank you, Mr. Chairman.
    I would like to highlight three points from my written 
testimony that is based on research conducted in my center at 
the Urban Institute, but also by other researchers inside and 
outside of government.
    First, the housing choice voucher program is tremendously 
effective and beneficial, although it is not working as well as 
it can and should be. We know how to make vouchers work better, 
and I suggest three strategies in particular that could improve 
outcomes for voucher recipients.
    Third, there is no reason to expect that States would 
voluntarily adopt any of these promising strategies under a 
block grant. Instead, it seems more likely that they would 
implement untested changes that risk undermining the current 
success of the voucher approach. I would like to just elaborate 
a bit on each of those points.
    The most important advantage of the voucher program is that 
it gives recipients the freedom to choose the kinds of housing 
and the kinds of locations that best meet their needs. As a 
result, many voucher recipients today live in healthy 
neighborhoods that offer social, educational and economic 
opportunities for themselves, but most importantly for their 
children. The current program certainly does not work perfectly 
in this regard.
    First, vouchers have not been as effective in promoting 
neighborhood choice and mobility for minority recipients as 
they have been for white recipients. In addition, as others 
have said, there are some families who receive vouchers, but 
are not able to find a house or an apartment in which they can 
use that voucher. There are a lot of reasons for that problem, 
including shortages of moderately priced rental housing, tight 
market conditions, racial and ethnic discrimination, landlords 
who are not willing to participate in the program, and 
sometimes ineffective local program administration. There is a 
growing body of experimentation around the country and research 
that suggests three very promising strategies for addressing 
these issues and strengthening the housing choice voucher 
program. First, vouchers should be linked with mobility 
counseling and housing search assistance. In experimental 
programs, housing authorities that have partnered with 
nonprofits to help voucher recipients learn about neighborhoods 
available to them, track down homes and apartments for rent in 
those neighborhoods, and negotiate effectively with landlords 
have been able to open up more options for these voucher 
recipients, resulting in greater mobility to low-poverty 
neighborhoods and racially mixed neighborhoods, especially for 
families from distressed inner-city communities who might 
otherwise have difficulty in the private market.
    Second, local housing authorities need to strengthen their 
landlord outreach and the services and incentives they provide 
to landlords who participate in the voucher program. There are 
several programs that have had success in expanding the options 
and choices open to voucher recipients by reaching out to 
landlords, listening to the concerns that they raise about the 
way the program operates, solving the red tape and other 
problems with program administration, and in some cases 
offering financial rewards to landlords who accept some of the 
most difficult to place families.
    Third, HUD should be promoting regional collaboration and 
even regional administration of the voucher program. In most 
urban areas, the voucher program is administered by too many 
different local housing authorities, each operating in a single 
city or county. This fragmentation makes the program very 
confusing for families, but also for landlords, and it 
interferes with the portability feature that should allow 
families to move anywhere they want to in the region with their 
voucher.
    Housing authorities in some metropolitan areas have 
addressed some of these issues by entering into mutual 
agreements that make their operations much more efficient and 
coherent. But HUD should be taking an active role in 
encouraging collaboration of that kind and testing the 
effectiveness of more comprehensive regional program 
administration.
    Under a block grant, it is conceivable that some States 
might choose to implement one or more of those promising 
strategies, but it seems unlikely, absent any strong 
programmatic mandate or incentive system. Instead, it is more 
likely that the quality of local program administration would 
deteriorate, particularly given the fiscal distress that many 
States are currently experiencing. Some States might use a 
block grant's flexibility to implement untested innovations 
like time limits or reduced subsidy levels that could undermine 
the success we have seen with vouchers and worsen the housing 
hardships that low-income families face.
    So instead of resolving the fundamental dilemma of 
inadequate funding for affordable housing in this country, a 
block grant would make housing hardship into a State problem, 
rather than a Federal problem, and it would open the door to 
untested program changes that could undermine the proven 
strengths of the voucher approach. Thank you.
    [The prepared statement of Margery Austin Turner can be 
found on page 400 in the appendix.]
    Chairman Ney. Thank you for your testimony, and all the 
witnesses.
    I have just a couple of questions, and anybody can feel 
free to answer. Basically, I wondered if you considered HANF 
good, just kind of cut to the chase, is HANF good or is it bad? 
It is not a trick question. It is just a yes or no.
    [LAUGHTER]
    Is it good or is it bad? The other thing I would want to 
ask is, do we need to change the way we administer the program? 
If you want to start in either direction.
    Mr. Egan. Mr. Chairman, to answer your first question, I 
would say that given what my colleagues have said here today 
and what others have said, that without some very, very 
fundamental changes to the current proposal, that HANF would 
not be a positive development. Secondly, there are many things 
that can be done to improve the program. My colleagues again 
here today have stated many of them, and I will not repeat 
them, but I think the more that we can increase utilization, 
involve landlords, connect with service and self-sufficiency 
opportunities, that the greater the success of the program will 
be.
    Mr. Husock. HANF is good, because it will allow positive 
experimentation. We heard the same kinds of alarms sounded 
before the 1996 Welfare Reform Act, and things have worked out 
rather well in terms of encouraging self-sufficiency. The 
thrust of my remarks was let's line up social policy with 
housing policy. The populations are very similar, and let's 
allow States rather than housing authorities, which do not have 
the capacity to innovate, to take on that challenge.
    Mr. Katz. HANF is bad, because the State infrastructure is 
just not in place for administering housing, and housing is 
just not the same as welfare reform. There are radical 
differences here that we need to understand. Voucher reform is 
needed to make choice for all low-income recipients real by 
matching up housing, schools and jobs. I think the major issue 
is to try to have more of a metropolitan approach to voucher 
administration, which is the way markets operate.
    Ms. Khadduri. HANF is a step in the right direction, but as 
currently designed, I do not think it should be enacted. First, 
it does not preserve the choice-based character of the voucher 
program, if I read the draft legislation correctly, the 
introduced legislation correctly. I also do not think it has 
the explicit mandates for reporting of household-level 
information that would be essential in order to overcome the 
fears of many who have testified before this committee, that 
what we are looking at is a block and cut scenario. I think in 
order to avoid such scenarios, the Congress needs to continue 
to know how many families are assisted, who those families are, 
where they live, and how much subsidy money they are getting. I 
do not think that the legislation as currently drafted and 
introduced provides those guarantees.
    I share the concerns of many others who have testified 
about such program changes as time limits. I think I would 
agree more with Mr. Husock that lining up vouchers with other 
elements of welfare policy is something that needs to be done, 
and we have not gone far enough in doing it. But I think we 
should approach it in small steps and carefully test those 
steps, as was the case before the enactment of welfare reform.
    Mr. Olsen. I would say that if HANF block grant money is 
not limited to choice-based assistance, it will be a disaster. 
But beyond that, I think we should have severe restrictions on 
the targeting on the poorest people, just as we have under the 
current program, with no discretion on the part of the 
Secretary to overrule that.
    Ms. Turner. HANF is a bad idea. It does not address the 
problems that we know exist in the voucher program, and it runs 
the risk of creating much more serious problems. If there is 
going to be a serious consideration of real reform of the 
voucher program, it should focus on getting the program 
administered more rationally at a regional, at a metropolitan 
level so that it works really effectively in terms of outreach 
to landlords and real housing choice for families.
    Chairman Ney. Thank you, and welcome to Congress. It was 
three to three.
    I yield to our ranking member, Ms. Waters of California.
    Ms. Waters. Thank you, Mr. Chairman. Let me just say to 
you, Mr. Chairman, that no one will be able to accuse you of 
not really doing a great job on Section 8. I think this is our 
third hearing, so you certainly have brought in a lot of voices 
for us to hear with all of these hearings. I appreciate the 
panelists who are here today.
    I was particularly struck by some interesting research that 
was done by one of the panelists that happened to conclude that 
somehow housing policy encourages single-parent families and 
provides a subsidy to single-parent families, when in fact we 
should be teaching single-parent families how not to be single-
parent families, and somehow this policy just exacerbates the 
problem. Also in this paper, it appears to be a lot of 
knowledge and information about the use of Section 8 vouchers 
by minorities who move into neighborhoods where they take their 
unsupervised children and play boom-boxes.
    I would like to know if this extensive and very scholarly 
research that is contained in this paper also helps us to 
understand what happens, and first of all, are there whites 
that use Section 8 vouchers? I guess my question would be 
directed toward the scholar from the John F. Kennedy School of 
Government, Mr. Howard Husock. In your research, can you tell 
me about whites who use vouchers and what happens when they 
move into suburban areas? What does your research show about 
the size of their boom-boxes or anything else?
    [LAUGHTER]
    Mr. Husock. Thank you very much for the opportunity to 
respond, Congresswoman Waters. I would just like to point out 
for the record that I was quoting minority homeowners who were 
expressing that concern. So it is fine to characterize my 
remarks as reflecting some sort of antipathy toward minority 
aspiration, but I can assure you that that is the farthest 
thing from the truth.
    Ms. Waters. Oh, I am sorry. I guess what I was asking, are 
you able to quote any whites about what happens when people 
with vouchers move into their neighborhoods?
    Mr. Husock. The particular essay that I wrote that included 
those interviews was based on interviews with minority 
homeowners because of the concern that I had for their property 
values. So I was not looking at white neighborhoods. But if 
white people were moving in and playing boom-boxes next to 
black people, that would be just as serious a problem in my 
opinion, nor would I assert that that could never happen.
    Ms. Waters. And how predominant is the playing of these 
boom-boxes? Do they play them all evening, on Saturdays or 
Sundays? What does your research show you?
    Mr. Husock. I think you would have to ask Mr. Moore of 
Hazelcrest, Illinois, who I quote as saying that. I am sure if 
you hold hearings in south suburban Chicago, and I hope you 
will, because you will find that there is a large group of 
African American homeowners who are very concerned about this 
program. He would be glad to apprise you of the extent of boom-
box playing.
    Ms. Waters. In addition to your scholarly research on boom-
boxes, could you describe more to me about the unsupervised 
children of people who have vouchers? How does it compare with 
people who don't use vouchers? Where is it predominantly 
showing up? Just how big is this problem of unsupervised 
children does your research show? What can you tell us about 
this?
    Mr. Husock. I was quoting one individual who said that.
    Ms. Waters. Okay. That is fine. Now, do you have any 
information in your research about discrimination that was 
described by one of the panelists who indicated that oftentimes 
minorities do not have the opportunity to use their vouchers in 
certain areas and in certain ways because they are 
discriminated against? Did you find that in your research?
    Mr. Husock. I did not research that topic. However, as you 
see in my prepared remarks, I examined HUD's research on 
concentration and inferred from that high degree of 
concentration that existed, that it may be inevitable that 
concentrations of Section 8 families develop because private 
property owners with other options appear to choose not to rent 
to Section 8 voucher holders, as evidenced by significant 
concentrations that we are seeing.
    Does that mean that no discrimination occurs? It is 
probably an economic discrimination. It is probably 
discrimination based on not wanting to participate in Federal 
programs, but we are seeing significant concentrations. We can 
rail against that and say, well, we must do, as other panelists 
have suggested, more to counsel people to get into other 
neighborhoods and to open up those neighborhoods.
    At the same time, I think we have to expect that that is 
going to be a very difficult road. That is why I welcome the 
possibility of social policy experimentation at the State 
level, because if you are going to have significant 
concentrations or you are going to have some individuals moving 
into areas in which they are pioneers, if you will, then I 
think it is very important that there be strong guidelines that 
align Section 8 policy with TANF and other social policy 
elements of the Federal government. This is because my concern 
lies with the aspirations of upwardly mobile families, 
particularly upwardly mobile minority families who I think are 
very concerned about this program, as I am sure you are aware.
    Ms. Waters. Are you aware that 48 percent of all the 
Section 8 vouchers are with whites?
    Mr. Husock. I don't really understand myself to be making a 
race-based argument. If you understand it that way, then I 
regret that, but that is certainly not my intention. My focus 
is on the economics of Section 8 and on the possibility of how 
we can encourage Section 8 families to themselves become 
upwardly mobile. I am suggesting that the TANF Act gives us a 
blueprint that we can apply to housing assistance. The fact 
that there has been friction and people express themselves 
perhaps crudely and I quote them, and I can therefore be open 
to caricature, well, I am sorry, but that is certainly not my 
intention here.
    Ms. Waters. Well, certainly I need to share with you that 
when a panelist appears before this committee, and particularly 
one from Harvard with a paper that talks about unmowed laws and 
shopping carts left on the street, and particularly quoting 
minorities and referencing minorities in relationship to 
unsupervised children and boom-boxes, that is racist, sir.
    Mr. Husock. I take strong exception to the idea that 
quoting African American homeowners making such remarks would 
be regarded as racist on my part. I am not quite sure how you 
jump to that conclusion.
    Ms. Waters. What is racist on your part is that you come in 
representing that you are from John F. Kennedy School of 
Government, without any respectable research, and you tend to 
use some isolated comments to describe a group of people. That, 
sir, is racist. Now, if you don't understand that, then we need 
to come up to Harvard and help them to understand the 
difference between using descriptions that are extremely 
negative, assigning it to one group of people without any data 
or research to support it. Yes, sir, that is racist.
    Mr. Husock. May I point out for the record that in the 
quotation that the Congresswoman is referring to, I do not 
refer to the race of the Section 8 families.
    Ms. Waters. Yes, you do in many ways.
    Mr. Husock. I refer to the race of the minority homeowners.
    Ms. Waters. We know how the language is couched, sir. We 
have been in this business for a long time, particularly I. And 
I understand exactly what you are saying and I do not like it. 
Now, you have a right to say it, but I have a right to tell you 
I don't like it. Thank you very much and I yield back the 
balance of my time.
    Chairman Ney. The time has expired.
    Mr. Scott of Georgia?
    Mr. Scott. Yes, I certainly find the line of questioning 
very interesting. It could stand some illumination in the fact 
that for your information, the consumption of boom-boxes and 
the hip-hop music that corresponds with it now has now moved 
over from being a predominantly African American consumption to 
being a predominantly white consumption, thanks largely to 
Eminem.
    [LAUGHTER]
    At any rate, I hope that this very exercise and this line 
of questioning shows the seriousness of this issue and the 
concerns of this committee that we not cause any more 
aggravation with the Section 8 program. It is having enough 
difficulties as it is. I do recall the line of questioning. Our 
friend from Harvard appeared before this committee when we were 
doing all we could to make sure that we continued the HOPE VI. 
It just appears to me that there is a consistency in your 
testimony that tends to not be complimentary of what I think is 
the best direction of this committee, one, to save HOPE VI and 
reinstitute it, and certainly to save the good points of 
Section 8.
    But I do find very interesting, you know, when you use 
research papers and you write, you may use a quote, you may go 
anyplace, but the intent of the research paper is not governed 
by anything other than the driver of that car. You are the 
driver of the car. It just seems to me that you may go out to 
find various things that may substantiate your position.
    But at any rate, I just wanted to get some clarification of 
why you mentioned this in your report. As I have written in the 
Manhattan Institute publication City Journal in suburban 
Chicago, with one of the highest concentration of voucher 
holders in the country, middle-class African Americans complain 
that they thought they left the ghetto behind, only to find 
that the Federal government is subsidizing it to follow them. I 
am trying to figure that out. And then you go on to say that 
Vikkey Perez of Richton Park, Illinois, owner of Nubian Beauty 
Supply, fears that the small signs of disorder that have come 
with the voucher tenants, the unmowed laws and shopping carts 
left in the street, and could undermine the neighborhood. 
``Their lifestyle,'' she says, ``does not blend with our 
suburban lifestyle.''
    The point I am trying to get at is why would you go there? 
What are you trying to accomplish there if it is not racially 
charged, because it is not the case in many of the instances 
where Section 8 has been used. I am just wondering why would 
you go there.
    Mr. Husock. I went to south suburban Chicago on the 
recommendation of those who were familiar with the Section 8 
program, because I was told there was great concern about the 
implementation of the program there. I would just like to point 
out for the record that the scholar William Julius Wilson has 
talked about the declining significance of race and the 
importance of social class difference as an important 
determinant of overall social policy.
    That is what you are seeing in south suburban Chicago. You 
are seeing people from different social classes involved in an 
unfortunate, somewhat acrimonious arrangement. I understand 
that this does not apply to every situation. The paper that you 
are holding in your hand was my written testimony. It is not a 
research paper and I did not represent it as such. But I think 
that a candid account of the potential for friction between 
social classes should be part of a reasonable discussion about 
Section 8 that need not be characterized as it has been.
    Mr. Scott. I guess what I am trying to get at is what is 
your point? You continue to make, even to go further, even go 
beyond using quotes, you come to some conclusion that says if 
voucher concentration is probable for economic reasons, it is 
important for program guidelines to encourage voucher 
beneficiaries to take steps to end or reduce their need for 
such assistance over time. In fact, such encouragement is just 
as important in areas where voucher concentrations are lower. 
Again, go to the south suburbs of Chicago and you will meet 
minority, first-time homeowners criticizing Section 8 in terms 
far stronger than I would dream of using here for, in their 
view, supporting households which they see as having brought 
problems to their neighborhoods.''
    Mr. Husock. Yes.
    Mr. Scott. That just troubles me because I just think it is 
like finding a needle in the haystack. We have so many great 
stories about how Section 8 has revitalized communities and 
what a great program it is. It just seems to me that you tend 
to go out of your way here to bring some information and come 
to some conclusion. Again, just as the gentlewoman from 
California said, it is not just coming from somewhere. You are 
coming from, you are making a Statement from arguably one of 
the most respected institutions in America, next of course to 
Florida A&M University, which incidentally last year received 
more merit scholars than did Harvard.
    [LAUGHTER]
    But we really have got to kind of pull the cover over some 
of these kinds of statements so that we don't give the 
credibility to them. This is just a little bit overblown here. 
I just want to call attention to that. You are certainly free 
to come to any conclusions, but it just seems to me there is 
some rather narrow purpose on this here that we certainly want 
to make sure that we raise the temperature on and let you know 
that we certainly are not in accord with them on this 
committee, and we find that they are certainly not received in 
a positive way, because we know of too many very positive 
cases. I guess really to take African Americans and put these 
words into them to say, it really tends to goad us, certainly 
me, the wrong way.
    Mr. Husock. Candidly, I included that in my testimony 
because I thought that you would be interested, not because I 
was seeking to characterize it. I truly indeed thought that you 
would want to know honestly, from the bottom of my heart, I 
thought you would want to know what I believe was the suffering 
that I encountered in that room when I met with those 
homeowners. I thought you would want to know that and that you 
would care, and that is why I put it in there. If I have 
offended because of that, I truly regret that.
    Mr. Scott. The point that I am bothered about is the fact 
that not that they are there, people can say things, but from a 
person in your position to come and to make a blanket 
concluding statement of negativity about this program. I do not 
question that. I mean, we do not know whether that happened or 
not. You say it happened, but the mere mention of using, from 
people who need the program the most to be the ones as the 
carrier of this, and with your credentials. So that is my 
point.
    I yield back.
    Chairman Ney. The time of the gentleman has expired.
    I don't know about Florida A&M, but as a graduate of The 
Ohio State University, we have a warm spot in our heart for 
Miami.
    [LAUGHTER]
    Mr. Watt?
    Mr. Watt. Thank you, Mr. Chairman.
    We have a little private joke going up here about the 
Chairman passing over me. Let me see if I can get us out of the 
anti-Husock posture and on to another subject. I saved you last 
time you were here, Mr. Husock.
    [LAUGHTER]
    Mr. Husock. I remember that, too.
    Mr. Watt. I did you that favor last time.
    Mr. Husock. I wrote you that letter.
    Mr. Watt. This is getting to be habit-forming here.
    [LAUGHTER]
    Let me applaud Mr. Katz and Ms. Turner for emphasizing a 
point, both of them independently, that I think is very 
important and I don't want to go unnoticed here. Both of you 
mentioned the need for Section 8 voucher recipients to have a 
broader base of information about available housing. I think 
Mr. Katz referred to it as a multiple listing of Section 8 
availability.
    I want to emphasize to the chairman and other members that 
in last year's housing bill, which did not go any further after 
it passed our community virtually unanimously, but there was a 
provision that sanctioned something called the socialserve.com 
program that has been used in Charlotte and some of the 
surrounding areas where they have come up with a really good 
listing of apartments that are available for low-income people, 
landlords who take Section 8 vouchers, all different kinds of 
criteria. They have developed this and we actually were able to 
get some assistance for the continuation and expansion of that 
program. It would be similar to a multiple listing of low-
income housing availability.
    Second, I want to, not to beat up on Mr. Husock, but to 
give Mr. Katz and Mr. Husock the opportunity to debate back and 
forth. Mr. Husock said that 28 percent of the recipients of 
Section 8 vouchers are also TANF recipients. For the life of 
me, I cannot figure out why you would take a 28 percent rate 
and say that that justifies treating the program in exactly the 
same way that you treat TANF. I would think that the 72 percent 
that is left might dictate how you treat the program, but that 
is not the point I want to make. Mr. Katz said that it is about 
13 or 14 percent, but either way it is a fairly small fraction. 
It is not even one-third of the recipients are recipients of 
welfare.
    So Mr. Husock, how do you get from even a 28 percent usage 
rate being welfare recipients to the conclusion that somehow 
the same model, even if we accept that the TANF model is a good 
model, which some of us do not accept, but if you accept that, 
I don't see how you get from 28 percent to the whole thing 
ought to be treated as a welfare program.
    Mr. Husock. A couple of things. First on the data itself, I 
specified 28 percent of non-elderly, non-disabled. If you 
include elderly and disabled, you get to a lower figure, as Mr. 
Katz did. So we are not really disagreeing about the figures.
    Mr. Watt. Well, that even more makes me concerned about 
what you said.
    Mr. Husock. Okay. I got the idea that they ought to be 
aligned because 28 percent, or whatever percentage you take, is 
still over 200,000 families in this country. That is a lot of 
people.
    Mr. Watt. Yes, but you have 800,000 people who are not. Why 
should they be following the model of welfare? They are not on 
welfare.
    Mr. Husock. What we do not know, I think, is whether it is 
fair to say that the TANF families are current TANF recipients. 
My concern is whether we are, as Congresswoman Waters pointed 
out about my concern about single-parent families, whether we 
are encouraging formation of families which are going to go on 
to have a lot of, you know, are prone to high poverty.
    Mr. Watt. You are making a different point. What is the 
rationale for not doing that, Mr. Katz?
    Mr. Husock. Right. We don't know how many there are, so it 
is not necessarily a bad idea to say there ought to be a time 
limit, which is where I am going with this.
    Mr. Watt. I am not suggesting it is a bad idea. I am just 
trying to figure out how you think it is a good idea, how you 
take 28 percent and make it a good idea. I think I could make 
the case that 72 percent makes it a bad idea a hell of a lot 
more than 28 percent making it a good idea. I wasn't even 
trying to do that.
    Mr. Katz, go ahead.
    Mr. Katz. I just wanted to reinforce your point. TANF is 
very different from housing. The first difference is that 
States were administering welfare prior to TANF. They were 
administering the AFDC program. They were experimenting with 
the program. They were getting waivers from the prior 
administration. So there was expertise. There was an 
infrastructure of administration on welfare that does not exist 
at the State level on housing. That is number one.
    Number two, I think the real conversation we should be 
having is how does housing serve as the platform for helping 
welfare recipients make the transition to work. And then how 
does it reward work once welfare recipients have made that 
transition? Because once they have made that transition, it is 
not like they are earning sufficient wages to afford housing in 
most metropolitan markets in the United States.
    So I think the HANF connection between housing and welfare 
is a really curious one. I think we have got to understand the 
role housing assistant can play in helping welfare recipients 
make the transition to work, and then stay in work, because the 
affordability problem does not go away even after employment.
    Mr. Egan. Mr. Chairman, with your permission could I add to 
that?
    Chairman Ney. Yes.
    Mr. Egan. I would like to speak from experience at the 
local level. As the Chairman indicated, I am the Chairman of 
the Fairfax County, Virginia Redevelopment and Housing 
Authority. I am struck with the ``therefore'' answer here. Just 
because the States administer TANF, therefore why should the 
voucher program also be administered by the States. Our 
experience is that where the connections with jobs, day care, 
transportation, supportive services are made are at the local 
level. We make those connections. I do not see therefore the 
HANF proposal, as I indicated earlier, adding any value to 
those relationships. In fact, my staff contends that they in 
fact would detract value from those relationships.
    Mr. Watt. Thank you.
    Mr. Chairman, I don't want to ask another question. I do 
want to make two very quick points, though. Number one, I am 
distressed that Mr. Husock seems to think that we should still 
be in the business of experimenting with poor people. That is 
one point and that is not a question.
    Second, for the life of me, I have not been able to figure 
out what Ms. Khadduri, the point that you were making which 
contrasts substantially I think with the point that Ms. Turner 
was making, that simply putting something at the State level 
makes it more effective. If that were the case, I don't know 
why we are even involved in the Section 8 program. I mean, we 
ought to just get out of the business and let the States do it. 
That is not a question. There are a couple of points in your 
testimony where you just kind of assume that something is 
better because it is not here. I do not necessarily accept 
that.
    Thank you, Mr. Chairman.
    Chairman Ney. Thank you.
    Mr. Clay?
    Mr. Clay. Thank you, Mr. Chairman, Ranking Member Waters, 
and good afternoon, witnesses.
    Let me try a more targeted approach. Let me ask Mr. Olsen 
first, you stated that the housing choice voucher program is by 
far the most cost-effective program of housing assistance in 
the United States. Why do you want to change it? Tell me how 
the conversion to block grants will make the Section 8 voucher 
program better? And how will it be better for recipients?
    Mr. Olsen. Actually, Ms. Khadduri would probably be better 
for answering this because what I know about this is really by 
reading a paper that she wrote. I think the advantages of going 
to block grant are not really large, but she argues and I agree 
with her that it will improve the portability of vouchers 
across different areas. There would also be some administrative 
savings by not having multiple housing authorities dealing with 
the same geographical area.
    Mr. Clay. I will get to Ms. Khadduri. I want you to answer.
    OLSEN: Okay. I think those would be the main ones. I think 
I am forgetting one, but I don't regard it as large. I think 
the best-case scenario is that it would improve the program 
slightly. It has its flaws, but I think this is a very fine 
program.
    Mr. Clay. I just wanted to hear your thinking along those 
lines.
    Ms. Turner, you talked about portability of vouchers by 
region. Let me ask you out of ignorance, could HUD institute 
this policy now?
    Ms. Turner. I think HUD could be doing a lot to encourage 
the housing authorities in a region to collaborate with each 
other more effectively, to share waiting lists, to share 
application forms, and to streamline the process when families 
want to move from one jurisdiction to another. But HUD could go 
further. It could launch a demonstration inviting a regional 
institution in a metropolitan area to test the effectiveness of 
region-wide program administration, really assuming the 
responsibilities that are currently performed by individual 
housing authorities.
    Mr. Clay. You also raised the concern that States could use 
the block grants for untested methods. I guess that is somewhat 
sounding the alarm, that it could be a disaster to do this.
    Ms. Turner. Yes, I think it could. Again, unlike TANF where 
we currently have no evidence on what would happen if there 
were time limits, what would happen if subsidy levels were 
reduced, what would happen if other cost saving restrictions 
were imposed on this program. We can make some assumptions. I 
think those kind of changes in the program would undermine 
landlord participation, undermine families's ability to move to 
neighborhoods of their choice, and leave working families 
living in unaffordable housing without the assistance they need 
to pay high rent levels.
    Mr. Clay. Thank you.
    Let me ask for the entire panel, if you could each approach 
this question and try to come up with a response. Why are we 
going to take a successful program, send it to the States, and 
create problems for systems that are not adequate to administer 
the Section 8 program? If you could just start on that end and 
give it a shot.
    Mr. Egan. Mr. Clay, thank you. Let me just build upon my 
earlier comment and speak mainly from my experience at the 
local level in Fairfax County. We have found that the kind of 
things that make for a successful program at the local level 
are a high degree of landlord participation, the opportunity to 
increase utilization rates, to provide mobility counseling and 
other kinds of supports that happen at the local level. We 
don't see the State adding value to those activities. We do not 
understand why putting the decision making power in Richmond 
would make the program work better in Fairfax County.
    Mr. Clay. And that relationship is derived from the local 
PHA and the Federal government.
    Mr. Egan. I cannot imagine why a landlord in Fairfax 
County, who we work with very carefully and closely and 
supportively, would be aided and helped and encouraged to 
participate any better in the program by someone in Richmond 
developing that relationship.
    Mr. Clay. Thank you.
    Mr. Husock?
    Mr. Husock. Before Governor Thompson of Wisconsin became 
HHS Secretary and initiated his welfare to work program, we 
didn't know what the results of that were going to be either. 
So if we were to initiate adjustments in the Section 8 program 
based on encouraging long-term self-sufficiency and upward 
mobility, and to do it on a waiver basis as was suggested by 
Dr. Khadduri, I believe, such that the default would be on the 
States to demonstrate that there was a reasonable chance and 
they had thought their innovations out in a rigorous way, I 
don't think there is any reason to presume that we are courting 
danger. Again, we saw experimental, I guess that is a 
politically incorrect word here, work pre-TANF. And we can see 
the same kind of thing again on a waiver basis, nothing 
precipitous, but I think that there is no reason to presume 
that States are going to follow it up.
    Mr. Clay. But Mr. Husock, this is not a debate about TANF. 
I think the jury is still out on that. I mean, so what? We have 
dumped people off of the TANF rolls, and we do not know what 
has happened to those people. We don't know what their plight 
is. Some have been successful, but not all. So let's not 
compare TANF to HANF because I do not think it is similar. I 
really don't.
    Because I am running out of time, I would like to go to Mr. 
Katz, and thank you for your answer.
    Mr. Katz. When I was in the government, what we used to 
call this kind of proposals was an ``OMB special.''
    [LAUGHTER]
    This is a proposal that from my perspective is designed to 
cut the budget over time, to de-couple funding decisions from 
market pressures, from rent increases, and basically push the 
problem down to state governments, which obviously at this 
point in time are under dire fiscal stress. So I think we know 
what ultimately is behind this kind of proposal.
    Mr. Clay. Thank you.
    Ms. Khadduri?
    Ms. Khadduri. I guess I differ from Mr. Katz in that I am 
willing to assume that those who have proposed administration 
at the State level do so out of the best of motives, rather 
than out of the worst of motives. I do think that consolidating 
the administration of the program at the State level could make 
it a great deal more efficiently operated.
    As I said in my testimony and I have enlarged on it 
elsewhere, the program really has become a crazy quilt of lots 
of tiny little administrators of programs and of overlapping 
jurisdictions within a metropolitan area. Sometimes the city 
and the county administer vouchers in the same place. It does 
not make any sense, and it does get in the way of effective 
program administration because landlords do not know what the 
rules are since they are dealing with two different housing 
authorities. Families don't know which waiting list to get on.
    I also think that the possibility for coordination of goals 
and processes for linking the voucher to other social programs 
is something that really ought to make us consider state-level 
administration. For example, programs for people with chronic 
mental illness and with developmental disabilities, by and 
large those policies are created and implemented at the State 
level. This is a population that uses the voucher program a 
great deal, but it has been difficult to serve that population 
as effectively as it might be with vouchers because of the 
disconnect between the local administration of the vouchers.
    Mr. Clay. And after all of that having been said, will you 
take into consideration the dire financial straits that our 
States are experiencing now, and you still have confidence that 
they will be able to administer this program in a manner where 
they will not go in and try to manipulate that funding for 
other areas.
    Are you still confident that the States are capable of 
doing that? I mean, look, these States are really dying on the 
vine. They are in big trouble financially. And yet you are 
confident we can give them this block grant and that they will 
focus all of that funding towards Section 8 programs, 
especially those States that do not have any experience in 
housing? I know my time is up.
    Ms. Khadduri. As I said before, I think this should be a 
voucher program. I think the use of the program should be 
limited to tenant-based assistance, either rental assistance or 
homeownership assistance, but that States should not be given 
broad flexibility to use the program for other kinds of 
housing-related things.
    Mr. Clay. Thank you, and I am sorry for going over, Mr. 
Chairman.
    Chairman Ney. We are overtime on this one, I wanted to 
note.
    Mr. Davis?
    Mr. Davis. Thank you, Mr. Chairman. I thought we were at 
the NBA 5 minutes for a second, and not real-time 5 minutes.
    Mr. Husock, I was a little bit tempted to start with you 
earlier, but my friend from North Carolina, Mr. Watt's, effort 
at salvation only got you to purgatory, so I am going to leave 
you alone at that point.
    What I do want to do, though, is start with Dr. Turner. One 
of the observations that you make, Dr. Turner, I suppose is 
somewhat related to some of Mr. Husock's observations. It is 
the fact that, whether it is racially based or whether it is 
based on some kind of class stigma, you name the basis of the 
stigma, there has been an effort on the part of some people to 
stigmatize the program, and certainly some communities have 
reacted perversely or negatively to Section 8 people ``coming 
into the neighborhoods.''
    Can you talk for a second about how we can grapple with 
that problem? How we can deal with the problem of better 
educating people about Section 8? Because I think, number one, 
there is enormous misconception about it. I think Ms. Waters's 
point is certainly accurate that the majority of people in the 
program are members of, I hesitate to say majority, because I 
guess that would vary from State to state, but certainly a 
large number are white or Caucasian. That is a common 
misconception about the program, that it is mainly blacks or 
Hispanics.
    Another common misconception about the program is that a 
significant number of people on it are on welfare. Even by Mr. 
Husock's account, it is only 28 percent. So how do we grapple 
with some of the various stereotypes and misconceptions that do 
exist around this program?
    Ms. Turner. Thank you. I think that is an important 
challenge for the program, to overcome the stereotypes in 
receiving communities and also the stereotypes among landlords. 
In general, families who receive Section 8 vouchers have been 
quite successful in getting access to neighborhoods all over 
the metropolitan area. The program does not result in very much 
clustering. There are some exceptions to that, and those 
exceptions are cause for concern, but they are the exception, 
they are not the rule. Our research suggests that when that 
kind of clustering occurs, it is because of the persistence of 
race-and ethnicity-based discrimination and segregation in 
housing markets. It is because so many doors are closed to 
voucher recipients that they end up becoming clustered, often 
in the few neighborhoods that have not slammed their doors.
    Mr. Davis. Let me ask you a larger question, if I can take 
advantage of a chance to get into a slightly broader area, we 
recognize that there is an enormous amount of discrimination 
that still goes on in housing in this country, and the 
consequence of it is that our schools are re-segregating. 
Another consequence of it is that successful programs such as 
this end up getting stigmatized.
    How do we, as a practical matter, deal with that larger 
issue of integrating our neighborhoods in the context of using 
this kind of a program? Can you talk about ways that we could 
possibly better use Section 8 to accomplish the goal of 
integrating neighborhoods?
    Ms. Turner. It is obviously going to take more than the 
Section 8 program to win the fight against segregation and 
discrimination. But of all our housing programs, Section 8 
offers the most in this regard because it gives individual 
families the freedom to choose where to go and it lets one 
family at a time make a neighborhood choice and move into a 
neighborhood. When the program is used effectively, families of 
all races get a chance to look at the neighborhoods available 
to them; neighborhoods where they are race predominates; 
neighborhoods where they would be in a minority; look at them 
and decide is this the neighborhood that offers a better life 
for me and my children.
    When the program works well, they get help making that move 
and an effective housing authority would be reaching out to 
that receiving community, not sending up alarm bells if there 
is somebody new moving in here, but watching and being ready to 
help that family and help the community overcome any challenges 
of misunderstandings that might arise.
    Mr. Davis. Let me turn to a slightly different question in 
the time that I have left. There are at least two or three of 
you on the panel who have expressed some sympathy with the idea 
of decentralizing this program, if you will. I am not quite 
sure that I understand that argument. Number one, it is already 
a program that is decentralized. It is primarily administered 
at the local level as it is. I could see it if we were talking 
about a Federally administered program that you wanted to 
devolve into the local communities. This is, in effect, a 
locally administered program that you want to shift back up to 
the States. It is kind of the opposite of the usual Federalism 
thrust.
    Let me ask those of you who are sympathetic to the goals of 
HANF, why not simply find ways to strengthen our local housing 
authorities, which seems to me to be a slightly more rational 
response to this problem?
    Mr. Husock. I actually have some sympathy with that point 
of view. I think that HANF seems to be the vehicle, candidly, 
that could serve to practically become a means to adopt some 
changes in the program. But as I pointed out in my testimony, 
in Congressman Watts's home town of Charlotte, I think the 
housing authority there is doing a great job, because you 
happen to have an executive director who was bold and willing 
to experiment and not afraid of getting called names for trying 
out a voluntary time limit.
    If more housing authorities were encouraged to act in those 
directions, that I think would be a very positive thing. So I 
do not rule out the idea that housing authorities can do a good 
job. It just seems to be as a practical matter, we are more 
likely to get quicker change by aligning social and housing 
policy at the State level.
    Mr. Davis. If the chair would give me an additional minute 
or so let me try to make one additional point that I do think 
comes to mind as I listen to a lot of you. There is talk from 
at least some of you about the utility of putting this program 
in the hands of the States, and you are making the usual 
arguments about experimentation and about innovation. I think 
we have heard all those arguments before.
    One thing that strikes me as being very different, though, 
is the complete absence of standards that HANF would contain 
for what makes for a successful program. It is one thing to say 
to the States, go forth and innovate, go forth and create, but 
we are not giving them very many standards.
    Mr. Husock, you just outlined the kind of local program 
that you think works. That is well and good. The problem is 
that HANF does not do a very good prescriptive job of saying 
this kind of program works or that kind of program doesn't 
work. So I will just close with this observation that if we are 
even going to seriously consider as a committee and as an 
institution adopting HANF, which I hope we don't, but if we are 
going to consider doing that and if we are going to consider 
making these kinds of changes, it strikes me that we have to at 
least staple some genuine standards onto the administration of 
Section 8. Otherwise it will become simply survival of the 
fittest and that will not be a good thing for a lot of people 
dependent on this program.
    Thank you, Mr. Chairman.
    Chairman Ney. Ms. Velazquez is next, but Mr. Scott, did you 
have a comment?
    Mr. Scott. Yes, I just had one point I wanted to make right 
quick. I appreciate your giving me my time. The other point I 
wanted to discuss was that it just concerns me, of all the 
things about this move, is the move to the States. Let me tell 
you why. I served in the State legislature of Georgia for 28 
years, served 20 in the senate, and all of those years on the 
Budget Committee. One of the things that bothers me about this 
is there is no cry coming from the States of ``give me this 
program.'' Many of them said they really don't want it; many of 
them are not equipped to handle it; they have no housing 
experience; there are no housing authorities there.
    The other thing is, these are block grants going down to 
States, many States of which have constitutional amendments to 
have balanced budgets, which means quite frankly that if those 
funds are not dedicated, the only way they can be dedicated is 
to come with laws that the legislature will pass that they 
cannot be touched. None of those things are coming with this. 
This is money being given.
    So we really have some very fearful concerns that have not 
been addressed that to give this program to the States is just 
like throwing red meat out into the lion's den, to paraphrase a 
word.
    Mr. Davis. Would you yield for a second, Mr. Scott? Mr. 
Chairman, if you will just let me make one brief follow-up 
point.
    Chairman Ney. I will note that it will be on Ms. 
Velazquez's time.
    Mr. Davis. I can do it in 20 seconds, Ms. Velazquez.
    Chairman Ney. I will give you 10.5 seconds.
    Mr. Davis. Okay. One of the things that really keeps 
occurring to me is that whenever we talk about transferring 
these responsibilities to the States, has anybody ever bothered 
to ever poll the Governors or the Governors Association to ask 
them if they want these things? Those of you who are advocating 
that, has anybody even bothered to poll the Governors 
Association and ask them? Okay, I read that as a no. Thank you.
    Mr. Scott. That is my point.
    Chairman Ney. We will turn to the gentlelady from New York 
who has extended time.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Husock, I am sorry to have missed the earlier 
questioning of this panel. I understand, however, that several 
of my colleagues addressed negative implications and the tone 
of your testimony. I am glad that I went to another meeting so 
that I took some fresh air. I really was outraged by your 
testimony and your subjectivity. I resent the fact that we 
invite witnesses who can come here, read a Statement such as 
yours, and then say that those things cannot be attributed to 
you because these are words of other people. I don't know if 
what you wrote quoting other people was true or not.
    Anyway, so let's discuss not what you are attributing to 
other people what they said, but let's discuss part of your 
testimony that can be attributed to you. You advocate time 
limits on short-term assistance to enable long-term reliance. 
Approximately 70 percent of people on vouchers are already 
working. How will terminating their assistance help these 
families to improve their situation and achieve self-
sufficiency?
    Mr. Husock. My concern is the formation or, candidly, is 
inviting more people to participate over time by encouraging 
the formation of new households that are in need. I am hopeful 
that if we had a time limit, and maybe it should be a time 
limit for new households, for new enrollees, because we should 
not change the rules in the middle of the game. I take the 
point.
    If we can set the rules such that those who are enrolling 
in the program now understand, and this is how it was done in 
Charlotte. In Charlotte, the time limit was linked up with HOPE 
VI and those who were entering the HOPE VI program projects, 
they said, okay, this is a really good new unit and we think 
that in order to enroll in this program and to move into this, 
you ought to think about a five-year voluntary time limit. That 
is the way that Charlotte proceeded. I think that is really a 
national model.
    I am not endorsing a blanket time limit. I am saying we 
ought to look to the States to experiment. If States in their 
wisdom under the guidance of elected officials such as yourself 
think it is precipitous to move people off of Section 8, and we 
don't really even have data, by the way, on how long people 
stay in Section 8. HUD is not keeping that data and 
disseminating it, to my knowledge, so it may be that most 
people are not even on the program that long and it would not 
even be that big of a change. But it would be a big change for 
people who are coming into the program for the first time. I 
think a voluntary time limit or perhaps a mandatory time limit 
under some States's or localities's aegis is worth trying in a 
well-evaluated way, as Dr. Khadduri has said.
    Ms. Velazquez. Mr. Olsen, I am intrigued by the proposal 
that you set out in your testimony to have PHAs success rate 
determine rates to which they can over-extend vouchers. How 
would you handle the potential problem of more families finding 
a home than there are vouchers available? Who then decides 
which family gets the voucher? What would you do to make up the 
time lost to the family searching for a home, only to be denied 
a voucher? How would you compensate the landlord for any income 
lost as a result of potential tenants who were turned away 
believing the voucher holder would move in?
    Mr. Olsen. I think that we should expect that everyone who 
is offered a voucher would use it. We have had an Entitlement 
Housing Assistance Program. We tried it during the experimental 
housing allowance program, an entitlement program, the 
participation rate was less than 50 percent. Those vouchers 
were much less generous than the current vouchers. Their cost 
was about $3,000 a year, rather than $6,000 a year in today's 
prices.
    It is often said, people afforded vouchers can't find a 
unit. It is not that the unit is not there. The units are 
there. It is a question of how much incentive people have to 
find them. And when you had an entitlement program, many people 
chose not to, some of them went out and searched and simply 
could not find a unit within the amount of time they were 
willing to devote to it. But these were largely people who were 
eligible for the smallest subsidies. People eligible for very 
small subsidies just decided they were not going to do it. That 
has been found in the Section 8 voucher program. The 
participation rate is highest among the poorest people. Why? 
Because they receive the largest subsidy for finding a unit.
    Ms. Velazquez. But let's take New York, for example.
    Mr. Olsen. Yes.
    Ms. Velazquez. There are almost 100 percent of vouchers 
being used, and then the units are not there.
    Mr. Olsen. Well, the units must be there if all of the 
vouchers are used. Are you saying all of the people are getting 
into units?
    Ms. Velazquez. What I am saying is we are facing a housing 
crisis in New York City, and the same way in Los Angeles and 
other urban cities across the country.
    Mr. Olsen. Usage is not going to be a problem, certainly in 
the current situation, because there are about 30 times as many 
families eligible for vouchers who already live in units that 
meet the program's standards as there are vouchers to allocate. 
In the current situation, there can never really be a problem 
of using all of the vouchers. This is a matter of 
mismanagement. When they are not used, in my book it is a 
matter of mismanagement by local housing authorities, not 
adjusting their over-issuing of vouchers to the success rates 
they have actually observed.
    It is like college admission officers. If college admission 
officers did as poorly as some of the housing authorities, not 
all of them, as some of them, they would not be around. They 
would not have the job that much longer. So I view low 
utilization rates as a failure of administration by local 
housing authorities.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Ney. Thank you.
    Ms. Waters, any additional questions?
    Ms. Waters. If I may, Mr. Chairman. You have been very 
generous and gracious with your time. We did not have an 
opportunity to delve into this idea that somehow this housing 
program could teach morality. I am really concerned about the 
thinking that we encourage with Section 8 single-parent 
families, by giving women, single-parent women housing, somehow 
we support the idea that they are not married, or we support 
the idea that they are having babies out of wedlock. I am very 
bothered by that.
    Let me ask, what would you suggest we do with single-parent 
households that need housing, that qualify for housing? How 
would you develop a policy that would encourage them to get 
married, if that is some kind of value that you think should be 
inserted into this policy? How would you do that, Mr. Husock?
    Mr. Husock. I meant to point out just the figures speak for 
themselves, that the largest group of those who receive Section 
8 housing vouchers are single-parent families, especially among 
non-elderly, non-disabled. So I think it is a program that 
addresses that group, I think that is incontrovertible.
    My thought was that if for new enrollees particularly, over 
time they had the sense that this was a declining subsidy, 
perhaps not a precipitous cut-off, but a decline over time, 
again something that jurisdictions can consider, then they 
would make life choices, maybe they would say, gee, the rent is 
going to go up and if I want to buy this unit, maybe it is 
worth thinking about whether I want to make some kind of a 
lifestyle choice that would have some sort of co-household 
head. This is a category of HUD's too.
    Ms. Waters. I am sorry. I want to make sure I understand 
your Statement. It was kind of couched in some interesting 
language. You are saying that find somebody with enough money 
to help you pay the rent and get married. It is an economic 
decision?
    Mr. Husock. I am suggesting that financial incentives could 
play a role, sure.
    Ms. Waters. That is very interesting. Thank you very much.
    Chairman Ney. A question I had, and I want to get to the 
second panel, but a quick question I had, Mr. Katz, you were 
talking about urban metropolitan areas and some consolidation. 
Do you have any thoughts about the smaller areas where you have 
30 or 40 vouchers, you know, rural or small areas?
    Mr. Katz. I think that is an interesting question as to who 
ultimately should bear responsibility for administering the 
program in non-metropolitan areas. Perhaps that is where the 
States should play a role. Now, some of those smaller areas are 
obviously right at the fringe of metropolitan areas, directly 
in the path of growth. From my perspective, I would consider 
them to actually be part of the metropolitan areas, even if 
they are not defined as such.
    I still think the question of who administers is different 
from the question of how the funding arrangement is set out, 
and all the other programmatic restrictions and issues that 
have been discussed today. So I think this question of who 
administers is separate from some of the programmatic issues 
that have been discussed. That is why, from my perspective, the 
HANF proposal, whether it is for an entire state or just for 
non-metropolitan areas, is very troublesome.
    Chairman Ney. Thank you.
    I want to thank the panel. I think you have been a 
tremendous panel and I appreciate your time here up on the 
Hill. Thank you.
    Panel two can come forward, thank you. We had panel one and 
panel two, and we moved to panel three.
    [LAUGHTER]
    Let me just introduce the witnesses. Sheila Crowley is 
President and CEO of the National Low Income Housing Coalition. 
She is a member of the board of the National Housing Trust, the 
Poverty and Race Research Action Council and the Technical 
Assistance Collaborative. Dr. Crowley lectures widely on the 
issues of social policy, social justice and legislative 
advocacy. Welcome to the Hill.
    Henry Marraffa, Jr., has served on the Gaithersburg City 
Council since 1995. He is testifying today on behalf of the 
National League of Cities, where he serves on the Community 
Economic Development Steering Committee. Ann O'Hara is a co-
founder and Associate Director of the Technical Assistance 
Collaborative in Boston, Massachusetts. Previously, she served 
the Commonwealth of Massachusetts as the Assistant Secretary 
for Housing and Director of Rental Assistance Programs. John 
Sidor has 25 years of experience in the housing and community 
development field and is currently a public policy management 
consultant. He is also adjunct faculty member in the graduate 
program of strategic leadership at Mountain State University in 
Martinsburg, West Virginia.
    I want to welcome the panel. Thank you for your indulgence 
of the time waiting. We will begin.

STATEMENT OF MS. SHEILA CROWLEY, PRESIDENT, NATIONAL LOW INCOME 
               HOUSING COALITION, WASHINGTON, DC

    Ms. Crowley. Chairman Ney and Ranking Member Waters, thank 
you very much for the opportunity to testify today on the 
housing voucher program. I am Sheila Crowley. I am President of 
the National Low Income Housing Coalition and I am representing 
our members who share the goal of ending the affordable housing 
crisis in America and who have substantial experience with and 
expertise on the housing voucher program. We understand the 
program's value, its issues, and its challenges.
    We have advocated with Administrations and Congresses of 
both parties to expand and improve the program since it began 
in 1974, which coincides with the founding of the National Low 
Income Housing Coalition. We consider the housing voucher 
program to be a co-equal partner in what we see as the trio of 
solutions to the affordable housing crisis, that is production, 
preservation and income subsidies. We strenuously oppose the 
proposal to convert the Section 8 housing voucher program to a 
block grant.
    This committee has carefully studied the depth and breadth 
of the affordable housing crisis and has come to the same 
conclusions as many others that there is a serious shortage of 
housing units that are affordable for the lowest income 
households. The latest analysis of the affordable housing 
crisis is contained in the 2003 state of the nation's housing 
report issued by the Joint Center for Housing Studies of 
Harvard just this morning. I would like to request that copy of 
the report be placed in the record.
    Chairman Ney. Without objection.
    [The following information can be found on page 411 in the 
appendix.]
    Ms. Crowley. Okay. I think you will find this to be of 
satisfactory scholarly rigor.
    Despite housing being the one bright spot in an otherwise 
dismal economy, the Joint Center reports that three in ten U.S. 
households have housing affordability problems, and 14.3 
million households are spending more than half of their income 
for their housing. Three-quarters of these are households that 
are in the bottom income quintile and the gap between the 
number of renter households in the bottom 20 percent of income 
and the number of housing units they can afford now stands at 
two million.
    Our assessment of the housing voucher program is that it is 
essential. It is largely successful. It should be funded at an 
increased level, and it is in need of reform. Problems that 
have inhibited voucher utilization can be grouped into three 
categories: administrative shortcomings, discrimination against 
voucher holders, and the lack of modestly priced housing stock.
    H.R. 1841 only addresses the administration of the voucher 
program and does so, in our opinion, in a heavy-handed and off-
target manner. The rationale to block grant the voucher program 
to States in order to improve its administration fails to 
recognize substantial improvement in voucher utilization in the 
last two years, and indeed the information that we have gotten 
most recently from HUD is that the utilization rate is now over 
95 percent.
    There are numerous reasons to reject this proposal. I have 
reviewed many of them in my written testimony. You have heard 
many of them from other panelists. But let me say that its 
greatest flaw is the failure to guarantee that the funding of 
the housing voucher program would keep pace with housing costs. 
States would be unable to continue to serve the same number of 
low-income people at the level needed to assure housing 
affordability, much less expand assistance to help the many 
thousands of people on housing voucher waiting lists.
    Protestations that erosion of the voucher program is not 
the intent of the proposal notwithstanding, the mounting 
Federal deficit and the corresponding debt that it will create 
will force harsh measures in the not-too-distant future. In the 
current fiscal environment, converting the housing voucher 
program to a block grant is best understood as stage-setting 
for future cuts to the program.
    There are several straightforward things that Congress can 
do to improve voucher utilization, some of which were in H.R. 
3995, your omnibus housing bill from the last Congress, and in 
bills in the Senate. First, HUD has the option to reallocate 
unused vouchers from one administering agency to another, and 
Congress should require reallocation from communities that 
cannot use all their housing vouchers to those who can, and to 
the extent possible keep those housing vouchers in the same 
region. The threshold for reallocation should be quite high, a 
95 percent utilization rate.
    Second, Congress should enact reforms that will incentivize 
owners of rental property to participate in the program, in 
particular making the inspection process more flexible and less 
time consuming for owners, a proposal that was detailed in H.R. 
3995. And third, Congress should establish a housing success 
fund or other mechanism to help housing voucher holders find 
and access available housing with funds for application fees, 
credit checks, security deposits and the like, as well as 
supporting housing search assistance, outreach and counseling 
and those kinds of things.
    We know that some landlords decline to accept housing 
vouchers because they object to the people who are voucher 
holders. Congress should consider a testing program that would 
attempt to discern the extent to which discrimination against 
voucher holders violates Federal fair housing laws. Ultimately, 
the success of the housing voucher program does depend on the 
availability of safe and affordable housing.
    This committee came to bipartisan agreement last year on 
the need for some new form of investment in housing production. 
Many others have come to that agreement. So in closing, I would 
like to urge the committee to take up H.R. 1102, the National 
Affordable Housing Trust Fund Act of 2003, which now has 200 
cosponsors in the House, at your earliest possible convenience.
    Thank you for inviting me here today.
    [The prepared statement of Sheila Crowley can be found on 
page 284 in the appendix.]
    Chairman Ney. Thank you.
    Next witness?

     STATEMENT OF MR. HENRY MARRAFFA, JR., COUNCILMEMBER, 
  GAITHERSBURG, MD, ON BEHALF OF THE NATIONAL LEAGUE OF CITIES

    Mr. Marraffa. Chairman Ney, Ranking Member Waters, members 
of the subcommittee, my name is Henry Marraffa. I am a council 
member of the City of Gaithersburg, Maryland and a member of 
the National League of Cities, and I serve on the Community and 
Economic Development Steering Committee. It is my pleasure to 
be here today to testify on behalf of the National League of 
Cities and over 18,000 municipalities across the country, on 
the proposed changes to the Section 8 housing assistance 
program.
    Section 8 housing, also known as the Housing Choice Voucher 
Program, is a key part of the Federal government's efforts to 
addressing an ongoing national housing crisis through the 
private housing market. The NLC believes a radical change in 
the nation's largest low-income housing program will 
substantially damage a program that is effective in providing 
housing assistance to low-income families, the elderly and 
disabled individuals.
    H.R. 1841, the Housing Assistance for Needy Families 
legislation, poses significant threats to the success of the 
Section 8 program. In particular, the National League of Cities 
is concerned with specific provisions of the legislation that 
threaten, one, the overall level of Federal funding and the 
funding structure of the program; number two, the reduction in 
and constraints on assistance available to low-income families; 
number three, local control over housing programs; and number 
four, an increase in administrative burden.
    Currently, Congress adjusts funding each year based on 
changes in actual costs to ensure that housing agencies have 
sufficient funds to cover all the vouchers they have used. H.R. 
1841 makes no provision for adjusting total block grant funding 
based on housing costs, general inflation or any other factor. 
The formula proposed would only consider housing costs to 
decide the percentage of the total funding provided for the 
block grant nationally that would go to each state, not the 
cost of the housing at the local level.
    If Federal funding falls behind the program's needs, States 
would have to contribute their own funds, which they sorely do 
not have right now, or scale back the programs. They will do 
this in a number of ways: by reducing the number of families 
that receive housing vouchers; by shifting housing assistance 
to higher income families; they also will shift rent burdens to 
families participating in the program; or limiting 
opportunities to use vouchers to escape the high-poverty areas.
    As things stand now, three out of four low-income families 
eligible for vouchers do not receive housing assistance because 
of funding limitations. In Montgomery County alone, where I 
live, we have approximately 62,000 residents who cannot afford 
the market rate of $1,180 for a two-bedroom apartment. Our 
voucher program has a waiting list that is currently at 4,370.
    Local flexibility is the key to the success of the Section 
8 voucher program. Public housing authorities, with the 
cooperation of local governments, have a long history of 
administering the voucher program in a way that supports 
families and ensures accountability and protects the public's 
interest. For instance, in my city of Gaithersburg, the Housing 
Opportunity Commission of Montgomery County, with which we 
work, administers the Section 8 voucher program currently to 
4,292 lease vouchers. That is a 96 percent utilization rate. We 
actually do not have enough vouchers.
    Finally, one of the most problematic aspects of the 
proposal is the State's ability to discriminate against sub-
state areas. A state could shift vouchers from one community to 
another community; provide more administrative resources to one 
area to the exclusion of another; or even bar the use of 
vouchers in certain regions. This is politics at its worse. 
Such a discriminatory action would be detrimental not only to a 
local community not in good standing in the State, but also 
would ill-serve the overall needs of the low-income people 
living there.
    In conclusion, while the Section 8 voucher program has been 
successful across the country, the National League of Cities 
recognizes, along with most everyone else who has testified, 
that the program is not perfect. Perhaps some of the technical 
aspects of the program should be revisited by the experts who 
administer the programs. The National League of Cities is 
committed to assisting Congress and this administration in such 
a review. Local government and public housing authorities 
belong and should remain the front line to play a primary role.
    I would like to state for the record that the National 
Association of Counties, the National Association of Local 
Housing Finance Agencies, and the National Community 
Development Association share our strong commitment to local 
control and endorse the position of the National League of 
Cities as reflected in our testimony today and our written 
testimony.
    I would like to especially thank the Center on Budget and 
Policy Priorities and the Council on Large Public Housing 
Authorities for their technical assistance in preparing this 
testimony. I appreciate the opportunity to be in front of you 
all on behalf of the National League of Cities, and I would be 
happy to answer any questions at the end.
    Thank you very much.
    [The prepared statement of Henry Marraffa Jr. can be found 
on page 335 in the appendix.]
    Chairman Ney. I want to thank you.
    Next witness?

  STATEMENT OF MS. ANN O'HARA, ASSOCIATE DIRECTOR, TECHNICAL 
    ASSISTANCE COLLABORATIVE, BOSTON, MA, ON BEHALF OF THE 
  CONSORTIUM FOR CITIZENS WITH DISABILITIES HOUSING TASK FORCE

    Ms. O'Hara. Chairman Ney, Ranking Member Waters, and 
members of the subcommittee, I would like to thank you as well 
for the opportunity to provide testimony today on H.R. 1841. I 
do so on behalf of the Consortium for Citizens with 
Disabilities, a coalition of approximately 100 consumer 
advocacy provider and professional organizations who advocate 
with and on behalf of people with disabilities and their 
families.
    My work has been to expand access to Section 8 vouchers and 
other Federal housing programs for people with disabilities. My 
professional experience includes 6 years overseeing the 
Commonwealth of Massachusetts's statewide Section 8 program. 
The CCD Housing Task Force represents people with disabilities 
who have very low incomes, including three million who rely on 
Federal supplemental security income payments of $550 a month. 
They are participants in the program. They are on waiting lists 
for the voucher program, or they are trying to get on waiting 
lists. They live in institutions, in nursing homes, in board 
and care homes that are substandard, in emergency shelters, or 
at home with aging parents who don't know how the rent will be 
paid once they die.
    Two weeks ago, we released a study, Priced Out in 2002, 
which found that people with disabilities receiving SSI in the 
United States today need to pay 105 percent of their monthly 
income in order to rent an apartment at the HUD fair market 
rent. A deep housing subsidy like Section 8 is the only way to 
solve a housing affordability gap of this magnitude. In the 
past 8 to 10 years, the Section 8 program has become a lifeline 
for people with disabilities, particularly since more than 
400,000 units of public and assisted housing are now designated 
as elderly-only.
    The CCD Housing Task Force is strongly opposed to the block 
grant proposal. We believe that a block grant modeled after 
TANF has virtually no relevance to people with disabilities or 
to elderly households or families that work, for that matter, 
who comprise the vast majority of Section 8 participants. We 
believe that Congress should continue to have the direct 
responsibility for ensuring adequate funding for all vouchers 
and for establishing Section 8 policies. And we believe that 
the Section 8 program should continue to be targeted to the 
most critical housing needs in our country today, those of 
extremely low-income people.
    We would like to point out a few specific concerns 
regarding the legislation. As others have said, the block grant 
is very likely to cap program expenditures as rents rise. As a 
result, the number of households inevitably would go down or 
the rent paid by the tenant would inevitably go up. Neither of 
these options is acceptable to the disability community.
    Second, with a flexible block grant, state administrators 
could easily redirect voucher funding away from people with 
disabilities to serve more popular political constituencies. 
They could implement time limits that would be disastrous for 
people with disabilities whose impairments are not subject to 
arbitrary time limits. And they could implement policies that 
segregate people with disabilities, rather than promote 
community integration.
    We strongly oppose new targeting policies in the 
legislation that would permit higher-income households, 
including those for people with disabilities above 80 percent 
of median income. There are other housing programs that can 
assist people at these income levels. Fourth, a block grant 
proposal would end the congressional strategy to provide 
Section 8 vouchers for people with disabilities who are no 
longer eligible to move into elderly-only buildings. It could 
also jeopardize 10,000 vouchers currently funded from the 
Section 811 appropriations.
    Finally, there is ample evidence that a State-administered 
block grant will not work; that the transition would cause 
chaos in a program that, despite its problems, continues to 
work well. Many States have not done a good job running Section 
8. Many States do not want to administer a block grant program, 
and others lack the capacity to do so.
    Section 8 relies on an important third partner, the 
landlord. Any radical change proposed would prompt many 
landlords to sit on the sidelines. Tenants would also be 
uncertain about the future of their rent subsidy, a situation 
that would be disastrous for people with disabilities who have 
nowhere else to turn.
    We believe there are reforms and improvements which could 
be made to the voucher program. They have been mentioned by 
almost every speaker, like increasing local flexibility in 
setting maximum rents, flexibility that was actually in the 
program before Quality Housing and Work Responsibility Act was 
passed in 1998. We believe that vouchers should be linked more 
effectively to affordable units, especially accessible housing 
developed with HOME or tax credit financing. We believe that 
PHAs should be able to get access to voucher success funds for 
landlord outreach housing search and other costs associated 
with helping people find housing.
    Chairman Ney. I am sorry to interrupt, but they have called 
a vote, so if we can get a brief summary on yours because we 
might have some questions.
    Ms. O'Hara. In conclusion, Mr. Chairman, we would like to 
see Congress and HUD work together to seek solutions to these 
issues.
    Thank you.
    [The prepared statement of Ann O'Hara can be found on page 
343 in the appendix.]
    Chairman Ney. Thank you.
    Mr. Sidor?

   STATEMENT OF MR. JOHN SIDOR, PRINCIPAL, THE HELIX GROUP, 
                       HARPERS FERRY, WV

    Mr. Sidor. Yes, thank you, Mr. Chairman and subcommittee 
members. I appreciate the opportunity to speak to you.
    Let me just simply summarize my comments and say while I 
think the voucher program is a pretty good program, and 
probably a key component of national housing policy, it has two 
flaws that I think make it less effective than it should be and 
over time will make it a less effective program particularly. 
And that is, we tend to put vouchers where there are relatively 
few jobs for people of modest skills and education levels, and 
vouchers tend to be used in isolation from other resources, 
particularly human development resources.
    I have prepared a Statement in which I elaborate on both 
these points. It shows an indication of where jobs are and 
where vouchers are, and the disconnect, and shows some examples 
of state administration. Twenty-eight States administer the 
program, having an average voucher administration of 6,600. I 
think their networks of delivery systems really can overcome 
both these issues of providing vouchers where jobs are and 
using vouchers in conjunction with other resources.
    Therefore, I support the idea in concept of a State-
administered voucher program, not a HANF program, but a State-
administered voucher program in which States have the option to 
administer the program, modeled something like the CDBG 
program.
    Is that a quick enough summary?
    [The prepared statement of John Sidor can be found on page 
388 in the appendix.]
    Chairman Ney. Thank you.
    I will be very quick because of the series of votes. I want 
to ask Ms. O'Hara, did you say 105 percent of the income level 
for a person who has a disability?
    Ms. O'Hara. Yes. That is the national average.
    Chairman Ney. You mean 105 percent is paid for the 
apartment?
    Ms. O'Hara. It would cost 105 percent of the Federal SSI 
monthly payment to rent an apartment priced at the one-bedroom 
fair market rent.
    Chairman Ney. We would like to pursue that further, just 
because the average is 30 percent, if a person does not have a 
form of a disability.
    Ms. O'Hara. That is right.
    Chairman Ney. The question I wanted to ask Ms. Crowley, is 
there anything that you think needs changing? I read your 
testimony, so I am clear where you are at on Section 8. Are 
there some ideas you would have that things do need changing 
within the administration of this program? Are you saying we 
keep it right as it is?
    Ms. Crowley. I certainly think that there are ways to make 
the administration more efficient. For example, authorities 
that have a small number of vouchers, could create some sort of 
consortia. That would make more sense. I certainly think that 
the work that Bruce Katz has done on metropolitan understanding 
of regional areas contributes to understanding how it is that 
housing markets work, and that if housing authorities could in 
fact come together and figure out how to do regional 
administration, that would make a lot more sense than a lot of 
this overlap.
    On the small ones I live in this little city of 
Fredericksburg, Virginia. The State of Virginia administers the 
voucher program for about 40-some different small jurisdictions 
that do not have their own housing authorities. Three of them 
were together in Fredericksburg and surrounding counties. It 
was very inefficient. And so those three jurisdictions came 
together in and of themselves, made the decision to do it on a 
regional basis, contracted with a nonprofit that was doing 
other kinds of housing programs, building housing with tax 
credits and those kinds of things, but has housing expertise, 
and got the Virginia Housing Development Authority to agree to 
that, made a proposal, and that is going very nicely.
    So there are certainly lots of options that are available 
and that I think we should encourage them as much as possible
    Chairman Ney. Thank you.
    The gentlelady from California?
    Ms. Waters. I am fine, Mr. Chairman. There is one thing 
that I have not given enough thought to, but I want to, and 
that is support for landlords. I want to find out the problems 
that are associated with the landlords and why some do not want 
to accept vouchers, and see if the bureaucracy has grown so 
much that it is discouraging them, and see what we can do; see 
if there are any real problems there. That is one area I am 
going to pay a little bit of attention to. The other is 
automatic. We support the program as it is and are opposed to 
moving this to the States. The one area where I think we can do 
something is working with landlords.
    Ms. Crowley. If I may, that certainly was an area that was 
addressed in H.R. 3995 last year and that could easily be 
incorporated into a much less drastic piece of legislation.
    Chairman Ney. Thank you.
    Mr. Sidor, one quick question or clarification. You support 
block granting it, but you do not support HANF?
    Mr. Sidor. I think that is true. I think that they should 
have the option of administering a flexible voucher program, 
not HANF as proposed in the legislation.
    Chairman Ney. Thank you.
    The chair notes that some members may have additional 
questions for the panel which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days. Hearing no objection, it is open for 30 days for 
members to submit written questions to these witnesses and 
place their responses in the record.
    With that, we will conclude the hearing. I want to thank 
you for your time on the Hill.
    [Whereupon, at 4:54 p.m., the subcommittee was adjourned.]


                         THE SECTION 8 HOUSING
                          ASSISTANCE PROGRAM:
                      PROMOTING DECENT AFFORDABLE
                        HOUSING FOR FAMILIES AND
                      INDIVIDUALS WHO RENT--DAY 4

                              ----------                              


                         Tuesday, July 1, 2003

             U.S. House of Representatives,
                        Subcommittee on Housing and
                                     Community Opportunity,
                                   Committee on Financial Services,
        Washington, D.C.
    The subcommittee met, pursuant to call, at 10:30 a.m., at 
the California Science Center, Los Angeles, California, Hon. 
Robert W. Ney [chairman of the subcommittee] presiding.
    Present: Representatives Ney and Waters.
    Chairman Ney. I want to say hello to all the witnesses and 
everybody in the room. And this is a--I think it's the fourth 
hearing on the issue of the Subcommittee on Housing and 
Community Opportunity. My name is Bob Ney.
    I'm a Congressman out of Eastern Ohio, I'd like to 
introduce someone, who is no stranger to anyone in this room, 
Congresswoman Maxine Waters of California. And this is the 
Section 8 Housing Assistance Program. And today the 
subcommittee continues its efforts to examine the current 
operation and administration of the Section 8 Housing Choice 
Voucher Program and review various proposals intended to make 
the program more efficient and cost-effective.
    Voice. Excuse me, sir. Your volume needs to go up a little 
bit. I can't hear you.
    Chairman Ney. Okay. We'll do that. Usually there is a lot 
of hot air that comes out of Washington. Just need to direct it 
to the microphone.
    And again, this is the fourth hearing in the series and the 
first field hearing on the Section 8 program. So we're very 
happy to be here for the first hearing outside the Capitol.
    Michael Liu, Assistant Secretary of Public and Indian 
Housing Department of Housing and Urban Development testified 
at the first hearing on May 22nd, 2003. On June 10th, the 
subcommittee heard testimony from representatives from tenant 
organizations, landlord and development organizations, large 
and small public housing agencies, and the State housing 
finance agencies.
    On June 17th, the subcommittee heard witnesses from the 
academic community and advocacy groups from around the nation.
    Since the 1970s, rental vouchers have been a mainstay of 
Federal housing policy. Currently the Section 8 Housing Voucher 
Program supplements rent payments for approximately 1.5 million 
individuals and families.
    While the concept of the program remains sound, the program 
has often been criticized for its inefficiency. More than a 
billion dollars is recaptured from the program every year, 
despite long waiting lists for vouchers in many communities 
throughout the United States.
    The rising costs of the Section 8 program and some of the 
administrative concerns have caused many in Congress and the 
administration to conclude that the program is in need of 
reform.
    Among the reforms that have been discussed is the 
administration's proposal to replace Section 8 tenants' housing 
vouchers with the State-managed blocked grants.
    I have introduced this bill upon request of the 
administration. And for those of you not familiar with the 
``upon request,'' it throws the bill out for discussion. And as 
Chairman of the subcommittee, I've agreed to do that so we can 
discuss this issue, both in the Capitol and across the U.S.
    Rather than contracting with the estimated 2,600 separate 
public housing authorities, as HUD currently does, the 
department, under this provision, would allocate funds to the 
50 States, which could then work with public housing agencies 
or other entities to administer the voucher program.
    As well as examining the merits of this proposal, the 
subcommittee continues to discuss other avenues for reform. And 
I would also encourage people, if they are not in support of 
this proposal, to also give us ideas if you feel there are 
needs or ways to reform.
    This afternoon our two panels consist of government and 
nongovernment experts from the Los Angeles metropolitan area on 
the Federal government's primary program addressing the housing 
needs of low income renters, Section 8.
    I look forward to hearing the different perspectives and 
would like to welcome all of our distinguished witnesses as we 
discuss voucher utilization in the high cost areas, such as Los 
Angeles, and ways to improve America's communities and 
stressing housing opportunities for all citizens.
    I just want to say, before deferring to my colleague, that 
I appreciate the work of Congresswoman Maxine Waters, both 
within the U.S. Capitol, Washington, D.C., and also outside on 
many issues, not just this particular issue. We've been able to 
pass a couple significant pieces of legislation out of the 
housing subcommittee on a bipartisan basis. And I just 
appreciate the time that she has spent.
    And this is the recess, and she's dedicated two solid days 
to issues here in California. So it's been a great working 
relationship.
    [The prepared statement of Hon. Robert W. Ney can be found 
on page 468 in the appendix.]
    Chairman Ney. And with that, I'm going to defer to our 
ranking member, gentlelady from California.
    Ms. Waters. Thank you very much, Mr. Chairman.
    I'd like to welcome you all to this very important hearing 
that we are having here today. But I'd like to say a very 
special word of thanks to my colleague, Chairman Ney, for 
coming to Los Angeles and holding this hearing.
    As he mentioned, this is the first field hearing that has 
been held in this Congress. He took time from his break to be 
here. He could be in his own district, or he could be taking a 
vacation, like many of the rest of our colleagues are doing at 
this time, but he honored my request to be here. And I'm very 
appreciative for that, and I welcome him.
    Yesterday we had a most important hearing on the Community 
Development Block Grant Section 108 Loan Guarantee Program in 
the City of Los Angeles. So this is his second day here where 
he has spent hours yesterday, and will be spending hours today, 
dealing with these concerns that I have addressed and asked him 
to come out for.
    Let me just say that we are concerned about how we can use 
our positions to get something done in this country. This is a 
bipartisan effort, looking at CCG and Section 108 and housing 
funds that we send from the Federal government to our city in 
an attempt to make sure they're utilized in the best way 
possible.
    On Section 8 he certainly did not have to do this, because 
he was asked by the administration to carry it, to put it out 
there so that we'd create the discussion. He certainly didn't 
have to hold this hearing today. But I'm very pleased that he 
is doing it.
    And I think working together we may be able to provide some 
leadership for both of our caucuses and to this administration 
about Section 8.
    With that, I'm going to turn it back over to you, Mr. 
Chairman, to call on your witnesses.
    Chairman Ney. Before we begin, behind us--why don't you 
raise your hand if you're staff of either side of the aisle, 
give them a round of applause.
    And with that let me just introduce the panel.
    Matthew Franklin, Director of the California Housing 
Community Development, Sacramento, California; Donald J. Smith, 
Executive Director, Housing Authority of the City of Los 
Angeles; third is Carlos Jackson, who was here yesterday, 
Executive Director, Los Angeles County Community Development 
Commission; also Larry Triesch, Assistant Deputy, Long Beach 
Housing Authority, Long Beach, California; Eugene Burger, 
Eugene Burger Management, on behalf of the National Leased 
Housing Association, Washington, D.C.; and Thomas K. Shelton, 
Partner, Greystar Real Estate Partners, and President of the 
National Apartment Association, and also appearing on behalf of 
the National Multi Housing Council of Phoenix, Arizona.
    I would also note to all the witnesses that the members may 
have additional questions for this panel which they may wish to 
submit in writing.
    Without objection, the hearing record will remain open for 
30 days for members to submit written questions of these 
witnesses and place their responses on the record. Hearing no 
objection, that will be the format.
    Chairman Ney. The other thing I would note is we have a 
timer, and we would ask--and it will beep and that means you 
went five minutes. We would ask for five minutes. And now 
anything you have without objection will be submitted. If you 
have additional written testimony for the record. But if you 
could kind of try to hold to the timer for five minutes because 
we have a second panel we will make sure we'll finish.
    With that we will begin with Mr. Franklin. Welcome.

    STATEMENT OF MATTHEW O. FRANKLIN, DIRECTOR, HOUSING AND 
           COMMUNITY DEVELOPMENT, STATE OF CALIFORNIA

    Mr. Franklin. Thank you, Chairman Ney and Congresswoman 
Waters, for the opportunity to testify today and thank you for 
holding this hearing in California.
    As you may be aware, prior to joining the Davis 
administration, I served in several senior positions at HUD 
from 1997 to 2001, and have seen firsthand the good work you 
both do on housing issues, and also have done a lot of work 
with your staff, Mr. Jones and Mr. Olson, two of the hardest 
working Hill staffers on housing issues. So we really 
appreciate you taking the time to get out here.
    Under Governor Davis' leadership, the State of California 
is leading the nation in providing state funding and programs 
to meet its citizens' housing needs. In his first term, the 
Governor appropriated over $500 million for the development of 
affordable housing. This amount is three times greater than any 
prior California Governor appropriated in their entire term.
    And then last year, the Governor, along with the 
legislature, and most importantly, the people of California, 
passed Proposition 46, which is a $2.1 billion bond to support 
development of affordable housing. This is the largest housing 
bond in the nation and the largest in California history.
    The Housing Choice Voucher Program is a key component of 
our efforts to meet the housing needs of low-income families. 
Last year the State received approximately 258,000 vouchers, 
which were administered by a network of 104 public housing 
agencies.
    The State of California, through my department, Housing and 
Community Development, also administers vouchers in 12 rural 
counties. We administer about 780 vouchers.
    Voucher assistance generally serves extremely low income 
Californians, those earning less than 30 percent of area median 
income. The average California household receiving a voucher 
has an income of less than $14,000.
    55 percent of participants are families with children, many 
of them headed by a single parent, most often a single mother. 
47 percent of those served are households headed by elderly or 
disabled persons.
    Despite a difficult housing market in much of the State, 
the California PHAs and the State have been generally 
successful in ensuring high utilization. The Statewide average 
utilization rate is 96 percent. And for the piece that the 
State administers, we currently have a 95 percent utilization 
rate.
    However, the State does face many challenges. We are, as 
I'm sure you're aware, home to 18 of the 25 highest cost 
housing markets in the country. In these areas, rents have been 
rising at double-digit rates for several years, and vacancy 
rates are well below 5 percent.
    When combined with the low production of new housing units 
during the 1990s, these factors make it difficult for voucher 
holders to identify housing at the prescribed program rents in 
high cost areas. However, our single biggest problem with the 
HCV program in California is woefully inadequate funding.
    According to the 2000 census, only 17 percent of 
California's low-income households are actually assisted by the 
program.
    In regard to HANF, the Davis administration is concerned 
that the legislation would eliminate the existing commitment to 
fully fund all authorized vouchers and accommodate renewal 
costs at the real rate of growth in rents.
    In my view, this is the single most problematic feature of 
the proposed legislation. As you know, under the current 
system, Congress is committed to renewing all existing 
vouchers, with an annual adjustment in funding that accounts 
for increases in program costs and rents.
    This system ensures that the number of families served does 
not decrease over time, and it is designed to empower program 
participants by paying a fair market rent for housing.
    HANF would substitute this system of safeguards for one 
that would simply block grant funds to participating States, 
with no specific commitment for renewal funding or annual 
increases.
    In the past, Congress has utilized the CPI or other like 
indices to facilitate annual adjustments for other similar 
state block grant programs. Using CPI for this program would be 
a disaster for the people of California.
    According to the Center for Budget Policy and Priorities, 
over the last several years rents nationwide have increased at 
a rate equal to more than twice CPI. In California, where 
housing costs are the highest in the nation, the gap between 
annual rent increases and CPI is likely to be even greater.
    HUD's own annual adjustment factors for project-based 
Section 8 in California indicate annual increases three to four 
times CPI in the past year.
    If program funding does not keep pace with rents, the 
number of Californians served by the program would steadily 
decline over time. The only way to offset this erosion in 
program funding would be to target the program to higher income 
families or to require participating families to pay a larger 
share of their income for rent, actions that the Davis 
administration does not support.
    The program funding mechanism prescribed by HANF also would 
appear to preclude the possibility of future incremental 
voucher funding, something that is desperately needed in 
California.
    By wiping out the Congressional commitment to fully fund 
voucher renewals and account for real program costs, HANF 
would, in my view, seriously undermine the Housing Choice 
Voucher Program.
    It would eliminate one of the program's most valuable 
features, its focus on serving extremely low income families, 
and it would create unacceptable hardship on participating 
families by substantially increasing their rent burden.
    There are many other ways to improve the current program 
without sacrificing this assured funding.
    I would join others who have advocated for funding for 
mobility counseling and assistance programs for voucher 
recipients; funding for aggressive landlord outreach, service 
and incentives programs wherein PHAs continuously recruit new 
landlords to participate in the program, and importantly, 
regional collaboration, something HANF does contemplate, or 
regional administration of the voucher program to help address 
administrative barriers to portability.
    Thank you very much for this opportunity.
    [The prepared statement of Matthew O. Franklin can be found 
on page 478 in the appendix.]
    Chairman Ney. Thank you.
    Chairman Ney. Mr. Smith.

   STATEMENT OF DONALD J. SMITH, EXECUTIVE DIRECTOR, HOUSING 
              AUTHORITY OF THE CITY OF LOS ANGELES

    Mr. Smith. Good morning, Chairman Ney. Welcome to Los 
Angeles.
    Congressperson Waters, thank you and Chairman Ney for 
bringing the important work of the Congress to our city.
    My name is Don Smith, and I returned to be the executive 
director here in 1994. In 1975, I was the responsible manager 
for starting the Section 8 program at the Authority.
    Since the initial 1,500 certificate allocation, the program 
has tried to keep pace with the increased need for decent and 
safe housing. 70,000 households are on the waiting list, with 
4,000 new households registering each month. 50,000 allocated 
Section 8 resources meet only a small portion of the desperate 
needs----
    Chairman Ney. Move the microphone just a little closer.
    Mr. Smith. Sure--the desperate needs of these very low 
income and low income families seniors and the disabled.
    Just as the housing authorities in Ohio work closely 
together, so do we in Southern California, with programs 
tailored to meet local markets, local governments, and most 
importantly, close to the needy people we serve.
    The administration's HANF proposal, and you have heard most 
of the arguments in your hearings, promises to ease monitoring 
through 50 States, rather than 2,600 Section 8 providing local 
housing authorities.
    The proposal seems directed at the increasing outlay of the 
program. It would also give the States new policy and program 
flexibility. We do understand that it would have discretion on 
subcontracting.
    If I believe the program is broken at the service delivery 
level, I would support looking to a realignment of efforts to 
effectively house very low income housing persons. I do not 
believe that to be the case.
    Lease up in Los Angeles is 99 percent. This success is 
based on partnerships with 17,000 owners and numerous owner 
associations, which has resulted in more units being made 
available and in good condition.
    We support voucher holders with trained staff, other 
partner agencies and nonprofits in both their search and self-
sufficiency and needs.
    Following earlier models like Project Build, we learned to 
integrate housing supportive services and job training to add 
value to the future of these families, hopefully we will 
continue to improve our support of voucher holders in their 
difficult task of securing decent homes.
    Besides continued operational improvements internally in 
the housing authority, how can we improve the program?
    Let me give just one brief example. This is a market-driven 
program and needs market flexibility, especially as the markets 
tighten and rents spike. When HUD reduced the basis for the 
FMRs to the 40th percentile in a declining vacancy market, 
followed by an unwarranted 14 percent cut to the FMR, it caused 
a long-term disruption to voucher holders and contributed 
substantially to the increased failure rate.
    Rent setting flexibility could have made a huge difference. 
No immediate rent mechanisms were available. By the time we had 
succeeded in HUD's lengthy approval process, the market and 
thousands of opportunities for voucher holders were gone.
    And finally, HANF seems like an idea whose time has not 
come. In the interest of continuing to serve local families, 
the elderly and the disabled, I urge you not to adopt the HANF 
proposal and to continue working with local jurisdictions and 
housing authorities directly.
    On behalf of the Board of Commissioners of the Housing 
Authority, as Chair, Ozie B. Gonzaque, I want to thank you for 
your careful evaluation at the hearings on this program. Thank 
you.
    Chairman Ney. Thank you, Mr. Smith.
    [The prepared statement of Donald J. Smith can be found on 
page 518 in the appendix.]
    Chairman Ney. Mr. Jackson.

 STATEMENT OF CARLOS JACKSON, EXECUTIVE DIRECTOR, LOS ANGELES 
            COUNTY COMMUNITY DEVELOPMENT COMMISSION

    Mr. Carlos Jackson. Good morning, again.
    Yesterday I had the opportunity to testify on the Community 
Development Block Grant program and the importance to Los 
Angeles County.
    Today I'd like to really again express the importance of 
housing and impose the burden on the Federal government to deal 
with the real major crisis in Southern California.
    Therefore, I'd like to cover three areas in my testimony. 
One is to talk to about this legislative proposal. The second 
one is to discuss the proposal to cap and restrict Section 8 
administrative fees, particularly how it's detrimental to 
managing public housing and also some of the things that we 
have done to make Section 8 a success in Los Angeles County.
    First of all, we administer 20,000 Section 8 vouchers in 
Los Angeles County. We--on behalf of six small public housing 
authorities, we manage their programs as well. We are the 
fourth largest local administrator in managing Section 8.
    73 percent of our voucher holders are below 30 percent of 
area median income area. 24 percent are at 30 to 50 percent. So 
you can see that we're dealing with extremely low income 
residents.
    As Don mentioned, one of the key areas are our landlords. 
We have partnership with over 100--I'm sorry--10,000 property 
owners in our program.
    I'd like to announce as of yesterday, we are leased up 100 
percent. We exceeded our annual budget authority by a few 
percentage, because again recognizing that this is a real tight 
real estate market, and rents are continuing to increase.
    Just for your information, in California there are over 
300,000 vouchers. Between the city and the county, we 
administer 14.4 percent of those vouchers in the State.
    I'm sorry. Let me back up again. There's 300,000 vouchers 
in the State, which represent 14.4 percent of the nation's 
total. Between the county and the city, we represent 22 percent 
of the State's vouchers. So you can see that again, there is a 
major clientele in Southern California.
    There was reference to rent. The market rent for a two-
bedroom unit in Southern California is $1300. The fair market 
rent that we are allowed to operate with is $967, and the gap 
continues to grow.
    Our vacancy rate in LA County is 4 percent, less than 4 
percent. And the median price to purchase a home is over 
$300,000, where only 36 percent of the families in Los Angeles 
County can afford to purchase a home. So that number continues 
to increase over the period of time.
    As a local administrator when the proposal came out, my 
question: Was why? What is happening to stimulate this kind of 
a legislative proposal? It just doesn't make sense.
    Over the past years there have been gallant efforts made to 
lease up to 100 percent. There is a great need at the local 
level. I do not see inefficiencies, ineffectiveness.
    What I see is a great local partnership between landlords, 
tenants, the community and public agency to make this a real 
successful program, this in spite of all the real estate market 
conditions in Southern California.
    It is very hard to penetrate the rental market, but there 
is a real sincere interest on the part of landlords and 
property owners to participate in the program.
    To transfer it to the State would remove their ability to 
interact locally, and I would feel that they would be more 
isolated and alienated from being a good partner at this 
particular time.
    It would be very logical and very business like for them 
not to participate today. They could get more rents on the open 
market than participating in our program.
    But I have found out that there are quite a few landlords 
that are very sincere and have a commitment to the local 
community, and they want to participate and be part of the 
overall effort of providing affordable housing in Southern 
California.
    The other side on the performance issue is that lease up 
nationwide has increased. There has been much attention 
throughout the country to make this an ongoing successful 
program. So, therefore, I don't see why there is a need to 
change to this level.
    I would also think it would be very harmful to the program 
to try to think about transition during a time when many of the 
successes are occurring today. How long would it take to 
transition the program from the Federal level to the State 
level, particularly in times where many of the State are facing 
fiscal crisis?
    As you might be well aware, in the State of California the 
deficit is at $38,000,000. And today we still do not have a 
State budget for local government.
    So to think about the most meaningful protocol for 
affordable housing in a local community and to debate this at 
this time, I think is not right. And that's why what I was 
saying early on. It just doesn't make sense.
    Chairman Ney. The time has expired. Would you like to just 
summarize it and put most of your comments in the record?
    Mr. Carlos Jackson. Well, one of the reasons we're--I mean 
what we did to lease up to 100 percent, we had to go back and 
revamp our program, really look at streamlining things that we 
were doing that should not have been done, things that we could 
improve. But one of the most critical factors that we had was 
just to listen to landlords and determine what aspects of our 
program we could improve so they could feel comfortable and 
gain confidence in our ability to work with it.
    And I thank you for the time.
    Chairman Ney. Thank you, sir.
    [The prepared statement of Carlos Jackson can be found on 
page 488 in the appendix.]
    Chairman Ney. Mr. Triesch.

  STATEMENT OF LARRY TRIESCH, ASSISTANT DEPUTY DIRECTOR, LONG 
                    BEACH HOUSING AUTHORITY

    Mr. Triesch. Thank you, and good morning, Chairman Ney, 
Congresswoman Waters.
    I'm the Deputy Executive Director of the City of Long Beach 
Housing Authority. And I'm honored to have been invited to 
speak before you. And I'm pleased that you are seeking 
testimony with regard to the proposed block renting of the 
Section 8 program.
    The need for assisted housing in Long Beach is great. Of 
our 163,000 households, 25,000 of them are at 30 percent or 
less than median income.
    Our housing authority provides vouchers to a little more 
than 6,000 of these households. And many others are housed in 
privately owned, but publicly subsidized units. But there are 
still thousands of very low income households in Long Beach who 
are in need of housing assistance.
    As an anecdote, we recently opened our waiting list, and 
when, after presenting information on the application process 
at our local Cambodian community center, an older gentleman 
came up to me and asked: ``What if four families are all 
sharing the same house? Should they all put down the same 
address as their place of residence?''.
    To me that expresses the need for assisted housing better 
than a book full of statistics. And by the way, we did receive 
approximately 15,000 applications for the waiting list. So 
there is a tremendous need.
    We are a successful housing authority. We are 100 percent 
leased up. In fact, I got a report from my accountant 
yesterday, we're 101 percent leased up, which will cause me 
another problem, but that's not a bad problem.
    We are a high performer, according to the SEMAP scoring. We 
are always looking in ways--looking for ways to make our 
service more efficient and more attractive to the landlords, 
who are the one critical element to our program.
    Because we operate at the local level, we are able to 
partner closely with the apartment association, California 
Southern Cities, with our local Legal Aid Foundation, with the 
Fair Housing Foundation, just to name a few organizations.
    Because of partnerships such as these, we can provide good 
service to both our landlords and to our participating 
families. So we are very concerned that the proposed block 
granting of the Section 8 program could seriously impact the 
delivery of housing assistance to the families most in need.
    Two critical issues come immediately to mind, and you've 
heard these over and over again, and this morning as well. 
Number one, the program would no longer be a cost-driven 
program, but would become, instead, just a number, a dollar 
amount that could easily be reduced in tough times or not 
increased to keep up with the actual cost of housing.
    The second issue is just so obvious. If the State becomes 
the grantee, there is no way to know how the State will deliver 
the services. Will the State contract with the city of Long 
Beach Housing Authority?
    Will the State contract with the larger regional entity? 
And then what would happen to all the goodwill and the 
relationships built up at the local level to support landlords 
and the people we serve?
    And finally, as I understand it, one of HUD's stated goals 
is to end chronic aimlessness within 10 years. I think it's 
important to understand, as my friend Steve Ranahan, from the 
Housing Authority of the City of Los Angeles likes to say, that 
the Section 8 program prevents aimlessness.
    Most of the people that we serve are just one step away 
from being without a roof over their head. Each family we serve 
is given the chance to live in dignity, to live in a stable 
situation, where the kids can go to school and come home and 
have a place to do their homework.
    Each elderly person on SSI that we serve will have enough 
money through the month to purchase food for each meal.
    I know that there is a concern that the program is 
expensive. But if we want to help people pay the rent, I think 
the program will be expensive. I think there are ways that we 
could reduce the administrative costs a bit, given a bit of 
administrative leeway, regulatory leeway at the local level.
    I think that we could cut some administrative costs. I have 
examples. These are sorts of nuts and bolts that came out of my 
staff. For example, if we enacted a legislation--enacted a 
provision that would not allow landlords to increase their rent 
more than one time a year, we would serve energy and costs and 
money.
    If--currently we put landlords in abatement after 30 days 
when they fail to comply with our HQS requirements. If we said 
``In 45 days, if you do not comply, the contract is 
terminated,'' we would save energy and we would save money.
    I think that the elderly should be recertified once every 
two years, rather than every year. And I think that we should 
tie the inspection process to the annual recertification 
process.
    I think that we should get rid of the 40 percent 
affordability limit. Let people make their own choices.
    There's lots of areas like this where we could work the 
program and save money administratively.
    In conclusion, I ask that you don't fix a program that 
really isn't broken.
    Thank you for the opportunity.
    Chairman Ney. Thank you very much.
    [The prepared statement of Larry Triesch can be found on 
page 548 in the appendix.]
    Chairman Ney. Mr. Burger.

     STATEMENT OF EUGENE BURGER, PRESIDENT, EUGENE BURGER 
     MANAGEMENT, ON BEHALF OF THE NATIONAL LEASED HOUSING 
                          ASSOCIATION

    Mr. Burger. Chairman Ney, members of the subcommittee, my 
name is Eugene Burger. I'm President of Eugene Burger 
Management Corporation.
    We represent some of the tenants here. We've worked with a 
lot of the housing authorities and PHAs around the area right 
here in Los Angeles.
    Today I'm representing the National Leased Housing 
Association, whose members include both owners and managers of 
Section 8 housing, as well as housing agencies that administer 
the Section 8 voucher program.
    We appreciate the opportunity to testify on H.R. 1841 
administration's block grant or HANF program. We urge the 
subcommittee to reject H.R. 1841. This is an unnecessary 
reform, because the Section 8 voucher program works quite well 
in its current form.
    In fact, the Section 8 subsidy has provided much needed 
rental assistance to low and moderate income tenants so they 
can live in safe and decent housing.
    I would like to discuss two important points regarding the 
administration's proposal: The effectiveness of the current 
system and utilization of the Section 8 vouchers. We feel that 
it isn't broken, and if it isn't broken, we don't need to fix 
it.
    However, under HANF, the State would receive block grant 
funds from HUD to fund Section 8 vouchers. The State may, but 
is not required to subcontract with housing agencies or other 
entities within the State to administer the block grant funds. 
Thus the State could choose to use these funds for other than 
housing purposes. Meaning that the public housing agencies 
would receive less funding than needed to administer the 
Section 8 vouchers.
    In a State such as California, where there is a substantial 
budget shortfall, it's highly likely that the block grant funds 
will be diverted to other programs at the State's discretion.
    And, because HANF provides that funding for Section 8 
vouchers in subsequent years is tied directly to the amount of 
funds used the previous year, this diversion of block grant 
funds could, over a period of years, cause the public housing 
authorities to lose their funding for Section 8 vouchers 
altogether.
    Thus, we believe that block granting of Section 8 funds to 
the States could have disastrous results for affordable 
housing, and could have the long-term effect of eliminating 
Section 8 vouchers.
    HANF will only serve to widen the gap between the need for 
affordable housing subsidy and the amount of subsidy available. 
Again, the current system of delivering the Section 8 funding 
administration program is working fine.
    Utilization of the Section 8 vouchers in high rent areas, 
such as Los Angeles, we are somewhere in the 95 percent range 
right now. And if I heard correctly, we're getting close to 100 
percent right now. So I think that that delivery system here is 
working very well.
    One of the important benefits of Section 8 vouchers is 
their portability feature. In theory, a Section 8 voucher 
issued by a public housing agency in Los Angeles to a low 
income family can be taken to any rental property, so that the 
family can live wherever they choose.
    This is a laudable goal, albeit unrealistic goal, due to 
limits imposed on the value of the Section 8 voucher. The 
reality is that FMR-based rent and the value of the voucher 
relegates the family to lower rent areas.
    And one of the things that we haven't talked about so far 
in this is, whether we like it or not, in California a number 
of properties are being converted from affordable housing to 
conventional housing.
    The vouchers are allowing a smooth transition in that 
respect. We are able to negotiate with local housing 
authorities for an annual period to carry over those tenants 
who are in place now and give them an annual--a year to find 
new housing, where they can take their vouchers. That's a very 
important feature that is currently in need of.
    The payment standards set by housing agencies are tied to 
the FMR. However, HUD established fair market rents are often 
not reflective of real market conditions, especially in places 
like Los Angeles where rents continue to rise.
    HUD has taken steps to rectify this situation in recent 
years by providing higher FMR's in certain markets, but often 
the FMR rents lag behind the actual rents in the area.
    When you compare actual comparable market rents to FMR's in 
high rent areas, you realize that the FMR's are not fair 
market. The result is that the voucher payment standard limits 
the value of the Section 8 voucher, which does not cover the 
owners' prescribed rents, which is based on actual rents.
    Ideally the housing agency should be able to set a payment 
standard relative to market rents in the area served. However, 
if the FMR standard is to continue to be used, PHAs should be 
able to set the payment standard at whatever percentage of FMR 
is necessary to accommodate that.
    Currently, the PHAs are allowed to go 110 percent and 120 
percent over with HUD approval.
    In conclusion, HANF does not address the utilization of 
Section 8 vouchers and does absolutely nothing to improve the 
mechanism for delivery of the funding and administration of the 
Section 8 voucher program.
    On the contrary, by block granting the Section 8 voucher 
funds of the States where they are vulnerable to be siphoned 
off to fund state budget shortfalls, HANF stands to place the 
future of Section 8 vouchers in grave doubt.
    As mentioned, the current delivery section is alive and 
well, and we think it should be continue to be used that way.
    And I would support the idea of looking at some flexibility 
in the 40 percent cap rate. Also going to a move-in now for a 
new tenant. Give them 30 days. If there's an HQS problem, then 
fix it in 30 days or cut off the funding.
    Those are some of the things we could do. Thank you.
    Chairman Ney. Thank you for your testimony.
    [The prepared statement of Eugene Burger can be found on 
page 470 in the appendix.]
    Chairman Ney. Mr. Shelton.

 STATEMENT OF TOM SHELTON, CPM, GREYSTAR REAL ESTATE PARTNERS, 
  AND PRESIDENT, NATIONAL APARTMENT ASSOCIATION, ON BEHALF OF 
                 NATIONAL MULTI HOUSING COUNCIL

    Mr. Shelton. Chairman Ney, ranking member Waters, my name 
is Tom Shelton. I'm a partner of Greystar Real Estate Partners, 
one of the largest privately held apartment firms in the 
country.
    In addition to that, I'm also the 2003 President of the 
National Apartment Association and a member of the National 
Multi Housing Council.
    Our combined memberships are engaged in all aspects of the 
apartment industry, including development, ownership, 
professional management and finance.
    It is my pleasure to testify on behalf of both 
organizations. NAA and NMHC commend you, Chairman Ney, for your 
leadership, and we thank the members of the subcommittee for 
your valuable work addressing affordable rental housing in 
America.
    We also commend HUD Secretary Mel Martinez and the current 
administration for their interest in improving the Section 8 
Housing Program.
    We too believe Section 8 is critical to meet the housing 
needs of low- and moderate-income families, and believe that 
improving the existing Section 8 program is a central part of 
meeting those needs.
    Although it is well intentioned, we think the Housing 
Assistance for Needy Families Act of 2003, H.R. 1841, will not 
reduce the administrative cost to participating property 
owners, and will not maximize program benefits for residents, 
as it does not bring the program closer to conforming to 
conventional market practices.
    My testimony will first focus on how the Section 8 program 
works in tight housing markets since barriers to program 
participation can be particularly formidable in large, high-
cost areas.
    For example, the Los Angeles City Council recently adopted 
an ordinance that effectively prohibits owners from terminating 
Section 8 leases, which in turn discourages them from joining 
the program for fear that they will not be able to opt out in 
the future.
    If an owner chooses to terminate a Section 8 lease and 
convert that unit into a conventional one, for the following 
five years the owner may only collect the portion of rent which 
the former Section 8 resident paid.
    Local property owners report that the new law has already 
contributed to a decrease in affordable housing stock, because 
they left the program in advance of the law's passage, and are 
not now signing new Section 8 leases.
    Owners also say they are frustrated with local program 
administration, and cite as an example that periodic 
inspections are not scheduled at specified times, so owners 
must wait for hours to meet inspectors.
    We propose the following recommendations to improve the 
Section 8 program. First, we would like to see enacted a more 
efficient process for PHAs to apply for higher fair market 
rents that are more reflective of submarket rents.
    We also propose to allow PHAs to raise the payment standard 
to 120 percent of FMR without HUD approval, and to request 
higher payment standards when necessary. FMR's must be set high 
enough to encourage owner participation, and, in turn, create a 
sufficient supply of apartments for voucher holders.
    We thank HUD for raising the current FMR level to the 50th 
percentile in 39 high-cost areas. That level remains 
insufficient in areas with outdated FMR's and in high-cost 
submarkets.
    In addition, we propose speeding up the move-in process by 
allowing PHAs to conduct individual unit inspections within 60 
days after the resident moves in and payment commences.
    PHAs could also conduct building-wide inspections in 
certain cases. Alternatively, PHAs could initially inspect a 
representative sample of units in order to certify that a 
building is eligible and conduct regular periodic inspections 
thereafter.
    This approach would reward well-managed properties, allow 
PHAs to focus their scarce resources elsewhere, and all the 
while maintain resident safety.
    Finally, we urge Congress to continue to fund the existing 
program structure administered by HUD. Effective this year, 
Congress enacted changes to minimize recapture, and moreover, 
national utilization rates have risen to nearly 96 percent. 
That success should be recognized and the process supported.
    NAA/NMHC believe that the existing, successful 
appropriation structure, while not perfect, is working. We have 
considerable concern about the complexity of the proposed state 
level funding structure contained in H.R. 1841.
    I thank you for the opportunity to testify and wish to 
offer our assistance to the subcommittee as you continue your 
important work to improve affordable housing opportunities for 
low- and moderate-income families.
    [The prepared statement of Thomas K. Shelton can be found 
on page 512 in the appendix.]
    Chairman Ney. I want to thank all the witnesses for your 
thoughtful and good testimony.
    I have just a few questions. First would be directed to Mr. 
Franklin and to Mr. Jackson.
    Is there any merit to regionalizing Section 8 vouchers? 
Would there be any merit to the administration to regionalize 
versus a block granting to States?
    Mr. Franklin. You know, I would certainly concur with much 
of the testimony today, as to the value of the local PHAs being 
the front lines.
    I really do think the PHAs are doing a good job. In 
California, they have made tremendous progress and, at its 
core, Section 8 is a local program. However, I do believe that 
regional collaboration and cooperation could be a very smart 
approach to deal with some of the kind of sticky wickets here--
most particularly, the utilization rate issue.
    Currently there is discussion about moving vouchers between 
States; taking away from those who aren't using them, giving 
them to those that are.
    This has to be considered long and hard to make sure there 
aren't unintended consequences. But when you look at the 
performance on the regional level--and we ran some numbers, 
looking at the local authorities' utilization rates and 
combining them to get a county average, and the average county 
utilization rates looked very good, although an individual PHA 
may not be performing as well.
    Many are virtually right at 100 percent utilization, which 
shows, as you might expect, that housing markets are not 
necessarily consistent with city boundaries. You do need that 
cooperation across city boundaries and on the regional level.
    So I do think there be could some real potential in that 
area.
    Mr. Carlos Jackson. I support the same notion. To some 
extent we are already doing regional administration at the 
present time.
    We administer six, six small cities public housing, I'm 
sorry, the Housing Authority Section 8 Program. And we found 
that you can reduce and streamline the administrative process 
and have cost saving there, as well as developing a good 
working relationship with the landlords.
    I would support maybe almost to the extent, if you look at 
parallel to the community development block urban county side, 
where on behalf of small cities, we are administering their 
program. So there are streamlining measures that could be 
undertaken.
    Chairman Ney. Thank you.
    Mr. Smith, you mentioned about the voucher utilization 
rate. How did LA significantly increase its voucher utilization 
rates from low to very high? I'm just trying to see what 
lessons we can learn from LA.
    Mr. Smith. Well, we applied a complete reorganization. We 
did have to add staff. We added about 20 percent of our total 
Section 8 staff and reorganized them along the lines of 
supporting the residents in their search and owner outreach and 
streamlined the process of issuing vouchers the same day, in 
terms of verification, and a wide variety of approaches that 
were more responsive to the market.
    We formed what's called TESS, Tenant Empowerment Support 
Services, probably the best thing we ever did, because to 
actually go out with the tenants when they are negotiating the 
leases is a difficult task and worked particularly well between 
the leases--between the owner and the voucher holder.
    We conduct extensive orientations for owners on a regular 
basis. Every Saturday there is usually a lot of owners at the 
housing authority learning about the program. And we are very 
aggressive in terms of outreach to the owner associations.
    It's important to understand, in the City of Los Angeles of 
the 17,000 owners I mentioned, 16,000 of those owners are mom 
and pop owners. So you really have to do a lot of outreach, a 
lot of educating because they rely on their rent income on the 
1st of every month to make their mortgages, keep up their 
property, pay their people.
    Chairman Ney. Thank you.
    Mr. Burger and Mr. Shelton, you both are basically saying 
the current system is working. How would we make improvements 
to serve the community, more particularly in light of tight 
Federal budget environments, any other areas?
    Mr. Burger. I think we mentioned a couple of them in making 
the system more efficient, and at the site level down at the 
PLA level I think we need to use that money more effective than 
we have. I'm not sure that we need to increase all that much 
the funding to PHA level, particularly if it's not all being 
utilized. We need to use it better obviously.
    And I think that it's important that we do look at the gap 
rates and look at the percentiles. I think we need to move the 
percentile up a little bit to areas like Los Angeles, that type 
of thing.
    Chairman Ney. My last question, Mr. Triesch. What about--
what problems do you encounter when you're overleased, and how 
does HUD work with you on that issue or do they or how do they?
    Mr. Triesch. It's a bit of transition right now. To this 
point in time we could be overleased, if we had budget 
authority to be overleased. With the new regulations that have 
just gone into effect, as I understand it, we can no longer do 
that.
    I can be 101 percent overleased this month as long as by 
year end I am not overleased. So my target is to be as close to 
100 percent as I possibly can be at the end of my fiscal year. 
Our accountant works well with the HUD administrative financial 
staff. We have a good working relationship with them.
    Chairman Ney. Thank you.
    Mr. Triesch. My goal is to be at 100 percent even Steven, 
assuming the max--serving the maximum people that can be served 
in the city of Long Beach.
    Chairman Ney. Okay. Thank you.
    Also I asked a question--never gave Mr. Shelton a chance to 
answer. I'm sorry.
    Mr. Shelton. I was going to agree with Mr. Burger. I'm 
certain there are areas where the budget could help, but I 
think our primary objective in administering Section 8 at the 
site level is to make it as transparent as we can and as 
comparable as we can to how we treat regular market rate units.
    Additional provisions make the process somewhat cumbersome. 
Anything that can be done to make the leasing process itself at 
the site level as easy as possible, I think would encourage 
more participation from our members and owners.
    Chairman Ney. Thank you.
    Congresswoman Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    One of the reasons I'm so pleased that you're here is 
because you will have an opportunity to understand what is 
happening here in California, and in the Los Angeles area in 
particular.
    You have seen some of the information that was shared with 
you on the testimony of the cost of housing and the escalation 
of price that has taken place and continues to spiral upward, 
so that you get a real sense of what we are confronted with 
here.
    Also, I'm very pleased that, you know, for once perhaps in 
many of the hearings that we have we are all together on this. 
I mean we have all of our associations, our owners, our PHAs, 
everybody singing from the similar hymn book, and that's good, 
that's very good.
    We are all opposed to this idea of block granting. So what 
we need to do is what I think you have already come to 
understand is: How do we use this as an opportunity to 
straighten out a few of the wrinkles in the program? How do we 
come back with an alternative to this block granting and talk 
about what we can do to better serve all of our clients who 
need us so desperately?
    And I'm also interested in working out some of the problems 
of the owners and the landlords. I think that's extremely 
important.
    Now, you had some ideas, Mr. Triesch. You gave us a few 
recommendations. Would you kind of reiterate what you said to 
us in your recommendations?
    Mr. Triesch. I sat down with staff yesterday afternoon, and 
I asked them: How can we really streamline administration of 
the program? And these just were ideas that came from 
brainstorming.
    The first one was that we could enact a provision that 
limited landlords to just one increase a year. I'm sure that 
typically the Congressperson doesn't know what we have to go 
through when a landlord requests a rent increase.
    If it's--we have to do an inspection of the property, if 
one hasn't been done within 120 days of the increase. So if 
somebody waits six months after the last one, we have to do a 
whole new inspection again.
    Ordinary we have to do an amendment to the contract. We 
don't have to do a new contract, but the whole thing is time 
consuming. And if we limited just landlords just once, let them 
know up front you only get one a year, then I think that it 
would be a cost saving.
    Ms. Waters. Thank you. Would you hold that for a moment 
here?
    Chairman Ney. That was one point I wanted to talk about. I 
just wanted--how many times can they--in a normal lease I've 
ever had when I rented, it's you get one shot per year, or 
sometimes you don't get a shot until the lease is done.
    How many times a year can people do it?
    Mr. Triesch. The way the program is set, we are allowed to 
enter into a lease--well, in Long Beach what we do, and I think 
most of us probably, initial lease for a year. After the 
initial lease for a year, we just follow California State law. 
It goes from month to month.
    When it goes from month to month, by California State law, 
an owner can request a rent increase every month if he wanted 
to.
    Chairman Ney. And Section 8 they can do the same thing?
    Mr. Triesch. Well, we require 90 days, a 90-day notice. So 
they have to give a 90-day notice, every four years if they 
wanted to.
    And we get them typically to--especially right now when 
costs are spiralling and the landlords are getting more and 
more rent.
    Ms. Waters. All right. Let me hear what the landlords think 
about that.
    Mr. Burger. Being a landlord, from my standpoint, once a 
year will work just fine for me. Actually, it will. We have to 
go through a lot of hoops also to make that application. And if 
we can do it once a year, we could work it.
    Ms. Waters. Mr. Shelton.
    Mr. Shelton. I'm not sure so I'm in agreement with Mr. 
Burger about the once-a-year-rent increase. I think--however, I 
think there is some sense that can be made, particularly in 
high cost areas where rents continue to escalate.
    I would remind you, too, that a lot of the apartment 
markets across the country are not in the same financial 
situation that California or New York or South Florida is where 
the markets do pretty well. There are markets that we operate 
in that apartment owners are facing significant losses, 
vacancies are high, and occupancies are down and rents are 
down.
    So I think that we just need to be--the key to me, I think, 
is communication, working with the local housing authorities, 
and I think some of those issues could be resolved.
    Ms. Waters. We really are interested in eliminating 
bureaucracy and streamlining the process, because I hear from 
both the tenants and landlords that it's too cumbersome in 
various ways. So we are--we are interested in your 
recommendations about how to do this so that the tenants are 
not hassled, and the landlords get as fair price as you can 
get, and it's done in a way that does not cause long waiting 
periods, et cetera. That's how I think we ought to use this 
time.
    You know, the administration threw this out here, and we 
need to come back with something other than block granting 
where we can show we're all together. And I think we ought to 
be able to do something very positive about it.
    What was the second one?
    Mr. Triesch. The second one--you know, I'd like to say, you 
know, we might do well to get an organization, like NARO or 
FADA, to get a bunch of executive directors together to 
brainstorm, they could come up probably with a lot of good 
ideas for streamlining the program.
    But the second one was with regard to the abatement process 
and inspections. Now, when we inspect, if the unit fails, they 
have 30 days to correct the deficiencies or it goes into 
abatement. If they don't correct it within the 30 days, then 
they have until the end of the following month, and we 
terminate the contract.
    But we just said if they have 45 days to correct the 
deficiency or the contract is terminated, then you're going to 
be saving the time of multiple inspections, for example.
    Ms. Waters. How does that comport with state law that 
allows for deducting repair? I mean what happens here when, for 
example, if you gave 45 days, the tenant says ``I've got a 
problem here, and they said, ``I can't wait. I'm going to do it 
myself, and I'm going to give you the bill,'' how does that 
work or does it work?
    Mr. Triesch. I don't think I could address that.
    Ms. Waters. Don, do you know?
    Mr. Smith. Well, my feeling is, based on experience, that 
we intervene so rapidly, in terms of tenant complaints, and we 
have a good relationships with most owners, that that issue of 
inhabitability doesn't come into play, only in those cases 
where we abate, and the situation is not resolvable, that may 
come into play.
    Ms. Waters. Okay. Well, let me ask you--and this will be 
the last question--you have mom and pop--a lot of mom and pop 
landlords. I think you said the overwhelming number of 
participants in the program are mom and pop.
    What do we have that assists mom and pops in capital costs 
for the upkeep and repair of property? Low cost loans?
    Mr. Smith. There are rehab loans available through the city 
and most local jurisdictions have repair loans, I think.
    Ms. Waters. At low interest rates?
    Mr. Smith. Some are at low interest rates. Although 
compared to today's market, they may not be adjusting as 
rapidly.
    Ms. Waters. Well, if we have--the majority of our 
participants are mom-and-pop operations, people who own 40 
units----
    Mr. Smith. Basically 10 units and less, over 16,000 owners.
    Ms. Waters. Have you found that there's a problem when 
their capital costs, like putting on a new roof or repairing a 
staircase, I mean capital--are they able to do it and get it 
done on time?
    Mr. Smith. If they get adequate rents over a significant 
period of time, they are able to amortize. But they are not 
generally able to get it immediately.
    Ms. Waters. Okay. Are they able--they are able, not able 
to. That's a problem we need to look at?
    What are you finding, Mr. Jackson?
    Mr. Carlos Jackson. Well, the question you were asking is a 
real challenging one in that you have to have--well, many of 
the cities that we are operating in have an agreement with 
Section 8 and their own programs, and it's really a local 
decision there. For the unincorporated areas we do have limited 
rehab money that we predominantly give it to the homeowner who 
is living in the unit. We have emergency grants for roof 
repair, but not really rental units.
    Again, you look at the tier of priorities, we have a lot of 
seniors asking for emergency grants right after a rainstorm or 
like that.
    We've done a lot in terms of campaigning to do our lease 
up. One of the things that we did was to sit down and look at 
the entire process and ask on each step: Does it make sense? Do 
we need to do this?
    And during that process we also had a lengthy discussion 
with landlords as to where were the common areas of agreement 
and where were the differences so we could focus on those 
areas.
    For example, one of the--one of the areas was landlords say 
it would take us too long to return the contracts. Well, when 
the inspector went out to conduct the inspections, we would 
have them take the contract and meet the landlord at the site 
at the same time for signature.
    Through that process we found out that there is whatever we 
did we couldn't get a landlord to sign an agreement, with all 
the rents have been agreed to, everything has been agreed to, 
all we needed was the signature, we found a small group of 
landlords that were procrastinating.
    But we--the inspections, again, we made some determinations 
on the housing quality standards. There are some things that we 
could say, ``Look, give them 30 days to rectify and let them 
move in in the meantime.''.
    Again, if the unit remains vacant, it's lost income to the 
landlord. We were trying to accommodate those different kinds 
of things.
    We had large orientations for tenants, counseling them 
about when you go out to an apartment, what to look for, 
housing counseling services, groups that will help the tenants 
go through the screening process.
    Many of the things that will cost money--with the 
Department of Public Social Services we have data sharing, 
again so that we could streamline the information that has to 
be collected. And one of the things that should be done is we 
should be able to share data between agencies. That's a 
stumbling block right now.
    We don't know if someone goes to a housing authority and 
gets rejected, and we go through the same process. It's a 
costly venture.
    Ms. Waters. Thank you. Thank you very much.
    Chairman Ney. I want to thank all the panelists for your 
testimony. Thank you.
    And we will move on to the second panel.
    [Recess.]
    Chairman Ney. The subcommittee will come to order. We want 
to welcome panel 2. And the order is Chanda Peters, a voucher 
recipient of Los Angeles; and Leona Thompson, a voucher 
recipient from Los Angeles; Mr. Beverly Martin, voucher 
recipient--or voucher program owner--I'm sorry--of Los Angeles; 
Larry Gross, Executive Director, Coalition for Economic 
Survival, Los Angeles; John Jackson, head organizer Los Angeles 
ACORN; and Jeff Farber, Chief Operating Officer, LA Family 
Housing Corporation of California; and Ruth Schwartz, Executive 
Director, Shelter Partnership, Incorporated, Los Angeles.
    We have a timer. So when you hear--you'll hear two beeps, 
and then another beep, and that's the five minutes. But without 
objection, any additional testimony you have for the record 
will be submitted.
    The five minutes is simply to try to make sure everybody 
gets their say in. So we'd like to make it longer, but then 
we'll have questions and you'll be able to respond.
    So with that, we'll begin with Ms. Peters. Okay.

  STATEMENT OF CHANDA PETERS, VOUCHER RECIPIENT, LOS ANGELES, 
                           CALIFORNIA

    Ms. Peters. Good morning, committee members. I want to 
thank you for the opportunity to present to you my personal 
testimony on this very important issue, Section 8 Housing 
Assistance Program and the Family Self-Sufficiency Program.
    These two programs have not only changed my life, but also 
my children's lives dramatically for the better. My grandmother 
moved into the Eastchester Gardens Housing developments located 
in the Bronx, New York in the early 1950s. My mother grew up 
there, and I also grew up there.
    Due to my mother's illness I, an only child, was raised on 
welfare, so our life was not easy. After an extremely abusive 
marriage, I left New York with my three daughters and moved to 
Los Angeles, where I started my life all over again.
    With very little money, no job and having to start all over 
again, I had to get on public assistance. First I got on 
welfare, and then I signed up for the Section 8 program, 
because I simply could not afford to pay rent, utilities, the 
high cost of childcare, et cetera.
    Then one day I received an invitation to participate in the 
GAIN program, Greater Avenues for Independence, where they pay 
for your school tuition, books, supplies, travel, and, most 
importantly, your childcare expenses.
    I immediately signed up and registered at the Los Angeles 
Trade Technical College, where I took computer classes and 
office procedures. Shortly after I received another invitation 
to participate in the Family Self-Sufficiency Program, where 
they assist you with your career goals, such as providing you 
with educational development, technical, trade and vocational 
training, job counseling, as well as other services to help you 
become self-sufficient and eventually a homeowner. And again I 
did sign up for that.
    The Family Self-Sufficiency Program especially changed my 
life for the better because through their partnerships with 
other agencies I was able to utilize the facilities for 
studying and had access to their computers to do my homework 
assignments.
    The job counseling was extremely valuable and it motivated 
me to reach my goals. To this day I still use those skills for 
interviews for promotions that I seek.
    After completing GAIN I worked for temp agencies all over 
Downtown Los Angeles until I was hired permanently, and I have 
been employed ever since.
    I can't begin to express to you how important these 
programs and others that help encourage, inspire and support 
needy families to live in decent housing and get out of a 
situation that may seem hopeless.
    This is how my life has been since: I've utilized the tools 
and services needed to upgrade my computer and office skills, 
preparing me for the job market.
    I completed a two-year GAIN program, and I'm now gainfully 
employed full time since 1997, no longer on public assistance 
of any kind.
    I completed the Family Self-Sufficiency Program, receiving 
over $14,000. And I am now a proud homeowner of a beautiful 
two-bedroom, two-and-a-half bath townhouse located in 
Inglewood, California.
    I have two daughters attending UCLA, studying law, and one 
daughter at UC Riverside, studying veterinary medicine. My 
youngest attends University High, and they all have very high 
self-esteem because of my example, where I always tell them to 
reach for their dreams.
    I'm now employed with the Housing Authority of the City of 
Los Angeles as an eligibility interviewer, helping other 
families with housing assistance.
    And my mother no longer lives in Eastchester Gardens. I 
have moved her here, closer to her loved ones, this year just a 
few months ago, breaking a family cycle of a public assistance.
    Every single day when I go to work and I return home--
sorry--I'm so thankful. I truly enjoy my job, and I especially 
enjoy helping others.
    It is my hope and prayer that these programs continue to 
assist other families to becoming self-sufficient.
    Thank you for allowing me to give you my testimony, and I 
especially thank the Housing Authority of the City of Los 
Angeles.
    Chairman Ney. Thank you for your wonderful testimony and a 
great story.
    [The prepared statement of Chanda Peters can be found on 
page 505 in the appendix.]
    Chairman Ney. Also, before we go on, without objection, for 
the record, we have a letter from Governor Gray Davis that we 
will submit for the record.
    [The following information can be found on page 551 in the 
appendix.]
    Chairman Ney. And with that, we will go to Ms. Thompson.
    Ms. Waters. Thank you very much, Mr. Chairman.
    We need to know that the letter is a letter that's 
basically going in the same direction that we are all going in 
on Section 8. So we'll have that submitted.
    Chairman Ney. Thank you.

 STATEMENT OF LEONA THOMPSON, VOUCHER RECIPIENT, LOS ANGELES, 
                           CALIFORNIA

    Ms. Thompson. Good morning, committee members. I am very 
honored to be here today, and I thank you each of you for this 
wonderful opportunity to share my personal testimony of how my 
life was transformed by the Section 8 Housing Assistance 
Program and the Family Self-Sufficiency Program. Excuse me.
    As a recipient of these programs, I stand before you today 
as a self-sufficient individual, raising two sons in the heart 
of a very prominent Los Angeles community and helping others to 
achieve a level of independence that they possibly never 
imagined could exist.
    After separating from my children's father, due to 
unfavorable circumstances, I had to step out on a faith that 
would propel me into a better way of living and economic 
security. Not knowing which way to go, nor did my pride allow 
me to turn to my family members or relatives, I ventured out 
into the deep with nowhere to go, only a prayer of restoration 
would be my only consolation.
    A dear friend availed herself to me, allowing me to move in 
with nothing, as she and her two children struggled as well. We 
shared a comfortable, safe and secure place to live, hearty 
meals and transportation. I became a welfare recipient and 
fully utilized each opportunity presented to me to make a 
better life for my children.
    My friend told me about a program she was participating in 
called GAP. This program, like GAIN, provided childcare 
assistance, bus fare, money for books and school supplies, just 
to name a few.
    With only a high school education and some college, I knew 
that this would be an excellent opportunity to sharpen my job 
skills and choose a professional career path that would lead to 
economic independence.
    Shortly after enrolling in the GAP program, the Northridge 
earthquake rocked Los Angeles. Due to the extreme damage of the 
building that I lived in, I was able to receive an emergency 
Section 8 voucher, which initially was supposed to only last 18 
months, but thank God for the funding, it was able to be 
granted longer.
    I finally was on the road to self-sufficiency. With the 
housing assistance payment program I began to have extra money 
to save and do extracurricular activities with my children that 
was almost impossible to do prior.
    And also with the Section 8 voucher program I was able to 
secure a two-bedroom, two-bath apartment unit, with a pool, 
jacuzzi, 1200 square feet, which I would not have been able to 
afford otherwise.
    I was informed about a new program that the housing 
authority was offering to clients who wanted to set further 
goals for themselves and graduate from all public assistance 
programs to become totally self-sufficient and homeowners, 
first-time homeowners. This program was called the Family Self-
Sufficiency Program.
    After mastering many office skills through vocational 
training I was able to secure better job positions and higher 
pay. By leaps and bounds I transcended from extremely low-
income to well above the average low-income household within.
    Within one year of participating in this program I 
surpassed the income limit to participate and financially 
succeeded in stabilizing my family's future.
    I began to set aside money to purchase our first home. I 
received a check from the account that had been set aside for 
me while in the Family Self-Sufficiency Program. This was 
derived from the gradual increases in personal earnings that I 
received from my employment.
    To date, I am in the process of purchasing a new home. And 
I owe a great deal of thanks and appreciation to the Housing 
Authority of the City of Los Angeles Section 8 program and the 
Family Self-Sufficiency Program for providing the resources and 
information, savings account and self-empowerment to rise above 
the elements that keep so many people in economic bondage.
    My accomplishments since 1994: I received a certificate in 
medical assisting, a certificate in nurse assisting. I 
completed the GAP program. I've also successfully completed job 
trainings in medical front office, patient relations, and 
sales.
    I've secured enrollment for my sons to attend college 
preparatory schools. I am currently an eligibility interviewer 
for the Housing Authority of the City of Los Angeles.
    And I'm also enrolled in the PACE program at West Los 
Angeles College.
    Chairman Ney. What do you do in your spare time?
    Ms. Thompson. I thank God every day for where he's brought 
me from, and I'm happy and content with who I've become. And I 
plan to continue to help others who wish to step outside of the 
parameters of substandard living to well above average living.
    Thank you for affording me this great opportunity to share 
my testimony thank you housing authority of the City of Los 
Angeles.
    Chairman Ney. Thank you for your testimony.
    [The prepared statement of Leona Thompson can be found on 
page 546 in the appendix.]
    Chairman Ney. Mr. Martin.

STATEMENT OF BEVERLY MARTIN, OWNER/LANDLORD HOUSING UNITS, LOS 
                      ANGELES, CALIFORNIA

    Mr. Martin. Who wants to follow these two young ladies? 
Anyone out here?
    During the last three years, my wife and I became owner/
landlords in the Los Angeles area. This experience is 
relatively new to me, to us, after retiring from the Los 
Angeles Unified School District as a former school principal 
for 10 years, and as assistant superintendent my final seven 
years.
    This self-chosen investment as an owner/landlord has been 
both invigorating and gratifying.
    In a brief period I have owned a triplex, a 7-unit 
building, and a 29-unit building. All of these buildings are 
located in the South Los Angeles area, with the major 
concentration of my time being devoted to the 29 unit complex.
    Of the 29 units, 24 of the units are occupied by Section 8 
voucher tenants. I appear before you today as a strong advocate 
and staunch supporter of the current structure and operation of 
the present Section 8 voucher program.
    It is my understanding that legislation, via block grants 
to States, is being considered as an avenue for dissemination 
of funds for housing. I view this as a deterrent and another 
unnecessary layer of bureaucracy.
    The concept would indeed bring a negative impact and could 
prove to be an impediment in providing assistance to those in 
greatest need of affordable housing.
    As a resident of the State of California for 41 years, the 
State's financial and budget crisis has peaked in this state. 
This is a most inappropriate time to consider shifting these 
major housing responsibilities to the State of California. It 
would be devastating and would compound the present financial 
situation in California. Above all, the recipients, those to 
whom this service is intended, would suffer.
    The current local administration of the Section 8 voucher 
program, though not flawless, is functioning extremely well in 
this city and the cliche of ``If it ain't broke, don't fix it'' 
is an appropriate statement at this time.
    Last week as I read an article in a journal, a thought 
remained with me. In conclusion, allow me to share that thought 
with you, and I quote:
    ``Serious attention must be given to the awesome task, the 
awesome task of helping those who live below the poverty level, 
if we, as Americans, expect to maintain our image as a 
democracy.''.
    This thought has great merit. I'm available to respond to 
questions and to convey my personal views and opinions 
regarding the current local administration of the Section 8 
voucher program in the Los Angeles area.
    Thank you, Mr. Chairman.
    Chairman Ney. Thank you, Mr. Martin.
    [The prepared statement of Beverly Martin can be found on 
page 504 in the appendix.]

  STATEMENT OF LARRY GROSS, EXECUTIVE DIRECTOR, COALITION FOR 
           ECONOMIC SURVIVAL, LOS ANGELES, CALIFORNIA

    Mr. Gross. Chairman Ney and Congressmember Waters, thank 
you for the opportunity to offer testimony today.
    I'm Larry Gross, Executive Director of the Coalition for 
Economic Survival. CES is a 30-year-old tenants' rights 
organization assisting tenants, including project-based Section 
8 and housing choice voucher renters throughout the Southern 
California area. Many are here today.
    CES also overseas a HUD Outreach and Training Grant to 
assist to tenants living in expiring Section 8 housing and 
buildings subject to HUD Mark-to-Market program.
    I'm here today to express strong opposition to the Section 
8 block granting proposal because we believe it will have a 
disastrous impact on the ability to provide affordable housing 
to low-income seniors and families.
    Section 8 is a cornerstone of the Federal affordable 
housing program, providing vouchers to nearly 2 million 
households.
    As with most government programs, there is room for 
improvement, but the voucher program is highly effective in 
providing needed housing assistance. One of its main problems 
is inadequate funding, which results in tenants waiting years 
to receive vouchers. And then once finally obtaining them, face 
losing them, unable to find landlords willing to accept the 
voucher within the time period allowed.
    The Greater Los Angeles Area is facing one of the nation's 
most severe affordable housing crises. We can ill afford to 
take action which will further increase this crisis.
    The block grant proposal will likely result in fewer 
Section 8 vouchers, when many more are needed. Block granting 
would eliminate the current structure where Congress adjusts 
funding each year to ensure covering all vouchers being used.
    With block granting, Congress may decide on funding that 
has no correlation to voucher use, and on not providing 
adjustments for increases in rent. This approach would lead to 
the funding erosion of vouchers over time.
    Vouchers allow poor people to achieve a degree of less 
poverty and the ability to live in less segregated communities. 
Block granting would do the opposite. States could reduce the 
value of the voucher, that would make it more difficult to use 
the vouchers to move into neighborhoods with more 
opportunities, jobs, better schools and less crime.
    States could direct vouchers to specific developments and 
limit voucher use to certain neighborhoods. Thus, we can likely 
see the creation of voucher ghettos and barrios.
    States could also increase tenants' rental payments. 
Households could end up paying far more than 30 percent of 
their income for rent, a 30-year Federal affordable housing 
standard.
    We are greatly concerned about the impact on tenants living 
in housing where a mortgage pre-payment or project-based 
Section 8 opt-out has occurred.
    Los Angeles has the largest stock of privately-owned HUD 
subsided housing. There's nearly 25,000 units at risk due to 
pre-payments and opt-outs. Latest figures indicated that we've 
already lost 8600 units in the county and over 3500 units in 
the city. This is one of the highest rates of pre-payments and 
opt-outs in the nation.
    Currently, tenants in pre-payment and opt-out complexes for 
the most part are provided enhanced vouchers, which protect 
tenants from rent increases and displacement. Enhanced voucher 
tenants have the right to remain in their units as long as it's 
funded; and owners are mandated to accept the enhanced 
vouchers.
    Block granting threatens these protections because States 
wouldn't be required to issue new enhanced vouchers. A state 
might decide only to provide regular vouchers. And this could 
result in tenants having to pay higher rents, thus, forced to 
move, and owners would be under no obligation to accept the 
vouchers, resulting in tenant displacement.
    The City of Los Angeles has undertaken new initiatives to 
do its part to address affordable housing needs, such as 
creating a $100 million Housing Trust Fund and adopting a 
preservation program to address pre-payments and opt-outs.
    These significant local actions assume a certain level of 
support and commitment of funding on the Federal level. Block 
granting would likely undermine LA's affordable housing 
efforts. Locally, affordable housing advocates have developed 
an effective working relationship with the Section 8 division 
of the city's housing authority.
    Together we've been able to identify problems, develop 
effective approaches to deal with those problems, and implement 
programs to benefit tenants.
    This relationship would be placed at risk to block 
granting, which limits administrative costs to 10 percent of 
the State's total funding, yet adding administrative 
responsibility.
    In conclusion, we strongly urge that the Section 8 block 
grant proposal be firmly rejected. It would only bring 
increased hardship to our nation's low-income households, who 
are in dire need of securing affordable housing.
    Thank you again for giving me this opportunity to provide 
you with the views of the Coalition for Economic Survival.
    Chairman Ney. Thank you.
    [The prepared statement of Larry Gross can be found on page 
482 in the appendix.]
    Chairman Ney. Mr. Jackson.

  STATEMENT OF JOHN JACKSON, HEAD ORGANIZER, LOS ANGELES ACORN

    Mr. John Jackson. Good morning. My name is John Jackson. 
I'm the head organizer for Los Angeles ACORN; and we'd like to 
thank subcommittee Chairman Bob Ney for holding these field 
hearings, and also to just salute Maxine Waters--Congressman 
Maxine Waters who has been there on the 1,001 issues that we 
hold near and dear to our hearts.
    ACORN is the Association of Community Organization for 
Reform Now is the nation's largest organization of low- and 
moderate-income families in the country, with over 150,000 
member families, as well as 700 neighborhood chapters, in a 51 
cities across the country.
    Since 1970, ACORN has taken action and won and worked on 
issues of concern to our members. Our priorities include: 
Better housing for first-time home buyers, improved quality of 
life issues in the low-income communities, living wage jobs, 
investments--I mean more investment from banks, as well as 
government, and better public schools.
    Of course, if you look at saying ``Say yes to children,'' 
we really firmly believe in a child's right to live, grow, and 
grow up healthy in low-income communities. And that means 
affordable childcare, as well as affordable housing.
    We achieve these goals by building community organizations 
that have the power to implement changes through direct action, 
negotiation, legislation, voter participation.
    Los Angeles--our Los Angeles chapter consists of 20 
organizers of 550--5500 members. I don't do this. So let me 
just say, I don't really do public speaking.
    Chairman Ney. You're doing all right.
    Mr. John Jackson. But our office is really located walking 
distance from here, 3655 South Grand.
    We have a 1-800 number, where folks call every day for 
1,001 different reasons, some of which are around Section 8, 
some of which are around welfare, some of which are around 
childcare, just a lot of things that impact low-income 
community folks. And we just find ourselves being in a position 
to become problem solvers, rather than problem creators.
    I'm here today to express ACORN's opposition to 
restructuring the Section 8 voucher program and the State block 
grant.
    A lot of what I'm saying probably has already been said. So 
I probably would just like to set the testimony aside and speak 
from my heart a little bit here.
    We experience every day here in Los Angeles people that are 
going through trials and tribulations with the Section 8 
program. But more importantly, I think that it's building a 
dialogue. I'm jumping to the second part of it, and we'll 
submit this for public record.
    But we actually have been innovative in trying to create a 
dialogue between the landlords and tenants. It's the notion of 
a common ground, a common space where folks can get a sense of 
who this man is to my right. And I don't know his name, but, 
you know, we have to tip our hat to people that are willing to 
take a chance and take a stand on renting to low-income folks, 
and see there is some value in doing so because it improves the 
quality of life in communities that are struggling under the 
yoke of gang violence and substandard schools in this country.
    We have to salute them; we have to embrace them. And we 
have to do our part in educating our folks as to what their 
responsibilities are and engage with them with some dignity and 
respect and try to solve those problems rather than cast the 
burden upon the landlord. Because it isn't always the landlord. 
And we can't cast the blame or the burden on the tenant, 
because it isn't always the tenant. Or it's just sometimes just 
not enough information. And a streamlining of the process that 
landlords in increasing number can be comfortable in going into 
a program that can assist people in improving the life in these 
communities.
    But we oppose the block grant system because we think 
welfare reform was a failure. We believe the sending of block 
rent down to the State of California, then down to Los Angeles, 
it just leads to less services rather than more services. And 
by the time it gets down to the people that it's intended for, 
they probably will not be--obviously it won't be enough of 
those services to go around. It's not enough right now.
    But when you look at the crisis that the State of 
California is in right now, we love California, but we can't 
trust that these services to get down to the people that they 
deserve to go to with the $38 billion budget deficit.
    We just believe somehow some that of money just will go to 
unintended places and just representing the poor folks' 
organization, we would just be shocked and appalled that we 
can't afford to have any less than what the people are 
deserving of today.
    We appreciate you being here. This is an amazing thing to 
see a Republican here in a Democratic district to try to 
problem solve. We salute you. We salute--we salute you. We 
salute you for wanting to build bridges rather than walls and 
trying to problem solve rather than problem create.
    Thank you.
    Chairman Ney. I appreciate that. I also want to note for 
the record, I'm not sure of the accuracy, but I think my old 
district is 16 percent Republican. You may have more 
Republicans than I do. So I'm pretty comfortable.
    Thank you. I appreciate your comment.
    Mr. John Jackson. We welcome you, and we appreciate you 
being here.
    Chairman Ney. Thank you.
    [The prepared statement of John Jackson can be found on 
page 500 in the appendix.]

 STATEMENT OF JEFF FARBER, CHIEF OPERATING OFFICER, LA FAMILY 
                      HOUSING CORPORATION

    Mr. Farber. Good morning, Chairman Ney, ranking member 
Waters, and staff of the subcommittee.
    I thank you for the opportunity to testify today. I'm Jeff 
Farber, Chief Operating Officer for LA Family Housing. Founded 
in 1983, our organization is the leading nonprofit housing 
development corporation that provides housing and supportive 
services to over 14,000 homeless and low-income families and 
individuals in Los Angeles.
    We provide a range of services from emergency shelter, 
transitional housing, permanent affordable housing, and home 
ownership opportunities.
    We oppose the proposal to convert the Section 8 Housing 
Voucher Program into a block grant to the States. We consider 
Section 8 vouchers to be an essential component of the 
solutions to affordable housing crisis in Los Angeles and 
across the nation, production and preservation and income 
subsidies.
    We operate--our organization participates in a variety of 
partnerships with the housing authorities of the City and 
County of Los Angeles. Local leadership of the housing 
authorities has led to the creation of many innovative programs 
promoting affordable housing opportunities to those in need, 
including the nationally recognized Homeless Section 8 Program.
    Through our partnership with both housing authorities, we 
are able to place 100 to 150 homeless individuals and families 
in safe, decent and affordable housing annually. In this model, 
we refer Section 8 eligible households to the respective 
housing authority and provide them with the support services 
they need to gain tenant skills and maintain housing.
    Through this program we have assisted over 900 households 
secure and maintain affordable housing in the last 10 years. 
Many of these households have participated in Family Self-
Sufficiency Programs and have gone on to become homeowners.
    The Housing Assistance for Needy Families Act attempts to 
address the administration of the current voucher program. 
However, its approach is heavy-handed and fails to recognize 
the improvements made nationally to the program over the last 
several years.
    Nationwide utilization of the program has increased. And as 
you heard this morning, many of our housing authorities are 
leasing up at 100 percent or over.
    Additionally, switching from one set of administrative 
rules known and used by all jurisdictions to a separate set of 
rules used by each state creates incredible complications and 
difficulties.
    Block granting of the program adds an additional layer of 
bureaucracy. And as John so well stated, when you have a 
problem in a State, and you add in another funding source to 
it, you don't know how that bureaucracy will handle that 
funding source.
    Finally, relying on local codes to determine housing 
quality creates the potential for rules to vary from locality 
to locality.
    HANF fails to guarantee that the funding of the Housing 
Voucher Program will keep pace with housings costs. Los Angeles 
is in an affordable housing crisis. Almost 75 percent of 
families with annual incomes of $26,000 or less, which is 
120,000 families, spend more than half of their income on rent.
    In the City of Los Angeles a two-bedroom apartment rents 
for anywhere from 1,100 to $1,300 per month. Using the HUD 
guideline, that a family should not spend more than 30 percent 
of their income on housing costs, a household needs to earn 
over $21 an hour or $44,000 per year just to afford a two-
bedroom apartment.
    Section 8 is a life line for many of our city's working 
poor: Janitors, fast food workers, nurses aids, security 
officers, cashiers, who otherwise would find themselves 
homeless and be knocking on the doors of my agency for 
assistance if that Section 8 voucher was not available to them.
    HANF places these hard-working families at great risk. 
States--based on the system set up under HANF, States would 
either have to contribute their own funds or scale back their 
programs in the following manner: Reducing the number of 
families that receive housing vouchers, shifting rent burdens 
to families participating in the program, limiting 
opportunities to use vouchers to escape high-poverty areas, and 
shifting housing assistance from poor families to moderate-
income families.
    Each of these changes would damage the program and move it 
from its mission of using a market-based approach that allows 
voucher participants to move to apartments in areas of their 
choice.
    Congress can improve the administration and utilization of 
housing vouchers in a manner that is not detrimental to the 
well-being of families and does not disrupt the process of the 
existing program.
    HUD already has the authority to reallocate unused vouchers 
from one administering agency to another. To add strength to 
this policy, Congress should consider making reallocation 
provisions that automatically move vouchers from communities 
that cannot use them to those that can in the same region.
    Congress should look at reforms that incentivize owners. A 
couple of examples are more flexibility regarding inspections 
and an electronic payment system for the monthly payments that 
go to owners.
    Congress should also provide funds to assist housing 
voucher holders find and access available housing in their 
area. Our local housing authorities have been masters at this 
and have worked with a wide network of nonprofits to guarantee 
that households are able to find and maintain affordable 
housing using the voucher program.
    Thank you for your opportunity to testify.
    Chairman Ney. Thank you, Mr. Farber.
    [The prepared statement of Jeff Farber can be found on page 
474 in the appendix.]
    Chairman Ney. Ms. Schwartz.

    STATEMENT OF RUTH SCHWARTZ, EXECUTIVE DIRECTOR, SHELTER 
                          PARTNERSHIP

    Ms. Schwartz. Good afternoon. It's now noon. Chairman Ney 
and Ranking Member Waters, who is a long-standing affordable 
housing advocate. And I just have to say thank you so much for 
all that you do.
    I also wanted to acknowledge that Mayor Hahn's housing 
deputy is here today, Sara Dusseault. I think the Mayor has on 
record support also of the position taken----
    Chairman Ney. Thank you.
    Ms. Schwartz.----by most of the folks.
    Chairman Ney. Sorry to interrupt. If I could, just for the 
record, we have a letter for the record, which Congresswoman 
Waters may want to make a comment on, to be submitted without 
objection.
    Ms. Waters. Well, I'd like to move that this letter be 
inserted into the record. And it starts out in no uncertain way 
expressing its opposition to H.R. 1841.
    The Mayor is to be commended, not only for understanding 
the housing needs of the city, but for having put together the 
$100,000,000 program for housing assistance in this city. It's 
extraordinary. He is a leader in the nation on this. And we are 
very, very pleased that he is providing this kind of 
leadership.
    Chairman Ney. Without objection, it's part of the record.
    We stopped the clock so it didn't come off your time.
    Ms. Schwartz. My name is Ruth Schwartz, and I'm the 
Executive Director of Shelter Partnership.
    We were established in 1985. And what we do is fairly 
unique. We provide technical assistance and resource 
development for agencies developing housing for homeless people 
in all of Los Angeles County.
    As you know, Los Angeles County has a huge problem with 
aimlessness. It's estimated as many as 80,000 people are 
homeless nightly in the county. And I'm talking about people 
living in shelters, on the street, abandoned buildings and the 
like, about half of whom are located in the City of Los 
Angeles.
    Based on my 18 years experience--and I know I look much 
younger than to have 18 years experience at anything, but based 
on that I think without doubt the most successful program that 
has been developed for homeless families and individuals in Los 
Angeles County has been the Section 8 homeless assistance 
programs and the programs that have resulted since then.
    Without doubt, I mean you can provide all the services you 
want in the world to homeless people, but if you don't have 
housing, you don't have a program. And you don't have an exit 
from aimlessness. And that's documented from all the national 
studies as well. The most important intervention in the life of 
a homeless person is stable, affordable, and in some cases, 
supported housing.
    And I just want to congratulate the City of Los Angeles and 
the County of Los Angeles for being incredible leaders in this 
area. Since 1991, we've had a homeless assistance program, way 
before New York or anywhere else. So we've done it well. We've 
got over 12,000 people who were previously homeless, are now 
receiving Section 8 assistance, and that's families who are 
poor, including families that have experienced domestic 
violence and other incidents, people with mental illness, 
chronic mental illness who have lived on the street, as well as 
people living with HIV/AIDS thousands and thousands of people 
who were previously homeless. And there's a very high incidence 
of aimlessness of people with HIV/AIDS.
    These are very successful partnerships, and they include 
strong collaborations of community-based organizations, from 
groups like Watts Labor Community Action Committee, Minority 
Aids Project in the Congresswoman's district, to traditional--
more traditional mental health agencies and family agencies, 
like LA Family Housing throughout the City and County of Los 
Angeles.
    They've also been a great partnership, and I think this is 
why it's so important that things remain local. I mean local is 
what's relevant. We've been able to strategize and combine 
other kinds of Federal funds. So it's not all on the Section 8 
side. Things like the FEMA funds, other HUD funds like the HOPA 
grant funds, as well as State Department of Mental Health 
dollars. We've got a great program for chronically mentally ill 
people from the State legislature.
    We are combining those funds with Section 8 funds and 
really getting people who are really what we consider the most 
tragic victims of aimlessness into housing. And the support 
services are paid for through the State Department of Mental 
Health. So we've got some wonderful partnerships and 
partnerships that I think we can all be very proud of in Los 
Angeles.
    I'd also like to just mention something that hasn't been 
mentioned before, and that's having to do with project basing. 
And this is an area that maybe the oversight committee can help 
us solve.
    In the 2001 Federal Appropriations Act, it was agreed that 
housing authorities could again increase the number of project-
based units that would be allowable and give more local 
discretion in that. However, HUD has never issued final rules. 
All they did, after a long time, was submit those rules to OMB, 
only to recently withdraw those rules.
    So we have--so places like Los Angeles, where unfortunately 
we do have high concentrations of poverty, a lot because of 
families coming into the community from other countries, we 
can't really effectively use those project-based certificates 
with nonprofit developments. And we need those new rules to be 
released by HUD and find out why they haven't been.
    Just in conclusion, as you've heard the State through the 
$1,000,000,000 state Housing Trust Fund the city through the 
$100,000,000 Trust Fund and also the County of Los Angeles 
through their special initiative through industry funds is 
really doing--is recognizing the importance of housing and 
being able to combine that with the Section 8 program on a 
local administrative level would be lost if we were to not 
continue the program as it is.
    Thank you.
    Chairman Ney. Thank you.
    [The prepared statement of Ruth Schwartz can be found on 
page 507 in the appendix.]
    Chairman Ney. I just wanted to note, we will follow up on 
the rules. In the expansiveness of government and all the 
agencies you have--and that's why I'm glad you've raised it 
here today--we lose track of what went where and when where 
it's at. And you raised a very good issue: Where are those 
rules? What's happening? We will continue to follow up on that.
    Ms. Schwartz. Okay. Thank you. I'll get you some more 
information, too.
    Chairman Ney. And I would note you might have gotten 
somebody in trouble today because whoever you were working with 
18 years ago violated child labor laws.
    Ms. Schwartz. Yeah that's probably true.
    Chairman Ney. You should warn them.
    Ms. Schwartz. Yeah, I think it's true. I think it's true.
    Chairman Ney. Having said that, I have one quick question. 
And this is: Sometimes we've had them; sometimes we haven't had 
set asides. For example, set aside Section 8 for person 
specifically and/or families with aimlessness or HIV.
    What do you think about--and again, sometimes we've have 
and I understand sometimes we haven't. What do you think about 
set asides and how that impacts this issue?
    Ms. Schwartz. I'm really supportive of set asides for the 
people that are the most extremely poor and needy, especially 
those people who have no home to call home.
    I think that the program, as it started in Los Angeles, was 
because HUD wanted to demonstrate how--that the needy--the most 
needy could be served.
    Those set asides aren't part of the priorities today, but 
yet there's is a commitment locally to continue that and still 
serve and other households. And personally I think that's a 
good thing.
    Chairman Ney. Mr. Gross, I had a question. It goes to the 
30 percent of tenant income or the 40 percent. And I wondered 
if you had an opinion on that. And also, you know, the unique 
circumstance where tenants sometimes are now paying 70 percent, 
which is obviously a large strain on them.
    Any thoughts on going above the 30 or 40?
    Mr. Gross. Well, as was pointed out in Los Angeles, most 
renters are in, or a good percentage of renters, who are not on 
Section 8, are already paying way over 50 percent of their 
income.
    When that happens of course their options, they cut back on 
food, on clothing, on the ability to take care of their 
children and healthcare. And so we would oppose that. I think 
that's the one good thing about Section 8 right now. That it is 
that percentage of income to rent.
    Under this block renting proposal, we can see that figure 
rise, you know, much higher. Out of people's reach of being 
able to afford housing, even with a voucher.
    Chairman Ney. Thank you. And my last question, Mr. Jackson: 
You mentioned about building a dialogue with the landlords and 
tenants. And would you describe a few of the challenges you 
have in building that dialogue, and, you know, does the current 
system help with that, or are there ways that we can help the 
current system to do more with dialogue? Because that's 
important, I think, communication and dialogue.
    Mr. John Jackson. We did do some internal trainings--we do 
some internal trainings called the Common Ground Forum, which 
we try to examine, explore one of the things that are we 
allowing to keep us apart, and then we try to explore those 
things that are bigger than those things that are keeping us 
apart which we have in common, which is usually the quality of 
life in the community, because if you are a landlord in a 
particular community, and it's starting to deteriorate, there 
needs to be a dialogue about how to fix that. And we just need 
to figure out a way to separate perception from reality.
    Could you guys assist in that? Of course. There should be 
some way that landlords as well as tenants--I think that there 
is perceptions, and those perceptions become reality because of 
the lack of dialogue, not because of dialogue.
    And at every turn of the road there needs to be more input 
for those programs by the people it's intended to serve.
    John, Maxine Waters' staffperson, had a challenge of 
getting me to sit here and speak on behalf of this organization 
because I just feel more comfortable helping to prepare 
somebody that actually could say and articulate what their 
trials and tribulations were.
    God bless these sisters that are successful, and we tip our 
hat to them. But there is also another side of that that 
welfare reform hasn't been the ideal, dream forum. And how is 
that challenge getting to housing and how it interacts with 
housing needs to be a part of that equation as well.
    So could you guys help and what specific ways that you 
could help? I don't know what the specific ways that you can 
help, but I'm sure talented staff people out of these talented 
Congressional offices certainly could be a part of that 
equation. And we'd love to work with them to do that.
    Chairman Ney. They should contract with you to get some pay 
raises for the advocates that you have.
    In all seriousness, one other question I have of you is: 
Let's say, hypothetically, we do a block renting, and we have 
iron clad protection for Section 8 voucher recipients. Could 
you still trust, not the State of California, but would you be 
comfortable to trust a State that they will carry out 
protections for voucher recipients?
    Voice. No.
    Chairman Ney. Let's hear from Mr. Jackson first.
    Mr. John Jackson. It's such an uneven process. California 
is so vast that from county to county to county, there would 
not be uniformity. And quite frankly, Section 8 is a Federal 
program, and the Federal government has the obligation to see 
to the equity that's placed into it, not necessarily the States 
or the counties or the cities. And they're not going to own 
that obligation as well as we would trust that the Federal 
government would.
    Chairman Ney. One thing, and I'm concluding my questions 
and we'll move on to my colleague, but I did want to note one 
thing. If we did do this, we had block granting, I don't know 
how you write in certain protections. The thing I wanted to 
mention and I have a great state, the State of Ohio, and a lot 
of great people. However, in the budget process, because they 
were up against a wall like California, Head Start monies, we 
all know the basic 101 beginning law, if you're in office, you 
do not supplant Federal dollars with Federal dollars. That is 
course No. 101.
    In the State of Ohio, during the budget process they took 
our Head Start monies, went in, took $300,000,000 of HANF 
monies and applied the 300 million to the Head Start monies. 
Now, they appropriated it. When I was raised it was called 
theft; but they appropriated the money.
    Now, clearly, I made this objection known to everybody that 
did it, you know, clearly you don't supplant Federal with 
Federal. They did it. But in this whole process the one 
overriding question I've always had is: How do you write 
something so iron clad that it can't be done? Because it's a 
pretty iron clad thing, Federal to Federal. I'm asking the 
overriding--and I'm speaking as a former state legislator, and 
I'm looking at that side of it now as a Federal member.
    Mr. John Jackson. The punishment should be equal to the 
crime. I mean if people are dying as a result of the theft and 
thievery and thuggery, then the punishment--because they 
certainly right now in California they have a three strikes 
you're out law. You can be punished for a misdemeanor and wind 
up in prison for the rest of your life. If in fact the State of 
California, or any state for that matter, has the gall to take 
to money that's been allocated for poor folks and utilize it 
for what would not be considered the greater good, in their 
mind they may attempt to justify it that way, but when you look 
at it as in--through the eyes of the people that those funds 
were intended for in the first place, it's a whole totally 
different answer.
    So I would say let the punishment fit the crime and make, 
you know, the crime more severe as the devastation and how it 
affects people's lives.
    Chairman Ney. Congresswoman Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    I can't tell you how proud I am of both of our panels that 
have appeared here today. I am so proud not only of the 
panelists, but their ability to articulate the partnerships and 
the working relationships here in this area that help to make 
Section 8 a workable, viable program.
    And I think in all that you've heard, we certainly will go 
back to the Congress of the United States looking at this 
legislation and understanding even better why there is so much 
opposition to the legislation and why we are all together. 
There is such a consensus of opposition here in California and 
in the Los Angeles area.
    Let me just say to Ms. Peters and Ms. Thompson, you heard 
the people in this room just start to applaud you. And I think 
you can see from our reactions up here how absolutely proud we 
are of you.
    You have literally taken tools that have been offered to 
you, and you've used them in ways that we want so many people 
to be able to do. Not only are we proud of you and the work 
that you're doing and the opportunity that's been afforded to 
you to help others, but, you know, I'm going to follow up, and 
we're going to not only keep up with you. We want you to come 
and tell your stories to some of the other men and women in 
some of the places where the message has not gotten to.
    So we are just going delighted to have you here today with 
stories of success and positive actions that led to a whole new 
lifestyle for you.
    We are very proud of you, Bev Martin, I guess I've been 
knowing for 100 percent. I'm 100 and he is 101. And I didn't 
realize that he had retired, and that he was now an apartment 
owner providing rental services to people who need them so 
desperately.
    Thank you, Bev for, your new career, and again, I would 
like to use this legislation as an opportunity to look at other 
ways by which we can strengthen the program.
    Certainly number one is I want more money. I'm a tax and 
spend liberal. I want more money, more services for people. I 
just think that, you know, this nation could invest more.
    And I raised some questions earlier today about mom and pop 
or smaller landlords and capital costs and all of that, and I 
will certainly follow up looking at that. But again, to have a 
20--a unit--a building with 29 units, and I think you said 24 
of them occupied with Section 8, it sends a real message out 
there to other apartment owners that this can be done, this can 
work. And thank you very much for that.
    Larry Gross, you guys have been on the cutting edge of 
organizing for a long time now. And I really do appreciate that 
because we have so many people who need you, who need advocates 
who cannot only be in the streets, but in Washington and in 
places like this, speaking on behalf of people and helping them 
to be able to negotiate their environment and all that goes on 
in these complicated processes. You have a long and rich 
history, and just you continue to be there.
    Mr. Gross. Thank you very much.
    Ms. Waters. Now, John talks about not wanting to be in 
these kinds of arenas testifying. Now, John, we know, you're an 
organizer extraordinaire, but sometimes the organizer has to 
come from the streets and get into a room like this and help to 
merge the work of organizing with the work of this kind of 
legislative advocacy, and you do it well.
    You do it absolutely well. When you talk about speaking 
from the heart, that's what we need more of. We need more 
people who are willing to throw aside the paper and just talk.
    I appreciate the work that you do every day and also the 
work that you all do in, particularly ACORN on predatory 
lending that has been one of the hallmarks of your work here in 
the city. You've been at the city level, the State level and 
the Federal level.
    We are going to try and try desperately to do a bipartisan 
effort on that new predatory lending bill. And we are going to 
look to you to help us work and negotiate that.
    Mr. Farber and Ms. Schwartz, I thank you both for being 
here. Again, we have the thousands of renters and homeless 
folks who are out there not knowing or understanding which way 
to go. And if it were not for you guys, we would not have the 
kind of accomplishments that you've been able to describe here 
today.
    It is my greatest wish that we can keep evolving with this 
work so that we would not only be able to sing the praises of 
what has been accomplished so far with our government, but that 
we can move it to another level.
    I dream of the day when I can go into Downtown Los Angeles 
and not step over bodies on the street. I dream of the day 
where we won't have a Patch Park of the homeless who convene 
there every day. Many of those people are from my district.
    When I go through Downtown Los Angeles, I begin to hear the 
calls ``Hey, Maxine. Hey, Ms. Waters.'' These are folks who, 
you know, came from different places, but many of them from so-
called South Los Angeles, who have ended up down in Downtown 
Los Angeles.
    And I thank you for all that we have done to get a portion 
of them off the streets, those people, and into Section 8 
assistance so that they are now into units where the quality of 
life has changed for them.
    To the landlords, let me just say I dream of a day when 
we'll have some assistance where landlords can take the folks 
living in their units and provide services above and beyond 
what landlords do.
    For example, I just believe that you have a building of 24 
Section 8 folks, that the same kind of opportunities that have 
been extended through the housing authorities for those who 
were lucky enough to get connected, they could be unveiled and 
unfolded where ongoing meetings are going on in the apartment 
building, and people are being educated about the programs and 
the possibilities and get them up and out and doing things and 
changing their lives.
    Let me just say--and I'm kind of full with all of this 
now--that your testimony has been extremely important and 
meaningful here today. And really much of what you have said 
today should help restore everyone's faith in the possibilities 
of this government to be of an assistance to the least of 
these.
    I oftentimes am very frustrated and sometimes angry about 
what I see in the poor people and the lack of opportunity. But 
you know, each night that I go to bed, I go to bed filled with 
a little bit more optimism that tomorrow can be better, and 
that we can do it better.
    And with your being here today I know that tomorrow and the 
next day and the next day we can do even more to assist the 
many people of this nation to be able to have a decent quality 
of life.
    Most people simply want a decent home and roof over their 
heads. They want to be able to feed their families. They want 
transportation to get back and forth to their jobs and to be 
able to take care of their business.
    They want their children--Ms. Peters said ``My children at 
UCLA.'' We all--everybody would like to have the opportunity to 
support their children to be able to be educated.
    So I believe in--I believe in this country, but I believe 
more in each of us. This country will only be what we make it. 
I did not intend to be on the soap box today, but I could not 
help it. I'm just inspired by your presence.
    Thank you very much.
    Chairman Ney. Well, I'm glad you got on that soap box. It 
helps me listen to a few things.
    I just want to thank you for some great testimony, 
compelling advocacy you do, the personal stories you have 
shared with us.
    And like the movie ``Take It Forward''--Pay It Forward''--I 
think it's ``Pay It Forward''--I know you're doing that with 
other people in this area across the country.
    This has helped me a lot to be out here. We come from 
different districts. A town of 30,000 people to me is Los 
Angeles. Where I come from that's a huge, huge city. So we have 
some different concerns. But again, people I represent need 
housing. People out here need housing.
    I don't know if either Congresswoman Waters and I have ever 
been able to tell persons that need help of what they're 
registered. We don't care. We just help people that need help. 
The government needs to be able to step forward to do that.
    We may disagree on some things philosophically, but we 
agree on trying to make the system work. I'm thankful to be 
here because you have a whole different cost situation that is 
very, very difficult that we don't have, but yet we have some 
lack of space to help individuals.
    So this personally helps me, as Chairman of the 
subcommittee, and I appreciate the hospitality of my colleague, 
Congresswoman Maxine Waters, of having us here, appreciate the 
staff, both sides, to be able to make this hearing come about.
    And we've had a lot of trauma in this country over the 
course of its history. We've had a lot of trauma over the last 
couple years. But America will go on and continue and, 
hopefully, make itself better. And this is where America does 
her work.
    So I'm very pleased that we have been able to come outside 
the Capitol and bring the Capitol here and hear from the people 
right on the front firing line who live every single day with 
trying to help others.
    I've always said this many times. In 50 to 60 years, no one 
may know our names, any of us, but we will have rested, and our 
generations to follow can have comfort that everybody tried to 
do something to help other people. And down the road somebody 
will be in housing and going to college or get a good job, and 
it's because of things you all are doing today.
    So I'll give you an awful lot of credit for that. The 
energetic give-and-take of public debate, this is what it's 
about. We appreciate it.
    I want to thank my colleague for taking her time for two 
days straight now, after coming off a marathon session, I think 
we voted at 2:30 in the morning one day last week.
    So I want to thank Congresswoman Waters for sharing her 
time and all of you and her staff and all of you.
    And we will leave the record open for 30 days. There might 
be additional questions without objection that will conclude 
this hearing.
    Ms. Waters. Let me break all the rules of committee 
hearings and ask this great Los Angeles office to stand with me 
and this Chairman for the work that he is doing and his 
presence here.
    Okay. This is a wonderful facility that we are in, the 
California Science Center, and Monique Hudson, Government 
Affairs Director, and Carl Phillips, would you give them a big 
round of applause.
    And for those of you who have not visited this facility and 
you have not seen the great exhibits and all the work that many 
of us put in for years in the California State Assembly, you 
better come and bring your children.
    Okay. Thank you very much.
    [Whereupon, the subcommittee was adjourned.]


                            A P P E N D I X



                              May 22, 2003
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                            A P P E N D I X



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