[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
RURAL HOUSING IN AMERICA
=======================================================================
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
__________
JUNE 19, JULY 8, 2003
__________
Printed for the use of the Committee on Financial Services
Serial No. 108-41
91-225 PDF
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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
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Page
Hearings held on:
June 19, 2003................................................ 1
July 8, 2003................................................. 43
Appendix:
June 19, 2003................................................ 63
July 8, 2003................................................. 195
WITNESSES
Thursday, June 19, 2003
Anders, Gideon, Executive Director, National Housing Law Project,
Oakland, CA.................................................... 20
Bridges, Betty, President, Council for Affordable and Rural
Housing, Washington, DC........................................ 22
Fong, Phyllis K., Inspector General, U.S. Department of
Agriculture, Washington, DC.................................... 6
Griffiths, Patty, Housing Director, Community Action Commission
of Fayette County, Ohio appearing on behalf of the Housing
Assistance Council............................................. 24
Jones, Jack, Vice President, Chase Manhattan Mortgage Corporation
Deerfield Beach, Florida on behalf of the Mortgage Bankers
Association of America......................................... 27
Miller, Madeline, Executive Director, Wil-Low Nonprofit Housing,
Inc., Hayneville, AL........................................... 29
Myer, Joe L., Executive Director, National Council on Agriculture
Life and Labor Research, Inc., Dover, DE, Executive Committee
Member, National Rural Housing Coalition....................... 31
Rayburn, James R., Jackson, MI, First Vice President, National
Association of Homebuilders.................................... 32
Shear, William B., Acting Director, Financial Markets and
Community Investments, U.S. General Accounting Office,
Washington, DC................................................. 8
APPENDIX
Prepared statements:
Ney, Hon. Robert W........................................... 64
Anders, Gideon............................................... 66
Bridges, Betty............................................... 76
Fong, Phyllis K.............................................. 85
Griffiths, Patty............................................. 104
Jones, Jack.................................................. 112
Miller, Madeline............................................. 119
Myer, Joe L.................................................. 126
Rayburn, James R............................................. 134
Shear, William B............................................. 142
Additional Material Submitted for the Record
Bridges, Betty:
Written response to questions from Hon. Barney Frank......... 157
Position Paper by the Council for Affordable and Rural
Housing on the Aging Section 515 Rural Housing Portfolio... 159
Miller, Madeline:
Written response to questions from Hon. Barney Frank......... 194
WITNESS
Tuesday, July 8, 2003
Dorr, Thomas C., Under Secretary for Rural Development, U.S.
Department of Agriculture, Washington, DC...................... 45
APPENDIX
Prepared statements:
Dorr, Thomas C............................................... 196
Additional Material Submitted for the Record
Dorr, Thomas C.:
Written response to follow up questions...................... 206
RURAL HOUSING IN AMERICA
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Thursday, June 19, 2003
House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to call, at 2:45 p.m., in
Room 2128, Rayburn House Office Building, Hon. Robert Ney
[chairman of the subcommittee] presiding.
Present: Representatives Ney, Tiberi, Renzi, Castle,
Waters, Lee, Scott, and Davis.
Mr. Renzi. [Presiding.] The Subcommittee on Housing will
come to order. I would like to read an opening statement.
Today, the subcommittee meets to discuss the importance of
rural housing in America. I am pleased to announce that this is
theubcommittee's first hearing on the subject in over a decade.
Our goal is to review these programs and look at the ways
to increase the proficiency and cost effectiveness. Rural areas
are often plagued by poverty, high numbers of substandard
homes, affordable housing shortages, costly development and
inadequate access to mortgage loans.
The Rural Housing Service funds its programs through an
insurance fund which provides direct loans, guaranteed loans
and grants to help families obtain and maintain affordable
housing in rural areas. Today, it is estimated that rural
housing programs help finance new or improved housing for
65,000 moderate low-and very low-income families each year.
However, questions have arisen in recent years about the
effectiveness of rural economic development policies and
creating new opportunities for rural residents, as agriculture
and other resource-based economic sectors decline in their
overall importance to most rural economies. A wide ranging set
of often overlapping programs target rural areas and their
special needs.
But according to some critics, there remains little overall
coordination of these various programs to produce a coherent
rural policy. Over 88 programs administered by 16 different
federal agencies target rural economic development.
The U.S. Department of Agriculture administers the greatest
number of rural development programs and has the highest
average of program funds going directly to rural counties--
approximately 50 percent. On a personal note, I was raised in
southern Arizona and grew to understand that a safe and secure
home is the foundation for the family unit.
My belief in the importance of home ownership remains
steadfast. It is of great importance to apply these fundamental
values and rural experiences to help communities develop new
economic vehicles that will enable them to grow and prosper.
I look forward to hearing from all of our witnesses today
to discuss the various ways I which home ownership can be
strengthened for our rural communities and contribute to the
overall quality of life for rural families.
At this moment, I would like to recognize Ms. Waters from
the great State of California.
Ms. Waters. Thank you very much. I know that Chairman Ney
is tied up in a meeting and could not be here. But I am
delighted that you are chairing this meeting. And I thank Mr.
Ney for calling this hearing on an issue that really needs to
be discussed and is central to the need for more affordable
housing in our country.
Usually, when we discuss poor people, the focus is on urban
centers. However, there are poor people in rural America across
this country who need our assistance to help improve the
quality of their life.
The U.S. Department of Agriculture's rural development
mission is to administer programs that are designed to meet the
diverse needs of rural communities. The three principal program
areas are Single Family Housing, multifamily housing and
Community Facility programs.
According to an American housing survey, with the
assistance of the Housing Assistance Council, of the 200
poorest counties in America, all but 11 are non-metropolitan.
There are 363 rural counties where the poverty rate has
exceeded 20 percent.
Since these figures started being collected in 1960, Title
5 of the Housing Act of 1949 authorized the Farmer's Home
Administration to grant mortgages for the purchase or repair of
rural single family houses. Second, it authorized financial
assistance in rural areas to farmers, owners, developers and
facilities, ensuring to them various loans and financial
assistance for low rent housing for farm workers.
One of the primary issues that needs to be addressed is the
rental housing program. Section 515 of the Rural Housing
Program provides direct loans to non-profit and for-profit
developers for multifamily housing for very low-and low-to
moderate-income families, elderly persons and persons with
disabilities. It is important that when RHS approves an owner,
who agrees not to displace residents from a development, that
if an owner decides to convert the property to condominiums or
luxury apartments, that residents are protected.
That is why in 1987, the Emergency Low-Income Housing
Preservation Act of 1987 was enacted after a number of owners
of developments that were financed before 1979 were prepaying
their loans and displacing elderly and other households from
their homes. The RHS rental housing portfolio contains 450,000
rented apartments and Section 515 developments. The average
annual tenant income is about $8,000, which is equal to only 30
percent of the nation's rural median household income.
The General Accounting Office indicates that 100,000
families could be displaced if the Section 515 portfolio is
deregulated. These families have limited means and will not be
able to afford market rate rentals.
There are over 90,000 Section 515 households who do not
receive rental assistance. I will be interested in hearing
suggestions on ways to improve the program to ensure that the
people who need it most will be served.
Thank you very much. And I yield back the balance of my
time.
Mr. Renzi. I want to thank the gentlelady from California
and ranking minority member, a true advocate for the families
of limited means, a true fighter.
I want to recognize my neighbor over in the Cannon
Building, who has taken the time to teach me a lot as it
relates to housing issues, the gentleman from Georgia,
Congressman Scott.
Mr. Scott. Thank you very much, Mr. Renzi. I appreciate
your warm and kind remarks.
My distinguished colleague from Arizona, I certainly
appreciate your chairing this committee. I want to thank
Chairman Ney and Ranking Member Waters for holding this
important hearing today as well on this important subject of
rural housing in America, especially given that it has been
about 10 years since this committee has had a full hearing on
this important subject, as Mr. Renzi pointed out.
My district is very diverse. I represent urban, suburban
and rural areas to the south and east and north of Atlanta,
Georgia. The challenges of increasing home ownership and
providing decent quality homes is different for each of these
areas.
And from time to time, Congress should ask if a particular
policy is working and if it can be improved. I look forward to
the testimony from our distinguished panel of witnesses about
the effectiveness of rural housing programs. And I certainly
want to thank you for taking the time to come up to Congress to
share with us your expertise and thoughts.
And I also want to mention an issue regarding manufactured
housing, which is a large part of housing in rural America. I
certainly hope that the industry and Fannie Mae can work out an
assessment on available 30-year mortgages.
I do not think that rural Americans, especially the
elderly, should be penalized for the past unscrupulous loan
practices. There are some very serious questions I think we
certainly need to take a look at and hopefully, we will get to
today.
For example, how would the hypothetical block granting of
Section 8 programs, which are under attack now, affect rural
housing authorities? I think that is very important for us to
take a look at, as we look at this issue of moving Section 8
block granting it to the states, which we hope we have
effectively stopped. But I think that question needs to be
answered.
Would this put a strain on other rural housing programs,
for example? Also, I understand that the Farm Credit
Administration provides rural housing loans.
I think we need to examine the question as to: do you find
that the Farm Credit Administration programs compete with other
Federal programs? And do you believe that requiring a high down
payment for manufactured housing mortgages will put a strain on
rural housing opportunities?
Some very serious questions. This is very timely. And I
certainly appreciate the chairman and Ranking Member Waters for
doing it and Mr. Renzi, for you doing a fine job of hosting
this for us. Thank you very much.
Mr. Renzi. I thank the gentleman. And his expertise is well
noted. And I am sure the questions you will see today contain a
lot of deep substance.
I will now recognize the gentlelady from California, Ms.
Lee.
Ms. Lee. Thank you very much. And I wanted to also thank
the chair, in his absence, and to our chair here today and to
our ranking member for this hearing and to the panelists who
have come to present this testimony.
You know, oftentimes, we from urban centers--I am from
Oakland, California--forget really that California actually has
many, many rural communities. And that we sometimes forget also
that in these rural communities, there are deplorable
conditions, poor infrastructure. Many of the homes are
unaffordable.
And so I think that it is a very important hearing today.
And it is important for myself, being from an urban community,
to really understand and learn and be reminded that what
affects urban housing issues--in terms of affordability, in
terms of home ownership, in terms of infrastructure, in terms
of safety--also affects our rural communities. And we should
have a comprehensive strategy in terms of providing for decent
and affordable housing for everyone.
And that should be part of our domestic agenda. And it
should be a priority.
So I just want to thank you again, Mr. Chairman, for this
hearing and look forward to the testimony.
Mr. Renzi. Thank the gentlelady from California for her
insights.
Move now to the gentleman from Alabama, the former
prosecutor, Mr. Davis.
Mr. Davis. Thank you, Mr. Renzi, Mr. Acting Chairman, as it
were.
Let me welcome the members of both panels here today. And
let me certainly thank, in his absence, Chairman Ney for
calling this hearing.
I noted as I was watching the television feed of this in my
office, that Mr. Renzi opened by saying that this is the first
rural housing hearing in 10 years. I am very much struck by
that. I am very much struck by that.
When Michael Harrington wrote in 1965 about the other
America, he was talking about portions of our country that have
been extraordinarily isolated. And he was talking about people
whose needs sometimes get lost in this otherwise wonderful
process of ours.
And as we think about if Michael Harrington were to write
that book today or if another Michael Harrington were to write
that book today about the other America, I think he would be
talking in very large measure about people who are living in
rural America. My 7th District of Alabama happens to contain
five of the poorest counties of the United States, according to
the U.S. Census Bureau. And all five of those counties are
extraordinarily rural.
And as we talk about moving this economy forward, I think a
large part of that conversation has to involve connecting and
closing the gap between rural America and suburban and urban
America. So I am happy that we have this hearing. And I am
happy that it gives us a chance to talk about this pressing
issue.
I will make one other point. When the administration's
budget was announced several months ago, a lot of us on this
side of the aisle had sticker shock.
Normally, sticker shock is because things are higher than
we expect them to be. Our sticker shock was based on the fact
that the commitment was much less than we thought it would be.
And as someone who represents a rural district and as
someone who represents a district that is very much dependent
on rural housing initiatives, two things caught my eye. The
administration proposed to eliminate the RHED program, the
rural housing part of HUD, and the USDA's Rural Community
Development Institute, two programs that coincidentally--or
maybe not so coincidentally--happen to be the only rural
capacity building programs that really exist.
A budget says something about our priorities. A budget says
something about what we value and what we think is important.
And what troubles so many of us on this side of the aisle
and some like-minded folks on the other side of the aisle is
that in so many areas but particularly when it comes to rural
America, we are walking away from a very important commitment
that we have made. So to the extent that this hearing gives us
a chance to shine some light on that, to the extent that this
hearing gives us a chance to hear some perspective on a
forgotten part of America, then I very much welcome this
process and yield back the balance of my time.
Mr. Renzi?
Mr. Renzi. I thank the gentleman for pointing out the
contentious issues that were surrounding at least the original
blueprint of that budget. And I agree with him.
I thank the gentleman from Alabama. We will move to our
first witnesses. Two witnesses today on our first panel. Our
first is Ms. Phyllis Fong, who was sworn in as Inspector
General for the United States Department of Agriculture in
December of 2002.
She is responsible for conducting and supervising audits
and evaluations, as well as investigations and law enforcement
efforts relating to the USDA's programs and operations. Prior
to her appointment at the USDA, Ms. Fong had been an Inspector
General for the U.S. Small Business Administration. She is a
career member of the Senior Executive Service.
Welcome, Ms. Fong.
Our second panelist and witness today is Mr. Bill Shear.
And he is the Acting Director for Financial Markets and
Community Investments at the U.S. General Accounting Office.
He has directed studies and is addressing federal oversight
of government sponsored enterprises, including current
evaluations of empowerment zones, securitization of community
development lending and Federal Home Loan Bank System's
financial activities. Prior to joining GAO, Mr. Shear was a
senior economist at Freddie Mac, where he analyzed home
ownership decisions and HUD's geographic purchase goals for
Fannie Mae and Freddie Mac.
Welcome, Mr. Shear.
I would remind the witnesses that your written statements
will be included in the record. We ask that your oral testimony
be limited to five minutes. We will begin with Ms. Fong. Ms.
Fong?
STATEMENT OF PHYLLIS K. FONG, INSPECTOR GENERAL, U.S.
DEPARTMENT OF AGRICULTURE, WASHINGTON, DC
Ms. Fong. Thank you, Mr. Chairman and members of the
subcommittee. I am pleased to be here today to provide
testimony about the Office of Inspector General's work at
USDA's rural housing programs. With me today are Bob Young,
Deputy Assistant IG for Audit, and John Novak, Acting Assitant
IG for Investigations, who will help me respond to your
questions.
I would like to summarize the highlights of my testimony
for you at this time.
As you know, the Rural Housing Service within USDA has
three primary programs: Single Family Housing, multifamily
housing and Community Facility programs. OIG oversight of these
programs has focused on a number of different areas over the
past decade.
During the 1990's, we conducted audit work in the RHS
program of multifamily housing and single family housing. Over
the past several years, our audits have focused on more
specific and narrowly targeted issues, most often in response
to congressional and other requests.
Two of these audits have led us to identify areas where we
need to provide broader audit coverage. These would include
insurance coverage in multifamily housing projects and the
issue of eligibility for rental assistance. In addition to our
formal audit work, our desk officers continually assess program
activities. Our investigation side of the house receives and
pursues allegations of fraud in RHS programs.
Based on our work in these areas, we have identified six
major challenges for RHS management. These challenges include:
portfolio management; unallowable and excessive expenses
charged to RRH projects; RRH projects leaving the program;
rental assistance; allocation of funds to rural areas; and
performance measures.
My prepared statement discusses all six of these challenges
in some detail. So today, I would just like to focus on the two
most significant issues, in our view. And those two issues are
unallowable and excessive expenses and performance measures.
RRH programs can be vulnerable to fraud and abuse because
of the large cashflows involved. We have worked with RHS to
address these problems and to stop those who abuse the program
from participating in the program.
In 1999, we issued a comprehensive report on program fraud
and threats to tenant health and safety, which described the
results of a nationwide review of these issues. Financial
records that we reviewed revealed over $4.2 million in misused
funds at apartment complexes, operated by 18 owners and
apartment managers.
We identified 145 complexes that showed serious physical
deterioration. Problems included leaky roofs, worn exterior
siding, unsafe balconies and similar kinds of problems.
In response to these issues, RHS has been working with the
owners and management agents to resolve these health and safety
issues. We have found, through our audit and investigative
work, that there are several kinds of common schemes used by
owners and management agencies to improperly withdraw funds
from complex accounts.
One such scheme involves double charging apartment
complexes for management-related expenses. Another scheme
involves the owner or management agent charging complexes for
personal expenses.
A third type of scheme involves unallowable charges made by
identity-of-interest companies. These in particular are very
complex schemes. And they result from program vulnerabilities,
which raise a lot of concerns.
RHS, in response to these issues, has developed some
proposed program regulations to address these problems. Our
assessment of the regulations as they are currently drafted has
concluded that the proposal has satisfactorily addressed 4 of
our 19 audit recommendations. We believe that additional work
needs to be done on the remaining 15 recommendations.
On the investigative side of the house, we have run a
significant number of investigations of multifamily housing
programs, which have led to 25 convictions and $8 million in
recoveries. And in the single family housing program, we have
had 30 convictions and $2.3 million in investigative
recoveries. So we do continue to see a large number of
investigative allegations and referrals coming to our office.
Next, I would like to address the issue of performance
measures. As you know, managers need accurate performance data
to assess how effective their programs are in accomplishing
their mission.
We did a review in 2001 to evaluate RD's performance data
and results. And we found that in many cases the data that were
included in RD's report were inaccurate or unsupported. And as
a result, we found that the report was of little utility.
We believe these problems are caused primarily by RD's lack
of guidelines for collecting, validating and reporting its
performance results and documenting its data collection. We
also found, in some cases, that the items being measured were
not directly related to the program mission and that in other
cases, the performance measures were not supported.
You may wonder: why is this important? Well, we reported an
example of the consequences of inaccurate data in this program.
In 2001, we did an audit of the Rural Housing Service and
found that RHS reported it had built over 6,500 units, when in
fact it had built only 222. As a result of this inaccuracy in
data and reporting, $122 million out of the total $153 million
allotted to the program was not used for program purposes. Had
RHS had accurate data, perhaps this money could have been
directed to program purposes.
We also believe that it is important for the program to
develop internal controls that are accurate and that help the
program to manage its program. We did a report in 2002 that
reported on some vulnerabilities in the material weakness
process within RD.
So in conclusion, we believe that RHS faces a number of
management challenges in its efforts to deliver safe and
affordable rural housing programs. RHS itself has acknowledged
these challenges. And we are working with them to develop an
audit program for next year that will help them to address
these issues.
Thank you.
[The prepared statement of Phyllis K. Fong can be found on
page 85 in the appendix.]
Mr. Renzi. Ms. Fong, thank you so much for your insights
and your statement.
Mr. William Shear?
STATEMENT OF WILLIAM B. SHEAR, ACTING DIRECTOR, FINANCIAL
MARKETS AND COMMUNITY INVESTMENT, U.S. GAO, WASHINGTON, DC
Mr. Shear. Mr. Chairman, members of the committee, I am
pleased to be here this afternoon to discuss opportunities GAO
has identified to improve management at the Rural Housing
Service. My testimony today is based on two reports addressed
to this committee: first, our September 2000 report on rural
housing options; and second, our May 2002 report on multifamily
project prepayment and rehabilitation issues.
To summarize, we have found that while the Rural Housing
Service has helped many rural Americans achieve home ownership
and has improved the Rural Rental Housing stock, it has been
slow to adapt to changes in the rural housing environment.
Also, the Service has failed to adopt the tools that could help
it manage its housing portfolio more efficiently.
In particular, our work on rural housing options focused on
the dramatic changes in the rural housing environment since
rural housing programs were first created. These changes raise
questions as to why the separately operated rural housing
programs are still the best way to ensure the availability of
decent, affordable rural housing.
Overlap in the products and services offered by the Rural
Housing Service, HUD and other agencies has created
opportunities for merging programs for sharing the best
features of each program. For example, the Service's single
family loan guarantee program plans to introduce its automated
underwriting capabilities through technology that FHA has
already developed and has agreed to share with the Rural
Housing Service.
Also, even without merging programs or sharing the best
features of the programs of others, the Rural Housing Service
could increase its productivity and lower its overall costs by
centralizing its rural delivery structure. Here I will note
that a number of states, including the State of Ohio, have made
steps to consolidate the number of district offices within
their states.
In addition, servicing of single family loans is now
conducted centrally at the St. Louis Servicing Center. However,
for the most part, the Service's delivery structure remains
largely decentralized.
In addition, shifts in program funds, such as those from
direct loan programs to loan guarantee programs, have
contributed to challenges posed by the decentralized rural
delivery structure.
I will now turn to our work on multifamily issues. Here we
found that the Rural Housing Service does not have a mechanism
to prioritize the long-term rehabilitation needs of its
multifamily housing portfolio.
As a result, the Service cannot be sure it is spending
limited rehabilitation funds as effectively as possible. It
also cannot tell Congress how much funding it will need in the
future.
How they deal with the long-term needs of an aging
multifamily portfolio is the overriding issue for the Section
515 multifamily properties. About 70 percent of the portfolio
is more than 15 years old and in need of repair.
The Service's state level personnel annually inspect the
exterior condition of each property and conduct more detailed
inspections every 3 years. However, the inspection process is
not designed to determine and quantify the long-term
rehabilitation needs of the individual properties.
To better ensure that limited funds are being spent as cost
effectively as possible, we recommended that USDA undertake a
comprehensive assessment of the Section 515 portfolio's long-
term capital and rehabilitation needs. It is our understanding
that, in response, the Service plans to develop an inspection
and rehabilitation protocol by February 2004. The protocol will
be based on an evaluation of a sample of properties.
Mr. Chairman, that concludes my oral statement. I would be
happy to answer any questions.
[The prepared statement of William B. Shear can be found on
page 142 in the appendix.]
Mr. Renzi. Thank you, Mr. Shear. Both your statements are
absolutely eye opening. And I am sure we have got many
questions here.
Let me, for those who might be wondering, make sure we get
into the record today that Under Secretary Dorr of the USDA
will be attending a second day of hearings that we will be
conducting on the subject matter in July, in case we are
wondering about that.
Before we move on to questions, I recognize Chairman Ney is
here in the room. And so we were going to finish up some
questions. And then we will turn it back over to the real
chairman, okay?
Let me recognize the gentleman from Alabama, Mr. Davis.
Mr. Davis. Thank you, Mr. Renzi. Let me, if I can, pick up
on something that both of you alluded to in your written
statements.
One of the anomalies that is striking to some of us is that
the actual rate of home ownership is frankly very high in rural
America. I think it is around 76 percent.
At the same time that it is very high, there is significant
problem with the quality of housing stock. And because of the
problem with the quality of housing stock, often the homes that
people own are not typically leverageable as collateral. And
they cannot be used in the kinds of wealth creating manner that
homes are used by some people who own homes.
Can both of you address that particular problem and what
RHS can do to get a better handle on that issue? Because the
problem strikes me as not necessarily the conventional one of
increasing and promoting a higher rate of home ownership, as
opposed to rental status, but making better use of the home
ownership rate that we have got in rural America.
Mr. Shear. I will go first on that. Many of the problems of
inadequate ability to use home ownership as a vehicle to gain
wealth for those who are near the bottom, low-income people, is
a very large challenge. Much of it has to do with market forces
that, to a large degree, the Rural Housing Service does not
have that much control over.
Nonetheless, the Rural Housing Service does deal with a
number of partners to try to encourage community development in
rural areas, dealing with a number of programs such as self-
help housing and other programs. It might be that some of those
programs may offer the best hope in terms of making sure that
those low-income rural residents who are homeowners have the
ability, through the community development in the communities
that they live in and through self-help programs, in terms of
using sweat equity and other means to try to develop more
equity in their homes.
Mr. Davis. Ms. Fong, do you have a different perspective or
an answer on that?
Ms. Fong. Based on my understanding of the work that our
office has done, we have not done much in that area. And so I
do not have any basis to give you an assessment at this time.
Mr. Davis. Let me turn to a slightly broader question that
both of you touched on in your written testimony as well, and
it is the utility of Rural Housing Services existing as a
separate entity or the feasibility of integrating the entity
into HUD. As you know from the conversations we have had about
Section 8 and conversations we have had about a variety of
programs, there is kind of a wholesale consideration and
evaluation going on in this House of what the relative role
ought to be between, say, the states and particular programs,
the Federal government and particular programs and the whole
structure and contours of a lot of these programs.
I want both of you to talk a little bit about the arguments
for keeping RHS separate from HUD. And I will kind of give you
the backdrop for these questions.
When we had the Secretary of HUD here several months ago to
talk about housing, he was not--you know, one of the things
that he said that kind of caught my attention and probably the
attention of a lot of people in the room, was when I asked him
about several rural housing programs that were being eliminated
or cut, after struggling with the answers, he finally stated,
you know, ``I do not know a lot about rural housing.''
I am not sure that is the ideal perspective I would want a
HUD secretary to have. And in light of that, what is going to
be the future of RHS if it is put in a different home, if it is
put under HUD?
Do both of you have confidence that the program is going to
be administered in the way that we want, given HUD's relative
unfamiliarity with RHS and the principles behind it?
Mr. Shear. Since it was one of the reports which I
summarized in my written statement that addresses the issue of
options, I would address it in this way. The areas where it
seems to make the most sense to us to have a seperate service,
where the Rural Housing Service really plays a unique role and
has expertise and experience, is in dealing with many of the
poorest rural areas in America--Appalachia, Mississippi Delta,
Colonias and Indian trust lands. I am sure I could include the
areas that you alluded to in your opening remarks, as far as
some of the districts in the State of Alabama.
I think that if the programs of the Rural Housing Service
that are targeted particularly to those areas would move to
another agency, being it HUD or some other way consolidated
with the programs of another agency, that the challenges would
be pretty enormous. And that is where we say, in terms of the
options, that would be the hardest area.
It is in the areas where we start seeing where the Rural
Housing Service is providing housing assistance that is not
largely distinguishable, in terms of the areas it is serving,
when it starts getting into urban sprawl, into more suburban
areas and things like that, where it is harder for us to say:
why would you want a separate structure?
Mr. Davis. So if you will just yield me an additional 30
seconds or so, Mr. Chairman, the perspective that you are
expressing is that for the really acute rural housing
problems--because we know in this country, rural has different
meanings. There is the rural that I have got in my district,
which is very poor. And there is the rural that lies outside
the suburbs that can be very wealthy.
For acutely impoverished areas, your perspective is that
RHS has a unique, distinct function that it can serve and that
that mission may not be performed as effectively or as well if
it is absorbed within HUD.
Mr. Shear. We would have more concerns about the ability to
integrate the programs that reach into the most acutely poor
areas in terms of those parts of the Rural Housing Service.
Mr. Davis. Ms. Fong, can you give a very, very brief answer
to that same question?
Ms. Fong. We have not specifically addressed that issue. It
really is more within GAO's purview to look at those kinds of
cross-cutting Government issues.
I would draw your attention to this: I think that Mr. Shear
is absolutely right in identifying the issue of how do you
define rural area versus urban area bedroom sprawl? I think
that is an issue area for the policy makers to decide how do we
define these programs? And I do not have a solution.
Mr. Davis. Thank you, Mr. Chairman.
Mr. Renzi. Thank you, Mr. Davis.
I would like to recognize the gentlelady from the Golden
Bear State of California, Ms. Waters.
Ms. Waters. Thank you very much. I am sorry I had to leave
the room for a moment for an urgent call. But I was very
interested in what the Inspector General was describing as the
audit and investigative work that has been done.
What bothers me about the potential risk of a program like
this is mismanagement. But oftentimes, that mismanagement is
because we have not done enough in training and assisted those
who are involved with the program enough so that they can avoid
some of these management mistakes.
The business of these managers who have secondary
businesses, for example, who may have an electricity shop or a
plumbing shop. And they turn out to be the same ones to supply
the services, et cetera. It seems to me that that kind of stuff
could be easily managed and dealt with.
Certainly, it should be disclosed. But you know, these
individuals should be vetted. They should be screened in some
way, so as to know who they are and to avoid backing into those
kinds of situations.
Oftentimes, poor people are put at risk because the
oversight and the training and the technical assistance that is
needed to manage these programs is not built into the program.
So what can you tell us about your recommendations? And what
can you tell us about the severity of some of the things that
you discovered or the lack of severity of some of the problems
that you discovered?
Ms. Fong. Well, I think you have put your finger on it,
that in the area of overcharging, excessive charging to the
Rural Rental Housing program, there are an awful lot of
allegations of fraud and mismanagement. Much of it is due to
activities by so-called identity-of-interest companies, where
the project manager has a friend or a relative on the outside.
They manage to equity-skim the project's accounts.
We are very concerned about that. We have made a number of
recommendations to address that.
RHS is in the process of developing some regulations in
response to our recommendations. Our current assessment is that
we need to continue to work with RHS to tighten up those
regulations because there should be a way to go after this.
I also believe that in FY 2000, the Congress enacted some
legislation that would have tightened up some of these
restrictions, addressed some of these issues, and provided the
Secretary with some authority to impose civil penalties. Once
that program takes off and is implemented, that should help to
address some of these issues.
Ms. Waters. Okay. Let me raise a question about the
apartments that roll off the program with prepayment. That is a
problem, particularly when we have a housing market such as we
have now, where the demand is so great.
And if, in fact, the rising costs of maintaining those
units is such that the owners, I guess, would be better off by
prepaying them and getting out altogether, then I could
understand why they would do that. What incentives do we offer
to keep them in the program?
Ms. Fong. That is one of the challenges that we have
identified. Under the current situation, as the projects
mature, it is frequently in the project owner's interest to
prepay for a lot of reasons.
And so as a result of that, there is an incentive payment
that is being offered by RHS to project owners to enable them
to stay in the program and to make it financially feasible for
them to stay in the program. The payments would be equal to the
equity value in the property at the time the prepayment is
planned.
Now we have not looked at how that program is being
implemented. We would certainly want to look at that program or
at least keep an eye on it, to make sure that these payments
are being made appropriately and that, in fact, the project
owners continue to be eligible to maintain the properties to
provide safe and decent housing.
Ms. Waters. Can they borrow money for the upkeep of these
apartments at a very low or no interest rate?
Ms. Fong. Yes.
Ms. Waters. How low?
Ms. Fong. I understand it is 1 percent.
Ms. Waters. Cannot get much lower than that. Thank you very
much.
Mr. Renzi. Thank you, Ms. Waters.
Recognize the gentlelady from California, Ms. Lee.
Ms. Lee. Thank you very much. Let me just ask you, Mr.
Shear--and I think Mr. Davis referred to it also with regard to
home ownership rate is higher in rural communities. What is it?
You say it is 76 percent, which is very high.
But I am wondering, given that percentage and yet given the
rates of poverty, one is--well, what is first of all the
minority home ownership rate in rural America, in terms of the
Latino and the African-American community? Do you have that
broken down?
Mr. Shear. I do not have it broken down here. We can
provide a statement for the record on it.
Ms. Lee. Yeah, I would be very interested to see that.
Mr. Shear. It is definitely, when you go into the poorest
areas of America, the rural home ownership rate is much lower
than 76 percent. Among African-American and Hispanic
communities, it is much lower. And we can provide those
statistics for the record. I just do not have them right here.
Mr. Davis. Ms. Lee, if you would yield for one second? I
think it is 61 percent among minorities.
Ms. Lee. Sixty-one percent? That is African-American and
Latino? Okay. Thank you very much.
Let me also ask, did you find and are you finding, in terms
of the housing stock, that rural America significantly needs
more housing stock? Or is it rehabilitation only that is a
strategy that makes sense?
Mr. Shear. For the record, according to the 2001 American
Housing Survey, the homeownership rates for African-Americans
and Hispanics in non-metropolitan areas was 61 and 59 percent,
respectively. With respect to your broader question, I cannot
answer directly what Congress's priorities should be in terms
of spending and supporting the overall quality of the rural
housing stock.
With respect to the major multifamily program for the Rural
Housing Service, which is the 515 program, what we observe here
is that a very high percentage of the projects are around 20
years old. They are aging. They are in need of repair.
Many of them, the use restrictions due to the original rent
support contracts when those projects were built, are coming
due. So our focus, in terms of one of the reports that I
discussed, was in terms of the 515 stock and the need to assess
and to prioritize the financial and the structural condition of
that stock, in order to be able to prioritize where the Rural
Housing Service could direct incentive payments and other
resources to try to deal with the problem of keeping quality
units in this 515 stock.
Ms. Lee. Do we need more quality units in rural America?
Mr. Shear. Based on our work, I would say we certainly find
evidence, as others that you will hear during the second panel,
of certain housing needs. There are housing needs in rural and
urban areas.
But certainly, in rural areas, there are many housing
needs. We feel that, in terms of our analysis, we are trying to
provide information and analysis that will help the Congress
deal with basically how can we manage better, how can we take
actions to have resources go further. What are our options in
terms of policies?
But I think the ultimate question--how much should be spent
on the various activities, the various needs that this body
faces--that is really your leadership.
Ms. Lee. Right. But in terms of a policy option, I mean, a
policy option is increasing the affordable housing stock. I
mean, we do have a bill, the National Affordable Housing Trust
Fund. It increases housing stock, urban and rural America.
Would that be a recommendation from you to support, given
what you have learned or what you know about rural America?
Mr. Shear. In that we have not analyzed the particular
program or other programs developed in terms of trying to
strengthen the quality of rural housing, I am not in a position
to really recommend that initiative versus others.
Ms. Lee. But as a policy option, do we need to increase
then just the stock of affordable housing in rural America? I
know we do in urban America. I am trying to learn more about
rural America.
Mr. Shear. There certainly are very pressing housing needs
in rural areas. And certainly, there are very pressing housing
needs, particularly in areas where our work on the Rural
Housing Service have really concentrated, to a great degree, on
the poorest rural areas in America. And certainly, you have
some very pressing housing needs.
What I am saying here is that there are some value
judgments involved here in terms of where priorities are. But
you can certainly find many rural areas where you have housing
conditions that are much further from providing adequate, safe
and sanitary housing, compared with many of our urban areas.
There are certainly a lot of pressing needs in rural areas.
Ms. Lee. Okay, Mr. Chairman. So you are not prepared to
say, as a policy option, we need to increase the stock of
affordable housing as part of your recommendation.
Mr. Shear. Basically, I think that that is the point where
I just say there are some very pressing needs. But we have not
assessed specific proposals. And some of those involve value
judgments where we say that we go so far. But then you as a
body, in terms of Congress, have to consider what other
priorities----
Ms. Lee. Okay, thank you very much.
Ms. Waters. Will the gentlewoman yield?
Ms. Lee. Sure.
Ms. Waters. Thank you. This line of questioning by my
colleague from California is extremely interesting and
important because we are still seeing on television and in
magazines dilapidated dwellings that are falling down in rural
America. We are still seeing places without indoor plumbing.
And it was just a few years ago that we had Sugar Ditch down in
Mississippi, where people had cardboard serving as siding for
their homes.
Now what do you know about this? Have you been into any of
these areas? And if you have, why are you not sitting there
just jumping up and down about the living conditions in some of
these communities?
Mr. Shear. In terms of the poorest areas, I would like to
introduce Andy Finkel, if he could come up to the table, he has
been the assistant director who has led our work on rural
housing. He certainly has visited many of the areas in the
poorest rural areas of America. And I think that he could give
a better answer than I could.
Ms. Waters. Okay. All right. Okay.
Mr. Renzi. Mr. Finkel, you will state your full name please
for the record?
Mr. Finkel. Andrew Finkel.
Mr. Renzi. Thank you. Proceed.
Mr. Finkel. There are two pictures on the highlights page
of our report. They are before and after pictures, actually.
One is a shotgun house that a gentleman lived in for 46 years
in northern Mississippi.
And the next picture is the house that he moved into with a
Rural Housing Service direct 502 loan, leveraged with Federal
Home Loan Bank, state and local money.
It is in a historically African-American neighborhood that
they wanted to convert in northern Mississippi. And it took a
lot of work with a lot of leveraging.
But there were about a half dozen new houses like that
built in the development. People moved into a nice
neighborhood. We also saw was that in the immediate
neighborhood around it people were fixing up their houses.
To follow up on you point about people living in cardboard,
we also visited the colonias on the border in Texas. And that
is where we saw entire neighborhoods of homes without water,
without electricity, without sewers.
Mr. Renzi. Thank you.
Ms. Waters. Just one more and I will not take much longer.
Mr. Renzi. Yes, ma'am.
Ms. Waters. Is there an assessment of this kind of housing
in rural America? Where can we find the status and condition
and a real report on the housing needs of rural America? Where
is that information deposited?
Mr. Finkel. There is a report that comes out on the status
of rural american housing, I think it is the Housing Assistance
Council that puts it out.
Ms. Waters. It describes these shotgun and cardboard----
Mr. Finkel. Exactly.
Ms. Waters.----and dirt floors and tin roofs. Where can we
get that information?
Mr. Renzi. Maybe you can provide it to the gentlelady,
please?
Mr. Finkel. Yes, we will provide it for the record.
Ms. Waters. Okay. Thank you very much.
Mr. Renzi. Thank you, Ms. Waters.
Let me finish because I want to make sure the chairman is
able to get in here and get the next panel going. I was really
taken, Ms. Fong, by the inaccuracy of the data that you all
found out through the audit. I think your statement said that
in one instance, RHS reported that they had built over 6,500
units--page 15--and in fact it had built only 222.
This kind of an injustice, I mean, that kind of a severity
of disparity of numbers in their audit almost rises or does
rise to the verge of investigation type of injustices. So I am
going to ask, first of all, that lack of management with the
inability to access the proper data, what is your
recommendation, first of all, to attack that specific issue?
Ms. Fong. I think that RHS has to take a number of steps to
deal with this. You are absolutely right. Until we can be sure
that the data on program performance is accurate, it is very
difficult to assess how well the program is performing. And I
think that cuts across every area of the program.
We have suggested to them that they look at their data
collection instruments, the way that they report the data,
their computer systems. There are a number of things that need
to be addressed, as well as the very basic issue of how do we--
or how does RHS--define success in its program?
What is the performance measure for success? And how do we
measure that?
And so there needs to be some very clear thinking about
this from step one all the way through the end.
Mr. Renzi. And general counsel reminds me, RHS is in a
position now where the accuracy, from this point forward, will
be there for us. Or what is the status?
Ms. Fong. I believe this is a multiyear process. I do not
know what the status is.
Mr. Renzi. We are not there yet. Okay. We are not there
yet.
I want to follow up on a line of questioning with Mr.
Davis. My district is 58,000 square miles, larger than the
State of Pennsylvania, including the largest Native American
Indian population in America. We lost several babies last year
with a late snowfall because I have got Native Americans living
in tin shacks, just similar to what Ms. Waters described. We
have got frostbite conditions on babies' toes going on.
In addition, I have got a situation where I go all the way
down to the border of Mexico, where some of the conditions,
dirt floors are common. So true poverty is still in the land of
milk and honey here in America.
And so I want to ask and go back along Mr. Davis' line of
questioning. When you target severe rural areas, those with the
most needy of areas, what program specifically is it that we
can turn to, to help in the most needy and the most critical
areas where we have these kind of effects?
Mr. Shear. It would be the historic traditional programs of
the Rural Housing Service. It would be the 502 single family
program direct lending. It would be the 515 program in terms of
direct lending for multifamily properties. It would be the
Section 521 rental assistance.
Mr. Renzi. Okay. I am with you. You have got a list of
programs, okay?
Mr. Shear. I would say those programs, the distinguishing
feature of those programs is that they are very deep subsidy
programs that are a fairly high cost per recipient. They do
bring housing assistance to the poorest.
Mr. Renzi. High cost to the recipient in what area? Down
payments or where?
Mr. Shear. High cost in terms of the Federal government's
role, in terms of the budgetary impact of those programs are
high.
Mr. Renzi. Oh, okay.
Mr. Shear. Yet they are programs that are targeted for the
very poor.
Mr. Renzi. And the poor's access to those programs is?
Mr. Shear. I am sorry, what?
Mr. Renzi. The access to those programs, the ability to get
all that money out. If it is such a high-cost program, are we
using it 100 percent?
Mr. Shear. In terms of whether we are using it 100 percent,
we have initiated some work which is looking at rental
assistance payments and looking at the obligations that are
made from that program. And we are looking at questions of what
is happening to unliquidated balances and things of that
nature.
So there is a question of whether all the resources that
Congress is providing is going to those uses.
Mr. Renzi. Okay, well, unliquidated--that went over my
head. Okay? And I realize I am a snot-nosed freshman, but we
need to be sure that we are directing the assets, directing
these high-cost monies right down at the level.
Let me give you a little softball question here and we are
going to finish up. The future of where we are going, as far as
the research, the auditing, the development, where do you see
us going as far as the review and oversight? And we will just
finish with that.
I apologize, Mr. Davis, we are going to get to the next
panel.
Mr. Shear. In terms of that, we serve the Congress and, as
you know, the majority of our work is dictated by requests from
committees. If I was going to point out areas you might want us
to look at--and I think, Mr. Renzi, I think that is your
question--we would look at, as far as a relatively new program,
the Section 538 loan guarantee program for multifamily housing.
I would look at the whole question, as the Service has
shifted from more direct programs to guarantee programs, of the
issues of what types of internal controls, what types of lender
oversight when you use private sector lenders, are necessary.
And I would also say that the self-help programs certainly look
like they are having some very positive benefits in some areas.
But we know there is variation. And there is a question of: are
there any best practices that could be captured?
Mr. Renzi. Thank you. We are now just scratching the
surface obviously of an issue that we have grabbed on to, where
many injustices exist. I look forward to Chairman Ney's
leadership on this issue and his commitment to future hearings
on this, as we begin to delve deeper.
The chair notes that some members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 30 days for members to submit written questions to these
witnesses and to replace their responses in the record.
I want to thank my colleagues for their questions and their
insights. And thank both witnesses--all three witnesses. Thank
you.
Mr. Shear. Thank you very much.
Ms. Fong. Thank you very much.
Chairman Ney. [Presiding.] I want to thank Panel Two. To
begin the introductions, we will defer to Congresswoman Barbara
Lee to introduce Gideon Anders.
Ms. Lee. Thank you, Mr. Chairman. Let me just say how
delighted I am that one of our panelists here is actually from
my district and is a real expert and an individual committed to
the issues with regard to affordable housing, both in urban and
especially in rural communities.
Mr. Anders--Gideon Anders--is the executive director of the
National Housing Law Project, which of course is headquartered
in Oakland, California. Mr. Anders and the National Housing Law
Project are the leading housing rights and justice organization
for low-income individuals across the country.
The National Housing Law Project's mission is to advance
housing justice, increase and preserve the supply of housing,
improve housing conditions, expand and enforce low-income
tenants and homeowners' rights and challenge the ongoing
housing discrimination that many people encounter in both urban
and rural areas.
I have had the opportunity to work with Mr. Anders and the
National Housing Law Project on issues ranging from the need
for a national housing trust fund to defending the rights of
tenants under the current HUD ``One Strike'' policy. Mr. Anders
certainly believes that housing should be a basic human right.
And I am delighted that he is here to bring his wisdom and
his knowledge and his insight to this subcommittee. And I just
want to thank all of the panelists for being here today. And I
want to thank our chairman and our ranking member for allowing
us the opportunity to listen to someone who is such a leader in
rural housing from Oakland, California, Mr. Gideon Anders.
Thank you very much, Mr. Chairman. And I yield the balance
of my time.
Chairman Ney. I want to thank the gentlelady and the
witness. And also we will call upon Mr. Castle, who will
introduce Mr. Myer.
Mr. Castle. Well, thank you, Mr. Chairman. I do want to
introduce Joe Myer, who I have worked with for a number of
years now. I see on this resume he came to Delaware in 1976.
And we worked together on a lot of projects.
He is the executive director of a Dover, Delaware--which is
a small town which is the capital of Delaware with a rural area
around it--based housing group called NCALL, which stands for
the National Council on Agricultural Life and Labor Research
Fund. He went to Elizabethtown College and then has a masters
from Delaware State University.
As I indicated, I have toured a number of sites with Joe. I
have also talked to Joe on a number of occasions.
He serves many different populations--the elderly, our
migrant workers, seasonal farm workers--in all of our counties
in Delaware. He has a very successful partnership with the U.S.
Department of Agriculture to implement rural housing programs.
He has been an active participant in many other rural
housing organizations, including being the founding President
of the Delaware Housing Coalition, chair of the Delaware Rural
Housing Consortium and Past President of the National Rural
Housing Coalition. He frankly has just been as involved with
this subject as anybody possibly can be.
I cannot imagine a better person to talk to us today about
this. He has volunteered his time to come up and share with us.
And we appreciate his being here.
I may not be here because I have a conference call I have
to do at 4:00. but I really appreciate Joe being here, as well
as, by the way, all the other witnesses who, based on their
resumes, seemed extremely qualified as well. And I yield back,
Mr. Chairman.
Chairman Ney. I want to thank you. And we will move to Mr.
Davis to introduce Madeline Miller.
Mr. Davis. Thank you, Mr. Chairman. Let me thank you for
having this hearing today as well. I have the pleasure of
introducing the lady who is third from the right, Madeline
Miller. Ms. Miller, you are actually not technically in my
district. But you are close enough. I am going to claim you for
purposes of today anyway.
Ms. Miller is a graduate of my mother's school, Alabama
State University, and was born and raised in Pine Hill,
Alabama. And she is here today because she is the executive
director of Wil-Low Non-Profit Housing, a non-profit housing
entity that serves Lowndes County and the county that is in my
district, Wilcox County.
It has done extraordinarily important work in terms of
providing technical assistance to low-income and moderate-
income families, to enable them in everything from housing
reconstruction, to financing, to the purchase of a home. And it
is particularly appropriate that you are here, Ms. Miller,
because as you heard from listening to the last panel, we have
an interesting phenomenon in America, that we have high
ownership, high home ownership in rural America.
But the quality of the homes is not what it should be. And
your program has taken a very significant role in the Black
Belt of Alabama, in rural Alabama, in trying to get a handle on
that particular problem, so that we do not have a situation or
a scenario in which people are technically homeowners but are
living in conditions that are still offensive to so many of us
in this room.
Your organization has taken the lead in trying to do better
in that area. And I want to thank you for being here today.
Chairman Ney. I want to thank the members for introducing
and welcome the panelists. And I will introduce Betty Bridges.
Betty is President of the Council for Affordable Rural
Housing, which represents the interests of over 300 members
that include for-profit and non-profit entities, as well as
local housing authorities and financial institutions. Ms.
Bridges was an official with the Farmers Home Administration in
her home State of North Carolina for nearly 30 years.
Patty Griffiths is speaking today on behalf of the Housing
Assistance Council, a national non-profit group working to
create more affordable housing throughout rural America. She is
the housing director of the Community Action Commission of
Fayette County, a non-profit organization located in Washington
Court House, Ohio.
I share Ross County, a neighboring county, with Congressman
Hobson. And I got a glowing recommendation on you for a half-
hour today. I thought it would let you know that. So
Congressman Hobson says, ``hello.''
And also, Jack Jones is Vice President in charge of the
Rural Housing Channel for Chase Manhattan Mortgage Corporation,
Deerfield Beach, Florida. He is speaking today on behalf of the
Mortgage Bankers Association of America, which represents 2,600
companies involved in the real estate finance industry.
James Rayburn is a homebuilder and developer from Jackson,
Mississippi. He has built more than 3,000 homes and is a noted
expert in creating public-private partnerships to build
affordable housing. This year, he is serving as the First Vice
President of the National Association of Homebuilders.
And welcome to the committee. We will start with Mr.
Anders.
STATEMENT OF GIDEON ANDERS, EXECUTIVE DIRECTOR, NATIONAL
HOUSING LAW PROJECT, OAKLAND, CA
Mr. Anders. Thank you, Chairman Ney. I appreciate you
inviting us to testify today. And also to Congressman Lee, I
want to really thank you for the fine introduction, which saved
me about 30 seconds in my delivery today.
Thank you very much. It is a pleasure.
We have restricted our testimony today to the prepayment
issues with respect to the Rural Housing Service. We are
concerned about several trends that we are seeing with respect
to its administration of the Emergency Low-Income Housing
Program or ELIHPA preservation program.
In our view, the agency is not enforcing ELIHPA, and not
preserving units that can and should be preserved. And it is
failing to protect residents against displacement.
Before we address our concerns, let me just briefly
reaffirm our fundamental belief that there is an absolute and
continuing need to maintain an effective Rural Rental Housing
preservation program that protects residents against
displacement and protects and ensures that there is adequate
housing in rural areas.
Frequently, Section 515 developments are the only available
affordable rental housing in a community that is decent, safe
and sanitary. The conversion of that housing deprives
communities of a critical housing source and forces elderly,
disabled and working households to relocate other communities
that are tens of miles away from their current homes, jobs and
families.
We have four concerns with RHS' administration of the Rural
Preservation Program. The first of these is that RHS does not
have sufficient funding to operate an effective preservation
program.
RHS has represented to this and other congressional
committees that it has sufficient funds to meet existing
preservation needs. That is not true.
For at least the past 9 years, RHS has not had sufficient
money to fund equity loan commitments that it has made to
owners who have agreed to remain in the Section 515 program if
they were provided an equity loan.
In the recent Federal Register, publication of proposed
regulations seeking to alter the preservation program, the
agency acknowledges that it does not have sufficient funds to
meet all the equity funds that it has agreed to fund and claims
to have unfounded agreements that were entered into as early as
1996.
What is troubling about this picture is that it is a self-
created problem. The RHS Section 515 appropriations do not
specify how much money RHS should be using for preservation,
for maintenance or new construction. Those decisions are made
administratively by the agency after it receives the
appropriations.
We believe that the funding issue will become more
significant over the next several years and that inadequate
preservation funding may cripple the program. We urge that the
committee to really look closely, as a result, at the needs of
the agency in terms of preservation.
The second concern that we have is that RHS is not
preserving all the developments that it can. It has created
several loopholes by which owners can and will circumvent the
prepayment and preservation process.
The most glaring example is RHS' unwillingness to extend
use restrictions through the acceleration and foreclosure
process. RHS takes the position that an owner who pays the
balance due on a loan in response to an acceleration of the
promissory note is not prepaying the loan and is free to use
the property as it chooses after the loan is paid.
RHS is also using the acceleration process to avoid dealing
with troubled projects. It routinely forecloses on properties
that it feels it cannot handle and then leaves it up to the
private market to determine what should happen to them.
We do not believe that RHS' position is justified.
The third issue is RHS does not affirmatively enforce
obligations to rent units to low-income residents. In a
Missouri case in which we are involved, the PHA--the Public
Housing Authority--is trying to prepay and demolish a 50-unit
development some 19 years after it secured the RHS 40-year
loan.
When the authority began to systematically relocate
residents and leave the units vacant, RHS did nothing. Even
after the housing authority initiated a lawsuit challenging
RHS' authority to enforce the Emergency Low-Income Housing
Preservation Act, RHA did not take any action to force the
housing authority to rent up the facility by completing it. As
a consequence, 48 units of affordable housing have been
standing empty for nearly 4 years.
The fourth issue that we are concerned about relates to
RHS' capacity to coordinate and control lawsuits in which
owners are challenging the validity of ELIHPA prepayment
restrictions or seeking damages for their imposition.
Currently, there appears to be no concerted effort on the part
of RHS or its counsel to ensure that ELIHPA, a federal law, is
properly enforced. Basic arguments, such as the supremacy of
federal laws over state laws, are not being advanced. And cases
are being settled instead of appealed because certain legal
arguments have not been made in the federal district courts
where these cases are first heard.
Moreover, RHS, or at least its counsel, appear intent on
settling cases even before the agency's liability has been
established. Potentially, these settlements may cost the
government hundreds of millions of dollars that could have been
better spent on preserving the housing in the first place.
Ironically, in one case, the RHS settled instead of
appealing an adverse decision. The residents have gone on to
appeal the decision and have sought and secured a stay of the
district court decision and sought and secured an injunction
against the owners selling the development or terminating the
tenants' RHS rights. It is indeed ironic that residents of a
development and not RHS are appealing this case.
Before I close my testimony, Mr. Chairman, I would like to
just point out a couple of issues with respect to the new
regulations that RHS has recently proposed and which is one of
the questions which the subcommittee has asked questions about.
The first provision that we are concerned about deals with
RHS' proposal to finance future Section 515 developments with
loans that are amortized over a 50-year term but which become
due at the end of 30 years. In other words, the proposal would
finance Section 515 loans over 50 years, but create a balloon
payment at the end of 30.
In our view, this proposal violates ELIHPA. And we urge the
sub-committee to direct RHS not to implement that provision
and, if necessary, prohibit it from doing so.
The other provision which we have concern about is one that
we referenced earlier, which proposes to allow an owner to
terminate its equity loan agreements if RHS does not fund the
agreement within 15 months of the time that it was entered
into. In our view, as long as RHS, and not Congress, determines
the amount of funding that is made available for preservation,
the choice of whether to fund incentive agreements lies with
the agency and no one else. It must not, therefore, be allowed
to make incentive offers to owners that it later chooses not to
honor.
Thank you.
[The prepared statement of Gideon Anders can be found on
page 66 in the appendix.]
Chairman Ney. Thank you.
Next witness?
STATEMENT OF BETTY BRIDGES, PRESIDENT, COUNCIL FOR AFFORDABLE
AND RURAL HOUSING, WASHINGTON, DC
Ms. Bridges. Mr. Chairman and committee members, can you
hear me?
Chairman Ney. There you go.
Ms. Bridges. I am very pleased to represent the Council for
Affordable and Rural Housing, CARH. My personal experience, as
was stated by the chairman, I was a former Farmers Home
Administration official for almost 30 years and a private
developer of affordable housing for 10 years.
I will address the questions that were supplied by the
committed and several additional points that we at CARH believe
are vitally important to the future of rural housing.
I have submitted separate written remarks. But I will
summarize those.
CARH members generally have a productive working
relationship with RHS, the agency. But we experience a high
degree of frustration at the lack of resources and the
consistency from state to state. The agency is not fully able
to meet its intended purpose and goals because it is organized
in a manner that inhibits the sharing of information and
training, thereby greatly adding to transaction cost and
preventing many meritorious transactions.
It is not adequately funded to either expand or maintain
its housing stock and is unable to effectively coordinate with
existing resources from other agencies. And its programs are
subject to artificial statutory restrictions that limit
development and preservation.
All of these points are addressed in CARH's March 2003
position paper on the aging portfolio. And I respectfully
request permission to have this inserted in the hearing record.
Chairman Ney. Without objection.
[The following information can be found on page 159 in the
appendix.]
Ms. Bridges. The rural housing finance market is
experiencing a paradox in that tools and resources for
financing affordable rural housing have become increasingly
complex and sensitive to the national financial markets. Yet,
at the same time, local market conditions remain local and
isolated with dispersed housing and employment patterns.
This affects both home ownership and rental housing
patterns, which are both vitally important to meet rural
housing needs. While home ownership is the American dream,
rental housing is absolutely necessary for elderly and low-
income Americans, which is the agency's client base.
In the 515 program, the average tenant income is about
$8,100 a year. Nearly 60 percent of the households are elderly
or disabled. We understand that there are various discussions
and contracts between HUD and USDA about home ownership
programs. However, we believe that S. 198 and H.R. 1913 have
the greatest likelihood of achieving real progress on this
point.
We understand that HUD instituted a Rural Housing Office
several years ago. But we have not seen any material
coordination in the field among multifamily or the voucher
programs.
We understand that there are various changes at the agency,
such as their recently proposed 3560 regulation, which is an
important step in streamlining and modernizing the regulations.
Still, 3560 does not address certain basic problems with
the program; namely, that the agency has an extremely onerous
process for transferring properties within the 515 system and
an even more difficult system for prepaying and refinancing
outside the system. The result is what one industry commentator
calls a toll road with no exits.
We appreciate, Mr. Chairman, that you proposed an amendment
last year to H.R. 3995 to restore contractual prepayment rights
to owners of 515 properties, just like they were restored for
owners of HUD properties. Prepayment restrictions that violate
contract provisions are being successfully challenged in court.
The Supreme Court's unanimous decision on a case last year
characterized the statute restricting prepayment rights as a
repudiation of the contract and is dishonoring an obligation.
At CARH, we share the committee's interest in the 521 rental
assistance--RA--perhaps the largest budget item for the agency.
That program generally works well. But there is not enough
funding.
The RA program really can only be analyzed in conjunction
with the 515 program. Since RA cannot exist without a
corresponding 515 loans, 515 loans are serviced on a budget-
based method so that State office rural development staff
scrutinize operating expenses. In many places, this has
resulted in significantly below market rents that do not pay
for ongoing maintenance costs.
We also note that other programmatic alternatives exist.
The 538 program is an excellent idea. But the 538 statute makes
implementation with other programs difficult.
The agency staff has been excited about the 538 closings to
date. While we support that enthusiasm, we have to note that
only a handful of the 538 closings have been made and are well
below industry expectations.
The 538 program must be revised on a statutory level so
that it is consistent with current commercial standards. And we
urge further hearings on this point.
We appreciate the hard work and the good intentions of this
committee, as well as RHS and RD staffs. We have identified
many areas where we feel that we can work together to make
progress.
Some of these points require a further federal financial
commitment. But others only require structural changes to make
transfers, prepayments and preservation easier.
And we urge the committee to consider these changes. I have
spent my entire career working in this industry. And I hope
that you will think of me and my organization, CARH, as a
valuable resource.
Thank you.
[The prepared statement of Betty Bridges can be found on
page 76 in the appendix.]
Chairman Ney. Thank you.
Ms. Griffiths?
STATEMENT OF PATTY GRIFFITHS, HOUSING DIRECTOR, COMMUNITY
ACTION COMMISSION OF FAYETTE COUNTY, OHIO, APPEARING ON BEHALF
OF THE HOUSING ASSISTANCE COUNCIL
Ms. Griffiths. Thank you for the opportunity to submit
testimony.
Chairman Ney. Excuse me. I think you need to move it
closer.
Ms. Griffiths. Is that better? Okay. Thank you for the
opportunity for me to submit testimony on rural housing today
to your subcommittee. And thank you, Chairman Ney, for
convening this very important hearing.
My name is Patty Griffiths. I am the housing director for
the Community Action Commission of Fayette County, known as
CAC. We are a non-profit organization located in Washington
Court House, Ohio.
I also am speaking today on behalf of the Housing
Assistance Council, a national Non-profit group working to
create more affordable housing throughout rural America.
Established in 1971, HAC provides financing, information and
other services to non-profit, for-profit, public and other
providers of rural housing.
Our written testimony includes detailed responses to the
questions posed by your subcommittee. But in this brief oral
presentation, I wanted to focus broadly on needs and on what we
are doing in Ohio with USDA Rural House Service programs.
First of all, housing and poverty. Most housing policy is
focused on urban concerns, which are of course substantial and
deserve attention. But needs are often just as great in rural
America.
HAC's research shows that of the 200 poorest counties in
the nation, all but 11 are non-metropolitan. There are 363
rural counties where the poverty rate has exceeded 20 percent
since those figures were first collected in 1960.
In housing for most of the 20th century, substandard
quality was the primary rural problem. While quality is still a
problem today, sharply higher housing costs have made
affordability, rather than poor conditions, the major problem
in rural housing, especially for low-income people.
Among the 23 million non-metro households, approximately
five million, or 22 percent, pay more than 30 percent of their
monthly incomes for housing costs and are considered cost
burdened. Of these non-metro cost burdened households, more
than two million pay more than half their incomes toward
housing costs.
We see these conditions also in rural Ohio. The average
person in a big city may not think of Ohio as a rural state.
But in fact, Ohio has the fourth largest rural population
among the 50 states, with over 2.1 million people. Of our
640,000 occupied rural housing units in Ohio, over 20 percent
are occupied by families that are cost burdened.
Now I would like to turn and speak briefly about our work
in Ohio. Community Action, our agency, was founded in 1965. And
we have been involved in housing for many years.
We have done home weatherizations since 1967. We have
developed and managed housing for the elderly, for disabled and
homeless.
We provide housing counseling. We have developed several
rental projects using the Low-Income Housing Tax Credit.
And we have used the major programs of the USDA Rural
Housing Service, including Sections 502, 504 and 515. We also
use some HUD programs.
But since 1995, our agency has helped over 100 low-income
families become homeowners through USDA's self-help housing
program. Right now, we are the only USDA self-help housing
builder in Ohio, although we are currently hoping to expand
into Ross County and into Clinton County.
Under this unique program, which is sometimes called a hand
up, not a hand out, we organize groups of eight to 10 families.
We help them qualify for USDA Section 502 single-family
mortgages. We work with them as they put over 1,000 hours--that
is per household--of sweat equity into the building of their
own homes and their neighborhoods. No one moves into their
homes until all the homes in the group are completed.
A skilled construction supervisor from our staff works
alongside these families. And they do 65 percent of the labor.
Now these families do not just paint the walls; they
actually build the walls. They put up the shingles. They put up
the siding. They hang drywall. And they hang cabinets.
In our self-help work, we also have benefited greatly from
the Housing Assistance Council's HUD-funded Self-Help
Homeownership Opportunity Program, which we refer to as the
SHOP program. We have received $850,000 in SHOP funds from HAC
and $800,000 in other HAC loans.
The SHOP funding helps CAC buy the land and put in the
infrastructure for our self-help homes. HAC and CAC want to
thank this subcommittee for having created the SHOP program in
1996. I think our agency probably would have been out of the
self-help business had it not been for the SHOP program.
The commission has also used the USDA Section 504 home
repair program. We have developed and now own and manage a 24-
unit USDA Section 515 rural rental apartment project.
Overall, we have had excellent success with the USDA rural
housing programs. All of these Rural Housing Service resources
have been vital to our ability to meet the needs in Fayette
County, Ohio.
Perhaps the best way for me to illustrate our work has been
its impact on the clients that we work with. I would like to
tell--and end--with a brief story about one of our clients,
Julie Allen.
She was a single pregnant mother who became homeless after
leaving a domestic violence situation back in 1996. Our agency
first housed Julie and her children in our homeless shelter.
We then helped her through supportive housing. And then she
became involved in our USDA self-help housing program. And she
built her own home in one of our first sweat equity
subdivisions in Bloomingburg, Ohio.
Today, Julie is a homeowner. She has an excellent job. Her
children are thriving.
Last December, she was a featured speaker before 800 people
at the opening session of HAC's National Rural Housing
Conference, speaking about how self-help housing had changed
her life. I might add, she got a standing ovation at that
conference.
HAC and CAC considered asking Julie to be speaking up here
instead of me today, so you could hear from a person who is
really receiving these services. But she is getting married
Saturday and could not make it.
When I consider Julie Allen and her life, I can think of no
better reason to support, continue and expand the USDA Rural
Housing Service programs. Yes, they may need some changes and
improvements. They definitely need more funding. But they
really have had an enormous impact on the lives of millions of
rural people.
Thank you very much.
[The prepared statement of Patty Griffiths can be found on
page 104 in the appendix.]
Chairman Ney. I want to thank the witness for her
testimony.
And next, Mr. Jones?
STATEMENT OF JACK JONES, VICE PRESIDENT, CHASE MANHATTAN
MORTGAGE CORPORATION, DEERFIELD BEACH, FL, ON BEHALF OF THE
MORTGAGE BANKERS ASSOCIATION OF AMERICA
Mr. Jones. Good afternoon. And thank you, Mr. Chairman, for
holding this hearing and inviting the Mortgage Bankers
Association of America to state its views on the U.S.
Department of Agriculture's Rural Housing Service programs.
My name is Jack Jones. And I am the Vice President in
charge of the Rural Housing Channel for Chase Manhattan
Mortgage Corporation in Deerfield Beach, Florida. I am
particularly pleased to be here today representing MBA on an
issue to which I have devoted the last 11 years of my
professional career--providing homeownership opportunities for
rural families.
MBA and Chase are strong supporters of the Rural Housing
Service's mission to foster home ownership opportunities across
rural America. Chase is the largest originator in the Rural
Housing Service's Section 502 Guaranteed Single Family Housing
Loan program, commonly called the GRH Program.
In many rural communities, the Section 502 direct and
guarantee programs are the only home ownership options
available to low-and moderate-income families. Last year, Chase
loaned just over $900 million, which provided 11,000 rural
families the opportunity to become homeowners.
Chase does this in partnership with over 2,500 community
banks, mortgage bankers and mortgage brokers in all 50 states.
Unfortunately, rural areas traditionally have lacked the
financial resources for home financing. For this reason, the
RHS programs are vital to increase the availability of safe,
decent and affordable housing for low-and moderate-income rural
home buyers and renters.
RHS provides this important function for both single family
and multifamily housing. In addition to the GRH program, RHS
also offers the Section 538 program, which guarantees loans to
developers of multifamily housing to build and/or renovate safe
and decent rental units affordable to very low-, low-and
moderate-income families.
Both of these programs provide private capital, guaranteed
by public funds, to promote adequate access to home financing
capital for rural communities.
MBA would like to recognize the good work that this
administration, under the guidance of RHS Administrator Arthur
Garcia, has undertaken in the last 2 years, making significant
improvements to a program that was at risk of being neglected.
MBA urges these favorable changes be built upon through the
following initiatives: first, guidelines under the GRH program
should be amended to allow the financing of the guarantee fee
on top of the appraised value of the property. Second, the
population limits under the GRH program should be raised.
Third, the income limits should be raised for the GRH
program and targeted in high-cost areas. Fourth, thermal
standards on existing housing stock should be eliminated from
the GRH program.
And fifth, clarification of Ginnie Mae authority on Section
538 loans guaranteed by RHS is needed.
MBA urges these changes for the following reasons: a key
feature of the GRH program is the ability of the purchaser to
borrow up to 100 percent of a property's appraised value. This
feature allows the borrower to purchase a home with no down
payment and finance some portion, if not all, of the costs
related to closing a mortgage, including the RHS guarantee fee.
The current law, however, limits the loan amount to the
appraised value.
MBA urges the financing of the guarantee fee on top of the
appraisal for purchases. This change would mean a greater
number of rural families would be able to overcome the down
payment and closing cost obstacle to home ownership. This is
especially true for first-time and minority homebuyers.
Use of the GRH program is limited to communities with
populations of either 10,000 or 20,000, depending on whether or
not they are contained in an MSA. These definitions were
created over 30 years ago and need to be updated.
MBA supports aligning the GRH population requirements with
other USDA programs or other statutory rule definitions.
Currently, borrowers applying for the GRH Program are
limited to a maximum household incomes of 115 percent of the
area's median income, in all states except Alaska. This 115
percent limitation in 49 states does not take into account the
varying levels of housing affordability across the United
States.
MBA urges the Secretary of Agriculture be granted
discretion to raise the family median income limits in areas
designated as targeted areas and in high-cost areas, allowing
financing to be extended to families making up to 150 percent
of the area's median income.
Unique to the GRH program, existing homes are current
required to exhibit thermal efficiencies that are contrary to
the State of the housing stock in rural America. This
requirement necessitates costly improvements that we believe
have only nominal economic value. These thermal standards for
existing homes cannot be found in any other conventional, FHA
or VA home loan program and is a source of ongoing resistance
to the use of the GRH program.
MBA urges Congress to provide strong encouragement to the
agency to eliminate this burdensome, costly and onerous
regulation.
Currently, loans made under RHS Section 538 Rural Rental
Housing guaranteed program cannot be securitized by the
Government National Mortgage Association, Ginnie Mae. Ginnie
Mae's charter allows only the securitization of insured
multifamily loans, but not guaranteed multifamily loans.
MBA urges Congress to change the Ginnie Mae charter to
allow the securitization of these guaranteed loans. This change
will provide greater liquidity for these loans and ensure that
rural communities are not disadvantaged due to lack of access
to capital.
[The prepared statement of Jack Jones can be found on page
112 in the appendix.]
Chairman Ney. I need to interrupt you just to--the time has
expired, but to also let the panel know what is going on.
Unfortunately, there is a 15-minute vote in progress, a 10-
minute debate, another 15-minute vote, another 15. It is
basically 45 to 50 minutes' worth of votes.
So what I would like to do is to go over, cast a vote. It
will give a 15-minute window to be able to come back to get
your testimony in of the three witnesses for the record because
we would like to do that, to be able to do it.
And then I do not know if any questions can be--any time
for questions. But we will be able to at least submit questions
if the members would like to. So if you could indulge us, we
will be at recess for about seven minutes.
Thank you.
[Recess.]
Chairman Ney. Sorry for this. It is hard to predict the
votes. Let us proceed as briefly as possible as we can with the
remaining witnesses. Thank you.
STATEMENT OF MADELINE MILLER, EXECUTIVE DIRECTOR, WIL-LOW
NONPROFIT HOUSING INC., HAYNEVILLE, AL
Ms. Miller. Mr. Chairman and ranking members, good
afternoon. I am Madeline Miller, executive director, Wil-Low
Non-Profit Housing, which is a non-profit organization
incorporated in 1971 in Lowndes County, Alabama when it was
spun off another non-profit organization, Friend, Incorporated.
Most of our work is conducted in Wilcox and Lowndes
Counties. The organization was formed by citizens from Lowndes
and Wilcox Counties who were concerned about the quality of
their community housing.
That year, Wil-Low hired its first executive director and
received its first grant--$38,000 from the Rural Housing
Alliance.
The organization's mission then, as it remains today, is to
provide technical assistance to very low-, low-, and moderate-
income families and farm worker families so they can have the
opportunity to acquire decent, safe, sanitary and affordable
housing.
Wil-Low helps families with new construction,
rehabilitation of existing owner-occupied dwellings, rental
housing and housing counseling. Today, Wil-Low still operates
its housing programs, consisting of new construction,
rehabilitation of owner-occupied dwellings, the purchase and
rehabilitation of an existing dwelling, rental units and
housing counseling.
To date Wil-Low has constructed over 300 home units through
both its self-help program and its contractor built home
program. One hundred percent of the funding for these units was
provided by Rural Housing, which means the families we work
with all have incomes at or below 50 percent of the median
income.
Rural Housing has made available over $2 million in funds
that enables families to own their homes. We also have used
their rehabilitation program, the Rural Housing 533 Housing
Preservation Grant and its 504 program. A total of over 300
homes have been rehabilitated.
But there is a need for additional funds for the Rural
Housing Service Rehabilitation Program, especially the Loan/
Grant Program, because the numbers of homeowner-occupied
dwellings that are in need of rehabilitation keeps increasing.
If these homes are not repaired, family members will be forced
to move in with relatives or others, creating or increasing
another problem--overcrowding.
Wil-Low has successfully trained 50 on-the-job trainees in
construction. In 1999, our dream became a reality. We broke
ground to start construction on 20 rental units and a community
building. Then, in May of 2000, the first resident moved in and
today the complex is fully occupied.
The one problem is that we were only able to build 20
units. And we have over 100 applications from families who are
still in need of a decent and affordable place to live.
The total cost of the project was $1,399,239, which
included the entire infrastructure cost. We also operate a
housing counseling program.
But there are many challenges that Wil-Low Non-Profit
Housing faces. Today, Wil-Low has had to overcome in the past
and is still faced with today, in an attempt to operate a
successful rural housing program: recruiting eligible families;
resolving credit issues; funds to do site development work for
subdivision approval; sufficient funds to leverage other money;
locating suitable building sites; infrastructure; acquiring gap
financing; understaffing; overcoming NIMBY-ism; improving the
quality of housing; and increasing outreach services to migrant
and seasonal farm workers.
To help alleviate some of the substandard housing units and
overcrowded living conditions, Wil-Low has the following goals
outlined: single family house purchase of a 10-acre tract of
land in Wilcox County, Alabama; construct 18 single-family
units; also, multifamily units, 20; and also to rehabilitate 50
units; a housing counseling program to counsel approximately
300 and this would include predatory lending.
To sum this up, the only way that Wil-Low can achieve these
goals and its overall goal of providing decent housing in rural
Alabama is to coordinate our effort with those of other groups
and organizations, such as Rural Housing. Also, for a rural
housing program to be successful, we must continue to make our
communities aware of the programs and services offered by Wil-
Low.
Because our communities are changing, part of that
awareness involves providing outreach services to migrant and
seasonal farm worker families. To be a rural housing non-profit
requires more than building or rehabilitating units, it also
requires providing a whole host of services from jobs to
counseling.
Thank you for allowing me the opportunity to speak on
behalf of Wil-Low Non-Profit Housing Corporation and other non-
profit organizations that are struggling to survive in order to
continue providing the housing-related activities that are
needed in order to improve the living conditions of residents
in this county and in America.
Thank you.
[The prepared statement of Madeline Miller can be found on
page 119 in the appendix.]
Chairman Ney. Thank you.
Mr. Myer? I should also note that if any witnesses have
transportation problems or difficulties and unfortunately need
to leave because of these votes, the members will be able to
put questions to you in writing. We do appreciate your time
today on the Hill. And I am sorry again for the unknown factor
of the votes.
Mr. Myer?
STATEMENT OF JOE L. MYER, EXECUTIVE DIRECTOR, NATIONAL COUNCIL
ON AGRICULTURE LIFE AND LABOR RESEARCH, INC., DOVER, DE
Mr. Myer. Mr. Chairman, my name is Joe Myer. I am executive
director of NCALL Research, a non-profit rural housing
technical assistance provider based in the great State of
Delaware, represented by Congressman and former Governor Mike
Castle.
I am also President--Past President and current Executive
Committee Member of the National Rural Housing Coalition. And
RHC is a national organization that advocates on rural housing
policies and programs. And we appreciate the opportunity to
testify today.
Regarding need, the 2002 Millennial Housing Commission
Report states that rural communities were bypassed and left
behind in the economic good times and now face rates of
poverty, substandard housing, unemployment and rent burdens
similar to the nation's big cities.
There are 7.8 million of non-metro population that is poor.
One-quarter face cost overburden. And 1.6 million housing units
are substandard.
USDA's research shows 4 million or 17 percent of non-metro
households experience housing poverty. Renters in rural areas
are the worst housed with 33 percent cost burdened, one million
suffering from multiple housing problems and paying exorbitant
portions of income for housing.
In Delaware, our rural counties and small towns have higher
rates of poverty and substandard housing than the State
national average. Poultry processing has fostered a dramatic
increase in the Hispanic population in some of our smaller
communities, like Georgetown, whose population increased from
two percent Hispanic in 1990 to 32 percent in the 2000 census.
This increase unfortunately took place without any appreciable
increase in housing stock.
I must indicate the importance of the rural housing
programs. It is the only option for decent, affordable housing
for many rural families.
If we look at Section 502, single family direct, at least
40 percent of these loans go to families below 50 percent of
median. It has very attractive rates. It is an excellent
program.
Average income of households assisted is $18,500. The
current loan level will provide financing for about 15,000
units. There is an unprecedented demand for Section 502, which
totals several billion dollars.
We are very pleased with the 2004 budget request of $1.366
billion. We think it is a bargain to the government because
each housing unit costs $10,000 a unit to the government.
Self-help housing has been discussed by Patty. Families
trade labor and determination for housing resources. They
recruit groups through non-profit organizations of six to eight
families who apply for 502 loans. The families receive home
ownership counseling, construction training. And they work
together to build their homes and neighborhoods, much like the
church and barn raisings of the past.
The family labor saves an average of more than $15,000 over
the cost of a similar cost. That is an average. Sweat equity
provides the opportunity for home ownership, while saving the
government millions in reduced mortgage costs. Self-help
families arguably are the lowest income mortgage borrowers with
the best payment record.
Section 515, rental housing program, seemingly forgotten in
many ways. A portfolio of 450,000 apartments with only a 1.6
percent delinquency rate, an average tenant income of $7,900
and more than half the tenants elderly or disabled.
[The prepared statement of Joe L. Myer can be found on page
126 in the appendix.]
Chairman Ney. I am sorry to interrupt. I am watching the
clock ticking. If we could move on to Mr. Rayburn, just to get
a few minutes in. And then if we have it, we can come back, if
you do not mind.
STATEMENT OF JAMES R. RAYBURN, JACKSON, MI, FIRST VICE
PRESIDENT, NATIONAL ASSOCIATION OF HOMEBUILDERS
Mr. Rayburn. Thank you, Mr. Chairman. My name is Bobby
Rayburn. And I am a homebuilder from Jackson, Mississippi. I am
the First Vice President also of the National Association of
HomeBuilders. And I am pleased to represent the views of some
211,000 members.
NAHB and its members place a high priority on providing
safe, affordable, high quality housing for rural Americans.
While progress has been made in improving housing in rural
America, considerable unmet needs remain, particularly for
very-low and low-income rural households.
Specifically, there is a significant need for new
production of affordable housing units. And existing rental
stock is aging and requires extensive rehabilitation. And
access to competitively priced credit for potential home
buyers, as well as builders, remains a problem in many rural
areas.
Remedies are urgently needed. While there are many possible
approaches to meeting the need for the production of new units
and preservation of the existing housing stock, there are two
common elements that are crucial to success: more resources
must be committed and a range of interests beyond the
Department of Agriculture must join in the effort.
Some success in providing affordable home ownership and
rental housing opportunities has been achieved through the Home
Investment Partnership Program and the Community Development
Block Grant programs in States were efforts have been given in
sufficient priority. NAHB strongly supports both of these
programs, which distribute HUD funds to States and local
jurisdictions through block grants. And we believe additional
appropriations would be available and effective in addressing
unmet housing needs in rural areas.
Other federal efforts to address rural housing needs are
currently undertaken through the Department of Agriculture's
Rural Housing Service. I understand that we are before the
authorizing and not the appropriations committee.
But RHS programs have been severely hampered by inadequate
funding, with the appropriation shortfalls most severe in
Section 515, direct loan program for multifamily housing. The
administration's fiscal year 2004 budget proposal includes no
money for Section 515, new multifamily production projects.
Currently, there are no alternatives to the Section 515 for
producing housing affordable for very low-income households in
rural areas. So the absence of a new production money is a
major setback.
The problems at RHS go beyond inadequate funding, however.
Inconsistencies in how the projects are monitored occur from
state to state. Management fees have wide variations. And it
seems to be difficult to remove bad property managers and
owners.
Chairman Ney. If I could interrupt. I am going to need to
leave to make the--I missed the one vote because I needed to
stay here. And I am going to make the final passage. And then I
will be--anybody who has to leave, please feel free. I will
also be more than happy to come back and listen to the last
testimony, if you would like.
Mr. Rayburn. Yes, sir.
Chairman Ney. I will do that. And if I can cast the final
passage vote, I will return.
Anybody who would like to stay. If you cannot stay, we
fully understand that. I will return. The committee will be in
recess.
[Recess.]
Chairman Ney. If I could keep this up for a couple of
weeks, I might be able to get back into my suit I wore to my
homecoming senior year.
[Laughter.]
So I want to thank you for that in the House. And we will
continue. How about we continue with the last witness and then
we will go back to Mr. Myer.
Mr. Rayburn. Thank you, Mr. Chairman. I will just continue
where I left off, if that is all right.
In addition to RHS staff can present roadblocks to
potential purchasers of existing properties who plan to improve
the properties. This is the result of slow decision making and
requirements that add unnecessary cost.
RHS needs a viable management and preservation strategy,
which must include the ability to respond more decisively and
effectively. NAHB understands that some of these issues are
addressed in RHS' recently proposed regulatory changes to its
multifamily programs, which are intended to streamline and
consolidate 13 regulations into one, as well as address
concerns raised by the Office of the Inspector General.
NAHB supports such efforts and encourages RHS to move
towards simplifying its regulations in as much as possible, as
well as strengthening its ability to address the portfolio
responsibilities. Even with more funding, RHS cannot do the job
alone. Addressing rural housing needs is far too important to
be left exclusively to one small sub-cabinet agency.
Limited coordination of partnerships efforts are underway
to improve rural home ownership opportunities. Such initiatives
should be greatly expanded and extended to the production of
affordable rental housing.
The housing GSEs--Fannie Mae, Freddie Mac and the Federal
Home Loan Banks--State housing finance agencies, the farm
credit system and HUD all have responsibilities and resources
to take a far more aggressive role in addressing the housing
problems of the nation's rural communities. Fannie Mae and
Freddie Mac are required by law to meet annual housing goals
established by HUD.
Several upward provisions in these goals had little, if
any, impact to improving the availability of housing credit in
rural areas. In the 2000 revision of the goals, the underserved
areas goal was increased from 24 to 31 percent. But there was
only a limited increase in the role of Fannie Mae and Freddie
Mac in rural housing finance.
During development of the 2000 rule, NAHB commented that
HUD should encourage increased participation in rural areas by
Fannie Mae and Freddie Mac through the use of bonus points or
double credit for purchases of loans in rural areas. HUD did
not include this recommendation in the final rule. But we plan
to revisit this issue during the revision to the goals in 2004.
In conclusion, Mr. Chairman, NAHB thanks you for bringing
this to attention and supporting the cause of rural housing.
NAHB stands ready to work with this committee, RHS, HUD, the
GSEs and all other supporters of rural housing to improve the
programs and to develop creative solutions to maximize the use
of scarce resources in addressing these critical housing needs.
Thank you, Mr. Chairman.
[The prepared statement of James R. Rayburn can be found on
page 134 in the appendix.]
Chairman Ney. Thank you.
Mr. Myer?
Mr. Myer. And I will just continue on as well. In Delaware,
the 515 program is the rental backbone of our communities,
providing a great community asset. Waiting lists are long.
Recently, more than 200 applicants showed up to rent a 24-unit
Acorn Acres complex in Georgetown, Delaware. That gives you an
idea of the need.
The President's budget cuts 515 to $71 million, the first
time in more than 30 years that the Federal government will not
provide any new rental units for rural America.
Prepayment of Section 515 properties is a threat to two-
thirds of the portfolio over the next 7 years because it
results in displacement of tenants and loss of low-income
housing stock. Owners' incentives and resources to preserve
this stock are important.
In 1994, Section 515 was funded at $540 million. It has
been cut an unconscionable 73 percent and not replaced with
anything. This is a great program that seems to be biting the
dust.
514/516 farm labor housing is the only program that serves
our nation's migrant and seasonal farm workers. The last
national study done indicated there was a shortage of 800,000
units for farm workers.
Fifty-two percent of farm workers live below poverty.
Seventy-five percent of all migrant farm workers live in
poverty. Yet, few farm workers can qualify for normal
subsidized housing.
Current funding totals $37 million, which provides 700
units of housing. We are appreciative of the $37 million. But
it is far less than what is needed.
We ask for your support of the Rural Rental Housing Act of
2003. This creates a new Federal program to alleviate cost
burdened substandard conditions. It would create a $250 million
rental development fund, administered by USDA.
Money would be allocated to States based on need for the
purposes of acquisition, rehabilitation and construction of
low-income rental housing. Federal funding will be matched,
dollar for dollar, by participants. USDA will make funding
available to entities with a record of accomplishment in
housing development.
And finally, the act will be administered at state levels
most familiar with local needs. This new resource, if enacted,
could finance up to 5,000 rental units a year.
We also encourage the refunding of Rural Community
Development Initiative, RCDI, to support the rural non-profit
delivery system. There was more than $80 million in
applications for the $6 million that was available in 2000.
This is a valuable program. And it is also at risk in the
Federal budget.
Mr. Chairman, thank you for this opportunity.
Chairman Ney. I want to thank you. And thank all the panel.
I have a question for Mr. Jones. As I understand it, the
Appropriations Committee last year inserted a provision for no-
year funding. That is for the Section 502 guarantee program.
And my understanding is the intent of this provision was by
making this change, it would provide stability in the budget
process for consumers, the bankers and realtors who participate
in the program. The continuous operation of the program without
delay or interruption of the funding also was a factor.
There was a concern by the Appropriations Committee when
the administration lowered the fee for the new guaranteed
loans. And the refinancing of existing loans, there would be an
additional cost to that program.
The Appropriations Committee rescinded approximately $11
million from one account and transferred the funds to the
Section 502 guarantee program to make up for the anticipated
additional costs. And that would be so that the program funds
would not be depleted before the end of the fiscal year.
So is the current level of funding for this fiscal year
sufficient for the demand? The President's proposed fiscal year
2004 budget requests a program level of $2.8 billion for this
program. So do you believe that the level of funding is
adequate and will be sufficient for the demand?
Mr. Jones. My belief is that that level of funding will
indeed be insufficient.
Chairman Ney. Please pull the microphone. Thank you.
Mr. Jones. With the decrease in the guarantee fee and other
initiatives from the agency, we have seen tremendous momentum
build for the Guaranteed Rural Housing Program. As a result, we
will more than likely exceed the $2.75 billion this year, which
is unfortunate because for the first time, we do have the
opportunity for the no-year funds provision but will actually
not have any funds carried forward.
We have yet to ever experience a 12-month program.
Typically, the private sector knows as we begin each fiscal
year----
Chairman Ney. I am sorry. You have never experienced a 12-
month program?
Mr. Jones. Because funds come to us typically very late in
October or early November, either through the CR process or at
the time the actual appropriations bill is funded.
Chairman Ney. So because they are late, you cannot then
gear up?
Mr. Jones. We never have a full year to actually see what
we can do with 12 consecutive months of consistent funding. I
believe this year we are going to exhaust the allocation, the
$2.75 billion the agency has, which really means we will not
have funds carry into the next fiscal year. And I believe the
proposed fiscal year 2004 will be insufficient.
Chairman Ney. The gentlelady from California?
Ms. Waters. Mr. Chairman, I would like to thank all of the
panelists for the time that you have spent here this afternoon
to share this very, very valuable information with us. I think
I am coming to some conclusions about rural housing needs. And
I sincerely believe that there needs to be a lot more advocacy
here by members of Congress who represent all of these areas
that perhaps we are not hearing enough from.
Obviously, there is a need for more money. I think this
multiple family units and all of the issues with I guess the
515 program, we really do need to take a very deep and serious
look at, to see what we can do. As one urban legislator, I am
absolutely committed to the proposition that the urban and
rural legislators should work together for rural housing and
for urban housing.
I think that we could do a better job combining our efforts
to make sure that we have adequate housing and housing
resources in certainly the rural community.
I guess I have a lot of questions. I am going to hold them
in reserve because I am going to review all of the testimony
and interact with my chairman on it and other members of this
committee.
But let me just raise this question of, I guess, Mr. Myer.
I know that we have laws that allow for migrant farm workers to
work, I guess, in this country. Maybe for particular seasons or
a designated period of time, I do not know.
But do we coordinate the laws that encourage migrant farm
workers to come and work with the housing resources that should
be available to them if they are here working? Is there any
coordination between that?
Mr. Myer. Well, I think there is some coordination. There
is always room for more coordination.
But the fact is that local farm workers, their only access
to housing is this 514/516 program. And then migrant farm
workers that migrate to a certain area to support agriculture,
their only option appears to be the 514/516 program. It is the
only program that is dedicated to serving farm workers.
And again, there is an 800,000 unit need for farm workers.
I am not fully sure that I answered your question.
Ms. Waters. Well, that gives me some idea. If the need is
800,000, then it appears that what we are doing is we have laws
that allow for migrant workers, but we do not match the
resources for housing with the number of migrant workers who
are performing the services.
Mr. Myer. The program is funded at $37 million, which
provides about 700 units a year.
Ms. Waters. Okay. That is helpful. Thank you very much, Mr.
Chairman.
Chairman Ney. Another question I had--and anyone that would
like to, please feel free to answer this. And then we will go
to Mr. Davis for a question.
What are your general impressions and overview of the Rural
Housing Service and whether the agency within the U.S.
Department of Agriculture is meeting its intended purpose and
goals? Any reflection on RHS?
Feel free to speak out or raise your hand or whatever you
would like to do.
Mr. Anders. If we have an hour, sure.
Chairman Ney. I have got some time, maybe not an hour, but
close to it.
Mr. Anders. I mean, in many ways, the agency is doing an
excellent job. I mean, the agency has been around since 1949.
Actually in some respects it has been around longer than that.
And it has been doing a very credible job in certain areas of
doing single family homes and doing multifamily housing and in
doing some of the rehab loans, what you are talking about the
502, the 504 and the 515 programs, as well as the Farm Labor
Housing Program.
The problem has been in the last 10 years that the agency
has suffered substantial cuts in funding. And they have had to
consolidate their staff.
Some of the support and infrastructure which needs to be
dealt with, in terms of longevity of some of the housing
programs, particularly the Rural Rental Housing Program, which
we heard about earlier, there are some significant issues in
terms of maintenance of the portfolio. The agency is short on
staff to deal with it.
And so it is a cost issue. But I think that, by and large,
the agency is doing a very good job and is meeting its
purposes.
Chairman Ney. Are RHS--we are going to hear from them July
8th. But I just thought I would get anybody's observation.
Ms. Bridges. Even with the problems that were cited by the
investigative panel earlier, the RHS is absolutely the best
delivery vehicle for affordable housing in the rural areas. We
have no other vehicle to deliver it. The tax credit program, as
good as it is, is not sufficient in the rural areas to meet the
needs of the very low-income people.
The biggest problem that we have had in the past few years
is the lack of funding. At the time that we were having $500
million to $900 million allocation, we were doing great. And
these problems that are addressed are a minor amount of
problems. They are not large.
We have many, many, many other owners and managers that are
doing an excellent job and serving thousands and thousands of
families. So I strongly encourage the committee to look at the
funding that could be possibly available and maybe another way
of delivering the program. There are ways.
As the previous witness said, I will not repeat him, but
they have lost some of their staff because of funding cuts.
However, we do not need to be micromanaged in the field. We do
not need that.
There are a lot of honest developers and managers out there
that would do a good job if we had the funds available.
Chairman Ney. Thank you.
Mr. Jones?
Mr. Jones. I would echo the sentiments of my colleagues. I
believe this agency has done a very effective job. Most
recently, I would note that this administration has been
willing to listen to the private sector and the needs of the
private sector to really promote this program.
Without question, the GRH borrower is best served by this
loan. It provides 100 percent financing, meaning no cash
contribution from the applicant. And because of their low-and
moderate-income status, no mortgage insurance.
But the program is only going to work if we can get the
private sector interest in delivering it. And I was very much
moved by Congresswoman Waters' comments regarding
affordability.
Let's face it. This administration just cut the guarantee
fee, making it affordable.
The agency is focusing now, as part of a greater concern,
on addressing minority home ownership rates, which consistently
lag behind white homeowners in rural America. The things that
we talked about today--financing of the guarantee fee--allows
the applicant to take full advantage of the appraisal, to
finance all the closing costs without wasting one dime on the
guarantee fee, which is typically put on the loan amount with
HUD, VA and even in the refinance program.
All of these things are going to knock down the barriers of
affordable home ownership, which I believe are everyone's
objectives today.
Chairman Ney. Do I read you correctly then, you are not
saying it is as much money as it is private sector involvement?
Mr. Jones. Certainly, for the guaranteed program, the
private sector is critical. The private sector is actually
originating, processing and servicing these loans, in lieu of
RHS staff. And whatever we can do to induce the private sector
to contribute its efforts to gear up to deliver this program is
going to get us the most home ownership opportunities for these
applicants that simply make too much money and cannot be served
by the direct or other RHS loan programs, but do not have any
other options.
Chairman Ney. Thank you.
Mr. Rayburn, did you?
Mr. Rayburn. Mr. Chairman, I would like to remind this
committee that in addition to being a builder and very involved
with the National Association of Homebuilders, that I am from
Mississippi. And several of the questions that were directed to
certain earlier panel members about places in Mississippi.
I know very well where those places are. I know very well
where cardboard shacks were in many cases because our company
has helped to solve some of those problems.
Are there a lot of them still out there? There surely are.
We could not solve those problems with Rural Housing
Service dollars and staff. We had to go elsewhere in order to
do that. Because part of Rural Housing Service is doing a very
good job. The better job is done on the single family side,
probably for the most part around the country.
On the multifamily side, it is not. They need to come into
this century and use good, sound business practices.
We probably do not have the time. But if you would like to,
I would be glad to provide in written comments a couple of
specific instances whereby our company was going to bring in
outside, fresh, new, non-federal dollars into a couple of 515
developments, multifamily rental developments.
And because of the cumbersome, outdated requirements that
the staff was putting on us, we were not able to do that, even
though we had a half a million dollars funded from the Federal
Home Loan Bank AHP program in the form of a grant. We were told
that was fine on the front end.
On the back end, they came up with another $300,000 that
needed to be done to the development. So the project is still
in its deplorable condition today, with sewer running on the
ground, with cabinet doors nailed shut that will not work
because the management company was getting exorbitant
management fees. And things like that needs to be stopped.
Chairman Ney. We would like, if you could, to give us
detail after this----
Mr. Rayburn. Be glad to, surely.
Chairman Ney.----on at least the two and anything else you
would have.
Mr. Davis?
Mr. Davis. Thank you, Mr. Chairman. Let me thank the panel
and chair for their patience. I know it is late in the day.
Let me give you all a number--let me give the panel a
number--that puts some of this in a great deal of perspective
from my standpoint. The 1994 fiscal year, the combination of
Section 502 loans and Section 515 loans was $530 million or so.
Actually, I think it was around $663 million total subsidy cost
spent on rural housing programs in fiscal year 1994.
Less than $200 million in subsidy on Section 502 and
Section 515 in the current fiscal year. That is a drop from
$660 million down to $200 million.
Now I am not much of a math major. But that is certainly a
significant drop.
Has the housing crisis in rural America abated over the
last 10 years? Has it somehow gotten better than it was in
1994? Does anyone think that the housing crisis is somehow less
acute now than it was in 1994?
Mr. Rayburn. If I could answer, no.
Mr. Davis. In fact, it is worse in a lot of ways.
Mr. Rayburn. It is worse. It is worse in so many cases
because of the lack of infrastructure in so many communities,
the lack of infrastructure that has to be gone in and put the
streets, the water, the sewer in to so many different areas,
causing additional increases in prices, tied back to that
homeowner that you are trying to serve, and many times in the
low-and very low-income category.
Mr. Davis. So we are making less of an investment to
address a problem that is becoming more acute? Is that right?
All of you are nodding your heads.
Ms. Miller?
Mr. Rayburn. Yes, sir.
Ms. Miller. Yes, that is right, Congressman Davis, because
take for example in Wilcox County, when it comes to sewage,
infrastructure system, then you only have just two towns that
have actually a sewer system. You have Camden and Pine Hill.
But then if you look at the other area, there is a great
need in the whole country for housing. And now that most of
those counties, if the land does not perk, then you have to go
into expensive, what you call, a raised bed septic tank. And
that can cost anywhere from $6,000 to $10,000.
And that fee would have to be added into the cost of the
family loan because they are not able to make a down payment.
And well, most of the families--but you are familiar with that.
I do not have to go into detail on that, how they can qualify.
Mr. Davis. Let me give you all another statistic that my
colleagues from California alluded to earlier. We talked about
what is a very real paradox, the fact that a large percentage
of people in rural America own their homes, but the homes that
they own are absolutely substandard.
They are houses, really, and not homes, to be very blunt
about it. Another statistic, doing some quick math here, 31
percent of the housing units surveyed for the American Housing
Survey in rural America, 31 percent of those occupied rental
units were substandard in some way, ranging from inadequate
heating to inadequate physical infrastructure, to water
leakage; 31 percent of them had some very particular problem.
So once again, I think we ought to recognize that when we
are talking about people having a high rate of what we would
call home ownership--again, they are not living in homes. They
are living in physical structures called ``houses'' that are
not in the condition that they need to be to raise a family. Do
a lot of you agree that is a regular problem?
Let me direct another question to all of you. We have heard
a lot of talk in all of these hearings about the Federal
government taking less of a role, whether it is as a function
of devolving responsibilities on the states or devolving them
on the private sector.
Let me ask some of you to comment on what you think the
government can be doing right now that it is not doing. What
can the government do if we, for whatever reason, end up with
an administration one of these days that is committed to
addressing these issues and wants to be proactive? What can the
government do now that it is not doing?
Yes, ma'am?
Ms. Miller. I think one thing that the government can do is
make more funding available and can lessen some of the
regulations when it comes to the rural because the regulation
is steep. And then the money is not there for the rural to pay.
The housing standards are very high. Just to give you an
example, if a qualifying applicant lives on a rural gravel
road, they must include in their loan adequate funds to
construct a concrete driveway to the gravel road. These rules
apply to qualifying applicants' whether they own a car or not.
This could add between $2,000 to $3,000 to an applicant
loan amount, so there is a number of rules in the regulations
that can be minimized, depending on each individual situation,
and the applicant still could get a well constructed, quality
built dwelling.
So there is a lot of things the regulations can be
minimized, but still remain at a good standard home can be
built.
Mr. Davis. And do all of you agree that we cannot address
the housing problem, particularly in rural America, without a
sustained focus on job training, without a sustained focus on
economic development? It is impossible to get a handle on the
housing issue without looking at all the problems that
accompany the issue.
Do all of you agree with that?
Ms. Miller. I agree with that.
Mr. Davis. All right. Thank you, Mr. Chairman.
Chairman Ney. I want to thank you. And I appreciate the
panelists for your testimony on this important issue.
I just want to echo some comments made earlier. And I come
from obviously a very rural Appalachian area. And I think that
in Congress, we have a large, great, diverse country. And we
have to be sensitive to the concerns of urban centers, which
are different, and the concerns of rural, take care of
everybody we can in the sense of listening to individuals and
also to try to get affordable and available housing, no matter
what size of a city or a town.
I do think that we can focus more here in Congress-that is
what we are trying to do--on rural. I am not sure that it has
been focused enough on.
I have also told all the advocacy groups to speak up a
little bit more or scream a little bit more or come around the
halls. And that is no reflection on anybody here. I am just
saying, I have told everybody, let's energize this issue and
get it going a bit.
I give you a lot of credit for working out in the trenches
to make sure people have some support and some help. And with
that--did you have--and with that, I want to thank the
panelists.
The chair notes 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 for members to submit written questions to these questions
and to place their response in the record. I want to thank the
members of the committee and the panelists.
The committee is adjourned.
[Whereupon, at 5:36 p.m., the subcommittee was adjourned.]
RURAL HOUSING IN AMERICA
----------
Tuesday, July 8, 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 10:07 a.m., in
Room 2127, Rayburn House Office Building, Hon. Robert W. Ney
[chairman of the subcommittee] presiding.
Present: Representatives Ney, Bereuter, Renzi, Waters, and
Davis.
Also Present: Representative Frank.
Chairman Ney. Today's subcommittee holds its second hearing
to discuss the importance of rural housing in America. Two
weeks ago we heard from multiple witnesses, including the
Department of Agriculture's Inspector General and the General
Accounting Office, concerning the Rural Housing Program, RHS.
My goal is to continue to review Rural Development's programs
to look into ways to increase their proficiency and cost
effectiveness. I have said this to quite a few groups involved
with rural housing: I think we need to energize it and get the
tone level up and get people involved, and we need to do it in
urban areas, we need to do it in general housing, minority
housing. There is a lot of work that we need to work together
on.
From our previous hearing it was evident that RHS faces a
number of management challenges to carry out its mission. It is
critical that USDA's Rural Development programs have access to
accurate, relevant performance data and measures to assess
program efficiency and effectiveness. Without timely and
precise information, Rural Development will be unable to
determine how well it is accomplishing its mission of
delivering safe and affordable rural housing programs.
However, questions have risen in recent years about the
effectiveness of rural economic development policies in
creating new opportunities for rural residents as agriculture
and other resource-based economic sectors decline in overall
importance to most rural communities. A wide-ranging set of
often overlapping programs target rural areas and their special
needs, but according to some critics there remains little
overall coordination of these various programs to produce a
coherent rural policy. Over 88 programs administered by 16
different Federal agencies target rural economic development.
The U.S. Department of Agriculture administers the greatest
number of Rural Development programs and has the highest
average of program funds going directly to rural counties. That
is approximately 50 percent.
I look forward to hearing from our sole witness today,
Under Secretary Dorr. We appreciate you coming to the Hill to
discuss the various ways in which home ownership can strengthen
our rural communities and contribute to the overall quality of
life for rural families. So thank you for appearing before the
subcommittee this morning. We look forward to working with you.
I do want to mention, too, in closing my statement that
things have changed in the rural areas and so we have to adapt
with that change. I was recently in Los Angeles. And I mean, I
have been in the Congress 9 years. I have dealt with housing in
the State legislature. But until you go out and you actually
hear some of the things--I mean, there are some amazing
challenges in the urban centers, absolutely amazing, and in
rural, too. So there is a lot of work to be done, but we do
appreciate you coming to the Hill.
Chairman Ney. I now recognize the gentlewoman from
California.
Ms. Waters. Thank you very much, Mr. Chairman. I am just
anxious to hear from our witness today. We have received quite
a bit of information about Rural Housing Services and we want
to know more about their preservation of multifamily housing
efforts. I am a little bit concerned about the Inspector
General's report. I am anxious to hear about the management of
the 521 Rental Assistance program. If we have unspent money
there, why do we have it when we know that the needs are so
great?
I come from an urban community and I, of course, I have
spent all of my time, most of my time dealing with the housing
crisis as it impacts Los Angeles and urban areas. But I have
come to understand that we need to do a lot more to ensure that
we have adequate housing in rural communities. And if we have
some administration problems or oversight or management
problems, we need to get on with straightening those problems
out so that we can provide more housing assistance in the rural
community.
So with that, I am anxious to hear from you today and thank
you for coming.
Chairman Ney. I want to thank the gentlelady for her
statement. And the gentleman from Arizona. I thought I was
rural, but I am New York and Los Angeles compared to some parts
of your district. We appreciate you also chairing this for us
the previous time.
Mr. Renzi. Thank you, Mr. Chairman. I am grateful. I am
especially grateful for the fact that here we are again, in
just less than 2 weeks, in the second in a series of rural
housing hearings. And I represent about 58 percent of the land
mass of the State of Arizona, and in particular I represent
probably the fifth poorest county in America and one of the
poorest regions, the sovereign State of the Navaho Nation,
which parts of it compare to a Third World country.
In addition, I am privileged to represent some of the
barrio regions, poor Hispanic regions of Casa Grande, Arizona.
So I deal in particular with needs of the families, the basic
necessities of life where we have many of our rural homes that
are during the wintertime--even though Arizona is warm most of
the time during the wintertime--we have had some tough
situations where our children have been frostbitten,
particularly this year I think. I have complained in the past,
some of the tragedies that our children have gone through.
So I am very interested in particular in the housing
program as it relates to the 523, the Mutual Self-Help program.
I look forward to your testimony also, Mr. Dorr. Thank you for
coming today.
Thank you, Mr. Chairman.
Chairman Ney. I want to thank both of our members.
Mr. Dorr, welcome.
STATEMENT OF THOMAS C. DORR, UNDER SECRETARY, RURAL DEVELOPMENT
Mr. Dorr. Thank you, Mr. Chairman, members of the
committee. I do appreciate the opportunity to come before this
committee to share with you an update of USDA Rural Development
and its related programs. I look forward to answering the
questions from your July 1 correspondence both in today's
testimony and by follow-up written response.
Rural Development in my view is the venture capitalist for
rural America. It is with this vision in mind that we carry out
our mission of, first, increasing economic opportunity and,
secondly, improving the quality of life for all rural residents
through programs that are administered by the Rural Housing
Service, the Rural business Cooperative Service, and the Rural
Utility Service.
The Rural Housing Service serves as a foundation for
helping rural families build wealth through home ownership and
by providing safe, decent, and affordable rental housing.
Working with oversight agencies we are implementing a number of
improvements to build a stronger housing program. I appreciate
the opportunity to share a few of those with you today.
Last month we celebrated National Homeownership Month by
hosting the first housing summit at the Press Club here in
Washington. Rural Housing Services has undertaken a major
consolidation of 13 Rural Development regulations, which was
published in the Federal Register on June 2nd of 2003. The goal
of this proposed rule is to make the multifamily housing
programs more customer friendly, streamline the process, reduce
cost to the taxpayers and increase the Agency's level of
customer service.
The Rural Housing Service Section 515 Program, used in
conjunction with the Section 521 Rental Assistance Program,
provides a source of funding for the construction, repair and
rehabilitation of affordable housing to families who need it
most. The section 515 program helps to avert homelessness and
operates with an extremely low delinquency rate of 1.7 percent.
With regard to the 514/516 Farm Labor Housing Programs, the
Agency has committed a total of $46 million to fund 27
proposals in fiscal year 2003 and we will produce 925 units. Of
these units, 696 are off-farm which receive nearly 100 percent
rental assistance.
The Multifamily Guaranteed Loan Program, which is known as
Section 538, serves moderate-income families that typically do
not qualify for very low-income rental housing, but still they
cannot afford the expense of home ownership. It should be noted
that 80 percent of the Section 538 projects contain tax
credits, which means that the housing serves people making less
than 60 percent of the area's median income.
A proposed rule was published on June 10th to allow the
Rural Housing Service to buy back guaranteed loans from the
investor as well as to reduce the minimum level of
rehabilitation work from $15,000 per unit to $6,500 per unit on
loans for acquisition and rehabilitation. In March of this
year, we began the formation of a multifamily housing advisory
group to oversee completion of a comprehensive assessment of
our multifamily housing portfolio. The study will provide data
and analysis for evaluation of the entire portfolio.
Prepayments continue to challenge Rural Housing's ability
to retain needed affordable housing in rural America. Over 64
percent of our borrowers are eligible to prepay their loans
because of expiring use restrictions. We continue to look for
creative solutions to address limitations that have resulted in
litigation from borrowers who wish to exit the program. The
capital assessment will assist us in determining the likelihood
of a property to be prepaid based on market data analysis.
Rural Development has also taken significant steps toward
automating its multifamily portfolio information as well as
modernizing the forecasting of rental assistance usage.
Rural Housing Service has formed a working group to seek
improvements to the rental assistance forecasting process. We
plan to implement this improved process by November 1st of this
year. Rural Development continues to work closely with GAO and
other oversight agencies to improve program delivery. Many of
the issues raised in oversight reviews will be addressed
through issuance of the final rule 3560 and the implementation
of the rental assistance forecasting tool.
I want to make this point: Rural Development is uniquely
qualified to meet the housing needs of rural America through
our network of nearly 800 field offices across the United
States and by incorporating cross-cutting programs offered by
the Rural Housing Service, the Rural Utility Service, as well
as the Rural Business Service. It is our intent to make
significant progress on the administration and servicing of
multifamily housing programs, thus enabling us to run a strong,
viable housing program.
With your continued support, Rural Housing Service looks
forward to working with Congress to provide decent, affordable
housing to low- and moderate-income rural Americans.
Mr. Chairman, this now concludes my oral testimony. We
would like to submit a lengthier testimony for the record. I
look forward to answering any questions you or the committee
may have.
Chairman Ney. Without objection, the complete written
statement will be submitted for the record.
[The prepared statement of Thomas C. Dorr can be found on
page 196 in the appendix.]
Chairman Ney. I would also note that, as usual procedure,
members may have certain questions and we will keep the record
open for 30 days for members to ask questions to be submitted
in writing and also returned by the witness. I will have some
questions that we will submit for the record to you.
I wanted to ask about--there was just two areas it has
shown, I think it was 1981, which would have been 3 years after
the program began--trying to remember which program it was--but
one of the programs that began in 1981, and it showed that
really the portfolio wasn't being assessed correctly way back
at that time, rental assistance. And so it was kind of getting
off to a nonaccurate, calculated start 3 years after its
inception. Do you have any comments on that, on that program?
Mr. Dorr. We have two major issues that we have to deal
with in this multifamily housing Program. One of them is the
rental assistance issue, and the other is what we generically
term our ``capital needs assessment,'' which essentially is to
determine the housing stock that we have available, and, in the
rental programs, where it is needed, the quality of it, and
whether or not there are things we can and should do to make
sure they are properly placed.
On the rental assistance side of the issue, my
understanding is that in 1982, up and through 1982, new
construction rental assistance projects were automatically
authorized a 20-year rental assistance contract. There was a
formula developed determining how many of the units in a
project would qualify for rental assistance. There was a
commitment made for rental assistance for up to 20 years. On
renewed projects, the contracts were 5 years. It has taken some
time to essentially try to ascertain what has gone on in that,
but the short of it is that after a fair amount of digging--
which let me make one other very quick point--when I was
appointed last August, the No. 1 priority on my list was to get
a handle on these multifamily programs. So we have been working
aggressively, trying to answer these questions since last
September. But the bottom line is that we determined that there
was a large amount of unliquidated obligated rental assistance
to a number of projects.
I will give you an example. On March 15th of this year, if
my memory serves me correctly, we still had approximately 111
months of unliquidated rental assistance on contracts that were
written in 1978 for 20 years. Five-year contracts that were
written in 1999, also that would expire September 30th of this
year, on March 15th still had 21 months of unliquidated rental
assistance. What I determined was that our systems were not
fully automated and our algorithms and calculations to
determine how much rental assistance should be obligated to
these projects, quite frankly, weren't as accurate as they
should be. We have determined as a result, that we have $700-
plus million of obligated unliquidated rental assistance, of
which about 500 million plus is tied to these 20-year-old plus
contracts. We are in the process now of trying to ascertain a
fix to that because there are contracts which these are tied
to, and there is a lot of difficulty to rework those contracts
to fix the issue.
Chairman Ney. Thank you. The gentlelady from California.
Ms. Waters. I will yield to the gentleman from Alabama so
that he will have more time to deal with the rural housing
concerns in his area.
Mr. Davis. Thank you, Ms. Waters. Thank you for yielding.
Mr. Dorr, let me thank you for being here today. Let me, if
I can, turn to something that you said was I believe your
priority of the section 515 multifamily housing units. As I
understand the section 515 units, their primary purpose I
suppose is to rehabilitate and to renovate a lot of the housing
stock that exists right now in rural housing areas. Is that
essentially correct?
Mr. Dorr. The 515 program essentially was a construction
program, started out years ago. And we built affordable housing
for low income households, or those that had diminished
resources in rural America, frequently dealing with single
family parents or the elderly, or young couples who quite
frankly didn't have the resources either.
Over the years that program has grown, and projects were
built. And to that were tied rental assistance contracts.
Rental assistance contracts have become quite onerous and they
have become a large portion of our budget. At this point,
although I think we are this year building something in the
neighborhood of $24 or $25 million worth of new 515 projects in
the 2004 budget, we are simply focusing on trying to spend
funds for rehabilitation and repair so that we can maintain and
keep these projects in the program.
Mr. Davis. Let me tell you one thing that I have noticed
regarding the funding for the program. Obviously I am not going
to try to compare the current budget climate with 1994, but
there have been some significant decreases over a period of
time. For example, in fiscal year 1994 there was a 540 million
appropriation under this program. It is down to 115 million in
the last fiscal year. I think there is a marginal increase to
116.5 or something for the current fiscal year.
I understand a lot of the conceptual problems that you have
outlined regarding the way this program functions; but as a
general rule, would you agree that the mission of this program
has been compromised by some of the funding cutbacks over the
last 10 years; it would be easier to do your job if you had
more money instead of less money?
Mr. Dorr. It is always easier to run any household or any
program if have you more money than less money. I think one of
the dilemmas with this program was that rental assistance grew
so expansively that people were, generally speaking, looking to
the source of resources to keep the new construction side going
as well.
My feeling is that we are on the threshold of determining a
better tool to project rental assistance that should mitigate
some of this growth in rental assistance requirements. That
leaves everyone involved some flexibility to determine how they
wish to handle the new construction or the rehabilitation
preservation issues.
This administration is very committed to the preservation
of this housing stock in rural America. We understand the
critical need for it. And so I would not suggest that we
couldn't use more money, but I would also suggest that we are
getting a handle on certain management issues that may make
things more clear when we get finished.
Mr. Davis. Let me ask you a fairly basic question. What do
you consider the main thrust of section 515 to be right now? If
you had to delineate what are the one or two most important
goals, what would they be? Give me some indication consistent
with that of exactly how this appropriation of 116 million is
going to be apportioned between those goals.
Mr. Dorr. Number one, we are very sensitive to the needs of
those who need housing in rural America. Number two, we are
very focused on stewardship and management issues. As a result,
we hope to be able to develop the kind of efficiencies and
administrative efforts that make the program viable, strengthen
it, and keep it doing what it is supposed to be doing over a
long period of time. I don't see that that would change.
Mr. Davis. How much input--and my time is about to run out,
but let me ask you one final question. One of the criticisms
that I often hear of this program, a lot of the other various
rural housing programs around the country, is that there is not
a lot of effort to integrate the opinion or to solicit inputs
from a lot of the people who do local housing work on the
ground, people who are connected with various housing advocacy
organizations, people who run the various public housing units
in a lot of rural areas.
Can you talk with me about whether you think that is a
problem--if the Chair would indulge me enough to finish my
question and you can answer it--can you tell me if you would
agree that that is a problem, not getting adequate input from
people on the ground, and what your Department is doing to
address that concern?
Mr. Dorr. Well, that is a great segue. I just happened to
be in your district last week. I was at EPS with Ralph Paige
down at the Federation of Southern Co-ops facility. We went
over to one of our projects, Windy Hills.
Mr. Davis. You didn't give me a call. I am disappointed.
Mr. Dorr. This was an effort that Reverend Paige and I put
together over a period of months. It was not designed to be
anything other than to get-to-know-one-another and look at the
issues. I am from a rural area. Until 2 years ago I spent all
my life in rural Iowa in a small town of 1,200 people. I know
what housing is all about in these rural areas. I have had some
direct involvement with my own with folks in my local
community. I was very impressed with Windy Hills. There is no
question that they could always use more resources, but in the
case of Windy Hills and a number of others, we are spending a
lot of time putting together task forces of State directors,
multifamily directors, to get direct input from them on how
better to handle and manage these programs in ways that make
them not only effective but sensitive to the families and the
folks that live in these communities.
I don't know what it has been like in the past. My sense is
that there were probably some management issues that should and
could have been dealt with. But I can truthfully say that our
team under Mr. Garcia and the folks at Rural Housing and the
folks at USDA Rural Development are very, very interested in
making sure these programs work and work effectively.
At our Rural Housing Summit we inked an MOU with HUD to
specifically work with the four corners area of the Colonias to
make sure we collaborate effectively in areas where we have
programs that overlap or we know of folks that have other
needs. It is a long-winded answer and I apologize, but we are
in fact very serious about getting on-ground input and doing it
on a regular basis.
Mr. Davis. Thank you, Mr. Chairman.
Chairman Ney. Thank you. Mr. Renzi.
Mr. Renzi. Thank you, Mr. Chairman.
Mr. Dorr, thank you for your testimony. I was real
fortunate, I grew up in southern Arizona, along the Mexican
border. Came from a family where we were taught ``never rent,''
whether we had the money or not. I didn't come from the lap of
luxury, but we were taught not to rent. Do whatever you can to
buy a house, hang on to the house even if you are house poor,
borrow from the equity in the house, and then eventually use
that equity either to have your own business or whatever to
prosper and grow a family. I got a family of 12 children so I
needed to borrow a lot of equity in order to pay grocery bills.
But I want to segue into Congressman Davis's thoughts. That
mentality that I was taught at a young age in my family and
that economic model of owning a home, having an appraiser come
out and appraise the home, borrowing against the equity, trying
to move myself up, is that the kind of model you are seeing? I
know you have been around and seen a lot in your travels. Is
that same mentality shared particularly in the regions that we
are talking about?
GAO came out and said that Mississippi Delta, Appalachia,
the Colonias on the Mexican border, and Native American trust
lands--I have got two of the four in the worst rural and most
severe rural housing quality programs in our country, those
four regions. I know Congressman Davis shares one of those
regions, too. So could you tell me, that mindset that I just
described with you, are you seeing that around the country?
Mr. Dorr. Well, that is an interesting question. And I
think generally speaking, yes, there is a mindset that home
ownership and equity in a home goes a long way toward building
communities, building and securing strong families and strong
family relationships.
I will tell you my experience with the minority community
coming from Iowa was fairly minimal until I got in this
position. And I think the one thing that I have observed is
that the minority community, generally speaking, probably have
been disadvantaged because of a lot of historical reasons. You
know, I have some observations on that, but I think it is an
issue that needs to be resolved. I think we need to be more
aggressive in making sure that minorities have the same
opportunities of home ownership and equity building, just like
those of us that had the opportunity to do it.
The Section 523 Self-Help Program is one of the most
interesting and effective programs we have. And we are doing
everything we can to run that program long and hard; because
through grant programs working with nonprofits, it enables
young couples, single parents, families and singles, to
actually expend sweat equity and ultimately move into their own
home and move into it with an equity position. I concur with
your observation.
Mr. Renzi. When you look at some of the travels that you
have had in the South, in particular what kind of impediments
are you seeing when we talk--I think you have got some good
research as far as the appraisals. I grew up in a small
community, I played football with the local boy who is the
appraiser. I know he is going to come over and give me a fair
shake on my appraisal. If I can get him in a headlock, I will
get a couple more bucks out of him. What are you seeing
particularly in the South on that?
Mr. Dorr. Let me go back to my visit last week with Mr.
Paige. At the Federation of Southern Co-ops they are running a
number of informational and training programs that will result
in the development of new business opportunities. A number of
credit union initiatives are underway, a lot of training and
people development as well. Much to my surprise, when they were
talking about their credit union initiative, I think in the
neighborhood of 20 credit unions that he put together, they had
slightly more than $20 million in assets. As they were going
around the table discussing their various programs, one of the
things that came up was that issue. So I looked at them and
said, ``Explain something to me. How many dollars do you think
are under pillows or buried in backyards; that is, aren't in
banks or credit unions?'' Ralph looked at me and smiled and
said, ``There is a lot.''
So then it moved on down the table to another young woman
who was running a land development program. She talked about
the inability to aggregate quantities of agricultural real
estate, which essentially was impeding their ability to have an
asset base to grow.
I finally looked at them and I said, ``If I am hearing what
I think you are telling me, answer this question. How many
black surveyors are there? How many black title companies,
black-owned title companies are there out here?'' The gentleman
down the table looked at me and said, ``I can't find any.'' He
said, ``I have looked in North Carolina, South Carolina,
Arkansas, Alabama, Mississippi,'' I don't know if he mentioned
Louisiana, ``I can't find a black-owned surveying company.''
Mr. Renzi. No African American surveyors, no African
American appraisers; am I right? So if you are African American
in the South and you do have the ability to own a home, and
then you are trying to borrow against that, your ability to
possibly--or your worry, I am sure, of trying to get a fair
shake on the appraisal--I mean, you got to be--.
Mr. Dorr. The ability to secure the property, to get a fair
title, to get an appraisal, all of those issues are mitigated.
As a matter of fact, I suggested to Ralph we need to sit down
and work out a training program just in that exact area. Quite
frankly, folks have to have trust in the people that they are
dealing with and they have to have trust that the property is
properly titled. That would go a long way toward mitigating a
number of these home ownership issues.
Ms. Waters. Would the gentleman yield?
Mr. Renzi. Yes, ma'am.
Ms. Waters. Where did you get your information that leads
you to conclude that minorities don't aspire to home ownership
in the same way as whites?
Mr. Dorr. If I gave that impression, it was wrong. I think
they absolutely aspire to it.
Ms. Waters. I am sorry. What did you say?
Mr. Dorr. What I intended to say was that their ability to
think they can aspire to it, based on their experience, is
probably diminished relative to whites or to the majority race,
simply because of the experiences that they have had, as we
have discussed concerning their lack of trust in the system
that will enable them to acquire homes and property.
Ms. Waters. Well, I am not sure what you are trying to say,
but let me just give you a bit of my experience with the desire
for home ownership, the desire for land ownership, and the
desire for farmland ownership, all of those issues. You are
from USDA. As you know, it was just less than 2 years ago that
there was a class action lawsuit brought by African American
farmers because of the discrimination in the Department of
Agriculture. And that has been the most horrendous experience
that I have ever had in trying to straighten out a problem of
unfairness. And we still have farmers, for example, who are
struggling with the way that they have been treated by USDA and
the Department of Justice.
I point that out to you because if what you are trying to
say--and I think as you explained it a little bit better, what
you may be trying to say is because of lack of opportunity,
because of discrimination, because of redlining, all of these
issues that some of us have been fighting for years, it has
limited the ability of minorities to be able to own homes and
property and farms in the way that they should have been able
to had there not been the kind of discrimination that is
documented through the actions like the class action lawsuit.
And let me say this to you: Even today as we sit here and
we talk about the Mississippi delta, it is shameful what still
happens in the Mississippi delta. There are still shacks
without running water, without partitions. Why do we continue
to have those kinds of situations? Given what I am looking at
now, all these programs and all the opportunities that we are
supposed to have, why do we still have such substandard housing
in places like the Mississippi delta?
Mr. Dorr. Well, I think you have framed my observations
very well. It is a limited ability due to discrimination and
due to the lack of capability relative to the system giving
them the opportunity that everyone else has. So you are right.
You are absolutely correct.
Now, in defense of USDA--and I am not defending their past
actions and a number of the issues that have been clearly
outlined--but I would draw your attention to what I think is a
stellar example of positive action that we have just completed
at USDA's Rural Development. I don't know if you are familiar
with a community called Bay View, Virginia. Bay View, Virginia
is on the eastern shore of Virginia, just across the Chesapeake
Bay Bridge from Norfolk. Last week, Deputy Secretary Mosley
attended an open house there. Bay View is a minority community
that had ramshackle houses with no running water and no sewer
system. The water systems that they had were next to septic
tanks. This occurred before I got there. But somehow residents
connected with the folks at Rural Development.
Within Rural Development we have three agencies: Rural
Utility Service, Rural Housing Service, and Rural Business
Service. The first entity that they engaged was Rural Utility
Service. We have subsequently been involved and drilled wells,
put in water and waste systems, so that they have water, waste,
and livable conditions. Then last week our Rural Housing
Service completed the opening of 35 brand new multifamily
housing units in that community, and there are now on the
drawing board a number of single family housing units. That is
all tied to a farming operation of which I quite frankly don't
know all the details.
So we are mitigating these issues where we have the
resources, where we have the opportunity, and where we can
engineer things of this sort to happen.
Ms. Waters. Well, I appreciate your example. And I would
hope that under your watch you will expand that.
I don't have a rural community, but I go to Selma and down
through Alabama every year as we commemorate the March across
the Edmonds Pettis Bridge. I am still appalled at some of what
I see. I go down in the delta with Benny Thompson who invites
us down from time to time for various reasons. I am still
appalled at what I see. I listen to my chairman of this
committee talk about communities that don't have water. And I
am still appalled at some of what is happening in Appalachia.
So we got a lot of work to do.
And while I appreciate what you are telling me, some of the
images of rural housing, the lack of rural housing, still
appear on television from time to time as stories come out in
various ways, and the camera is panning shacks where people are
sitting on broken-down porches and the mention of no running
water, et cetera.
So it seems to me that there is a lot of support in this
Congress for rural housing. And I don't know what is going on
with all of the programs, which I am going to try and pay a lot
more attention to. But I think that those images that we
constantly see, and I have been seeing practically all my life,
we are just a few years beyond Sugar Ditch in Mississippi,
these have to be gotten rid of.
This administration can't afford to talk about housing in
Afghanistan and Iraq until it gets something done in
Mississippi and Alabama and Appalachia. So I am one person that
is going to be pretty persistent in trying to pursue the
opportunities for the rural poor, because I am not simply
concerned about the urban poor, I am concerned about the rural
poor as well.
Chairman Ney. Thank the gentlelady. Mr. Renzi.
Mr. Renzi. Reclaiming my time, I wanted to--.
Chairman Ney. Your time has expired, therefore--.
Mr. Renzi. I want to thank you. I think you did an
excellent job of calling out some of the impediments that you
observed during your trip to the South.
Do you see within the community, within the leaders that
you met down there, the ability for the African American
community to now put in place in their training programs new
programs that will bring about more appraisers, more land
surveyors, so that won't be an impediment, is I think what you
described?
Mr. Dorr. It clearly now on the table of issues that we
need to address through the number of programs that we are
involved in. I would intend to do that. I frankly am appalled
by the fact that there aren't black appraisers, surveyors,
abstract companies, et cetera. Maybe there are someplace; we
just haven't found them.
Mr. Renzi. I am sure with Congressman Davis's knowledge of
this now, he will also be a leader on it.
If I could move real quick, I think we will do a second
round of questioning, to the Mutual Self-Help Housing Program.
In southern Arizona along the border, we have got a great
amount of labor. We have got a lot of Hispanics who have been
involved in the construction industry. We have the Navaho, the
Apache, the Hopi, all of which I represent and am fortunate to
represent. Represent the largest Native American Indian
population in America. So we have plenty of labor, plenty of
people out of work.
We have plenty of timber, if it is not burning in our
forests out there. And I like this idea of being able to take
the labor that we have available, take the materials, the
building materials that we have available, these natural
resources, and being able to use this 523 Mutual Self-Help
Program.
And I would like you to just expand in the remaining time
that I have on the 523 program and in particular the amount of
money that is available that was used--that is not used. And I
will finish with that question. Thank you, sir.
Mr. Dorr. In our Self-Help 523 Program, we have an
appropriation of $35 million. That is budget authority that is
used to make grants to nonprofits or other housing assistance
councils or authorities that are collaborators who work with
Rural Development to bring together, usually in tranches of 8
or maybe 16 potential homeowners, provide them guidance,
construction oversight and assistance in building, through the
use of sweat equity, their own homes. This is a marvelous
program because it uses local supplies, and local labor.
When we get all done, these young people have homes of
their own with equity usually when they walk in the door. It is
a program that we intend to push and push aggressively, because
it doesn't use a lot of government resources.
Mr. Renzi. How much left over from the 35 million?
Mr. Dorr. Last year I believe we had 16 million left over.
There is a reason for that, quite frankly.
Mr. Davis. If I could ask a quick question--will you permit
a second round of questions?
Chairman Ney. We will go to Mr. Bereuter and then start a
second round.
Mr. Bereuter. Thank you, Mr. Chairman. Mr. Dorr, welcome to
the subcommittee.
Mr. Dorr. Thank you.
Mr. Bereuter. With the help of my colleagues, I am the
person that took the initiative in developing the 502 program
and the 538 Guaranteed Loan Programs authorized initially. So I
am very interested in these two programs and their successor
programs.
I would like to go to the 538 Multifamily Loan Guarantee
Program first. I understand that a rule was published on June
10th which would hopefully make two changes to improve the
program's secondary market participation. But mortgage bankers
came before this subcommittee lately--let's see, I think I
actually have the date--and they suggested that we need
statutory language to make it clear that Ginnie Mae could
ensure--could securitize loans under the 538 program.
I checked with a Nebraska USDA rural office in my home
State and found that there were none of the 538 properties in
Nebraska involving the Ginnie Mae program. I did make an
inquiry of your Agency with respect to the 502 Single Family
Loan Guarantee Program. I understand that your response was
that the 502 program can be securitized under Ginnie Mae.
Do you have any feelings about whether or not this
subcommittee should advance legislation which would make Ginnie
Mae an eligible securitizer for the 538 Multifamily Loan
Guarantee Program?
Mr. Dorr. We are in the process of working to get Ginnie
Mae as a securitized underwriter of this 538 program. If it
takes statutory language, that is something that we would
obviously have to run by our counsel, et cetera, to determine
where we are at on that. But anything that would make the
program more liquid and more effective would make sense.
Mr. Bereuter. I think that is one of the problems now. I am
inclined to introduce legislation to make it clear that they
have the authority to proceed in that area.
Can you give me some idea as to whether or not the
appropriations in recent years have been sufficient to meet the
demand for the 538 program?
Mr. Dorr. Well, in a cursory overview, it appears that it
has up to this point. It is because of the lack of liquidity
and some of the underwriting issues that I think it has been
slower to take off than perhaps one would have hoped. By the
same token, we are in the process right now, among other
things, of engaging a couple of folks with very, very
substantial background in the multifamily area; It is my hope
they will help us understand better how to operate this program
in a way that makes it function as it was designed by the
statute.
Mr. Bereuter. Without the ability to securitize loans, it
has been very difficult. We have had to be very innovative in
the few projects we have made work in Nebraska. The 502
program, do you have any idea how many families have been
provided housing either by purchasing an existing home or
building a new home, or a 502 program nationwide?
Mr. Dorr. Last year we were able to work with right at
44,000 homeowners.
Mr. Bereuter. Got any overall figures since the first pilot
program in 1991?
Mr. Dorr. Yeah, I do. It is quite substantial.
Mr. Bereuter. I think it has been substantial. I think it
has a successful program.
Mr. Dorr. I believe to date the 502 guarenteed program has
assisted over 260,000 rural families with homeownership.
Mr. Bereuter. Most of that I think is in the guaranteed
program.
Mr. Dorr. Actually, the majority of our portfolio is still
in the direct, although the guaranteed portfolio is growing
rather substantially.
Mr. Bereuter. I see. All right. The difference, it seems to
me, as to whether low- and low/moderate-income people take
advantage of this program oftentimes comes down to whether or
not there is an aggressive local banker that works the program.
I want to congratulate you on keeping the program simple to use
at this point. In fact, most bankers and other financial
institutions cannot believe how easy it is compared to some of
the loan guarantee programs related to agriculture. So they are
reluctant to even look at it. When they do, they can really
make a go, make it work. Some of the smaller banks are some of
the most successful in using it. That has been my experience at
least.
Now, in fiscal year 2003, I think the ceiling was set at
4.528 billion. And because of the low default rate, the low
administrative cost, you were able to operate, I gather,
meeting demand with only 32.6 million budget authority. The
current administration request for fiscal year 2004 is down
dramatically, only 2.5 billion, but the budget authority level
is suggested at 39 million there. Why was it so low in fiscal
year 03 compared to 04? Has there been a recalculation of risk?
Or what is the difference, if you can help me with that
question?
Mr. Dorr. Are you talk talking about the direct or--.
Mr. Bereuter. Talking about the loan guarantee program.
Mr. Dorr. The loan guarantee program. I don't have a
precise answer on that for you. We requested a 32 percent
increase in our direct 502 program appropriations. I can get
you an answer on what caused the guaranteed program BA
requirement to change in 2004.
Mr. Bereuter. If you have a budget authority level of 39
million, will you be able to meet the demand for the 502 Loan
Guarantee Program for fiscal year 04?
Mr. Dorr. It may be difficult, but I think we will.
Mr. Bereuter. Very difficult. Were you able to meet this
thus far in 2003? Do you expect to be able to meet it in 2003?
Mr. Dorr. Yes, we hope to. It is going to be tight. We were
able to move 11 million of carryover from the Section 523
Program into our direct program with the appropriation last
February. That gave us an additional 900 million in single
family guaranteed authority, gave us about over 10,000 homes.
So that is clearly what kept us running.
Mr. Bereuter. Why do we use the direct program when we have
such a larger payoff, so to speak, from the loan guarantee
program? Why does there continue to be the demand on the direct
program when we can leverage so dramatically the Federal funds
involved by the loan guarantee program?
Mr. Dorr. Essentially the direct program addresses the
needs of a tranche, of lower income families which we think
merit an opportunity to acquire a home. If we can do that, we
think that is worthwhile.
Mr. Bereuter. So these would be people largely below 50
percent of the average income level in the region?
Mr. Dorr. Yes.
Mr. Bereuter. Whereas we designed the loan guarantee
program for 85 percent.
Mr. Dorr. 80 percent of average median income.
Mr. Bereuter. Sixty, I should say.
Mr. Dorr. I am sorry; it is up to 115 percent of median
income.
Mr. Bereuter. We had 100 at one time, and it was moved to
115 as I recall. The multifamily housing Program, the 538
program, the budget includes $100 million--excuse me--proposes
to build 2,700 units. Without some changes, some changes coming
through the rules changes, perhaps by getting Ginnie Mae
authorization you will be able perhaps to build more. Will you
be able to come up to the 2,700-unit level for the next fiscal
year? Do you have any thoughts about that?
Mr. Dorr. There has been some misunderstanding in terms of
the funds obligated and ultimately used in this program over
the last several years. I think the key to it is what you
identified early on, and that is the ability to securitize and
make these projects liquid. If we can resolve that issue, we
could use these funds in their entirety. But the speed of the
resolution of that issue I think will drive it.
Mr. Bereuter. Just for your information, Mr. Dorr, I go to
the Appropriations subcommittee each year and ask for more
funds for the loan guarantee programs, the 538 and 5902
program. And while the staff there probably understands this
program rather well, I find that members are intrigued to learn
about the program, even though it has been ongoing for a number
of years, and about its potential and about its growth in
number of houses that are being made available to low- and
moderate-income Americans.
So I encourage you to have even more contact within your
Agency with the appropriators in both houses on this issue and
give them some of the charts that I have provided from your
Agency to them this time to show them the growth in the
programs. That is my suggestion to you. Thank you very much for
your response.
Chairman Ney. Thank you. Mr. Davis.
Mr. Davis. Thank you, Mr. Chairman.
Let me try to globalize this discussion a little bit, Mr.
Dorr. One of the things that is evident to me, if I can follow
up on my colleague from Nebraska's observations, is not just
that few Members of Congress are relatively acquainted with the
various 528s, 538s, whatever the various numbers are. Much more
importantly in my experience, a very, very thin fraction of the
people that these programs are meant to serve know anything
about them.
That I think is a very significant gap that speaks to some
extent to Ms. Waters' questions earlier about why, despite the
existence of all of these programs, despite the funding for all
of these programs, which at one point was at a fairly
respectable level though it is not now, there has still been
this persistent housing crisis that is concentrated in parts of
the country, the areas Mr. Renzi represents and the Mississippi
Delta, Alabama Black Belt area. Do you agree that that's a
significant problem, making the potential clientele for these
programs aware of them and what, if anything, is USDA doing to
aggressively go, not just to the Ralph Paiges of the world, but
to the people who are living in these counties in addition to
Mr. Page, the people who actually are going to benefit from
these programs? What is being done to go into the local
communities to make people aware of these various benefits?
Because I'd make an observation to you. My colleague from
Nebraska mentioned the necessity of the banks implementing a
lot of these programs, the guaranteed loan programs. I will
represent to you that in major parts of the area that you
represented last week, there is a very small banking presence.
I think in the whole of Sumter County, there may be all of
about two banks, maybe really one bank that is really
capitalized in a significant degree. You can go through major
portions of my district that you represented last week, and you
don't run into any banking presence, and maybe even more
pernicious than that, when you run into banks, when the people
in those communities run into banks, the banks are not a
friendly face to them. The banks are the people who keep them
from getting loans in their perspectives. The banks are the
people who are not friendly to them when they come in needing
money to get some new agricultural equipment. The banks do not
have a great reputation in lot of these communities. So given
the fact that the banks are not going to be the best purveyor
of information, what do you suggest, I mean, what do you
suggest to get these programs into the heart of the people who
would benefit from them?
Mr. Dorr. That is a tough question. People have looked at
it for a long time. Naively, perhaps, I would make a couple of
observations.
First of all, these credit unions, between them had I think
$20 or $22 million. You could convert that $20 or $22 million
into black-owned banks that would have an asset base of a
billion dollars. With proper security and the types of
securitization possibilities, there would be a lending base
there. We have entered into an MOU with the National
Association of Credit Unions to try to work more closely with
them to market our programs, as well as to use their ability to
help provide home ownership loans and that sort of thing.
When you are dealing with a credit union with a million
dollars and a lot of volunteer staff, the sale of a home loan
into a secondary market involves complex and sometimes more
involved issues than the staffs sometimes have.
We, at Rural Development, have to do a better job of
marketing. Statutorily there are some limitations in our
ability to go out and quote/unquote market government services.
But I think a more effective marketing effort must be made. We
are in the process of taking a very close look at what we can
do within the framework of our authority to make sure that we
are doing a better job.
We have also initiated, a year ago, something called the
Five-Star Initiative, which is part of a Rural Development
effort in conjunction with a Credit Education Program through
the FDIC. Our Five-Star Initiative essentially amounts to an
enhanced marketing strategy to bring minority homeownership
more front and center in ways that involve marketing,
education, and an aggressive attempt to increase minority
homeownership within our programs by 10 percent in the near
future.
We are doing a number of things. There are a lot of issues
that have to be dealt with. Are they all right? Are they all
the most effective? I am not sure that I know, but we are
sensitive.
Mr. Davis. Let me just close on this observation that
follows up on Mr. Renzi's observations earlier about the
absence of minority participation in a lot of aspects of the
rural housing market. One thing that is always striking to me,
Mr. Dorr, that if you look at the largest banks in my district,
and we have a number, and if you look at the next tier of banks
in my district, we have a number of those, to my knowledge, not
counting the one or two minority-owned banks, at the majority-
owned banks in my district, there are about six or seven of
them, there is a combined total of one African American who
sits on the board of directors of all six or seven of those
institutions. I am sure if I am wrong, I will hear about it by
the end of the day. But I think that that number is about
right. That is a significant problem that I think all of us,
certainly on this committee, should recognize. You do not have
a significant amount of participation by individuals in the
minority community or a significant amount of participation by
folks who even have relatives who live in some of these areas,
frankly, until we get a handle on that phenomenon. Because I
would describe the phenomenon this way. It is the perspective
of people whose economic interests are primarily directed
outside of the community still making the bulk of the economic
decisions about the distressed communities. That is certainly
the perception of the people on the ground in these areas. And
I think until we get a handle on that problem, until we find
some way to inject more of a feeling of participation because
whatever the reality, if a given community feels that its needs
are ignored and neglected, that will certainly weaken their
ability to take advantage of the programs that do exist.
So I will close on that note and certainly thank the Chair
for calling this hearing. And thank Ms. Waters for her
engagement in this issue. She has been, despite the absence of
a rural presence in her district, she has been way before I got
here, a persistent voice on these kinds of issues, and we need
more urban voices engaging this question. Thank you.
Mr. Dorr. Thank you.
Chairman Ney. Thank you. Mr. Renzi.
Mr. Renzi. Thank you, Mr. Chairman.
I want to jump on the coattails of my colleague, Mr. Davis.
In southern Arizona, we have been somewhat successful, not
great success, but somewhat successful in using the Section 523
Program. And one of the ways we were able to get the word out
was the 523 Program. For 60, 65 percent of the labor that you
put into the home, we were using the Catholic churches, and I
know your network of African-American churches in the South is
as strong if not stronger, but the idea that we have got $18
million left in the 523 Program, a program where you can use
local materials--and I was a homebuilder before I came here--
use local materials and local labor to build your own home, and
when you walk into this you have equity, and if we can get the
local churches to get behind that kind of a program, there is--
I am going to overreach here, but I can't see any reason to
rent. Why is it that we had $18 million left over? And I know I
am looking here at underqualified supervision. Is that a State-
licensed GC, or is there a Federal qualification?
Mr. Dorr. Mr. Garcia says it is a State-licensed--.
Mr. Renzi. GC?
Mr. Dorr. Right.
Mr. Renzi. So it has got to be a GC?
Mr. Dorr. Right.
Mr. Renzi. Okay.
Mr. Dorr. Seventy percent of the folks that go into our
self-help program are minorities. That is a market tranche that
we are very heavily engaged with.
Secondly though, to have the kind of oversight necessary to
make sure these projects succeed. I mean the worst thing that
can happen is somebody goes to work for five or six months, in
addition to maintaining a 45- or 50-hour-a-week job, they spend
another 30 hours a week building a home, and they have poor
oversight quality because these folks don't have backgrounds in
building skills and buying materials and that sort of thing,
and then to get four or five months into it and have the
project fail because of some lack of oversight, and we have had
a couple of those.
Mr. Renzi. I would--I hope you have failure rates through
the roof, because you have got $18 million left over, my
friend. And I know most people out there with good supervision,
as you know--and I am preaching to the choir here--can put
together a home. It is not that--I mean if I could do it
anybody could do it.
Mr. Dorr. Well, that may or may not be the case, but I
understand what you are saying. And the simple fact of the
matter is that what we are not trying to mitigate all failure.
I understand that. And I have identified a number of
organizations around the country who can help. I intend to put
them in touch with some of these folks that I met last week
that can come in and provide the training and provide the
support and the background to get these houses up and running.
That's the kind of marketing we need to be more forceful
on, and we intend to do that.
Mr. Renzi. I am with you. There it is, the training aspect
of it. The idea that maybe to train some of these supervisors
and get the program out. Again, just real quick and I will wind
up. The $18 million that we have left over was primarily why?
Mr. Dorr. Why? Because we just didn't have enough demand
for it, based on our ability to market the program and to make
sure that those that were interested in this had the ability to
make sure these projects would likely succeed.
Mr. Renzi. Thank you, Mr. Dorr. It was great having you
today. Appreciate it.
Mr. Dorr. Thank you.
Chairman Ney. Thank you. Any other members would like to
ask a question? Just in kind of a summary, would you like to
say anything about the vision you have, you know, in a nutshell
and how you would like to carry it out through some changes you
need to make?
Mr. Dorr. Well, if there is a take-away vision of what
Rural Development and this administration would like to be
viewed as number one, I want to make it most clear that this
administration is very sensitive to the housing needs of rural
Americans. Second, it is in that vein that we are trying to
administer these programs effectively and to get our hands
around them in a way that provides the stewardship of the
resources that we are given in ways to make this program work.
And thirdly, if we administer and implement these programs
effectively because of good stewardship, and our sensitivity to
the needs, I would like the committee to also understand that
we are going to need some management flexibility relative to
how we deal with rental assistance, securitization issues, and
a number of the issues concerning the 523 Program. We do have
these tools, but we need flexibility in how we implement them.
If we can do that, then our vision of Rural Development being
the venture capitalist for rural America with the goals of
increasing economic opportunities and improving the quality of
life will, in fact, bear fruit. We are well-positioned to do
that, and with your help and cooperation, I would like to think
we can attain those goals.
Chairman Ney. What I would suggest, as we try to get to
where we want to be in the vision, if you have the ideas of
what you need to do legislatively, you know, bring it here to
the committee, and we can take a look at it and see how we
could work together if there needs to be legislative changes. I
know some of it is internal management, some of it is getting
out the word of what's there, maybe some of the things that are
there are not working so--but I just think we need to, like I
said, beef the level up all the way around to get the issue out
there. And I will still say it, downpayment is a problem. I
mean when we talk about the housing downpayment as a problem.
We have talked about it, and people can work and pay that
monthly payment but the downpayment always tends to be a
problem.
Mr. Dorr. Well, thank you; I want to take this opportunity
to make a point about downpayment. We have a Rural Development
program, right now, where we have State directors and single-
family employees working with employers who are providing the
downpayment on 5-year forgivable loans in conjunction with
Fannie Mae buying the paper and us originating the loan. There
are many of these opportunities out there. We are trying to
corral them all, and when we do that, it does make housing much
more affordable and available in ways that I think would
satisfy everyone.
Chairman Ney. It makes a huge difference. We have talked
about it with the FHA; I have talked to the ranking member. It
makes a huge difference. If a person sits and it literally
takes 10 years for the downpayment, I don't note what that
shows about their credit worthiness in the sense of the child
was in third grade, now the child is out of high school, they
could have been in that house to have a better place to study,
et cetera. I mean, we all know you can't maybe prove all these
things with calculations, but we know it works. So some way--I
am glad to hear that is happening.
Any other way I think we can directly tackle that is going
to help people. The sooner people get into housing, the better
off they are going to be, their families and their whole way of
life.
I want to thank all the members. If there is no further
questions that concludes the hearing. Thank you.
[Whereupon, at 11:17 p.m., the subcommittee was adjourned.]
A P P E N D I X
June 19, 2003
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A P P E N D I X
July 8, 2003
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