[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
                     OVERSIGHT OF THE DEPARTMENT OF
                     HOUSING AND URBAN DEVELOPMENT
                    AND ITS FISCAL YEAR 2006 BUDGET

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 2, 2005

                               __________

       Printed for the use of the Committee on Financial Services


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                            Serial No. 109-5

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana          PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio                  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           DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois         MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          HAROLD E. FORD, Jr., Tennessee
    Carolina                         RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut       WM. LACY CLAY, Missouri
VITO FOSSELLA, New York              STEVE ISRAEL, New York
GARY G. MILLER, California           CAROLYN McCARTHY, New York
PATRICK J. TIBERI, Ohio              JOE BACA, California
MARK R. KENNEDY, Minnesota           JIM MATHESON, Utah
TOM FEENEY, Florida                  STEPHEN F. LYNCH, Massachusetts
JEB HENSARLING, Texas                BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey            DAVID SCOTT, Georgia
GINNY BROWN-WAITE, Florida           ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina   AL GREEN, Texas
KATHERINE HARRIS, Florida            EMANUEL CLEAVER, Missouri
RICK RENZI, Arizona                  MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin,
RANDY NEUGEBAUER, Texas               
TOM PRICE, Georgia                   BERNARD SANDERS, Vermont
MICHAEL G. FITZPATRICK, 
    Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina

                 Robert U. Foster, III, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 2, 2005................................................     1
Appendix:
    March 2, 2005................................................    53

                                WITNESS
                        Wednesday, March 2, 2005

Jackson, Hon. Alphonso, Secretary, U.S. Department of Housing and 
  Urban Development..............................................     7

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    54
    Baca, Hon. Joe...............................................    56
    Frank, Hon. Barney...........................................    57
    Gillmor, Hon. Paul E.........................................    58
    Hinojosa, Hon. Ruben.........................................    59
    Matheson, Hon. Jim...........................................    63
    Ney, Hon. Robert W...........................................    65
    Scott, Hon. David............................................    68
    Velazquez, Hon. Nydia M......................................    70
    Jackson, Hon. Alphonso.......................................    72

              Additional Material Submitted for the Record

Hinojosa, Hon. Ruben:
    Written letter to the Hon. George W. Bush, President of the 
      United States of America...................................    80
Jackson, Hon. Alphonso:
    Written response to questions from Hon. Joe Baca.............    82
    Written response to questions from Hon. Jim Matheson.........    83
    Written response to questions from Hon. Stevan Pearce........    88
    Written response to questions from Hon. Wm. Lacy Clay........    92


                     OVERSIGHT OF THE DEPARTMENT OF
                     HOUSING AND URBAN DEVELOPMENT
                    AND ITS FISCAL YEAR 2006 BUDGET

                              ----------                              


                        Wednesday, March 2, 2005

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 10:15 a.m., in Room 
2128, Rayburn House Office Building, Hon. Michael G. Oxley 
[chairman of the committee] Presiding.
    Present: Representatives Oxley, Lucas, Ney, Biggert, Shays, 
Miller of California, Tiberi, Kennedy, Feeney, Brown-Waite, 
Renzi, Pearce, Neugebauer, Fitzpatrick, Davis of Kentucky, 
McHenry, Frank, Waters, Sanders, Maloney, Velazquez, Watt, 
Ackerman, Sherman, Lee, Capuano, Hinojosa, Clay, Israel, 
McCarthy, Baca, Matheson, Lynch, Miller of North Carolina, 
Scott, Davis of Alabama, Green, Cleaver, Wasserman Schultz, and 
Moore.
    The Chairman. The committee will come to order. Pursuant to 
Rule 3(F)(2) of the Rules of the Committee on Financial 
Services of the 109th Congress, the Chair announces that he 
will limit recognition of opening statements to the Chair and 
ranking minority member of the full committee, and the Chair 
and ranking minority member of the Subcommittee on Housing and 
Community Opportunity or their respective designees to a period 
not to exceed 16 minutes, evenly divided between the majority 
and minority.
    Today, the Financial Services Committee welcomes Secretary 
of the Housing and Urban Development Department Alphonso 
Jackson. We offer our congratulations on your successful first 
year as Secretary.
    Over the past few years, this committee and the 
administration continue to seek bipartisan ways to extend 
homeownership to make existing housing programs work better. 
For example, the committee passed the American Dream Down 
Payment Act that benefits 45,000 new homeowners annually.
    The committee passed the Hospital Mortgage Insurance Act of 
2003, which streamlined the process for local community 
hospitals to insure mortgages, thereby enhancing the quality of 
life and health care, particularly in rural communities.
    The committee enacted legislation to increase FHA 
multifamily loan limits, which addresses the acute issue of 
affordable rental housing in high-cost areas.
    In rural areas, the committee passed legislation that would 
allow the Government National Mortgage Association to 
securitize Rural Housing Service multifamily loans, as well as 
providing new homeownership opportunities for Native Americans.
    This year the President's fiscal year 2006 budget proposal 
would strengthen the core of certain housing initiatives, 
including rental housing assistance and public housing. The 
proposal advocates homeownership, which endures as an important 
goal for most Americans. The administration has also proposed 
an overhaul of the way the Federal Government funds and 
administers community and economic development. The 
administration has not yet offered legislation describing how 
these 35 programs will collapse into grant programs.
    Mr. Secretary, I am looking forward to the opportunity to 
have you and Secretary of Commerce Gutierrez address this 
committee on the details of this proposal, and how we can reach 
common ground to promote homeownership, community development 
and economic opportunity.
    President Bush has inspired us to make homeownership happen 
for even more Americans, even at a time when our homeownership 
rate is the highest ever at 68 percent. Since last year, 
homeownership for African Americans and Hispanic homeowners has 
now exceeded 50 percent.
    Mr. Secretary, I also want to congratulate you on your 
leadership in creating and sustaining rental housing 
opportunities for families not yet ready to pursue 
homeownership. This year's budget provides an increase in 
funding for rental housing through housing choice vouchers.
    To address another aspect of HUD's oversight 
responsibility, over the past 2 years we have learned of 
accounting errors at Fannie Mae and Freddie Mac, and also 
discovered that Fannie Mae sold fraudulent loans to Ginnie Mae.
    Chairman Baker has been diligent in his goal of reforming 
the GSEs. Many of the issues that have come to light can be 
directly attributed to his efforts. As we consider proposals 
for the reform of the GSEs, it is my hope that the committee 
can work with the administration to craft a regulatory 
structure that protects the taxpayers, ensures their safe and 
sound operation, and maintains their housing mission.
    Last year, your Department determined that the enterprises 
were not meeting underserved markets. As mission regulator, HUD 
raised the affordable housing goals that the GSEs must meet. 
This committee is interested in any update you can provide 
related to the progress the GSEs have made in meeting these new 
goals.
    I would also like to mention reform of the Real Estate 
Settlement Procedures Act. We will all support the goal of 
simplifying the home-buying process, making it less expensive 
for consumers. I am hopeful that you will address the 
Departments' future intent regarding the development of a new 
proposed rule.
    Let me also take this opportunity to thank Housing 
Subcommittee Chairman Ney for his work on housing issues and 
recognize the gentleman from Massachusetts for an opening 
statement.
    Mr. Frank. Thank you, Mr. Chairman. And the most 
significant thing that has happened with regard to the budget 
within the jurisdiction of Secretary Jackson, I guess the 
analogy here is the Sherlock Holmes story in which a dog did 
not bark. This committee is the dog that will not be allowed to 
bark or make any other sound with regard to that budget 
submission.
    In the past, we have had committee markups in which, under 
the Rules of the House and the procedures of the House, 
traditionally we have voted on our opinion of the budget and 
have submitted those views to the Budget Committee. There is a 
procedure whereby committees are asked to do that.
    This year we are doing it in writing with no opportunity 
for there to be any collective discussion, and the reason is 
very clear. My colleagues are, on the other side of the aisle, 
very reluctant to vote on the budget submission you have made. 
My guess is that when the time comes, many of them will vote 
against it, but they hope by then some of them will have been 
forgotten. Because I think it is striking that people should 
understand, a year ago we did vote, and we voted in this 
committee by majority to disagree with the budget submission on 
HOPE VI and on Section 8.
    I believe that if the committee would have voted on a whole 
range of issues here, it would have voted ``no.'' I think the 
majority's position was very, very clear: Better no vote than 
voting ``no.'' So I think people should understand the absence 
of that.
    And the reason for the unpopularity, I think, however, is 
not fully understood.
    There are cuts in most of the programs that HUD administers 
that would help deal with inequality in our society that goes 
beyond what we ought to tolerate. Obviously, some inequality is 
essential economically to make our system work.
    And I think it is important to make this point. In this 
area, with regard to a whole range of programs, housing for the 
disabled, community development block grants, even by the way 
of homeownership--and the Secretary talks about homeownership, 
the chairman talked about homeownership. Last year, this 
committee voted on a bill that I thought was an administration-
supported proposal, zero down payment for FHA. This committee 
voted it out with great bipartisan support, and the 
Congressional Budget Office killed it because they said it was 
going to cost money, and we need the money for war and tax cuts 
and other things.
    So, while we have this commitment in principle to 
homeownership, the FHA zero down payment bill that passed this 
committee was--it passed this committee, it didn't pass any 
further. The Republican leadership, presumably with the 
cooperation of the administration, said ``no'' to it.
    So all of these wishes about homeownership apparently 
weren't enough to overcome this, and I think what we have here 
is a general position that needs to be articulated in a number 
of areas. Certainly here with regard to CDBG, housing for the 
disabled, public housing, the FHA zero down payment, the 
administration is, in the name of budget deficit reduction, 
asking us to make a number of decisions which members think are 
unpopular.
    I think people need to understand, it is not simply a 
series of random decisions to do unpopular things here or 
there. The things that the administration is asking Congress to 
do, that Congress even on the Republican side is reluctant to 
do, are not accidental. They are the products of a philosophy. 
They are the products, I believe, of a philosophy which the 
administration has tried to kind of make more attractive by 
calling it the ``ownership society.'' But a lot of people in 
this society are going to be too poor to own a lot or to own 
very much.
    And I think, as we look at how this works specifically in a 
whole range of areas--in Social Security, to housing, to 
veterans' health, to a number of other areas--what we are 
really being told is that this is the ``you-are-on-your-own 
society.'' you are on our own; no help is on the way. We do not 
have any kind of common responsibility to work together.
    And, unfortunately, this HUD budget reflects that you-are-
on-your-own society, and in almost every area, not every area, 
but in almost every area where we felt we had some 
responsibility to come together, the administration asks us to 
do less, asks us to do less in the name of perpetuating its tax 
cuts.
    You know, I will just note, the CDBG program, that will be 
a big controversy. There are proposals for substantial cuts in 
it. One month of the war in Iraq costs more than the entire 
CDBG program for the whole country. And people can have their 
views on the war in Iraq one way or the other, but it does seem 
to me very odd to tell us that we cannot afford 1 month of the 
war in Iraq for a program that is as important to the cities as 
the community development block grant.
    Thank you, Mr. Chairman.
    The Chairman. Thank the gentleman.
    The chairman of the Housing Subcommittee, the gentleman 
from Ohio, Mr. Ney.
    Mr. Ney. Thank you, Mr. Chairman. I want to welcome the 
Secretary here once again to the House and to the committee, 
and thank Chairman Oxley for holding this very important 
hearing that examines both the programs and budgets specific, 
of course, to HUD.
    Those of us on the committee are acutely aware of the many 
difficult management challenges that are inherent to the 
Department and have been over the years.
    I take this opportunity to pledge to obviously work with 
you and members of our Housing Subcommittee to continue to 
create new opportunities for families and individuals seeking 
to find their part of the American dream.
    I do want to mention, last Congress--and our ranking member 
is here, Congresswoman Waters of California, and we surely 
appreciate her support, Members both sides of the aisle of the 
subcommittee--we passed 15 housing-related bills, I think 12 
didn't even have a roll call. And we shared thoughts and ideas 
on these bills. And I think through cooperation on a bipartisan 
basis with the ranking member and members on both sides of the 
aisle, and through the support of our chairman and also Mr. 
Frank, we were able to enact legislation, I think, that has 
worked in a lot of different ways to make a good situation for 
housing. There is always more room to grow, as we all know, in 
it.
    I also see the President's commitment to homeownership. I 
think that is fantastic, and is something that he has pushed 
with the American Dream Down Payment and other pieces of 
legislation that have come through here.
    But, as far as minority households, we need to constantly 
realize and state that their share of the American dream is 
substantially lower. The homeownership rate among white 
households is about 74.2 percent, while the percent for 
minority households is substantially less.
    So lagging minority homeownership rates are, I think, a 
serious problem. Obviously, we have got to deal with it; we 
need to constantly improve the ability of people to have 
homeownership.
    Now, I have talked about the owning of a home, but--that is 
a desired goal, but of course we deal with Section 8. Not 
everyone can own a home, and the housing assistance program has 
been the major vehicle for providing rental assistance to low-
income families, individuals. The Section 8 program has become 
the largest component of HUD's budget.
    Rising costs of providing rental assistance is due in 
varying degrees--and we are proposing something. We have run 
this by the chairman's staff, and we are working with the 
ranking member of our Housing Subcommittee and our vice 
chairman, Mr. Miller, and others, but some roundtables--and we 
discussed this with you, Mr. Secretary, and we appreciate HUD's 
input in it; and we are talking with Mr. Knollenberg, who is 
the appropriator--but a series of roundtables, so that we can 
really bring in people across the country. And those will take 
place soon and we will be able to have a dialogue on where we 
are going.
    Mr. Frank mentioned about the fact of, you know, what 
happens after these situations? But I think--I notice my time 
has expired. But I think these will be good ways to approach 
this. GSEs is a great concern, keeping the housing goals 
intact.
    Thank you, Mr. Chairman.
    The Chairman. Thank the gentleman. The gentlelady from 
California, Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Good morning, Secretary Jackson. Let me just piggyback a 
little bit on what Chairman Ney has shared with you.
    This committee has worked very well from both sides of the 
aisle to try and create more housing opportunities for people 
all over this country. And I had great hopes because of the 
American dream that this administration was going to really do 
something substantial in this budget. So you have to know I am 
just very disappointed.
    And I have to tell you, I have gone through your testimony, 
and I am even more disappointed with your testimony and with 
the huge budget cuts and the massive program transfers away 
from HUD that the administration has proposed in funding the 
fiscal year 2006 budget.
    The funding year 2006 HUD budget accelerates, it appears, a 
4-year effort by the administration to dismantle critical HUD 
programs, to make deep funding cuts in these programs and, 
regrettably, to target these cuts to our most vulnerable low-
income families, seniors and disabled persons.
    Mr. Secretary, I hope to find out in the questioning 
whether these are really your budget proposals, or whether you 
just simply are being a good soldier and you have to defend 
them. In any event, however they have happened, whoever is 
responsible for them certainly cannot take credit for caring 
about the poor and the most vulnerable in our society.
    Mr. Secretary, I regret to say that after reading your 
prepared testimony, it appears that you have your head in the 
sand. It has that kind of quality to the testimony, and it 
simply is stunning to me. You lead an agency that is being 
decimated by this administration, an agency whose budget will 
fall by $3.85 billion, a 12 percent cut, if the President's 
funding year 2006 budget is enacted. This is the largest cut of 
any Cabinet agency.
    The President's proposed budget would eviscerate CDBG 
flexible block grants to States and localities, thereby 
resulting in a loss of affordable housing investments of $1.16 
billion, cut the disabled housing budget by 50 percent, 
continue an assault on the rental housing assistance safety net 
programs--that is, Section 8 of public housing--eliminate 
future funding for the HOPE VI program, rescind $143 million in 
funding year 2005 HOPE VI funding that was only appropriated a 
few months ago, and cut funding for housing programs for Native 
Americans by 16 percent.
    Funding for critically needed capital repair of public 
housing units is cut another whopping $252 million, and 
operating assistance is cut by 17 million. The overall funding 
year 2006 public housing request is 9 percent below last year's 
level, and 30 percent below the level when the administration 
took office after adjusting for inflation.
    Home block grants and the housing for people with AIDS 
program are also cut. The proposed CDBG cuts, if enacted, would 
have a devastating impact on housing, neighborhood improvements 
and social services for the elderly, the disabled, families 
with children and the homeless. The proposal also would 
reorient CDBG away from its traditional HUD focus of affordable 
housing and community development and--I can't understand why--
stick it in Commerce. And I just do not now how they would 
administer this program in that Commerce caters to business 
interests.
    We are talking about taking a program that is dealing with 
all that I just alluded to and putting it in a place that has 
no understanding of how to administer it. And particularly with 
its being cut in the way it is, so far as I can tell, not only 
did you not resist these cuts and program transfers, it appears 
that you encouraged them or are at least are indifferent to 
them.
    Mr. Secretary, you may not see it or you may not be willing 
to acknowledge it, but let me tell you, we have an affordable 
housing crisis in most of this country. Just 2 weeks ago, the 
Los Angeles Times reported that police had to disperse a crowd 
of about 3,000 people who were vying for 150 income housing 
applications in Hollywood, California, when some people rushed 
the line and a riot ensued. I think you can find a similar 
scene in many, many communities.
    Mr. Secretary, you have an impossible task before you and I 
await with interest your attempt to defend this patently 
inadequate budget.
    I thank you and I yield back the balance of my time.
    The Chairman. The gentlelady yields back.
    Now I am pleased to recognize the Secretary of Housing and 
Urban Development, the Honorable Alphonso Jackson. Mr. 
Secretary, welcome back.

 STATEMENT OF THE HONORABLE ALPHONSO JACKSON, SECRETARY, U.S. 
          DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Secretary Jackson. Thank you, Chairman Oxley and Ranking 
Member Frank and distinguished members of the committee. Thank 
you for inviting me to be here this morning.
    I am honored to outline the fiscal year 2006 budget 
proposal by President Bush for the Department of Housing and 
Urban Development. Mr. Chairman, in order to save time for 
questions, I would like to focus my opening statements on HUD's 
key priorities, new initiatives, and ask that I be allowed to 
submit my full statement to the committee.
    The Chairman. Without objection.
    Secretary Jackson. Thank you, Mr. Chairman.
    Over the past 4 years, HUD has expanded homeownership, 
increased access to affordable housing, fought housing 
discrimination, tackled homelessness, and renewed the 
commitment to those in most need.
    HUD's $28.5 billion budget for fiscal year 2006 seeks to 
build on our success and to lend a compassionate hand to 
individuals in need, while also using taxpayers' money more 
wisely through government reforms.
    In June 2002, the President challenged the Nation to create 
5.5 million new minority homeowners by 2010. In 2004, more 
Americans achieved the dream of homeownership than at any time 
in our Nation's history. Today, nearly 70 percent of all 
American families own their homes, an all-time record.
    Since President Bush's challenge, 2.2 million minority 
families have become homeowners. This represents a 40 percent 
increase of the 5.5 million goal. As a result, minority 
homeownership has surpassed 51 percent for the first time in 
the history of this country.
    Despite this progress, we have more work to do. For many 
families, high down payment and closing costs represent the 
greatest barrier to homeownership. Since President Bush signed 
the American Dream Down Payment initiative into law in December 
of 2003, HUD has distributed $162 million in funds to over 400 
State and local governments. These funds have already helped 
thousands of families purchase their first home, and more than 
50 percent of the buyers were minorities.
    The 2006 budget requests $200 million to fully fund the 
program and help the estimated 40,000 families to become 
homeowners. The budget also proposes a $40 million housing 
counseling program to assist more than 700,000 families to 
become homeowners and to avoid foreclosures on their homes.
    To remove one of the largest barriers to homeownership, 
high down payment costs, the fiscal year 2006 budget proposes a 
new mortgage program. The zero down payment mortgage program 
will allow first-time buyers with strong credit records to 
finance 100 percent of their home purchase price and closing 
costs. In 2006, this program could assist more than 200,000 
families to achieve homeownership.
    The President is also proposing a new single family 
homeownership tax credit that could increase the supply of 
single-family affordable homes by adding 50,000 homes annually. 
Under the President's plan, builders of affordable homes for 
moderate-income purchasers would receive a $2.5 billion tax 
credit over the next 5 years. If Congress approves these funds 
requests, HUD will be able to help an estimated 500,000 
families realize the American dream of homeownership in fiscal 
year 2006.
    The fiscal year 2006 budget will make government a better 
steward of taxpayers' money through reform of the Section 8 
housing choice voucher program. In fiscal year 2001, the three 
Section 8 programs consumed 43 percent of HUD's annual budget. 
That percentage has increased 57 percent in fiscal year 2005. 
The rate of increase, combined with the extremely complex set 
of laws and regulations, has resulted in a program that is 
difficult to sustain.
    In the past, funds were distributed to public housing 
authorities for a specific number of vouchers based upon the 
number of units leased. Congress recently converted the unit 
base allocation system to a budget-based system. However, for 
the budget-based system to work, program requirements must be 
simplified and PHAs must have greater decision-making 
flexibility. Building on the changes in the 2005 Consolidated 
Appropriations Act, the administration will submit authorized 
legislation to this committee to implement this reform.
    The Section 8 program fulfills an important component of 
HUD's mission. I am committed to it and to its success.
    Throughout our budget, HUD will strengthen its efforts to 
assist those most in need--adults and children from low-income 
families, the elderly, those physically or mentally disabled, 
victims of predatory lending, and families living in housing 
contaminated by lead-based paint hazards.
    This administration is committed to ending chronic 
homelessness and has aggressively pursued the policy to move 
more homeless families and individuals into permanent housing. 
The budget provides for a record-level resource of permanent, 
supportive housing for homeless individuals. This budget 
provides $1.4 billion for homeless assistance grants; 25 
million will go to the prison reentry program.
    The budget also proposes 39 million in funding for the HUD 
fair housing program to ensure that everyone has accessibility 
to living environments that are free from unlawful 
discrimination.
    The President's budget also proposes new initiatives in a 
consolidated program such as the CDBG program into a more 
targeted, unified program that sets accountability standards in 
exchange for flexible background use of funds. This new 
initiative will be housed within the Department of Commerce.
    All of us share the goals of creating housing opportunities 
for more Americans. We have done great work over the past 4 
years, and we should be proud of everything that we have 
accomplished together. But we should not be satisfied because 
our work is far from completed.
    I look forward to the challenge ahead and will seek to have 
open communication with everyone on this committee. I would 
like to thank the members of this committee for your support, 
and I welcome your guidance as we continue to work together.
    [The prepared statement of Hon. Alphonso Jackson can be 
found on page 72 in the appendix.]
    The Chairman. Thank you, Mr. Secretary.
    Mr. Secretary, let me first begin by thanking you for all 
of your efforts over the last few months and cooperating with 
the committee on a number of issues.
    Let me begin with the overall question on the CDBG and the 
transfer of that program to Commerce. How do you envision that 
working? That is, what kind of changes--if it was enacted, what 
kind of changes would we expect other than the program itself 
being moved over to Commerce?
    Secretary Jackson. I would say, Mr. Chairman, that all of 
the legislation has not been worked out yet. From our 
perspective, the budget was $4.2 billion that will be shifted 
to Commerce. We will keep certain programs, the home programs, 
the shop program, the homeless program.
    What will be entailed once it comes to Commerce, right now 
I am just not in a position to be able to discuss that with 
you. I think that they are working out the legislation at this 
point.
    The Chairman. Well, the figure you cited, the 4.2 billion, 
is that correct?
    Secretary Jackson. Yes, that is what we are zeroing out of 
our budget to go to Commerce.
    The Chairman. And what was the number for the last fiscal 
year?
    Secretary Jackson. I think it was just about 4.2.
    The Chairman. It was about the same?
    Secretary Jackson. It was 5-point something with all of the 
programs. But all of the programs are not going over, just the 
4.2.
    The Chairman. So counsel informs me it is 3.7 billion is 
the number that would go to Commerce. And that would reflect, 
then, some of the programs that you would retain?
    Secretary Jackson. No. We are zeroing 4.2 out of our 
budget. I can't tell you what is being sent to Commerce. We 
know that we are taking 4.2 out of our budget.
    The Chairman. Counsel informs me that when you add all of 
the programs together and move it to Commerce, it is 3.7. So it 
appears to be a significant cut in the service. I just wanted 
to get that clear in my mind.
    Do you find, in your experience, an overlap or duplication 
of Federal efforts to fund community development? My sense is 
that the effort by the administration to make these structural 
changes was at least what appeared to be a recognition that 
there were some duplicative efforts between HUD and Commerce, 
or at least among the programs at HUD. Is that your sense?
    Secretary Jackson. If you are talking about community 
development, no, there is not duplication. If you are talking 
about economic development, that was the purpose for 
consolidation, and the economic development programs were being 
shifted to Commerce to better coordinate it.
    It is important to understand that, yes, there were 
duplications in the economic development programs--some in 
Agriculture, some in HUD, some in Commerce. And so, in an 
effort to consolidate, the decision was made that the best 
place to consolidate the program was at Commerce.
    Now, it is important to understand that we made our logical 
argument as to why it should be at HUD, but I do agree with the 
administration that the program should be consolidated in one 
spot. And the decision was made to consolidate it at Commerce.
    The Chairman. Let me ask you about RESPA reform. That has 
been an issue that has been on and off the table at HUD for 
some time. Your predecessor got inside the red zone, I think, 
and ran out of time or fumbled or got sacked, but--I sound like 
George Allen--it was handed off, right.
    Since you are now the heir apparent, what kind of plans do 
you have in terms of that RESPA reform?
    Secretary Jackson. We believe that we will be starting--we 
have been doing some analysis over the last 90 days. As I 
committed and promised you and Chairman Shelby, we will be 
coming to you within the next 60 days to get your input and the 
input of the ranking members as to what is the best approach. 
Once we get that input, we will go back to the industry and let 
the industry group make their comments on that.
    I can assure you that once that is done, we will not hold 
the bill in abatement as we did last time; we will get it out 
very quickly with the help of--with your help and support and 
your input. I still stick to that. I don't think that we should 
in any way deliver your bill in a vacuum; I think that your 
input is important.
    My basic belief is that if we can get a consensus of 75 to 
80 percent of the people in the industry and your consensus, we 
can get a bill that will pass and address the needs of making 
sure that the closing cost is resolved very quickly.
    The Chairman. I would hope so. There is clearly a need for 
drastic reform in the closing process. Any of us who have 
practiced law and been involved in closings can cite chapter 
and verse about the complexity and the total confusion by the 
client, by the homeowner to be a homeowner. And anything we can 
do to simplify it and to make it more transparent and to have 
kind of apples-to-apples comparisons on costs would be 
incredibly important for the consumer.
    And I think by your effort to work with the Congress, it 
improves the chances dramatically that we can get a good 
proposal out there that can pass muster and have a very, very 
positive influence on the home-buying market. So we thank you 
for your efforts, and we are glad that you are pursuing that in 
that regard.
    The gentleman from Massachusetts.
    Mr. Frank. Thank you.
    Mr. Secretary, on the details--not even the details, the 
specifics--when are we likely to get them on this moving and 
consolidation of all of the programs?
    Secretary Jackson. I think, Mr. Ranking Member, we have--as 
stated by Chairman Oxley, we are going to have a hearing with 
Secretary Gutierrez. At that point, I hope we will have some of 
the details as to----
    Mr. Frank. That hearing is in the middle of April, and you 
hope we will have some of details. If you are serious about 
this, it is to go into effect October 1st. I guess I would--if 
gambling were legal, because I am very law abiding, I would 
have a pool. What are we going to see first? The details on 
this or the specifics on Social Security?
    The only problem is nobody would join the pool because 
nobody would win.
    Let me just also say, I think you are talking about major 
changes affecting many, many departments--Health and Human 
Services, Treasury, Agriculture, HUD and Commerce--and it is to 
be in effect by October 1st. This does not have, to me, the 
ring of seriousness when we are being told that we may have 
some of this specifics in the middle of April.
    By the way, on the point that the chairman raised, the 
total of all of the programs that the budget proposes to 
consolidate and send to Commerce in the current fiscal year is 
5.66 billion. They are budgeted in Commerce at 3.7 billion, so 
that is a 34 percent cut, if it were proportional.
    It includes not just the CDBG, but the community service 
block grant, which is generally known as the poverty program, 
Economic Development Administration, so we are talking about a 
very, very substantial cut.
    But now, on homeownership, you talked about a plan for zero 
down payment. Is that the one that we passed last year that the 
Republican leadership wouldn't let come to the floor? Do you 
know something we do not know about a change of heart? Is Mr. 
Delay becoming somewhat--you know, you guys get together in 
Texas and chat about that?
    Secretary Jackson. Congressman Frank, no, it is the one--we 
did bring it to you last year.
    Mr. Frank. We passed it last year in a bipartisan way, and 
the Republican leadership--the chairman put it up and the 
leadership of the House of Representatives wouldn't let it come 
to the floor. So we ought to be clear about that.
    I don't know, have you spoken to the majority leadership 
about this in the House?
    Secretary Jackson. We know that last year----
    Mr. Frank. Have you spoken to them?
    Secretary Jackson. Not yet.
    Mr. Frank. I am seeing a pattern, frankly, that doesn't 
impress me with your seriousness.
    We passed a bill; the Republican leadership wouldn't even 
let it come up, and you do not talk them about it.
    Secretary Jackson. I think the Congressional Budget Office 
had disagreements with us, and we are speaking with them now.
    Mr. Frank. So you weren't allowed to talk to the House 
leadership because the Congressional--but now, this is part of 
the President's budget?
    Secretary Jackson. Yes.
    Mr. Frank. Did it go through the Congressional Budget 
Office?
    Secretary Jackson. No.
    Mr. Frank. So this budget submission is not approved by the 
Congressional Budget Office? Were they----
    Secretary Jackson. It is a proposed budget that must be 
approved by Congress.
    Mr. Frank. Yes, but I assume it is also submitted through 
the CBO.
    Are you telling me that CBO has not signed off on this 
particular proposal? I would find that very odd. Is that the 
answer?
    Secretary Jackson. Yes.
    Mr. Frank. They have not. So you have sent us a budget 
submission that was not cleared with the Congressional Budget 
Office?
    How about OMB? Have they cleared it?
    Secretary Jackson. Yes, they have.
    Mr. Frank. So your problem is still going to be CBO. And 
you think they were just wrong about the number?
    Secretary Jackson. We had a disagreement. We think it is a 
viable program. They perceive that it is not.
    Mr. Frank. But couldn't you ask the Republican leadership 
to do it anyway? I don't understand why you didn't talk to 
them----
    Secretary Jackson. I was asking all of the leadership in 
the House to pass it.
    Mr. Frank. We did it. It is being blocked by the Republican 
leadership in the House.
    Let me ask you now on housing discrimination. That 
continues to be a serious problem.
    Secretary Jackson. I think housing discrimination is a 
serious problem, and we will continue to address it. I don't 
think that housing discrimination is as rampant as it has been 
in the 1940s, 1950s, 1960s; but, yes, I think it is still a 
problem today.
    Mr. Frank. Well, has it gone down substantially from--do 
you expect it to go down substantially because you are cutting 
the budget for the fair housing budget? The fair housing budget 
is 46 million in the current fiscal year, and you are proposing 
38 million.
    Now, 8 million is not a lot of money, but neither is 38 
million, to be honest with you. And I do not understand in this 
budget of so much money, why you are cutting--why are you 
asking us to cut the budget for fair housing? You are asking us 
to cut both the amount that goes to the local groups that do 
these initiatives, that work with us, and you are asking for a 
cut in your own budget for administering fair housing.
    What is the basis for that? Do you expect a 15 percent 
reduction in discrimination? That troubles me.
    Secretary Jackson. No, Congressman Frank, we do not expect 
a reduction. But I will say this to you we are prioritizing, 
and clearly one of the priorities is the Section 8 voucher 
program. As I have said to you before and to the chairman, it 
is eating away at our budget. In 2001, it was 43 percent of the 
budget. It is 57 percent.
    We added $1.1 billion to make sure that the Section 8----
    Mr. Frank. I am asking you why you are cutting $8 million 
out of fair housing. Do not blame Section 8.
    Secretary Jackson. I am not.
    Mr. Frank. Why are you cutting----
    Secretary Jackson. I am telling you the facts, if I may 
speak.
    Mr. Frank. You may speak to my question. What is the 
justification for cutting $8 million out of fair housing?
    Secretary Jackson. I am saying to you that you will see 
cuts in a number of programs at HUD because we are in the 
process of prioritizing Section 8.
    Mr. Frank. So what you are saying then is that you are 
cutting the $8 million out of fair housing not because it is 
not needed, but because you are--it is not high enough on your 
priorities to get spent?
    Let me ask you a similar question about housing for the 
disabled; this one troubles me. And the President talks a lot 
about faith-based. Faith-based groups already are doing a lot 
in the housing area.
    This notion that somehow they cannot get money, only people 
who do not know anything think that faith-based groups are not 
terribly active in housing. One of the big programs to them is 
housing for the disabled. You are proposing to cut it by more 
than half. What is the justification for cutting construction 
of disabled housing? I know people believe in the market. Do 
people really believe that the market is going to be able to 
take care of all of the need for disabled housing?
    Secretary Jackson. First of all, Congressman Frank, there 
are 40,000 people we are serving right now. Units we are 
serving, we will continue to serve. There are others in the 
pipeline that we will serve. We are cutting 1,500 out of this 
budget.
    But, again, I will reiterate to you that we had to make 
very hard decisions, and one of those decisions was, were we 
going to fund the Section 8 program fully? Were we going to 
fund the operating subsidy more fully? And we made a decision 
that those were critical.
    Mr. Frank. I do have to say one last thing: But that is 
assuming that the tax cuts stay in place and the money to go to 
Mars stays in place, so that what you are then telling me is 
that the administration gave you too little money, because of 
its commitment to spending money elsewhere, send people to Mars 
and these major tax cuts, and as a result--and I will close 
with this--I thank you for not trying to defend these on the 
merits.
    You are not saying on the merits that you are cutting fair 
housing or on the merits you are cutting housing for the 
disabled, but what you are saying is that within the budget the 
administration gave you, you do not have enough money to meet 
all of these needs. I think that is probably true.
    Secretary Jackson. That is not what I am saying. I am 
saying that the Section 8 budget is overwhelming the HUD 
budget.
    Mr. Frank. That is because you got too little.
    Secretary Jackson. We could debate this all day, 
Congressman. The budget is clear that----
    Mr. Frank. The budget that you were given by the 
administration, they gave you too little money to take care of 
all of these things.
    The Chairman. Mr. Ney.
    Mr. Ney. Thank you, Mr. Chairman.
    Mr. Secretary, I wanted to see if you had a comment on why 
you believe that Commerce could--this is something that is 
asked quite a lot in the district I represent and across the 
United States--that Commerce could provide better direction or 
assistance to CDBG?
    Secretary Jackson. Mr. Chairman, as I said to the ranking 
member, we made our case. We believe that clearly Housing and 
Urban Development could manage the program. The decision was 
made, and we agreed, that the programs must be consolidated. 
And the decision was made to consolidate it at Commerce.
    I think that our handling of the community development 
block grant program has been good. Are there problems? Yes, 
there are problems. But I think we have handled the program in 
economic development very well. I am in agreement that it 
should be consolidated, and the decision was made to 
consolidate it at Commerce. And clearly I think it should be 
consolidated, without a doubt.
    Mr. Ney. I just wonder, you know, if it will stay intact. I 
mean, if it went from HUD as it is over, some of the philosophy 
of Commerce might be strictly in the job creation. The CDBG is 
used in other areas beside the creation of a job, as you know. 
And sometimes people might criticize why it is used, but some 
communities need a fire truck which is available, the 
paramedics, you know, the units save lives.
    Some people say, Well, why do they buy it? Well, some 
communities, that is what they need. Some communities need 
infrastructure, some communities need water, other things.
    I just wonder, if this goes over with no detail or 
direction, it might get caught in a different flavor of a 
different agency. That is why I wondered if that had been 
talked about, if it went--if it is a matter of consolidation or 
went intact. That was one concern I wanted to raise.
    Due to the limited time, I just wanted to ask about the 
housing goals for the GSEs. Do you think that it provides 
enough flexibility for Fannie and Freddie to be able to respond 
to the task, housing goals, and to the market?
    Secretary Jackson. Yes, Mr. Chairman. I have had the 
opportunity to meet with the acting CEO and the chairman and 
CEO--acting CEO of Fannie Mae and the chairman and CEO of 
Freddie Mac. We have had extremely positive discussions, and 
what we have said is that we believe that these goals are 
attainable.
    But if it is clear that they are not, we are flexible and 
we will work with them. But until it is demonstrated that they 
are not attainable, we believe that they are; and in fact, we 
took input from the industry and from professional groups. And 
initially we had the goals set at a higher percentage; we 
lowered that percentage because clearly it was demonstrated to 
us by the industry group and the professional group and Fannie 
and Freddie that they might be out of line with the ability to 
accomplish those goals.
    So we feel very comfortable that those goals can be 
accomplished. But if we are wrong, we are flexible and will 
work with both agencies.
    Mr. Ney. We all know the controversy of Fannie and Freddie 
and that will be twisted and bandied and thrown about this 
country, I am sure. But putting that aside, as this committee 
eventually, you know, takes on the job of regulators, et 
cetera, we have got to watch the housing goals, make sure that 
the system is not all in chaos and that people can still, you 
know, be able to be part of what the Congress has supported for 
years, which is, you know, to have the housing.
    So I think--as we go along the process, I think it has to 
be carefully, always watched and analyzed as to what we are 
doing.
    Another question I had--you may not be able to answer this 
maybe; with the section that handles Native Americans you 
could, but last year we passed the Homeownership for Native 
Americans Act. It was sponsored by Mr. Renzi of Arizona, 
supported by Mr. Matheson, and also our ranking member, 
Congresswoman Waters. That act made changes to Title 6 of the 
Native American Housing Assistance and Self-Determination Act 
of 1996, and it tried to improve the tribes' access to capital 
by increasing the guaranteed authority for the Title 6 loans.
    Now, I am glad to see the President's budget does include 
an increase in the request for that credit subsidy for this 
program. I think it is a vital program. The increase in the 
credit subsidy, though, is a bit puzzling. This came as a 
result of a meeting with some of the tribes that are dealing 
with this issue.
    The increase to an already high credit subsidy rate reduces 
the amount of available guaranty authority that would otherwise 
be available for building desperately needed housing units.
    We went out to the reservations. It is unbelievable. I 
don't think there have been any defaults, to the best of my 
knowledge, in the last decade. So I wonder what the basis would 
be for the high and increasing credit subsidy rate.
    So, on one hand, we acted, and on the other hand, that 
increased subsidy rate may not allow the program to work as 
good.
    If you cannot answer this, I will follow up with you.
    Secretary Jackson. I will be happy to get back to you to 
answer that.
    Mr. Ney. Thank you.
    The gentlelady from California.
    Ms. Waters. Secretary Jackson, I think you can conclude, 
based on my testimony, that I am very upset about CDBG for a 
lot of reasons. Not only is it the last standing block grant 
program from the Federal Government for these 501(C)(3)s and 
nonprofit agencies that are providing services for at-risk 
youth and seniors, et cetera, et cetera; we have got housing 
money, and in a district like mine, you have small cities who 
depend on this for some of their infrastructure support.
    I know that you talked about setting priorities, but why 
did you allow CDBG to be consolidated in the way that you are 
proposing to do it and to be transferred and cut? Was it 
because you had too much money and you didn't need any more 
money? I mean, they cut you because you had more than you 
needed? Or was your money mismanaged? Did you do a good job?
    And can you say to this committee that there is not a need 
for all that you had, plus more? I mean, explain to me this 
decision to cut and transfer. And what did you do? Did you 
fight for CDBG? Was this one of your priorities? What did you 
say to those people--I don't know who they are--who did this?
    Secretary Jackson. Thank you very much for the question, 
Congresswoman.
    As I said to the ranking member, we made, I think, a very 
strong case as to where the economic development should be. The 
decision was made that it would be consolidated. We agreed. We 
think the program should be consolidated.
    Ms. Waters. Are you talking about programs like Section 
108?
    Secretary Jackson. Section 108?
    Ms. Waters. I am talking about CDBG. Are you putting that 
in the category of economic development programs?
    Secretary Jackson. Yes, because if you realize, the 
community development block grant money, even that 1.1 million 
is for housing, 1.4 million is for infrastructure, it is still 
always related to economic development. That is why we tacked 
with the empowerment zones, the RC zones, we felt that clearly 
it is there.
    We believe, as I said to you before when you asked the 
question, we made our case. Do we believe that consolidation of 
all of the economic development programs as they relate to 
developing communities should be in one place? Yes, we do.
    Did we think that we should be the agency that administered 
the program? Yes. We made our case.
    But I do believe in the final analysis that the key was 
consolidation, not that we had not done a good job, not that 
the program was not working. You can ask the people in the 
industry; you can ask professionals.
    Are there problems with the program? Yes, there are 
problems, and we were in the process of correcting those 
problems, but the key to it is, I still believe----
    Ms. Waters. You had problems with CDBG?
    Secretary Jackson. Of course, we had problems.
    Ms. Waters. Well, the first thing that I would differ with 
you on is allowing anybody to categorize the programs as 
economic development programs, because that makes it easier for 
them to talk about going into Commerce that is responsible for 
economic development.
    But as I look at CDBG, these funds are used for a wide 
array of activities, including housing rehab loans and grants 
to homeowners, landlords, nonprofits and developers, new 
housing construction, down payment assistance, other help for 
first-time home buyers, lead-based paint detection and removal, 
the purchase of land and buildings and construction--on and on 
and on.
    This cannot be categorized simply as economic development, 
which would make it more likely to be transferred, and that 
argument certainly should have been resisted.
    And I don't know why this consolidation someplace else--
they were already consolidated in HUD, were they not?
    Secretary Jackson. We had all of the programs there in HUD.
    Again, Congresswoman, I understand what you are saying. I 
can't disagree with you that the programs were there, but I do 
believe, in the final analysis, that many of the programs, if 
you see the name of the programs going over to Commerce and 
strengthening America's economy and communities, so it is 
taking into account community development.
    My position is still the same. We made what we thought was 
a logical argument. But in the final analysis, I still believe 
that all of those programs which are spread out over three or 
four different agencies should be consolidated, and the 
decision was made to consolidate it at Commerce.
    The Chairman. The gentleman from California, Mr. Miller.
    Mr. Miller of California. Thank you, Chairman Oxley.
    Welcome. It is good to have you here; it really is. I know 
you not to be a shy man; let's put it that way. Having had 
numerous conversations with you, you are creative. One thing I 
do know you understand is there is an affordable housing crisis 
in this country, and I think you are doing a good job.
    Secretary Jackson. Thank you.
    Mr. Miller of California. I know you get beat up by a lot 
of people, but I really think you are doing a good job. But 
there is a difference between economic development and 
community development. When you go talk to your cities and they 
talk about economic development, they are looking for Wal-Marts 
and Costcos and those types of things. When we talk about 
community development, we are talking about housing. There is a 
difference. As far as I am concerned, there is a huge 
difference.
    When you talked about GSE oversight, I think you do a great 
job. I don't think you should be removed from that authority; 
you should have it. If they want to do something with fiscal 
oversight, we will talk about that.
    But CDBG funds, I look at what my city uses them for: for 
home improvement programs, rehabilitation programs, senior 
programs, independent living programs. I mean, they will use 
them, and I think they are really, really necessary for that.
    Now I am going to ask you a serious question here, and it 
is not meant to be teasing you, but do you believe in your mind 
you are doing a bad job encouraging basic community 
development?
    Secretary Jackson. Absolutely not.
    Mr. Miller of California. I agree 100 percent. That is the 
problem I have. You know, if we look at the issue, in your view 
there is currently overlap. But is there currently significant 
overlap or duplication of Federal efforts in community 
development? I am talking about significant. There is always 
overlap of some form, but do you think they are really 
significant?
    Secretary Jackson. No, There is not significance in 
community development per se.
    Mr. Miller of California. Exactly. I think you are doing a 
good job at it, and I don't see any reason at all to send it 
over to Commerce.
    Consolidating programs makes sense if there is significant 
overlap, but you are always going to have some form of overlap. 
The benefits of CDBG programs is the flexibility with which the 
communities use the money. Do you think there is going to be a 
change in that flexibility if it goes over to Commerce rather 
than from HUD and the oversight?
    Secretary Jackson. Congressman, I cannot honestly answer 
that question. I think that the legislation is being written as 
we sit. The decision, as I have said to Congresswoman Waters, 
was to consolidate. And I do believe--can you hear me?
    Mr. Miller of California. I hear you fine, sir.
    Secretary Jackson. Okay. I do believe that they were 
overlapping in certain programs and that we should consolidate. 
As I said before, we made a----
    Mr. Miller of California. You are stuck. You are stuck on 
this one, my friend. But there is not significant overlap. And 
the biggest problem I am having is you are doing a great job, 
and I just don't want to look at somebody doing a good job and 
say we are going to take it away from you and let somebody else 
mess it up. And I know you understand the development needs of 
this country. I know you do. You understand what communities 
are going through, although some people beat you up like you 
don't know. You do know, and that is the real problem.
    Why is the Department of Commerce more able to provide 
efficient and effective community development assistance to our 
communities than you are? Give me one or two reasons why they 
are better able to do that?
    Secretary Jackson. I don't think it is a matter of whether 
they are better. It is a matter that a decision was made to 
consolidate, and I agree that the programs must be 
consolidated.
    Mr. Miller of California. Okay. Let's not use consolidate 
anymore. I am going to talk to my friend. We are not going to 
talk about consolidation.
    But I am just having trouble here, Secretary Jackson, 
because you are doing a good job, and I am particularly talking 
about programs that are significant for our community, CDBG. 
From our community leaders, those elected city council members 
who are trying to provide for the needs, they are the people 
who have to face the community twice a month, at least, in 
public hearings, and they know what the community needs. I have 
not heard a greater uproar than the concept of what is 
happening today. And what I don't want to have is a perception 
created that you are the one causing this problem, because you 
are not. I think we need to look at this issue because there is 
not a better use of Federal dollars locally than, I think, CDBG 
when it comes to trying to help people who need the help out 
there.
    So I am having a real problem understanding why we are 
doing what we are doing. You are doing a real good job trying 
to cover yourself so you don't say the wrong thing because you 
are kind of stuck, but we need to stop talking about 
consolidating and talk about quality, and I think you are doing 
a quality job.
    I am glad you are the Secretary. I think you are very 
capable. Looking at your history and having talked to you and 
understanding your expertise, you are doing a tremendous job. I 
think we need to seriously look at retaining the current 
oversight that we have and not throw the baby out with the bath 
water because somebody thinks it might be a good idea.
    I yield back. Thank you, Mr. Chairman.
    Mr. Chairman. The gentleman yield backs.
    The gentleman from Vermont, Mr. Sanders.
    Mr. Sanders. Thank you, Mr. Chairman; and, Secretary 
Jackson, thanks for being with us today.
    Mr. Secretary, in my view, my view, we have a major housing 
crisis in this country. More than 14 million Americans are 
paying over 50 percent of their limited incomes in housing; 3.5 
million people in this country will experience homelessness 
this year, including 1.3 million kids and a half a million 
veterans. One-third of the entire country lacks safe, decent or 
affordable housing. On average, families across the country 
must earn more than $15 an hour--almost 3 times the national 
minimal wage--to afford a two-bedroom apartment. So my first 
question to you: In your judgment, do we have a housing crisis?
    Secretary Jackson. I will say this to you, Congressman, I 
think that reasonably in certain areas we have a housing 
crisis. If we talk about the east coast, where you are from, or 
the west coast, where Congresswoman Waters--we do have a 
serious crisis. I think if we talk about middle America, 
southwest, southeast----
    Mr. Sanders. Fair enough, thank you. And I would agree with 
you. Certainly there are some parts of this country where there 
is not a housing crisis. But given the fact that in the west 
coast, in the east coast, in many parts of our country there is 
a major housing crisis, why, in your judgment, will the 
President of the United States give hundreds of billions of 
dollars in tax breaks to the wealthiest 1 percent and yet slash 
the overall housing budget by more than 11 percent?
    Secretary Jackson. Congressman, if you look at the budget, 
taking into consideration the shifting of the $4.2 billion to 
Commerce, we are up $800 million in this budget overall. We 
have increased the Section 8 program by $1.1 billion, the 
operating subsidy by $1 billion. And, yes, we have had to cut 
in other areas, but overall the program is up. So the President 
is very, very concerned, and he has demonstrated that by adding 
additional money to the----
    Mr. Sanders. Well, Mr. Secretary, in all due respect, I 
don't believe that is accurate. My understanding is the CDBG 
program will be reduced by 35 percent, resulting at a $1.16 
billion cut in funding for low-income housing, including a $9 
million cut from my own small State of Vermont. Is that true or 
is that not true?
    Secretary Jackson. What I know is that we zeroed out of our 
budget, Congressman, $4.2 billion, from my perspective, to be 
sent over to Commerce to work with Community Development Block 
Grant Economic Development. I cannot comment on what is in the 
present Commerce budget. I don't know.
    Mr. Sanders. My understanding is the Public Housing budget 
would receive a $270 million cut. I don't want to say anything 
that is inaccurate.That is my understanding.
    Secretary Jackson. Well, that is the capital budget, but 
the overall operating subsidy is up by a billion dollars.
    Mr. Sanders. Well, the capital budget is--I think we have a 
disagreement of fact here. I would yield to Mr. Frank if he has 
some information that I don't have. We need to get our facts 
straight here.
    Mr. Frank. Let me just ask you, on the operating budget, 
what are the numbers--Ms. Schecter, could you tell us, what is 
the operating budget in the current fiscal year and what is 
your proposal? You said it is up a billion, the operating 
budget for----
    Secretary Jackson. It is $2.4 billion at this present time, 
and it goes up $1 billion.
    Mr. Frank. Well, yeah, our understanding is the calendar is 
shifting for public housing funding, isn't that correct?
    Secretary Jackson. Yes.
    Mr. Frank. Now when you say there is a billion dollar 
increase, does that correct for the shift in the calendar?
    Secretary Jackson. Yes, it does.
    Mr. Frank. Not according to our figures.
    Well, I guess we will put this out later, but our sense is 
that the increase you are claiming is based largely on the 
effect of the shift in the calendar, and when you correct for 
that, we do not have that increase. But I think we will ask 
that that be made public. We will put the documents out.
    Mr. Sanders. Well, I do think it is important that we 
understand we are talking apples to apples here. But my 
understanding is that in my own small State President Bush's 
proposal to block grant and cut the Section 8 program, if 
enacted, would result in a thousand fewer families in the State 
of Vermont who would receive affordable housing assistance 
through Section 8. That is a heck of a lot of families in a 
small State.
    So let me conclude by asking you this, Mr. Secretary. Last 
year, along with Barbara Lee, among others, many others, we 
introduced the National Affordable Housing Trust Fund, which 
ended up with 215 co-sponsors and the endorsement of over 5,000 
organizations. That program would build, preserve and 
rehabilitate at least one and a half million affordable housing 
rental units over the next decade. How do you feel about an 
effort like that?
    Secretary Jackson. My position is that if Congress so 
desires to have a program and it is in HUD, I would be happy to 
implement it.
    The Chairman. The gentleman's time has expired.
    Mr. Sanders. Thank you.
    The Chairman. The gentlelady from Illinois, Mrs. Biggert.
    Mrs. Biggert. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary, and thank you so much for the 
delivery last week to the City of Chicago and its surrounding 
suburbs of a good news flat package. We really appreciate all 
that it will be used for in housing in that area.
    I wanted to address the question of Section 811 being 
singled out for a 50 percent cut in this budget. I have an 
organization in my district, Trinity Services--it is only one 
of many wonderful organizations that I have--but it has 
operated since 1950 and provided housing and other vital 
services to disabled residents in the community. I am concerned 
that--I know that for the past 8 years Congress has allowed HUD 
the discretion to direct up to 25 percent of section 811 
funding for tenant-based rental assistance, as opposed to 
capital advanced grants and budget-based assistance being 
administered by non-profits. But my concern is, with the 
programs like this that really have provided services for those 
that are disabled, that are not quite ready to be off on their 
own, I am concerned that the only availability will be the 
vouchers. Does that mean that these vouchers will only go to 
the tenants and not to organizations such as Trinity who really 
have constructed units and group housing for these groups--for 
these people?
    Secretary Jackson. I am sorry, Congresswoman. No, we will 
continue to support all of the units that are in place today 
and to honor the Section 811 vouchers that already exist.
    What we did is in this budget, it was 1,500 units that we 
zeroed out of this budget, but it will in no way affect the 
ongoing of the program.
    Mrs. Biggert. But does that mean just the 1,500 that were 
being proposed for this year?
    Secretary Jackson. Yes, the 1,500 of new construction.
    Mrs. Biggert. Okay. And does that mean that when money 
becomes available, the next budget, that you would put that 
back in? You know, I think this is a high priority, the group 
housing and particularly the services, and maybe those are 
given by other, you know, agencies, but still it is like a one-
stop shopping where some of these--it goes from, you know, the 
seniors down to children that are really taken care of under 
these----
    Secretary Jackson. Yes, ma'am.
    Mrs. Biggert. Well, I would hope that, you know, you would 
reconsider that, to look at those houses.
    Secretary Jackson. I would be happy to.
    Mrs. Biggert. All right. Thank you. And I would yield back.
    The Chairman. The gentlelady yields back.
    The gentlelady from New York, Ms. Maloney.
    Mrs. Maloney. Mr. Secretary, I first would like to 
compliment HUD for the really caring job they have done in the 
city and State that I represent in the past.
    I recall when I served on the City Council after the Carter 
years, with monies put in the budget, and HUD rebuilt 7,000 new 
units of affordable housing in 4 years in my councilmanic 
district alone--but looking at this budget, I just don't see 
how we can survive in New York, and I am sure my colleagues 
feel the same across the country. In looking at what has been 
put forward, all of the city programs in HUD have been reduced 
by 5 to 10 percent in New York City; and since 2001 the funding 
for public housing has been cut 30 percent.
    HUD now provides many, many valuable programs, code 
enforcement and lead abatement and other functions in New York 
City. So my first question to you about the Strengthening 
America's Communities proposal which you have put forth, can 
you offer any assurance that the housing code enforcement, lead 
abatement and other functions that my home city of New York 
currently uses the Community Development Block Grants for will 
be continued or permissible under this new program? These were 
vital housing assistance programs.
    Secretary Jackson. Congresswoman, you ask me, can I make an 
assurance? No. I would hope that all of these programs would 
continue to be enforced, and I do believe that they will be, 
but I cannot guarantee something from another department.
    We zeroed out $4.2 billion in our budget to be transferred 
to the Department of Commerce. The legislation is yet to be 
written, but it is my belief and hope that, yes, it would 
continue.
    Mrs. Maloney. Well, hoping isn't good enough. What we have 
heard is that some of these programs are going to Commerce, but 
there is absolutely no assurance that they will continue. They 
are still being worked out. Your proposal reminds me of the 
Social Security proposal we have before Congress. The Bush 
administration is saying trust us, but their proposal--you 
know, how can we trust you?
    You are saying trust me, I hope, but there is no assurance. 
You really need to be more responsible and consistent with this 
Congress, and you have got to assure us that the housing goals 
that are currently being served by CDBG will continue to be 
served. And to sit here and say I hope is certainly not good 
enough.
    It is just--to me--Newt Gingrich, when he came to power, 
came out and said, I want to abolish HUD. At least he came out 
and said what he was going to do. With this budget you are 
almost like termites eating away at the foundation of HUD, 
which has been an incredibly valuable program in so many ways 
to the communities that we serve.
    I tell you, housing is so important, and you cannot build 
affordable housing or public housing without a Federal 
commitment. Localities and States cannot do it. And I don't see 
it in this budget. Even in the Section 8 that you talk about 
that you have maintained at the approximate levels, it is still 
$50 million short of what was expended for Section 8 in 2004 in 
New York City alone. So I find this budget tremendously 
problematic.
    I would like to also ask you about your Strengthening 
America's Communities proposal. You consolidate the community 
development financial institutions and the national community 
development initiatives. You put those two together. These are 
the two main ways that local governments attract and leverage 
private capital into their communities. How do you suggest that 
these private funds be replaced?
    Secretary Jackson. Congresswoman, I cannot, today, discuss 
the intricate details of the Strengthening America's 
Communities proposal. That is over at Commerce being developed 
at this time. What I can tell you is what we have done in the 
past with the community development program, which you know and 
that in the final analysis, as I said before, for consolidation 
purposes the program is going to Commerce, and we zeroed out 
$4.2 billion out of our budget.
    Mrs. Maloney. Well, also, you said in your testimony that 
you were going to consolidate these programs and provide more, 
quote, economic development programs over at Commerce. So can 
you explain what administrative changes and what realignment of 
funds will be great enough to account for the tremendous 
decrease in funding by $1.6 billion? I mean, I am flabbergasted 
by this budget; not only do you flat out cut public housing 
code enforcement, the programs that we use to leverage to get 
private investment into housing--how do you expect that we are 
going to meet the needs of the local communities?
    The Chairman. The gentlelady's time has expired.
    Mrs. Maloney. And you have no proof. It is a disaster.
    The Chairman. The Secretary may respond.
    Secretary Jackson. Yes. Congresswoman, as I said, you asked 
for assurance. I cannot give you assurance of what another 
department will do because I am the Secretary of Housing and 
Urban Development. What we did was agreed that consolidation is 
a necessary occurrence, and the decision was made to 
consolidate at Commerce. The legislation is presently being 
written, and I am convinced that it will address many of the 
issues that you have just enunciated.
    The Chairman. Gentleman from Florida, Mr. Feeney.
    Mr. Feeney. Thank you. And thank you very much, Mr. 
Secretary.
    I tried to follow the lines of the argument very carefully 
here, and I am afraid I have lost the forest for the trees. 
Some people are very concerned that you are consolidating 
things, that budgets aren't increasing rapidly enough, that the 
burden on the American taxpayer is not expanding fast enough in 
housing-related issues.
    As I recall your testimony, American ownership is at all-
time historic high. Not just for America, but is there any 
other nation in the history of the earth where as high a 
percentage of people have owned the house they live in or the 
land that they live on that you are aware of?
    Secretary Jackson. I think that the ownership rate in this 
country is the highest. There might be another, I think in 
Singapore. But, other than that, we are far ahead of everybody 
else in the world.
    Mr. Feeney. Well, based on the big picture forest which I 
am very concerned about, that you and your predecessor and the 
Bush administration ought to be very, very proud of what you 
have accomplished.
    We know that there is more to be done. I work with homeless 
coalitions, for example, in my neighborhood.
    But related to that issue, I recognize you may not be an 
economist, but I am noticing today in the Washington Post that 
there is concern that in California last year property values 
increased 27 percent, 20 percent in my home State, some 36 
percent in Nevada. Some economists are concerned, actually, 
about a pricing bubble.
    Do you think if we added some enormous subsidies, handouts 
and other programs that may have been advocated that we do a 
lot more for, that we may actually be inadvertently 
incentivizing or encouraging speculative investment and perhaps 
a pricing bubble that as the Washington Post, in a column by 
Mr. Samuelson, points out traditionally has been the 
precursor--these are housing price bubbles--to serious 
consequences that ultimately lead to recession, perhaps even 
depression on a global nature? Do you have some concern that 
overly generous subsidies in some areas may have that possible 
effect?
    Secretary Jackson. Actually, Congressman Feeney, no. 
Because I really believe that we have a prime opportunity, and 
so does the President, to create more little-market housing--
some people will say affordable housing--in this country; and I 
think we can do that by the American Home Ownership Low-income 
Tax Credit Act by helping developers develop in the urban 
areas.
    Also, I think, too, that probably within the next 5 to 10 
years there is still going to be a growing need. What we have 
seen, since we have seen the increase of home ownership in this 
country, especially with minorities, is that it is so 
pervasive, as the Congressman said a few minutes ago, that many 
people are paying over 50 percent of their income just for 
rent. So if they can get into a home or we can provide ways of 
getting them into a home, they are used to paying 30 to 35 
percent, that is usually a 15 to 20 percent reduction from a 
rental unit.
    Now that does not mean that in any way HUD is getting out 
of the rental business or that rental units will not be used, 
but I think if we can give incentives to first-time homebuyers, 
not only do we create good citizens, we create stable 
environments. We have learned, also, that a child coming up in 
a home reads 9 percent better, does math 7 percent better.
    So if we can, in essence, give a helping hand to those 
families, we effectively keep them from entering the market of 
maybe the homeless or public housing. So we will not need as 
much public housing or as many Section 8 vouchers that we have 
today. So I think it is important to stress that. Now that in 
no way diminishes HUD's commitment to subsidize apartment 
complexes or homes.
    Mr. Feeney. I have got a lot more on this area. We may have 
some disagreements about the potential risk of overly generous 
subsidies.
    But, finally, while I am into economics, is it your 
opinion--and I realize it is not your expertise--some urban 
areas' rent control, enormous regulatory burdens imposed by the 
locals, and other reasons that are self-inflicted ruins--have 
contributed to the high cost of affordable or, as you put it, 
middle cost housing?.
    Secretary Jackson. You are absolutely correct, and I have 
asked a person on our team to do nothing but look at ways of 
removing those regulatory barriers.
    If you take an example, Congresswoman Waters out of Los 
Angeles, California, before a home comes out of the ground in 
California through regulatory barriers you are looking at 
somewhere between a hundred and $109,000. My position is that 
clearly moves it out of the middle-market-housing market for 
fire people, police people, teachers, nurses. So our position 
is that let's try to remove those regulatory barriers, but the 
first step--and we are about 60 percent through--the first step 
of removing regulatory barriers is we need to remove them at 
HUD; and we are in the process of doing that before we insist 
that cities and counties and States move theirs.
    The Chairman. The gentleman's time is expired.
    The gentlelady from New York.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Secretary, do you think that $1.3 trillion in tax cut 
is too much of a handout? But that is not my question. My 
question is about the present budget.
    The President's budget, he proposed cutting funding for 
public housing by 9 percent, bringing the total cost, since the 
President took office, to $1.5 billion. There is currently a 
backlog of $21 billion worth of physical improvements needed in 
public housing, including the repair and replacement of roofs, 
boilers, windows, and doors that are jeopardizing the health 
and safety of residents. With cuts to these funds, PHAS will be 
forced to make extremely difficult budget choices, pitting 
important priorities against one another while building 
conditions worsen.
    How does the administration expect PHAS to meet quality and 
safety standards without the adequate resources to maintain 
their properties and make necessary repairs?
    Secretary Jackson. Well, Congresswoman, as I said before, 
we have added one billion to the operating subsidy of the 
public housing budget.
    Ms. Velazquez. Yeah, but that doesn't address the issue 
that we have $21 billion worth of physical improvements. And 
when was the last time that you visited a public housing 
development?
    Secretary Jackson. Probably 2 months ago.
    Ms. Velazquez. And you saw the needs for repairs.
    Secretary Jackson. No, I did not.
    Ms. Velazquez. You did not. I welcome you to come to my 
district in New York City.
    Secretary Jackson. Well, the public housing development 
that I visited was in excellent shape.
    Ms. Velazquez. So you think that $1 billion is enough?
    Secretary Jackson. No. That is for the operating subsidy. I 
truly believe that we have enough in the Capital Fund budget to 
address the needs of many of the issues that you just said.
    Ms. Velazquez. According to Assistant Secretary Liu, the 
budget only provides 89 percent of what is needed for full cost 
reimbursement for public housing operating expenses. My 
question to you is, are PHAs supposed to perform only 89 
percent of the repairs needed in their developments?
    Secretary Jackson. Well, Congresswoman, I will tell you 
that the backlog of capital improvements in public housing 
developments are down by about $18 billion over the last 4 
years, so I am not sure where your figures are coming from. I 
know, having ran three public housing agencies, that the issues 
that we faced in the 1970s and the 1980s and the 1990s are not 
the issues that we are facing today. And my position is that we 
are doing everything to make sure that we address the capital 
needs of public housing agencies in this country.
    And you asked a question. The last time that I can remember 
public housing being funded at a hundred percent, I can't. Out 
of the three agencies I ran, I can't ever remember it being 
funded really over 95 percent. So I am not sure, when you ask 
can they operate off of 90 percent, yes, I operated an agency 
off of 90 percent.
    Ms. Velazquez. Ninety percent. It is 89 percent.
    A crucial element of the success of the Section 8 program 
is the participating landlords----
    Secretary Jackson. I am sorry. I didn't understand you.
    Ms. Velazquez. A crucial element of the success in the 
Section 8 program is the participating landlords. With 
increasingly more Section 8 buildings reaching the end of their 
20 year contracts, it is imperative that landlords feel 
confident in the program so that they will continue to 
participate and provide a much-needed source of affordable 
housing. New York City alone is short $50 million of what is 
needed to fund all vouchers this year, with expiring contracts 
for nearly 2,000 units in my district. HUD's misguided shift 
from unit-based funding to an inadequately funded dollar-based 
system has jeopardized private sector confidence in the Section 
8 program, removing critical incentives for landlords to 
participate in the program.
    Secretary Jackson, what concrete steps is the Department 
going to take to restore landlord confidence in the Section 8 
program and ensure their participation moving forward?
    Secretary Jackson. Congresswoman, I think we have. We added 
$1.1 billion to the present Section 8 voucher program. I don't 
think there is anything more resolute than giving monies to 
carry out the program. But the question becomes, can we 
continue to increase the program at its present rate? I do not 
believe so----
    Ms. Velazquez. My question is about the confidence coming 
from landlords regarding the program. Every time I go back to 
my district, we have to deal with HUD and landlords who do not 
want to continue in the program because of lack of confidence 
in the program. And isn't it true that Judith Kennedy, 
president of the National Association of Affordable Housing 
Lenders, was quoted last May in a Bond Buyer article saying, 
and I quote, ``Because HUD's announcement at least partially 
validated the concerns of rating agencies and landlords about 
the appropriations risks associated with the voucher tenants, 
some of the harm may be irreversible.'' and that HUD, and I 
quote, ``just in essence validated rating agencies and 
underwriters' fears that you cannot trust government 
subsidies.'' Irreversible, Mr. Secretary.
    I ask you again, how will HUD attempt to rectify the 
harmful effects of its poor management decisions?
    Mr. Ney. [Presiding] I should note the time of the 
gentlelady is expired, but if you would like to wrap up.
    Secretary Jackson. Sure. Congresswoman, I will say this. If 
it is irreversible, you cannot prove it by the number of bond-
issuing companies coming to public housing agencies today 
wanting to do their bonds, or the number who are willing to 
underwrite the Section 8 program in many housing authorities.
    Ms. Velazquez. And there are a number of landlords who do 
not want to continue in the program.
    Secretary Jackson. Well, I can tell you, in your city 
alone, you have got people at your housing agencies willing to 
do it tomorrow, and I am not telling you what I think, I am 
telling you what I know.
    Mr. Ney.  The time has expired.
    The gentleman from Ohio, Mr. Tiberi.
    Mr. Tiberi. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for your leadership. Thank you for 
your support of Columbus, Ohio's unique approach to dealing 
with chronic homelessness. It has been great to see your 
leadership there. And thanks for your support on the Zero Down 
legislation as well. As a realtor, it has been great to see 
people react the way they do in home ownership. It helps 
communities, and you know that, and thanks for your support 
there. And thanks for your commitment on dealing with an FHA 
issue in Columbus, Ohio, dealing with first-time homebuyers as 
well. I look forward to working with your staff.
    About a year and a half ago, Chairman Ney and I had a field 
hearing in Columbus, Ohio, and out of that we requested a GAO 
report on CDBG, which has gotten a lot of attention here for 
another reason. Our concern stems from the fact that in 
Columbus, Ohio, the Mayor and City Council testified at that 
hearing that Columbus was the largest city in Ohio--is the 
largest city in Ohio and was not getting as much CDBG money as 
some of the other cities in Ohio that are older cities than 
Columbus. Columbus has seen exceptional growth in the last two 
decades.
    I will give you an example. St. Louis, Missouri, with a 
population of around 350,000, is the 49th largest city in the 
U.S. In fiscal year 2001, St. Louis received over $28 million 
in CDBG money. Columbus is the 15th largest city in the Nation, 
population of over 700,000, double, received about $$8.8 
million in CDBG. Similar discrepancies can be found in other 
cities who are smaller than Columbus and whose funding is 
greater than Columbus with respect to CDBG.
    Why do you think cities that are significantly smaller than 
Columbus are receiving much more, when Columbus' poverty 
statistics are similar to these cities that are half the size?
    Secretary Jackson. I understand, Congressman Tiberi, your 
concern, and let me say this. It is because of the formula that 
was set by Congress; and in this formula it is based on 
poverty, growth and age of housing in the communities. When you 
look at a city like St. Louis pre-1940 housing, you have a 
substantial large number of that in that city. If you look at 
Columbus--which I used to visit frequently when I ran the 
utility company--it is basically a brand new city in the sense 
that you have a very growing market now and clearly a very 
viable--and if I remember distinctly, it is the largest city in 
Ohio.
    Mr. Tiberi. It is.
    Secretary Jackson. That is why we did an in-depth analysis 
and study--that we have submitted to the public now and to you 
all--looking at four different alternates to be able to address 
the community development needs of each of these cities to be 
more equitably distributed between the cities. Right now, you 
are absolutely correct. It is just based on poverty, age of 
housing and the growth of the city.
    So there are a number of iniquities that exist in cities, 
but we think that with the study and the proposal that we have 
submitted to you all and at the request of Chairman Ney, I 
think we have--the four alternates that we have given will 
address that issue.
    Mr. Tiberi. That is great.
    One other question, Mr. Chairman.
    The issue of Section 8 has come up, and I don't know if the 
statistics are on the top of your head or not, but one of the 
things that we have seen is that, over the last several years 
that I have been here, is the amount of money spent on Section 
8 has increased significantly. Can you, off the top of your 
head, tell us, since you have been at HUD how significantly 
Section 8 has taken a bigger piece of your budget?
    Secretary Jackson. Sure. Congressman, we have gone from 
funding Section 8 at about 42 to 43 percent to 56 percent; and 
if we include the project-based subsidy, it is about 60 
percent. So it is taking about 60 percent of our budget, and 
that is at the perils of other programs. I know people have 
said, well, it shouldn't be. You are underfunded. No, it is not 
that. The program could not continue to grow at the rate that 
it is growing. That is the real issue.
    Secondly--which some people refuse to deal with--is that we 
are not serving more people on this program. We have an 
imaginary cap that 75 percent of the recipients must be 30 
percent or less the median, which means we are not only paying 
their rent, we are paying all of the additives to that, 
utilities and others. So we are not serving more people. 
Landlords are consistently going up in the rent, and what we 
found out is that in many of the urban areas there is a great 
disparity between what landlords are charging and what the 
median rent is for that specific area.
    So I am saying, let us go back to where I was the last time 
that I ran a housing authority in 1995, back to budget base. I 
was given a budget, and I had the flexibility of serving as 
many people as I could. That is, some people were at 30 percent 
of median, some were at 50 percent of median, some were at 60 
percent of median. Now we are over 80 percent. And clearly what 
we had----
    Mr. Ney. The gentleman's time has expired.
    Secretary Jackson.--which I think it important, is we had a 
turnover in Section 8 at that point, pre-1998, at about 3 
years, 3 and a half years. Today it is about 8 years, and we 
are serving less people.
    Mr. Tiberi. Thank you.
    Mr. Ney. The gentleman's time has expired.
    The gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman.
    Thank you for being here, Mr. Secretary.
    You referred to some legislation that is being drawn at 
Commerce on several occasions, and I will just express my hope 
that you are involved in putting HUD and the prior programs of 
HUD in play as part of those discussions and that it is just 
not Commerce that is doing this. I assume that you are involved 
in that?
    Secretary Jackson. Yes, Congressman Watts.
    Mr. Watt. Thanks. Okay. And I would also express my hope 
that that process moves quicker than the process that--you all 
told me
    a couple of years ago the process was going to lead to some 
successor legislation that was going to replace Hope VI, which 
I still have not seen. And I am--you know, I am beginning to 
turn blue here, if I keep holding my breath for it. So I hope 
you all are still working on that. Are you still working on 
legislation that would come up with a program that would 
replace Hope VI and do that, or was that going to Commerce, 
too?
    Secretary Jackson. No, that is not going to Commerce. We 
are still working on it.
    Mr. Watt. Okay. So I am glad to know you all consider that 
community development rather than economic development.
    In the meantime, according to the information I have, in 
2001 HUD issued the Hope VI notice of funding availability 
approximately 4 months after Congress appropriated the funds; 
and, unfortunately, in 2002, 2003, 2004, the NOFA didn't come 
out until 8 or 9 months after the funds were available, so I am 
a little worried about what the status of the Hope VI funds 
appropriated for fiscal year 2005 is.
    Is there going to be a NOFA for the funds that were 
appropriated, even though you all--even though the President's 
budget proposal confiscates those funds back? Or are you just 
going to assume that that is going to happen? Can you tell me 
the status of the NOFA for 2005 funding?
    Secretary Jackson. We expect the NOFA to be out in March. 
Clearly, it was allocated in the 2005 budget, and so I intend 
to put the NOFA out and to get responses and to evaluate those 
responses.
    Mr. Watt. Now what impact will that have, then, on the 
President's proposal to reclaim those? I mean, he has rescinded 
those funds in his proposed budget. If you put a NOFA out, will 
that trump his rescission, or will his budget proposal trump 
your NOFA?
    Secretary Jackson. Congressman, that is a proposed budget--
--
    Mr. Watt. I understand that, but I am just trying to figure 
out which ones--you are putting out your NOFA. I assume if 
people submit proposals in response to that NOFA, that will be 
funded, is that correct?
    Secretary Jackson. That is correct, until you rescind it, 
until Congress rescinds it.
    Mr. Watt. All right. That is all I want to be assured of.
    Now there was some language, as I recall, in that bill 
about recapturing some prior money that was in HOPE VI. What is 
the status of that? How much money is still out there in HOPE 
VI that has not been committed?
    Secretary Jackson. All of the money has been committed----
    Mr. Watt. Except the 2005 funds.
    Secretary Jackson. Right. But the other part--if I were to 
answer your question a different way, how much money is out 
there that is not obligated, it is about $3 billion, but all of 
it has been committed to different authorities.
    Mr. Watt. Okay. Obligated and committed being--give me the 
distinction that you are drawing.
    Secretary Jackson. Committed is that--we have monies now 
that has gone to all those housing authorities--I can give you 
the best example, and I won't use a city. One authority has the 
money, but they have not drawn down on it for the last 4 years. 
So the commitment is there, but they have not obligated the 
funds, and, unless they obligate it, they are not in a spending 
mode.
    Mr. Watt. What is going to happen with that? You take that 
money back at some point?
    Secretary Jackson. No. We send them a notice. We are 
working with a number of cities in that process, trying to get 
them to spend their money.
    One of the things we have done is said, why don't you get a 
developer who can leverage the money and develop the project?
    Mr. Ney. The time of the gentleman has expired.
    Secretary Jackson. In many cases, when the money has not 
been expended it is because they do not have a developer who 
can come in and leverage the money, so we are working with 
them.
    Mr. Watt. Thank you, Mr. Secretary.
    Mr. Ney. Thank you.
    Mr. Pearce from New Mexico.
    Mr. Pearce. Thank you, Mr. Jackson. I appreciate your 
service, and I thank you for your willingness to come in today.
    If I am understanding correctly, in the administration of 
your program you have decreased the fraudulent payments by $1.6 
billion.
    Secretary Jackson. Yes, we have.
    Mr. Pearce. So we have got a certain number of people off 
the program that were there fraudulently.
    Secretary Jackson. That is correct.
    Mr. Pearce. Also, then you have increased home ownership by 
2.2 million people, so you have got 2.2 million people less.
    Secretary Jackson. Right.
    Mr. Pearce. And you are not asking for less money in this 
budget, you are asking for more, which means that we have the 
capability to really expand services significantly.
    Secretary Jackson. Yes, we do.
    Let me say this to you. We have a backlog now of less than 
$18 billion in public housing capital funds, but we have, to 
date, 80,000 fewer public housing units than we had just 10 
years ago. We are working with a number of private developers 
and private investors with the vouchers to make accommodations 
for low- and moderate-income people. The best example I can 
give you is Chicago, where Mayor Daley, from my perspective, is 
doing an excellent job of leveraging private monies with our 
housing monies to create housing that is integrated both 
socially and economically, rather than the humongous high-rises 
that you saw going down the Dan Ryan Freeway. And that is what 
we are looking at. We don't have the same number of units when 
they say, well, the budget is cut; we have 80,000 fewer units 
in this country.
    Mr. Pearce. I appreciate that. I guess my point is that 
when you tell me that we are not serving more people, that the 
landlords are going up to above-market rates, that those 
landlords could be perceived as special interests. And much of 
the arguments here today could be special interests kicking 
back against a system that is trying to cut housing rental 
subsidies that are going up faster than the market rate, which 
will represent large blocks of landowners, rather than creating 
an ownership society.
    Secretary Jackson. I agree with that, but I won't say it is 
special interests. What I will say is this, is that what I 
found in running three housing authorities, unless you clearly 
state and make landlords compete, there is no need for them to 
compete, so they can raise the rates at their will. And that is 
what we are seeing in this country.
    I can tell you firsthand. I made a sincere effort, the last 
housing authority that I ran in Dallas, that I had landlords 
competing to make sure that I got the best value for my dollar 
because I was allocated only so much money and I wanted to 
serve as many people as I could serve.
    Today, based on the unit-base cost, there is really no 
incentives to do that. I think that if you give them budget 
base and flexibility, many of the housing authorities are 
capable and will do it, will make landlords compete, but until 
then there is no reason.
    So that is why I said that the money is going up that we 
are allocating, but the number of people who we are serving has 
not increased any. And you will get debate and they will say 
that is not true. Well, you know, I ran three housing 
authorities, I think I am a pretty good expert, and all three 
of them were high performance, so I know exactly what I am 
talking about. When you are on budget base, you have to operate 
flexibly; unit base, it is not required.
    Mr. Pearce. Well, I read in here at one point that you 
serve 4.8 million households under one program. Do you have the 
total number of households that you are serving right now 
through all the programs, just approximately?
    Secretary Jackson. I know it is 2.2 in Section 8, and it is 
4 point something in public housing--2 million in Section 8 and 
about 1.2 in public housing. I am sorry.
    Mr. Pearce. So about 4 million.
    Secretary Jackson. And then the other programs, right.
    Mr. Pearce. So when you set a goal of 5.5 million by 2006, 
is it 2006?
    Secretary Jackson. No. That was the home ownership goal set 
by the President.
    Mr. Pearce. I understand. But home ownership, you are 
supposedly taking people out of the program, the rental 
subsidies, and putting them over into a program where they 
never are going to have to have a subsidy again----
    Secretary Jackson. Not necessarily so. A lot of people are 
coming out of the program, but a lot of these are just first-
time homeowners, period. They are middle-income people, fire 
people, police, nurses, teachers. They are not necessarily 
either on a voucher or in public housing.
    Mr. Pearce. All right. Well, I appreciate, Mr. Jackson, the 
efforts to change the whole culture, the culture of paying high 
rents with non-competitive leases, the culture of having 
subsidies rather than home ownership. I appreciate those 
attempts on the part of your Department to sort through a very 
difficult, difficult problem. I know it takes a lot of focus, 
and you are open to criticism from us, and we appreciate that.
    Secretary Jackson. Thank you.
    Mr. Ney. The gentleman's time has expired.
    The gentlelady from California.
    Ms. Lee. Thank you very much. Thank you, Mr. Chairman.
    First of all, Secretary Jackson, let me just say I believe 
that this proposed HUD budget really does reflect the values of 
an agency which has decided that it no longer takes on 
responsibility for caring for the least of these. It reflects 
priorities that you acknowledge rob Peter to pay Paul. Yet--we 
keep hearing about the religious values of the President and 
this administration. Yet this budget, if you ask me, does not 
reflect any sense of morality. It does just the opposite.
    It is really, quite frankly, immoral to shatter the hope 
out of HOPE VI and accept housing that really is subhuman in 
our country. I can't figure out what is moral about cutting 15 
percent from the housing account for Native Americans, 
allowing, also, families to live with lead paint or brown 
fields. It is my understanding there is about a 28 percent cut 
in lead paint grants. Of course, this will lead to sicker 
children.
    I guess I have got to ask you, where is the morality in a 
budget that leaves those living with HIV and AIDS in a position 
where they have to choose between their healthcare and their 
housing? A 5 percent cut is unacceptable.
    So, Mr. Secretary, I can't figure out how the 
administration can honestly cut these and other essential 
healthy community programs and really say that it cares about 
the poor and the elderly and the disabled. What you are doing 
is creating blighted neighborhoods which will wreak havoc on 
the most vulnerable people.
    So I guess I have to ask you, given this--and I call it an 
unethical budget, what standards of morality did you use in 
putting it together, or was it strictly the accounting kinds of 
maneuvers that you had to do? Did you vigorously fight for 
additional funds so that the priorities wouldn't have to be 
what you are dealing with now or did you accept this as sort of 
a fait accompli?
    Secretary Jackson. I guess, Congresswoman, I am not going 
to debate you about ethics and morality. I think that----
    Ms. Lee. Well, I think we should, because----
    Secretary Jackson. No, I don't think we should.
    Ms. Lee.--your agency is the one that protects, hopefully, 
the most vulnerable of people in our country----
    Secretary Jackson. Well, you have your beliefs, and that is 
fine. I respect your----
    Ms. Lee. You don't believe that?
    Secretary Jackson. I respect your belief.
    Ms. Lee. You don't believe it.
    Secretary Jackson. I believe the budget does address the 
issue.
    Ms. Lee. Well, how do you do that by cutting all the funds 
out of housing initiatives for, for instance, people living 
with HIV and AIDS? Five percent is terrible, 50 percent cut on 
the disabled. I mean, how do you justify? That is all I am 
asking.
    Secretary Jackson. Well, I will say this to you again. You 
have to make choices and priorities, and in this budget I made 
priorities. The priority was to make sure that we fund the 
Section 8 program fully and the public housing operating 
subsidy, and that meant that some areas would be cut. We looked 
at those areas that would be cut and looked around and realized 
that other people were serving many of those areas, too, and 
that our service would be augmented by other agencies. So I 
would----
    Ms. Lee. Then can you tell me what agencies are going to 
augment, for instance, the cuts that address people living with 
HIV and AIDS and the disabled?
    Secretary Jackson. Health and Human Services addresses it 
every day.
    Ms. Lee. So they are going to get an increase----
    Secretary Jackson. I can't speak for them, but----
    Ms. Lee. But you chose to cut this because of the 
priorities and you didn't have enough money.
    Secretary Jackson. I didn't say we didn't have enough 
money. It was clear that we have programs that are eating into 
our budget, and until we address the issues of Section 8 we are 
going to continue to have to look very strongly at other 
programs.
    I will say this to you in response. I have no great 
pleasure in cutting any program. It is a matter of looking at 
where we can best serve the people most in need, and clearly 
those people under the Section 8 program are in need, and that 
is a decision that had to be made.
    Ms. Lee. But, Mr. Secretary, what I am saying to you is 
oftentimes secretaries make a fight within the administration 
for additional resources because they don't want to cut these 
programs. So I am asking you--you say you didn't want to cut 
it. So if you did not want to cut it, did you go to the 
administration and say, look, we need not--we don't want to cut 
the disabled, we don't want to cut out Native American housing 
initiatives, we want to increase the efforts for cleaning up 
lead and lead-base grants? I mean, did you make that argument 
internally? And maybe perhaps you could have at least 
maintained some of these initiatives that the most vulnerable 
people need in our country.
    Secretary Jackson. Well, I think we have maintained those 
issues that the most vulnerable people need. And I am clearly--
--
    Ms. Lee. But Native American housing has been cut by 15 
percent. You are cutting the grants to the disabled by, what, 
about 50 percent. You are cutting housing for those living with 
HIV and AIDS by about 5 percent. So explain this. That is what 
I asked you earlier, the kind of standard that you used to do 
that.
    Secretary Jackson. I think I have said that you have your 
belief and I have my belief. My belief is that we have----
    Mr. Ney. The gentlelady's time has expired.
    Secretary Jackson. The Section 8 program consistently 
eating into our budget, and I made some very hard and difficult 
decisions.
    Ms. Lee. So you didn't fight to protect the others.
    Mr. Ney. Time has expired.
    Mr. Fitzpatrick of Pennsylvania.
    Mr. Fitzpatrick. Thank you, Mr. Chairman.
    Secretary Jackson, thanks for taking the time to come 
before the committee today. I know that I can say that, as a 
new member, your testimony has given me a greater appreciation 
and understanding for your budgetary issues at HUD.
    I represent a district in southeastern Pennsylvania, 
Pennsylvania AID. It is some urban but mostly suburban, and we 
have had great experiences in working with your Department, 
especially in economic fields, economic development initiative. 
There is a lot of pressure for businesses to expand and develop 
in some of the open spaces in the county and in our 
communities, and the ability to take those BETI funds and 
redevelop older, abandoned industrial sites. That has been 
important to us, and I just want to sort of put in a plug for 
the BETI program.
    Secretary Jackson. Thank you.
    Mr. Fitzpatrick. But I want to talk a little bit about the 
Community Development Block Grant.
    As a local elected official, county official for 10 years, 
we really appreciate the Block Grant for a couple of reasons, 
not only for the cash assistance to the local community but, 
just as importantly, for the flexibility that it gives to a 
local governing official to be creative and to use those 
dollars in ways that local communities and local governments 
see them to be the most effective and the most efficient.
    One of the things that we did in Bucks County, 
Pennsylvania, our little spot of the United States, was 
recognize that it is important for community development 
programs and economic development programs to work together to 
understand each other. We took our community development office 
that was in charge of implementing the CDBG program and we 
created a new department, essentially, a more efficient 
department called the Office of Community and Business 
Development, because we wanted those two sides of the equation 
to be talking to each other.
    So my question is, the CDBG program goes to the Department 
of Commerce, business side. Would you have any comments for 
Commerce on maintaining that level of flexibility for local 
governing officials? I know that you don't control the 
Department of Commerce, but what kind of message might you give 
the Department so they maintain that flexibility so local 
government can continue to do their job?
    Secretary Jackson. That the program works, and that if you 
look at the majority of the cities who receive the Community 
Development Block Grant Program, they are doing a very 
excellent job in being able to juxtapose both the community 
side and the economic development side, as you just said in 
Bucks County, and that we should look very seriously at 
maintaining a number of the ingredients within that program 
because they have been successful.
    As I said to the Congresswoman from California, there are 
some issues, but, overall, the program, from my perspective, 
works very well. And I would hope that it would continue to 
work well because, clearly, it addresses the needs of many of 
the urban areas--well, not only the urban areas, many of the 
county areas, too.
    Mr. Fitzpatrick. I think it goes without saying that, you 
know, when you send dollars to a local community there is 
always the capacity, always the ability to use those dollars 
more effectively and to get greater benefit by stretching the 
dollars. Doing more with less sometimes is possible. I know 
that working in the local government sector.
    Secretary Jackson. I think most of the cities have done a 
very excellent job of leveraging the block grant monies that 
have been sent to the cities. I have seen it.
    One is--there is a commercial development within I think 
either yours or Congresswoman Waters' district where they built 
a Home Depot and a whole shopping center, and that was 
leveraged with Community Development Block Grant money. So I am 
a believer that it served a very, very excellent purpose.
    Mr. Fitzpatrick. And you do you believe the Department of 
Commerce will maintain that level of flexibility for local 
governing officials?
    Secretary Jackson. I would hope so. As I said to 
Congressman Watts, they will have our input because we believe 
that they are valuable and good programs.
    Mr. Fitzpatrick. Thank you, Mr. Secretary. I yield back.
    Mr. Ney. The gentleman yields back the balance of his time.
    Mr. Green of Texas.
    Mr. Green. Thank you, Mr. Chairman. I want to thank the 
ranking member, Mr. Frank, and I would like to thank you, Mr. 
Secretary, for appearing today.
    Mr. Secretary, when I ran for Congress I indicated that I 
would be a representative for the least, the last and the lost. 
Reverend Kirby John Caldwell referenced the least, the last and 
the lost when he gave the prayer at the State of the Union 
Address. The least, in my opinion, are those who have not. They 
cannot afford affordable housing. The last--many times those 
who are the last to be hired, first to be fired. The lost, 
those who are victims of AIDS, the mentally ill. And, Mr. 
Secretary, it is my belief that this budget adversely impacts 
the least, the last, and the lost.
    And, Mr. Secretary, my comments are not addressed to you, 
but rather they are addressed to us, because we live in a world 
where it is not enough for things to be right, they must also 
look right. And while it may be right to grant trillions in tax 
cuts to the wealthiest, depending on who is counting, about 3.4 
trillion, while we are cutting AIDS housing 5 percent, $14 
million, lead paint abatement 29 percent, $48 million, disabled 
50 percent, fair housing 16 percent. Now, while that may be 
right to do that, it doesn't look right. And history is not 
going to be kind to us as it evaluates us. Not you, Mr. 
Secretary, but us. Because it is not enough for things to be 
right, they must also look right.
    It may be right to cut community development block grants 
and yet spend enough in 1 month to cover those cuts; it may be 
right, but it doesn't look right. And history is not going to 
be kind when it evaluates us.
    Mr. Chairman, Mr. Secretary, I am very concerned as a 
person who comes out of the human rights civil rights movement, 
about the cuts in fair housing, approximately $7.3 million, 20 
percent in the fair housing initiatives program, 15 percent in 
the fair housing assistance program. And I am concerned because 
every time we have tested, we have found that discrimination 
still exists when persons are seeking housing opportunities.
    And for us to have complaints that average more than 3 
million annually in housing violations, and to cut these 
programs that can be so beneficial, I think it is going to hurt 
the least, the last, and the lost.
    And I want to make one more comment. And I am really not 
begging for a response, Mr. Secretary. As I said, my comments 
are not directed to you, but rather to us, because we are all 
going to be judged. On the question of faith-based initiatives, 
HUD--this is a quote: ``HUD has removed all discriminatory 
barriers to participation by such organizations.''
    Mr. Secretary, I went to the colored water fountains. I sat 
in the back of the bus. You may have as well. And I am not 
demeaning you. Let's say we did these things. And, Mr. 
Secretary, I think that what we are doing with this faith-based 
initiative is opening the door to discrimination. I think we 
are rolling back the clock to a time that I don't care to 
revisit. I find that right now, faith-based organizations have 
the same opportunities to government grants as any other 
organizations. What appears to be the desire of some is to 
discriminate in hiring practices, which is invidious to the 
Constitution of the United States.
    Those of us who value the distance that we have traveled 
and the Constitution of the United States are shocked with the 
whole concept of allowing discrimination to sew its seeds in 
the church.
    So, Mr. Secretary, I want to thank you for coming. And 
again, my comments are not directed toward you. We all are 
going to be judged in terms of how we allow this situation to 
continue, because it is not enough for things to be right; they 
must also look right. And this doesn't look right.
    I thank you, Mr. Chairman.
    Mr. Ney. [Presiding] Mr. Shays.
    Mr. Shays. Thank you, Secretary Jackson. I believe that you 
do the very best you can with the resources you have. I also 
believe that you wouldn't be Secretary if you do not agree to 
the reductions that were asked of you, and then you try to make 
the reductions as acceptable as possible.
    But still, now the bottom line is that we have a budget 
that I think is very harmful to our cities. I represent three 
urban areas, and I am going to be wrestling with whether I can 
even vote for the budget resolution if we aren't able to solve 
the problem. And the problem is that your budget needs to be 
larger.
    I took tremendous pride in the community development block 
grant and the community services block grant in HHS, because I 
thought they allowed for flexibility. They allow for focusing 
where we need to. And you know, I fear that this Republican 
administration, of which I am proud to be a part of in terms of 
working with them, but I am concerned they are giving block 
grants a bad name; because really what we are doing, whether it 
is 5.6 billion down to 3.7 billion, or whether it is 5.3 
billion down to 3.7 billion, the reduction is $1.6 to $1.9 
billion.
    And I guess what I am just saying to you is that what we do 
in block grants, instead of taking what makes sense about them, 
their flexibility, and expand them, we put a lot more into it 
and then we cut it, and then we say fight over what remains. 
And so I don't have a difficult time understanding why we give 
our Democratic colleagues a chance to rightfully criticize what 
we are doing.
    So I guess my message is, because I have heard your 
comments, I do not need to ask more about what I have already 
heard. I wanted to wait, hear your testimony, and express to 
you publicly that I think of all of the things to cut, to cut 
community development block grants and community service block 
grants is just really a big mistake. And now it is on our 
shoulders to resolve it. But it is going to be difficult.
    I yield back.
    Mr. Ney. Mr. Scott from Georgia.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Secretary Jackson, I really am so concerned about what is 
happening to your Department and the budget cuts that I am not 
sure where exactly to begin. But let me begin with HOPE VI. I 
am so continuously baffled with this administration.
    HOPE VI is arguably the Republican's foremost program in 
housing. It was created by Republicans, supported by Democrats. 
It has gone down to the abject poverty level as far as housing 
is concerned in public housing.
    It has reinvigorated the whole concept, brought in mixed 
income, and more than any other program has leveraged the money 
we have given to them for millions and millions of dollars' 
worth of economic development in surrounding communities.
    In my hometown of Atlanta, Georgia especially, the impact 
has just been tremendous. And when you were here before the 
committee before, I asked you to go back and talk with 
President Bush and ask him not to cut HOPE VI. It is the 
paramount virtue of what he is all about in an ownership 
society, opportunity society, it is there. And yet with all of 
that success, the rewards that HOPE VI seem to be getting can 
best be captured in the words ``cruel and unusual punishment.''
    Let me just give you an example. Amazingly, the 
administration has proposed cutting the funding for HOPE VI in 
fiscal year 2006, which we have already appropriated for HUD to 
spend this year. Worse, the administration is proposing to cut 
that very same funding at the same time that it is supposed to 
be spending that funding.
    It is such a schizophrenic situation here that it is just 
mind-boggling. And on top of that, HUD has a notorious history 
for spending HOPE VI money late. As a matter of fact, fiscal 
year 2004 HOPE VI funding still hasn't been spent. Now, I want 
to ask you a few questions about that, because I know you to be 
a very decent person, a very caring person about this.
    But we need you to be a fighter for these programs, to 
fight for your Department. You should not take these cuts lying 
down. Your agency has the most significant cuts of all, and I 
encourage you to fight for this. This budget is here. We 
haven't voted on it. There is still opportunity.
    But in HOPE VI, let me ask you about this schizophrenic 
funding here where we have proposed money. You are holding onto 
fiscal year 2004 money. Are you deliberately holding onto that 
money until the fiscal year 2006 congressional appropriations 
bill is passed? That is my first question.
    Secretary Jackson. No. We are not holding onto fiscal year 
2004 moneys. We have fiscal year 2005 moneys. As I said to 
Congressman Watts that No File will be out in March.
    Mr. Scott. What specific steps are you taking to ensure 
that the fiscal year 2005 HOPE VI money will be spent in a 
timely fashion?
    Secretary Jackson. Once we sent the No File, we expect to 
get it back within 60 days. And we expect to evaluate and 
allocate the moneys to those cities who rank the highest. We 
usually, I think, go to about 20 cities with the amount that we 
have. So clearly we will allocate the money once the proposals 
come back in.
    Mr. Scott. What are you telling to folks like the Atlanta 
Housing Authority, the Fulton County Housing Authority, Clayton 
County Housing Authority in Georgia, where, as you know, we are 
the poster child for success with HOPE VI?
    Secretary Jackson. You are absolutely correct. There is no 
question that Atlanta is the poster child. And there are a 
couple of other cities, Dallas, Charlotte.
    If, Congressman, if every city was like Atlanta, like 
Dallas or Charlotte, the HOPE VI program would be virtuous. 
Right now we are setting on about a little over $3 billion that 
has been unspent somewhere between 3 to 10 years. We have only 
completed a little over 30 of those projects that we have 
funded, almost 200 of them. The money is being unspent.
    You have asked me to speak to the President. But as I told 
you when we discussed it last year, as I told you when we 
discussed it individually, I was part of the organization that 
created the HOPE VI, that wrote the legislation. I believe in 
HOPE VI, but I do not believe in funding a program that is not 
working. Right now we have over 150 cities who have not in any 
way started the process of their HOPE VI. And some of them go 
back to 8, 9, 10 years. So my position is, we cannot keep 
funding something that is not working. As of today it is a 
little over 30 out of 200 projects.
    Mr. Scott. But can't we find a way to work with those 
programs that have proven successful, rather than throw them 
out with everything else?
    Secretary Jackson. Well if we look at your city--I will 
close with this--you have done an excellent job. I was just in 
your city about 2 or 3 months ago. I think that all of your 
HOPE VIs have been done very well. You do not have the same 
problem that faces most cities.
    Mr. Ney. Mr. Renzi of Arizona.
    Mr. Renzi. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for coming over. I want to ask you 
to travel with me out west now to the Colorado plateau. Red 
dirt everywhere. When the wind blows, it makes a pink snowstorm 
up there, a pink sandstorm. They have got rattle snakes and 
scorpions, and we are too young Navajo brothers growing up in a 
hogan. A hogan is a mud hut with sticks. And we grow up in that 
hogan. And if we are lucky enough to go out and harvest wood, 
we have firewood that heats our home at night. And the elders 
who grew up out there, since they do not have the ability to 
walk half a day to get firewood, they bring the sheep in at 
night and they heat their homes with animal heat, like the 
cavemen used to.
    And that sounds like a story that I made up. But Maxine 
Waters from California came out there in her high heels and she 
saw it was true. And so we grew up in that hogan together, you 
and me, Mr. Jackson. And we pull ourselves up by our boot 
straps and we get a job up in Window Rock, Arizona making 
$25,000 a year, just above the poverty line, which is about 
what 50 percent of the people up there make.
    And we apply to get a loan. We are the first people in our 
family to ever apply for home ownership. And we apply to get a 
loan, on line maybe, because we have access to the local 
Internet and the computer. And when we do that, the Bureau of 
Indian Affairs decides whether or not the title and the search 
methods on the plot of land that you and I are buying together 
is a clear title, it doesn't have a cloud on it. It takes a 
year and a half for that title search to get done, because 
while we call them sovereign people, the Federal Government in 
trust decides whether or not they can have ownership of that 
land or not. A lot of talk about ownership society. So the 
Bureau of Indian Affairs hasn't been able to get it right.
    So what we did a couple of years ago is we reached out to 
you folks over at HUD and said, do us a favor, hold these guys 
by their hand and shake up the Bureau of Indian Affairs because 
young men, young people, up-and-comers, should not have to wait 
a year and a half to have a title search. Right?
    Secretary Jackson. That is correct.
    Mr. Renzi. So they went to this technology fix over at BIA, 
this STAR system they call it. And that is supposed to be the 
cure-all. But in essence, out there on the Native American 
computers, you have got a piece of paper that has to be 
stitched and has to be carried around.
    So my first question, my friend, my Navajo brother, what is 
it that the HUD has been doing to help hold BIA's hand? Where 
are we on making sure that this repressive nature of title 
searches is being broken so that we can bring some hope out 
there?
    Secretary Jackson. Congressman, I----
    Mr. Renzi. You didn't like my story?
    Secretary Jackson. No, I thought your story was excellent. 
And I know it is true. We have signed a memorandum of agreement 
with the Bureau of Indian Affairs in September. And it is our 
effort to try to provide the title search for no more than 30 
days, to have it done within 30 days, because I too agree with 
you that it is not right. It is not right for that to occur on 
a year, a year-and-a-half basis. We are trying to make sure 
that at this point it is always under 60 days. That was the 
memorandum of understanding.
    Mr. Renzi. Do me a favor, because I know you are a good man 
of compassion. We have heard a lot of discussions here today. 
Take your leadership and your passion and your pointed spear 
and get after those guys over there at BIA, please, okay? Make 
them follow you, all right?
    Let me talk to you about another issue. When we talk about 
Native American housing has the funds, this is the third year 
in a row we are looking at cuts. One of the reasons we are 
looking at it is because we gave $33 million back last year 
that we didn't access, because we are dealing with Native 
Americans who don't know the best way to navigate through the 
system, who aren't used to being able to get on line on the 
Internet, they are not used to breaking down the walls of 
application process as it relates to lenders.
    You are talking about people who have never done this 
before, who do not have an uncle that is going to put a little 
money in the bank account so they can get the down payment like 
my kids will have. And a lot of these folks--we all know you 
borrow a little money here from the relatives. That is how you 
get the down payment. Well, they do not have that.
    So when you look at the amount of money in particular that 
you are having to prioritize, and you look at last year, under 
section 184 that we gave back $33 million because we didn't use 
it. As a friend, I would say to you, that when you look at the 
HUD technical assistance and training area, and you look at the 
money that is going to be pulled out of there, that is where we 
best counsel and train and help people navigate through the 
system who have never been able to do it before. And of all of 
the areas that we do not want to cut, we do not want to cut the 
counseling that you guys provide that helps people navigate 
through the system.
    Thank you for your leadership, especially as it relates to 
BIA.
    Mr. Ney. Mr. Cleaver, the gentlemen from Missouri.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here. I will try to ask 
a number of questions quickly. The first of them is on page 7 
of your statement, in the fourth paragraph, bottom line, you 
said: More importantly, there has been a 50 percent reduction 
in improper payments amounting to $1.6 billion.
    If HUD is saving $1.6 billion dollars, congratulations. 
But, secondly, why cannot that $1.6 billion go to CDBGs?
    Secretary Jackson. Because all moneys basically that we 
save reverts back to the Government. I mean, we----
    Mr. Cleaver. CDBG is the government.
    Secretary Jackson. To the Treasury. We do not have control 
once the money is saved. It does not--we have a budget that is 
approved by you every year, so we do not have a carryover from 
savings. It goes directly back to the Treasury once we save the 
money.
    Mr. Cleaver. So no matter--but that money was allocated, 
though?
    Secretary Jackson. Well, you are absolutely correct. But I 
can tell you other moneys that we save in Ginnie Mae and FHA, 
Federal Housing Administration, that once we save it goes 
directly to the Treasury.
    Mr. Cleaver. But does it not give HUD a more powerful 
argument about funding CDBG when you can talk about the fact 
that you saved 1.6 billion? I mean, is that not a powerful 
argument?
    Secretary Jackson. I think clearly.
    Mr. Cleaver. You are not asking for new money.
    Secretary Jackson. It just does not work that way. I mean, 
we save money. And now, there is no question that I will always 
defend and make an argument for all of the programs that we 
fund because I think they are important, but at the same time, 
Congressman, I have to prioritize. And clearly that is what I 
have done in this budget.
    Mr. Cleaver. Okay. I disagree with all of that. But I 
served as mayor of Kansas City all through the 1990s. And we 
have an annual housing survey. We did 240--we identified 
240,000 homes in Kansas City, 55,000 of which were in serious 
need of serious rehabilitation, 5,000 of which we needed to 
demolish. And we used the lots on which we tore down the houses 
to build affordable homes. And we did that using one-third 
CDBG, two-thirds private sector participation. And as a result, 
we were able to make some significant progress; 12,000 
properties were rehabilitated in our community.
    I am going to have a 10 o'clock town hall meeting on Friday 
with a number of poor individuals in Kansas City at the Bruce 
R. Watkins Center. One of the questions that may come up, and 
certainly one of the things that I would like to deal with, is 
the fact that 48,000 families are in homes with rehabilitation 
needs. Is there something I can communicate to them from the 
HUD Secretary with regard to the fact that those dollars are no 
longer going to be available? What can I tell them to make them 
feel better?
    Secretary Jackson. Well, the dollars are still available 
now at HUD. Those dollars are allocated to the respective 
areas. Kansas City is one. I am very familiar with the work 
that you did as mayor and what the present mayor is doing. I 
think it is absolutely laudable.
    The key to it is the funds are still available, the CDBG 
funds, the home funds, all of the funds are available. And as 
the Congresswoman asked, again, from California, I would hope 
that once we have the legislation written, and with my input, 
that many of the programs that exist now still exist.
    Mr. Renzi. [Presiding] The gentleman from Kentucky, Mr. 
Davis.
    Mr. Davis of Kentucky. Thank you, Mr. Chairman.
    Mr. Secretary, I think the diverse lines of questions that 
you have received here today really reflect assumption on many 
of our parts about what the role of government ought to be. And 
I want to applaud the Department for finding $1.6 billion in 
waste. I think if we viewed this as our money that we were 
spending, we would not pour good money into ineffective 
processes that do not meet standards.
    Housing is a big issue with me personally, and in my own 
experience our Congressman cut through government bureaucratic 
red tape 35 years ago to help my mom get into a little two-
bedroom starter house that literally changed our lives. So home 
ownership, especially at the entry level with poor families, is 
a big priority to me.
    I think that we have millions and millions of dollars in 
lost opportunity. My question is not about spending--or asking 
for more money, but is more from a perspective of leverage that 
you have as the Secretary, the Department has with dollars that 
are coming into our local communities.
    In Covington, Kentucky, for example, in the heart of our 
district, we have many hundreds and hundreds of small two-
bedroom starter homes, some that are nearly 100 years old. 
Those could not be built today according to local regulation 
and State regulation for code and regulatory compliance, much 
of which has absolutely nothing to do with sound engineering, 
with safety, and environmental adherence. And frankly, it 
becomes a barrier to those most in need of housing. I have seen 
this over and over again, even to a degree in our rural areas, 
but especially in the urban areas.
    I was wondering if perhaps you could consider looking at a 
different rule set in application, not only on compliance with 
your stated standards. I think you are well put and correct to 
not give money to regions that are not in compliance because of 
their internal difficulties. Yet at the same time, I am 
wondering if you might beable to use that leverage on local 
government that does have need for that, to perhaps relax or 
simplify these regulations that don't add value to the 
citizens.
    I think in the end, not only would it increase 
opportunities for ownership, it would dramatically reduce the 
cost of housing in urban areas. We are finding entry-level 
folks have to move out of their neighborhoods or out of the 
community to buy a house if they get to that point. And it 
would keep neighborhoods together. In the long run it might 
even increase the ability of HUD to service our citizens with a 
higher level of service at a lower cost.
    Secretary Jackson. I agree with you, Congressman. And let 
me say this, Congressman Davis. I think it is imperative that 
we remove the regulatory barriers. And as I said a few minutes 
ago, that is why we started with HUD, because when I walked in, 
there were probably more regulatory impediments that we 
insisted that cities and counties follow than necessary. We are 
about 60 percent, or a little over, through with that. Then I 
think I have the authority to say to people, us mayors, county 
administrator in Covington, Kentucky, you need to remove these 
barriers because they are an inhibition to people owing homes.
    And many of these barriers are put up because people think 
that their community has been developed enough and they make a 
decision: not in my back yard. Well, you know, my position is 
the people we are talking about building the homes for, people 
we are talking about getting into homes are teachers or fire 
people, police people. These are people who serve us, who teach 
our children. Yet we are keeping them out with these regulatory 
barriers.
    As I said just a few minutes ago, just using California as 
an example, Los Angeles, before a home ever comes out of the 
ground you spend somewhere between 100,000 and $109,000 on 
permits. That to me is just unacceptable, because that 
effectively removes a person--a family of four, both teachers, 
from being able to afford a home within the boundaries of the 
city of Los Angeles.
    So I think if we can get past these regulatory barriers and 
give incentives to developers, you will begin to see that. That 
is why I asked you all to pass the Affordable Housing Tax 
Credit Act which will give $2.5 billion to developers to come 
back into the urban area. I am a firm believer that counties 
can thrive, but they cannot thrive as well as they can if they 
have a viable urban area. I think the urban area is extremely 
important.
    Mr. Davis of Kentucky. In closing, there has been a lot of 
talk about compassion. And having spent the last 25 years of my 
life working in the inner city, giving back to, in a sense 
returning to the next generation, folks who had a big impact on 
my life, there is a great deal of compassion in the building 
community and the entrepreneurial community, folks who have 
come from these neighborhoods who want to come back and make a 
tremendous difference in the long term.
    I have heard it over and over again from folks that if some 
leverage can be put on the local government in a positive 
sense, a proactive sense, where there was incentive to bring 
some common sense to regulations, they would make the 
investments right now in the home building and real estate 
development area. They want to keep our communities together. I 
think this will be laudable.
    If you would share with us or with my office, we can work 
with you, we would be glad to do that. Thank you.
    Secretary Jackson. I will be happy to work with you 
because, you know, I too believe that my effort to work at HUD 
is extremely compassionate. And I--as the Congressman said a 
few minutes ago, Congressman Jefferson, it is very important to 
me. Like him, I was brought up in a very segregated environment 
in Dallas, Texas so I know about noncompassion.
    Mr. Renzi. Thank you. The gentleman from the show-me State 
of Missouri, Mr. Clay.
    Mr. Clay. Thank you. And welcome back to the committee, Mr. 
Secretary. It is always a pleasure to see you.
    Like most Members of Congress, I am deeply concerned by the 
drastic budget cuts of the CDBG and the proposed shift of this 
jurisdiction from HUD to the Commerce Department. I 
additionally have questions about whether the efficiency of 
targeting revenue from CDBG grants will be enhanced or 
diminished if such a transfer does take place.
    Now, we have heard mention of St. Louis, the area that I 
represent. And in St. Louis, the stack of poverty and lack of 
housing in north St. Louis qualifies the city for quite a large 
amount of money from HUD through the CDBG program. Yet much of 
this money is never seen in north St. Louis, and is sent 
downtown and to other parts of the city for other projects. We 
bring money into the city, yet the problems still exist. How do 
we better effect methods to get the money to the areas that 
produce the justification for the CDBG grants?
    Although I do not favor sending the program over to 
Commerce, would this result in much more efficient targeting of 
the moneys than is presently practiced? What suggestions do you 
have? What are in your plans to make this process more 
efficient so that it actually targets those populations that 
the money is intended for?
    Secretary Jackson. I think that is a fair question, 
Congressman Clay. We have sent to the Congress four new 
proposals of how we will address the CDBG allocations. We think 
it is more equitable. We will let the Congress look at those 
four proposals.
    Secondly, I think it is important what you said. I have 
heard this on a number of occasions. If moneys are not being 
allocated to where they are--where they should be, we need to 
know that, and then we can address that with the mayor of your 
respective city and the city council who we allocate moneys to, 
because it is clear in the community development block grant 
proposal and legislation what the money is to be used for.
    If it is not being used for that--and I have had a number 
of occasions since I have been here to address cities on that 
issue--we will be happy to address that to make sure the money 
is allocated and spent where it should be.
    Mr. Clay. Let me just have a restatement of that so that 
everyone is clear about the fact that you have gotten 
complaints in the past from other jurisdictions; that the money 
that comes in directed towards poor communities somehow doesn't 
get there. And so I just wanted to----
    Secretary Jackson. And we have corrected that. It has not 
been a lot, but we have had cities where that occurs.
    Mr. Clay. Okay. On another issue--thank you for that 
response.
    Many public housing authorities in Missouri still have not 
received their year-end settlement reports from HUD for the 
fiscal year ending June 30 of 2004. They have no way of knowing 
their financial position until they can reconcile their 
finances. This sometimes results in recapturing of reserves and 
sometimes charges of administrative fees. Why is the process 
taking so long? Can it be speeded up?
    Secretary Jackson. We will make every effort to speed it 
up. But the reason that the delay is there, because you know 
that they sued us based on administrative fees, and we were in 
the process of trying to resolve the lawsuit.
    Mr. Clay. So there is pending litigation on that matter?
    Secretary Jackson. Yes.
    Mr. Clay. One other issue. An overlooked problem within 
housing agencies, which you are very familiar with from your 
background, is the high rate of personnel turnover. The loss of 
experienced staff results in efficiencies and costly training 
for replacements. The turnovers occur due to a lack of proper 
raises. And how do we maintain personnel who have the required 
knowledge regarding the details of HUD's complicated 
procedures?
    Secretary Jackson. I really do not know, and I can't answer 
that, because each individual housing authority--that is, the 
CEO of that housing authority--is responsible for the running 
of the housing authority. So some housing authorities work 
extremely well, others do not. I just do not know. That is left 
up to the management of the housing authority.
    Mr. Clay. Well, could it be an issue of a proper operating 
subsidy that these housing authorities receive?
    Secretary Jackson. No. I think housing authorities have to 
make difficult decisions. But each housing authority that I ran 
had to make difficult decisions. I can remember of the three I 
ran, the subsidy was never over, I think, 94 percent. So I 
think you have to operate within a budget. At least that is 
what I always did.
    Mr. Clay. Thank you for your response.
    Mr. Renzi. Thank you, sir. The gentleman from Texas, Mr. 
Hinojosa.
    Mr. Hinojosa. Thank you, Mr. Chairman. I would like to 
submit for the record a copy of a letter I sent to President 
Bush dated February the 14th, 2005, expressing my extreme 
concerns about his proposed housing budget cuts, especially the 
35 percent reduction in the CDBG funds and the elimination of 
the RHED Program.
    Mr. Renzi. Without objection.
    [The following information can be found on page 80 in the 
appendix.]
    Mr. Hinojosa. Thank you.
    Mr. Secretary, thank you for meeting with us today. The 
President's proposed housing program budget cuts and other 
changes could cost my congressional district $15 million in 
community block grants, community development block grant 
program funding alone, in the proposed 2006 budget.
    Overall, my district could lose another 19 million in 
Federal funding for the important housing and community 
development programs at a time when Texas, its cities, and 
localities are strapped for cash and in need of Federal funds.
    Your proposal to eliminate the 24 million HUD rural housing 
and economic development program funding would devastate the 
poorest of the poor, such as those living in colonias in my 
district, who rely on the program for affordable housing.
    Secretary Jackson, you issued a press release dated Monday, 
September 13th, 2004, announcing that 14 communities were 
receiving HUD's Community Development Excellence Award for 
their outstanding work in using CDBG funding to create better 
communities and to improve the lives of their lower-income 
residents.
    One of the recipients of the award was Pharr, Texas, 
located in my congressional district. You recognized Pharr for 
its outstanding work in using this funding to change Las 
Milpas, which is a colonias south of Pharr, changing it from a 
colonias into--and I quote from your own press release--"a 
growing community with pride.''
    In that same release you state that ``these communities are 
outstanding examples of how CDBG works.'' You further note that 
``in a climate where results and performance count, these 
communities, including Pharr and many others like them, are 
doing wonderful work and building better neighborhoods and 
creating greater opportunities for their lower-income 
residents.'' Those were the words of praise that you expressed.
    I find it odd, to say the least, that President Bush would 
propose and that you would defend such cuts to the CDBG fund 
less than 5 months after issuing such a strong press release 
praising the CDBG program.
    I endorse the comments made by Mr. Scott, that you need to 
fight for areas like ours. You need to make a better case to 
not allow these things to happen. What could possibly have 
happened over these last 5 months to change your mind? I would 
like for you to answer that.
    Secretary Jackson. Thank you very much, Congressman 
Hinojosa. Nothing has changed my mind. I still believe that the 
CDBG program is an excellent program. And what I said in that 
letter still stands today. I have had a chance to be in Pharr 
and saw the colonias areas myself. I saw them before and 
afterwards. And so I am in agreement with you.
    What I said is that a decision was made to consolidate. And 
as I said to Congresswoman Waters, I made our case. And I will 
still say, I think I made a very excellent case. But the 
decision was made to consolidate. I do believe that the 
programs, as fragmented as they are, should be consolidated. I 
still believe that today.
    But my personal opinion has not changed. I think that when 
I sent that letter to the mayor of that city, I meant that. I 
think that area is absolutely wonderful. I have seen the 
transformation.
    Mr. Hinojosa. Let me interpret you. Time is running out.
    Secretary Jackson, why is this administration proposing 
housing and community development program funding cuts and 
jurisdictional changes that could cost my district the 15 
million in CDBG funds?
    Secretary Jackson. I can tell you about the consolidations, 
because we have fragmented programs. What I can say to the 
first part is that we sent--we zeroed out of our budget $4.2 
billion. I am just not apprised of how the 4.2 billion will be 
spent at Commerce. We will get back to you, because we are in 
the process of developing legislation.
    And as I have said to a number of Congress people, I will 
specifically keep talking about how well the program has 
worked, and hopefully they will hear my position on this 
matter.
    Mr. Renzi. Mr. Miller of North Carolina.
    Mr. Miller of North Carolina. Good morning, Mr. Secretary. 
Your predecessor, Secretary Martinez, now Senator Martinez, 
testified on April 8th of 2003 before the Subcommittee on 
Housing and Community Opportunity on the down payment grants 
program, the American Home--American Dream Down Payment Act. 
Have you seen his testimony or reviewed it at all?
    Secretary Jackson. I was there when he testified.
    Mr. Miller of North Carolina. You were there. Even better. 
I am sure that you recall the administration first said that 
that program--the funding for that would come out of the home 
block grants, and then said no, that that was not the case. And 
by the time of our hearing 2 years ago, that was still very 
fresh on the minds of the members of this committee.
    So when Secretary Martinez testified, Ms. Waters began by 
saying, I am worried about this idea before us today because 
there is no new money. We already have the home program, I 
believe it is, where the cities are using some of their dollars 
to reduce the cost of down payment, but they have flexibility 
in the use of those dollars so they can use it in any number of 
ways. If you want a program that is basically going to be a 
duplication of something that is already going on, you have to 
get more money and not rob from Peter to pay Paul.
    Secretary Martinez, just a few moments later in response to 
questions from Mr. Renzi, said, ``So it would not be instead 
of, it would be in addition to all other available programs.''
    Mr. Renzi said, ``So we here have a means to provide over 
200 million?"
    And Secretary Martinez interrupted him and said, ``Of new 
money, by the way.''
    Mr. Renzi said, ``New money?"
    Secretary Martinez said, ``It is totally new money.''
    Mr. Renzi: ``In addition, $200 million of new money?"
    Secretary Martinez: ``Absolutely. Totally.''
    Ms. Waters interrupted. ``Will the gentleman yield?"
    Mr. Renzi: ``I will be happy to yield.''
    Ms. Waters: ``We need to straighten this point out. Wait 
just a minute. We did not see this new money in the budget.''
    Secretary Martinez: ``It is absolutely in the budget. It is 
200 million of new money.''
    And on and on. I made the same point in my opening 
statement.
    The subject of CDBG comes up. And Mr.--Secretary Martinez: 
``this is not a set-aside within the HOME program, it is going 
to be an opportunity for this program to run alone, it does not 
interfere or conflict with the current things that HOME does, 
or with CDBG dollars, and the continued flexibility of the HOME 
program.''
    Mr. Ney, sensing that Secretary Martinez wanted to make a 
point, asked him the same question again. He emphasized new 
money. New money. New money.
    Ms. Lee then raised the point, after Secretary Martinez 
again said, ``It would work with the existing home program and 
the CDBG program,'' said, ``Is that in the bill, because--and 
the same thing with the CDBGs. That is not on the chopping 
block this year at all? You are fully funding that?"
    Secretary Martinez says, ``Yes. CDBG and HOME is full 
funding.''
    Ms. Lee: ``Is it authorized?"
    Secretary Martinez: ``Of course.''
    Ms. Lee: ``Have you reauthorized it or sent it up as a 
proposal?"
    Secretary Martinez: ``CDGB, of course. Of course it is. 
Yes.''
    Ms. Lee: ``And is it reauthorized?"
    Secretary Martinez: ``Reauthorized and fully funded.''
    Secretary Jackson, several members of this committee have 
asked you today for assurances about what this administration 
is going to do in the future about programs that affect low-
income folks. I am not sure I would place any value on 
assurances from this administration, unless you could square 
for me what Secretary Martinez said 2 years ago and what this 
year's budget does to the very programs that Secretary Martinez 
assured us about.
    We have heard a great deal about the CDBGs, the HOME 
programs would be cut by 66 million, which when adjusted for 
inflation is a 12 percent cut over the lifetime of this 
administration.
    Can you square what Secretary Martinez said 2 years ago, 
the assurances he gave us about the HOME block grants and the 
CDBG block grants and this year's budget?
    Secretary Jackson. I can't attest to what Secretary 
Martinez said. I was there. But, again, I had to look at the 
budget and make priorities. One of the priorities is clearly 
home ownership. Another was to make sure that we fully fund the 
section 8 program and that we fully fund the operating 
subsidies for PHAs. In that process, it was clear some things 
had to be cut. And I looked at it as candidly as I could and 
made those cuts based upon that.
    As I said before, my concern is the tremendous growth of 
the section 8 voucher program that keeps eating at our budget, 
Congressman. And I think as long as that is the case, if we do 
not pass the flexible voucher program bill, we will be back 
next year and I will still have to make some very, very 
difficult and hard decisions.
    Mr. Renzi. The gentlelady from Wisconsin, Ms. Moore.
    Ms. Moore. Well, thank you, Secretary Jackson. It certainly 
is really a privilege to be here. I am a new member from 
Milwaukee, Wisconsin. And certainly, just to share with you, we 
have a district where we have 59 percent unemployment among 
African Americans. We are in the middle of the Rust Belt and so 
we depend tremendously on CDBG funds.
    Many members on both sides of the aisle have peppered you 
with questions all morning about the loss of housing funds. I 
do not envy the hard decisions that you have had to make about 
where to cut; you know, 50 percent cut in disabled housing. I 
am sure that that was not an easy decision to make. And I do 
believe you when you say that you have made a yeoman's effort 
to articulate your concerns and your competency to run the 
housing programs.
    But it was decided, perhaps by your boss--we all have 
bosses--that we would indeed consolidate these programs and 
they would go to Commerce.
    My question is not a money question. It is something that 
many, members have raised, but they just really haven't asked 
the question. It is about jurisdiction. What happens--we have 
all of these cuts in housing. And then when these programs are 
transferred to Commerce, the authority to use them for housing 
programs will also be lost.
    And so I am curious about whether or not you are willing to 
transfer authority. I will give you an example. For example, 
brownfields. You know, in order for a housing project to be 
developed on land--low-income housing, you might have to have a 
clean-up. But if there is no authority to use it for housing 
programs, then that is a loss of money.
    The CDBG section 108 loans, very critical in housing 
development.
    So are you willing to transfer authority? Now that you have 
lost the fight on the money, are you willing to transfer the 
authority? Or is the authority just going to be lost? Because 
what our Democratic leadership is concerned about is that there 
is a present value of $1.6 billion that is going to be lost 
because there won't be the authority. And, of course, that will 
grow exponentially.
    Thank you.
    Secretary Jackson. Thank you very much, Congresswoman 
Moore. I will surely have my input as it relates to 
transferring the authority on all of the programs. Again, my 
answer is--it is very simple. We have all of the programs. They 
came to the tune of about--I have been saying 4.2, but I mean 
$4.5 billion. We transferred all of the programs or zeroed all 
of the programs out of our budget with the intent to go to 
Commerce. That is what we did.
    Now--and we would transfer in the new legislation the 
authority to go along with that. But----
    Ms. Moore. I guess that is what I question. Just to 
expedite this discussion, that is my question. My question is, 
because Commerce right now does not--if it works any way like 
the State of Wisconsin State legislature from where my roots 
are, that there is lots of friction and conflict between 
Commerce and housing agencies, because the mission of the 
Commerce Department is not to do housing.
    And so that is what I am saying. Is this is not just a loss 
of money. What will you be able to say when you are at the 
table about the Commerce Department now taking on a new role in 
housing development? You say that you agreed with the 
consolidation, but I do believe that you were saying the 
programs need to be consolidated in HUD, because you would 
still have the authority, and local communities, as many people 
have mentioned, would have the flexibility to use them for 
economic development or housing, sort of joint projects.
    And my fear is that once it gets over to Commerce that that 
flexibility will be lost and gone. So that is why I am not 
comprehending why you agreed with the consolidation, given the 
fact that the authority will be lost.
    Secretary Jackson. Hopefully the authority, once the 
program is shifted, will not be lost. As I said before, I will 
be involved in the new legislation. So I expect I will give the 
input. I cannot, as the previous Congress person asked me, I 
cannot guarantee or assure you. I will put my input in. And 
secondly----
    Ms. Moore. That is your argument for getting the programs 
to stay at HUD.
    Mr. Frank. Mr. Chairman, before you get on to Mr. Davis, 
who has very patiently waited, I wanted to extend my thanks to 
the Secretary. He has sat here now for 3 hours. None of us 
asked for the committee to be as large as it is, but I really 
do appreciate your accommodating all of the members and staying 
to the end for the questioning.
    I would also comment on the tranquility that you have 
maintained during this. I know that this is not necessarily 
your natural reaction. So I admire that.
    I do want to thank you for accommodating this large 
committee. I do appreciate it.
    Mr. Renzi. The gentleman from Alabama.
    Mr. Davis of Alabama. Thank you, Mr. Chairman. I would echo 
the comments about your patience.
    Rather than spending the last block of questions wading 
back into the details of these programs with you, let me ask 
you a fairly broad set of questions. You didn't recommend to 
the President the changes in CDBG or the new funding levels. Do 
you know of any single mayor in the United States who called 
the White House and recommended the CDBG changes that are 
happening?
    Secretary Jackson. No.
    Mr. Davis of Alabama. Do you know of any county 
commissioner or any county commission chief executive or county 
chief executive who called the White House and requested the 
changes that are happening?
    Secretary Jackson. No.
    Mr. Davis of Alabama. Do you know of any Governor who 
called the White House and requested the changes that are 
happening?
    Secretary Jackson. No.
    Mr. Davis of Alabama. Okay. So if the President doesn't 
listen to his HUD Secretary, doesn't listen to any mayors 
administering the programs, doesn't listen to any county 
commissioners administering the programs, doesn't listen to any 
Governors, who the heck is he listening to on housing policy?
    Secretary Jackson. I would disagree with you. I think he 
does listen to me.
    Mr. Davis of Alabama. No. On that specific issue, on CDBG, 
if he doesn't listen to you, mayors, Governors, county 
officials, who in the world is he listening to on CDBG?
    Secretary Jackson. I think the President does listen to me.
    Mr. Davis of Alabama. On CDBGs? If you didn't recommend the 
changes and you didn't recommend the cuts, and you cannot 
identify anybody else who did, who in the world is he listening 
to?
    Secretary Jackson. No. What I said to you is this: I agree 
with the administration and the President that the program 
should be consolidated. I made----
    Mr. Davis of Alabama.  But you also say they are excellent 
programs. You agree that they are working. And if they are 
excellent and they are working, most things in my office that 
are excellent and working I do not change.
    Secretary Jackson. I can't disagree with you.
    Mr. Davis of Alabama. So if that is the case, I am trying 
to ask you a fairly simple question----
    Secretary Jackson. And I am trying to answer it for you.
    Mr. Davis of Alabama. I am looking for an answer. If you 
didn't recommend the changes and nobody else did, who is the 
administration listening to on CDBGs?
    Secretary Jackson. I think the administration listened to 
me. Again, I will go back to my original proposal that I do 
believe the program should be consolidated, and I made the 
logical argument where it should be consolidated. The argument 
was heard and the decision was made that Commerce would be the 
better agency.
    Mr. Davis of Alabama.  Let me ask you another question. You 
do not dispute that HUD is getting the greatest percentage cut 
of any of the Cabinet departments?
    Secretary Jackson. No question.
    Mr. Davis of Alabama.  No question about that. Now, 
normally when--and I recognize that budgets are about 
priorities, and the President and people around him, and Carl 
Rove and company, have to make decisions about what programs 
get what.
    But normally if a program or an agency receives the 
greatest cut, it means one of two things. It means it is the 
least effective performer, or that it reflects the least 
priority.
    Now, I assume because you haven't resigned and you are 
still in your position that you do not buy the first 
explanation. So what about the second one?
    Secretary Jackson. I do not buy that either. I think the 
program was consolidated----
    Mr. Davis of Alabama. No. No. I am talk being about HUD. We 
are not talking about CDBG. We are talking about HUD right now. 
HUD receives the single greatest cut of any Cabinet department. 
Usually that means one of two things: It is the least effective 
performer or it is the smallest priority. Which one is it?
    Secretary Jackson. I don't think it is either one. You look 
at it from our perspective, that you are talking about 
efficiency. I don't think there is any diminishing in the role 
of HUD.
    Mr. Davis of Alabama. Let me ask you this. Are you saying 
that no other Cabinet department has the efficiency issues that 
HUD has?
    Secretary Jackson. We do not have--I don't think that this 
consolidation is about efficiency. I have not said that.
    Mr. Davis of Alabama. We are not just talking about CDBGs. 
We are talking about the fact that HUD is getting the greatest 
cut, and you have bemoaned that all morning.
    Secretary Jackson. Congressman, I do not see it as a cut. I 
see it as a shifting of funds. It is not a cut.
    Mr. Davis of Alabama.  Didn't you just agree with me that 
HUD was getting the biggest cut of any department?
    Secretary Jackson. If you are talking about cuts, yes. But 
I don't see cuts as a priority when you are talking about 
removing a program. The program is going over to Commerce.
    Mr. Davis of Alabama.  But we are not talking about CDBGs, 
we are talking about HUD. You agree with me that HUD is getting 
the biggest cut.
    Secretary Jackson. That is the cut. There is no question. I 
am not disagreeing with you.
    Mr. Davis of Alabama. Let me ask you this question. Since 
you are not going to answer that one, let me try this one. I am 
a little bit curious about how you grade your own 
effectiveness, Mr. Jackson. I will kind of wrap up with this 
point. If you argued--and you believe CDBGs are a good 
program--and you argued for their current preservation but you 
lost out, presumably you asked for more money for HUD--you 
haven't conclusively said that, but I am going to assume that 
you did--you lost out. Presumably you asked for greater 
spending levels for all of these things and you lost out.
    How do you measure your own effectiveness if you cannot get 
the President who appointed you to follow your suggestions 
about the funding levels for your own department and the 
priority level to keep it from getting the biggest cut of any 
other department?
    Secretary Jackson. First of all, that is a presumption on 
your part that I don't think that we are funded at the level 
that we should be. I do believe that we are funded in the 
programs.
    Mr. Davis of Alabama. So you think that these cuts are good 
cuts?
    Secretary Jackson. I think these cuts have to be made, 
because I think clearly all budgets are restrained. As my 
father used to say, that everyone operates with a budget.
    Mr. Davis of Alabama. Let me close on this. This will be my 
last point, Mr. Renzi.
    Mr. Secretary, what I would submit to you--and I absolutely 
think you are a good person, I do not doubt your commitment to 
housing or to poor people or any of that. But if you sincerely 
think that these cuts are appropriate, then it raises the 
question to me of whether HUD would be better off with someone 
who is an advocate for a higher funding level as opposed to 
someone who is acquiescent in the cuts.
    I will yield on that note, Mr. Renzi.
    Secretary Jackson. I think you have a right to your 
opinion. I won't disagree with you. I think that I am an 
advocate, but I also know that within budget constraints I have 
to operate. And clearly, as I have stated earlier, we cannot 
have the exponential growth of the section 8 program that we 
have had the last 5 years, otherwise it will eat up our budget. 
It started out 4 years ago at about 43 percent. It is 56 
percent.
    Mr. Renzi. The gentleman's time has expired.
    The gentleman from Massachusetts.
    Mr. Frank. Just ask unanimous consent to submit--to have a 
couple of members submit some further questions to the 
Secretary for him to answer in writing and to submit an 
explanation of the point that some of us were making about our 
interpretation of the operating budget.
    Mr. Renzi. Thank the gentleman.
    Mr. Renzi. Mr. Secretary, thank you. This hearing was one 
of those iron-pants hearings that you go to sit through. I 
thank you for your leadership, sir, your resolve. We need you 
over there.
    The Chair notes that some members may have additional 
questions for this panel which may be submitted in writing. 
Without objection, the hearing record will remain open for 30 
days for members to submit written questions to these witnesses 
and to place their responses in the record.
    [The prepared statement of Hon. David Scott can be found on 
page 68 in the appendix.]
    Mr. Renzi. The hearing is closed.
    [Whereupon, at 1:05 p.m., the committee was adjourned.]


                            A P P E N D I X



                             March 2, 2005

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