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



 
 PUBLIC HOUSING MANAGEMENT: DO THE PUBLIC HOUSING AUTHORITIES HAVE THE 
FLEXIBILITY THEY NEED TO MEET THE CHANGING DEMANDS OF THE 21ST CENTURY?

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON FEDERALISM
                             AND THE CENSUS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 10, 2006

                               __________

                           Serial No. 109-209

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform



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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
------ ------

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

               Subcommittee on Federalism and the Census

                   MICHAEL R. TURNER, Ohio, Chairman
CHARLES W. DENT, Pennsylvania        WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       PAUL E. KANJORSKI, Pennsylvania
VIRGINIA FOXX, North Carolina        CAROLYN B. MALONEY, New York
------ ------

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                     John Cuaderes, Staff Director
                          John Heroux, Counsel
                         Juliana French, Clerk
            Adam Bordes, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 10, 2006.....................................     1
Statement of:
    Apple, Doug, general manager, New York City Housing Authority    29
    Hiebert, Curt, executive director, Keene, NH, Housing 
      Authority..................................................    57
    Johnson, Gregory D., executive director, Dayton Metropolitan 
      Housing Authority..........................................    10
    Martens, Betsey, co-executive director, Boulder Housing 
      Partners...................................................    41
    Peterson, Terry, chief executive officer, Chicago Housing 
      Authority..................................................    23
    Rudman, Steven D., executive director, Housing Authority of 
      Portland...................................................    34
Letters, statements, etc., submitted for the record by:
    Apple, Doug, general manager, New York City Housing 
      Authority, prepared statement of...........................    31
    Dent, Hon. Charles W., a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............    87
    Hiebert, Curt, executive director, Keene, NH, Housing 
      Authority, prepared statement of...........................    59
    Johnson, Gregory D., executive director, Dayton Metropolitan 
      Housing Authority, prepared statement of...................    12
    Martens, Betsey, co-executive director, Boulder Housing 
      Partners, prepared statement of............................    43
    Peterson, Terry, chief executive officer, Chicago Housing 
      Authority, prepared statement of...........................    25
    Rudman, Steven D., executive director, Housing Authority of 
      Portland, prepared statement of............................    36
    Turner, Hon. Michael R., a Representative in Congress from 
      the State of Pennsylvania, prepared statement of...........     3


 PUBLIC HOUSING MANAGEMENT: DO THE PUBLIC HOUSING AUTHORITIES HAVE THE 
FLEXIBILITY THEY NEED TO MEET THE CHANGING DEMANDS OF THE 21ST CENTURY?

                              ----------                              


                        WEDNESDAY, MAY 10, 2006

                  House of Representatives,
         Subcommittee on Federalism and the Census,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2154, Rayburn House Office Building, Hon. Michael R. 
Turner (chairman of the subcommittee) presiding.
    Present: Representatives Turner and Clay.
    Also present: Representative Emanuel and Senator Sununu.
    Staff present: John Cuaderes, staff director; Juliana 
French, clerk; John Heroux, counsel; Peter Neville, fellow; 
Adam Bordes, minority professional staff member; and Cecelia 
Morton, minority office manager.
    Mr. Turner. Well, good morning. And a quorum being present, 
this hearing on the Subcommittee on federalism and the Census 
will come to order.
    Welcome to the subcommittee's hearing entitled, ``Public 
Housing Management: Do the Public Housing Authorities Have the 
Flexibility They Need to Meet the Challenging and Changing 
Demands of the 21st Century?''
    This is the second of a series of hearings on public 
housing. Congress first authorized public housing in 1937 as 
part of Franklin D. Roosevelt's Depression-era public works 
legislation package. Public housing over the years has changed 
from a public works program designed to serve predominantly 
working families on a temporary basis to a program that serves 
poorer families on a permanent basis.
    By the mid-1990's, conditions in many public housing 
projects around the country were deplorable. The picture of 
public housing most Americans had was that of substandard high-
rise buildings with high crime, rampant drug use and extreme 
poverty.
    In the eyes of conservatives and liberals alike, the system 
was a failure. It failed to provide safe, affordable, quality 
housing to those families most in need. Many pointed their 
finger at HUD; others laid blame on the shoulders of the public 
housing authorities themselves. In fact, by the end of the 
1970's, much of the focus had turned toward public housing 
management as the problem.
    In 1979, a Massachusetts court placed the Boston Public 
Housing Authority in receivership. By 1995, three more 
authorities, Washington, DC, Pennsylvania, and Kansas City, MO, 
were placed into receivership. By 2001, HUD had placed an 
additional 11 housing authorities into administrative 
receivership, including Chicago and New Orleans.
    In 1998, Congress passed the Quality Housing and Work 
Responsibility Act of 1998. The goal of Congress was to 
streamline the system, provide public housing authorities with 
more management flexibility, and create more accountability 
within the system. Eight years after the legislation's 
enactment, our Nation's public housing system is still 
undergoing dramatic changes in how it is funded and how it is 
managed. Some of those changes have worked, and some have not. 
A recent report released by the Brookings Institution opined 
that HUD's aggressive efforts to improve the management of the 
most troubled housing authorities have been effective, but the 
act's success in deregulating public housing management with 
increased accountability has been mixed.
    The purpose of this hearing is to examine whether HUD has 
appropriately implemented reform in keeping with the spirit of 
the act's stated purpose of deregulating and controlling public 
housing authorities and providing for more flexible use of 
Federal assistance. The subcommittee will hear from several 
witnesses representing various public housing authorities from 
around the country. We're interested in hearing their views on 
HUD's implementation of the act and its new management rules, 
and hearing some of their incredible and exciting successes. It 
is our hope that the public housing authorities here today will 
comment on what steps HUD could take to further improve the 
public housing system while increasing accountability, whether 
that means expanding programs like Moving to Work 
Demonstration, or finding some other mechanism.
    With that, I would like to thank each of the panelists who 
are here today and look forward to their comments.
    [The prepared statement of Hon. Michael R. Turner follows:]
    [GRAPHIC] [TIFF OMITTED] 32546.001
    
    [GRAPHIC] [TIFF OMITTED] 32546.002
    
    [GRAPHIC] [TIFF OMITTED] 32546.003
    
    Mr. Turner. And before we move on, I would like to yield to 
our ranking member, the gentleman from Missouri Mr. Clay, for 
any remarks he might have.
    Mr. Clay. Mr. Chairman, thank you for today's hearing on 
the continuing regulatory challenges facing our Nation's public 
housing authorities.
    As housing costs continue to rise, and our financial 
support for public housing declines, I believe we must 
proactively pursue solutions that can improve agency 
performance in an era of stagnant resources.
    Our Nation's public housing programs have been a bedrock of 
support for millions of families, elderly and disabled 
individuals since their establishment under FDR's New Deal. 
They are facing increasing pressures, however, due to limited 
Federal funding options, insufficient regulations that limit 
the amount of capital for long-term development projects, and 
growing economic disparities among our citizens who rely on 
housing programs for their survival.
    I readily admit there are no silver bullet solutions to 
these problems, but remain open-minded to new ideas that may 
potentially improve the lives of residents.
    My hometown of St. Louis is a model for the challenges 
facing an urban PHA on a limited budget. Our local PHA, the St. 
Louis Housing Authority, has a budget of $60 million that is 
derived entirely from the U.S. Department of Housing and Urban 
Development. It has extensive waiting lists for this housing 
voucher program, and its public housing units are in desperate 
need of repair and renovation.
    That said, I come into today's hearing wondering whether 
current HUD regulations, demonstration program efforts or 
deregulatory proposals offered by our witnesses can possibly be 
helpful to my constituents. In particular, I realize that 
several panelists represent PHAs participating in the Moving to 
Work demonstration program. While they tend to speak mostly of 
the flexibility associated with MTW, I'm looking to hear more 
about improvements in services and quality-of-life issues for 
their residents. Does MTW offer significant relief for all 
agencies, both large and small, and have services for residents 
measurably improved since the pilot's inception? These are 
important milestones to meet if we are to consider a pilot 
program appropriate for widespread application.
    I look forward to our testimony today, Mr. Chairman, and I 
yield back. Thank you.
    Mr. Turner. Thank you, Mr. Clay.
    We also have with us here today Senator John Sununu from 
New Hampshire, who would like to briefly introduce a witness 
from his State, and I yield to Senator Sununu.
    Senator Sununu. Thank you very much, Mr. Chairman. And it 
is a pleasure to be here and to introduce and to welcome one of 
the leading lights in housing authorities in New Hampshire, 
Curt Hiebert.
    And I do want the committee to know that I risked a great 
deal of scorn and ridicule from my former colleagues by coming 
across to this side of the Capitol, but it's important. It's 
important for the reasons that both you and the ranking member 
mentioned in your opening remarks: We need to look at 
opportunities to really strengthen, I think, the role provided 
by the housing authority leadership that we see on the panel 
today, find solutions that enable them to use their creativity 
to help their clients, to help their constituents.
    Curt Hiebert has been the director of the Keene Housing 
Authority in New Hampshire since 1987. My staff have put 
together a few talking points, and I think most of them were 
issues that I dealt with before with Curt and with others, but 
this was certainly a new piece of information that he has been 
the Director of the Housing Authority for 20 years, is really 
an impressive dedication, and, I think everyone would agree, 
gives him a great wealth of knowledge how things were done 
under previous administrations, under previous bureaucracies, 
under previous leadership both at the Secretary level and at 
the elected level here in Washington and in New Hampshire.
    He has been the president of the New Hampshire Housing 
Authority, he has been on the legislation committee, or the 
vice president for legislation for the Public Housing Directors 
Association nationwide. And as you can imagine, because of this 
experience, he has been a great resource to me. He has been 
extremely helpful in understanding what has worked in New 
Hampshire, what he has seen implemented elsewhere in the 
country, and instilling in me an understanding that what works 
for one housing authority doesn't necessarily work for another.
    It's kind of exciting for me to see some of the leadership 
from Chicago, from New York and New Hampshire--even Portland is 
a very big city. So I'm sure you will see and hear a great 
perspective on different approaches and different solutions 
that work in different settings. But for us in New Hampshire, 
the Moving to Work Program has worked, and Curt has made sure 
that the flexibility that Moving to Work has provided has been 
put to very good use.
    I have visited the housing authority in Keene where Curt 
helps to operate 800 units of public housing and Section 8 
vouchers, not 8,000, not 18,000 or 28,000, which obviously is 
the norm in a city like Chicago or New York. But those are 800 
units and families that really depend on his ability to lead 
and to implement the Moving to Work Program. They have 
developed end structures that preserve their affordability, 
which is a huge goal for you all, but also that encourage self-
sufficiency, and that allow him to deliver different tools to 
different families, depending on their particular needs.
    And I think everyone would agree, when you have a family 
that needs assistance, of course there are the essentials, food 
and shelter, education, sometimes transportation, but what is 
most important in the long run is that you develop 
independence, that you develop self-sufficiency. And I think 
that has been the cornerstone of the Moving to Work program.
    Curt Hiebert is a real hero in New Hampshire's housing 
programs because of the commitment he has shown for years. And 
I hope that what they have done in Keene will provide an 
outstanding example of the approaches and innovation that we 
should seek to encourage as a Congress and expand wherever 
possible.
    Thank you, Mr. Chairman.
    Mr. Turner. Thank you, Senator. I want to thank you for 
your leadership on neighborhood and community development and 
lending your support for this hearing today and introducing 
Curt. We look forward, too, as this committee continues to look 
into the issue of how we might be able to assist public housing 
authorities in their role in our communities, and working with 
you in ways that we might be able to implement some of the 
recommendations that we find. So thank you for participating.
    Senator Sununu. It's my pleasure.
    Mr. Turner. Next we have one of our colleagues, Rahm 
Emanuel from Illinois, who is here with us today to introduce 
Terry Peterson. Terry just recently gave me a tour of some of 
the great successes that they have in Chicago, so I know you 
must be very proud of the things that they're accomplishing 
there, and we appreciate you being here today.
    Mr. Emanuel. Thank you, Mr. Chairman. Thank you to the 
ranking member.
    In between having worked at the White House and run for 
Congress, I served as vice chairman of the Chicago Housing 
Authority, which oversaw and implemented and began the stages 
of the plan for transformation.
    Chicago was known at one time as having the worst public 
housing in the country, and it earned that title. It did have 
at one time the worst public housing in the Nation, and today, 
by all accounts, the Wall Street Journal recently noted that 
what's going on in Chicago since public housing was started 
under Franklin Roosevelt is the most amazing transformation of 
public housing ever conducted anywhere in the country. That is 
not to take away from what everybody else is doing, but if you 
can accept the city of Big Shoulders, we would like to promote 
what we've done, and done under Terry's stewardship.
    I think some of the accomplishments should make any person, 
Democrat or Republican, but especially Republicans, warm their 
heart. We've gone from 58 high-risers to only 5 left. And by 
the time Terry is done, there won't be a single public high-
rise building in Chicago left. They will all have been taken 
down to no higher than six stories is my recollection.
    Second, Chicago at one time had 2,500 bureaucrats in the 
CHA, Chicago Housing Authority. Today there are less than 450.
    Third, one-third of the entire Chicago public housing, 
27,000 units, one-third of it will be mixed income. No other 
public housing authority will have accomplished that goal. And 
all of the others will have been revitalized, rebuilt.
    Last, he has done this in a way that is not to have walked 
away from public housing, but to revitalize it in a way that 
the Wall Street Journal noted that is now the most impressive 
transformation of public housing since its original days in 
1937.
    When Terry took over and I was vice chair, the people in 
public housing were isolated culturally, economically, 
geographically and from a service standpoint. They had their 
own child care centers, they had their own police force, they 
had their own garbage service, they had their own 
transportation system, and so they were literally physically, 
the residents, isolated from the rest of the city. The public 
housing authority got out of other businesses and focused on 
its job of providing housing.
    I actually also left out of there one other accomplishment, 
which was to live in public housing, you had to work, and it 
went back to an original idea that was essential as a premise, 
which is to get public housing, you had to take some 
responsibility, and work was a main issue of showing that you 
took responsibility for your life.
    And today the residents of public housing are a part of the 
city of Chicago rather than isolated. They are part of that 
city both geographically, economically, service wise, and, most 
importantly, culturally, because if you isolate them 
culturally, they will never be part of the overall city.
    And I am proud of what we've done under Terry's stewardship 
and Mayor Daley's stewardship and direction, because the truth 
is Terry had a great life as alderman of the 17th ward, and the 
mayor could have gone on to another reelection without taking 
on public housing. It takes a lot of courage to take on public 
housing and take on people's lives who have had their dreams 
shattered, and give them a sense of hope, which is why HOPE 
VI--contrary to some budgetary attempts, HOPE VI was essential 
to getting to where we are today, and eliminating HOPE VI would 
be wrong, and it should not be done.
    And I am proud of what Chicago has accomplished, not just 
for the balance of only 5 high-risers out of 58, only 450 
bureaucrats out of 2,500, those are all nice landmarks, but the 
most important landmark is the people in Chicago public housing 
feel they're part of Chicago. And having taken down those 
barriers and integrated them into the rest of the city, we have 
a chance of taking another generation and not isolating them, 
but integrating them completely economically, culturally and 
physically into the city. And that's why the Chicago public 
housing revitalization, it is more about bricks and mortar; as 
Terry always says, it's about people's lives.
    Thank you, Mr. Chairman, for the time.
    Mr. Turner. Thank you.
    We will now turn to our witnesses, and I will introduce our 
panel that we have with us today.
    First on the panel we have Greg Johnson, the executive 
director of the Dayton Metropolitan Housing Authority, my own 
town. I appreciate you being here, Greg. Mr. Johnson took over 
Dayton's housing program after it had many years of difficulty. 
He has done a great job in turning around that program, and I 
look forward to working with him in the future.
    Next we have Terry Peterson. Rahm has done an excellent job 
in telling the situation that you were facing in Chicago. And I 
greatly appreciated the time that you spent with us and the 
staff of this committee in showing us what is possible in 
public housing and what you're accomplishing. You're certainly 
to be commended, and we look forward to hearing your insight as 
to how those principles can be translated nationally and ways 
that we might be able to help you additionally.
    Next we have Doug Apple, who is the general manager of the 
New York City Public Housing Authority from the Big Apple; and 
we have Steven Rudman--and I've got permission from Doug. He 
said that everybody does that to him, so.
    We also have Steve Rudman, who the is chief executive 
officer and executive director of the Housing Authority of 
Portland, OR.
    And next is Betsy Martens, co-executive director of Boulder 
Housing Partners in Boulder, CO.
    And next we have Curt Hiebert, who was introduced by the 
Senator, and, of course, we heard some of the wonderful things 
that you're doing there, chief executive officer of the Keene 
Public Housing Authority in Keene, NH.
    I thank you all for agreeing to testify before our 
subcommittee today. Each of our witnesses has kindly prepared 
written testimony which will be introduced to the record of 
this hearing.
    Witnesses will notice that there is a timer light on the 
witness table. The green light indicates that you should begin 
your prepared remarks, and the red light indicates that your 
time has expired. The yellow light will indicate when you have 
1 minute left in which to conclude your remarks.
    It is the policy of this committee that all witnesses be 
sworn in before they testify, and so I will ask if this panel 
would please rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Turner. Let the record show that all the witnesses have 
responded in the affirmative, and we'll begin our testimony 
with Greg Johnson.

  STATEMENT OF GREGORY D. JOHNSON, EXECUTIVE DIRECTOR, DAYTON 
                 METROPOLITAN HOUSING AUTHORITY

    Mr. Johnson. Thank you, Mr. Chairman and members of the 
subcommittee. I take as a great pleasure of being here today to 
have been able to speak before you.
    I want to start off by saying Dayton Metropolitan Housing 
Authority has gone through a lot of changes over the last few 
years, and we look forward to progressing.
    I want to talk about the operating fund rule, and I do 
support the idea of project basing and asset management, but 
there are three critical concerns that I would like to address 
this morning with you as we start our discussion that I think 
will hamper housing authorities from being flexible and going 
forward to providing quality housing.
    Inadequate funding I want to bring up as one major concern. 
Right now there is a proposal for 78 percent of funding being 
as--last year we were funded at 89 percent, which caused a 
great concern for housing authorities across the country, which 
called for layoffs in staff and services being cut.
    The other item inadequate funding would be the rent or 
nonfunding of authorized vacant units. These are units that are 
being turned for new residents, and also units that are under 
modernization.
    Another one of my concerns is the micromanagement. When we 
look at the new operating fund rule, the cost allocations in 
how we're supposed to allocate certain expenses from central 
down to the front line or project level, it's going to be 
critical to stay within some of the HUD guidelines to make sure 
that happens.
    And last but not least, I wanted to talk about the new rent 
calculation. If we look at the new rent calculation and how 
housing authorities are supposed to survive, it calls for 
asking our tenants for more income, and I'm not sure how you 
get more dollars out of tenants that don't have a lot of money 
to give you.
    So those would be my three main concerns when we're looking 
at the new operating fund rule that poses a lot of challenges 
for housing authorities in the next upcoming year.
    I would like to mention just a little bit, I do believe 
that Dayton Metropolitan Housing Authority would benefit 
greatly from an MTW program. It would allow us to be a lot more 
flexible with our dollars than what we receive for supply 
services that we're not able to supply through funding today.
    We had a Jobs Plus program at Dayton Metropolitan Housing 
Authority which actually worked great. It's where residents 
were encouraged to get a job, and then froze their rent without 
a rent increase, and we had the support from HUD on the funding 
on the rent adjustments. So I would like to say thank you for 
allowing me to speak this morning, and that's it.
    [The prepared statement of Mr. Johnson follows:]
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    Mr. Turner. Terry.

 STATEMENT OF TERRY PETERSON, CHIEF EXECUTIVE OFFICER, CHICAGO 
                       HOUSING AUTHORITY

    Mr. Peterson. Thank you, Mr. Chairman and subcommittee 
members, for allowing me the opportunity to testify.
    My name is Terry Peterson, and I'm the chief executive 
officer of the Chicago Housing Authority.
    In the last 7 years under the leadership of Mayor Richard 
M. Daley, Chicago has transformed an agency overseeing some of 
the most notorious public housing developments in America into 
a well-managed, forward-thinking public agency overseeing a 
national model of community rebirth and renewal. This was 
possible in large part because of the local flexibility and 
funding commitment embodied in CHA's 10-year MTW agreement and 
the support of the U.S. Department of Housing and Urban 
Development Secretary Alphonso Jackson and former Secretary Mel 
Martinez.
    MTW allows PHAs to make decisions and create programs that 
meet the needs of each individual city. CHA created an MTW plan 
in conjunction with the residents which met the residents' 
specific needs, worked within the context of the larger local 
housing market, and allowed CHA to maximize dollars leveraged.
    In 1999, CHA was the poster child for what was wrong with 
public housing. Over one-third of our units were vacant. Most 
units were in deplorable condition; 14,000 units were in such 
bad condition that HUD mandated their demolition. Public 
housing families were physically and socially isolated, cutoff 
from the rest of the city of Chicago for decades, and as a 
result faced multiple barriers to self-sufficiency.
    Public housing was considered a blight on neighborhoods, 
resulting in lower property values in the surrounding area. In 
2000, CHA, the city of Chicago and HUD signed a 10-year MTW 
agreement providing CHA unprecedented local flexibility and 
funding commitments which were essential to ending the 
isolation and breaking the cycle of poverty that had so long 
persisted in and around CHA developments.
    Key provisions included, one, a 10-year program commitment. 
This provided the consistency that is essential to allowing us 
to maximize private investment in public housing; two, 
flexibility with the use of funding sources. This enabled CHA 
to pay for relocation and relocation counseling and social 
services; three, a commitment to provide the same number of 
affordable housing opportunities in 2009 as CHA was offering in 
2000. This prevented CHA from losing thousands of hard units of 
affordable housing in what are now hot real estate markets.
    In large part because of the flexibility in the funding 
commitment, CHA has made substantial progress. Since January 
2000, CHA has rehabilitated or replaced more than 14,000 units, 
or 57 percent of the 25,000 unit goal; 8,000 units in mostly 
gallery-style high-rise buildings were demolished, and 
construction is under way on almost every mixed-income site.
    Where CHA began construction activities, neighborhood 
revitalization followed. A steady funding stream is one of the 
most important features of CHA's MTW agreement. As a direct 
result of steady funding, CHA obtained significant funding from 
the private market that allowed CHA to leverage Federal public 
housing dollars at a rate of 1 to 4. $242 million of CHA 
dollars triggered over $1 billion in public and private 
investments in CHA mixed-income communities. For example, in 
December 2001, the CHA issued the first publicly offered tax-
exempt revenue bonds secured solely by public housing capital 
funds. Proceeds were used to fund a portion of the cost to 
rehabilitate approximately 12,000 of CHA senior and scattered 
site units, and effectively jump-start the first critical 
redevelopment phase.
    CHA also leveraged social service dollars; $118 million in 
CHA social service has triggered over $156 million in support 
from other public and private sources.
    CHA's MTW agreement will expire on January 6, 2010. CHA has 
already made significant investments in time and resources in 
developing a successful program. These programs are important 
to our continued success. Permanently authorizing CHA's MTW 
agreement will allow CHA to continue to operate under the same 
terms and conditions. Without permanent authorization, progress 
made to date will be at risk. CHA supports the proposed MTW 
charter bill which would make permanent our current MTW 
agreement and allow us to continue to rebuild the lives of 
public housing residents.
    In conclusion, it is important that we continue to stay the 
course. As mentioned before, I believe that public housing 
residents are looking for a hand up and not a handout, and by 
putting in place the MTW agreement, we will be able to continue 
to support this type of progress that public housing wishes.
    Thank you, Mr. Chairman.
    Mr. Turner. Thank you.
    [The prepared statement of Mr. Peterson follows:]
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STATEMENT OF DOUG APPLE, GENERAL MANAGER, NEW YORK CITY HOUSING 
                           AUTHORITY

    Mr. Apple. Good morning. I'm Douglas Apple, the general 
manager and chief operating officer of the New York City 
Housing Authority. I want to thank you, chairman, and ranking 
member, Congressman Clay for allowing us to be here today to 
testify.
    Being from New York, I can talk very fast, and I need to 
because we have a lot to say. And I think what you will hear 
from us is somewhat of a different story than what you just 
heard from Terry, for example.
    New York City has been--was the first housing authority, 
actually started in 1934, even before Federal legislation, and 
is the biggest housing authority here in the country. We serve 
1 out of every 12 New Yorkers, more than 650,000 families, 
people in our Section 8 and public housing program.
    And we believe--and being New Yorkers, we always do this, 
but we think we are the best housing in the country. We have 
not had to go through some of the difficult times that Chicago 
and other cities have, we have not done wholesale demolition, 
and we believe that's because we've always been able to provide 
quality services, always really served a mixed-income 
population.
    Today over 45 percent of our families work that live in 
public housing. We have less than 16 percent families on public 
assistance. So we believe that the strength of the public 
housing in New York City is because we serve a wide variety of 
individuals.
    But given that, the challenges have become more complicated 
in the last few years. Reductions in Federal funding, increased 
regulation, and really a change in the public housing 
environment with an aging infrastructure has made it a greater 
challenge for us to succeed, but we're determined and committed 
to do that.
    In New York, we've recently announced a seven-point plan to 
preserve public housing. That plan has essential elements that 
includes an enormous commitment from our mayor, Mayor Michael 
R. Bloomberg, who will provide a $100 million transitional aid 
package to the housing authority while we make some difficult 
decisions in New York, decisions that are right for New York 
City about preserving public housing.
    We did a $600 million capital fund financing bond issue 
last year that will give us a significant infusion of capital 
dollars to modernize and maintain our housing stock. In doing 
so, we were Triple A-rated by Standard and Poor's. I think that 
those are the kind of measures that HUD needs to think about 
and Congress needs to consider when you think about how you 
want to regulate housing authorities. Outcome measures, 
measures that show performance are really where I think housing 
authorities are going, and I think the regulatory structure 
needs to catch up to that.
    MTW is a way to achieve that, and we wholeheartedly embrace 
it. And, in fact, New York, unlike some of the other cities 
you're going to hear from today, does not have MTW status. It 
is something that is one of our highest priorities for this 
year.
    We also have been very active in new developments. The 
mayor has put forth the largest single municipal affordable 
housing program in the government in the Nation's history, a 
$3\1/2\ billion affordable housing program that will produce 
168,000 new and renovated housing units in the next 10 years. 
The housing authority, in conjunction with our housing partners 
in New York, the city's Housing Development Agency and the 
city's Housing Finance Agency have a pipeline of over 3,000 new 
housing units using public housing land and public housing 
buildings. It will allow us to spur new forms of construction 
to serve a range of New Yorkers, both in terms of low income 
and moderate income, and work force housing.
    One of the biggest challenges we face in a very tight and 
very hot real estate market in New York is really providing 
quality housing for the folks that really drive New York, the 
folks that make $30,000, $40,000, $50,000; the teacher, the 
fireman, the folks that work in our hotel industry and our 
entertainment industry. We see the public housing authority as 
a vital engine in doing so. We believe that MTW is necessary to 
allow housing authorities to perform in their local economies, 
to be successful in their cities, and to really thrive.
    The Congressman, Congressman Clay, asked for concrete 
examples of services that we can provide better to residents, 
and how flexibility can help us do so. We're putting in place a 
whole new technology base. We have 2 million work tickets a 
year, maintenance requests from our residents. It is now done 
in 200 separate locations. We have no way to monitor quality. 
We have no way to assure services. We're putting in place a new 
system that will centralize that, using technology and a call 
center based in Queens that will allow us to assure quality, 
schedule appointments, and really provide quality service to 
residents.
    Some of the aspects of the operating rules proposed by HUD 
will limit our ability to do that, so we would encourage you to 
look very closely at the rules HUD is providing to make sure 
that they give the housing authorities the flexibility to 
provide quality services to residents.
    Thank you.
    [The prepared statement of Mr. Apple follows:]
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    Mr. Turner. Steven.

  STATEMENT OF STEVEN D. RUDMAN, EXECUTIVE DIRECTOR, HOUSING 
                     AUTHORITY OF PORTLAND

    Mr. Rudman. Thank you, Chairman Turner, Ranking Member 
Clay, for the opportunity to testify today.
    The question you're asking about public housing flexibility 
is indeed a critical one for our industry. I'm speaking as the 
director of the housing authority in Portland, OR, a midsized 
housing authority that's had the privilege of working under MTW 
for the past 7 years, recently extended for 3 more. So I would 
say as an MTW, the answer is yes, MTW does go a long way in 
removing barriers to effective management of resources in an 
environment where it's exceedingly difficult to manage.
    HAP owns over 4,000 units of work force and special needs 
housing in addition to 2,500 units of conventional public 
housing, so we have an excellent vantage point from which to 
view the transition of traditional public housing to an asset 
management model. We also understand what it takes to develop 
new housing. We serve as developer for 21 of our 33 local 
developments, and are currently self-developing two HOPE VI 
projects.
    I'd like to briefly make four points. First, housing 
authorities must be allowed to be true asset managers of public 
housing. At HAP, we initiated our transition to property-based 
management well before HUD issued its prescriptive operating 
rules because it made good business sense to us.
    However, the shift will not be compete without access to 
capital markets or the ability to use debt financing as a tool 
in managing public housing. HUD has taken a step of allowing 
financing on future capital grants through QHWRA, but this tool 
is limited and has a finite cap.
    Housing authorities should be able to attach debt to 
conventional public housing much more broadly by using 
operating funds in addition to capital funds to develop new 
housing, and by granting mortgages and security interests in 
public housing properties to help need tremendous capital 
needs.
    My second point is that the flexibility very few of us have 
under MTW should be extended to a broader group. This 
flexibility gives MTW agencies tremendous ability to tailor 
policies and programs to local conditions, needs and 
priorities.
    We've used this flexibility to expand our self-sufficiency 
program in Portland. Over 500 households from public housing in 
Section 8 have graduated off public assistance; 40 percent of 
those have become homeowners. We also use it to approach our 
Section 8 funding crisis in innovative ways.
    The third point is one I know you have heard from others in 
a previous committee hearing in terms of the need to increase 
support for HOPE VI. This program has been invaluable in 
replacing the Nation's most distressed public housing with 
vibrant mixed-income communities. There is no other development 
tool for public housing that comes close to matching the 
benefits of HOPE VI, which leverages private investment and 
supports critical social services and community development 
activities.
    My fourth and final point is this: I'd like to urge anyone 
who is considering the design of new public housing initiatives 
to build in requirements for collaboration from the outset. 
Housing policy shifts over the last several decades have 
resulted in housing authorities serving a very poor client 
base. Even as an MTW, over 90 percent of our Section 8 and 
public housing households are in way below 30 percent of median 
income, and 50 percent of that population are elderly and/or 
disabled, and that population continues to grow.
    We provide a safety net in our communities, but we cannot 
do it alone. It takes much more than housing to help create 
positive change in our clients' lives, and funding for social 
services and community development activities is as great of a 
challenge as it is for funding for affordable housing.
    It is critical for those of us who have some resources to 
support the most vulnerable, to find ways for those precious 
tools to be used more collaboratively and systemically. I 
believe Federal funding and policy can promote greater ways to 
do just this.
    Finally, I just have a concern. While flexibility is a key 
question, so is adequate funding. They're not mutually 
exclusive, and one does not compensate for the other. All the 
flexibility in the world will not maintain the decades-old 
physical housing stock that continues to age as we sit here. It 
will not reverse market trends which are driving rents and home 
prices up in our region and other areas of the country. It will 
not offset the effects of working with the very poor population 
that has increasingly less access to services.
    We can and we will as an industry improve how we manage 
public housing, but it will take good management, program and 
policy flexibility, as well as adequate resources to preserve 
this resource well into the century. I thank you for your 
support in the past, and look forward to efforts in the future.
    [The prepared statement of Mr. Rudman follows:]
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    Mr. Turner. Betsey.

  STATEMENT OF BETSEY MARTENS, CO-EXECUTIVE DIRECTOR, BOULDER 
                        HOUSING PARTNERS

    Ms. Martens. Thank you, Mr. Chairman, members of the 
committee, for this opportunity to testify today and for 
holding these hearings which are not only well-timed, but 
absolutely essential.
    I'm Betsy Martens, the co-executive director of Boulder 
Housing Partners, the housing authority serving the city of 
Boulder, CO.
    I am also pleased to serve as the chairperson for the 
Public Housing Subcommittee of NAHRO, the National Association 
of Housing and Redevelopment Officials, and as a member of 
NAHRO's Board of Governors.
    Mr. Chairman, we face a significant problem in the 
management of public housing today. In my portfolio of 991 
units, of which I have 6 different housing types, public 
housing is by far the most difficult thing I manage. In my 
written testimony I've tried to give you a reasoned and 
articulate response about why that is, but for purposes of 
summation here today, I want you to know that public housing is 
so difficult to manage because it's unlike any other asset in 
my portfolio. Other than roofs or walls or residence, it bears 
no resemblance to real estate. Its current regulations are 
complex, cumbersome and constantly changing, and they quite 
literally put the asset at risk.
    I suggest that we have to do five things. First, we need to 
reform the way rent operates in public housing. There are two 
fundamental problems; the first is that rental income is not 
tied to the economics of public housing, and I'll come back to 
that in a second. The second is that rent structure is complex, 
invasive and very expensive to implement. We need to replace it 
with a simple system that empowers our residents and also 
preserves our collective investment in public housing.
    The second point and second thing we need to do is attend 
to the very real capital needs of this portfolio. My public 
housing was built in 1972, which means it's nearing the end of 
its physical life cycle. Despite careful attention to 
maintenance and good stewardship of the asset, we have 
significant deferred maintenance. We need a national 
preservation strategy for this essential irreplaceable asset.
    The third thing we need to do is achieve meaningful 
flexibility and deregulation. Contrary to its intent, QHWRA has 
not deregulated our agency; I suggest that it has reregulated 
our industry. We spend as much, if not more, staff time in HUD 
compliance than we ever did.
    The fourth thing we need to do is recognize that public 
housing residents come to us with problems that are not only or 
always economic. I think we need to end the decades-old debate 
about whether we're property managers or social services 
providers. The two are inextricably linked, and we are both. We 
need to incorporate resident services into the fundamental 
program and recognize it as a cost of doing business.
    And finally, I believe we need to restructure the 
underlying finance. Currently the system is upside down, and I 
believe that most of the problems that we're talking about here 
today in this panel could be solved if we could change the way 
funds flowed to public housing. I need an economic rent that 
covers my cost to operate, including resident service, and 
allows me access to the capital markets. A subsidy then would 
bridge a family's income to the rent.
    Mr. Chairman, I just talked to you about the need for 
flexibility, and I have to underscore a concern in our industry 
as HUD mandates a transition to asset-based management.
    The principles of asset-based management are excellent, 
they're well-tested, they come to us from the private sector, 
and I've been using them in my housing authority for more than 
10 years where they make sense. Most housing authorities don't 
have a public housing portfolio in which it justifies a 
project-based management approach. We're in an all-too-familiar 
pattern of HUD prescribing a one-size-fits-all solution where 
the very essence of asset management contravenes that idea.
    Asset management means portfolio responsiveness and lots of 
flexibility. We're very, very concerned about the way HUD is 
approaching not only asset management, but project-based 
management. I think HUD should promote the principles of the 
best practices in the industry, but not insist that there is 
only one way for us to manage.
    In closing, I'd like to say that it's imperative that we 
find reasoned and responsible change. I see the industry at a 
tipping point where we risk losing the deep affordability that 
public housing represents for millions of families for whom we 
cannot afford to lose this affordability. We need to take a 
very deep and thoughtful look at the programs and start testing 
new ideas through pilot programs.
    Mr. Chairman, absent a very thoughtful and reasoned policy 
about public housing, I'm seeing my colleagues exit in ways 
that I think put this country at risk.
    Thank you for this opportunity to testify. I offer all that 
my staff and my colleagues and the Rocky Mountain States can 
bring to the discussion as it proceeds. Thank you very much.
    Mr. Turner. Thank you.
    [The prepared statement of Ms. Martens follows:]
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    Mr. Turner. Curt.

   STATEMENT OF CURT HIEBERT, EXECUTIVE DIRECTOR, KEENE, NH, 
                       HOUSING AUTHORITY

    Mr. Hiebert. Thank you, Mr. Chairman, Mr. Ranking Member. I 
appreciate very much the opportunity to talk to you today. And 
I'm very humbled and flattered by Senator Sununu's 
introduction; I'm not sure if my family and friends would 
recognize who he was talking about.
    I won't take a lot of time telling you again who the Keene 
Housing Authority is, but we are one of the original 24 Moving 
to Work demonstrationsites.
    And Representative Clay brought up a very valid point 
earlier when he was talking about a concern about MTW. Our 
entire MTW program was developed and consisted with a 
concentration on the need--the individual needs of families and 
elderly, and continues to do so. That's what MTW has enabled us 
to do.
    Since 1999, this program resulted in significant positive 
changes in not only our ability to administer our Federal 
housing programs, but also has dramatically changed the ability 
of our residents and Section 8 participants to stabilize their 
housing situations and achieve self-sufficiency.
    Mr. Chairman, small housing authorities are struggling to 
keep their heads above the sea of paper, an over proscriptive 
process developed by the Department. Over 2,000 of the 3,300 
housing authorities across the country have less than 250 units 
of public housing. I don't presume to speak for all of them, 
but the KHA faces the same issues that they do, and I would 
like to share some of those issues with you.
    The KHA is one of the smallest housing authorities to 
participate in the MTW program, and our statistics and numbers 
may be insignificant compared to some of the other figures 
you've heard today, but I can't emphasize enough that to a 
smaller community or a smaller housing authority, even the loss 
of a seemingly small amount of funding or an addition of 
significant and unnecessary administrative burden can result in 
a proportionately large reduction in their ability to serve 
their residents and program participants.
    The vast majority of housing authorities are well-run, 
administratively lean, and struggling under reduced funding 
accompanied by increased micromanagement, and--the phrase 
you've heard again and again--one-size-fits-all regulations 
designed to deal with extremely large cities or housing 
authorities that have problems not applicable to those smaller 
communities or housing authorities.
    QHWRA itself was designed to deal with a number of 
different issues, and, to quote one of those issues, 
deregulating and decontrolling public housing authorities, 
thereby enabling them to perform as property and asset 
managers, HUD's response to this is the currently proposed 
project-based accounting and property-based management 
regulations. Although touted as being formulated with industry 
input, I think the more accurate statement would be that it was 
formulated over industry concerns and objections. This 
incredibly convoluted and complex process of counting instead 
of merely applying currently acceptable CAP accounting 
principles sets up a massive prescriptive and proscriptive 
process.
    Even though smaller housing authorities will have some 
simpler procedures than larger ones, the entire process will 
burden smaller housing authorities and complicate larger ones. 
The end result is the exact opposite of deregulating and 
decontrolling.
    Project-based management is supported by housing 
authorities, but if its purpose is to identify and dispose of 
properties that don't sustain themselves, the end result of 
reduced operating and capital funding by HUD will result in a 
dramatic reduction of the extremely valuable resource that the 
public housing industry represents. For instance, it doesn't 
take the proverbial rocket scientist to understand that it 
takes more time and effort and money to manage and maintain and 
capitalize family housing than it does to manage housing by the 
elderly. Recommendation: Reduce the micromanagement of the 
currently proposed PBA/PBM regulations and allow the 
congressionally mandated housing subsidy recalculation to go 
forward as approved in the negotiated rulemaking, and allow 
housing authorities to operate under GAAP principles like 
virtually every other nonprofit in the country.
    Another object of QHWRA was creating incentives and 
economic opportunities for residents of the dwelling units 
assisted by public housing agencies to work, become self-
sufficient and transition out of public housing.
    The current rent system for public housing in Section 8 has 
resulted in a system that encourages deceit; confuses 
applicants, tenants, housing authority staffs, policymakers and 
the general public. There are significantly different rents for 
virtually identical housing. The system punishes work, and the 
system, not surprisingly, results in errors.
    The recommendation: The Keene Housing Authority and several 
MTW housing authorities have developed effective alternative 
rent structures that preserve affordability, encourage self-
sufficiency, provide a safety net for those that have 
circumstances beyond their control, and increase housing 
choice. In 1999, 46 percent of our families were working full 
time; now 65 percent are. Since 1999, average family income has 
increased by 30 percent.
    My final recommendation: To conclude, I believe that HUD 
has lost its compass in following the directive of QHWRA to 
develop policy implementation and deregulate and decontrol 
housing authorities. The Department has become increasingly 
directive and intrusive in the daily operation of local 
agencies, even attempting to influence or control uses of non-
HUD and non-Federal resources. Please expand the Moving to Work 
program, reform assisted rent structure, and ensure that 
housing programs have adequate and predictable resources.
    Thank you very much, Mr. Chairman.
    Mr. Turner. Thank you very much.
    [The prepared statement of Mr. Hiebert follows:]
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    Mr. Turner. It is so motivational listening to all of you 
because you're such experts on something that is so important.
    And Betsey, you were saying, I think, something that is 
such an important point that we hear in each of your testimony 
is the broad range of issues that you have to manage. You're 
not just a federally regulated agency, you're also a property 
management agency, you're also a social service agency. The 
different functions that you have to perform really require the 
level of talent that we see in front of us, and I want to thank 
you all for your dedication in what you do.
    I have a few specific questions, and I have some global 
questions, some policy things. On the policy side, the types of 
discussions that you've heard nationally, where people were 
trying to make--recall judgments that I would think, in looking 
at the broad spectrum of the types of communities that you 
have, that we would probably be surprised at the unanimity that 
you might have in advice to us.
    And then there are some things that each of you said in 
your testimony that I want to highlight. So you're going to 
find that there is not too great of an order to the types of 
things that we're trying to hit with you. And at the end, after 
Mr. Clay and I are finished with our questions--and I see Mrs. 
Foxx has joined us--we're also going to give you an opportunity 
to add anything else to the record that we might miss. So as 
we're going through this today, and if you take your notes as 
to things and points you want to make, if you have not gotten 
to them, we are going to give you some catch-all time to give 
us some closing comments and thoughts.
    Greg, I'm going to begin first by putting you on the spot 
for just a moment, and that is, each of you are here today 
because of the success that you have had both in your 
organization and the success that you have brought to the 
table. That is not necessarily true of all public housing 
authorities, and it is not necessarily true of the history of 
all public housing authorities that you represent. And that is 
something that I think whenever we talk about the need for 
flexibility and the need for increased funding, that we have to 
be aware there is always the need for improvement in overall 
performance.
    And so, Greg, I'm going to ask you a question, and I'm 
going to let you pick, but lead you a little bit. Greg, you 
took over a housing authority that you had to immediately take 
a significant attack to the budget, and that is something that 
requires not only diligence, but skill, because you have to 
find the right things in which to cut, but you also have the 
determination to be successful to conclude it.
    I'd like you to highlight, if you would, just a couple of 
the things that you found that needed to be addressed in your 
housing authority that was not funding--not spending that would 
violate any rule or regulation, but that perhaps that doesn't--
violates the primary goals and objectives of the organization. 
I'm going to give you one hint which you can highlight or not 
highlight, and that is, I'm more interested in the number of 
vehicles that you are faced with. But if you give us a couple 
of examples of things that you found that allowed you to be 
more efficient in tackling your budget.
    Mr. Johnson. Thanks, Mr. Chairman.
    When looking at the housing authority's budget, first thing 
you look at is your employees, because it's the largest cost 
that you have, but also wanting to maintain a certain level of 
services to the residents is a high concern.
    What I found--what we found in Dayton was that we had a lot 
of duplication of services, and a lot of dollars spent not 
toward our asset, a lot of dollars spent on marketing and 
things like that. So one of the things I did was to look at 
where people were placed and placed appropriate staff on the 
maintenance side where that would take better care of our 
asset, and cut down some of the marketing and things like that. 
So that really helped our budget in Dayton.
    But even with doing that, in looking at our asset, we still 
need additional dollars to maintain or raise the level of our 
asset in Dayton to the level that I think we should be 
providing to our residents and clients. So coming from the 
finance department, that was relatively easy for me to identify 
some of the places where we can make a quick impact and put 
more dollars back into our asset.
    Mr. Turner. Terry, one of the things that you spoke to us 
about when we were in Chicago was that even with the increased 
opportunity to have requirements for the goal of economic 
transition for your residents, for moving residents to work and 
independence, you found instances where you might want to be 
more restrictive than what HUD had permitted, and you related 
to us some difficulty in getting approval for that. I was 
wondering if you might talk about that for a moment.
    Mr. Peterson. Thank you, Mr. Chairman.
    Two things. One is in our mixed-income development sites--
and we've got 10 underway now--we've got requirements such as 
working, drug testing, going to school, but you've got to be on 
a track to move toward self-sufficiency. But we're also going 
to rehab about 6,500 units of traditional public housing, 
mostly two to three-story walk-ups. And what we don't want to 
have, while we're expecting to have success, we're at 99 
percent lease up at the mixed-income sites, we don't want to 
have at our rehab public housing units public housing residents 
moving back and not being on a track to move forward.
    And so one of the things that we have requested from HUD is 
the ability to put in a 30-hour-per-month--it's called Economic 
Independence Program, which is you would have to be either 
going to school, working, engaged in something for 30 hours a 
month and moving toward self-sufficiency. I think the 
regulations only call for 8 hours per month. Well, at 8 hours 
per month, that's not going to get us very far in terms of 
working with residents. And what we've said is if you're not a 
senior, if you're not disabled, we think you should be engaged 
in some activity moving forward.
    Because of the flexibility that we have, let's say, for 
example, if a resident wants to go back and complete their high 
school diploma and get a GED, the Chicago Housing Authority, we 
will assist in helping them pay for that. If a mother needs 
access to daycare, we will assist in paying for that.
    So we feel that we're in a position to help our residents 
move forward, but with, you know, HUD telling us that the most 
that they can support us is 8 hours when we think 30 hours 
makes more sense, it hampers our ability to help our families 
to move forward toward self-sufficiency, especially in light of 
the fact that I've got about 30,000 individuals on the waiting 
list looking to get in public housing. So we're trying to move 
families who are in traditional public housing into hopefully 
affordable and then hopefully home ownership, but we can't do 
it at 8 hours per month social services.
    Mr. Turner. Doug, in your testimony you mentioned that if 
you were in the Moving to Work program, that you estimated a 
$40 million fiscal impact to your deficit. Can you elaborate on 
that, please?
    Mr. Apple. Sure. Unlike other cities, again, we've actually 
taken some significant steps to control our spending in the 
past few years, and, really, I know everybody's had to do that 
in different ways. I'm sure Greg had similar challenges, though 
a very different size, but I think the challenges you hear are 
the same across the country.
    We've actually reduced our head count of over 1,400 
positions, a more than 10 percent reduction in out head count 
in the past 3 years, taken over $400 million in spending 
cumulatively out of our budget, and done that in a way that we 
believe we've still maintained the high quality of services by 
decentralizing functions, by putting in place technology that 
takes antiquated processes and allows us to do them more 
efficiently.
    Without MTW we've only been able to take that so far. So we 
see that the opportunities that MTW provides is really allowing 
us to really make decisions locally to invest our resources 
strategically where we think it will have the best benefit for 
residents in our community.
    So, for example, we have been able to rent--take savings 
out of our Section 8 program by creating new ways of doing 
business. We now, for example, have less staff to do 
inspections. We have almost over 85,000 vouchers in use today 
in New York City. We have 15 percent less inspectors to do that 
work because we implemented a couple of years ago a hand-held 
technology that allows inspectors to do the inspection onsite, 
to send the information, you know, through a telecommunications 
link back to our system, to generate the letter to the landlord 
immediately, and to then get the landlord to be able to do the 
repairs promptly. So it resulted in better service to landlords 
and to residents, and allows us to do the job more effectively.
    The savings we generate from that program we can't reuse, 
we can't reinvest it back in vouchers or back into public 
housing. Something like MTW could allow us to do that. So when 
we looked at our programs, without increasing appropriations $1 
to New York City, we believe that we can take $40 million of 
spending out of our various programs, actually doing it in ways 
that are smart and improve services, but that reinvest them 
back into either public housing or into new vouchers for 
families that are on our waiting lists, which in New York are 
over 250,000 families.
    Mr. Turner. Thank you for that.
    Steve, in your testimony you talk about the goal of 
transition to independence. You even raised the issue of 
homeownership and the types of barriers that are faced when you 
look really at the type of intervention that is necessary for 
the residents in public housing. Could you people talk for a 
moment about--and Betsey had raised the issue of the social 
service function, the really inventory function that you do of 
the needs of the residents. Can you talk a moment about the 
residents and their needs and how that can affect and impact a 
Moving to Work program and your success?
    Mr. Rudman. Yes. Thanks, Mr. Chairman.
    I think it is important to recognize that in our case about 
half of the residents that we serve are elderly and/or 
disabled, so the ability to actually move off the program may 
not be there. But we start with the notion of being a 
successful resident, being a resident in good standing where 
there is responsibility. But for those families whose working 
life is ahead of them, our organization is trying to triple the 
number of people that we currently serve to actually look at 
kind of a voluntary way where folks look at a horizon of about 
5 years. And we think if we surround supportive services of 
child care and employment, educational kinds of opportunities 
locally, that housing is a necessary, but insufficient, 
ingredient to help a family achieve self-sufficiency.
    You know, the FSS, or Family Self-Sufficiency program, that 
HUD offers does have an ability for folks on that we house in 
public housing or Section 8 to save money. And I think it is 
asset-building more than it is income that really helps folks 
move ahead in this society. So we're looking at ways to expand 
our asset-building approaches where residents can begin to save 
money and be able to buy a house, go to school, buy a car, and 
live more like mainstream Americans.
    Mr. Turner. Betsey, in your written testimony, you tell a 
fascinating story of a woman who was the victim of theft 
identity. And it's a great story because it tells of not just 
of the difficulty that she went through, but of the 
administrative burden that is placed upon you and the 
difficulty you have when something like this comes up in 
getting it resolved and how it fits into HUD's bureaucratic 
processes.
    I was wondering if you might talk about that issue for a 
moment, and tell us, again, focusing on, you know, the burden 
that's placed upon you, but also what would you like to see in 
HUD where that burden could be lessened?
    Ms. Martens. Thank you for that question, Mr. Chairman. For 
context for the audience, the chairman refers to a problem that 
I testified about regarding the EIV system. And I have to tell 
you that even as I walked out the door to fly here, my staff 
were following me with more examples of--the last one was a 79-
year-old woman living in Boulder who is supposed to be working 
two jobs in a Mexican restaurant in Georgia. So I think the 
point is that when we have an income system where rent is based 
on--a system we put so much, so much pressure on the definition 
of income, and we are creating so many mechanisms around the 
integrity of rent that we have pretty much wrapped ourselves 
into paralysis on this.
    I think the--well, we think that the EIV system holds some 
certain promise for being able to verify incomes. It's classic 
in the pattern of HUD rolling something out before it's field 
tested and ready. Because I mentioned to you in my testimony 
that we will now suffer sanctions in trying to correct the 
problems that we see coming up almost daily.
    So the EIV system where we submit our transactions to HUD 
through the 58 system, if our income--so if our alleged Fisher 
woman has income solely from Social Security, we report that. 
But HUD's system shows us that she has actually quite a good 
income, working at the fish factory in Portland, ME. So they 
will count that as a discrepancy. And now they will say, if you 
have more than 5 percent discrepancies, we'll hold your money 
back. A little bit worse than that is the problem for a 70-
year-old woman to try to navigate that system.
    I just can't imagine that this is what we anticipate when 
we're trying to create an equitable system for rent. The 
solution for me is to vastly simplify the system, and I 
advocate one of two things. We either take rent based on gross 
income, just a simple percentage of gross income; and for 
elderly, for those who qualify for medical deduction, we're 
just taking a straight standard deduction.
    I also mentioned in my testimony, hopefully descriptively, 
what it takes for us to calculate rent. You know, we sit there 
with almost a year's worth of receipts for bananas, if someone 
has a potassium deficiency. We don't have the time or money to 
be doing that. We need to just take straight gross income or I 
think for families who work and can really--you know, are 
moving toward self-sufficiency. We really need to look hard at 
a flat rent system.
    Mr. Turner. Curt, you made a pretty stunning statement in 
your Section 8 description, and I've got the hearing testimony. 
I'm going to read it, and I'd like for you to elaborate on this 
because it's a pretty powerfully packed sentence that I know 
has lots of components to it. So I'd like for you just to talk 
about it a little bit more.
    You say, ``The current rent system for public housing and 
Section 8 has resulted in a system that encourages to cheat, 
confuses applicants, tenants, housing authority staff, 
policymakers and the general public.''
    I mean, those are some very strong conclusions of which I 
know that not many would disagree with you; but if you could 
provide us--for the purposes of when we're done, have a 
record--some of the types of things that you see that result 
from that or the big cause in that and ways in which it might 
be able to be remedied.
    Mr. Hiebert. I would be glad to, Mr. Chairman. In the 
written testimony I'm submitting as well, there's a chart 
that's been reduced down to about 18-by-24. It shows a flow 
chart similar to a computer that shows just how complicated it 
is to figure out somebody's rent.
    These are some of the steps that it takes for not only a 
staff member but a resident to figure out their rent. It is--as 
a matter of fact, I think it's shorter than the IRS schedule in 
figuring out your income tax. That's one of the things. It's 
the complicated nature of it. Nobody can understand it. 
People--two families living in the same building----
    Mr. Turner. Can you please make certain we have a copy of 
that for the record?
    Mr. Hiebert. I would be glad to submit one for the record.
    Mr. Turner. Since the Senator's gone, I can probably say 
it's probably even shorter than passing legislation through the 
Senate.
    Mr. Hiebert. And probably as painful, Mr. Chairman.
    The other thing that happens is that there's an inequality 
in rent. Two families with very similar gross incomes living in 
identical apartments right next to each other might have vastly 
different rents.
    Also, when it's based on an income, the tendency is to want 
to not have your rent go higher. We punish working families. If 
they get a raise, if their spouse gets a raise, gets a job, we 
say, thank you very much, the rent is going up. Keene Housing 
Authority and some of the other MTW agencies have dealt with 
this by removing that as a factor. We determine eligibility to 
the programs, but we make the radical assumption that people do 
not want to live in public housing for the rest of their lives, 
and that assumption is rewarded. People want to move up and 
out, and it's beneficial financially to the housing authority. 
By the time they are ready to leave and graduate from our 
programs--that's a term we use and was used earlier today, when 
they graduate from the programs.
    In the old system, when somebody is fortunate and works 
hard and gets a job and their rent goes up high enough, they 
leave. When something happens 6 months later and they don't 
have a support mechanism, where they lose the job or their boss 
turns into a jerk--and in my line of work, everybody's boss 
turns into a jerk after 6 months--they very often end up back 
on our waiting list.
    Develop a system that doesn't do that; that encourages 
people to graduate and stay a productive member of our 
communities.
    Mr. Turner. Thank you very much.
    Mr. Clay.
    Mr. Clay. Thank you very much, Mr. Chairman. I'd also like 
to thank the panel for your testimony today, and I certainly 
appreciate the service you give this Nation in your local 
communities.
    Let me start with Mr. Apple. I realize that New York City 
desires to become another moving-to-work demonstration 
participant, but your operating budget deficits appear to pose 
significant threats to your long-term strategic goals. Are 
increases in financing the silver bullet solution, or are there 
also regulatory challenges that are just as menacing?
    Mr. Apple. Thank you, Congressman.
    Yes, what I would say is that--and you heard it again and 
again today--that some of the regulatory challenges have 
enormous impact on our ability to provide quality service to 
residents, especially in the environment of diminished 
resources.
    So the, as Betsey talked about, the EIV system, I mean, we 
have 181,000 families we serve in public housing and another 
85,000 through Section 8, so over 265,000 families that we do 
that system for every year. It's a huge, huge complicated 
issue.
    We think we've done it as well as anybody. We actually are 
well under the 5 percent standard that HUD sets for errors. We 
find some of the same problems that Betsey talked about; people 
working in Chicago and living in New York. Things like that 
happen all the time, but we've been able to manage it. But it 
comes at a real cost.
    So, again, finding ways to use this flexibility, not to let 
housing authorities to, you know, do what they want because, as 
you can see, housing authorities make smart decisions in their 
cities.
    And I also wanted to sort of touch upon something that the 
chairman said and I think Curt also mentioned is the one-size-
fits-all approach really doesn't work. I mean, what works in 
New York City is obviously not going to be the same as it works 
in Boulder, CO, or Keene, NH. And the system today really 
doesn't recognize that, and it's not fair to the Keenes and the 
Boulders; and it certainly isn't working for the New Yorks and, 
you know, Chicagos in that regard as well.
    So I really would encourage you to think of ways to really 
create a system that reflects that diversity and the strength 
of public housing in this country and also create standards.
    None of us are saying that we shouldn't be held 
accountable. None of us are saying that there shouldn't be a 
standard that we're held to by the Federal Government. We all 
embrace that. In fact, you can see we've all far exceeded that, 
but use reasonable standards. You know, Standard and Poor's 
rated us a Triple-A. There's a standard you can hold your hat 
to.
    Mr. Clay. So I keep hearing this recurring theme that tells 
me that HUD might be too bureaucratic. It may be too immersed 
in red tape. I don't want to get anybody on this panel in 
trouble, and it may be reflected by the way you answer, 
answering this inquiry. But is HUD too burdensome? Nobody 
speak.
    OK. Let me ask these two here. OK. Betsey.
    Ms. Martens. I know, I'm surprised we didn't fall all over 
each other to answer that question. Yes, yes, yes is the 
answer. I think here--let me tell you this, I think as the 
manager of, you know, a medium-sized public housing authority, 
the way I should start my day, I should turn on my computer, 
and I want to be able to see, what's my daily cash? What were 
my maintenance staff doing last night? What are the move-outs 
coming up in the next 30 days? That is how you manage an 
affordable housing program.
    Instead, an environment with HUD, many of my colleagues--
this doesn't include me--you have to go to the HUD homepage to 
see, what is the new notice? What has HUD said today? What are 
we supposed to be doing today? I'm constantly in conversation 
with my colleagues saying, haven't you read 2006-6? Oh, my 
gosh, no. I'm running a business.
    Really need to be able to allow us to manage to the high 
standards that our local communities set for us, that our 
mission requires of us.
    Mr. Clay. That indicates a lack of communication on the 
part of HUD as well as a lack of a working relationship there. 
If you say you have to go to the Web page and see what the 
regulation of the day is, it's become too bureaucratic.
    Curt, go ahead.
    Mr. Hiebert. I would echo that sentiment. The emphasis is 
on process rather than on results, coming from the department. 
We have, as Betsey was saying, the results we all want are very 
simple; and when you get a book of or notices of regulations 
that are an inch-and-a-half thick that you have to plow through 
and figure out on a simple process, it may become weekly to try 
to figure out. We are drowning in a sea of paper.
    Mr. Clay. Sounds like a maze. Thank you very much for that 
response.
    One last question, Mr. Chairman; and this is for Mr. 
Peterson.
    Mr. Peterson, are you certain that CHA will be able to 
maintain the same number of units available to beneficiaries 
even though capital funding and operating costs have been 
reduced in real dollar terms? Hasn't the real estate market in 
a city like Chicago become prohibitively expensive for public 
housing expansion? And as an addendum to that, has your 
authority explored any possibilities for home ownership tenants 
once they graduate from your program?
    Mr. Peterson. Yes, sir.
    Mr. Congressman, let me just take the second question 
first. At all of our mixed-income sites, we have set aside a 
percentage of the units for home ownership. We encourage our 
residents to move toward home ownership. We've actually used a 
voucher program by another means of working with public housing 
residents to move toward home ownership.
    In terms of funding to continue the success that we've had 
in Chicago, one, not only do we need consistent funding, but we 
need adequate funding. There's nowhere where we can go to the 
private market and try to leverage private resources without 
knowing that we'll have adequate capital funding over a period 
of time to pay those dollars back.
    The thing that I like about the MDW agreement is that it 
gives you flexibility both with capital funds as well as 
operating funds. So while we talk about flexibility, I think 
one of the points made by Betsey was the need for adequate 
funding.
    You know, every year when you face cuts and both the 
capital funds and operating subsidy, it makes it difficult for 
us to be able to go out to the market. We were the first 
housing authority, I mentioned, to go out to the bond market, 
$291 million, Triple-A rating again from the rating agencies; 
but it was based upon the fact that we were able to project out 
what our capital allocation would be over a period of time to 
be able to pay back the debt service and to pay that back. So 
while we've had success in Chicago, we need to have adequate 
and consistent funding in order to be able to continue the 
momentum that we've had.
    Mr. Clay. I thank the panel for your response. I appreciate 
it very much. Thank you, Mr. Chairman. I yield back.
    Mr. Turner. Thank you. I, unfortunately, have an 11:30. I 
have a series of questions I want to ask each of you, and then 
I want to leave some time for you to be able to put on the 
record the thoughts that we've missed because, one, this has 
just been absolutely incredible. Your written testimony is 
phenomenal. The things you've raised today are great. They'll 
give us a tremendous amount of things to pursue further.
    This is only our second hearing in oversight on the issue 
of public housing. There's a number of things that we need to 
pursue both in your testimony and in your experiences that can 
give us ways to hopefully effect change in this process.
    So the next series of questions I'm going to ask you are 
somewhat short and quick. If there's one that you disagree 
with, and we need to embellish it, great, please do; but if 
it's one that you agree with, a yes would be sufficient.
    I'm aware that some housing authorities are having 
difficulty with their senior housing, having the eligibility 
for disabled in senior housing; and the issue of drug 
dependency and alcohol dependency being declared a disability, 
affecting the tranquility, if you will, of senior housing. 
Let's go down the line and start with Greg. Are you having that 
difficulty?
    Mr. Johnson. Thank you, Mr. Chairman. I definitely agree 
with that. I know in Dayton, very quickly, we get a lot of 
inquiries on, how did this young 25 or 35-year-old get in? My 
mom's been living here. She's 65, 75. Having parties on the 
weekends and things like that. So it's increasing the cost of 
maintaining and running senior housing, I know, in the Dayton 
market.
    Mr. Peterson. Mr. Chairman, it is also part of the 
testimony that I submitted in Chicago. One of the challenges 
that we have is that we finally got senior housing designated 
for seniors only, 62 or older; but it's only for 5 years; and 
then we've got to come back to HUD and reapply for it to become 
senior housing again. And we think it should be permanently put 
in place for individuals 62 and older.
    Mr. Turner. Your age and place comment in your testimony 
was very important.
    Doug.
    Mr. Apple. We have, like Terry, been designated as a 
senior-only. So we have 43 developments that are for seniors. 
We have another over 9,000 units, 5 percent of our other 
housing stock, we designate specifically for the disabled. So 
it's really not an issue in that regard in New York.
    Mr. Turner. Good.
    Mr. Rudman. Mr. Chairman, we have a mixed population in our 
high rise so we do not have elderly only. It is an increasing 
problem for the need for services to help people be successful. 
We are losing some of our elderly tenants to Section 202 and 
elderly only redevelopment.
    It seems to me one of the things we're looking at is a 
population that's disabled who will become elderly, and so, 
more and more, we'll have elderly and disabled in some of our 
buildings.
    Mr. Turner. Betsey.
    Ms. Martens. I was rather long-winded in my testimony. So 
let me be brief: Yes, yes, yes, it is a big problem for us.
    Mr. Hiebert. Yes, Mr. Chairman, we do. In a small housing 
authority, we don't have the luxury of designating a particular 
development and another development as elderly only. In a high 
rise, we have 42 percent of the residents under 62 with 
disabilities, and it is a problem. Though with the Moving to 
Work, what we've been able to do is provide some additional 
alternatives for people with disabilities, other than living 
with a number of elderly people, which they don't necessarily 
want to do, but it has been the only place that they were 
eligible for.
    Mr. Turner. Excellent. Well, I have just been given a note 
from my staff that we do have a reprieve. My vice chair will be 
joining you at 11:30. So we'll be able to continue this. I'll 
be able to finish my questions, and then we'll be able to get 
your comments and any additional questions that Mr. Clay might 
have also.
    Economic segregation is an important issue. It's a lesson 
that we have learned that is not conducive to economic 
transitioning. I liken the issue many times to the small-town 
experience. You always see that people of a broader economic 
range in a small town tend to have greater successes, greater 
opportunities than those that are concentrated in small areas 
of poverty; but just the interaction, the ability to understand 
what is possible and what is necessary for achievement, that 
interaction and the sense of a community and its improvement 
and condition I think can have a big impact.
    Terry, you had mentioned that as one of the big issues that 
you were facing in looking at multi-economic housing 
opportunities. The counter to that, of course, is the stigma of 
the issue of gentrification, which has been incredibly 
frustrating for me as a topic when the subject is raised 
because I have never met a gentry in my life. And in addition 
to that, I know cities, being a former mayor, for cities to be 
successful, you have to have a mixed economic base and that you 
have to have mixed economic communities.
    There's not a housing development or project we had 
undertaken that resulted in displacement of the populations 
that actually resulted in bringing investment to communities. 
That is a policy discussion that we all continue to battle, 
economic segregation versus the issue of gentrification.
    Can you just speak from your experience for a moment about 
that issue? And your thoughts. We'll start at this end this 
time.
    Curt.
    Mr. Hiebert. That is a very important issue, particularly 
in a small community. It's also a difficult one that either 
takes a week to answer or a short answer. Our rent structure 
encourages a broad range of incomes, and that used to be a 
policy in HUD housing and has gone by the wayside over the past 
number of years.
    It's helpful to have modelling within a family development, 
to have families that are doing well, and others that are 
coming in that are maybe at one of the lowest points in their 
lives, for them to be able to see a success, rather than an 
entirely homogenous population. So it really makes sense.
    We have not had a problem. We're not a HOPE VI agency. 
We've not had to destroy property. But to give you an idea of 
scale in the city of Keene, we have a development with 29 
family units. My daughter came home from school, and she said, 
yeah, she met somebody that lived in the projects. This was in 
Keene with 29 units, and it was illuminating to me to see the 
way that it was labeled.
    So we all struggle with this, but it comes back down to how 
you administer the programs. So if you have a rent structure 
and a program that can allow for a progression up and 
graduation down, I think it makes a difference in the long run.
    Mr. Turner. Thank you.
    Betsey.
    Ms. Martens. Thank you, Mr. Chairman. Yes, in Boulder, 
everything that we're trying to do is to mix incomes. We were 
fortunate from the beginning of our public housing investment 
where HUD insisted that we maximize the investment in land or 
we minimize the investment in land and maximize value. They 
insisted that our first 150 units be built all together on one 
side. We pushed back and pushed back and were able to have 
those reconfigured into three sites.
    So from the very beginning of the public housing days, we 
drew a line in the sand and said, public housing must reflect 
both the fabric and patterns of the community, and it still 
needs to be today.
    We don't do a service to families who are struggling to 
surround them by families who are also struggling. Public 
housing tends to be high density. Neighbors live very, very, 
very closely together. The problems flow out into the halls. We 
really need to create an exhale in the portfolio and spread it 
out.
    I have long had a vision of being able to lift my public 
housing unit assistance and spread it out into the vast 
portfolio of non-HUD units that I have. So I would take a 50-
unit family development and put 20 units over in my 126-unit 
market property, and I'd put 20 over here. I would spread it 
out. I think that as we all practiced non-HUD development, so 
we have quite a lot of real estate development experience. We 
were looking for in every setting a mix of incomes and uses and 
family experience so that the community can come together and 
create a fabric of strength and resilience.
    Mr. Rudman. Mixed income communities make economic and 
social sense. Nothing speaks better to this than the HOPE VI 
program and examples throughout the country. I think what 
Betsey said, in many of our departments that are locally owned, 
our goal is to try to find ways to put a mix, of financing 
public housing Section 8 in developments with other folks who 
are in the work force. I think it makes good economic sense. 
Areas that are gentrifying, it enables people with lower 
incomes to stay, and I think it just is part of their future, 
mixed income.
    Mr. Turner. By the way, you can say that sentence also by 
saying, by those areas that are becoming more market rate.
    Mr. Rudman. That's correct.
    Mr. Turner. I'm sorry. The word gentrification just really 
is one that I think has a stigma that diminishes some of the 
great hard work everybody's doing for economic transition. And 
I know it is one that is in all our lexicon, and we all know 
what we mean when we say it, but there are those who use that 
word, I think, to diminish the effectiveness of really what is 
economic capital investment that each of you are working 
toward.
    Mr. Apple. In New York, obviously, as you say, Chairman, 
really the same as in all cities across the country, that 
phenomenon is really ever-growing and ever-changing. In fact, 
neighborhoods like the South Bronx, the one that we all 
remember from 1977 where Howard Cosell talked about the Bronx 
burning during the World Series, you're now seeing new forms of 
home ownership, new development really right across the street 
from some of our largest, most dense public housing complexes 
in Harlem, where you're now seeing million-dollar brownstones 
being bought by folks that have lived in that community, moving 
into that community right next to some of our most important 
public housing developments. And we think what we're doing is 
really helping that to happen.
    Obviously, the real estate market has a lot to do with it, 
but we have always encouraged working families in public 
housing in New York for the last decade. We've had a preference 
for working families. As I said earlier, almost 45 percent of 
our families are working. That is the highest percentage in 
almost 30 years in New York. So we think mixed income just is 
really organic in the way we do what we do in New York.
    We also think that improving services and the quality of 
our public housing makes the community and the neighborhood 
more desirable. Not just services in terms of the day-to-day 
maintenance and our capital work to really make our properties 
work better and look better, but also the social services we 
provide, the job training we provide to our residents, the 
community centers that we have built and managed or managed in 
conjunction with community-based partners who do a wide variety 
of services, not just for our residents but for the entire 
community, and finally, really become mixed-income models.
    Within our campuses, we have very many large-scale 
campuses. So we're now taking land, parking lots and available 
land and building new mixed-income models, using Section 8, 
using tax credits and even building the west side of Manhattan, 
in some of the most valuable property in the world, building 
work force housing within public housing complexes.
    Mr. Peterson. Mr. Chairman, as you had an opportunity to 
see in Chicago, one of the sites we went to, Roosevelt Square 
on the west side, on Friday where we had an opportunity to see 
in our mixed-income developments. You've got teachers. You've 
got firemen. You have police officers. You've got healthcare 
workers living next door to public housing residents. You've 
got children now being able to get up in the morning and seeing 
individuals getting up, are going to work.
    We've been fortunate in Chicago that one of the biggest 
concerns when we started the plan for transformation is that we 
would sell off all of our land, that the community would 
regentrify, and there wouldn't be room for the poor. But we've 
entered into 99-year leases. The private market has embraced 
it.
    The other thing that I think is important about a mixed-
income community is how other stakeholders in Chicago have 
gotten involved. University of Chicago, you were at Oakwood 
Shores, over in the Kenwood. Oakwood community has now started 
a charter school that our residents now have access to, 
providing $5,000 forgivable grants to any of their employees 
who purchase a home at one of our mixed-income sites; the 
University of IIT, providing again $7,500 forgivable grants.
    So we think, in Chicago, mixed-income communities are the 
way to go; and we've also done it in such a way that there's 
room for public housing residents as well as the working poor.
    Mr. Johnson. Mr. Chairman, thank you.
    In Dayton, there's the HOPE VI program. We've been able to 
provide affordable housing, home ownership out in the county 
area. Also acquiring and rehab public housing out in the county 
and also through our HOPE VI in the inner city to take down 212 
public housing units and mix it in with home ownership, 
project-based Section 8 and project housing.
    So in Dayton, the new word in Dayton with the new schools 
being built is a regional approach to making sure our community 
as a whole is taking part in the housing and in the services 
that we all need in our community. So we definitely champion 
and look for our new construction to be mixed with market-rate 
public housing and project-based Section 8.
    Mr. Turner. Excellent. Well, I'm going to reach to my vice 
chair, Representative Dent from Pennsylvania who will be taking 
over the remaining portions of the hearings.
    I want to thank each of you for participating today and 
really for your expertise in doing what you do every day in 
changing people's lives. The importance of this is not only to 
the host, host communities, but also to the people that live 
there. You clearly all have a focus on that, and we'll find 
ways to help you for making sure that HUD is responsible, and 
we give you the rules and the regulations and capital funding 
that is necessary.
    The issue of mixed income--I just want to let you know 
that, in Washington, DC, I personally live next to a public 
housing building. I'm living in a mid-rise that is an ownership 
mid-rise, and behind me is a market-rate mid-rise that is 
rental, all of which is doing wonderful and is helping change 
the community. So it certainly is a model. I know what you're 
implementing in your communities and is being implemented here, 
and every day when I'm in D.C., I can see it's success. I want 
to thank you, and I turn it over for additional questions to 
Mr. Clay.
    Mr. Clay. No questions at this time, Mr. Chairman. Perhaps 
your vice chair would like to have questions.
    Mr. Dent [presiding]. For all the panelists, it's my 
understanding that part of the subsidy for your residence is 
for utilities. For example, energy costs. Can you explain this 
further to the subcommittee? And what are your requirements 
under current law in terms of paying for utilities? And I would 
just be curious to hear your comments and thoughts on this 
matter. Maybe if we can start from Mr. Johnson or whoever would 
like to go first.
    Mr. Johnson. Our clients receive programs in their Section 
8 and also public housing, a utility reimbursement. And the 
reimbursement is calculated based on your area, part of the 
country and bedroom size and style of the unit. Normally for 
one to--a three bedroom in Dayton, the resident receives a 
utility reimbursement of $149 off their rent so it's off of 
their rent. So the utility rising costs in utilities is 
affording housing authorities to take and sometimes give out 
more dollars, especially this last year with the rise in costs.
    It's really put a big dent, I know, in Dayton's budget 
where we have no settle up at the end of the year where we used 
to have settle up on our utility costs; right now, at this 
time, it's really, really hurting our budgets.
    Mr. Dent. Mr. Peterson.
    Mr. Peterson. Thank you, Mr. Chairman. I would also say, in 
Chicago, similar to the Dayton Housing Authority and probably 
across the board, the increase in rising utility costs, how 
it's impacted our budget, again, our utility allowances, based 
upon the unit size as well as the income. One of the things 
that we do, we don't give the utility allowance directly to the 
tenant anymore. We make direct payments to the light and the 
gas company on behalf of the tenant. And one of the reasons for 
that is that we discovered a lot of times tenants would find 
themselves with high utility bills. But again, I think what 
you're going to hear across the board is that with the rising 
cost of utility within the city of Chicago, it's starting to 
become a challenge for us from a budget standpoint. But again, 
it's based on the resident income as well as the unit size.
    Mr. Dent. Just a quick followup question. Do you get any 
support from Lockheed from any of your tenants?
    Mr. Peterson. Yes, we do. In fact, we've been very 
fortunate; the city of Chicago and Mayor Daley contributed an 
additional $5 million to the program. Our residents were at the 
front of the line. We've had great support from the State in 
terms of assisting our residents. So we get a lot of support 
from the City and the State as well in terms of assisting our 
residents through light, heat.
    Mr. Dent. Do you do any weatherization programs on your 
own?
    Mr. Peterson. Yes. As a matter of fact, we've been able to 
go out, working with LaSalle Bank in terms of being able to 
borrow money for window replacement at some of our 
developments, paid back over a period of time; but we also work 
with the Department of Housing in terms of their weatherization 
programs as well.
    One of the things that's going on in Chicago, our entire 
portfolio of 25,000 units are currently being rebuilt or 
rehabbed in the city of Chicago. We've completed--of that 
number--we've completed over 14,000 which would be 57 percent 
of the 25,000. So all of our new units are coming back with new 
windows, new furnaces, new heating systems and all of that.
    Mr. Dent. Thank you. Mr. Apple.
    Mr. Apple. Thank you, Congressman. Yes, as similar in 
Dayton and Chicago, obviously energy costs are one of our 
biggest challenges this year. Single fastest growing cost, up 
over 70 percent this year compared to last year; 92 percent of 
our public housing units are not metered. So therefore, it's a 
direct cost to the housing authority.
    What we've done is a couple things. One thing we've done is 
entered into partnership with the State power authority in New 
York to get low-cost power. So that helps to manage our costs. 
Also, a series of energy conservation programs we've done with 
them. For example, we were able to get 180,000 refrigerators, 
one for every apartment; and those refrigerators are energy 
efficient. We paid for them through energy savings of the 
discount program to the power authority, and we've been using 
performance energy contracts, which is something that HUD 
allows. And I would encourage them to, you know, consider 
expanding that to allow us to come up with new technologies to 
save money and then reinvest that savings back into the 
properties.
    Mr. Dent. You do weatherization of your own properties as 
well?
    Mr. Apple. We do. We do. We do. Like Terry. Again, taking 
advantage of these performance contracts, allow us to put in 
high energy-efficient boilers and new windows and high energy-
efficient lighting, using these contracts that allow you to 
repay over a 20-year period.
    Mr. Rudman. Mr. Dent, I agree with the previous testimony. 
We are also using performance contracts, looking at 
weatherizing our properties. It's definitely a cost that's been 
increasing.
    Ms. Martens. I would add that in the first quarter of our 
financial year, we are 94 percent over budget in gas spending. 
The good news is the snow has stopped falling in Colorado. 
We're out of the heating season. So that should even out a bit.
    Mr. Dent. Fairly mild winter where I live this year.
    Ms. Martens. I'm not proud to share this with you, but 
given 100 percent loss in funding for my housing authority for 
resident services, my resident services director is now the 
director of energy conservation. It has become such a big issue 
that we really need to direct our full-time attention to it. I 
think that we have to ask ourselves whether we serve the 
country appropriately when we redirect talent from serving our 
residents to someone who has to spend all their time now 
serving us.
    Mr. Hiebert. I was just going to brag that we got a $50,000 
grant for weatherization for all of our units, but considering 
some of the numbers that were just bandied about here, I was 
humbled. But that does make quite a difference for a small 
housing authority, but it's a constant concern. My predecessor 
in the early 1970's converted 200 units of our public housing 
to electric heat. And many times I cursed him over the years, 
but I'm starting to thank him again as times turn.
    Mr. Dent. Well, that's funny how that happens. You know, 
decisions you didn't like years ago seem like pretty smart ones 
today in some cases.
    I'd like to talk a little about HOPE VI. And I'd like to 
hear your comments on that. And my congressional district, 
Allentown, PA, we were successful in receiving a $20 million 
HOPE VI grant to deal with one of the oldest housing 
developments, public housing developments in the Nation. And 
we're going through a massive transformation of that property 
to a more appropriate mix of housing. And we're excited about.
    I would be curious to hear your comments on HOPE VI, the 
successes and problems you may have experienced; and maybe if 
we can start from right to left, maybe some of you don't have 
experience with HOPE VI.
    Mr. Hiebert. No experience, Mr. Chairman.
    Ms. Martens. Likewise.
    Mr. Rudman. Mr. Chairman, we at Portland, OR, have two HOPE 
VIs, and there's nothing like that in our 65-year history 
that's helped us position both the housing authority but more 
important the perceptions of taxpayers and neighbors about what 
public housing communities can be.
    The notion of mixing incomes and looking at, you know, 
trying to mirror communities throughout the city I think is 
important so the isolation that exists socially and 
economically is something that doesn't make rational social 
sense.
    So the HOPE VI program--maybe a HOPE VII program in my 
opinion--is extremely important for this industry because it's 
been very successful, in my opinion, around the country.
    Mr. Apple. Yes. We have two HOPE VI in New York. Obviously, 
given that our housing stock is really stable and we don't have 
the kind of distressed properties other cities had, it was a 
little different experience for us. In one case, we really used 
it to just modernize it and really vitalize a really aging 
property in a very isolated part of the city, Rockaway, Queens, 
which is really a peninsula where we had a very difficult time 
with crime issues. We had very few working families, and with 
the investment through HOPE VI, we now have moved over 600 new 
working families into the complex; and really, it's starting to 
stir up broader economic development in that community 
entirely. So though it's different for us, I think that you'll 
hear from maybe Terry, I think the vitality of the program and 
the benefits are real.
    The downside of the program I would say is the over-
regulation by HUD. The mixed finance rules are very 
complicated. Developers in New York have told me that they 
won't do HOPE VI because it's not worth the effort. So I would 
pose that it's a program we want to save, but I think, like 
Steve said, I think you want a HOPE VII that really thinks more 
about how you make development work and how you have 
development partners.
    Mr. Dent. Thank you, Mr. Apple.
    Mr. Peterson.
    Mr. Peterson. Mr. Chairman. We've had great success in 
Chicago in terms of HOPE VI. We have about seven HOPE VIs. One 
of the things that I mentioned earlier in my testimony is that 
we've spent about $242 million and leveraged over $1 billion. 
We have 10 sites currently under construction either offsite or 
onsite in Chicago. The private market has taken to it. We've 
had great success in terms of involvement. We've been able to 
attract developers, not just locally but nationally to come 
into Chicago.
    Michael's is an east coast developer who's doing one of our 
HOPE VI sites at Wells/Madden over 3,000 units they're going to 
bring back. So we've had great success, big supporter of HOPE 
VI. Think that it's needed. Think that it should be 
reauthorized and continued really in terms of what we're doing 
in Chicago.
    Mr. Johnson. Mr. Chairman, thanks. Such a huge HOPE VI in 
Dayton, but we received a grant for $18.3 million which we were 
able to leverage to $50 million, and it's working wonderfully. 
I do agree that some of the regulations on it makes it a little 
costly, and it makes it a little confusing, but we definitely 
champion to continue to--the use of it.
    Mr. Dent. Are you using all your HOPE VI dollars at one 
particular site, or are you spreading it around the city?
    Mr. Johnson. Actually, in Dayton, we did a wonderful thing. 
We're actually taking some dollars, using them in the city and 
then some dollars, using them in the county. So, just for 
example, in the city, we took down 212 units. We brought back 
80 units of public housing; 50 of the 80 units were for 
families, single family homes, public housing Section 8, and 
then 30 units was a senior high rise right in that same 
community, and then we're also doing a market rate, market rate 
housing new construction of 55 homes and just where the 212 
units were. Then we leverage dollars from the county where we 
were able to give up to $70,000 of down payment assistance to 
families to move out into the county as part of the 
disbursement, and 35 families took advantage of that. We didn't 
have to give that much money. So we were able to help more 
families. It was started at 20. It grew to 35 families. And 
then we actually went out into the county and acquired existing 
properties and turned 70 of those units into public housing. 
It's worked great in Dayton, and we're in our last phase of it, 
so we definitely took the opportunity.
    Mr. Dent. I may put people from the city of Allentown in 
contact with you. We're leveraging a $20 million grant and 
keeping it more or less on one site that had been troubled for 
many years.
    The final question is really for all of you, is there 
anything else you'd like to establish here for the record 
before we adjourn the hearing? Anybody have any final comments? 
Mr. Hiebert.
    Mr. Hiebert. Yes, Mr. Chairman. I wanted to make a point 
about the Moving to Work and the development of it. In and of 
itself, the entire theory is to reflect local community 
conditions and be able to respond to them. It doesn't simply 
trade one ivory tower for another one. In other words, the MTW 
program in Keene was not developed in my office without public 
input. It is designed to reflect the local circumstances, what 
are the vacancy rates what is the employment situation, what 
are the demographics of the people you're serving, how does it 
serve the people on your waiting list. And I think that would 
be the point I would make that would hopefully sway some of the 
fears of MTW, if there's granted excess flexibility to housing 
authorities that there will suddenly be a huge influx of people 
thrown out on the streets. That's not our mission. That's not 
what we do. We house people; we don't throw people out. And I 
just wanted to get that on the record about the development of 
an MTW program.
    Mr. Dent. Thank you.
    Anyone else?
    Ms. Martens.
    Ms. Martens. Thank you. In closing, I would like to say 
that my view from the western States where public housing 
authorities tend to be smaller is that HUD is contracting the 
programs to the point where we really have to question the 
future economic sustainability of the system.
    In my community, public housing represents a thin line 
between being housed and being homeless. And from my seat on 
our local homeless shelter board, I know exactly what it costs 
to house someone who is homeless, and I assure you that cost is 
much greater than investing in the current inventory that we 
have.
    We have a $90 billion investment in public housing in this 
country. We really need to consider a preservation strategy for 
this asset, which is irreplaceable. I have suggested a pathway 
in my own testimony about how we get there. And I think it's 
quite possible if we reform rent, if we invest--allow us access 
to the capital markets, if we recognize that there are very 
serious significant service needs for our residents, and if we 
can start to restructure the underlying finance and let the 
funds flow the way it needs to, we can hang onto this asset and 
the deep affordability and the essential fundamental nature of 
housing in our communities. Thank you.
    Mr. Rudman. Thank you, Mr. Chairman. I guess my final 
comment would be, I think the industry's really going through a 
sea of change. And I don't think most of us or any of us on 
this table want to be viewed as a HUD franchise. I think we are 
responsible stewards in our own local communities. We want to 
tailor our programs with our local marketplaces. If we're going 
to become asset managers for our community, we need to look at 
HUD as our major investor, but not the only investor. And I 
think that's really important that we really try to change the 
dynamic and policy that really recognizes the vital roles 
housing authorities can play in the coming century.
    Mr. Dent. Thank you.
    Mr. Apple.
    Mr. Apple. Thank you, Congressman. I want to thank Chairman 
Turner also for this hearing and this opportunity. I think what 
you heard today really was very much the same, regardless of 
the size and the type of housing we operate; that local 
decisionmaking works; that in our local communities, we can 
best working with our local elected officials and our 
congressional Representatives best determine what's needed in 
our communities. That the HUD one-size-fits-all approach 
doesn't really work for anybody, but that standards matter and 
accountability matters, that there does need to be some 
standards, and there needs to be ways of holding us 
accountable, and I think that a new system, a system that MTW 
kind of has started is really what's needed to allow us to do 
what we do; that funding flexibility, that regulations but not 
over-regulation is where we need to go. And that we think that 
today was a great opportunity to talk about that, and we hope 
that you and the rest of your colleagues will really embrace 
that and really take that to the level that we all think we 
need to make it work in our communities.
    Mr. Dent. Thank you.
    Mr. Apple. Thank you.
    Mr. Dent. Mr. Peterson.
    Mr. Peterson. Mr. Chairman, let me just say too, in 
Chicago, and I would say debt owed to all my colleagues in 
Chicago, Mayor Richard M. Daley always talks about public 
housing is more than bricks and mortar. It's also about 
rebuilding lives, and our hope is to break the cycle of 
poverty. But in order to do it, I think local flexibility is so 
important. There's no way going into year 7 we would be at this 
point, over 57 percent of the 25,000 units completed the number 
of community stakeholders from universities to foundations of 
the private sector to civic community embracing this; if we 
didn't have local flexibility in terms of being able to design 
a program that breaks the cycle of poverty that allows 
residents to move forward, to get on their feet so that we 
don't create another generation of families trapped in public 
housing, isolated from the rest of the city.
    Again, I want to just thank this committee for providing us 
the opportunity to talk about some of the issues that we deal 
with locally, and I want to say something that might be more of 
the exception than the norm, and that is that we've had a great 
working relationship with Secretary Jackson.
    In Chicago there's no way we would have been able to 
accomplish this without his support. At the top he's been very 
supportive of Chicago and working with us and also I would be 
remiss if I didn't mention the fact that under his leadership 
and former Secretary, Mayor Martinez, both were very supportive 
of what we were trying to accomplish in Chicago. Thank you.
    Mr. Dent. Thank you. We'll certainly share that with the 
administration. Thank you.
    Mr. Johnson.
    Mr. Johnson. Mr. Chairman, I'd like to say thank you, and 
thank you to Congressman Turner for holding this subcommittee 
hearing. I ditto what my colleagues have already said. I just 
wanted to say there are few programs that I want to just 
reiterate that I think are critical to the success of public 
housing in the future, which is: Jobs Plus, Moving to Work, and 
HOPE VI programs. Without programs like this, housing 
authorities would lose their flexibility and ability to be 
creative, to supply quality housing and services to our 
families. Thank you.
    Mr. Dent. Well, I'd like to thank all of you for your 
testimony. We've heard from communities both large and small 
and mid-sized, and I really appreciate your comments. I think 
this has been very helpful. Your testimony today has been 
extremely helpful to the committee, and we will certainly take 
this all under advisement, and I'd also like to make clear to 
everyone that, should you have any additional comments or 
statements for the record, the committee will keep that open 
for an additional 2 weeks. So I just wanted you to be aware of 
that. So without any further comment from me, I'd like to 
adjourn this meeting, the Government Reform Subcommittee on 
federalism and the Census. Meeting adjourned.
    [Whereupon, at 11:52 a.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Charles W. Dent follows:]
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