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




 
    POVERTY, PUBLIC HOUSING AND THE CRA: HAVE HOUSING AND COMMUNITY 
   INVESTMENT INCENTIVES HELPED PUBLIC HOUSING FAMILIES ACHIEVE THE 
                            AMERICAN DREAM?

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON FEDERALISM
                             AND THE CENSUS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 20, 2006

                               __________

                           Serial No. 109-218

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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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
                          Jon Heroux, Counsel
                         Juliana French, Clerk
            Adam Bordes, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 20, 2006....................................     1
Statement of:
    Gutzmann, Jon, president, Public Housing Authorities 
      Directors' Association, executive director, St. Paul Public 
      Housing Agency; George Moses, chairman of the board of 
      directors, National Low Income Housing Coalition; James 
      Riccio, director, Low-Wage Workers and Working Communities 
      Policy Area; Benson F. ``Buzz'' Roberts, senior vice 
      president, policy and program development, Local 
      Initiatives Support Corp.; and Judy Kennedy, president and 
      CEO, National Association of Affordable Housing Lenders....     8
        Gutzmann, Jon............................................     8
        Kennedy, Judy............................................    51
        Moses, George............................................    21
        Riccio, James............................................    27
        Roberts, Benson F. ``Buzz''..............................    41
Letters, statements, etc., submitted for the record by:
    Clay, Hon. Wm. Lacy, a Representative in Congress from the 
      State of Missouri, prepared statement of...................     6
    Gutzmann, Jon, president, Public Housing Authorities 
      Directors' Association, executive director, St. Paul Public 
      Housing Agency, prepared statement of......................    11
    Kennedy, Judy, president and CEO, National Association of 
      Affordable Housing Lenders, prepared statement of..........    54
    Moses, George, chairman of the board of directors, National 
      Low Income Housing Coalition, prepared statement of........    23
    Riccio, James, director, Low-Wage Workers and Working 
      Communities Policy Area, prepared statement of.............    29
    Roberts, Benson F. ``Buzz'', senior vice president, policy 
      and program development, Local Initiatives Support Corp., 
      prepared statement of......................................    43
    Turner, Hon. Michael R., a Representative in Congress from 
      the State of Ohio, prepared statement of...................     3


    POVERTY, PUBLIC HOUSING AND THE CRA: HAVE HOUSING AND COMMUNITY 
   INVESTMENT INCENTIVES HELPED PUBLIC HOUSING FAMILIES ACHIEVE THE 
                            AMERICAN DREAM?

                              ----------                              


                         TUESDAY, JUNE 20, 2006

                  House of Representatives,
         Subcommittee on Federalism and the Census,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2154, Rayburn House Office Building, Hon. Michael R. 
Turner (chairman of the subcommittee) presiding.
    Present: Representatives Turner, Dent, Shays, Foxx, Clay, 
Kanjorski, and Maloney.
    Staff present: John Cuaderes, staff director; Juliana 
French, clerk; Jon Heroux, counsel; Adam Bordes, minority 
professional staff member; and Jean Gosa, minority assistant 
clerk.
    Mr. Turner. Good morning.
    Quorum being present, this hearing of the Subcommittee on 
federalism and the Census will come to order. Welcome to the 
subcommittee's hearing entitled, ``Poverty, Public Housing and 
the CRA: Have Housing and Community Investment Incentives 
Helped Public Housing Families Achieve the American Dream?'' 
This is the fourth in a series of hearings the federalism and 
the Census Subcommittee is holding on public and low-income 
housing.
    The purpose of this hearing is twofold. First, we will 
examine the self-sufficiency and poverty deconcentration 
provisions of the Quality Housing and Work Responsibility Act. 
Second, we will examine the Community Reinvestment Act [CRA], 
and its purpose to public and affordable housing. Our first 
goal today is to gain a better understanding of whether QHWRA's 
self-sufficiency and poverty deconcentration provisions have 
helped Public Housing Authorities [PHAs], to improve the living 
situations of their tenants in a meaningful way. From what we 
have learned in our previous hearings, there is evidence that, 
despite some of the progress, the rules governing the 
calculations of rents and other incentives are still too 
complicated and cumbersome to use effectively. The Public 
Housing Authorities have cited numerous examples of the 
complexity within the current system and the burden that 
complexity brings to managing their portfolios. They have 
argued that this complexity is counterproductive and is 
diverting limited resources away from their primary mission 
which is their providing low-income families with safe, clean 
and affordable housing. The Public Housing Authorities have 
repeatedly called for changes in the law they claim would ease 
this administrative burden. These changes range from 
simplifying the rent calculation process to expanding the 
Moving to Work program.
    While these proposed changes may appear to be common sense 
approaches for addressing the problem, they may also have 
unintended consequences.
    In this hearing, we hope to gain the perspective of tenant 
advocates. We also want to ascertain the impressions of our 
witnesses on any past or current proposals designed to address 
these issues. The second purpose of today's hearing is to 
review the public policy theory behind the Federal investment 
and public and affordable housing and the role of the Community 
Reinvestment Act and how it has played in achieving the public 
policy goals.
    As the subcommittee learned in its May 23, 2006 hearing on 
public housing in the capital markets, the Community 
Reinvestment Act has provided incentives to some financial 
institutions to invest in low-income housing when they may not 
have otherwise done so. However, recent rule changes by the 
four agencies regulating financial institutions have caused 
some affordable housing advocates to be concerned that these 
goals may be undermined. It is their concern that these rule 
changes may weaken the effect the CRA has on future decisions 
by financial institutions to invest in affordable housing. For 
this reason, we have invited two CRA experts to testify on this 
topic. Before we move on, I would like to yield to our ranking 
member, the gentleman from Missouri, Mr. Clay for any opening 
remarks he may have.
    [The prepared statement of Hon. Michael R. Turner follows:]

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    Mr. Clay. Mr. Chairman, I thank you for holding today's 
hearing to examine how well programs to decrease widespread 
poverty in public housing are working. I welcome our witnesses 
and look forward to their testimony.
    There have been significant pros and cons raised concerning 
both public housing rental costs and efforts to develop mixed-
income housing, the options for a resident. Although current 
law seeks to protect the poorest of residents with the 30 
percent cap on rent, many lower-income working individuals are 
now contributing upwards to 50 percent of their annual income 
toward rent. This is a major concern for me as many public 
housing residents that return to work end up in low-wage jobs 
with little hope for advancement.
    Furthermore, I have significant concerns about the 
elimination of program requirements to replace a decommissioned 
housing unit with a new unit on a one-to-one basis. This 
policy, coupled with reductions in the number of housing 
vouchers available, is causing significant decreases in the 
availability of affordable public housing units for many low-
income working citizens.
    As I've previously stated, if the Federal Government cannot 
be considered a reliable funding partner, our capital markets 
will have little incentive to remain a contributor to the 
development and maintenance of public housing programs. While 
the Community Reinvestment Act and other proposals are helpful, 
pure economics will not permit adequate investment without a 
strong commitment from both the Congress and the 
administration. This concludes my remarks, Mr. Chairman, and I 
yield back.
    [The prepared statement of Hon. Wm. Lacy Clay follows:]

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    Mr. Turner. Thank you, Mr. Clay.
    Today we have one panel of five witnesses. The first three 
witnesses will discuss the self-sufficiency and poverty 
concentration topic. Next, as I just mentioned, the last two 
witnesses will discuss the Community Reinvestment Act and its 
relationship to affordable and public housing. First, we will 
hear from Jon Gutzmann, president of Public Housing Authorities 
Directors' Association, and executive director of the St. Paul 
Public Housing Authority. Next, we have George Moses, chairman 
of the board of the National Low Income Housing Coalition and a 
tenant organizer in Pittsburgh, PA. Following Mr. Moses, we 
will have James A. Riccio, director of low-wage workers and 
communities at MDRC, a research institution focusing on social 
programs. On the issue of the CRA, we will first hear from 
Benson ``Buzz'' Roberts, senior vice president for policy and 
program development at Local Initiatives Support Corp. [LISC]. 
And, finally, we have Judith Kennedy, president and CEO of the 
National Association of Affordable Housing Lenders, who will 
also be speaking to us on the CRA.
    I welcome each of you here today, and we look forward to 
your comments. Each witness has kindly prepared written 
testimony which will be included in 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. So if you 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 will begin our testimony today with Mr. Gutzmann.

     STATEMENTS OF JON GUTZMANN, PRESIDENT, PUBLIC HOUSING 
  AUTHORITIES DIRECTORS' ASSOCIATION, EXECUTIVE DIRECTOR, ST. 
PAUL PUBLIC HOUSING AGENCY; GEORGE MOSES, CHAIRMAN OF THE BOARD 
  OF DIRECTORS, NATIONAL LOW INCOME HOUSING COALITION; JAMES 
  RICCIO, DIRECTOR, LOW-WAGE WORKERS AND WORKING COMMUNITIES 
POLICY AREA; BENSON F. ``BUZZ'' ROBERTS, SENIOR VICE PRESIDENT, 
   POLICY AND PROGRAM DEVELOPMENT, LOCAL INITIATIVES SUPPORT 
     CORP.; AND JUDY KENNEDY, PRESIDENT AND CEO, NATIONAL 
           ASSOCIATION OF AFFORDABLE HOUSING LENDERS

                   STATEMENT OF JON GUTZMANN

    Mr. Gutzmann. Thank you, Chairman Turner and subcommittee 
members.
    I am Jon Gutzmann and the president of the Public Housing 
Directors Association. I am also the executive director at St. 
Paul Public Housing, a position I have had for the last 18 
years. I'm testifying on behalf of PHADA, its 1,900 members and 
St. Paul Public Housing, which has 20,000 low-income 
households, and I'm advocating on behalf of the 1.2 million 
households that live in public housing. Public housing is 1 
percent of the housing supply in America. Our agency has been 
rated a high performer ever since it was created. We collect 99 
percent of the rent. We've been 99 percent occupied for 7 
consecutive years, have had no audit findings for 9 years and 
many more things. And I point to those out of pride but also 
say they're representative of most housing authorities in the 
country.
    As I mentioned, housing represents 1 percent of housing in 
America, and it's under assault. More than 60 percent of public 
housing residents have incomes below 30 percent of AMI. The 
average income of $11,000, frankly, is about 20 percent of AMI. 
The shelter is for mostly very poor, mostly elderly, mostly 
disabled and a vast majority who either work or are on a 
pension but is under severe distress.
    And the source of distress is threefold. The shrinking 
Federal financial support from Congress, burdensome 
micromanagement from HUD, and a real resistance to change and 
deregulation from some of our advocacy colleagues. The 
combination of these influences place the public housing 
program in jeopardy. And although appropriations are not a 
matter of this subcommittee's jurisdiction, I think it's 
difficult to talk about policy reform without talking about the 
dollars. Our programs have lost $1.4 billion in the last 4 
years. The House recently approved the appropriation budget for 
2007. And in it, $250 million is eliminated from the capital 
fund, and the operating fund is only funded at 78 percent. 
Contrary to the deregulation and decontrol goals of QHWRA, 
housing authorities face unprecedented levels of 
micromanagement and oversight from HUD. HUD is ignoring its 
recommendations from its inspector general and how they want us 
to set up procurement. HUD is moving away from GAAP accounting 
requirements and implementing new mandates and more.
    So added to the funding problem and the HUD 
micromanagement, it just seems that our programs are under 
assault, and I predict that many housing authorities will be 
out of business within a few years. PHADA has supported for 
over 15 years national policy alternatives that preserve the 
public housing asset and improve the quality of the stock and 
the way we conserve residents. We believe in deregulating 
public housing and getting the true flexibility that QHWRA 
promised. We want to support and maintain communities within 
public housing and encourage appropriate levels of self-
sufficiency by residents.
    We do endorse the Moving to Work programs that have been 
advocated. The recently introduced Moving to Work Charter 
Program Act, Senate 3508, would make the demonstration 
permanent, expand a number of participants from the current 27 
to 250 agencies of diverse size. In the experiences of the 
existing Moving to Work communities like Keene, NH, Portland, 
OR, and others, demonstrate that housing authorities can 
establish rent structures that preserve affordability while 
rewarding work. There are documented positive outcomes in these 
housing authorities, and there are no documented outcomes of 
PHAs rushing to the marketplace with their rents, which is a 
fear many of our advocate friends have.
    Others would say these are anecdotal. Well, the anecdote of 
the Keene Housing Authority added to the anecdote of the Tulare 
County Housing Authority are real tenants and many of them who 
have successfully transitioned from welfare to work while 
maintaining affordability.
    We've had experiences in my housing authority with 
unanticipated outcomes of the existing rent structure where 
people quit their jobs when the earned income disregards 
expire. PHADA has promoted rent reform for the last 15 years. 
In 2004, we introduced our rent reform proposal. It has two 
alternatives we believe would resolve this problem. One is a 
tiered rent system that resembles the Low-Income Housing Tax 
Credit System. It can be made affordable. And the second is a 
simplified income-based rent system. I'll stop right there, Mr. 
Chairman, and take your questions later.
    [The prepared statement of Mr. Gutzmann follows:]

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    Mr. Turner. Thank you.
    Mr. Moses.

                   STATEMENT OF GEORGE MOSES

    Mr. Moses. Thank you, Mr. Chair. Thank you to the 
subcommittee. My name is George Moses. Thank you for the 
opportunity to testify before the House Government Reform 
Subcommittee on federalism and the Census. I am chair of the 
board of the National Low Income Housing Coalition. I reside in 
Pittsburgh, PA, where I am a tenant organizer, member of the 
Southwestern Pennsylvania Alliance of HUD Tenants and a member 
of the Board of Directors of the Housing Alliance of 
Pennsylvania. I was a project-based Section 8 resident for 15 
years until last month.
    The National Low Income Housing Coalition is focused 
exclusively on what is in the best interest of people who 
receive and those who are in need of Federal housing 
assistance. These are people with low incomes. Our research has 
shown that there is nowhere in the United States where you can 
work full time at minimum wage and afford the local fair market 
rent for a one-bedroom apartment. The private market does not 
meet the housing needs of the lowest-income Americans.
    In Pittsburgh, there's a deficit of more than 15,000 units 
affordable and available to people with low incomes below 30 
percent of the area median. Unless this reality changes, the 
Federal Government has to help bridge the gap between housing 
costs and what low wage earners and people on fixed incomes can 
afford.
    If we define self-sufficiency as being able to take care of 
one's self and one's family, I would argue that all residents 
of Federal assisted HUD housing are self-sufficient because 
they have found ways to afford housing in a market where there 
simply are no affordable alternatives.
    HUD's Moving to Work has in its name the words ``moving and 
work'' but this demonstration with public housing cannot show 
itself to have accomplished its goal, reducing costs or 
increasing housing choices. The jury's still out on this 
demonstration model to achieve its goals. HUD's own reports as 
well as the HUD's inspector general have issued inconclusive 
reports on Moving to Work. We fear the real motive behind the 
proposed expansion of the Moving to Work is to give PHAs the 
authority to disregard their statutory requirements of meeting 
the needs of the lowest-income people in an affordable way in 
order to cope with the continued cuts in the PHA budgets caused 
by Congress's failure to appropriate significant funds to run 
PHAs. This is not an acceptable reason to take a huge risk in 
the well being of millions of people with modest means.
    To many neighborhoods, they might not look like good 
neighborhoods. My neighborhood was such a neighborhood, but 
there was a lot of good neighboring. We must be extremely 
careful when we interrupt this neighboring and community under 
the name of revitalization and deconcentration of poverty. When 
you tear all that apart, you don't know your neighbors; you 
don't know where to turn when you need a baby sitter, a friend, 
a quart of milk or just someone to talk to.
    From our perspective, it's about choice. HOPE VI demolishes 
public housing under the name of deconcentration but only 
provides vouchers that can be used in other high-poverty 
neighborhoods. This is not choice. To claim to want to 
deconcentrate but then offer no real choice for how extremely 
poor people can afford to live in low-poverty areas is much 
more about displacement of the Nation's Federal housing safety 
net. And I would recommend that folks read, Root Shock, by Dr. 
Mindy Fullilove, who explains this very well.
    Congress's appropriations must ensure that housing 
assistance funds serve the lowest-income households. In 
Pennsylvania, more than 87 percent of the households with 
incomes below 30 percent of the area median pay more than half 
of their incomes toward rent. Only 10 percent of households 
with incomes between 31 and 50 percent of area median do so. In 
Ohio, more than 90 percent of the households with incomes below 
30 percent of area median pay more than half of their incomes 
toward rent.
    The National Low Income Housing Coalition proposes a new 
housing production and preservation program, a national housing 
trust fund. Such a fund exists in H.R. 1461 and would provide 
new off-budget resources to produce and preserve housing for 
extremely low-income people. This solution is desperately 
needed and is at hand. We must know how to--so we know how to 
solve our Nation's housing crisis by producing and preserving 
affordable housing for low-income folks. This is a tremendous 
network of professionals ready to take on the task. They just 
need the resources to do so. Thank you very kindly.
    [The prepared statement of Mr. Moses follows:]

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    Mr. Turner. Thank you.
    Mr. Riccio.

                   STATEMENT OF JAMES RICCIO

    Mr. Riccio. Mr. Chairman and committee members, I'm Jim 
Riccio of MBRC, a national nonprofit, nonpartisan policy 
research organization. Thank you for inviting me to testify 
today.
    Most people would agree that public housing residents who 
can work should work. After all, these are some of the poorest 
people in some of the poorest places in the Nation, and it's 
hard to imagine they can escape poverty or their communities 
can reduce the concentration of poverty, or that public housing 
itself can remain viable without making work a part of the 
solution. Simply put, many residents need to earn more money, 
and most people would agree that something should be done to 
help them to do that.
    But what should be done? Unfortunately, this is a field in 
which credible evidence about effective strategies is hard to 
come by, and policymakers usually have to guess about what 
would work. Today I want to tell you about one approach that we 
now know is effective. It's called Jobs Plus. It's the most 
carefully evaluated jobs initiative ever tried in public 
housing. It was a focus of a six-city evaluation sponsored by 
HUD and the Rockefeller Foundation, along with other funders. 
MBRC conducted the study.
    The good news is that this study, which was conducted like 
a clinical trial using a control group, shows that Jobs Plus 
substantially increased residents' earnings in the mainstream 
labor market. It thereby helped residents advance toward self-
sufficiency, which is a longstanding bipartisan public policy 
goal now enshrined in QHWRA. How did Jobs Plus do this? First, 
it attacked the problem with a three-component intervention. It 
offered assistance with employment and training at a job center 
located conveniently within the housing development. It gave 
working residents a break on their rent by introducing new rent 
rules, allowing them to keep more of their earnings, and these 
were rent moves that were simpler, broader and much more 
generous than in QHWRA. And it spread work-related information 
through residents' own social neighbor to neighbor networks 
within the development.
    In addition, Jobs Plus was not a limited-slot program but 
reached out to all working-age residents of the development. 
Finally, Jobs Plus was not just a housing authority program. 
Instead, it was accomplished through a local partnership that 
involved the Welfare Development, Workforce Development Agency 
and work force representatives. Now let me tell you a little 
bit more about what the sites achieved and how big a difference 
they made. Three of the sites, Dayton, OH, Los Angeles, and St. 
Paul, fully implemented and sustained Jobs Plus over several 
years. From their experiences, we learned not only that it is 
possible to integrate a work focus into the day-to-day 
operation of public housing but also how to do this. In these 
three sites, we found Jobs Plus increased residents' average 
earnings above and beyond the control groups' earnings by over 
$1,100 per year during the 4-year followup period. This is a 14 
percent improvement over the control group, which was made up 
of similar residents living in public housing elsewhere in the 
city. Also, the size of the earnings effect grew larger over 
time. In the 4th year, in fact, it exceeded $1,500 per 
resident, which is a 20 percent improvement, and there was no 
sign of the effect going away by the end of the study. And, 
cumulatively, by the end of the study, residents who had worked 
were substantially better off than they would have been without 
Jobs Plus by about $6,000 on average. The program also had 
large earning effects for a wide range of residents including 
welfare recipients and those not on welfare, men as well as 
women, African-American, single mothers and legal immigrants 
from Mexico, Central America, Southeast Asia and many other 
parts of the world. By increasing residents' earnings, Jobs 
Plus helped deconcentrate poverty within public housing. This 
was especially true in tight housing markets where resident 
move-out rates were low. Deconcentrating poverty is another 
important core goal, and Jobs Plus contributed to it by helping 
existing tenants not by replacing them with new higher-earning 
residents.
    Finally, it's worth noting that Jobs Plus achieved its 
results at fairly modest costs. The overall net government 
expenditure on Jobs Plus per person totaled roughly between 
$2,000 to $3,000 over the 4-year period, including the cost of 
the rent breaks. So, to sum up, the Jobs Plus results deserve 
special attention because they occurred in high-poverty public 
housing environments; the effects were substantial and 
sustained; they occurred for very different types of people and 
places; they occurred in good economic times and bad; they were 
achieved for modest costs; and they are based on highly 
credible evidence. As a result it's likely that many more 
public housing authorities would embrace an opportunity to 
implement Jobs Plus if they had the funds to do so. So the 
evidence of Jobs Plus's effectiveness in hand, Congress may 
wish to consider introducing Jobs Plus in additional public 
housing developments across the country. It need not try to do 
this everywhere, but it would serve an important public purpose 
to replicate Jobs Plus even on a limited basis where the need 
is great and where the local commitment is strong. Thank you.
    [The prepared statement of Mr. Riccio follows:]

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    Mr. Turner. Thank you.
    Mr. Roberts.

            STATEMENT OF BENSON F. ``BUZZ'' ROBERTS

    Mr. Roberts. Thank you, and good morning. I'm Buzz Roberts. 
I work at LISC, the Local Initiative Support Corp. One brief 
word about LISC, our job is to raise capital mostly from the 
private sector and to provide it to nonprofit community 
organizations that are rebuilding urban neighborhoods and 
isolated rural areas, and we do that all over the country 
through 33 local offices and a national rural development 
program. Over our 26 years, we've raised about $7 billion and 
put that on the street in low-income communities, and that 
includes almost $1 billion last year alone.
    Today, Judy Kennedy and I are going to cover some of the 
same territory. So in order to make this as efficient as 
possible, I'm going to talk a little bit about how Federal 
policies come together on the ground, and Judy's going to talk 
a little bit about some specific policy recommendations that 
flow from all that. Over the last 20 years, we have seen the 
emergence of a new production system for affordable housing and 
a wider range of community development activities at the local 
level, and this system has been flexible and decentralized and 
well integrated. And it is distinctive because it is market-
driven; it is locally controlled; and it is performance-based. 
So there are a lot of checks and balances on the system that 
make it work. And what it does very effectively is it combines 
a variety of public policies. In fact, a cluster of policies 
has really enabled this system to emerge and to be sustainable 
over time with private sector investment, and private sector 
investment is crucial to this whole system. Now, part of that 
is that there are limited Federal resources, so in order to 
stretch them as far as possible, it's great to bring in private 
capital. That's fine. But there are other important reasons as 
well. Private capital brings a discipline to the system that 
you just can't get with public funds alone. And for those of us 
who care about not just providing housing per se but also 
rebuilding communities, access to that private capital is 
fundamental to healthy communities well beyond the reach of a 
particular deal or a particular loan, and a system that works 
encourages the private sector to do more and more in these 
communities. So we can really reverse the vicious cycle of 
disinvestment and turn it into a virtuous cycle of 
reinvestment, and we're seeing that happen in some of the 
toughest communities around the country, urban and rural.
    So how does it work? I'd like to sort of walk you through a 
little table on page 3 of my testimony. It looks like this. 
It's somewhat simplified but not too awfully simplified because 
it shows you how financing comes together. One piece is equity 
investment. That's what owners invest. In a typical affordable 
housing production deal, that's going to come from low-income 
housing tax credits. In a more traditional private sector 
model, equity investors are going to look for cash-flow and 
capital appreciation. Affordable low-income housing isn't going 
to provide either of those things. So instead, the Low-Income 
Housing Tax Credit does that, and it is performance-based, and 
so there are a lot of incentives from equity investors to plan 
and build and operate these properties very, very tightly.
    Second is a first mortgage. This is obviously a traditional 
source. Banks traditionally originate these loans. And the 
third is gap financing. And that's pretty much as it sounds. 
When you look at how much a bank can lend and how much 
investors can invest, there's often a gap in order to make the 
deal really work, and that's where gap financing comes into 
play.
    Now, what about this system? What about the Federal 
policies? Pretty simple. Equity investment comes from housing 
credits, as I said. States allocate those credits according to 
a very competitive allocation plan, and oftentimes, banks make 
those investments. And guess what, CRA is an important reason 
they do.
    Additionally, Fannie Mae and Freddie Mac are also major 
investments based on housing credits. On first mortgages, 
again, CRA makes a big difference here. It encourages banks to 
make those loans. Those loans are often profitable and safe, 
but they're what we call high-touch loans. They're not easy to 
do. They take time and effort. And if you're just trying to 
maximize your profit, you might want to find a bigger easier 
deal to do. And the Fannie Mae, Freddie Mac affordable housing 
goals encourage Fannie and Freddie to buy those loans on the 
secondary market. So it's a very important part of the policy 
puzzle.
    And, finally, the gap financing typically comes from home 
and CDBG and a variety of other Federal sources. HOPE VI often 
plays this role in the redevelopment of public housing. So you 
put that together, and you've got yourself a deal.
    [The prepared statement of Mr. Roberts follows:]

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    Mr. Turner. Thank you, Mr. Roberts.
    Ms. Kennedy.

                   STATEMENT OF JUDY KENNEDY

    Ms. Kennedy. Well, first let me compliment the committee on 
the hearing. It's the first of its kind in either chamber that 
I'm aware of. The devil's in the details of a lot of things, 
but certainly the description Buzz just gave, brings home to 
you there are a lot of details and a lot of devils in community 
reinvestment. Our group represents 50 of the largest banks and 
50 of the blue chip nonprofit lenders that many of you know of 
because they're in your home State.
    The concept was actually established by David Rockefeller 
before community reinvestment. He's still alive. He's 91. I 
haven't given up hope that somebody's going to lure him to 
Washington for a hearing. His premise was that if banks 
couldn't get involved in very low-income housing on their own, 
they could pool their money, they could pool their risks, they 
could hire the right skill sets for originating, underwriting 
and servicing loans affordable to very low income, I mean under 
50 percent of area median income. Our nonprofit lenders by and 
large as the San Francisco Fed has documented are providing 
affordable housing to families under 60 percent of area median 
income to the degree of about 90 percent. It's Self Help in 
North Carolina. It's Ohio Capital Corp. and the National 
Affordable Housing Trust in Ohio. And so this is the new face 
of affordable housing. It's beautiful. It's very different from 
what you'd think of or the public thinks of in terms of 
programs.
    I heard former Fed Chairman Paul Volcker speak and the 
difference it's made in the last 30 years as taking the rough 
edges off of capitalism. And in a sense, that's true, but as 
much as anything, it's been an exciting motivation to go into 
emerging markets. Without which I think our cities would look 
very different.
    All you have to do to understand CRA is drive up 14th 
Street. You get a sense of a neighborhood that over 20 years 
has been totally revived by infusion of private capital. So 
every study that's looked at this has confirmed that it's an 
enormous success. Total data's hard to come by, but focus on 
some of these numbers: $16 billion invested in low-income 
housing over about a 10-year period by just national banks. 
Take a look at the Federal Reserve's report from 2000, that 
banks have put about $1 trillion into low-income lending over a 
6-year period. Take a Treasury study in 2001 that said 
increased home purchase loans to low-income, under 50 percent 
of area median income, up 94 percent in 5 years. The numbers 
are extraordinary even though they're not totaled. Clearly, 
this works. Clearly, banks know that it works and are excited 
about the business. I've got to bring home though that there 
are some things that we need to increase the flow of private 
capital to low-income neighborhoods.
    Buzz spoke about Fannie and Freddie buying the loans. 
Unfortunately, the loans that they buy are not the same loans 
that banks are required to originate. Fannie's affordable 
housing goals are very different from banks, and it's allowed 
them frankly to double count, triple count the House would fix 
this. Mr. Oxley and Ney's bill would reform the GSE bills so 
they would finally have to provide a secondary market for loans 
affordable to low-income families.
    On the Senate side, Senator Santorum, Sarbanes and Reid are 
in agreement so I hope this would happen soon. We do have some 
CRA rule problems. I think we had a problem a couple years ago 
when some of our bank regulators didn't understand the enormous 
impact of CRA on home building. Take, for example, that the 
Low-Income Housing Tax Credit is involved in 40 percent of all 
rental housing starts in our country and 98 percent of all new 
rental affordable to low income. Once the bank regulators 
understood the impact of gutting the Community Reinvestment 
Act, three of them stopped, reconsidered and did the right 
thing, and I give great credit to the OCC, the FDIC and the 
Federal Reserve for coming out with a rule for what they call 
intermediate small banks, banks between $250 million and $1 
billion. It's an improvement over current regulations. 
Unfortunately, the Office of Thrift Supervision without real 
public consultation or notice totally gutted Community 
Reinvestment Act regulations, and that has not been fixed 
despite the fact that there's a new OTS director for almost the 
past year. So we need to bring all of the rules into alignment, 
and we need to do the right thing. And it would also be 
sensible to allow big banks credit for community development 
lending. Ironically, this lending on affordable multifamilies 
doesn't get any CRA credit now for banks over $1 billion. It 
maybe gets a little icing on the cake, but it's not a layer on 
the cake. That should be fixed.
    Finally, what we've learned the hard way is it's hard to do 
anything for public housing with the micromanagement that, 
frankly, the pulling out the rug from underneath the Section 8 
and the block grant funding and public housing funding now. You 
know, when banks are investing for CRA, they're investing your 
savings and mine. They have to be prudent about maybe taking a 
little less return on the loan, but they do need to have a 
return to the principle. And until 2 years ago, if a borrower 
came in and said, I'm going to take all the Section 8 vouchers 
that are presented to me in Columbus, anybody that comes with a 
voucher, I will be tickled to rent to, that would get a little 
increase in the mortgage amount because you knew you could 
count on Section 8 funding. In other words, he could create a 
couple more affordable housing units. By virtue of what the 
administration's done, Section 8 is now a liability in 
underwriting. In other words, my lenders are asking for 
reserves if a borrower says he wants to do Section 8.
    And then, finally, what Katrina has taught us is, you can't 
rob Peter to pay Paul. It doesn't make sense to take money away 
from Missouri or Ohio for those States. They need their own 
dedicated resources. Because their rents were so low pre-
Katrina, we think they need Section 8 vouchers on top of the 
generous tax credits being provided. And finally, I'm not going 
to go into the details with this. Just know that we've been 
following the Basel Accord, the international risk-based 
capital rules. Right now, American regulators are supporting us 
in saying banks' investments in communities shouldn't be 
subject to the kinds of capital requirements on investing in 
Bill Gates' latest venture. And I hope that will all come 
together. We'll be following it closely. Thank you for giving 
us this opportunity to talk about this lovely new face of 
affordable housing.
    [The prepared statement of Ms. Kennedy follows:]

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    Mr. Turner. First off, I want to thank all of you again for 
incredible testimony, incredible insight into this issue and 
topic. But as you are aware, our subcommittee has been taking a 
look at public housing and affordable housing and the 
mechanisms for funding that are out there, its impact on 
neighborhoods and communities and the impacts on residents. The 
discussion that we're having on the ability to assist residents 
in transition, providing services to residents who are in 
public housing, recognizing that communities that have public 
housing are hosts to those housing, it's part of the fabric of 
the neighborhood and the community. And how do we make certain 
that the neighborhoods and the community and the public housing 
authorities are meshed? And then the issue of the capital 
markets, and how do we find private capital to support 
affordable housing?
    And, Buzz, you gave an incredible discussion of the tax 
credit process, and your chart is incredibly helpful. You took 
a $150,000 unit and indicated $90,000 of the money would be 
coming from tax credits, $35,000 from a first mortgage, $25,000 
from a gap financing, which could be in the form of additional 
public subsidies that come from either CDBG or home dollars 
that a community contributes.
    In their discussions, both Ms. Kennedy and Mr. Roberts, you 
acknowledge also that some of these Low-Income Housing Tax 
Credit developments would seek residents with Section 8 
vouchers and provide housing for them. When you look at the 
ability to provide private capital to these projects, the 
amount of subsidy does get to be significant. I mean, even 
though there's a line of tax credits being a credit, it really 
is in the form of a grant. And those are Federal moneys that 
are going directly to the project through private hands. 
They're exchanging a credit that they're going to receive off 
of their income taxes in exchange for the dollars that they're 
handing to the development.
    So of the three categories that you identified, only one is 
fairly clear or clean of any other additional subsidy. Then 
once you take the tenant, and if they have a Section 8 voucher, 
you have additional subsidy that's being laid on top of that. 
Perhaps you could speak for a moment as to why this is still a 
good deal even though the tax credit line item, the gap 
financing, which could be CDBG dollars or home dollars, and the 
Section 8 voucher placed on top of it are all looking to some 
type of Federal program or source?
    Mr. Roberts. Right. Well, it costs a lot of money, and it 
takes a lot of subsidy in order to serve very low-income 
tenants on a sustainable basis. And you know, it's just a 
matter of math. If you have a tenant who is earning $20,000 and 
they can afford to pay 30 percent of that for rent, that's 
about $500. First, off the top are things like utilities and 
maintenance and repairs and management, and that just doesn't 
leave a lot of cash-flow available to carry a private mortgage.
    So if there were plenty of supply of affordable rental 
housing, this would not be a worthwhile thing to do. But I 
would also say there are four or five specific kinds of cases 
where there is simply no substitute for production. One is 
where you have deteriorating stock that is dragging down an 
entire neighborhood, and unless you fix that stock, you are 
going to lose a lot more not just affordable housing 
opportunity for poor people but also moderate-income housing 
for moderate-income people and middle-income people in that 
same neighborhood. We lose entire neighborhoods because of this 
kind of deterioration, and a few billion dollars of prevention 
is worth manyfold that in cure.
    Second is there is some housing that serves populations 
that have special needs, whether they're homeless or elderly or 
disabled or struggling to become independent off welfare or 
whatever the case is. In those special needs housing 
situations, you have to produce because there is an integral 
service and housing system that enables folks to live stable 
and independent lives. And it's much cheaper to do that than to 
have mentally ill people unstable, committing crimes landing in 
acute care in hospitals, landing in jail; much cheaper than 
paying through the Medicare/Medicaid system for nursing homes 
because there's no decent independent living facility for the 
elderly and the like. And third is, there are some places where 
we have just outright supply shortages, and you have to produce 
in order to overcome those.
    Ms. Kennedy. Can I just add to that?
    Mr. Turner. Ms. Kennedy, if you would pause for a second. I 
think almost all of you are aware, I'm a big fan of Low-Income 
Housing Tax Credit. So having served as mayor of my community 
two terms, 8 years, one of the things that we had undertaken 
and were utilizing the Low-Income Housing Tax Credit for 
redevelopment, the senior housing is an area where we were most 
effective, even taking two abandoned structures where we 
combined it with historic tax credit to cause redevelopment. 
One of the developments--actually two of the developments 
ultimately my grandmother moved into. She moved into one and 
then relocated into another one when we opened the next one. 
And she was not receiving a Section 8 voucher, although she 
qualified for the income requirements. And so I'm aware also 
that you get a mix of the initial subsidy that occurs, and then 
some units where the initial subsidy occurs, but then also the 
Section 8 voucher provides additional subsidy. So the unit as a 
whole has a different cash-flow than just a public housing 
facility itself.
    But my question--and Ms. Kennedy, we won't miss your 
comments. I will give you an opportunity also at the end to add 
anything that you want to add as we go along. I will give you 
all an opportunity to add to the record.
    But the attraction of capital to these projects is really 
how they're tauted. The question would be to Mr. Roberts, Ms. 
Kennedy and Mr. Gutzmann--aware of any studies--and also, Mr. 
Riccio, if the other two of you are aware, or Mr. Moses, you 
can also chime in--of any study of comparison of the Low-Income 
Housing Tax Credit as a vehicle for providing affordable and 
low-income housing versus straight public housing, and its 
cost, overall subsidy cost to the taxpayer? I'm unaware of an 
actual comparison of how we can cut a check for public housing 
authorities to create a unit. We can put together a development 
vehicle for Low-Income Housing Tax Credit program which creates 
a unit. In the end, the cost to the taxpayer--I wonder if you 
are aware of how that comparison flushes out.
    Mr. Roberts. I'm not sure I have seen a study about it, but 
I would say that our experience with housing credits has been I 
think unique in the history of Federal housing policy. And 
that's because it's a pay-for-performance credit. And if you 
only pay for success, you set up a system that really creates 
success. So in the housing credit world, we see foreclosure 
rates, which is how we measure failure, at 0.02 percent 
annually, 0.02 percent annually. That is a much lower 
foreclosure rate on low-income rental housing without the 
benefit of Federal guarantees or guaranteed rent flows than we 
see on any other form of commercial real estate, including 
luxury high rises, office and retail.
    Ms. Kennedy. I guess you hit the nail on the head with the 
story of your grandmother. When Mr. Oxley and Mr. Ney wanted to 
understand what pulling the rug out from Section 8 meant in 
their districts, Ohio Capital Corp. took them to a lovely tax 
credit building, introduced them to a lovely little old lady 
who had also lived in the building affordable to under 60 
percent of area median income with a little help from her son. 
She didn't have a voucher. Until he went to Iraq, and he was 
re-upped. And all of a sudden, she needed a voucher to be able 
to stay in that apartment. So I guess I would say, think about 
this continuum of need. What CRA did brilliantly--let's use 
Chicago as an example where there's still a very strong housing 
stock that just needs some rehab. How can affordable to under 
60 percent of area median income--there doesn't involve tax 
credits, but in Chicago for elderly and disabled, there is a 
need for tax credits, and in Chicago, there is a need for tax 
credits plus Section 8 plus home because of the cost of 
construction. And in Chicago, there is a need for public 
housing. So all of these resources put together address 
different places along the continuum of need.
    Mr. Gutzmann. Mr. Chairman, I would just echo that 
continuum concept. If you look at, again, the entire supply, if 
you add in the tax credit and the Section 8 and the public 
housing, we're still talking about 4 to 5 percent of the 
housing supply in America. That's all we're serving with all of 
these products, and there is a continuum, and they serve very 
different audiences. Tax credits can never reach the income 
levels that public housing serves. The tax credit deals 
generally are targeted to people at 50 to 60 percent of area 
median income. Public housing across the country from the 
backward-up model of who applies, that's who you'll serve; it 
serves 20 percent of AMI nationally. So it's, again, it's a 
slice of our inventory, 45 percent nationally, and it's really 
a gut check of America on how we want to serve. There's no 
secret to get those kind of deep subsidies. It costs money.
    And last point I'd make, in St. Paul, it costs me $650 a 
month to run a public housing unit. The backward model of rent 
based on income, my average rents are $200. I can only serve 
people at 20 percent of AMI if I get $450 a month from HUD. And 
if we want that product deeply affordable, then we have to pay. 
There's no other way to really make it work. We're kind of 
saying that now we don't want the product, is really the state 
of our world. The appropriations have basically already written 
off 20 percent of the housing supply of America. And we're 
going the wrong direction with our funding, and there's just no 
secret. It costs money to serve low-income folks.
    Mr. Turner. Mr. Moses and Mr. Riccio, I want to change 
topics for a moment because, in the two different testimonies, 
there was a great comparison of the issue of what I consider 
the transition process for low-income housing. Obviously, our 
seniors or those who have a disability who are in our public 
housing or some other condition that is making it difficult for 
them seeking employment or making a transition, impediment if 
you will, are those individuals we want to make certain we 
provide that safety net in the continuation of housing 
opportunities in public housing? All the other studies that 
have been done have indicated that the most important thing 
that we could do in public housing besides providing clean 
affordable safe housing is the intervention process of 
assistance for those individuals that have the ability to 
transition to independence; that being the goal of those who 
are in public housing, is the same goal as the providers, same 
goal as the taxpayer and the families that are impacted. That 
is a difficult process in that the circumstances of each 
individual who's in public housing, their needs, the assistance 
that they need and intervention for transition will vary 
widely.
    In looking at the public policy issues of how do we make 
certain that people are in an environment that encourages 
transition and independence, one of the ills that we saw was 
economic segregation. When you look at the model of a small 
town, those individuals who are in an economically diverse 
small town, their children, their families tend to do better in 
the opportunities for transition than individuals who are in 
high-concentration poverty neighborhoods. And you know, when I 
was the mayor of Dayton, I lived in one of the lowest-income 
census tracks in the city. And I can tell you that, as the 
neighborhood was transitioning, one of the things that was 
important for the interaction in the community was an 
understanding of what's even necessary as children looked to 
their dreams as to what they might become in the future, as to 
what's necessary for them to do now, what's necessary for them 
to do later, if someone wanted to say, I want to be a lawyer, 
it was important that there was a lawyer in the community that 
can say, what does it mean, if you're going to have that goal 
and pursue it, what is that path? So economic segregation we 
know is an ill that we want to remedy. I'm not very fond of the 
word deconcentration because it sounds like your goal is 
dispersal of the individuals instead of improving the lives of 
the individuals, and in our public policy review, economic 
segregation has proven to be a cycle of poverty.
    Mr. Moses, you gave a great description of the concept of 
community that I think is one that certainly I saw in my 
neighborhood, and I think is very important.
    Mr. Riccio, you gave a great--your testimony was a great 
public policy outline of the types of topics and issues that 
we're addressing. So I'd like if we could for a moment have a 
discussion, and we'll start with Mr. Moses and then Mr. Riccio.
    I'm also very fond of saying, those of you who have been to 
my hearings before, you know that another word that I hate is 
gentrification because I've never met a gentry in my life. So 
when we look at communities that are in transition that are 
going to diverse economics, it does appear that there is an 
improvement in opportunity for everyone who is in the 
community. And Mr. Moses, I'd like you to expound, if you 
would, on your statements because your statements could be 
taken to be cautionary of making certain, as you're making this 
transition, that you be sensitive to the issue of--that you 
have a community that you are dealing with, relationships and 
individuals, much as we should have been when we put the 
interstate highways through cities and didn't take into 
consideration the fabric of the communities that we divided. Or 
it could be an alternate view of the issues of the public 
policy of making certain that we have economically diverse 
communities.
    And Mr. Riccio, if you would, in following up on that, if 
you could talk to how our having diverse economic communities 
might relate to the issue of transition economically.
    Start with Mr. Moses.
    Mr. Moses. Thank you. I appreciate what you said, sir, and 
I look at what I used to do when I came to Washington, when I 
first came here, and I met Cushing Dolbeare some years ago, and 
she has been my mentor in this whole process. There was a place 
I believe that was called the Chili Bowl. It was a great place 
where you could go get food, great, great restaurant. And I 
remember the guy telling me the story that as he was growing 
up, and his dad was there; he knew everybody in the two-block 
radius. Now he knows no one. This is the story that's happening 
all across America. In Pittsburgh, it's the same thing. When 
you break up that fabric--I remember once taking some 
foundation folks in Pittsburgh on a tour of the public housing 
communities in Pittsburgh because all they had was this 
negative stereotype of who lives in public housing. And one 
morning, we got up, and we took a bus, and we rode through the 
communities, and they saw people getting up in the morning, 
going to work with their children, and fathers and mothers 
going, doing jobs. And then we took them into some folks' homes 
in public housing. And they were amazed to see the folks live 
the way they did, and the lady says, well, this is my home, why 
should it not be that way? Your home would be the same for you. 
This is my home. And she was really amazed at that. Why, I 
could not understand. But she was really amazed at that. And 
then we came through what we call was the HOPE VI thing. I 
lived through the urban renewal when the lower hill was 
removed, and my family was displaced, and we had to go other 
places. It happened all over again when we did this with the 
HOPE VI thing. People who had got removed in the 1960's were 
now being displaced in the 1990's, and the alternative was, 
people again were losing that connection of family, of friends. 
When I lived in these communities--in Bedford Dwellings. It was 
called Bedford Dwellings. It was a 1,700-unit complex that was 
straight-lined. But in there, there were different communities. 
There was Francis Street. There was Summers Drive. Whiteside 
Road. And when I get back, I'm going to a Whiteside Road 
reunion where we all get together again, but when they came in 
and said, we're going to make it better, and we're going to 
tear it down and rebuild, a lot of folks got scared because 
they remember what happened in the 1960's, and being not 
included in the planning process of what was taking place, 
families and neighbors got split apart as if you dropped a bomb 
back onto the community. And people who--I remember as a young 
man coming up, and there was a young lady. She's referenced in 
this book, Root Shock, which chronicles--Pittsburgh, the study 
was done there--that we could go to her if we had a problem; if 
you needed some, a little bit of money to pay your rent, if you 
needed a baby sitter, she would settle disputes. She was the 
matriarch of the complex.
    But when they came in and they said ``boom,'' everybody 
went. They pushed us places that we had no existence of, no 
knowledge about. And that fabric of quality, of neighboring, 
was lost.
    Who do I turn to when I need a babysitter? Who do I turn to 
when I have a problem? And as some of this, as we are led to 
believe in this Moving-to-Work experience, in Pittsburgh, at 
least, they said they were supposed to create all of these 
tiers, and it was not done.
    All of this case management, all of these things that were 
supposed to keep us together, it did not happen. And as a 
result, in some instances, 450 families, they don't even know 
what happened to them. Still do not know what happened to them.
    And so when we look at this, we must be very sensitive to 
what we do when we come into a community, and, for the sake of 
revitalization, we tear that inner fabric that makes a 
neighborhood, that makes a community. And we must be very 
sensitive to that.
    Mr. Turner. Mr. Moses, that was a very compassionate and 
great description of that issue.
    Mr. Riccio.
    Mr. Riccio. I would like to make two comments about mixed 
income. One is creating mixed income populations within public 
housing. One way to do it is to try to get higher-income people 
to move in. That doesn't necessarily do anything, at least in 
the immediate term, for the people who are already living 
there.
    Another way is to try to help the people who are living 
there move up. And that is the effect that Jobs-Plus had, 
particularly in communities where there was not very high 
turnover in public housing. So you can raise average earnings, 
increase the mix of income, or intervene, as Jobs-Plus did 
within the Public Housing Development itself. That is one 
strategy.
    Another strategy is to move people out of public housing to 
lower-poverty communities. There is another very rigorous study 
of the strategy to do that, the Moving to Opportunity Study, 
which used a random assignment methodology. So it was a very 
credible study, and it found that although there were some 
positive outcomes on safety and other issues, there were no 
effects on self-sufficiency outcomes. There was no increase in 
employment and earnings.
    So I think the idea of just moving people to a different 
environment, to a lower-poverty environment, and expecting that 
is going to change their economic experiences in the short 
term, doesn't seem to be supported by the evidence we have so 
far.
    It may be that if you move people to lower-poverty 
communities but you connect them to an employment-focused 
intervention that tries to help them adapt to work and take 
advantage of new opportunities that might confront them in that 
community, you might see some change in economic outcomes.
    Mr. Turner. We turn now to Mr. Clay. And I appreciate his 
patience as we have had this discussion.
    Mr. Clay. Mr. Chairman, let me ask Mr. Gutzmann, have 
rental policies under QHWRA, such as the flat rent option, as 
opposed to families paying 30 percent of their income, had a 
positive or negative effect on your members' efforts to 
stimulate economic self-sufficiency, and are the results the 
same between large and small or urban and rural PHAs?
    Mr. Gutzmann. Thank you. Sir, they have had some positive 
effect, I would say. But QHWRA ultimately limits any rent 
structure to 30 percent of median income. You can play around 
with flat rents, ceiling rents a little bit, but ultimately 
QHWRA did not repeal Brook, and Public Housing can ultimately 
not charge more than 30 percent of adjusted gross under any 
scheme.
    So you can have flat rent models, ceiling rent models, but 
it is not a true market model, and perhaps--nor should it be. 
It still should be affordable. I do not think there has been 
any difference in application across large or small.
    The fact of the matter is, it is still a very incredibly 
complicated rent-setting system. If you think about it, there 
is basically one rent for every person who lives in public 
housing. They all have their own rent. And that is 1.2 million 
households with their own rent.
    It is very complicated. It is very affordable, but it is 
very complicated. There are always charts we have published on 
all of the steps you have to do to disregard income. Congress 
just passed a new one with the appropriation bill that 
disregards military income.
    So housing authorities have to figure that out. HUD is over 
us on every little mistake; they say we are inefficient if we 
have one mistake. But let's just think about it. There is 
probably 1.2 million rents for 1.2 million households. It is 
very complicated.
    Mr. Clay. Sounds complicated. In your testimony you 
mentioned the Jobs-Plus program. Please offer us some examples 
of success stories from St. Paul's Jobs-Plus programs and how 
they can aid poverty deconcentration efforts.
    Mr. Gutzmann. Thank you, sir. We are proud to be one of the 
demonstrationsites in St. Paul. We had the program for 7 years. 
The headline was that the control site, when it began, only 16 
percent of the people were working; and when it was over, 51 
percent were working. And their incomes doubled during that 
period of time.
    Mr. Riccio was a close partner. MDRC evaluated it. The 
trick, though--and I talked to Jim about this--it costs the 
Federal Government $1.4 million for our success. Those 350 
families really became successful because we fixed their rent 
problem.
    We did not increase their rent when they got their job. And 
that cost us lost rent, and HUD paid. And it cost us $1.4 
million. HUD paid. So my comment is, it is a very successful 
model. People went to work, doubled their income, but it was 
kind of costly.
    Mr. Clay. I don't see that as too costly.
    Mr. Gutzmann. I personally do not see it as too costly.
    Mr. Clay. We spend money on other objects around. Thank you 
for your answer.
    Mr. Moses, in your testimony you talked about the Chili 
Bowl. It was really Ben's Chili Bowl, still here, located at 
13th and U Streets Northwest. While you are here, you may want 
to visit. Let me ask you about QHWRA----
    Mr. Moses. Are you buying?
    Mr. Clay. It is very good. I have been going since a 
teenager. QHWRA does not require PHAs to replace units that are 
dilapidated on a one-for-one match with units built in their 
place.
    What impact does this have on those at the lower economic 
rung of public housing?
    Mr. Moses. Thank you, sir. I would say it has a great 
effect. I think that has been one of the most impacted policies 
that has been--because from Pittsburgh, they demolished 
millions--thousands of units. And when you do not replace those 
units, you lose the affordability, you lose units of 
affordability for folks.
    As I have said in my testimony, that Pittsburgh, by the 
University of Pittsburgh's report, that we are lacking 15,000 
units of affordable accessible housing. And so when you have a 
PHA demolished, let us say 1,200 units of affordable public 
housing units, and only rebuild, let's say, 480 units, and of 
those 480 only so many are public housing units, so many are 
tax credit units, so many go for market rate, the loss becomes 
great. So it does affect folks, it does affect where folks live 
and how they--and where they live and who they live with.
    Mr. Clay. Thank you for that response.
    Let me ask you one other question. Does a 1 or 2-year 
exemption for those beginning to work again provide enough time 
for them to regain financial stability before facing rental 
rate increases? The 1 or 2 years, is that enough time?
    Mr. Moses. Good question. And personally I do not know, 
sir. I would, in the jobs market that is out there, in--and as 
we have stated where the minimum wage, which most of our 
workers earn, and they cannot afford nowhere; if they go up the 
pay scale, it might be, but they would have to get at a scale 
where we are talking about $15 an hour to maintain a 1-bedroom 
unit. So 2 years, I am looking at, and I would say it would be 
close, but it would be very close to doing that.
    Mr. Clay. Thank you for your response. I am going to move 
down the line.
    Mr. Riccio, are PHAs better suited to participate in Jobs-
Plus if they are moving toward communities, or if they 
participate in other types of public housing demonstrations?
    Did you hear the question.
    Mr. Riccio. Jobs-Plus, in fact, was--the Jobs-Plus sites 
were, in fact, Moving-to-Work sites. So they did have 
additional flexibility to change the rent rules and to do other 
things in support of the program. So certainly the ability to 
change the rent rules was fundamental to Jobs-Plus. And Moving-
to-Work, providing that opportunity. That is not to say that 
you couldn't operate Jobs-Plus outside of the context of 
Moving-to-Work if there were other ways, other legislation that 
would provide for modifying rent rules.
    Mr. Clay. Mr. Roberts, can you offer us some stats on the 
number of low-income areas affected since the Office of Thrift 
Supervision eliminated financial service requirements for 
thrifts?
    Mr. Roberts. Well, thrifts operate in low-income 
communities and elsewhere all around the country. So I would 
say that, in general, most places would be affected by that 
relaxation of the thrift requirements.
    Mr. Clay. OK. Let me shift to another issue that you 
brought up. In your opinion, are revenue-based tax credit 
programs considered a more desirable redevelopment funding 
mechanism for lenders than discretionary programs such as HOPE 
VI?
    Mr. Roberts. Well, you know, as the point was made earlier, 
you need different tools in your tool boxes for different 
tasks. I am reluctant to say that screwdrivers are better than 
hammers, in general. They are better for driving screws than 
hammers are, for sure, but hammers are better for driving 
nails.
    There are certain ways in which HOPE VI is absolutely 
fundamentally important. If you have a very large Public 
Housing Development project that you need to redevelop, you 
probably cannot get enough housing credits and home and CBDG 
money to do it, because that money has to be distributed fairly 
widely, and you need a big hunk of money from HOPE VI, 
typically $25 million or so, in order to get that done.
    Second is that even in HOPE VI deals, HOPE VI does connect 
with housing credits and private mortgage finance. Usually the 
mix is a little different. And, of course, you need to have the 
public housing operating subsidies or something equivalent to 
that in order to make sure that whatever portion you want to 
preserve as affordable to extremely low-income people, can do 
that.
    You know, capital subsidies are different from operating or 
rent subsidies. If a family cannot afford to pay in rent enough 
money to cover the basic operating expenses of the building, 
you can give the building away for free and it is not going to 
be sustainable and affordable at the same time.
    So you really do need to have the mix. The key is to have a 
local system in place, a partnership network that understands 
the different roles that they as players contribute to the 
system, and the different tools in the Federal tool box that 
can be best applied in the right way.
    Ms. Kennedy. I would add one thing quickly, and that is, in 
my experience, the key to private capital coming in is stable, 
predictable funding. In tax credits you have relative 
stability. You have a commitment to the investor to maintain 
all of the factors necessary to ensure those tax credits. And 
as Buzz pointed out, you have the discipline, then, of the 
private sector overseeing that.
    Five years ago, section 8 was considered stable, 
predictable funding. And banks leaned on Fannie and Freddie for 
worrying about appropriations risk and not buying those loans 
because they involved Section 8.
    We were talking about financing public housing, property by 
property. Well, the funding is no longer stable, it is no 
longer predictable, it is no longer an asset.
    Mr. Clay. Thank you for that. Mr. Chairman, my final 
question to Ms. Kennedy.
    What role or responsibilities do your member institutions 
play in the rebuilding of the gulf coast and other areas 
destroyed by natural disasters?
    Ms. Kennedy. Well, I think there are exciting 
opportunities. This is a case where all four financial 
regulators--from day one, because you are a member of the 
Financial Services Committee--were flexible and understanding 
about the waivers the banks needed to continue to support 
recovery and then rebuilding. And we are very pleased with 
that.
    Recently, NAAHL members captured--by NAAHL members I mean 
both our nonprofit lenders and our banks, about $660 million of 
new markets tax credits, which will be an enormous incentive to 
economic recovery in the gulf. We know that there are lots of 
low-income housing tax credits.
    And so I think this package of tax credits, if and when it 
is supplemented by some of these spending subsidies to get down 
to the very low income.
    In Alabama tenants were paying $40 a month for rent. Now, 
low-income housing tax credits are not going to allow people to 
come back at $40 a month. So I think banks and nonprofits are 
going to be hugely involved, and it is just a matter of, again, 
stable, predictable funding to supplement tax credits.
    Mr. Clay. Has your association or your institutions taken a 
position on the adequacy of the insurance programs and their 
coverages in the gulf coast region?
    Ms. Kennedy. The adequacy of which?
    Mr. Clay. Of the insurance coverage, of the insurance 
programs. Is there adequate protection?
    Ms. Kennedy. Well, I cannot speak for my members on that, 
because we haven't discussed it. I think there are a lot of 
uncertainties. And I certainly hear the banks talking about 
that. And I think for the nonprofits, again, they attract 
private capital based on some predictable streams of income. 
And if there are uncertainties about getting insurance, the 
banks always say they haven't been so interested in the 
insurance companies having to lend in low-income neighborhoods, 
they are concerned about insurance companies insuring the 
properties on which the banks have made mortgages.
    Mr. Clay. I thank all of the witnesses for their responses. 
Thank you, Mr. Chairman.
    Mr. Turner. Thank you, Mr. Clay. Appreciate your assistance 
and certainly your leadership in your community on the issue of 
public housing.
    A couple more questions, Mr. Roberts, and Ms. Kennedy. In a 
previous hearing, one of the things that came up about CRA and 
the low-income housing tax credit, which is why we wanted to 
pursue this issue, was the question of why aren't we able to 
attract capital beyond banks and low-income housing tax credit 
developments?
    And, second, if the CRA requirements were not there, would 
banks continue to invest in those opportunities? The answers 
that we received were that capital outside banks are not going 
to be attracted to these investments because their returns are 
so low that without an alternative incentive to invest, 
monetary return is not present sufficient for that to attract 
the capital.
    The second is that there was a real fear that the CRA--and 
there is certainly in your testimony, Ms. Kennedy, you allude 
to it--that absent the CRA benefit to financial institutions, 
that they might cease to fund these important investment 
vehicles.
    Can you talk to both a moment about that issue, the need to 
keep the banks at the table; and the second, what do you think 
it would take so that these tax credits might be an attractive 
investment even beyond the compulsory incentive that we have 
for banks? We'll start with Ms. Kennedy.
    Ms. Kennedy. Sure. Well, I learned from the threat to tax 
credits that we survived a couple or 3 years ago that roughly 
banks hold about a third, Fannie and Freddie hold about a 
third, and other companies do hold about a third. And what 
their motivations are, in addition to tax relief, I don't know. 
Buzz may be able to speak to that.
    You know, I think going back to the Volker comment about 
taking the rough edges off of capitalism, we certainly know 
from the Fannie, Freddie, Enron era, the pressure on management 
of companies to deliver stable earnings per share hit those 
numbers, and the fiduciary responsibility to get the highest 
return to shareholders.
    All of that is mitigated by CRA. You know, in essence, the 
law said you are getting a Federal charter, you are getting 
insurance on all of your deposits, you get access to the 
payment system, you get Federal Home Loan Bank and Federal cost 
of funds. In return for that, you should have to meet the 
credit needs of your entire community.
    And meeting the credit needs of the entire community has 
been a regulatory directive. The challenge for the banks and 
the nonprofits has been that the GSEs did not have that same 
regulatory directive. So they are sitting on billions of 
dollars of multifamily, affordable loans, single-family loans 
to people under 80 percent of varying median income. And when 
they try to sell them, they have to go one by one, like a 
Fuller Brush man, you know, to insurance companies and others 
who may be interested. Pension funds.
    So I think the complicated issue is, you know, what role 
does this Federal regulatory incentive play in meeting the 
credit needs of very low-income and immigrants, and I think 
experience shows it plays a huge role. And not until private 
capital is flowing into every historically underserved 
community and is available to every historically underserved 
person at comparable rates, will we not need these incentives.
    Mr. Roberts. I would say there are a few reasons why banks 
and other financial institutions dominate the investment market 
for housing credits.
    Mr. Turner. Before you go on, I just want to tell you, Mrs. 
Kennedy, we were just discussing among ourselves about how 
thrilled we were by your answers and your insight.
    Ms. Kennedy. Well, thank you.
    Mr. Turner. I think that you could cut out your testimony 
in this hearing on your answers and frame them, and you would 
have great succinct policy statements.
    Ms. Kennedy. I wish my daughter were here to hear this.
    Mr. Turner. Mr. Clay was mentioning that it would be 
helpful for the Financial Services Committee. But we do really 
appreciate it. It has been wonderful listening to you.
    Mr. Roberts.
    Mr. Roberts. Well, Judy is a tough act to follow. With 
trepidation, I proceed.
    Mr. Turner. Not to put you under any pressure, by the way.
    Mr. Roberts. There are a few reasons why financial services 
companies dominate the investment market for housing credits. 
One of them is they understand the basic business of what it 
means to invest in affordable multifamily housing. And, you 
know, does General Motors specialize in that? No, they focus on 
building cars. So this is--it is close to home, whether it is a 
bank or a GSE or it is an insurance company that does this kind 
of thing all of the time, it is within their range and comfort 
zone.
    The second is, for a bank, investing in housing credits 
generates other business. It can generate a construction loan 
on the same deal, it can generate other lending opportunities 
in the same neighborhood in which the housing credit deal plays 
a catalytic revitalization role.
    And the third is, they get CRA credit for making the 
investment. And that does affect the price of housing credits. 
And if you lighten up on the interest of investors, 
specifically banks, in the credit, there will be other 
investors who come in, but at a different rate of return, and 
they will require a higher rate of return for that market to 
clear.
    And when that happens, guess what? Go back to the table and 
the financing gap widens. And then Congress is very hard-
pressed to appropriate additional funds to fill those financing 
gaps, and the bottom line is less housing and the housing that 
gets produced is less affordable to a wide range of families.
    Mr. Turner. Mr. Gutzmann, you were talking about the issue 
of the regulatory burden income calculation, the issues that 
you face in having to meet the Federal requirements for 
oversight.
    It is obviously a difficult balance. The statistics that 
you gave us for your performance are wonderful, and certainly 
would be great to see in every housing authority.
    But obviously there has to be a balance in that. On 60 
Minutes we can probably all recall seeing exposes on poorly run 
housing authorities and the impacts on the families and on the 
neighborhoods. How do you balance that?
    Mr. Gutzmann. Well, Mr. Chairman, I just, again, want to 
thank you for holding these hearings. I can tell that you are a 
mayor--a former mayor--in your questions, and I can tell that 
you care about public housing and low-income people by all of 
your comments. And it really sings to me.
    You balance it with tough love. HUD has all of the 
authority right now to get rid of poor performing housing 
authorities. Receivership is probably the best tool. When they 
are that broken, they need to be out of the local politics. As 
you know, in local politics you need to have executive 
directors who are not the brother-in-law of somebody, but 
actually legitimate housing professionals. You need to have 
strict oversight and accountability. And receivership has been 
a good model.
    This housing authority in the District of Columbia came out 
of trouble by being placed in receivership. So I think you have 
to deal with the bad actors, and get them to perform on a 
performance-based model that exists. They are an embarrassment 
to the industry. And we who struggle hard to perform our 
mission feel that they weigh us down.
    Having said that, we know they are a small number of the 
3,200 housing authorities, but yet, sadly, usually they occupy 
big cities and they get the headlines.
    Mr. Turner. In a previous hearing we had Betsy Martens, 
director of the Boulder Housing Partners. And she talked 
extensively about the cumbersomeness of the rent calculations 
for tenants, especially with regard to income set-asides and 
exclusions.
    She suggested that the Congress pass a standard deduction 
for medical and other expenses. She gave a pretty eloquent 
description of having to account for receipts for a resident 
with a potassium deficiency, had to eat a significant amount of 
bananas, and she actually subsequently gave us a copy of the 
receipts that had to be counted in order to be able to 
determine the medical expenses that she was incurring.
    She had suggested that there be almost, as in our income 
taxes, a standardized deduction. What is your view of that?
    Mr. Gutzmann. I think any model to simplify the rent 
calculation formula makes sense. That one is a good one. The 
FADA approach also includes just a different income-based 
model. Right now it is 30 percent of adjusted gross. This is 
the foldout, these are real steps to calculate rent. I am going 
to give this to you, too.
    These are all the steps we have to do to calculate rent. 
First you disregard income with exclusions, deductions for 
medical; then you calculate income, then you calculate rent.
    And Congress keeps passing laws that are worthy, that say 
let's not charge people rent on military income. That just 
passed the House Appropriations Committee.
    Simplify it, but keep it affordable is our mantra. And I 
think you can do it with income-based----
    Mr. Turner. Just a second. We have seen that chart before. 
You may or may not be able to do this for us, but I am assuming 
that this is a calculation that your staff are going through. 
Might it be possible, as a supplement to this hearing, that you 
would provide us an estimate of the cost administratively to 
get through that?
    Mr. Gutzmann. I can tell you right now. But I will provide 
a supplement. I have 10 percent of my staff who do nothing but 
calculate rent. I have 220 staff; 10 percent of them do nothing 
but calculate rent, redetermine rent when income changes, 
recertify rent if people are still eligible to live in public 
housing.
    I say probably nationwide, 10 percent of the housing 
authority's staff are in some way, shape, and form involved in 
income and rent calculations. We will get more information for 
you and try to quantify that.
    The danger is, we keep getting our staff reduced and these 
burdens remain. The worst world for us is bad money and liberal 
rules. And this is a wonderfully affordable way of calculating 
rent, but it is very burdensome. And, as I mentioned, it is the 
case management approach. 1.2 million households, 1.2 million 
different rents.
    It could be simple, it could be affordable; 25 percent of 
gross income, for instance, just that. That is one of the FADA 
models, just say 25 percent of gross income, with maybe a few 
deductions for medical, so you really do not hurt your 
grandmother and my grandfather who lived in public housing, and 
the elderly who tell us, I have already worked my whole life, I 
have paid taxes, I do deserve a place to live affordably for my 
remaining years.
    So 25 percent of gross income actually has about the same 
burden to households as 30 percent of adjusted gross, with all 
of those things to do to calculate the true rent. And that is a 
FADA proposal, in our rent reform package. It would mean great 
simplification.
    There are ways to keep it affordable and simple, and that 
is what I would hope this committee also takes into account. We 
are having a hard time selling that because these are our 
friends, in the low-income housing advocacy world. They think 
if we get that freedom, we will rush to the marketplace, and 
that is not what we are going do. And so it is a hard sell 
within our own advocacy community to be given freedom from all 
of this rent burden.
    Mr. Turner. Mr. Moses, I will turn to you next.
    Mr. Moses. He is my friend, and I admire and respect him 
very much.
    But H.R. 5443, has no standard Medicare deductions and many 
other good simplifications. And we believe that the tiered rent 
just gives you too many peaks and valleys that people--to fall 
in for residents, and it would be just more cumbersome to try 
to enact.
    And H.R. 5443 rejects the tiered rent approach and keeps 
the standard deduction at 30 percent of income. So, you know, 
we support some things, but on this we say, this is what needs 
to be done.
    Mr. Turner. Mr. Riccio, by the one comment that you made, 
about the Dayton experience, which was a plus, I do not believe 
that they are moving toward community. There may be some 
additional issues that you might want to look at as to how 
they, with the Jobs-Plus program, operated outside of Moving-
to-Work.
    But in your written testimony, you make a comment that goes 
to actually some of my perceptions and experience in public 
housing in Dayton. And in going through how the various 
communities were successful with Jobs-Plus, you indicated where 
private rental housing was much more affordable; example, 
Dayton Jobs-Plus residents were quicker to move out than they 
were in other cities.
    Dayton is a very affordable community. In fact, our 
companies that transfer people into Dayton say that the people 
coming into your community feel like they have won the housing 
Lotto, and people in Washington, DC, would be envious of what 
you can afford in Dayton with respect to housing and prices.
    An experience that I had with our Public Housing Authority 
when I served as mayor, there was a neighborhood in which we 
had undertaken a mixed-income development. It was a distressed 
neighborhood. It also had a historic district overlay. It 
historically had varying levels of housing stocks. So it would 
lend itself very nicely to redevelopment as a mixed-income 
community.
    It had a public housing facility that we would normally 
think of as projects-type public housing, that was the source 
of both crime and criminal activity, and was a high level of 
complaints for those who lived in the facility and those who 
lived around it. It was land that presented an opportunity for 
redevelopment.
    So we approached the Public Housing Authority about this 
particular housing development, and noted their vacancy rate 
that they had in other units, and indicating that this would 
present an opportunity for mixed-use income, that we would like 
to seek for this site to be redeveloped. And the then-housing 
director said to me, I cannot do that. The people who are 
living in this facility are economically on the cusp of 
independence, and if I take this facility out of my inventory 
they will not move to my other units. They themselves can be 
economically independent and will move unto the neighborhood 
where all around them there was affordable housing that they 
could afford.
    I, of course, said to him, gee, I thought that was the 
point. But he related to me, though, that the impact on the 
Public Housing Authority itself, on the overhead charge that 
they receive, would result in his impact on his budget for his 
administrative staff. The conclusion to the story is that site 
is now transitioning and is scheduled for redevelopment.
    Many communities, though, given this paragraph, you really 
broke out the different experiences of communities. And I 
wondered if you would contrast for us what a community is 
facing that has affordable housing all around it, and easily 
accessible, and those that do not; because those individuals in 
that Dayton community would not readily have the ability if 
they were in a different market. And if you would just expound 
on that, I would appreciate it.
    Mr. Riccio. It relates to the issue of how do you judge 
success of an employment-focused or self-sufficiency-focused 
intervention in public housing? One way to think of it is in 
the way that public housing officials would be most inclined to 
think of it, is looking at the proportion of people employed, 
proportion of their tenants employed year to year, and the 
average earnings in the development year to year. Are those 
earnings going up, or are they staying flat?
    Well, it is actually a little more complicated, because you 
may have a successful intervention that is giving people a leg 
up, really giving them a boost, and they move away. And that is 
more likely to happen if there is a soft housing market as in 
Dayton. So people can, in effect, take their earnings game with 
them outside. So it may look like year to year, well, we are 
not increasing employment, we are not increasing earnings, but 
in fact--and you cannot see it as an official--you may be 
having a very big effect on people's self sufficiency. It is a 
kind of a launching pad strategy.
    The beauty of the Dayton situation is that someone comes 
in, gets help, moves out; another poor person comes in, can get 
some help, moves out and so on. Year to year, you may not see a 
big increase in average earnings, but you may in fact be almost 
like a factory if you are really effective, helping a lot of 
poor make the jump.
    Now in another situation, St. Paul is a good contrast, 
there is much less affordable housing. So by helping the 
existing residents, you are increasing their earnings, and 
their earnings increase the overall average year to year, 
because those residents who gain in earnings are a little slow 
to move out. So, kind of lifting the average earnings and 
employment rates for the development as a whole.
    Many people even in St. Paul do move out. We do have some 
stories of people buying homes from the savings that they 
accumulated with the rent reforms and so on.
    But the main point is that, you know, that an intervention 
like this can function and have different kinds of effects on 
the development as a whole, in different communities, and both 
can be positive.
    Mr. Turner. Well, I want to thank all of you, not only for 
the time that you have taken in the preparation today, but in 
all of the work that you do that changes communities, impacts 
people's lives.
    Each of you have reached out to try to accomplish more than 
just the tasks that are on your desk, and I greatly appreciate 
that. The expertise that you have lent to us is certainly 
great. The impact that you have on our learning curve by coming 
and describing to us both the bedrocks of some of the policy 
and the realities of how you are executing public housing 
really makes a difference in formulating policy here.
    As promised, I want to give you an opportunity, there have 
been a number of topics that we have discussed, a number of 
questions that you may have anticipated that we have not asked. 
And so I would ask that if you have any items that you would 
like to add to the record, I am going to give you the 
opportunity now to give us some of that discussion.
    But also you can submit items later after the hearing is 
over if you would like them to be considered for the record, 
included in the record.
    I would start with Mr. Gutzmann, if you have any closing 
comments for us.
    Mr. Gutzmann. Again, Mr. Chairman, thank you so much for 
holding this hearing. It is really good to know that Members of 
Congress care and that they get this. I will submit additional 
written testimony, as I described, about the percentage of 
staff who do rent calculations.
    I do think that the Moving-to-Work demonstration offers a 
good opportunity, and our advocate friends who are nervous 
about it actually cannot point to any bad things, and they only 
say, well, there is anecdotal success.
    But these are coming in one community at a time. And the 
local communities that have had this freedom have preserved 
affordability and removed disincentives to employment. They say 
there is no data. Let's start collecting the data. Let's start 
showing that these demonstrations are productive, that we are 
advocates too. We are preserving affordability, we are helping 
people move up and out of poverty.
    And, again, for the small slice of our housing stock, let's 
preserve it. And that has to happen with continued 
congressional appropriations. Thank you, Mr. Turner.
    Mr. Turner. Thank you. Mr. Moses.
    Mr. Moses. Thank you, Mr. Chairman, for having me here for 
these hearings. I think it was incredible for me to be in this 
surrounding, and around all of those great people.
    I too will submit some other written comments later to the 
committee, but I would just like to say that I believe that as 
my colleague has said, Mr. Gutzmann, let's get that information 
to see what Moving-to-Work has really done.
    I have talked to many folks in many jurisdictions, and it 
is just not working. So I would like to see the statistics on 
what has really been accomplished and what is just really 
working before we increase any other housing authorities to go 
into this program. Thank you very kindly, sir.
    Mr. Riccio. Yes. I would like to make comments on two 
issues briefly. One is on the cost of the rent incentives and 
other aspects of Jobs-Plus. It is true that in St. Paul, as I 
mentioned to Mr. Gutzmann just before the hearing, they had a 
very extensive rent structure, particularly in the first year.
    But they switched to a cheaper rent structure in subsequent 
years. We had cheaper rent incentives structures in subsequent 
years as well in other sites. So there are more expensive and 
less expensive ways to do rent reform. The more common way in 
the demonstration was to institute a set of flat rents in 
public housing with an income-based rent as a safety net for 
people who could not afford the flat rent.
    And taking into consideration the cost of that flat rent 
structure, and the other services in Jobs-Plus, we estimated 
that the program, on average, cost $2,000 to $3,000 per person 
over a 4-year period, which when you compare to other Welfare-
to-Work or employment interventions is really quite modest.
    The other point I would like to make is that the issue of 
self-sufficiency in public housing is not just a public housing 
issue. It is a welfare system issue. It is an employment 
system, work force development system issue. Their clientele 
live in public housing, they have a responsibility to do 
something to help those people. Jobs-Plus tried to address the 
problem, understanding that those other systems had resources 
and had expertise that the public housing system did not have 
around employment, and built, I think, effective partnerships 
to deal with an employment issue within public housing.
    So there are resources and there is expertise outside of 
public housing that has to be brought into the solution in 
addressing work questions within public housing.
    Mr. Turner. Mr. Roberts.
    Mr. Roberts. A couple of points, quite quickly. One is this 
whole question of raising rents as incomes rise is terribly 
unfair. It imposes a 30 percent income tax surcharge on the 
poorest people in our country. And that is without payroll 
taxes or Medicare, Medicaid taxes, or income taxes, and earned 
income tax credits and the like. If you want public to work, do 
not give them the highest tax rates in the country.
    Second is, resident leadership and involvement is very 
important in all of this. We are all fearful of what is going 
to happen when more powerful institutions decide our fates. And 
we are all much more willing to be part of a solution if we are 
on board from the beginning.
    Our work works almost entirely through local nonprofit 
community organizations. And that has really made a big 
difference in setting the course for revitalization. And what 
residents want are mixed-income communities. They do not want 
forced displacement. They don't want the breakdown in the 
social networks that keep neighborhoods together. But they want 
a place that works for everybody.
    And finally we are increasingly working with PHAs to get 
them involved in the whole system of private finance. And there 
are a lot of great PHA partners who are already at the table in 
this world.
    Mr. Turner. Ms. Kennedy.
    Ms. Kennedy. Well, I want to reiterate my gratitude to you 
and Mr. Clay, not just for the nice words, which I will try to 
tell my teenager, but for doing this hard work. We are a dog-
bites-man story. Nobody is interested. And, frankly, this good 
news needs to get out, because I think it affects all of the 
policy decisions that are being made both at the macrolevel and 
the appropriations level.
    I have said more than I want to think about over the last 3 
years, thank God for Ohio. You Members get it. You know that 
whole continuum of need. And you have a fabulous housing 
delivery system, one of the top three in the country in my 
mind.
    But there are Members, because of your leadership limits, 
moving up to stay in financial services, who only know one 
piece of the continuum of need. They need to get the mortgage 
limit of Fannie and Freddie increased.
    So we are going to need all of you and your understanding 
and knowledge of this to help deliver this good-news story of 
affordable housing. Let me leave you with one picture. Rosa 
Park's home is in Montgomery, AL, the first elderly, disabled, 
affordable housing in Montgomery, a result of 7 years of a 
nonprofit taking bank investments and working with tax credits.
    But I also leave you with the idea that in Massachusetts, 
someone Barney Frank has known a long time, our chairman, 
introduced low-income housing tax credits and can no longer do 
that business, because private capital has moved in, and they 
pay subsidized prices in Massachusetts with what they are 
making in, say, Iowa.
    And so he has moved on to the new markets tax credit. And 
the Louisiana bankers, even as we speak, are trying to invent 
one of these nonprofits that has so benefited Alabama and 
Massachusetts.
    But the more you can help us get this good news out, the 
better off we will all be.
    Mr. Turner. Well, thank you. I certainly appreciate your 
reverence for Ohio.
    Before we adjourn, I would like to thank all of you again 
for preparing today, and for what you do in this area. It is 
very important in impacting the lives of people, and in making 
certain that we have effective policies, and policies that we 
understand their impacts.
    In the event that there may be additional questions from 
Members that we did not have time for today, or other Members 
who were unable to attend, I would like the record to remain 
open for 2 weeks for submitted questions and answers, if you 
would be so kind to answer them, if you you do have questions 
submitted to you; but also to remain open if there is anything 
in the next 2 weeks that you would like to add to your 
testimony, we would certainly be appreciative of receiving it.
    With that, we thank you all. We stand adjourned.
    [Whereupon, at 11:50 a.m., the subcommittee was adjourned.]

                                 
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