[Senate Hearing 109-]
[From the U.S. Government Publishing Office]
DEPARTMENTS OF TRANSPORTATION, TREASURY, THE JUDICIARY, HOUSING AND
URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR
2007
----------
THURSDAY, MARCH 2, 2006
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:32 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond, Murray, Kohl, Dorgan, and Leahy.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. ALPHONSO JACKSON, SECRETARY
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. Good morning. The Senate Appropriations
Subcommittee on Transportation, Treasury, Judiciary, HUD, and
Related Agencies will come to order, and it is a pleasure once
again to welcome an old friend, Secretary Alphonso Jackson, and
extend our sincere thanks for appearing before us today to
testify on the Department of Housing and Urban Development's
fiscal year 2007 budget request.
Mr. Secretary, we are looking forward to your comments on
both the fiscal year 2007 budget as well as HUD's
responsibilities with regard to the overwhelming disaster and
rebuilding issues facing the gulf coast because of Hurricane
Katrina and related storms.
HUD's budget request proposes some $33.65 billion for
fiscal year 2007, a decrease of $621 million, or 2 percent,
from the 2006 funding level. Unfortunately, this request does
not reflect the true extent to which many important housing and
community development programs are compromised. In particular,
because of needed increases to section 8 funding, funding for
many widely supported programs, such as CDBG, public housing
capital funding, HOPE VI, section 202 for the elderly, and
section 811 housing for the disabled has been slashed. In
addition, the budget includes a $2 billion rescission of excess
section 8 funds, which we are waiting to see where and how they
would be available, also existing FHA single-family mortgage
insurance program that is marred by a shrinking share of the
homeownership market, and increased default rates.
In addition to the very difficult decisions posed by the
HUD fiscal year 2007 budget, the subcommittee will also have to
face substantial shortfalls in many other accounts, including,
for example, a $400 million gap in proposed Amtrak funding, not
enough to support Amtrak's funding needs, and I am not even
sure that flat funding would meet the needs in 2007.
Another example of the difficult decisions is the
administration proposes to cut $765 million from the airport
improvement program, which is critical to maintaining and
improving infrastructure in our airports.
These are just two examples. You have got enough headaches.
But these are the range of headaches that we have in the budget
that we have been given, and we face huge challenges in
balancing the decisions for all our programs in a very tight
funding year with HUD, as always, representing one of our
largest challenges. And that is why we are always glad to see
you here, Mr. Secretary.
I know you have worked hard to defend these programs, and
your work is greatly appreciated. You have been able to
convince OMB of the importance of the section 8 program, which
is adequately funded, even though I am not happy with the
mandate that you have to push section 8 into a block grant
assistance program. If anybody wants to talk about that, we
will be happy to explain to them what we think are the very
real and perhaps insurmountable problems with that.
CDBG
I am disappointed the CDBG level has been reduced by $1.15
billion, but I am gratified that HUD was able to keep it, and
keep it within this subcommittee, even at what is a
significantly smaller budget for 2007. And, again, we
appreciate the great leadership you have shown in helping OMB
come to some slightly more reasonable judgments and requests.
I think it is critical that HUD maintains the section 8 in
public housing, CDBG, and HOME, flagship areas, along with FHA
mortgage insurance that is necessary if HUD is to continue to
play its role as a leader in housing and community development
activities. And it requires adequate funding and your
responsibility for these programs.
PUBLIC HOUSING OPERATING FUND
The OMB continues to undermine many important programs
which are critical to housing and community development needs.
I am very much concerned that the public housing operating fund
is flat-funded at $3.56 billion. We are moving toward
implementation of an asset-based management of public housing.
Unfortunately, the funding level does not meet the needs of
these new operating requirements, nor does the funding address
HUD's inclination to micromanage how PHAs will have to meet
these new requirements.
If you cut the budget significantly of any Government
entity, the least you could do is give them the flexibility to
use the funds how they can best be utilized. And this is very
difficult for you or me or any of us in Washington to tell a
PHA in Washington or Missouri or Texas what their problems are
and how they are going to use their funds.
HOPE VI
Once again, OMB has gone after one of the programs I
started, HOPE VI. They propose rescinding all of the 2006
funding even though it is being used. They propose eliminating
HOPE VI in 2007 and reducing the Public Housing Capital Fund by
some $261 million. If enacted, these proposals would
substantially diminish the effectiveness of every program that
is designed to address the capital needs of PHAs.
More troubling, in support of eliminating HOPE VI, the
administration argues PHAs can use their Capital Fund for bond
collateral or debt service of loans in support of rehab and
construction. Nevertheless, if at the same time capital funds
are reduced or eliminated, the administration is undermining
its justification for eliminating HOPE VI because lenders
simply will not lend, and if they do, the cost of any bonds or
debt will increase. So that OMB policy just makes no sense.
REDUCTION IN CDBG
Also, obviously, I am concerned over the reduction in CDBG.
As you and I and my colleagues know, this is supported by every
mayor and Governor in the Nation and reflects the important
principles of deferring to State and local decisionmaking and
how to address local housing and community development needs
instead of relying on some cubicle in the basement of the Old
Executive Office Building in Washington. This is an important
program, and I am troubled by OMB's continuing efforts to
whittle this program to nothing.
I do not have time to highlight all of my concerns with the
budget. We will be having lots of correspondence and telephone
calls with you over many, many more problems, but I do note the
budget undermines funding for section 202 elderly and section
811 disabled housing. Both programs are very important in
addressing the needs of our most vulnerable and needy citizens.
The elderly housing program is especially important since we
know the need for elderly housing will skyrocket for the
foreseeable future due to the aging of not only my generation
but the baby boomers coming along behind.
And then, once again, this committee has strongly supported
the Lead Hazard Reduction program and the Rural Housing and
Economic Development programs. These were our programs. They
met an important need, and OMB went after them again. Certainly
they have my attention. They cut everything that I have worked
with my colleagues to put into the HUD portfolio because I
think based on our examination and discussions they make sense.
Nevertheless, I know you have tried very hard, Mr.
Secretary, to fund many of these programs, but I think there is
still hope, and we appreciate your good work. You deserve great
credit, and I thank you for fighting for a balance in the
funding of HUD programs against what I consider to be the worst
instincts of the budget geeks in the basement of OMB.
Nevertheless--and if there are any OMB people here, we will
discuss that at greater length, if you wish to. The
subcommittee needs to find more funds for HUD programs. We
should not be trying to balance the budget and eliminate the
deficit on the backs of our communities and most vulnerable
citizens.
I am an infrastructure Republican, and many of these
programs are not only critical to recipients, communities, and
States, but are critical in the creation of jobs, helping
leverage new private and public investments in our vital
communities and increasing their tax base. I think they are
good investments for the Federal Government. They are
investments I strongly support.
FUTURE OF FHA
Finally, let me share with you my concern over the FHA
single-family mortgage program. It is imploding. FHA's share of
the market dropped 40 percent in fiscal year 2005. In
particular, FHA home sales dropped to 4.3 percent in 2005
compared with 7.6 percent in 2004, despite overall home sales
being up 7 percent in 2005. In addition, FHA endorsements
dropped 46.7 percent in 2005, while insurance-in-force dropped
13 percent. Finally, and most troubling, default rates
increased to 6.36 percent in fiscal year 2005, a 0.2 percent
increase over the previous year.
Over the last several years, in every HUD budget hearing, I
have raised concerns about the viability and the future of
HUD's FHA single-family mortgage insurance program. In every
instance, my warnings and questions have been ignored, and I
have been advised that the future is bright. The future is not
bright unless you consider a burning trash dump bright. It may
be time to close out FHA mortgage insurance for single families
in deference to the marketplace or re-establish FHA as a
private government corporation.
I know that HUD plans to submit legislation to grow FHA
receipts by increasing its ability to attract homebuyers with
better credit ratings as well as balancing these new receipts
to help families with poor credit risk become homeowners.
PREPARED STATEMENT
I think we first need to understand whether the FHA single-
family mortgage insurance program is needed in today's market,
and if so, how it is needed. I am concerned that HUD's new FHA
model may be designed to take on more risks, not only risks
associated with poor credit homeowners but the risk of lenders
who face losses and who under the HUD proposal will be able to
pass the risk of these losses onto FHA.
I appreciate your time today, Mr. Secretary, and now it is
a pleasure to turn to my ranking member and partner on this
subcommittee, Senator Murray.
[The statement follows:]
Prepared Statement of Senator Christopher S. Bond
The Senate Appropriations Subcommittee on Transportation, Treasury,
the Judiciary, HUD and Related Agencies will come to order. We welcome
Secretary Alphonso Jackson and thank him for appearing before us today
to testify on the Department of Housing and Urban Development's fiscal
year 2007 budget request. Mr. Secretary, I look forward to your
comments on both the fiscal year 2007 budget as well as HUD's
responsibilities with regard to the overwhelming disaster and
rebuilding issues facing the Gulf Coast because of Hurricane Katrina
and related storms.
HUD's budget request proposes some $33.65 billion for fiscal year
2007, a decrease of some $621 million, or some 2 percent, from the
fiscal year 2006 funding level of $34.27 billion. Unfortunately, this
funding request does not reflect the true extent to which many
important housing and community development programs are compromised.
In particular, because of needed increases to section 8 funding,
funding for many widely supported programs, such as CDBG, Public
Housing Capital funding, HOPE VI, section 202 Elderly and section 811
housing for the disabled, has been slashed. In addition, the budget
includes a $2 billion rescission of excess section 8 funds which are
unlikely to be available as well as an existing FHA Single Family
Mortgage Insurance program that is marred by a shrinking share of the
homeownership market and increased default rates.
In addition to the very difficult decisions posed by the HUD fiscal
year 2007 budget, this subcommittee will also have to face substantial
shortfalls in many of its other accounts, including, for example, a
shortfall of some $400 million in the proposed Amtrak funding level for
fiscal year 2007. This proposed funding level is clearly not enough to
support Amtrak's funding needs and I am not sure that even flat funding
will meet Amtrak's anticipated expenses in fiscal year 2007. Another
harsh example of the difficult decisions faced by this subcommittee is
the administration's proposed cut of $765 million in fiscal year 2007
to the Airport Improvement Program. This program is critical to
maintaining and improving the infrastructure of our Nation's airports.
And these are only two examples of a number of significant funding hits
taken by programs within our jurisdiction. Consequently, this
subcommittee is facing huge challenges in balancing the funding
decisions for all our programs in a very tight funding year with HUD
representing one of our largest challenges.
I am pleased, Mr. Secretary, that you have convinced the
administration of the importance of the section 8 program which is
adequately funded for the year even if I am dismayed by your continuing
support of the administration's proposal to block grant section 8
assistance. And while I am disappointed that CDBG has been reduced by
some $1.15 billion from the fiscal year 2006 level, I am gratified that
it continues to be funded within HUD and in this subcommittee even at a
proposed paltry $3.03 billion for fiscal year 2007. I think it is
critical that HUD maintain section 8 and Public Housing, CDBG and HOME,
and FHA mortgage insurance--these are the 3 flagship areas of housing
and community development assistance and HUD's role as the Nation's
leader in housing and community development activities depends on
adequate funding and responsibility for these programs.
Nevertheless, this administration continues to undermine many
important programs within HUD which are critical to the housing and
community development needs of our States and communities, especially
our low-income communities.
First, I am concerned that the Public Housing Operating fund is
flat funded at $3.56 billion. We are moving toward the implementation
of asset-based management of public housing. Unfortunately, the
administration's funding level does not meet the needs of these new
operating requirements; nor does the funding address HUD's inclination
to micromanage how PHAs will have to meet these new requirements.
Moreover, the administration has proposed rescinding all fiscal year
2006 HOPE VI funding, eliminating the HOPE VI program for fiscal year
2007 and reducing the Public Housing Capital Fund by some $261 million.
These proposals, if enacted, will substantially diminish the
effectiveness of every program that is designed to address the capital
needs of PHAs. More troubling, in support of eliminating HOPE VI, the
administration argues that PHAs can use their Capital Fund for bond
collateral or for the debt service of loans in support of
rehabilitation and construction. Nevertheless, if capital funds are
reduced or eliminated, the administration is undermining its
justification for eliminating HOPE VI because lenders simply will not
lend and, if they do, the cost of any bonds or debt will increase.
Overall, this administration policy makes little or no sense.
I am also concerned over the proposed reduction to CDBG by some
$1.15 billion in fiscal year 2007. This account is supported by every
mayor and governor in the Nation and reflects the important principle
of deferring to State and local decisionmaking in how to address local
housing and community development needs, instead of relying on some
nameless bureaucrat in a cubical in Washington. This is an important
program and I am troubled by the administration's continuing efforts to
whittle this program into almost nothing.
I am not going to highlight my every concern with HUD's budget--I
will note, however, that the budget undermines funding for the section
202 elderly housing program and the section 811 housing for the
disabled program. Both programs are very important since they address
the needs of our most vulnerable and needy citizens. The elderly
housing program is especially important since we know the need for
elderly housing will skyrocket for the foreseeable future due to the
aging of the baby boomer population. In addition, the fiscal year 2007
budget eliminates the Lead Hazard Reduction program and the Rural
Housing and Economic Development program, both of which I helped to
author and both of which meet specific and real needs in our
communities.
Nevertheless, Mr. Secretary, I think you have tried hard to push
for the HUD budget and to fund many of these programs--perhaps not all
the programs, but I think there is still hope for you. In any event,
you deserve credit for fighting for a balance in the funding of HUD's
programs against what I consider to be the worst instincts of the
budget geeks in the basement of OMB. Nevertheless, this subcommittee
needs to find more funds for HUD's programs. We should not be trying to
balance the cost of the deficit on the backs of our communities and
most vulnerable citizens. I am an infrastructure Republican and many of
these programs are not only critical to recipients, communities and
States but are critical in the creation of jobs, in helping to leverage
new private and public investments and in increasing the tax base of
our communities. This is a good investment for the Federal Government
and it is an investment I support.
Finally, I want to express my concerns over the FHA Single Family
Mortgage Insurance program. This program is imploding. FHA's share of
the market dropped 40 percent in fiscal year 2005. In particular, FHA
home sales dropped to 4.3 percent in 2005 compared with 7.6 percent in
2004, despite overall home sales being up 7 percent in 2005. In
addition, FHA endorsements dropped 46.7 percent in fiscal year 2005
while insurance-in-force dropped 13 percent. Finally, default rates
increased to 6.36 percent in fiscal year 2005, compared to 6.13 percent
in fiscal year 2004.
Over the last several years, in every HUD budget hearing, I have
raised concerns about the viability and future of HUD's FHA Single
Family Mortgage Insurance program. In every case, I have been ignored
and advised that the future is bright. The future is not bright unless
you consider a burning trash dump bright. It may be time to close out
the FHA Mortgage Insurance program in deference to the marketplace or
re-establish FHA as a private government corporation.
I know HUD plans to submit legislation to grow FHA receipts by
increasing its ability to attract homebuyers with better credit ratings
as well as balancing these new receipts to help families with poor
credit risks become homeowners. I think we first need to understand
whether the FHA Single Family Mortgage Insurance program is needed in
today's market, and, if so, how it is needed. I am concerned that HUD's
new FHA model may be designed to take on more risks--not only the risks
associated with poor credit homeowners but the risks of lenders who
face losses and who, under the HUD proposal, will be able to pass the
risks of these losses on to FHA.
Mr. Secretary, I appreciate your time today and I now turn to my
ranking member and partner on this subcommittee, Senator Murray.
STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Well, thank you very much, Mr. Chairman,
and, Mr. Secretary, I welcome you here. I hope we have a
productive hearing, although it sounded to me like listening to
the statement from the chairman that maybe we should have OMB
in front of us. That might be more productive.
Senator Bond. I might lose my temper.
Senator Murray. All right. Well, thank you again, Mr.
Secretary, for being here today. It has been more than 6 months
since Hurricane Katrina reminded all of us of the ongoing
poverty that grips so many American families today. After the
storm, millions of us gathered around our television sets and
saw vulnerable Americans struggling for their dignity and
struggling for their lives.
One of the little-known facts about Hurricane Katrina was
that public housing authorities across the country made heroic
efforts to find housing, to relocate hurricane victims, and I
want to commend them today for their hard work and their
compassion.
But the sad fact is that every one of those public housing
authorities already had long waiting lists of local families
who had been waiting years for housing to become available.
That means the efforts to house Katrina victims pushed other
poor families further down a very long waiting list. Those
families who were pushed down the list were in most cases no
less poor, no less desperate, and in some cases, no less
homeless than the Katrina victims. And the vast majority of
them are still waiting for an available unit today.
We should not be in a position where, if we respond to a
disaster, our only choice is to hurt families who have been
waiting years for housing. But that is the position we find
ourselves in today, and there is one reason why: years of
misguided housing budgets. And now we are once again working on
a new budget for the coming fiscal year, and we should not make
the same mistakes again.
Unfortunately, that is exactly what the President's budget
would do. HUD has a very critical mission: to promote
homeownership, ensure safe rental housing, house the homeless,
rejuvenate desolate communities, and provide hope to a great
many struggling Americans.
We are talking about the impoverished elderly. We are
talking about disabled citizens who have very unique housing
needs. We are talking about the working poor who are climbing
the economic ladder.
Now, I have often said that budgets are about priorities,
and it is clear that the Bush administration's priorities are
not with the missions of the Department of Housing and Urban
Development. The President's budget for the coming fiscal year
proposes to increase discretionary spending by 3.2 percent, but
within that total, HUD is singled out for a cut of 1.8 percent.
The Community Development Block Grant is slated for a cut of
more than $1 billion.
HOPE VI
All funds for the HOPE VI program that the chairman
mentioned, a program designed to demolish and replace our most
decrepit public housing units, is proposed for elimination in
the Bush budget. In fact, the administration budget goes even
further and calls on Congress to eliminate the funding that we
have already appropriated for this program in 2006. Housing for
the elderly is cut by 26 percent, while housing for the
disabled is cut by 50 percent.
These proposed cuts come at a time when every study tells
us that these populations are growing, and growing rapidly.
One thing that has been very clear to every American this
winter is the fact that utility costs have risen dramatically.
It seems that everyone knows that except for the Bush
administration. While utility costs have risen dramatically for
public housing authorities across America, the Bush
administration wants to freeze operating funds for public
housing authorities for the fifth year in a row.
Funding for the public housing capital fund, which is
intended to keep over 13,000 public housing properties from
falling into dilapidated, decrepit, and inhumane conditions, is
singled out for an 11 percent cut.
As I said earlier, the President's budget proposes to
increase discretionary spending by 3.2 percent, but all of the
rhetoric and public housing statements and his OMB Director
have sought to divide this budget into three separate
categories: funding for defense, funding for homeland security,
and funding for everything else. That implication is pretty
clear. In the view of the Bush administration, programs in that
third category, programs that educate our children, prevent
disease, house the underprivileged, are the least worthy of
public funds.
Within this third category, the President proposes to cut
overall spending by a half percent, but for HUD, which falls
entirely into this third category, the administration is
proposing a much larger cut of 1.8 percent.
The message to me is clear: The non-defense, non-homeland
security portion of the budget is a low priority for this
President, and funding for HUD's work is an even lower
priority.
Now, it is worth noting that while the administration is
proposing to cut the HUD budget by more than $620 million, they
are proposing to boost spending for exploration systems in NASA
by more than $860 million. Now, like a lot of my colleagues, I
do support the overall goal of space exploration. I think it is
great. But when it comes to sending an astronaut to Mars or
housing our elderly and disabled neighbors here on Earth, there
is no doubt where my priorities lie.
Mr. Chairman, last year, with your strong support, we were
able to fend off many of the painful cuts that were included in
the President's budget for HUD. Unfortunately, we were handed
an allocation by a budget resolution that I did not support
that resulted in our having to accept some of those proposed
cuts. Last year, our appropriations bill did cut Community
Development Block Grant program by more than $0.5 billion. We
did cut HOPE VI program by 31 percent.
Now, I am a member of the Budget Committee--as you used to
be, Mr. Chairman, and we miss you there.
We do need you back.
PREPARED STATEMENT
If we are presented, however, with a budget resolution that
continues to cut the Community Development Block Grant program,
I want you to know I am going to be the first Senator out of
the box offering amendments to restore those cuts.
I hope that together you and I can work toward ensuring
that we get a budget resolution this time that will allow us to
reject those ill-conceived proposals so we can keep faith with
the people who need HUD assistance the most.
Thank you very much, Mr. Chairman, and thank you, Mr.
Secretary.
[The statement follows:]
Prepared Statement of Senator Patty Murray
Thank you, Mr. Chairman and welcome Secretary Jackson.
It's been more than 6 months since Hurricane Katrina reminded all
of us of the ongoing poverty that grips so many American families.
After the storm, millions of us gathered around our television sets
and saw vulnerable Americans struggling for their dignity and
struggling for their lives.
One of the little known facts about Hurricane Katrina was that
public housing authorities across the country made heroic efforts to
find housing to relocate hurricane victims. I want to commend them for
their hard work and compassion.
But the sad fact is that every one of those public housing
authorities already had long waiting lists of local families who had
been waiting years for housing to become available.
That means the efforts to house Katrina victims pushed other poor
families further down a long waiting list.
Those families who were pushed down the list were, in most cases,
no less poor, no less desperate and, in some cases, no less homeless,
than the Katrina victims. And the vast majority of them are still
waiting for an available unit today.
We shouldn't be a in a position where--if we respond to a
disaster--our only choice is to hurt families who have been waiting
years for housing.
But that's the position we find ourselves in today--and there is
one reason why--years of misguided housing budgets.
And now, we're once again working on a new budget for the coming
fiscal year. We should not make the same mistakes again.
Unfortunately, that's exactly what the President's budget would do.
HUD has a critical mission--to promote home ownership, ensure safe
rental housing, house the homeless, rejuvenate desolate communities,
and provide hope to a great many struggling Americans.
--We are talking about the impoverished elderly.
--We are talking about disabled citizens who have unique housing
needs.
--We are talking about helping the working poor climb the economic
ladder.
I have often said that budgets are about priorities. And it is
clear that the Bush Administration's priorities are not with the
missions of the Department of Housing and Urban Development.
The President's budget for the coming fiscal year proposes to
increase discretionary spending by 3.2 percent. But within that total,
HUD is singled out for a cut of 1.8 percent.
The Community Development Block Grant--or CDBG--program, is slated
for a cut of more than a billion dollars.
All funds for the HOPE VI program--a program designed to demolish
and replacing our most decrepit public housing units--is proposed for
elimination in the Bush budget.
In fact, the administration's budget goes even further and calls on
the Congress to eliminate the funding that we have already appropriated
for this program in 2006.
Housing for the elderly is cut by 26 percent, while housing for the
disabled is cut by 50 percent. These proposed cuts come at a time when
every study tells us that these populations are growing--and growing
rapidly.
One thing that has been clear to every American this winter is the
fact that utility costs have risen dramatically. It seems that everyone
knows that--except for the Bush Administration.
While utility costs have risen dramatically for public housing
authorities across America, the Bush Administration wants to freeze
operating funds for public housing authorities for the fifth year in a
row.
Funding for the Public Housing Capital Fund--which is intended to
keep over 13,000 public housing properties from falling into
dilapidated, decrepit and inhumane conditions--is singled out for an 11
percent cut.
As I said earlier, the President's budget proposes to increase
discretionary spending by 3.2 percent, but all of the rhetoric and
public statements by the President and his OMB Director have sought to
divide this budget into three separate categories:
--funding for Defense;
--funding for homeland security, and
--funding for everything else.
Their implication is clear.
In the view of the Bush Administration, programs in this third
category--programs that educate our children, prevent disease, or house
the underprivileged--are the least worthy of public funds.
Within this third category, the President proposes to cut overall
spending by 0.5 percent. But for HUD, which falls entirely into this
third category, this administration is proposing a much larger cut of
1.8 percent.
The message is clear:
--the non-defense, non-homeland security portion of the budget is a
low priority for the President,
--and funding for HUD's work is an even lower priority.
It is worth noting that, while the administration is proposing to
cut the HUD budget by more than $620 million, they are proposing to
boost spending for Exploration Systems in NASA by more than $860
million.
Like many of my colleagues, I support the overall goal of space
exploration. But when it comes to sending an astronaut to Mars or
housing our elderly and disabled neighbors here on earth, there's no
doubt where my priorities lie.
Mr. Chairman, last year, with your strong support, we were able to
fend off many of the more painful cuts included in President Bush's
budget for HUD.
Unfortunately we were handed an allocation by a budget resolution
that I did not support that resulted in our having to accept some of
his proposed cuts.
Last year, our appropriations bill did cut the Community
Development Block Grant program by more than half a billion dollars. We
did cut the HOPE VI program by 31 percent.
I am a member of the Budget Committee, as you used to be, Mr.
Chairman. If we are presented with a budget resolution that continues
to cut the Community Development Block Grant program, I am going to be
the first Senator out of the box offering amendments to restore those
cuts.
I hope that, together, you and I can work together toward ensuring
that a budget resolution is adopted that will allow us to reject these
ill-conceived proposals so that we can keep faith with the people who
need HUD assistance the most.
Thank you, Mr. Chairman.
Senator Bond. Thank you very much, Senator Murray.
Now, Mr. Secretary, if you would begin.
STATEMENT OF HON. ALPHONSO JACKSON
Secretary Jackson. Thank you very much. Good morning,
Chairman Bond and Ranking Member Murray, and other
distinguished members of the committee. I thank you for the
opportunity to be here to discuss the President's proposed
budget of fiscal year 2007. It is a good budget, and I
encourage you to give it your support.
The President is very concerned about helping all Americans
have access to affordable housing that is decent and dignified,
and his $33.6 billion budget request for HUD demonstrates that
concern.
At the same time, the President understands that fiscal
restraint is necessary if we want to reduce the deficit and
keep the economy growing as it has been and help everybody by
creating more jobs and higher wages.
I want to highlight how the President's budget will help
HUD achieve the mission Congress has assigned to us,
particularly in three areas: helping more Americans own their
own homes, especially folks who always thought homeownership
was out of reach; helping those not ready or willing to own
their own home to find decent rental housing; and reforming the
way the Federal Government supports community development by
better focusing block grant resources toward the most needy,
while beginning to consolidate community development programs
under one umbrella at HUD.
First, Mr. Chairman, is helping more Americans achieve the
dream of homeownership.
If Congress will enact HUD's proposed changes to the
National Housing Act, the FHA will make its mortgage insurance
more flexible so that more Americans can qualify for mortgages
without paying sub-prime rates. This will help more low-income
families own and keep their homes.
FHA FORECLOSURE MORATORIUM
Speaking of FHA, I am pleased to say that HUD has just
announced a further extension of the FHA foreclosure moratorium
for victims of Hurricane Katrina. Borrowers with FHA loans now
have until March 31 to show that they have made long-term
payment arrangements with their banks. If they do, they will
have foreclosure protection until the end of June. And this is
in addition to HUD's agreement to make interest-free loans to
hurricane-affected families to pay their FHA-insured mortgages
for a year.
HOME PROGRAM
The President's budget includes $1.9 billion for the HOME
Investment Partnerships program. In the past, every HOME dollar
allocated has attracted $3.60 in private sector investments.
Under that program, the President has proposed that the
American Dream Downpayment Initiative, what we call ``ADDI,''
be funded at $100 million. Though it is a new program, ADDI
funds have already assisted 13,845 low-income families to
become first-time homebuyers.
HOMEOWNERSHIP VOUCHER PROGRAM
Another young but important program helping low-income and
minority families become homeowners is the Homeownership
Voucher program, which allows families on section 8 rental
assistance to use their vouchers to pay a mortgage on their own
home for up to 10 years. The program has already helped 5,000
low-income families own a home in the last 4 years, and we
expect to have helped 3,000 more by the end of fiscal year
2007.
HOUSING COUNSELING
The President has proposed $45 million for housing
counseling. This is a proven method for helping low-income
families to prepare themselves for the responsibilities of
homeownership, avoid predatory lending practices, and avoid
foreclosure. This program, in continuing partnership with many
faith-based and community organizations, would be able to
assist approximately 600,000 families in 2007 if the
President's proposal is adopted.
Second, Mr. Chairman, is helping other low-income families
find decent, dignified, and affordable rental housing.
HOUSING CHOICE VOUCHER RENTAL ASSISTANCE PROGRAM
HUD's largest program, at $16 billion, is the Housing
Choice Voucher Rental Assistance program. Because of
unsustainable cost increases, Congress wisely changed this to a
dollar-based system. But for the new system to work better,
Congress needs to pass legislation to allow the PHAs to design
their own rent policies. That is why the administration is
asking Congress to pass Senator Wayne Allard's State and Local
Housing Flexibility Act, Senate Bill 771. And I want to thank
the Senator for his leadership on this important issue.
HUD continues its work to help communities remove
unnecessary regulatory barriers to the development of low-
income housing--through America's Affordable Communities
Initiative and its Regulatory Barriers Clearinghouse.
The 2007 budget also proposes funding an additional 3,000
housing units for the elderly and persons with disabilities.
All expiring rental assistance contracts are being renewed, and
all construction that is in the pipeline already is still
eligible for amendment funds if their construction costs
increase.
In order to help more Native Americans become homeowners,
the President proposes increasing the section 184 loan
guarantees program by more than 100 percent, over fiscal year
2006, to $251 million. He also wants to increase funding to
support housing for persons with HIV/AIDS to $300 million,
enough to provide assistance to an estimated 75,000 households.
Our budget request includes a provision that would allow us to
allocate these funds more fairly based on housing cost
differences across the country.
HOMELESS ASSISTANCE
The administration also remains committed to helping the
homeless. HUD has aggressively pursued policies to move the
homeless into permanent housing. This budget proposes to
increase the amount for homeless assistance to $1.5 billion,
enough to house more than 160,000 individuals.
CDBG
Third, Mr. Chairman, is laying the groundwork for reform of
the way Federal resources are used to support community
development. A key part of HUD's mission is to strengthen
communities so that they can be better places to live, work,
and raise families. HUD is committed to developing better
performance measures for the Community Development Block Grant
program, but we need a better way to target the CDBG funds to
those most in need. So HUD will propose a new formula for the
CDBG allocation very soon to you. Also, since the Community
Development Block Grant program is staying at HUD, the
President's proposed budget consolidates three other similar
programs within HUD into the CDBG, laying the groundwork for
further governmentwide consolidation later after HUD proves
that the reforms are working well.
In conclusion, Mr. Chairman, the administration's budget
provides ample resources for promoting homeownership, fair and
affordable housing, and community development--the key elements
of the mission that Congress has assigned to HUD.
PREPARED STATEMENT
This is a good budget, Mr. Chairman and ranking member, and
I respectfully urge you to ask Congress to adopt it.
I thank you for this opportunity to speak before you today
on the 2007 budget, and I am now available for questions that
you might have.
[The statement follows:]
Prepared Statement of Alphonso Jackson
Chairman Bond, Ranking Member Murray, distinguished Senators of the
subcommittee, the President's proposed fiscal year 2007 budget truly
reflects his intent to address our Nation's housing, economic, and
community development requirements. HUD's $33.6 billion fiscal year
2007 budget seeks to build on our success and lend a compassionate hand
to Americans in need, while using taxpayer money more wisely and
reforming several HUD programs.
Over the past 5 years, HUD has successfully implemented the
President's agenda to spur on economic and community development by
promoting homeownership, particularly among the lowest-income
Americans; increased access to affordable rental housing, while
combating all forms of discriminatory housing practices; and made a
commitment to focus community development dollars better on those most
in need by increasing local control. At the same time, HUD has improved
the operational efficiency of the Department. The President's fiscal
year 2007 budget request will allow the Department to build upon those
successes by advancing the core mission given to HUD by Congress.
HOW HUD WILL PROMOTE ECONOMIC AND COMMUNITY DEVELOPMENT THROUGH
HOMEOWNERSHIP
The President's vision for an ownership society correctly focuses
on the reality that the ownership of private property helps human
beings prosper. There is ample evidence to prove the President's
assertion that ownership promotes financial independence, the
accumulation of wealth, and healthier communities. Chief among the
things a person can own is his own home.
Under President Bush's leadership, this administration has achieved
new records in the rate of homeownership. Today, nearly 70 percent of
the Nation and more than 51 percent of minorities own their homes.
Despite achieving the highest homeownership rate in American history,
minorities remain less likely than non-Hispanic whites to own their
homes. To close this gap, President Bush challenged the Nation to
create 5.5 million minority homeowners by the end of the decade, and to
date 2.6 million minority families have joined the ranks of homeowners.
While President Bush is pleased with the progress made, there is more
to be done.
The President's proposed budget will help HUD to further that
mission by transforming the Federal Housing Administration (FHA) so
that it can expand homeownership opportunities for low- and moderate-
income families; spur Fannie Mae and Freddie Mac to lead the market to
create more affordable homeownership opportunities; help more of the
lowest-income Americans make a downpayment through the HOME Investment
Partnerships program (HOME) and the American Dream Downpayment
Initiative (ADDI); transition more Americans from HUD assisted rental
housing to homeownership through the Homeownership Voucher program;
and, through our rapidly-growing partnership with faith-based and
community organizations, increase the level of housing counseling that
has been so useful in helping families prepare for homeownership, avoid
predatory lending practices, and avoid default on their homes.
FHA Product Transformation.--HUD proposes to amend the National
Housing Act, which was created in 1934 to create the FHA and its
mortgage insurance programs. The National Housing Act has not been
updated in over 70 years. Existing statutory requirements prevent FHA
from updating its products; this lack of flexibility has allowed a
resurgence of high-cost loans similar to those that predominated in
1934, such as interest-only and short-term balloon loans.
The original purpose of the National Housing Act was to encourage
lenders to offer loans that were less risky for consumers. If Congress
will enact changes to the National Housing Act to allow FHA flexibility
to offer insurance for loans of different term, cash requirement, and
amortization, then FHA could make it possible for additional buyers to
enter the market, thus aiding both consumers and the lending industry.
This is a top legislative priority for me this year and I look forward
to working with Congress to see it enacted.
Using HOME and ADDI to Help More Low-income Families Own Their Own
Homes.--For many low-income Americans, the single greatest obstacle to
homeownership is the cash requirement for downpayment and closing
costs.
The HOME Investment Partnerships program, the largest Federal block
grant program of its kind, completed nearly 72,000 units of affordable
housing in 2005, often in partnership with nonprofits, States, and
local governments. The administration proposes to increase the HOME
program to $1.9 billion in 2007. Each HOME dollar allocated typically
attracts $3.60 from private sector investments.
Within the HOME allocation, ADDI funds have assisted 13,845
families to become first-time homebuyers, at an average subsidy amount
of $7,431. More than 47 percent of those assisted are minority
homeowners. We have requested $100 million for fiscal year 2007 to
further enhance homeownership in America through ADDI.
Homeownership Voucher Program.--I am very proud to report that
during this program's first 4 years, over 5,000 low-income families
have been moved from the section 8 rental program rolls into the ranks
of homeownership. By the end of fiscal year 2007, the program will
provide homeownership opportunities for approximately 8,000 families.
Counseling Our Way to Greater Homeownership.--Housing counseling is
an extremely important tool to help Americans purchase and keep their
homes. The fiscal year 2007 budget proposes $45 million for housing
counseling in order to prepare families for homeownership, help them
avoid predatory lending practices, and help current homeowners avoid
default. In partnership with faith-based and community organizations,
HUD will assist approximately 600,000 families to become homeowners or
avoid foreclosure in fiscal year 2007. More than ever, potential
homebuyers need assistance to make smart homeownership choices. Housing
counseling is the most cost-effective way to educate individuals and
arm them with the knowledge to make informed financial choices and
avoid high risk, high cost loans, and possible default and foreclosure.
HOW HUD WILL INCREASE ACCESS TO AFFORDABLE HOUSING
While homeownership is one of President Bush's top priorities, the
President realizes that it is not a viable option for everyone. The
largest component of HUD's budget promotes decent, safe, and affordable
housing for families and individuals who may not want to become
homeowners or who may not yet be ready to purchase a home.
Promoting Local Control and Flexibility--Section 8.--HUD's Housing
Choice Voucher program is HUD's largest program at $16 billion
annually. The program provides approximately 2 million low-income
families with subsidies that help them obtain decent, safe, sanitary,
and affordable homes.
In response to unsustainable cost increases, Congress recently
converted the previous ``unit-based'' allocation system to a ``dollar-
based'' system. This made sense, but for the dollar-based system to
work effectively, program requirements need to be simplified, and
Public Housing Authorities (PHAs) need to be given greater flexibility.
The State and Local Housing Flexibility Act (SLHFA) introduced last
year in both the House and the Senate would, among other things, give
PHAs the flexibility to serve more people and better address local
needs. If Congress passes SLHFA, local PHAs will be able to design
their own tenant rent policies, and, in turn, they can reduce the
number of erroneous payments, use their dollars more flexibly, and
create incentives to work.
The administration's plan will eliminate many of the complex forms
that are currently required to comply with program rules--saving both
time and money. Furthermore, the administration's proposal will result
in benefits and rewards for a PHA's decision to utilize good
management. Enactment of this bill is one of my top priorities this
year, and I stand ready to work closely with this committee and the
Congress to make that happen.
Making Improvements to Public Housing.--For fiscal year 2007, the
Department will continue its efforts to improve public housing by
moving toward project-based management, and mandating financial
accountability. Project-based management will provide the information
on individual properties, allowing managers to compare high and low
cost properties and intervene as necessary.
Public Housing's Capital Fund Financing Program.--The Department
continues its successful implementation of the Public Housing Capital
Fund Financing Program. This program allows PHAs to borrow from banks
or issue bonds using future Capital Fund grants as collateral or debt
service, subject to annual appropriations. In this way, PHAs are able
to leverage the Capital Funds to make improvements. The President's
fiscal year 2007 budget request includes $2.2 billion for the Capital
Fund, which will cover the accrual needs of PHAs. The President's
budget holds the Operating Subsidy funds level at $3.6 billion.
Implementation of Harvard Cost Study.--In 1998, Congress directed
HUD to undertake the Harvard Cost Study, a review of public housing
costs analyzing how PHAs manage their units. The Department will
continue its scheduled implementation of the congressionally mandated
formula for allocating subsidies for public housing operations, and
will implement the formula by fiscal year 2007. The proposed State and
Local Housing Flexibility Act would help PHAs' administration of public
housing through its flexibility and simplification of tenant rent
policies. The implementation will include transitioning the management
of public housing to an asset-based model similar to how private sector
multifamily housing is managed. Project based accounting is scheduled
to be implemented in fiscal year 2007, and asset based management by
fiscal year 2011.
Management Accountability of Public Housing.--The Department
continues to place great emphasis on the physical condition of public
housing properties, and the financial status and management
capabilities of PHAs. The Department will continue providing technical
assistance to PHAs and rating the effectiveness of PHAs through the
Public Housing Assessment System (PHAS). PHAs with consistently failing
scores may be subject to an administrative or judicial receivership.
The Department will continue to utilize other tools such as Cooperative
Endeavor Agreements with local officials, Memoranda of Agreements, and
increased oversight, in order to correct long-standing deficiencies
with PHAs. Over the past 5 years, the physical condition of public
housing units has improved significantly.
America's Affordable Communities Initiative.--Unnecessary,
excessive or exclusionary Federal, State, and local regulations
severely limit housing affordability by increasing costs as much as 35
percent. They also limit the ability of housing providers to build
affordable multifamily housing and perform cost-effective housing
rehabilitation. The Department believes that regulatory barrier removal
must be an essential component of any national housing strategy to
address the needs of low- and moderate-income families, and is
committed to working with States and local communities to do so. The
Department established ``America's Affordable Communities Initiative:
Bringing Homes Within Reach through Regulatory Reform'' in fiscal year
2003. This has encouraged efforts at the local level to review and
reform regulatory barriers and other impediments to expanding housing
affordability.
Through the Regulatory Barriers Clearinghouse, the Department
maintains and disseminates important information to local governments
and housing providers about regulatory barriers and new strategies
developed by other communities. All proposed HUD rules, regulations,
notices, and mortgagee letters are now carefully reviewed to ensure
they enhance rather than restrict housing affordability.
Indian Housing Loan Guarantee Fund.--The U.S. Government holds much
of the land in Indian country in trust. Land held in trust for a tribe
cannot be mortgaged, and land held in trust for an individual must
receive Federal approval before a lien is placed on the property. As a
result, Native Americans historically have had limited access to
private mortgage capital. The section 184 program addresses this lack
of mortgage capital in Indian country by authorizing HUD to guarantee
loans made by private lenders to Native Americans. The President's
budget proposes $251 million in section 184 loan guarantees for
homeownership in tribal areas, which represents a more than 100 percent
increase over fiscal year 2006.
Elderly and Persons with Disabilities.--The fiscal year 2007 budget
proposes funding for approximately 3,000 additional housing units for
the elderly and persons with disabilities. While still expanding the
program, the budget reflects a decrease in the rate of growth from the
2006 level, where over 7,000 new units were funded. This decrease
recognizes that there are already a large number of projects in the
pipeline. Importantly, however, all expiring rental assistance
contracts are being renewed, and amendment funds are available for
qualifying increased costs of construction projects already in the
pipeline. Funds will also be available to provide supportive services
through the Service Coordinator Program and for the conversion of
existing elderly housing projects through the Assisted Living
Conversion Program. Funds are also available to support the existing
Mainstream Voucher Program fully.
HUD has constructed almost 27,000 units specifically for persons
with disabilities. Including the funding for fiscal year 2005, HUD has
314 projects in varying stages of development in the construction
pipeline.
HUD has constructed almost 400,000 units specifically for the
elderly. Including the funding for fiscal year 2005, HUD has 342
projects (about $1.6 billion) in varying stages of development in the
construction pipeline. Moreover, HUD serves an additional 675,000
elderly families under other HUD rental assistance programs such as
section 8 and Public Housing.
Housing for Ex-offenders Returning to Society.--Every year, more
than 600,000 inmates complete their sentences and are returned to the
community. Approximately two-thirds of prisoners are re-arrested within
3 years of their release and nearly half of them return to prison
during that same period. Individuals released from prison face
significant barriers upon re-entering their communities, such as lack
of job skills and housing. To confront this problem, the President
proposed a 4-year Prisoner Re-entry Initiative in his 2004 State of the
Union address, designed to harness the experience of faith-based and
community organizations to help individuals leaving prison make a
successful transition to community life and long-term employment. The
President's 2007 budget provides a total of $59 million for the
Prisoner Re-entry Initiative, including $24.8 million in the HUD
request for housing needs for this population.
Youthbuild.--The President's 2007 budget again calls for the
transfer of the Youthbuild program, which supports competitive grants
to train disadvantaged youth, from the HUD to the Department of Labor
(DOL), as recommended by the White House Task Force for Disadvantaged
Youth. On July 22, 2005, the Secretaries of Labor and HUD jointly
transmitted legislation to the Congress to accomplish this transfer.
Shifting this program to DOL will promote greater coordination of the
program with Job Corps and the other employment and training programs
the Department of Labor oversees.
Housing Opportunities for Persons With AIDS (HOPWA).--The HOPWA
program provides formula grants to States and localities for housing
assistance for low-income persons living with HIV/AIDS. The program
helps maintain stable housing arrangements that improve access to
health care and other needed support. The program also provides
competitive grants to government agencies and nonprofit organizations.
In fiscal year 2007, the President is proposing an increase in HOPWA
funding to $300 million, which will support an estimated 28 competitive
grants and will provide formula funding to an estimated 124
jurisdictions. These resources will provide housing assistance to an
estimated 75,025 households. In addition, the fiscal year 2007 budget
request includes a proposal that would allow HUD to change the formula
so that the distribution of funds is more equitable because it
recognizes housing cost differences across the country.
HOW HUD WILL REFORM COMMUNITY DEVELOPMENT
A key component of HUD's strategic goals is to strengthen
communities, ensuring better places to live, work, and raise a family.
HUD is committed to producing a better means of measuring the
performance of community development efforts, specifically within the
Community Development Block Grant program. Allocating these funds more
efficiently will help further reinvigorate our communities.
Laying the Groundwork for Reform of CDBG, Focusing Block Grants
According to Unmet Needs.--The Community Development Block Grant (CDBG)
program serves low- and moderate-income families in cities and urban
counties, States, and insular areas across the United States through a
variety of housing, community, and economic development activities. The
fiscal year 2007 budget proposes to reform the CDBG program to
contribute more effectively to local community and economic progress.
Formula changes will be proposed to direct more of the program's base
funding to communities that cannot meet their own needs; bonus funds
will reward communities that demonstrate the greatest progress in
expanding opportunity for their residents. Other Federal programs that
support local development will operate in coordination with CDBG within
a new, broader framework of clear goals, crosscutting performance
indicators, and common standards for awarding of bonus funding and
measuring community progress. HUD programs that duplicate the purposes
of CDBG--Brownfields Redevelopment, Rural Housing and Economic
Development, and section 108 Loan Guarantees--will be consolidated
within CDBG as part of this reform. This is another top legislative
priority for me, and I look forward to working closely with you to
achieve it.
Block Grants for Native American Communities.--The needs of this
country's Native American population continue to be addressed through
HUD's programs. The fiscal year 2007 budget proposes to increase the
funding of the Native American Housing Block Grant program to $626
million.
Healthy Homes and Lead Hazard Control.--Today, the Department
estimates that 26 million fewer homes have lead-based paint compared to
1990 when the program began. Ten years ago, there was no Federal
funding for local lead hazard control work in privately owned housing;
today, the HUD program is active in over 250 jurisdictions across the
country. The President is proposing $115 million for this program.
Faith-Based and Community Initiative.--HUD continues its successful
efforts to increase participation by faith-based and community
organizations (FBCOs) in HUD programs. Due to a variety of efforts,
more faith-based and other community organizations are extending their
reach when helping society's most vulnerable citizens. The Center
continues to provide outreach and technical assistance to FBCOs,
through its grant writing workshops, its Unlocking Doors Affordable
Housing initiative, and other outreach efforts. I am proud to report
that the Center's outreach and technical assistance efforts have helped
all groups compete on a level playing field for HUD assistance,
regardless of whether they are faith-based or secular. According to the
White House's 2004 data collection numbers, faith-based organizations
have successfully competed for and won 23.3 percent of eligible HUD
funding--a higher percentage than in any other department of the
Federal Government.
HOW HUD WILL COMBAT HOMELESSNESS
In addition to pursuing other agency goals, HUD remains committed
to the goal of ending chronic homelessness. The chronically homeless
live in shelters or on the streets for long periods, often suffering
from mental illness or substance abuse problems, and absorb a
disproportionately large amount of social and medical services and
expenditures. The fiscal year 2007 budget proposal includes an increase
to $1.5 billion from $1.3 billion in 2006 for Homeless Assistance. This
increase supports the administration's long-term goal of ending chronic
homelessness by dedicating up to $200 million for the Samaritan
Initiative that bolsters communities' efforts to produce supportive
housing for the chronically homeless. Through the Continuum of Care
grant competition, HUD has aggressively pursued policies to move all
homeless families and individuals into permanent housing. This overall
funding level in 2007 will house 160,000 individuals and families
through this program.
This year, in addition, I am pleased to chair the U.S. Interagency
Council on Homelessness, where the Federal agencies are working
together toward this goal.
The administration again proposes to consolidate HUD's three
Homeless Assistance Grants programs into one simplified program that
will give local communities greater control to direct these funds to
their priority needs.
HOW HUD WILL CONTINUE TO FIGHT HOUSING DISCRIMINATION
The Bush Administration is committed to vigorous enforcement of
fair housing laws, in order to ensure that equal access to housing is
available to every American. Fair housing enforcement activities are
pivotal in achieving the administration's goal to increase minority
homeownership by 5.5 million by 2010. For 2007, the President's budget
proposes approximately $45 million to support Fair Housing and Equal
Opportunity activities to help ensure that Americans have equal access
to housing of their choice. These activities include education and
outreach, as well as administrative and enforcement efforts by State
and local agencies and nonprofit fair housing organizations.
Additionally, the requested amount would support the Department's
ongoing efforts to address fair housing concerns in areas affected by
Hurricanes Katrina and Rita. The efforts would include bilingual public
service announcements, printed advertisements, and training events. The
Department would provide technical assistance to builders, architects,
and housing providers on accessibility requirements through
Accessibility FIRST to ensure that newly constructed housing units are
accessible to persons with disabilities.
HOW HUD WILL INCREASE ITS OPERATIONAL EFFICIENCY
HUD made significant strides in financial management this year. We
are particularly proud of our achievements in:
Financial Performance.--Successfully accelerating the close of our
operational books and audit of our financial records within 45 days of
the end of the fiscal year, HUD earned an unqualified audit opinion on
its 2004 and 2005 financial statements, giving the Department an
unqualified or clean audit opinion on its financial statements for the
past 6 consecutive fiscal years. The financial auditors also determined
that HUD made significant progress in strengthening internal controls.
The auditor downgraded two long-standing material weaknesses--one
dating from 1990.
Continuing progress on the implementation of the final phases of
the FHA Subsidiary Ledger Project contributed to HUD's ability to
accelerate the preparation of auditable financial statements, and
eliminate longstanding material internal control and financial systems
weaknesses. HUD will complete the FHA Subsidiary Ledger Project in
fiscal year 2007 and continue to pursue its goal for modernizing the
Department's core financial system by fiscal year 2008, through the HUD
Integrated Financial Management Improvement Project.
Electronic Government.--HUD continues its E-Government
transformation in order to meet public expectations and government
performance mandates by: increasing access to information and services
using the Internet; eliminating duplicative and redundant systems by
leveraging and integrating with existing Federal-wide services;
acquiring or developing systems within expected costs and schedules
that can be shared and used to simplify business processes; ensuring
the protection of personal data; and providing increased security to
guard against intrusion and improve reliability. HUD has executed plans
to improve its information technology capital planning, project
management, and security environment, along with modernizing HUD's IT
systems infrastructure. HUD's future focus will be on modernizing its
core financial systems applications and business systems applications
in its largest program areas--rental housing assistance, single-family
housing mortgage insurance, and discretionary grants, as well as
establishing integration from our procurement data system to the
Federal Procurement Data System (FPDS). In 2005, HUD successfully
implemented two new systems: (1) a Human Capital support system and (2)
a cross-match system with HHS to assist PHAs in verifying tenant
incomes to assure eligibility for the program and accuracy in computing
tenant rent contributions.
Eliminating Improper Payments.--HUD has reduced its gross annual
improper rental assistance payments by 61 percent since 2000. In 2003,
improper payments were reduced to $1.6 billion from the 2000 level of
$3.2 billion. In 2004, improper payments were further reduced to $1.25
billion. In October 2005, HUD provided local PHAs with an electronic
tool to verify tenants' income with the Department of Health and Human
Services' National Directory of New Hires. This new tool will further
improve the accuracy of eligibility determination for the rental
assistance program and the proper calculation of the tenant's portion
of the rent and the amount of Federal subsidy to be allocated. While
the estimated improper rental housing assistance payments in fiscal
year 2004 were substantially reduced from prior year estimates, they
still represented 5.6 percent of total program payments. Through
continuous corrective actions, HUD's goal is to reduce that improper
payment rate to 3 percent of total payments during fiscal year 2007.
In conclusion, Mr. Chairman, the President's proposed fiscal year
2007 budget makes good progress toward successfully realigning Federal
Government priorities according to our Nation's current needs. The HUD
portion of that budget will help promote economic and community
development through increased opportunities for homeownership and
affordable rental housing, free from discrimination; it will also lay
the groundwork for reform by focusing community development funding
more carefully toward those most in need; and it will enable HUD to
continue along the path to greater Departmental efficiency and
effectiveness.
I thank you for the opportunity to articulate the President's
fiscal year 2007 agenda for HUD. This is a good budget, Mr. Chairman,
and I respectfully urge the Congress to adopt it. I am now available to
answer any questions that you or other Senators may have.
Senator Bond. Thank you very much, Mr. Secretary, and as I
said, we have a lot of questions. We have touched on some of
them.
The PHA formula funding is flat-funded, but the estimates
currently project that HUD's operating budget proposal will
fund these agencies at about 80 percent of their eligibility
under the formula for 2007. How can you expect agencies to
operate safe and decent housing when they receive 80 cents on
each dollar they expect from the Federal Government? And what
kind of shortfalls is this liable to produce?
Secretary Jackson. Mr. Chairman, that is a fair question. I
think if we can pass the reforms that we have asked, that will
be increased. But if we keep it at the present state that we
have, you are correct. I think that the agreement that we have
had with the industry is the best approach to go to asset
management; that is, we have a lot of public housing
authorities today that have assets that are underused, and in
many cases not used at all. If we go to total asset management
and those units are not used, you are paying only for the used
units. Today, I think it is very important that we look at it
in that manner. We have not been looking at it that way. And
that was one of the reasons when we were doing the negotiation
and I talked to many of the people in the industry and they
were unsatisfied, I told our staff to go back to the table and
try to address the needs that had been denoted to us by the
people in the industry.
And I think having come out of the industry for a period of
time, I am very sensitive to their needs, and I think that
clearly if the reforms are passed and adopted, we will have
substantial monies to cover the program. If not, then, yes, we
will have a shortfall.
Senator Bond. Well, as I understand, during the negotiated
rulemaking the Department acknowledged that implementing the
rule would require an additional $250 million in funding, and
since then, the implementation of the rule seems to have become
increasingly complex and costly. You know, granted, there needs
to be a new system, but how can we expect a reasonable and
ordered implementation of the rule as we move to asset-based
management when there is a cut and in the face of the
transition costs which have been acknowledged by HUD?
Secretary Jackson. We have acknowledged there is a concern,
and, again, speaking with the industry, I sent our staff back
to the table to make the transition as smooth as possible so
that we would not have this kind of effect that you have just
said.
We felt that we had come to an agreement, and I still think
we have come to an agreement, by delaying some implementation
by some housing authorities and letting others start
implementation when we set the program to start.
I believe we have addressed the issues that the industry
wanted to--said was very significant, and I am a little
perplexed in talking to some of my industry colleagues when
they say that we have not, because I specifically said to the
staff, ``Get in the room and resolve this'', because I, too,
felt deeply that that specific issue had to be addressed.
ASSET-BASED MANAGEMENT
Senator Bond. Well, there is another issue that just
strikes me as being a real problem. HUD is behind schedule, I
gather, in developing the criteria for asset-based management,
and when October 1 rolls around, PHAs scheduled to lose
subsidies will not be able to use the stop-loss provisions of
the rule, which would limit their loss to 5 percent, if they
comply with the asset management requirements. I understand
that HUD has indicated that the criteria should be completed by
mid-2007, and PHAs in compliance will have their funding
restored retroactively according to stop-loss rules.
But how do you do that? How do you plan for a year when you
are going to get a shortfall and you are going to be shorted at
the front, and you do not know what you are going to--if you
are going to come out a winner in the end? It seems to me that
by saying, hey, you start operating on October 1, and maybe by
March 1 we will tell you how much money you are going to get,
as a former chief executive of a small operation, I would have
found that extremely difficult to handle.
Secretary Jackson. I think your assessment under normal
circumstances is correct, but one of the things that I think is
very important is I asked the industry--because I have tried to
be extremely open and accessible to the industry if that was
acceptable. They said to date it was acceptable. That is why we
extended the ability for the stop-loss gap to go into effect.
Now, if it is not, then I am a little baffled and
surprised, and I would suggest that as chairman, you and I sit
with the industry because I would not have made--I would not
have gone forward with this unless clearly the industry had
accepted this.
Senator Bond. I think maybe your team selects some, and our
guys and gals will select some, and maybe we will have
everybody sit in the same room so that they tell you the same
things they are telling us, because somebody is getting the
wrong story.
Secretary Jackson. I think you are correct, Mr. Chairman.
And I am a little baffled.
Senator Bond. I think this one is----
Secretary Jackson. You know, I think----
Senator Bond. They are telling you one thing and us
another. I would like to find out where the truth lies.
Secretary Jackson. I have asked the staff to go back and
make tremendous concessions, because I believe that when we did
the meetings for the operation perspective, that the industry
operated in good faith and down the road somewhere we stopped
operating in good faith, and I sent them back to the table.
Now, I feel that--I have personally talked to the major
entities in the industry, and I thought we had resolved this,
and I do not question you because I have a great deal of
respect----
Senator Bond. Well, it is not a question--I am not
questioning what you are telling me or what my staff is telling
me. But we are getting two very different signals.
Secretary Jackson. I agree.
Senator Bond. So we need to get together and have the group
that we are trying to serve tell both you and us what the truth
is.
Secretary Jackson. I would be happy to do that, sir.
BLOCK GRANT VOUCHERS
Senator Bond. Vouchering the block grant, as I said, I have
got a minimum amount of high enthusiasm for that proposal.
Maybe it could work if there is an adequate commitment of
future funding and if it included special protections for
extremely low-income families. But there is no guarantee of it.
I would be interested in why the Department does not
include the current law requirement that 75 percent of the
vouchers go to extremely low-income families at or below 30
percent of area median income. And what is your response to the
claim that there would be more homeless families without this
requirement?
Secretary Jackson. Again, I think that is a fair question.
I think we do adhere to that 75 percent of the vouchers should
go to, at this point as the present law is written, the
households below 30 percent or less of area median income. I
don't think, Mr. Chairman, that in the present state of the
program we can change the quality of making sure that more
people have accessibility to the voucher. The extended time
that people stay on that voucher has been increased
tremendously since 1998. Before that, it was nearly 3 years.
Today it is about 8 years. So we do not have the turnover that
we had before.
I truly believe that if we give the authority to the
housing authority in a block grant, as we did before 1998--we
did not have unit-based costs before 1998. They gave us an
allocation. And I can tell you both in St. Louis, both in the
District of Columbia, and both in Dallas, I dealt with
allocations and I was able to house more people at a quicker
rate than we are doing today.
To me, there are no incentives for a housing authority to
ask people or to help people get off section 8, because they
are going to get their administrative costs regardless of what
they do, whether they lease up or do not lease up those units.
So I believe that if we go back to where we were before
1998, we will see aggressive housing authorities moving,
serving more people, and the voucher will turn over much
quicker. And, you know, again, you know, I hear the argument
that is being made by housing authorities. But I am just sorry,
Mr. Chairman and ranking member, I do not buy the argument. I
ran three housing authorities, and I know what it takes. And
the three housing authorities I ran all did very well, as you
know, in St. Louis, and we served a lot of people. But I think
we should give housing authorities incentives to serve more
people and turn the vouchers over much quicker than what they
are doing. And at this stage, they have no incentives to do
that, and that is why the lines for section 8 vouchers are
longer and longer and longer, and getting longer. And I don't
know whether we are creating more homeless people, but I can
tell you that the lines are getting longer.
Senator Bond. Senator Murray.
CDBG CUTS
Senator Murray. Mr. Secretary, I read through your formal
opening statement, and reading that statement, you would never
know that you are proposing a cut to CDBG of $1.15 billion or
about 27 percent. What your statement says is ``Allocating
these funds more efficiently will help further reinvigorate our
communities.'' Can you tell us how cutting available resources
by $1.15 billion next year helps reinvigorate our communities?
Secretary Jackson. Senator Murray, I perceive us cutting
about $635 million out of the block grant program as it stands
today, not $1.2 billion. I do believe this, that the block
grant program has served a very vital purpose. That is why I
was such a great advocate of it. But I am also convinced that
you have very wealthy communities that have pockets of poverty
that they should be taking care of. When I look at the block
grant program, I think we should zero in on those communities
that have been in distressed conditions, that really need our
help, both economically, housing, infrastructure-wise, and gear
our money toward those persons to help them move forward. And
if they are moving forward, continue to help them until they
come to the level that they do not need our help.
That has not been the case with the Community Development
Block Grant Program, and I must admit that.
Now, to say that it has not done good in many places, I
could not say that because that would be very hypocritical
because I am a great proponent of it and I served as chairman
of two community development agencies, but I do think the money
can be zeroed in, and if the reforms are adopted, I think we
have substantial money to address the needs of those
communities most in need.
Senator Murray. I am in my 14th year here in the Senate,
and I can say that I know of very few programs that have as
much broad-based support as CDBG. It is supported by Members of
Congress, by Governors, mayors, county supervisors, community
development organizations, everywhere I go, and it is
consistently supported by Democrats and Republicans alike
because they go home and they hear how these funds are being
used, and they know that it makes an incredible difference in
their community. It seems to me like the only group that
appears to be openly hostile to the CDBG Program is the Bush
administration.
Last year the proposal was to combine the program with
other programs and cut it by more than one-third, and this year
you want to cut it by $1.15 billion. I just want to know how
the administration came to the conclusion that this program is
broken and it needs to be fixed.
Secretary Jackson. Let me say this to you. I do not think
that we are hostile toward it, and I can specifically tell you
that I am not. I have seen the program work, so I cannot debate
about it not working----
Senator Murray. What is broken about it?
Secretary Jackson. The point is, is I do not think it zeros
in or zooms in on those communities most in need or those
cities most in need, and I think that if we began to do that,
not pockets of poverty in Palm Springs, but places like Akron,
Ohio that really needs tremendous infusion of funds. I think we
should clearly specify where the money should go and what is
needed, and we have not done that. I think that that is a
serious problem, we have not. I mean there are areas in Dallas,
where I was born and raised, that receive block grant funds
that should not, but if you take specific areas in St. Louis
where you have almost a total community that has suffered
tremendously, I think we should gear the money where it is
needed.
Senator Murray. Okay. But right now your own budget
documents say that as the program exists today, 95 percent of
CDBG entitlement funds and 97 percent of State grantee funds
went to benefit, today, low- and moderate-income individuals.
So if every dollar of this program is already providing
benefits to targeted communities, why is the administration
saying we need to target it even more?
Secretary Jackson. Again, I am not going to disagree with
you, but let me say this to you. Take Dallas as an example,
where I am from. Their block grant monies, a great deal is
spent on housing inspection. That is a worthless waste of time
of Community Development block grant money. That is what it is.
But if you ask Dallas, they are going to say that they are
doing that in low- and moderate-income areas, which they are,
but that is a function of city government, and they should be
doing it themselves. They should be using the block grant
funds, if they are going to use them wisely, for the
infrastructure and rebuilding of that city.
Senator Murray. Here in Washington, DC, are we going to
look at every community and decide ourselves here, or yourself
in your program, who is using the money wisely, and start doing
earmarks?
Secretary Jackson. No, that is not what I am saying, but I
am saying to you that we have communities that are wealthy that
can address many of these needs, and they have not been
addressing these needs.
Senator Murray. I do not know Dallas. I did not know it was
wealthy. But in your proposal, you say, so-called affluent
communities are going to be eliminated. How are you going to
define affluent communities? We have Bellview, that some people
may say is affluent, but let me tell you, there is a growing
large number of low-income people in Bellview, and they use
those funds for low-income people even though Bellview may be,
I do not know, within the Nation, an affluent community. I do
not think so, but how are you going to define this?
Secretary Jackson. Well, if you want to use Bellview, that
is a very good example.
Senator Murray. It is not a good example.
Secretary Jackson. I am very aware of it. They use a larger
portion of their funds for housing inspection. They should be
doing that. That should not be a function. If we are going to
deal with it, we should look at the areas of the highest area
of poverty to address needs.
Senator Murray. So are you saying CDBG funds should not be
used for housing inspections?
Secretary Jackson. Really, I do not think it should. If it
should, it should come out of the administrative costs of that
city. See, I think we have gotten so used to us not really
addressing the needs of Community Development Block Grant funds
as to what they were initially set out to do, that we think
that it is okay to continue to do this. I am not saying that a
portion of it should not be used, or should not come out of the
administrative costs.
Senator Murray. How are you going to define affluent
communities?
Secretary Jackson. I think when you get our proposal that
we are submitting to you, to reorganize and to look at how we
can best serve communities. I think we can define affluent
communities. I think Palm Beach is an affluent community. I
think that, clearly, several communities that I could name are
affluent. I think Bellview is affluent.
Senator Murray. So you are basically going to say at the
Federal level, we are going to define what affluent communities
are, and none of them will get any CDBG funds; is that right?
Secretary Jackson. No, that is not what I am saying, but I
think we should look at it very hard and see how we address it
proportionally or whether they should receive it.
Senator Murray. When will we get your proposal?
Secretary Jackson. You will have our formula within the
week of what we are setting forth.
Senator Murray. Well, it will be very fascinating to see
how you define affluent.
Secretary Jackson. I will tell you this, I clearly believe
we can define it without a doubt, and I think the formula will
address that.
Senator Murray. Communities like Bellview have a
dramatically growing number of low-income people. They are the
people who work in the hotels. They are even the people who
teach in our schools, and their housing needs are incredibly
difficult because they live in a community where housing is
even more expensive than other communities. So I see CDBG funds
being incredibly important to what you may well define to us as
affluent.
Secretary Jackson. And I would say to you, I do not
disagree with you on what you just said, but if the monies were
going to the housing needs, that would be a different
perspective. I think I would ask you to go back and look at how
Bellview has been spending their money, because one of the
things I did before I got here is I did look at it, and a lot
of it is being spent in areas that I think you would ask them
to relook at that and go spend it for just what you said.
Senator Murray. We will see how you define affluent and
what happens with that.
Secretary Jackson. Okay.
Mr. Chairman, Thank you very much.
Senator Bond. Thank you very much, Senator Murray.
We are very pleased to be joined by additional members of
the subcommittee, and sorry you missed out on our initial very
thoughtful discussions that Senator Murray and I offered.
But now we are happy to hear your questions, beginning with
Senator Leahy.
STATEMENT OF SENATOR PATRICK J. LEAHY
Senator Leahy. Thank you, Mr. Chairman. We were here prior,
but we also have a massive immigration bill before Judiciary,
and that is where I was.
Secretary Jackson, it is good to see you again.
Secretary Jackson. Good seeing you, Senator.
Senator Leahy. Welcome you to your second appearance before
our subcommittee. I know that Senator Bond and Senator Murray,
who do a superb job in leading this committee--I will repeat
that for Senator Bond.
Senator Bond and Senator Murray, you do a superb job in
leading this subcommittee.
Senator Bond. Thank you very much.
Senator Leahy. I am concerned though about the budget, and
I understand what you said to Senator Murray, but I look at
cuts in affordable housing by cutting funds for public housing,
weakening of the section 8 program, the President slashed
funding for--I believe that CDBG is extremely helpful.
Secretary Jackson. I agree.
Senator Leahy. I have watched how it has been used in my
State, and I see these cuts. Whether you are for or against the
war in Iraq, we just get asked for billions and billions and
billions of dollars more all the time to rebuild parts of Iraq,
to do everything from providing for the National Guard of Iraq,
while we cut money for the National Guard of the United States;
for housing for Iraq, we cut it here. I believe a strong
America begins at home, and that has nothing to do with whether
you are for or against the war in Iraq, but if we are going to
be providing for these things in Iraq, we ought to start
providing for them in the United States.
Fortunately, the attempts to pay for the war in Iraq out of
our domestic programs is not a wise one to do. If the war is
that great an idea, then pass a tax to support it. We did this
with World War II. We did it in Korea. We have always done it.
Now, I think this puts a real burden on ordinary people. In my
home State of Vermont, Vermonters are finding it harder and
harder to find basically affordable housing. It is going to
become increasingly difficult for our teachers and our police
officers and our fire and rescue workers even to afford places
to live in the communities they serve. We are going to see
homeless families in Vermont grow.
PREPARED STATEMENT
Last weekend it was 10 degrees below zero in Vermont, not
unusual this time of year. I have been in my home in Vermont
when I could not tell exactly what the temperature was because
the thermometer on the front porch only goes to 25 below zero.
I live in a comfortable house. Many Vermonters do not. That
does not become a matter of discomfort, that becomes a matter
of life or death. I will submit a full statement for the
record, if I might, Mr. Chairman.
Senator Bond. Without objection.
[The statement follows:]
Prepared Statement of Senator Patrick J. Leahy
I welcome Secretary Jackson to this hearing of the subcommittee. We
have much to discuss, as the President has sent a budget to Congress
that ratchets down affordable housing among our budget priorities, and
that would increase, not lessen, the burden put on the shoulders of our
Nation's struggling low-income families. I must say that I wish it
could start on a more positive note. Unfortunately the President's
proposed budget for the important work of your Department is one that
again invites disappointment and even incredulity, not praise.
For an unprecedented sixth year in a row, the Bush Administration
has decided that affordable housing is not a national priority. The
President's budget proposal says to ordinary Americans families
struggling to make ends meet and needing help in affording basic
housing, ``Sorry, but putting a roof over your head is no longer our
concern.'' That attitude is short-sighted, has real consequences in
real communities for real people and is anything but compassionate.
At a time when Federal leadership is needed more than ever before,
the Bush Administration is running in the other direction. The
President has sent a budget to Congress that would hurt affordable
housing programs by cutting funds for public housing and weakening the
section 8 program, and he would slash funding for one of the most
successful initiatives that supports economic development and
affordable housing, the Community Development Block Grant (CDBG)
Program.
After squandering record surpluses and converting them overnight
into a record national debt through irresponsible tax and spending
policies, the White House's solution is to slash funds for affordable
housing programs that help hard-working Americans and their families
who are stuck in a financial cul de sac, as the gap between housing
costs and wages continues to widen. At the same time, the White House
calls for more massive tax cuts for the wealthiest individuals and
corporations. Our children and grandchildren, who cannot possibly
afford such irresponsibility, will reap the true legacy of the Bush
Administration's abysmal fiscal management.
In my home State, Vermonters are finding it harder and harder to
find basic, affordable housing. If we fail to address this problem head
on, it will become increasingly difficult for our teachers, police
officers and fire and rescue workers to afford places to live in the
communities where we need them. We will continue to see the ranks of
homeless families in Vermont grow. This is not a problem unique to
Vermont.
The budget before us signals a substantial retreat in our
commitment to help provide access to safe and affordable housing for
all Americans. The public housing capital fund is cut by 11 percent and
the operating fund is level-funded despite the need for additional
funding for the operation of public housing under the new asset-based
management system, funds for housing for persons with disabilities have
been cut in half, HOME formula grants have been reduced, the housing
for the elderly program has been slashed, and both fair housing
programs and lead-based paint grants have been cut.
Most egregious is the administration's proposal to cut the CDBG
program by $736 million, leaving funding at its lowest level since
1990. This program provides critical source of funding for affordable
housing, supportive services, public improvements, and community and
economic development. If the President's proposed cuts to CDBG are
enacted in fiscal year 2007, then an estimated 97 percent of the more
than 1,000 communities that have held entitlement status since fiscal
year 2004--which was the highest level of funding for CDBG under this
administration--or earlier and every State program would have their
CDBG allocation slashed by at least one-third.
One of the few programs to see an increase in this budget proposal
is the section 8 Housing Vouchers program, and even that increase will
not be enough to restore the cuts that were made to this year as a
result of inadequate funding in fiscal year 2005.
I hope to hear from you today about the vision you have for the
Department of Housing and Urban Development and how you expect to run
efficient and effective programs like these, when they are slowly being
starved to death.
Senator Leahy. To go back to what Senator Murray was saying
on CDBG, slashing by $736 million, that is the lowest level
since 1990. The National Low-Income Housing Coalition estimates
these cuts are in there, then 97 percent of the more than 1,000
communities that have held entitlement status will find it
slashed by at least one-third. You have been asked questions
about that. I will not keep going on that. But we see CDBG,
proposed consolidation of Brownfields redevelopment grants,
rural housing, economic development, and section 108 loan
guarantees. If you are going to consolidate all of those
programs, how are you going to do more with less? Is there some
magic or are we using the same rosy assumptions we are in Iraq?
Secretary Jackson. Well, first of all, I would not agree
that it is a rosy assumption in Iraq. I believe our President--
--
Senator Leahy. I have heard the administration say we would
be welcomed as liberators. I have seen signs ``mission
accomplished,'' and I heard, ``Bring it on,'' and I heard that
this is just a momentary blip in the road as the country is
spiraling, apparently, into civil war. But this is not the
committee of Defense Appropriations or Foreign Operations. I am
just worried that we sometimes make these projects, and they do
not work very well.
Secretary Jackson. To answer your question, Senator, if I
did not think that this could work, I would not be here
defending it. I think before you came in I said to Senator
Murray I have the real dubious distinction of being the only
HUD Secretary to run a housing authority, and to be chairman of
two community development agencies. And my perspective is, is
that----
Senator Leahy. That is one of the reasons we welcome you,
because of your experience.
Secretary Jackson. Thank you, sir. My perspective is that
if we implement the revised formula, which I think is very
important--and I have said this almost from day one when I was
Deputy Secretary--to look at how best to distribute the money
to those communities most in need, and not as we have over the
last 30 years. I think that when Senator Murray asked me or
made a statement about the success of the program, there are so
many successes. I cannot even debate that. But I think we can
distribute the money much better to address those communities
in 2005 that most need it, and not communities that have used
it for programs that are not necessary to address the needs of
what the block grant program was, from the inception, believed
to accomplish.
And I say that again, yes, there is a cut, but I believe
that clearly the monies that we have, if we adopt a formula
that we are going to submit to you, will address the needs of
what we think is very important in the block grant.
Now, if it is not adopted, I think you are absolutely
correct, but I do believe that we can do a lot more with not as
much money this time.
Senator Leahy. My time is up, but I see this case every
year. There are all these different holes in the budget. This
subcommittee is faced with the unenviable task here for every
mayor, every Governor, and just by every other group saying,
``Can you put the money back in?'' Again, we have worked in a
very bipartisan way here, but it is somewhat difficult. We will
have a further conversation. My time is up, but I will submit
questions for the record, and maybe you and I might chat later
on.
Secretary Jackson. Yes, sir, thank you.
Senator Leahy. Thank you, Secretary.
Senator Bond. Thank you very much for your comments and for
your sympathy, Senator Leahy. This is a tough year, and we will
all have a lot of work to do.
Senator Kohl.
Senator Kohl. Thank you very much, Mr. Chairman.
Secretary Jackson, just to plow this ground a little
deeper, and once again, about section 202. The program, as you
know, provides funding for local nonprofit agencies to
construct and manage housing for low-income seniors. This
section 202 program creates, as you know, safe and affordable
communities where senior residents have access to the services
that allow them to live independently, with the number of
individuals over the age of 65 expected to double, as you know,
in the next 24 years. How do you explain in a way that makes
people understand and accept a proposal by the administration
to cut funding for this program?
Secretary Jackson. To date, Senator, we have decreased the
program by $307 million, but it is fully funded for the
existing contracts that exist today, fully funded. In 2006 we
funded 7,000 units of 202 and 811, and in 2007 we are funding
an additional 3,000 units. So clearly, from my perspective, if
the money is spent in an expeditious manner, I have no problems
at all going back, saying we need more money. The program has
been slow starting, and in fact, we geared the program up,
since we have come in 2001, to get the backlogs of 202s, 811
that was in the backlog, and we have almost cleared it up, but
not quite. And if the money continues to be funded, I think it
is--I will be happy to go back and ask. I am not against 202's,
811, but I think the money must be expended very quickly.
HOPE VI
That is my argument even with my good friend, the chairman,
about the HOPE VI. To date we still have about $3.2 billion
outstanding over 10 years in HOPE VI that has not been spent,
and I do not think we should continue to fund the program
unless clearly the money is spent expeditiously and wisely. To
date, out of 200 allocations of HOPE VI, a little over 200, we
have only had about 35 completed. That was the same situation
we faced when we came in to 202. So it is not, again, that I do
not think it is worthy. I think we have to look at the program
and see whether it is being utilized in the best manner. If we
do that, then, yes, I am the person that will defend it until
the end and go ask for money.
CDBG
Senator Kohl. Well, we will see. CDBGs, Mr. Secretary, as
you know, provide important funding to States, counties, cities
and local communities for a range of projects such as housing,
supportive services for seniors and disabled, improvements in
public facilities, and so on. In my State, Wisconsin, the
program has funded housing projects for elderly, homeless and
single family housing, for low-income first-time homeowners,
and a host of other projects. It is a sort of decentralized,
locally controlled program that this administration has
supported. So, again, why does the budget target this program
for such a significant cut? And is it going to be distributed
in such a way so that communities such as Wisconsin will not be
cut? Is that what you suggested earlier?
Secretary Jackson. What I suggested is, is that we put in
place a revised formula that we are going to submit to you all
for you to act upon. I think that we are going to look at all
of the recipients of block grant programs, look at the
community as a whole, not necessarily piecemeal, and that is
what I said to Senator Murray. You have very rich communities
that have pockets of poverty, but clearly, those communities
can address that pocket of poverty, where we could best use the
monies that we have and been allocated, to address those cities
of total communities that need it.
I am one, Senator Kohl, that believes block grant works. I
have seen too many great projects that have been very well
carried out, but I have also seen cities utilize money--and
this is not something I have just said today--I have seen
cities over the years utilize monies for things I did not think
they should be utilizing the money for. One of the biggest
problems, when I chaired the redevelopment authority here in
the District, I had great fights with the council people
because they had their pet projects, and I said, really, that
should not be the case. We should zero in on the low- and
moderate-income community, those with the most poverty, those
which have the potential of developing economic development in
conjunction with housing. And so I do believe that the program
is valuable and worthwhile. I just think we have to redirect
our energy and specifically say how this program should be
used.
Senator Kohl. In doing so, cut the budget for the program.
I mean, we must----
Secretary Jackson. No, and a revised formula. Yes, the
budget has been cut.
Senator Kohl. I mean, at one end you say it is a great
program and you support it, you endorse it, you think it is
good. On the other hand, the budget has a cut for the program
and there is something there that does not connect. If you, for
example, take the position, as most of us do, that there is so
much that needs to be done in our country, so much, with
programs like this, how you can support at the same time
cutting the program is, as you can understand, to some of us
hard to understand.
Secretary Jackson. Sure.
BROWNFIELDS
Senator Kohl. But before my time runs out, just on
Brownfields, obviously, the program, Brownfields, promotes
economic development in abandoned and under-used industrial
commercial facilities, as you know. It is a program that is
good for the environment, good for business, and good for
economic development. A number of communities in my State,
including a neighborhood development initiative in Beloit,
Wisconsin, have benefited from the Brownfield funding. So, can
you explain why the President would propose eliminating,
eliminating funding for the Brownfield redevelopment programs?
Secretary Jackson. We have not cut it. We have consolidated
the program. I think in consolidating the program, it goes back
again to what I have said to the others. I think we must zero
in on those communities, Senator Kohl, that most need the
money. And if Beloit is one of those communities--that is one I
cannot comment on--then, yes, we would zero in on that
community. The question we would ask when we zeroed in on this
community: ``When we go in with the Community Development Block
Grant Program, what effect is this going to have on the
community? Has this community been devastated because of loss
of jobs over a period of time? Will this invigorate the
economic development, the housing development within that
community?''
If it does, then it is our responsibility to go in and help
Beloit become a better community. But it is not our
responsibility to go into Palm Beach and help Palm Beach get
richer, even though you might have pockets of poverty in Palm
Beach.
Senator Kohl. Are you saying that the Brownfield program
will not be eliminated in Beloit?
Secretary Jackson. It will be part of--it is consolidated
into the Community Development Block Grant Program.
Senator Kohl. Our fear, of course, as you know, is that
this consolidation will result in less or no money for
something like brownfields. As you know, that is what those of
us on the other side of the issue are arguing, and very fearful
will occur. Tell us that we are wrong.
Secretary Jackson. Well, I can tell you as the Secretary
that is not my intention when we talk about consolidation. My
intention is to take a picture of what is needed in a community
to bring that community to where it should be after devastation
has occurred, whether industry has left, whether that has
happened. I do believe that it is important to look at the
community as a whole, and as I said to Senator Murray a few
minutes ago, yes, there are cuts, but I am well aware of monies
from block grants that have not been used for what I think they
should be used for. I know people will disagree and say, ``That
is what you think,'' and it is what I think.
I think that cities have totally taken--as my city, Dallas,
I use all the time--just totally taken every housing inspector
in the city off the payroll and put them on CDBG. I think that
is the function of the city of Dallas. And I always want to use
the city because that is the safest city for me to use, since
it is Dallas. But I do not think it should be used for that.
I think it should be used for infrastructure to address
issues, as the Senator just said, for rebuilding house
infrastructure for low-and moderate-income people, such as fire
people, police people, nurses, teachers, who find it very
difficult today to be able to afford a home in this country.
That is why I think we should juxtapose CDBG funds with HOME
funds, with Shop funds, and help people who most need it, and
in many cases that has not been the case. It has been a
supplement for cities to do things that they should be required
to do themselves.
Senator Kohl. Thank you so much.
Mr. Chairman, thank you.
Senator Bond. Thank you very much, Senator Kohl.
HOPE VI
Mr. Secretary, since you wanted to talk about HOPE VI, I
thought that we might talk a little bit about it, because you
know how complex it is. You know how long it takes these deals
to get done. Very difficult for the local governments to put
all the plans together, and, frankly, from what I hear, HUD has
not been as helpful as it could and should be, doing something
that is absolutely the most important thing we can do, and that
is to turn obsolete, unsafe, unsound, housing, which has been a
festering place for crime and drugs and not good places for
families, and turn them into viable communities.
Now, I can show--and I know you have seen what is going on
in St. Louis, Murphy Park instead of Vaughn, the King Louis
operations. This has truly revolutionized downtown St. Louis.
Secretary Jackson. That is true.
Senator Bond. And I understand Atlanta, and Louisville, and
even Chicago, which had had some very real programs, is being
reborn with the money that goes into the HOPE VI operation. I
am not going to be like Jim Cramer on Mad Money and tout my
book, but I hope that you have read the San Francisco Chronicle
article on HOPE VI, which said that it was one of the very few
revolutionary programs that is making a difference in housing.
And if you wanted to change it, if we want to, first of all,
improve the management, administration of it, but when you are
saying, well, all these needs are going to be handled through
the Public Housing Capital Fund, and at the same time more than
a 10 percent decrease in that, you take that into account with
the proposal to eliminate HOPE VI, it seems to me that this
budget turns its back on the need to help cities provide the
infrastructure that is needed in many instances to clean out
unsafe, unlivable housing projects into decent places for
families to live.
I am just very much troubled by what the budget does to the
Public Housing Capital Fund, and to HOPE VI.
Secretary Jackson. Mr. Chairman, let me say this to you.
Since 1991, when we first implemented the first HOPE VI after
the recommendation of the National Committee on Severely
Distressed Public Housing, which I served on, and you, and Jack
Kemp were very instrumental in making sure that HOPE VI was put
into law, we have demolished almost 120,000 units today around
this country. So the same capital fund that was needed then is
clearly not needed today. And I think, clearly, we should not
have the same amount of money.
Secondly, I cannot ever question St. Louis. St. Louis has
been very, very unique in a sense--so has Atlanta--because in
their HOPE VI they have had developers who would leverage the
money. That was the basis of the program in the first place, is
to find a developer who would take the allocation from the
Government, leverage it and create a community that was both
socially and economically integrated.
Now, have we seen that in St. Louis with developers? I will
not call any names, but it has been successful. Have we seen
that in Atlanta? It has been successful. Have we seen that in
Charlotte? It has been successful. Have we seen it in Dallas?
It has been successful. But those are only some examples of the
35 of over 200 applications that were funded, that were done,
and done in a timely manner.
Now, if you look in the last 3 years that we have been
here, we went back to the original language of the HOPE VI,
where we suggested that you have a developer come in who could
leverage the money that we give you. That is working, but we
still have this money in the pipeline.
Now, I would be the first to say if we are recapturing part
of this $3 billion, I would say, yes, let's find some way to
reallocate it to other HOPE VIs in the country, but right now,
the money is standing still. And we just began, after 15 or so
years in New Orleans, to get those HOPE VI off the ground. So I
am saying to you, I am not saying the program in certain areas
has not worked, but clearly it has not been the program that
you thought about or Secretary Kemp thought about, or we
thought about on the National Commission.
Senator Bond. I think we suggested recapturing some of that
money, some of the unused HOPE VI money, but we understood that
HUD opposed it because they did not want to be in the position
of recapturing it.
Secretary Jackson. No, no, Senator----
Senator Bond. If there are some areas where it is not being
used, and other areas where it is needed, I think we ought to
work together to recapture that. But you put your finger on one
critical point for HOPE VI to work, there has to be a community
with a developer with leverage that is going to come in and
make this a truly mixed income, viable community.
Secretary Jackson. If you recapture the money and tell us
what to do with it, I will do it.
PUBLIC HOUSING CAPITAL FUND
Senator Bond. Well, we have about $20 billion in public
housing capital backlogs, and the budgets that have been
presented by OMB do not come anywhere near meeting those. We
need to get money into the Public Housing Capital Fund, and you
and we need to be clear that if you are going to have HOPE VI,
you need to come in with a plan, and with a developer, with the
financing, with this community support, and then HUD needs to
streamline its act----
Secretary Jackson. Absolutely.
Senator Bond [continuing]. So these people can make it
work. There are needs around the country for the HOPE VI
funding, and if some day when you say that they are all done, I
will be happy to check, and I will bet we can find some more
where it is needed.
Anyhow, I took up a lot more time than I meant. Sorry.
Senator Murray.
Senator Murray. Thank you, Mr. Chairman.
PUBLIC HOUSING CAPITAL FUND CUTS
Mr. Secretary, following up on that, in your formal opening
statement you said the Department continues to place great
emphasis on the physical condition of public housing
properties. Well, I am having a hard time reconciling that
statement with the budget proposal that actually cuts the
Public Housing Capital Fund by more than a quarter of a billion
dollars, both last year and then again this year.
Let me just share with you how those Federal capital grants
have impacted a PHA in my State. King County Housing Authority
has been trying for a long time, for years, to install fire
prevention sprinkler systems into all their older buildings
that house the elderly and house the disabled. They have had an
increasing number of fires, and one of them resulted recently
in a fatality.
These cuts in capital grants have meant that the
installation of those safety systems are taking longer and
longer and longer to get done, and it is really putting people
who live there at risk.
If the Department is so concerned with the condition of
public housing, why have you allowed funding for this program,
the housing capital fund, to drop every year for the last 6
years?
Secretary Jackson. Let me say this to you, Senator: We
believe that the assets which King County and other housing
authorities have are marketable. They can issue bonds very
easily to cover any expense that they need, because, clearly,
they know they are going to receive every month their monies
from HUD.
The best example I can give you is what Mayor Daley has
done in Chicago. He has issued bonds to the tune of almost $350
million to address needs, plus using the capital fund. If they
did not have those assets, I think the argument that you--the
question you just asked, the argument you are making is
legitimate.
We have gone back and said use the assets. For years,
housing authorities--and I was one of them--asked to be able to
issue bonds on our assets so that we could do things that we
ordinarily could not do within capital funds. We have given
them that authority to do it now. There is no reason why King
County or anyone else cannot issue bonds to cover areas that
they say are in critical need and do them very quickly. It is
being done right there in Chicago. It is being done right there
in Philadelphia. It is being done in other cities.
So I don't understand why they cannot address this if it is
a really critical need not only through the capital funds, but
also through issuing bonds.
Senator Murray. Well, maybe we can get you together with
them, because they say this is a real challenge, and when they
see those declining dollars in the future, they have to pledge
their future capital grants from HUD for this purpose, and when
those numbers are declining and they don't know that they are
there, it is harder and harder for them to do.
Secretary Jackson. Well, I think the key to it is that,
from talking to the investment bankers, they realize--and I
have had a chance to talk to them because that was a concern
that was raised, a legitimate concern. I said the only way we
are not going to meet the obligations of housing authorities in
this country is that our Government goes bankrupt. And I do not
see our Government going bankrupt, because if we go bankrupt,
then we cannot meet any of our obligations.
So I allayed the fears of many of the people on Wall Street
about making these bond issues. That is why they have done it
in probably 15 cities today, because they know they are going
to be paid out of the income that each housing authority
receives around this country.
We have to pay them. Every year they have the operating
subsidy, they have the capital subsidy that we have to give.
And we have to give it because it is in the budget that you
allocate for us each year. So I cannot understand why they
cannot do it.
ELDERLY DISABLED HOUSING
Senator Murray. Well, let me follow up on Senator Kohl's
question on housing for disabled and elderly. The AARP reported
that there are currently nine people waiting for every unit
available, and the senior population is expected to double by
2030, from 36 million to 70 million.
Given the unmet needs and the growth in the aging
population, I find it very hard to see how we can follow
through on a huge cut to housing support for elderly, more than
26 percent. How do you justify that?
Secretary Jackson. Because right now we have fully funded
the existing contracts in the 202 program. We did, as I said to
Senator Kohl, cut $190 million, but for 2006, we had and still
have 7,000 new units today that have not been developed. In
2007, we have an additional 3,000 units. And all of these to
date are being put out through a proposal to be developed.
So I think we are addressing the needs, and if we can clear
up, as we have done the pipeline before, we will be happy. That
is a program that I think is absolutely important. In fact, I
was talking to Chairman Bond about it. You know, I am almost
there. I am near elderly. So you will have to look and see
where we are in this program. But I believe that clearly right
now we are addressing the needs because we have not cut out one
existing contract. We have funded 7,000 units for 2006. We have
funded an additional 3,000 units for 2007. And then, if
necessary, we will fund again.
But I think until we develop those units again, I don't
think we should just put money in the budget.
Senator Murray. What you were saying to Senator Kohl is
there are unobligated funds in the pipeline so, therefore, you
are decreasing your request. Well, we don't do that in other
programs. There are a lot of unobligated funds in the NASA
program, but the President is asking for an increase there
because of the need. And I do not understand why the same is
not true, because the need is so high, and you are doing a
better job of getting the money out the door. But because the
need is so high, I do not understand why we are asking----
Secretary Jackson. Well, I cannot address what the
administrator at NASA does, but I can tell you what I have
suggested, and my position is that I believe that clearly we
can address the needs of the elderly at this point. If I did
not, I would go and--I would be the first to tell you. I really
do.
Senator Murray. All right. Well, thank you, Mr. Chairman.
Senator Bond. Thank you, Senator Murray. I will have a
number of questions to follow up on section 202 because, as I
mentioned to you, we share those concerns.
SECTION 811
I might as well get to another very serious cut, the 811, a
90 percent reduction in the 811 fund from $155, almost $156
million, down to almost $16 million. How are you supposed to
continue the progress toward eliminating costly institutional
care that everyone agrees is outdated if 811 is eliminated as a
tool for developing permanent supportive housing?
Secretary Jackson. First of all, 811 is still fully funded.
HUD has built about 27,000 units of 811, and there are about a
little over 300 in the pipeline today. I still believe, again,
that with the fully funded contracts, with the units built, we
can address the needs. If it is clear to me that the needs
further exceed what we perceive--what we have in the budget,
then clearly I will come back and speak with you.
Senator Bond. Well, we are going to have some more
questions about that. We will get back to you on that one.
Secretary Jackson. Okay.
Senator Bond. Because we really think that one is serious.
There are many other things I want to touch on very briefly.
IMPROPER PAYMENTS
Improper payments. You found $1.25 billion in 2004 in the
section 8 program, losses estimated $2 to $3 billion a year,
but under the Improper Payments Information Act of 2002, HUD
plans only to target improper payments of no more than 5
percent in 2006 and 3 percent in 2007.
How do you measure and verify these numbers? And has the
HUD IG verified your methodology?
Secretary Jackson. Yes, we have--the HUD IG is involved,
but also, chairman, when we came, we had really no way from our
perspective of really verifying it. We have got a top-notch
information technology person and we react now that we have put
in place systems that we can verify for the first time. We are
still working with others to even be more specific in verifying
it, but I feel a lot better now with the numbers that we are
giving you than I would have felt 3 years ago.
Senator Bond. Speaking of numbers, we had to rescind $2
billion-plus from section 8 for the current year, and you told
us you would find it, and now OMB has said you are going to
find another $2 billion.
How are you doing finding the $2 billion for 2006? And
where do you expect to find it from excess section 8 for the
coming year?
Secretary Jackson. I will have to give you a written
response to that, Chairman.
Senator Bond. I look forward to that one.
[The information follows:]
U.S. Department of Housing and Urban Development,
Washington, DC, August 31, 2006
The Hon. John W. Olver,
Ranking Member,
The Hon. Joe Knollenberg,
Chairman,
Subcommittee on Transportation, Treasury and Housing and Urban
Development, The Judiciary, District of Columbia, Committee on
Appropriations, U.S. House of Representatives, Washington, DC.
The Hon. Patty Murray,
Ranking Member,
The Hon. Christopher S. Bond,
Chairman,
Subcommittee on Transportation, Treasury, the Judiciary and Housing and
Urban Development, and Related Agencies, Committee on
Appropriations, U.S. Senate, Washington, DC.
The Fiscal Year 2006 Appropriations (Public Law 109-115) Act
requires the Department to notify the Committees on Appropriations if
the statutory rescission of $2.05 billion will be met from sources
other than section 8. Pursuant to this requirement, the Department is
submitting a list of programs that may be used to meet the rescission
requirement. With the exception of Drug Elimination Grants, the funds
for these programs will expire at the end of fiscal year 2006 if not
obligated. The Department will make these funds available to the
program offices for obligation almost through the end of September
2006. However, if by the end of September 2006, the funds are not
needed then these funds will be used to meet the Department's
rescission requirement for fiscal year 2006.
In fiscal year 2002, Congress terminated the Drug Elimination
Grants Program. The balances remaining in this program are from
recaptures. These balances will be used to meet the rescission
requirement. A reprogramming is pending Congressional approval for
$14.5 million of the total $34 million in the Public Housing Capital
Fund. If Congress does not approve the reprogramming in time, then
these funds may also be used to meet the rescission requirement.
If you have any questions or if I can provide additional
information, please let me know.
Sincerely,
L. Carter Cornick III,
General Deputy Assistant Secretary for Legislation.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT POTENTIAL SOURCES FOR FISCAL
YEAR 2006 RESCISSION
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Unobligated Funds Expiring at the End of Fiscal Year
2006:
HOPE VI (SY 2005)................................... $2,946,391
Housing for Persons w/Disabilities (SY 2003)........ 3,966,849
Housing for Persons w/Disabilities-TB (SY 2003)..... 118,800
Housing for Persons w/Disabilities (SY 2004)........ 3,084,243
Housing for Persons w/Disabilities-TB (SY 2004)..... 1,771,486
Housing for Persons w/Disabilities (SY 2005)........ 11,420,573
Housing for Persons w/Disabilities-TB (SY 2005)..... 2,307,920
Housing for the Elderly (SY 2003)................... 24,727,911
Housing for the Elderly (SY 2004)................... 3,942,457
Conversion to Assisted Living (SY 2004)............. 2,467,584
Service Coordinators (SY 2003)...................... 288,703
Service Coordinators (SY 2004)...................... 456,083
Pre-Construction Grant Demo (SY 2003)............... 4,440,662
Pre-Construction Grant Demo (SY 2004)............... 19,682,000
Working Capital Fund................................ 2,843,992
Public Housing Capital Fund......................... \1\ 34,810,700
Unobligated funds available until expended:
Drug Elimination.................................... 796 948
---------------
Total, non-section 8 sources...................... 121,273,302
===============
Section 8 Rescission.................................... 1,928,726,698
------------------------------------------------------------------------
\1\ Of this total amount, a reprogramming request has been submitted to
Congress for $14.5 million. If the reprogramming request is not
approved by Congress before the end of the fiscal year then the entire
$34.8 million will be available to meet the fiscal year 2006
rescission.
FHA MORTGAGE INSURANCE
Senator Bond. Moving on to FHA, you have heard me raise my
serious questions about the single-family mortgage program. It
is competing with the private sector, and you are trying to put
all kinds of bells and whistles on it to bring in wealthier
homeowners to subsidize less economically strong home
purchasers.
How is that going to compete successfully with the private
mortgages? And how do you expect them to--what role is FHA
going to provide that the private mortgage companies cannot
provide?
Secretary Jackson. Let me say this: Our regulations have
been an inhibiting force for us to continue to compete with the
private market. The first thing that we are doing is getting
rid of those inhibiting regulations.
Second, there is a large group of people who do not fit the
private market, but yet who have been using, in my mind, many
predatory lenders at high interest rates to get loans. We feel
deeply that that is the population we need to zero in on. And
if we can be flexible in our regulations and offer them the
same kind of flexibility that many private entities offer those
persons who are not in this limbo area that we call it, we can
address the needs.
I don't think that FHA is obsolete. I don't think it has
been managed very well, and I don't think we have put our
programs out publicly like we should have. We have not been
proactive in any of the processes, and so when we asked
Assistant Secretary Brian Montgomery to come, one of the things
that we stressed with him is that we have to be more active
with FHA to get part of the market back. Over the last 10
years, we have--it is the most amazing thing to see how we have
lost market, but we have lost market because it is as if we
really did not care about being in the market. And I think that
clearly, for those persons who are in that limbo area, we
should be there for them to make sure that they do not get
these high usury rates.
HIGH-RISK BORROWERS
Senator Bond. Well, one of the things I am worried about--
there are a number of worries I have about it. In other words,
there is a risk that HUD may be taking on the risks of a number
of mortgage companies who have taken on high-risk borrowers in
the sub-prime market and then FHA gives them a new FHA
mortgage. That is bailing out the initial lender, giving the
initial lender who had the high rates in the sub-prime market,
and you wind up with FHA bearing the loss that they have caused
by taking out--giving a sub-prime loan with a high rate to
somebody who is not a worthy borrower. So I am worried that FHA
is setting itself up to be the chump in this process and
leaving people with great problems in defaulted housing.
That relates to other questions, that HUD seems to be
permitting nonprofits funded by a property seller to fund the
downpayment so that they get the 3 percent downpayment
requirement, but the seller puts money into a charity that
provides and raises the price by 3 percent so the homeowner who
may not be economically able to carry a mortgage has
essentially a zero downpayment no-risk mortgage, which, based
on the experience we have seen, is destined to be a disaster.
Now, those things worry me about what FHA is doing. Please
respond.
Secretary Jackson. Well, let me say this: You are
absolutely correct. That was the posture of FHA for a period of
time. That is not our posture today because we see that as
unacceptable because we are creating severe problems for the
prospective homeowners. And, clearly, we do not think that is
what we should be doing.
That is why we are asking you to look at the Flexible bill
that we are sending you today, to give us the power to cut many
of the regulations so we can deal directly with this group that
is right in the middle rather than having the lenders that you
just spoke about dealing with that group.
So I do not disagree with you. That has been our posture,
but that is not our posture today.
Senator Bond. I will come back to that after Senator Murray
asks her questions.
HOMELESSNESS
Senator Murray. Thank you, Mr. Chairman.
Mr. Secretary, you noted in your testimony that you
currently serve as the Chairman of the Interagency Council on
Homelessness. Last year, our committee directed the Council to
assess an issue that I care a great deal about, and that is the
educational rights of homeless children. I have worked very
hard to strengthen the protections for homeless children in the
No Child Left Behind Act, the Individuals with Disabilities
Act, Head Start, Higher Education Act.
Can you tell me, as Chairman of the Interagency Council,
what the status and preliminary findings of your assessment are
yet?
Secretary Jackson. Honestly, Senator, I cannot, but I will
find out for you. I was not Chairman--I have been Chairman now
for about 4 months. I did not know that you had asked for that,
but I will ask where it is and I will make sure that I get back
to you directly, because I did not know you had asked for that.
Senator Murray. Okay. I would really appreciate that. I
have been really concerned by some reports I have heard that
homeless shelters may be requiring homeless children today to
change schools and that certain school districts are being
allowed to skirt their responsibilities to provide
transportation. And I want to know exactly what is happening
with that and----
Secretary Jackson. I will get back to you.
Senator Murray [continuing]. What leadership your agency is
demonstrating to make sure those homeless kids their
educational rights in this country. So I will be hearing----
Secretary Jackson. I will get back to you immediately.
[The information follows:]
Interagency Council on the Homeless Reports
The House Conference Report 109-307, on page 293 of H.R. 3058, the
``Transportation, Treasury, Housing and Urban Development, the
Judiciary, the District of Columbia, and Independent Agencies
Appropriations Act of 2006,'' enacted as Public Law 109-115, directed
the Interagency Council for the Homeless to conduct an assessment of
the guidance disseminated by the Department of Education, the
Department of Housing and Urban Development, and other related Federal
agencies for grantees of homeless assistance programs on whether such
guidance is consistent with and does not restrict the exercise of
education rights provided to parents, youth, and children under
subtitle B of title VII of the McKinney-Vento Act. This assessment also
addressed whether the practices, outreach, and training efforts of
these agencies serve to protect and advance such rights. The
Interagency Council for the Homeless submitted to the House and Senate
Committees on Appropriations the attached interim report on May 1,
2006, and the attached final report on October 25, 2006.
[Clerk's Note.--The reports referenced above have been retained in
the committee files, and are also available in part at http://
www.usich.gov/slocal/EducationWebPost.html.]
PHAS OPERATING COSTS
Senator Murray. Very good.
You are, as you told us, the first Secretary of HUD who
actually ran a housing authority, and I appreciate that. But I
have heard from some of the larger PHAs up in the Northeast
that are heating with natural gas that now they have to commit
half of their Federal operating funds just to pay for those
utility costs. And I was just curious if you were running one
of those PHAs up there and now having to pay those tremendous
costs for your utility bills, what would you do? Eliminate
services for elderly? Reduce maintenance? What decisions would
you make in order to pay for that?
Secretary Jackson. You know, I cannot answer that question
because to me--and I do not mean to dodge the question. That is
speculation because it is very strange to me. I have not heard
that yet. And I know the prices of natural gas have gone up,
but no one has brought that to my attention. So if there is a
large number that that is occurring----
Senator Murray. There is----
Secretary Jackson [continuing]. I will be happy to look
into it.
You know, let me say this to you, Senator--and I believe
exactly what you just said. What bothers me tremendously is I
have been very open to industry. It is amazing how they come to
you with stuff, and I have been the most open Secretary and the
only one that was their colleague at this level, and they do
not bring it to me. And I hope they are here and they hear what
I am saying, because they bring problems to me, but they do not
bring other stuff to me. And if they are going to still want
accessibility to me, I would much rather for them to tell me
that than me be surprised today with something that you have
said and they have not brought it to me.
Senator Murray. Okay. I am hoping they heard that.
Mr. Chairman, I have a number of other questions that I
will submit for the record. Particularly, I have some on
Katrina, but I understand you are coming before the committee
next week to talk directly about that.
Secretary Jackson. Yes.
Senator Murray. So I will save those for that time.
Secretary Jackson. Thank you.
Senator Bond. Thank you very much, Senator Murray. I am
going to close up, too, but I also am looking forward to
talking with you and Mr. Donohue, the HUD IG, about Katrina,
because we are being asked to put a whopping big amount in, and
I kind of wonder--like Jerry Maguire, ``Show me the money.''
Where did it go?
But we were talking the last time about the gifts for the
downpayment. Have you stopped that practice? Have you made it
clear that this is not a legal practice for----
Secretary Jackson. Have we stopped that practice?
I am sorry. We are waiting--I am sorry. I knew we had
brought--we are waiting on the IRS to come with a
recommendation to us because, clearly----
Senator Bond. It seems to me, the IRS or no IRS, it is a
recipe for disaster, and, you know, I think you ought to be
looking at the risks that are entailed with accepting this. I
mean, I don't care----
Secretary Jackson. You are right.
Senator Bond [continuing]. What the IRS says about it. I am
worried about what it does to the FHA.
Secretary Jackson. Chairman, I agree with you, and I will
do that.
SECTION 8 CUT
Senator Bond. And to go back to what I was saying about
section 811, the budget request is a 50 percent reduction, but
only about $15 to $16 million is going to be left for new
construction. The rest will go to rental payments for current
projects and vouchers, and so when I said 90 percent cut, the
new construction available under the budget request for 811 is
only $15 to $16 million, and it seems to me that there are a
lot more needs out there than that.
Secretary Jackson. Yes, sir.
PREDATORY LENDING
Senator Bond. All right. Predatory practices, what are you
doing to reduce predatory lending? And how successful have you
been?
Secretary Jackson. I think we have been very successful. We
are working extremely hard because we are concerned about that,
especially in the Northeast. It is--and when I say the
Northeast, I am talking everything from Washington, DC back. It
has been absolutely astounding, and also----
Senator Bond. One of our very good friends from Baltimore,
who is not here today, will have a lot to say about that, and
on her behalf, I reiterate the concern that she has had with
that practice.
Secretary Jackson. And she has been working well with us,
and we have talked to her on numerous occasions regarding that.
Senator Bond. Good. FHA multifamily, you are proposing
increased mortgage insurance premiums. Again, some have
suggested this could have a chilling effect on the development
of multifamily housing projects. Why is the fee necessary? And
have you conducted an impact analysis on the marketplace? And
if so, what did you find?
Secretary Jackson. I do not know the answer to that, Mr.
Chairman. I will get back to you.
[The information follows:]
FHA Mortgage Insurance Premiums
The Department's budget stated that FHA would apply a 32 basis
point increase on the FHA mortgage insurance premiums for all
multifamily projects except mortgages for projects that utilize low-
income housing tax credits, and GSE and HFA risk-sharing. This increase
was to apply to both initial and annual premiums. In no case, however,
was the resulting premium to exceed 80 basis points. The purpose of the
increase was to permit continuation of the program while at the same
time offsetting taxpayer liability for the program's administrative
costs and any potential financial losses arising from insuring these
mortgages. The proposal was prompted by the outcome of an evaluation of
the program using OMB's Program Assessment Rating Tool (PART). That
evaluation raised questions concerning program targeting and its
overall efficiency. Since submission of the budget, HUD staff has had
the opportunity to have numerous discussions with Congressional staff
and the industry on this topic. Both have raised legitimate concerns
about the impact such a premium increase would have on HUD's ability to
foster the development of much needed rental units. The Department
realizes these concerns must be addressed before any increases are made
to insurance premiums. The Secretary is committed to fully discussing
the proposed increase with the industry and Congressional leadership
before any action is taken.
Senator Bond. All right. Finally, you are chairing the
Interagency Council on the Homeless. How are you doing meeting
your goals? How much progress has been made to meet the goal of
150,000 units of permanent housing? And when do you expect to
achieve it?
Secretary Jackson. I would prefer to speak, Mr. Chairman,
to you and the Ranking Member in private about that.
ADDITIONAL COMMITTEE QUESTIONS
Senator Bond. All right. Well, the nice thing about it is
this conversation will be continued. We have lots of things to
work on. I believe that that concludes it. There will be--I am
sure that the ranking member and I will have several questions
for the record, and if any other members of the subcommittee
have questions for the record, we would ask them to get them in
by the end of this week. And we will expect your replies in a
timely fashion and look forward to continuing these
discussions.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Arlen Specter
PUBLIC HOUSING OPERATING FUND--NEW RULE
Question. The fiscal year 2007 budget request maintains funding at
$3.564 billion for the Public Housing Operating Fund. According to the
National Association of Housing and Redevelopment Officials, this level
of funding would represent only 81 percent of actual operating subsidy
needed for fiscal year 2007 as housing authorities shift to asset-based
management. Additionally, the implementation of the new regulations for
the Public Housing Operating Fund provides a new formula for
distributing operating subsidy to public housing agencies (PHAs) and
establishes requirements for PHAs to convert to asset management. What
is HUD's plan for assisting PHAs to come into compliance with this new
approach?
Answer. The Department has issued a significant amount of guidance
and information regarding the transition to asset management. Most of
the guidance has been shared with interested PHAs and representatives
of the industry groups that represent PHAs while it was in draft form
to solicit input prior to finalization and publication. Since
publication of the rule, the Department has held approximately 20
meetings with PHAs and the industry groups to discuss the steps
required for implementation of asset management. All guidance has been
shared with these groups prior to the meetings and working drafts
provided for comment and recommendations.
The transition to asset management is a complex undertaking and the
Department recognizes that a great deal of guidance and information for
both PHAs and HUD staff will be necessary to ensure a successful
transition. For that reason, the Department has been taking a phased
approach at getting the guidance developed and issued, rather than
issuing one set of guidance that is expected to cover all actions
required over several years as PHAs transition to asset management.
On the day that the Final Rule was published, the Department met
with representatives of the industry groups to provide a copy of the
rule and to discuss next steps. The Final Rule was published on
September 19, 2005 and in response to concerns raised by PHAs and the
industry groups over the implementation of the rule in fiscal year
2006, the Department issued a revision on October 24, 2005, pushing the
implementation date back to October 1, 2006. On November 2, 2005, the
Department published Notice PIH 2005-34 (HA) that provided an overview
regarding implementation of the Final Rule for the Public Housing
Operating Fund Program. This Notice was for informational purposes only
and informed PHAs of various upcoming notices and other activities tied
to the implementation of the Final Rule.
On December 28, 2005, the Department published a Federal Register
Notice that provided supplemental information regarding the
Department's method of calculating public housing operating subsidy
under the Final Rule. The Notice explained the computation of the
Project Expense Level (PEL) that is one factor in the formula expenses
component of the Operating Fund Formula. The Notice provided a step-by-
step description of the computation of the PEL so that PHAs would
understand how their PELs would be calculated.
A key component of the transition to asset management is the need
for each PHA to identify their project or property groupings.
Recognizing that the current project numbering system did not
necessarily reflect the appropriate grouping of buildings for
management purposes, the first step was to allow PHAs to self-identify
their project groupings. After a series of meetings with PHAs and
industry groups, the Department issued Notice PIH 2006-10 (HA) on
February 3, 2006 that provided guidance and related instructions to
PHAs and HUD field staff regarding the identification of projects for
purposes of asset management. On February 28, 2006, and March 1, 2006,
the Department held meetings with the HUD field office staff to discuss
the Notice and to conduct a live demonstration of the computer screens
that the PHAs would see when they entered their project grouping
information. On March 8, 2006, the Department conducted a video
broadcast with the PHAs and HUD field office staff on the project
groupings' Notice and conducted a demonstration of the computer screens
for both PHAs and field office staff. The broadcast was taped and used
as a webcast on March 15, 2006 and March 23, 2006. The webcast is
stored in the Department's archives of webcasts and can be accessed
from its web site at www.hud.gov.
On March 22, 2006, the Department issued Notice 2006-14 (HA) that
provides guidance to PHAs on the criteria for asset management. This
criteria is for those PHAs that want to submit documentation of
successful conversion to asset management in order to discontinue their
reduction in operating subsidy under the Operating Fund Program Final
Rule, commonly referred to as the ``stop-loss'' provision. This Notice
was discussed thoroughly with PHAs and representatives of the industry
groups prior to publication and the industry groups provided the
working drafts of the Notice to their members through their web sites
and provided extensive information and comments about it through their
publications.
The Department has held a series of meetings with PHAs, the
industry groups and the private market vendors that offer computer
assistance and software programs used by a number of PHAs. The meetings
with the IT professionals and the vendors are to assure that any
changes to systems and software can be done, as necessary, so that PHAs
do not experience system problems as they transition their inventory to
an asset management model.
The Department has also held a series of meetings with PHAs, the
industry groups, Fee Accountants, Certified Professional Accountants,
Independent Professional Auditors and representatives of the American
Institute of Certified Public Accountants (AICPA) to discuss the
necessary financial reporting changes. The Department will issue
guidance to PHAs on asset-based accounting and budgeting requirements.
The first group of PHAs that will have to maintain their books on an
asset-based approach will be those PHAs whose fiscal year begins July
1, 2007. The Department intends to have the guidance issued prior to
July 1, 2006, so that PHAs will have a full year to implement any
necessary changes to their accounting systems. The last group of PHAs
that will have to maintain their books on an asset-based approach are
those PHAs whose fiscal year begins March 31, 2008.
Question. Given the anticipated shortfall, how will your budget
fully implement the negotiated rule, including transitional costs?
Answer. Many PHAs have healthy levels of operating reserves. At the
end of fiscal year 2005, nationwide, PHAs had approximately half a
billion dollars in reserves that can be used to support the operation
and maintenance of low-income housing. PHAs are allowed to retain all
of the income they receive from investments and other non-dwelling
rental income such as income from rooftop antennas, laundry receipts,
etc. In 2005, this other income accounted for $298 million. For
purposes of subsidy calculation, rental income is frozen at 2004
levels, which means that any increase in rental income does not
decrease the amount of subsidy that the PHA will receive in 2006 and
2007.
There is much to be gained through providing needed program and
regulatory reforms that will give PHAs the flexibility to address their
locality's housing assistance needs. By unlocking the potential that
PHAs have in their assets, additional funding can be obtained to make
needed improvements in housing stock or to develop an additional type
of affordable housing that is self-sustaining and not wholly dependent
upon Federal appropriations. PHAs will be able to make local program
decisions and to focus their housing resources in a way that makes
sense for their communities while seeing reduced regulatory costs.
Through a variety of programs, the Department has encouraged PHAs to
look at their inventory and make informed management decisions about
the housing stock. Steps that PHAs have taken include demolishing the
worst, and often most expensive housing stock, entering into energy
performance contracts to reduce the cost of utilities, and switching to
tenant-paid utilities.
MOVING TO WORK PROGRAM (MTW)
Question. MTW has enabled public housing authorities to implement
federally-funded housing programs based on local needs by providing
budget flexibility and regulatory relief. The fiscal year 2006 TTHUD
Appropriations Conference Report provided a 3-year extension to MTW
agreements that would expire on or before September 30, 2006. While we
thank you for the extension, the Pittsburgh Housing Authority's MTW
agreement expires 3 months after the September 30, 2006 deadline. Would
you be willing to work with the Pittsburgh Housing Authority to grant
them a similar extension as was received by all housing authorities
expiring 3 months earlier?
Answer. The Department has agreed to grant the Housing Authority of
the City of Pittsburgh (HACP) a 1-year extension to their MTW
Agreement. Following subsequent communication between your office and
HUD, the Department is currently considering granting HACP a 3-year
extension rather than a 1-year extension.
The Department has expressed its willingness to continue and expand
MTW through Title III of the proposed State and Local Housing
Flexibility Act. While this bill is under consideration in Congress,
the Department recognizes HACP's desire to avoid a lapse in their
participation in the demonstration.
Question. Could you please clarify why some public housing
authorities initially received MTW extensions through 2011, yet similar
extensions have not been granted to other requesting housing
authorities?
Answer. No current MTW housing authorities have received an
extension to continue their MTW demonstration until 2011. Agreements
for only three of the demonstration participants have expiration dates
that occur in 2011 or 2012: Oakland, Baltimore, and Chicago. Oakland
and Baltimore only recently executed their agreements and were given
the now standard 7-year term. Their Agreements expire in 2011 and 2012
respectively. Due to the complexities of Chicago's Transformation Plan,
their initial Agreement provided for a 10-year demonstration term,
which expires in 2011.
It should be noted that the issue of extensions would not be a
matter of concern under Title III of the State and Local Housing
Flexibility Act (SLFHA), which is awaiting Congressional action. In
Title III, the MTW Demonstration Program is made permanent and
participating PHAs will meet certain performance requirements, not
arbitrary time periods for participation. SLHFA would provide funding
and program flexibility to PHAs; would allow agencies to develop
program implementations that respond to local market conditions; would
allow fungibility and flexibility needed to achieve greater cost-
effectiveness in Federal expenditures; increase housing opportunities
for low-income households; reduce administrative burdens; allow Federal
resources to be more effectively used at the local level; and enable
families to achieve economic self-sufficiency.
STRENGTHENING AMERICA'S COMMUNITIES INITIATIVE (SACI)
Question. The President's budget outlines a modified SACI
(Strengthening America's Communities Initiative) proposal where only 2
of 18 economic development programs would be funded--HUD's CDBG
program, and a Regional Development Account within Commerce's Economic
Development Administration. In fiscal year 2006, Congress funded these
18 programs at a combined level of $5.3 billion. The fiscal year 2007
budget proposes only $3.36 billion--a reduction of nearly $2 billion.
Additionally, the fiscal year 2007 budget proposes a plan for a new
CDBG funding allocation formula. Given the drastic cuts in funding to
the CDBG program, altering the formula would likely result in cutting
off CDBG funding to hundreds of municipalities--the expected loss in
CDBG to PA is $56.5 million. How does HUD intend to achieve the impact
of these 18 programs, with a nearly $2 billion or 37 percent reduction
in funding?
Answer. The fiscal year 2007 budget request for CDBG is an
acknowledgment that HUD and its grantees are actively working to
address the current and future effectiveness of the CDBG program. With
regard to the proposed CDBG formula changes, a recent study by the
Office of Policy Development and Research clearly indicates that
targeting to community development need has fallen dramatically since
the formula was established 30 years ago. Restoring a greater degree of
equity to the distribution of CDBG funds will help offset any
reductions experienced as a result of reduced funding levels. The HUD
budget does propose consolidation of the Brownfields, Rural Housing and
Economic Development program and the section 8 Loan Guarantee program,
all of which can be funded as eligible activities through the mainstay
CDBG program. In addition, these are small programs compared to the
scale of CDBG funding.
In addition to formula reform, the creation of a Challenge Fund
will further target grants to effective efforts as high impact projects
in distressed communities. Finally, the ongoing development of
effective performance measurement efforts will add to the efficiency
and effectiveness of the CDBG program.
Question. How does HUD intend to address the unmet CDBG funding
needs in municipalities that will lose funding under the new formula?
Answer. Any proposed formula revision would not alter or restrict
the list of CDBG eligible activities. CDBG will retain its hallmark
flexibility and emphasis on local decision-making and, through the
proposed formula reform, HUD will establish a strong foundation for the
future of the CDBG program. These reforms include:
--A proposed formula change to target to need. The formula change
will direct a higher proportion of resources to areas with
greater need than under the existing formula and areas with
similar needs will receive similar funding;
--In addition, the reform includes bonus funds to reward more
effective grantees;
--Finally, there is improved performance measurement, which will lead
to a more effective national program and greater local impacts.
ELIMINATION OF HOPE VI
Question. HOPE VI enhances communities by decentralizing poverty
and giving families an opportunity to live in mixed-income
neighborhoods with better educational and employment opportunities. I
have visited HOPE VI sites throughout Pennsylvania and have discovered
the critical impact that reconstruction in these public housing
developments has on revitalizing neighborhoods. As HOPE VI has
accomplished one of its goals of demolishing 100,000 units--which
suggests to me that the program has been effective--how does HUD
propose to accomplish this level of reconstruction in the future if
HOPE VI is eliminated?
Answer. As a result of the HOPE VI program and other initiatives,
the Department's goals for demolition of the worst public housing have
been met. However, the HOPE VI program has shown to be more costly than
other programs that serve the same population. For example, a GAO
report (GA0-02-76) stated that the housing-related costs of a HOPE VI
unit were 27 percent higher than a housing voucher and 47 percent
higher when all costs were included.
The Department recognizes the importance of addressing the current
capital backlog within the public housing inventory and believes that
this need can be more appropriately met through other modernization
programs operated by the Department; e.g., the Capital Fund, Capital
Fund Financing Program, non-HOPE VI mixed-finance development including
leveraging private capital investment, required and voluntary
conversion, section 30, and the use of tax credits. The Department will
encourage housing authorities in need of this assistance to submit
proposals under these programs. The Department has already approved
over $2.5 billion in 61 transactions involving 131 public housing
agencies under the Capital Fund Financing Program.
______
Questions Submitted by Senator Pete V. Domenici
ELIMINATION OF SECTION 811
Question. This is second year in a row that the administration is
attempting a deep cut to the HUD section 811 program. For fiscal year
2006, the proposal was to completely eliminate funding for new capital
advance/project-based units. Congress rejected this idea in 2005--both
the House and Senate Appropriations Committees restored funding. This
year, the proposal is to impose another reduction to the capital
advance/project-based side of the program--a 90 percent reduction, from
$155.7 million, down to $15.84 million.
Additionally, the President's New Freedom Initiative spans numerous
Federal agencies including HHS, Education, Labor and HUD. It is
designed to promote integration of people with disabilities into the
mainstream of community life through access to health care, education,
employment and housing. It is based on the principle of life in the
community as an alternative to institutional settings such as nursing
homes and psychiatric hospitals. These deep reductions to the 811
program run completely against the important national goals contained
in the New Freedom Initiative.
Secretary Jackson, how are States and communities supposed to
continue progress toward eliminating costly institutional care if 811
is eliminated as a tool for developing permanent supportive housing?
Answer. The budget proposes $119 million for the Housing for
Persons with Disabilities program. Despite the section 8 funding
absorbing a majority of the Department's budget, we are able to direct
significant funding to the section 811 program that provides for: (1)
funds to renew and amend existing contracts; (2) $13.2 million for the
construction of additional new units, and (3) continued financial
support for the 27,000 units that we have already constructed and for
the 314 projects (about $400 million) in the construction pipeline.
Question. What resource will replace the permanent supportive
housing developed by section 811?
Answer. We have not abandoned new construction in favor of
vouchers. We believe that both forms of assistance are needed to
properly serve persons with disabilities.
______
Question Submitted by Senator Herb Kohl
CUTS TO SECTION 202
Question. The section 202 program provides funding for local non-
profit agencies to construct and manage housing for low-income seniors.
The section 202 program creates safe and affordable communities where
senior residents have access to the services that allow them to live
independently. With the number of individuals over the age of 65
expected to double in the next 24 years, how can you explain the
proposal in the administration's budget to cut section 202 funding by
$190 million in fiscal year 2007?
Answer. Despite the fact that section 8 renewal funding absorbed a
majority of the Department's budget, we are able to direct significant
funding ($546 million) to the section 202 program to provide for: (1)
congregate services; (2) service coordinators; (3) funding to convert
projects to assisted living; $414.8 million for the construction of new
units; and (4) funds to renew and amend existing contracts.
The Department has always and continues to be a proponent of
housing for the elderly. We have constructed approximately 400,000
units specifically for the elderly and have 342 projects (about $1.6
billion) in the construction pipeline. In addition, we serve an
additional 675,000 elderly families under other HUD rental assistance
programs.
We also are ensuring that elderly families who own homes can remain
there through FHA's reverse mortgage program. In 2005, we insured
43,131 reverse mortgages and we are seeing a steady increase in this
area.
______
Questions Submitted by Senator Richard J. Durbin
WHY CUT CDBG FUNDS?
Question. I met with many of the Chicago aldermen last week while
they were here in Washington, and one of the first things they asked me
about was Community Development Block Grants. They asked: should we
just assume a 10 percent cut in CDBG funds when we plan our upcoming
budgets? They went on to tell me how devastating that would be, and how
much good they can do in their local communities in Chicago thanks to
those CDBG funds. So my question is this: why does the Bush
Administration want to cut CDBG funds each and every year?
Answer. The administration's fiscal year 2007 budget requests more
than $3 billion in funding for CDBG. While the request is lower than
the fiscal year 2006 appropriation level, the accompanying formula
reforms will enable these funds to be better targeted to the Nation's
most distressed communities. Over time, the program's targeting to
community development need has been diffused as a result of demographic
changes, development patterns and other factors. Therefore, HUD is
proposing to reform the program so that it can continue to meet its
objectives. Reform has four components: formula reform to restore
appropriate targeting and preserve fairness in the distribution of
funds; creation of a Challenge Fund that would enable effective CDBG
grantees to obtain additional funding for community and economic
development activities in distressed neighborhoods; consolidation of
duplicative programs; and implementation of a performance measurement
framework to establish clear, measurable goals of community progress to
show the results of our formula programs. In addition, each CDBG
grantee will retain the ability to utilize their CDBG funds as they see
fit, but will have to carefully prioritize their needs in order to use
those funds most effectively.
CAN HUD AND HHS WORK TOGETHER?
Question. We all share the goal of eliminating the homelessness
epidemic in this country. The experts tell me that in order to do so
the chronically homeless must be provided with services such as
addiction treatment, mental health counseling, job training, and so
forth in addition to housing, in order to keep them off the street and
help them become productive members of society. Do you believe that
your department can best manage the provision of these services, or
should the Department of Health and Human Services handle this effort?
If HHS should be doing this, how can you ensure that HUD and HHS will
effectively work together to provide the complete services that these
folks desperately need?
Answer. The McKinney-Vento Act authorizes the use of HUD funds for
a variety of supportive services through the Department's Supportive
Housing Program. As such, since enactment of the Act, HUD has provided
funding for housing as well as supportive services. HUD has and
continues to work closely with the Department of Health and Human
Services (DHHS) and other departments that provide supportive services
for homeless persons, including the Departments of Veterans Affairs and
Labor. All such agencies are members of the U.S. Interagency Council on
Homelessness (ICH). The ICH agencies have been working collaboratively
on a number fronts in recent years, including demonstration programs to
provide needed housing and supportive services for chronically homeless
persons. In these demonstrations, HUD provided resources for housing,
and other agencies, including DHHS, provided needed supportive
services. These demonstrations, now underway, will provide useful
insights on collaborations between the Federal partners involving
housing and services.
CAN HUD PROVIDE HOUSING DURING DISASTERS?
Question. We've watched in disgust as the Gulf Coast residents who
lost their homes to Hurricane Katrina have been locked in sports
stadiums, bused to different States, kicked out of hotels . . . and
maybe, just maybe, offered a trailer in a location that is not at all
conducive to finding a job or rebuilding a sense of community. FEMA has
shown that it is simply not up to the challenge of providing permanent
housing to such a large number of displaced families. What can HUD do
to step in here on behalf of the families in the Gulf? In preparation
for the next disaster, what role should HUD be prepared to play in
providing both short term and long term housing to those in need?
Answer. The $11.5 billion enacted for disaster assistance under the
Community Development Block Grant program can be used by States to
address the housing needs of families in the Gulf. The flexibility of
the CDBG program works well in the grey area between temporary and
permanent housing solutions. Each of the five States has a housing
component in its action plan for disaster recovery. Mississippi and
Louisiana will directly undertake programs that focus on housing.
Alabama, Florida, and Texas will distribute their allocations to
various units of general local government to address housing needs. In
addition, Texas plans to allocate funding to councils of governments to
carry out housing as part of their overall activities.
Following issuance of the report, The Federal Response to Hurricane
Katrina: Lessons Learned, and at the direction of the Homeland Security
Council, HUD began actively exploring options for implementing the
recommendation that HUD become the lead Federal agency for the
provision of temporary housing should that transfer of responsibility
occur. HUD's preparation involves consideration of comprehensive and
scalable program designs, operations and logistics, program
authorities, and appropriation resources for temporary disaster housing
program funding, staffing, travel, training, etc.
WHY CUT FUNDING FOR THE ELDERLY AND DISABLED?
Question. At a time in which the President continues to push hard
for making permanent the tax cuts that overwhelmingly benefit the
wealthy, how can you at the same time justify cutting funding that
supports the housing needs of the elderly and the disabled? What does
that say about the morals and the priorities of this administration?
Answer. The $1.1 billion increased cost of serving the roughly 3.4
million families currently receiving section 8 rental assistance
required that the Department make some very difficult funding
decisions. Our first priority had to be to families currently receiving
subsidy.
However, despite the fact that section 8 renewal funding absorbed a
majority of the Department's budget, we are able to direct significant
funding ($546 million) to the section 202 program to provide for: (1)
congregate services; (2) service coordinators; (3) funding to convert
projects to assisted living; $414.8 million for the construction of new
units; and (4) funds to renew and amend existing contracts.
In addition, proposed sufficient funding for the section 811
program provides for: (1) funds to renew and amend existing contracts;
(2) $13.2 million for the construction of additional new units; and (3)
continued financial support for the 27,000 units that we have already
constructed and for the 314 projects (about $400 million) in the
construction pipeline.
______
Questions Submitted by Senator Byron L. Dorgan
HOUSING FOR THE ELDERLY AND DISABLED PROGRAM CUTS
Question. A large number of North Dakotans who take part in public
housing programs are elderly or disabled. Many of these folks cannot
work, and if they do, cannot afford suitable housing without
assistance. We are now on the front edge of the boomers turning senior
and my State doesn't have housing available for the rapidly growing 30
percent of median and under portion of this group. This is a problem
that the section 202 Elderly Housing Program and section 811 Disability
Housing Programs were designed to address. In my opinion, these
programs should be expanding not contracting. If you were in my shoes,
how would you justify cutting section 202 by 25 percent and section 811
by 50 percent to my constituents?
Answer. Our first priority for fiscal year 2007 was to provide for
the $1.1 billion in increased costs associated with serving the roughly
3.4 million families currently receiving section 8 rental assistance.
This required that the Department make some very difficult funding
decisions.
However, despite the fact that section 8 renewal funding absorbed a
majority of the Department's budget, we are able to direct significant
funding ($546 million) to the section 202 program to provide for: (1)
congregate services; (2) service coordinators; (3) funding to convert
projects to assisted living; $414.8 million for the construction of new
units; and (4) funds to renew and amend existing contracts.
In addition, proposed sufficient funding for the section 811
program provides for: (1) funds to renew and amend existing contracts;
(2) $13.2 million for the construction of additional new units; and (3)
continued financial support for the 27,000 units that we have already
constructed and for the 314 projects (about $400 million) in the
construction pipeline.
CUTS TO COMMUNITY DEVELOPMENT BLOCK GRANTS
Question. This year, the President's budget calls for a $1 billion
reduction in the CDBG program, representing a 25 percent loss in
funding from last year's levels. Because of its flexibility and use in
a variety of projects, local and State governments in Grand Forks,
Fargo, and other North Dakota communities have come to rely on the
program as the cornerstone of any new community revitalization effort.
Folks at various North Dakota Housing Authorities tell me that for
every $1 of the CDBG program invested in communities, $3 are leveraged
in private funding, bringing much-needed investment, and jobs in North
Dakota communities. I support this program and am pleased that Congress
rejected the administration's proposal to eliminate CDBG last year. I
see the proposed cuts as evidence that the administration is abandoning
its commitment to America's communities in the guise of reform. How
would you respond to that, Mr. Secretary?
Answer. The administration's fiscal year 2007 budget proposal is a
clear statement of commitment to America's communities and of support
for the CDBG program. It retains the program at HUD, funds it at a
level of $3 billion, and proposes a series of legislative initiatives
that will ultimately strengthen the CDBG program. HUD is committed to
seeing these reforms enacted and establishing a strong foundation for
the future of the CDBG program. These reforms include:
--A proposed formula change to target to need. The formula change
will direct a higher proportion of resources to areas with
greater need than under the existing formula and areas with
similar needs will receive similar funding;
--In addition, the reform includes bonus funds to reward more
effective grantees;
--Finally, there is improved performance measurement, which will lead
to a more effective national program and greater local impacts.
NATIVE AMERICAN HOUSING AND SELF-DETERMINATION ACT BILL LANGUAGE
CONTINUATION
Question. The fiscal year 2007 budget requests the continuation of
bill language included in last year's HUD appropriations Act that
amends the Native American Housing and Self-Determination Act funding
formula to require that HUD distribute funds on the basis of single-
race or multi-race data, whichever is the higher amount. What is the
Department rationale for including this language in fiscal year 2007,
given that it generated a fair amount of controversy among the tribes
and tribally designated housing entities in fiscal year 2006? Wouldn't
it be preferable to consider whether changes are appropriate to the
funding formula as part of the NAHASDA reauthorization process, which
we will be engaged in the 110th Congress?
Answer. The fiscal year 2006 HUD Appropriations Act (2006 Act)
contains a provision directing the Department to implement what is
commonly known as the ``hold harmless'' provision. This calls for the
Need component of the Indian Housing Block Grant (IHBG) formula to be
calculated twice for each tribe, once using single-race data and once
using multi-race data. Each tribe is then awarded the higher of those
two amounts.
Until reauthorization of the Native American Housing Assistance and
Self-Determination Act (NAHASDA) is addressed, and Congress determines
what statutory changes, if any, it will enact during the
reauthorization process, the Department has determined that the best
course of action to follow is to continue the methodology Congress
provided in the 2006 Act. This will ensure stability and continuity in
the way that IHBG recipients receive their IHBG formula funding.
RISING UTILITY COSTS IN PUBLIC HOUSING
Question. Public housing and voucher program participants make a
monthly housing payment that covers rent and utilities. As utility
costs skyrocket, energy costs consume a greater and greater proportion
of the housing payment. This means that housing authorities receive
less in the form of rent for public housing. The utility over payments
in the Voucher program come directly out of the fixed administrative
fees allocated by HUD. In public housing, I'm told that increased
utility costs could easily tap out these reserves. Under the
President's proposal, there is not a utility allowance adjustment. Do
you think that HUD is prepared to cover skyrocketing utility bills?
Answer. While the Department will not know the actual cost of
utilities for fiscal year 2006 until PHAs submit their financial
statements for the past 5 to 7 years, PHA utility costs have remained
relatively stable with no dramatic spikes. Immediately after Hurricane
Katrina, utility rates spiked and then came down considerably.
The 2007 Utility Expense Level (UEL) for the Public Housing
Operating Fund is calculated based upon a 3-year rolling average to
account for increases as well as decreases in the cost of utilities
over a period of time. Although, the Department's 2007 utility expense
estimate is based on actuals from a 3-year rolling base inflated by the
OMB utility inflation factor of minus 1.8 percent, it is difficult to
estimate the impact of utilities without actual cost data.
However, over the past 3 fiscal years (2003-2005), PHAs have been
able to retain over $100 million in excess utility payments made to
them, which are available as a part of their operating fund reserves to
cover operational and maintenance costs of their program. Also, to
reduce the cost of utilities, the Department encourages PHAs to enter
into energy performance contracts, and to also switch to tenant-paid
utilities. Switching to tenant-based utilities does not shift the cost
of utilities to the persons needing the assistance because the tenant's
rent is lowered by the amount of the standard utility allowance, and
the tenant becomes responsible for the entire utility cost, above or
below what the standard utility allowance was before the change in
policy. This will encourage personal responsibility of tenants in
conserving energy and reducing utility consumption and will reduce, or
at least make predictable, the utility expense of the PHA and the
Department. In addition, the Energy Policy Act allows for energy
performance contracts to run for up to 20 years instead of 12 years.
This should allow PHAs and HUD greater certainty in planning their
utility expenses, and responding to unexpected variations in
consumption or price.
The Housing Choice Voucher program assists families with the gross
rent, which is not only the rent due to the owner, but also includes
applicable utility allowances for any tenant supplied utilities. The
individual PHA establishes the utility allowances for its program.
These allowances must be based on the typical cost of utilities and
services paid by energy-conservative households that occupy housing of
similar size and type in the same community. In accordance with 24 CFR
982.518(c), the PHA must review its schedule of utility allowances each
year, and must revise its allowance for a utility category if there has
been a change of 10 percent or more in the utility rate since the last
time the utility allowance was revised. Funding to cover these
allowances is part of the Housing Assistance Payment (HAP) subsidy
amount provided by HUD for rental assistance; it is not part of the
administrative fee provided to a PHA to manage the program. Starting in
fiscal year 2005, Congress has provided funding to PHAs based on a
budgetary formula and has directed PHAs to manage all increases in HAP
costs, including increases in utility allowances, within that budgetary
allocation.
______
Questions Submitted by Senator Patrick J. Leahy
CUTS TO COMMUNITY DEVELOPMENT BLOCK GRANTS
Question. This is the second year that the President's budget seeks
drastic cuts and changes to CDBG. The request would slash CDBG by over
$1 billion, leaving funding at its lowest level since 1990. This
program is a critical source of funding for affordable housing,
supportive services, public improvements, and community and economic
development.
The National Low Income Housing Coalition estimates that if further
cuts to CDBG are enacted, then an estimated 97 percent of the more than
1,000 communities that have held entitlement status since fiscal year
2004--when we reached the highest level of CDBG funding under this
administration--or earlier would have their CDBG allocation slashed by
at least one-third. Each State would also see its allocation reduced by
at least a third compared to the fiscal year 2004 funding level.
Secretary Jackson, your Department is principally responsible for
housing and community development. How do you justify a budget that
slashes funding for this most successful initiative that supports
economic development and affordable housing?
Answer. The fiscal year 2007 budget of $3.032 billion for CDBG
reflects a reduction of approximately $700 million from the enacted
fiscal year 2006 level. The administration's fiscal year 2007 budget
proposal recognizes the value of the CDBG program to local community
development efforts in two ways. First, it maintains the CDBG program
at HUD as opposed to consolidating or transferring it to another
agency. Second, the budget requests funding for the CDBG program at a
level of more than $3 billion. In addition, the fiscal year 2007 budget
proposal improves the effectiveness of the program in several
significant ways. The proposal is as follows:
--proposed formula change will direct a higher proportion of
resources to areas with greater need than under the existing
formula and areas with similar needs will receive similar
funding;
--bonus funds will be established to provide additional funds to more
effective grantees; and
--improved performance measurement will lead to a more effective
national program and greater local impacts.
CUTS TO COMMUNITY DEVELOPMENT BLOCK GRANTS
Question. Is it the President's intention to focus this program
solely on job creation and economic development? If so, why don't we
call this what it is--the elimination of community development as part
of HUD's core mission?
Answer. The proposed reforms of the CDBG program will not alter or
restrict the list of CDBG eligible activities. Thus, grantees will
continue to make their own decisions as to the activities they will
fund with their CDBG dollars--be it public services, infrastructure,
housing or economic development. The reforms will achieve three goals--
CDBG formula reform, improved performance measurement standards for
CDBG and implementation of a challenge grant to provide targeted
development grants to high impact projects in distressed communities.
CONSOLIDATION OF HUD'S SMALLER COMMUNITY DEVELOPMENT PROGRAMS
Question. I noted that the President's proposal from last year for
the ``Strengthening America's Communities Initiative'' remains alive in
the fiscal year 2007 budget request. The administration was soundly
beaten back by Congress last year on its proposal to consolidate and
slash funding under this initiative for several smaller economic and
community development programs with larger programs like CDBG.
The administration pursues this misguided goal for fiscal year 2007
with a proposed consolidation of CDBG with Brownfields Redevelopment
grants, Rural Housing and Economic Development, and section 108 Loan
Guarantees. It again proposes no funding for these smaller programs and
would fund CDBG at 20 percent less than this year.
Since the fiscal year 2007 budget request would fund CDBG at
substantially less than this year, as well as consolidate it with those
other programs, how do you magically propose to do so much more with so
much less?
Answer. The key will be reform of the CDBG formula. A recent study
by the Office of Policy Development and Research found that one of the
problems with the CDBG formula is that some communities with little
need for CDBG funds have received much more on a per capita basis than
many communities with much greater needs. Restoring a greater degree of
equity to the distribution of funds will help offset any reductions
experienced as a result of reduced appropriations levels. The budget
does propose consolidation of the Brownfields Economic Development
Initiative (BEDI), Rural Housing and Economic Development Program, and
the section 108 Loan Guarantee Programs under CDBG. In almost every
case, the activities eligible for assistance under these programs can
be funded through the CDBG program. This point is demonstrated by the
fact that the section 108 and BEDI programs are authorized through the
CDBG statute and utilize the CDBG eligible activities list to define
their eligible activities.
CUTS TO HOUSING PROGRAMS
Question. I was pleased to see an increase this year for the
section 8 voucher program in fiscal year 2007. Finding an affordable
place to live is becoming increasingly difficult for many working
families in Vermont and the section 8 program often helps bridge the
gap for families who are struggling to make ends meet.
Unfortunately due to inadequate funding in fiscal year 2005, local
housing agencies budgets continue to be cut this year. Some estimate
that 80,000 fewer families may be served by the voucher program as a
result, over 200 of those in Vermont. The increase in the fiscal year
2007 budget is enough to undo about half of these reductions--and I
thank you for that--but it still falls short of the money needed to
restore the cuts we have seen over recent years.
In other areas of the budget we see additional rollbacks. The
public housing capital fund is cut by 11 percent, the operating fund is
level-funded despite the need for additional funding for the operation
of public housing under the new asset-based management system, funds
for housing for persons with disabilities have been cut in half, HOME
formula grants have been reduced, housing for the elderly programs have
been slashed, and both fair housing programs and lead-based paint
grants have been cut.
Mr. Jackson, each year the administration submits a budget for HUD
that is littered with bullet holes--one year it is section 8, the next
it is public housing, the next it is CDBG--and each time the
subcommittee is left holding the bag. Can you offer me any assurances
that this will not continue in future years?
Answer. While some, including the Center for Budget and Policy
Priorities (CBPP), forecasted that approximately 80,000 fewer families
would be able to be assisted given the administration's funding request
for fiscal year 2005, this has turned out not to be so. In fact more
families were assisted in fiscal year 2005 than the previous year and
the CBBP has retracted its initial fiscal year 2005 projections in a
footnote to its 2006 report. The Department has not been made aware of
a single family in the State of Vermont displaced as a result of the
fiscal year 2005 budget for the Housing Choice Voucher Program.
HUD has been consistent in its support for the section 8 program.
The administration agrees with the appropriators in that the most
effective way to deliver section 8 rental assistance is through a fixed
budget that allows public housing agencies to properly plan their
operations. In support of that approach the President's budget request
currently being debated, includes a $380 million budgetary increase
over 2006 funding levels coupled with a number of key legislative
proposals aimed at further improving the efficiency of the Housing
Choice Voucher Program. HUD will continue to actively engage in
communication with Congress to ensure these important reforms are
enacted. By measuring outcomes and aligning incentives, these important
programs will be even better.
CUTS TO PROPOSED HOUSING PROGRAMS
Question. How do you expect to run a Department whose core programs
are being eroded away bit by bit?
Answer. By appropriately prioritizing resources and proposing
reforms to key Departmental programs, including section 8 and CDBG, HUD
can continue the advances for the good of the low-income community.
Those programs that are not able to drawdown all of its funds or are
simply inefficient, must be reformed. HUD will continue to work with
Congress to ensure these key reforms are enacted.
SUBCOMMITTEE RECESS
Secretary Jackson. Thank you.
Senator Bond. Thank you very much. The hearing is recessed.
[Whereupon, at 11:04 a.m., Tuesday, March 2, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]