[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                    AFFORDABLE HOUSING PRESERVATION:

                       LESSONS FROM STARRETT CITY

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

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 10, 2007

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-47



                     U.S. GOVERNMENT PRINTING OFFICE

38-387 PDF                 WASHINGTON DC:  2007
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP, 
Washington, DC 20402-0001


                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            RICHARD H. BAKER, Louisiana
CAROLYN B. MALONEY, New York         DEBORAH PRYCE, Ohio
LUIS V. GUTIERREZ, Illinois          MICHAEL N. CASTLE, Delaware
NYDIA M. VELAZQUEZ, New York         PETER T. KING, New York
MELVIN L. WATT, North Carolina       EDWARD R. ROYCE, California
GARY L. ACKERMAN, New York           FRANK D. LUCAS, Oklahoma
JULIA CARSON, Indiana                RON PAUL, Texas
BRAD SHERMAN, California             PAUL E. GILLMOR, Ohio
GREGORY W. MEEKS, New York           STEVEN C. LaTOURETTE, Ohio
DENNIS MOORE, Kansas                 DONALD A. MANZULLO, Illinois
MICHAEL E. CAPUANO, Massachusetts    WALTER B. JONES, Jr., North 
RUBEN HINOJOSA, Texas                    Carolina
WM. LACY CLAY, Missouri              JUDY BIGGERT, Illinois
CAROLYN McCARTHY, New York           CHRISTOPHER SHAYS, Connecticut
JOE BACA, California                 GARY G. MILLER, California
STEPHEN F. LYNCH, Massachusetts      SHELLEY MOORE CAPITO, West 
BRAD MILLER, North Carolina              Virginia
DAVID SCOTT, Georgia                 TOM FEENEY, Florida
AL GREEN, Texas                      JEB HENSARLING, Texas
EMANUEL CLEAVER, Missouri            SCOTT GARRETT, New Jersey
MELISSA L. BEAN, Illinois            GINNY BROWN-WAITE, Florida
GWEN MOORE, Wisconsin,               J. GRESHAM BARRETT, South Carolina
LINCOLN DAVIS, Tennessee             JIM GERLACH, Pennsylvania
ALBIO SIRES, New Jersey              STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio              JOHN CAMPBELL, California
ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida               THADDEUS G. McCOTTER, Michigan
JIM MARSHALL, Georgia
DAN BOREN, Oklahoma

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
           Subcommittee on Housing and Community Opportunity

                 MAXINE WATERS, California, Chairwoman

NYDIA M. VELAZQUEZ, New York         JUDY BIGGERT, Illinois
JULIA CARSON, Indiana                STEVAN PEARCE, New Mexico
STEPHEN F. LYNCH, Massachusetts      PETER T. KING, New York
EMANUEL CLEAVER, Missouri            PAUL E. GILLMOR, Ohio
AL GREEN, Texas                      CHRISTOPHER SHAYS, Connecticut
WM. LACY CLAY, Missouri              GARY G. MILLER, California
CAROLYN B. MALONEY, New York         SHELLEY MOORE CAPITO, West 
GWEN MOORE, Wisconsin,                   Virginia
ALBIO SIRES, New Jersey              SCOTT GARRETT, New Jersey
KEITH ELLISON, Minnesota             RANDY NEUGEBAUER, Texas
CHARLES A. WILSON, Ohio              GEOFF DAVIS, Kentucky
CHRISTOPHER S. MURPHY, Connecticut   JOHN CAMPBELL, California
JOE DONNELLY, Indiana                THADDEUS G. McCOTTER, Michigan
BARNEY FRANK, Massachusetts
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 10, 2007................................................     1
Appendix:
    July 10, 2007................................................    43

                               WITNESSES
                         Tuesday, July 10, 2007

Arriaga, Frederick C., Counsel, Borough of Brooklyn..............    24
Cestero, Rafael, Senior Vice President, Enterprise Community 
  Partners, Inc..................................................    30
Donovan, Shaun, Commissioner, New York City Department of Housing 
  Preservation and Development...................................    21
Montgomery, Hon. Brian D., Assistant Secretary for Housing-
  Federal Housing Commissioner, U.S. Department of Housing and 
  Urban Development..............................................     8
Pazant, Shirley, ACORN member....................................    32
Perine, Jerilyn, Executive Director, Citizens Housing and 
  Planning Council...............................................    28
Purnell, Marie, President, Starrett City Tenants Association.....    26
VanAmerongen, Deborah, Commissioner, New York State Division of 
  Housing and Community Renewal..................................    18

                                APPENDIX

Prepared statements:
    Velazquez, Hon. Nydia M......................................    44
    Arriaga, Frederick C.........................................    49
    Cestero, Rafael..............................................    54
    Donovan, Shaun...............................................    60
    Montgomery, Hon. Brian D.....................................    67
    Pazant, Shirley..............................................    71
    Perine, Jerilyn..............................................    75
    VanAmerongen, Deborah........................................    78

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Statement of David Bistricer.................................    85
    Statement of Disque D. Deane.................................    91


                    AFFORDABLE HOUSING PRESERVATION:



                       LESSONS FROM STARRETT CITY

                              ----------                              


                         Tuesday, July 10, 2007

             U.S. House of Representatives,
                        Subcommittee on Housing and
                             Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10 a.m., at 
the Brooklyn Sports Club, 1540 Van Siclen Avenue, Brooklyn, New 
York, Hon. Maxine Waters [chairwoman of the subcommittee] 
presiding.
    Members present: Representatives Waters, Velazquez, 
Ellison, and Shays.
    Also present: Representatives Towns and Clarke.
    Chairwoman Waters. Good morning. First, I would like to 
thank you for your patience. We are getting started a little 
late; however, we are excited about being here, and we thank 
you for waiting past the 10:00 to get started. I think we are 
going to have some good news for you today.
    This hearing of the Subcommittee on Housing and Community 
Opportunity will come to order.
    Ladies and gentlemen, I would like to thank first Mr. 
Edolphus Towns for requesting this hearing on the preservation 
of Starrett City out of his concern about the loss of this 
development as affordable housing.
    Let me just share with you that when I first learned about 
this, I was in California--I think we may have been on break--
and I got an urgent call from Mr. Towns, and I have talked with 
him every day since that call, assuring him that we would be 
here today and we would have this subcommittee hearing.
    So, I know that you just gave him a round of applause. We 
are going to break all the rules. Give him another round of 
applause.
    I would also like to thank Congressman Christopher Shays, 
who went to a great deal of trouble to be here today. He did 
not get in until after 1:30 this morning, but he wanted very 
much to be here because he sees this as an opportunity for us 
to learn about what we can do, not only here at Starrett, but 
with other, similar developments across the country.
    Another New Yorker who has been very concerned about this 
project, and despite the fact that she probably should be at 
the doctor right now, she said that she had to spend the time 
here, because this is so important not only for Brooklyn and 
this area, but for all of New York, Congresswoman Velazquez.
    And, we will probably be joined a little bit later by 
another member of the committee--all right. We are going to 
talk a little bit louder, with the microphone a little bit 
closer.
    I want to make sure that you understand that Mr. Shays and 
Ms. Velazquez are members of the Subcommittee on Housing and 
Community Opportunity, and we will probably be joined by one 
other member, Mr. Keith Ellison, and another New Yorker, Ms. 
Yvette Clarke. They will perhaps be joining us this morning.
    I would like to start by noting--and I have to do this for 
the record--that without objection, Mr. Towns and Ms. Clarke, 
who are not members of the committee, will be considered 
members of the subcommittee for the duration of this hearing. 
Also, without objection, all members opening statements will be 
made a part of the record.
    Ladies and gentlemen, we are here today at Starrett City, 
the largest federally subsidized, affordable housing 
development in the United States, in order to discuss 
preserving its affordability for current and future tenants.
    In February, Starrett City Associates sold this development 
to Clipper Equity for $1.3 billion. However, the Department of 
Housing and Urban Development and the New York State Division 
of Housing and Urban Renewal rejected that sale due to a lack 
of a clear plan as to how the development would be kept 
affordable.
    In March, Clipper Equity submitted a second plan to HUD. 
This plan relies heavily on enhanced vouchers which protect 
most tenants from rent increases, but does not make the 
development affordable after tenants move out. Perhaps more 
troubling is the fact that not all tenants will receive 
enhanced vouchers, and some of those who receive them will 
still see their rents increased. There are also unsubsidized 
tenants at Starrett who will see their rents increase under 
Clipper Equity's plan.
    Although Clipper Equity says it will phase this increase in 
over 3 years, the rise in rent could cause a hardship for these 
working families. However, there have been concerns raised also 
about the financial feasibility of this plan, and I certainly 
shared those concerns once I reviewed the plan.
    However, I am pleased to announce that the Department--that 
is, HUD--has rejected the plan a second time. I was informed of 
the Department's decision yesterday, and I would like to take 
this moment to commend the Secretary of HUD, Secretary Jackson, 
for recognizing the infeasibility of Clipper Equity's plan.
    In a letter dated July 9th, Secretary Jackson stated that 
Clipper Equity has failed to demonstrate that it has the 
organization or financial capacity to follow through with its 
plan. In addition, Secretary Jackson notes that Clipper Equity 
has not provided a full management plan to preserve long-term 
affordability of Starrett City. The message from HUD is very 
clear: This plan simply is not financially feasible.
    And this rejection signals that the sale of affordable 
housing resources like Starrett City is to be held to the 
highest scrutiny.
    I share Secretary Jackson's concerns about the financial 
infeasibility of the plan submitted by Clipper Equity. In 
addition, I am very concerned about the suitability of David 
Bistricer as a manager of affordable housing, given the 
numerous housing code violations at Flatbush Gardens and his 
department by the State of New York from converting rental 
housing into condominiums or cooperatives.
    The New York State Division of Housing and Community 
Renewal has also rejected Clipper Equity's plan for a second 
time. Yesterday, DHCR announced that they, too, were rejecting 
the plan for affordability submitted by Clipper Equity.
    So, right now, this is a victory for the tenants.
    We have worked to keep Starrett affordable, and Mr. Towns' 
role in requesting this hearing, which has clearly prompted 
these decisions from HUD and DHCR, should not be forgotten.
    We are very pleased with this announcement that Starrett 
City will remain affordable. In his written testimony to this 
subcommittee, Disque Deane states that it is time for his 
patient and long-term investors to move on from Starrett City, 
and that the application of housing subsidies does not 
transform his privately owned asset into a public work.
    To that, I say to Mr. Deane, your first obligation is not 
to your investors or to your stakeholders, but to the families 
and communities who make Starrett City so valuable. All of 
these families are worth more than $1.3 billion, and Mr. Deane, 
I believe, should recognize that. Any plans for the sale of 
this development must be undertaken in a clear and transparent 
manner, with input from residents and government officials, and 
must, absolutely must take pains to keep this development 
affordable.
    I am disappointed that Mr. Bistricer and Mr. Deane have 
chosen not to testify at these proceedings, or to make a 
representative available to testify on their behalf. However, 
Mr. Bistricer and Mr. Deane have submitted written testimony to 
this subcommittee, and it will be entered into the record, 
without objection.
    Affordable housing preservation is a national issue. From 
1995 to 2003, this country has lost 300,000 federally assisted 
affordable housing units. This loss in affordable housing comes 
at a time when more and more families are struggling to pay the 
rent; 17 million of the Nation's renters have housing cost 
burdens, paying over 30 percent of their income in rent. Of 
this number, 8 million have severe housing cost burdens, paying 
over 50 percent of their income in rent. Low-income families 
with severe housing cost burdens often spend substantially less 
on food, clothing, and health care. It is hard for these 
families to make ends meet, because their incomes have 
stagnated while rents have risen.
    This means that rental housing is increasingly out of reach 
for America's working families. When renters only earn an 
average of $13 an hour, but really need to earn at least $16.31 
an hour to pay the rent on a two-bedroom apartment, the need 
for affordable housing preservation is very clear.
    But, it simply isn't enough to retain each unit of 
affordable housing. We must also create new units. For every 
two units of affordable housing lost, only one affordable unit 
is built. It is clear that we need to do more to increase the 
supply of the Nation's affordable housing.
    This is why I am honored to be an original cosponsor of 
H.R. 2895, the National Affordable Housing Trust Fund Act of 
2007. The goal of the Trust Fund is to preserve, rehabilitate, 
and produce 1.5 million more units of affordable housing over 
the next 10 years, without increasing government spending or 
adding to the Federal deficit.
    The sale of affordable housing resources like Starrett City 
is about more than bricks and mortar. It is about lives and 
communities, and anybody should clearly demonstrate to the 
government how it will protect those lives and communities.
    I believe that the witnesses gathered here can help this 
subcommittee understand the importance of the continued 
affordability of Starrett City.
    I would now like to recognize Congressman Shays for his 
opening statement. Thank you very much.
    Mr. Shays. Madam Chairwoman, thank you for holding this 
hearing. I am here because Chairwoman Waters and Representative 
Towns said, ``Be here.'' We could not have a more caring 
chairwoman than Chairwoman Waters or a more caring and 
effective Representative than Ed Towns.
    I appreciate the interest all the stakeholders have taken 
in this issue--HUD, the Governor, the Mayor, the borough 
president's office, the property owners, and, most importantly, 
the tenants who live here, all of you.
    For better or worse, the Federal Government has removed 
itself from owning and managing affordable and public housing. 
Because of this evolution, the Government is captive to the 
costs of renting housing from private owners.
    Today, we will examine how we can best preserve our 
affordable housing stock nationwide, and what some of the 
challenges are as the value of affordable units becomes so 
attractive in the private real estate market.
    While today's hearing will focus on preserving access to 
affordable housing in Starrett City, we know the outcome of the 
proposed sale would have a profound impact on the marketplace 
nationwide. In coming years, as more owners of affordable 
housing communities consider the desirability of maintaining 
their investment, a sale to private developers is more and more 
likely.
    Although it is not the situation in Starrett City, in some 
cases, the need for capital improvements to the property is so 
great that the owner has no choice but to sell all or part of 
the property. The greatest risk when interested parties 
improperly intervene in the sale or transfer of a property is 
that the owner loses all interest in the future of the property 
and simply sells to the highest bidder, losing the affordable 
units altogether.
    We know that as Starrett City goes, so will go many future 
developments in the affordable housing marketplace. Owners, 
prospective buyers, State and local governments, tenants, and 
advocates are all watching closely. And we need to be concerned 
that a negative outcome will stifle future investment, and 
interest in affordable housing will continue in the private 
marketplace.
    We need to find a resolution that, first and foremost, 
protects the families who live here, and also takes into 
account the needs of the owners to maintain this very 
successful private and public partnership.
    I am grateful that HUD has examined this issue so closely. 
It did not hesitate to rule that the initial proposal 
threatened the preservation of affordable housing for those who 
need it most, the families of Starrett City, and how it has 
done the same again.
    Under the leadership of Secretary Jackson, HUD's commitment 
to preserving the affordability of these units is real, and it 
is appreciated by all of us.
    Madam Chairwoman, thank you again for your leadership on 
this issue. I look forward to the testimony.
    I also want to convey my appreciation for the friendliness 
of this place; I had bumped into Ms. King in Apartment 3-B, and 
she invited me up to her unit.
    Chairwoman Waters. Thank you very much.
    I would now like to recognize Congresswoman Velazquez.
    Ms. Velazquez. Good morning, everyone. Thank you, 
Chairwoman Waters, and Mr. Shays, for convening this important 
hearing and leading this discussion on the dire need for 
affordable housing in our City and across the United States.
    I also want to thank the City administration, particularly 
HPD, and the State government and HUD, for coming together in 
addressing such an important issue. Whatever happens at this 
development will be a defining point for the rest of the 
country. And what it shows is how we can bring positive results 
when different levels of government come together. Despite the 
fact that we have a Republican Administration, on this issue, I 
have to say that you have been responsible in making sure that 
working families who are working two and three jobs have a roof 
over their heads.
    And I say thank you to Mr. Shays for your sensitivity, to 
Mr. Towns for your commitment to preserve affordable housing, 
but most importantly, to the tenants of Starrett City for your 
activism, and your commitment and your drive to preserve 
affordable housing.
    So, in light of the issue at hand and in light of the heat, 
I will ask unanimous consent that my entire statement is 
admitted into the record.
    Chairwoman Waters. Without objection.
    Ms. Velazquez. And, with that, I just am eager to hear the 
good news from the Honorable Brian Montgomery. Thank you.
    Chairwoman Waters. Thank you very much.
    And now I will call on the gentleman who has talked to me 
every day until we got here, Congressman Edolphus Towns.
    Mr. Towns. Thank you. Thank you very much.
    Let me begin by thanking the chairwoman, Congresswoman 
Maxine Waters, who came 3,000 miles to be with us this morning. 
Let's give her a big round of applause. We thank her for her 
commitment and her dedication. And, of course, we welcome her 
to Brooklyn.
    I would also like to thank the Secretary of HUD, who made 
two visits to Starrett City--not one, but two. And then, of 
course, after making his visit, he then ruled, which means that 
he understands Starrett City. He had an opportunity to talk to 
the residents of Starrett City before he made his decision. So 
I want to thank Secretary Jackson for his commitment and his 
dedication.
    I want to thank HPD, and I also want to thank State Housing 
for all of their visits to Starrett City. Let me tell you that 
anybody, anywhere that I have met, I told them about what was 
happening at Starrett City, and they needed to assist us in 
doing a good job.
    I am delighted to be joined by my colleague, Nydia 
Velazquez, who has worked with me on this issue. And, of 
course, I have gotten everybody involved. Yvette Clarke, who is 
my next-door neighbor, we have her here. We want her to hear 
what is going on.
    And, of course, this is the largest subsidized housing in 
the country, and we should not forget that. And, of course, the 
way Starrett City goes is the way the Nation is going to go, so 
we want to make certain that we learn as much as we can from 
you, as to what we might be able to do from this day on.
    A few years ago, the American Heart Association ran a 
successful series of public service announcements to raise 
awareness of the perils of high blood pressure. The spots 
labeled the disease the silent killer. Today, the Nation faces 
a public policy challenge that reminds me of how blood 
pressure, acute, growing, and deadly, yet for most Americans, 
unknown, the issue is affordable housing. The escalating rents 
and deplorable housing conditions for tens of thousands of 
Brooklyn residents are familiar to us all.
    You know, they talk about enhanced vouchers. Well, enhanced 
vouchers really are not a solution to our problem, you see, 
because the voucher is tied to the individual, and not to the 
apartment. So, if the person moves out, then they just can 
raise the rent in the apartment, because that enhanced voucher 
is gone.
    So we need to make certain that we don't listen to the 
tricks. We have to learn today to make certain that we ask the 
right questions. Because in order to get the right answer, you 
must phrase the question properly.
    We don't want to be like the old man who was sitting on a 
bench, and not too far from him was a dog. Two young fellows 
were playing around, and they asked the old man, ``Will your 
dog bite?'' And the old man said, ``No, my dog will not bite.'' 
The young fellow went over to pet the dog, and the dog took a 
hunk of meat out of his hand. He said, ``I thought you said 
your dog wouldn't bite.'' And the old man said, ``That is not 
my dog.''
    So we need to make certain that we phrase the question 
properly, so that we will be able to get the right answers. And 
that is the reason why I am so happy that we have the 
chairwoman of the committee here, and all the others here 
today, to try to see if we can't phrase the right question to 
be able to get the right answers.
    You can be assured that Ed Towns is not going to go away. 
Now, I understand that somebody has tried to run, and the 
purchaser said, ``Well, we wish Ed Towns would go away.'' Well, 
I want to let you know that I am not going away. As long as the 
people in this development are affected by what they decide to 
do, I will not go away.
    A lot of us have heard the record from hundreds of 
residents who believe this transfer in ownership will result in 
significantly higher rents, a reduction of services, and undue 
pressure for tenants to relocate. This deal has already been 
rejected twice. How many times do they have to reject it before 
they get the message that this pig will not fly?
    While housing policy is often complicated, housing itself 
is very simple. Everyone needs a decent place to live and the 
ability to pay for it. This is the social minimum. It is a goal 
we can achieve, and a goal we must set if we expect families to 
succeed and our neighborhoods to flourish.
    So I thank the committee for coming to Brooklyn to hear 
firsthand what the residents of Starrett City and Spring Creek 
and Brooklyn have to say about the issue of affordable housing. 
Let me assure the residents of Starrett City that you are not 
alone in this fight. Ed Towns will say it, as long as my tongue 
clings to the roof of my mouth, affordable housing must be 
kept.
    Thank you so much.
    Chairwoman Waters. Thank you very much.
    Ladies and gentlemen, we have been joined by another New 
Yorker, Congresswoman Yvette Clarke.
    Ms. Clarke. Let me just start by thanking the distinguished 
chairwoman from California, young Maxine Waters, for coming 
across the country to be here in Brooklyn, New York, where the 
Nation really, truly is.
    Let me just say that I have found, in my short tenure in 
the U.S. House of Representatives, that all that we have heard 
and all that we have read about Maxine Waters remains true, 
remains vibrant, and ever vigilant on behalf of the people of 
the Nation. And so we owe her a debt of gratitude, and it is 
certainly my honor and my privilege to serve with her.
    To my colleague, Congressman Ed Towns, my partner who I--we 
have adjoining districts. When I hear about a struggle 
happening in the 12th Congressional--and to my colleague, Nydia 
Velazquez, who sits on the other side of my district, and I 
hear about a struggle happening in her district, the 10th 
Congressional, it has a profound impact on the people of the 
11th Congressional District. And so I am moved to be where 
these Members are, to stand up for each and every one of you 
who make our civil society just that, a civil society.
    Affordable housing is instrumental to so many New Yorkers 
and working families in our community, and when we turn our 
backs at this juncture in our history, we are saying that we do 
not embrace the value of this Nation. It has been families like 
yours and like mine who have made America what it is today.
    We have an obligation not only to wage this battle and win, 
but we have an obligation to leave a legacy for those who are 
coming behind us. If we lose this battle of affordability, of 
our humanity, and just being humane around how we will support 
housing for our people, then we are saying that we give up on 
the future of this Nation. When we win here in Brooklyn, New 
York, they will win in New Orleans, Louisiana.
    I am committed, as are my colleagues, to diligently pushing 
for a better agenda that will protect our diminishing supply of 
affordable housing and push forward forcefully for increased 
affordable housing in this Nation, in this City, and in this 
State. If not, we know what the consequences are; we will 
continue to see a separation between the haves and the have-
nots. The have-nots will continue to labor in vain, and their 
American dream will not be attained. I cannot stand by for 
that.
    Let me just close by saying that I want to thank the 
Honorable Brian Montgomery for taking the time to be here with 
us. It is a lovely facility here in Starrett, and we want to 
make sure that the residents who have been the stewards of this 
place continue to receive the respect and the dignity that they 
deserve.
    Today, we send a signal to all working people throughout 
this City, and throughout this borough, that we stand together 
in unity, understanding that a roof over one's head is an 
indication of growth, of development, and that when we fail to 
make sure that our people are housed, we have failed in our 
civil society.
    Let me thank HPD--I see so many of my friends here; You 
know, I was a Council member just 6 months ago--and I thank 
DHCR for their vigilance in this matter. I look forward to 
partnering with my colleagues, and with each and every one of 
you, as we are victorious in making sure that affordable 
housing is truly affordable, and that it remains a fact of the 
foundation of our community.
    Mr. Towns. As I pass the microphone back to the chairwoman 
of the committee, let me just ask that all the able-bodied 
stand and give seats to our seniors. We have some seniors who 
are standing. And, of course, we hope that you would do that. I 
mean--so think about it, and see if you can't help me out. 
Thank you so much.
    Chairwoman Waters. Thank you very much.
    I would now like to introduce our first panel, which 
consists of the Assistant Secretary for Housing for the United 
States Department of Housing and Urban Development, Mr. Brian 
Montgomery. Assistant Secretary Montgomery, thank you for 
appearing before the subcommittee today. And, without 
objection, your written statement will be made a part of the 
record.
    You will now be recognized for a 5-minute summary of your 
testimony.

   STATEMENT OF THE HONORABLE BRIAN D. MONTGOMERY, ASSISTANT 
   SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER, U.S. 
          DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Montgomery. Good morning. Thank you very much, 
Chairwoman Waters, Chairman Towns, and distinguished members of 
the Subcommittee on Housing and Community Opportunity. On 
behalf of HUD Secretary Alphonso Jackson, thank you for 
inviting me and the Department to testify here today. We 
appreciate the opportunity to provide the committee with our 
position on Starrett City, as well as our commitment to the 
preservation of affordable housing across the Nation.
    Starrett City has been a model housing effort. The 
development has allowed low-income families to find affordable 
housing in the City, to remain part of the City, to feel a 
sense of community and to grow within the community. It is for 
these and other reasons our Administration and HUD remain 
committed to preserving this affordable housing.
    With more than 16,000 residents, Starrett City is the 
largest federally subsidized development in the country and is 
an essential affordable housing resource for the entire area. 
We believe the proposed transaction threatens New York City's 
affordable housing market and those most in need of the 
housing. At HUD, we recognize that this sale is expensive to 
the developer and that rents will have to be increased to cover 
the debt service. As a result, the sale could quickly displace 
most, if not all of the residents, who will have few housing 
options left in this tight market.
    As you are aware, the Department rejected the initial 
request from Clipper Equity due to the lack of information 
needed to make an informed decision as to their capacity and 
their experience to operate a development of this size. And the 
Department has recently reviewed a revised proposal and 
yesterday, yes, HUD Secretary Alphonso Jackson rejected this 
proposal, as well.
    We at HUD continue to have serious concerns regarding 
Clipper Equity's organizational and financial capacity, as well 
as their ability to sustain the development as affordable 
housing for the long term.
    As you know, the Secretary also met with more than 100 
residents of Starrett City in Washington a few months ago. He 
wanted to listen, and he heard the concerns. And from day one, 
the Secretary has made it clear that HUD's number one priority 
is preserving Starrett City as affordable housing. This remains 
our goal, and we will not waiver from it.
    The need for preservation of our existing affordable 
housing stock cannot be overstated. In addition to the aging of 
the physical structures, preservation is challenged by a number 
of things, including escalating market rents in some areas, 
including up here, rapid increases in operating expenses, and 
regional demographic shifts that include our aging populations 
and persons with disabilities.
    To date, HUD has preserved the affordability of more than 
250,000 units nationwide. But to assist us in doing more, our 
industry partners and elected officials from around the country 
have put forth legislation to address affordable housing 
preservation.
    One proposed legislation is H.R. 647, introduced by 
Chairwoman Waters and Deborah Pryce, and S. 131, introduced by 
Senators Allard and Reed of Rhode Island. These will further 
HUD's opportunities to strengthen and advance our preservation 
efforts. This legislation reauthorizes the Mark-to-Market 
program that has preserved more than 125,000 units to date. If 
reauthorized for another 5 years, we can expect to preserve 
approximately 50,000 additional units.
    In May of this year, we also sponsored a national 
affordable rental housing symposium, Preservation: Now and in 
the Future. We covered many topics and had a very productive 
dialogue with preservation experts and housing advocates, with 
more than 250 in attendance. Some key issues discussed were the 
section 202 refinancing rules and the need for clarification to 
have it be a more effective tool. We also discussed the one-
for-one unit replacement policy and when it should be required, 
as well as the need for resources--private, local, State, and 
Federal--to work together to preserve projects and mortgages 
that are maturing with no long-term affordability or tenant 
protections.
    We are also pleased to report that a revised section 202 
refinancing notice is in its final stage of completion. We are 
also working on policy regarding the conversion of units from 
efficiencies to one-bedrooms, and how to use the one-for-one 
replacement when redeveloping and preserving a project. Both of 
these notices, I am pleased to report, should be published 
within 90 days.
    It was also collectively concluded that we need to 
establish more incentives for owners to maintain the housing as 
affordable for the long term. This will be after mortgages 
mature or rental assistance contracts expire.
    Lastly, the Department is also committed to increasing the 
supply of affordable housing in this country. The majority of 
affordable housing projects built today are financed through 
the Low-Income Housing Tax Credit. We have begun an initiative 
to identify and address ways in which HUD's financing 
programs--FHA, and section 202, and section 811--can work more 
effectively and more efficiently with the Low-Income Housing 
Tax Credit program. We are streamlining our subsidy layering 
procedures and processing procedures in order to improve the 
timing of HUD approvals to meet the tax credit program 
deadlines.
    But we are committed also to working with the Department of 
the Treasury to achieve better coordination between the two 
agencies in administering these very successful affordable 
housing programs.
    In closing, I would like to reiterate the Administration 
and HUD's commitment to the development and preservation of 
affordable housing, including, of course, Starrett City. I 
enjoy visiting such vibrant communities as I found here in 
Starrett City, and preserving these kinds of communities is our 
top priority at HUD.
    Thank you, again, Madam Chairwoman. This concludes my 
testimony. I would be happy to respond to any questions you may 
have at this time. I would also like to thank the residents 
here for hosting this day, as well. Thank you.
    [The prepared statement of Assistant Secretary Montgomery 
can be found on page 67 of the appendix.]
    Chairwoman Waters. Thank you. Thank you for your testimony, 
Assistant Secretary Montgomery.
    I would like to begin the question period with a few 
questions you raised in my mind.
    I have been told that Mr. Bistricer will not go away, that 
he is going to come back with another proposal. I have been 
told that the seller is interested in selling, and if not to 
Mr. Bistricer, perhaps someone else will come with a proposal.
    I heard your commitment for reviewing any proposal in the 
way that you have reviewed this one, to make sure that it is 
financially sound and that the management capability is well 
documented. So are you telling the residents here that should 
there ever be a sale, it would essentially be seamless, that 
there should not be a lot of waivers and other kinds of 
subsidized support from the Federal Government, or anything 
that would increase the rents, and displace people?
    Would you please just talk to us a little bit more about 
what happens if there is a continued attempt to purchase.
    Mr. Montgomery. I will give you a short answer.
    Chairwoman Waters. Say it loud.
    Mr. Montgomery. Unless a proposal keeps this facility 
affordable--
    Chairwoman Waters. I am sorry. They can't hear you in the 
back.
    Mr. Montgomery. Unless a proposal keeps this facility--a 
Starrett City proposal keeps this an affordable property, we 
are not interested in such a proposal.
    Chairwoman Waters. Thank you.
    And secondly, Mr. Secretary, I would like to ask you, have 
we learned very much, looking at this proposal, that will help 
us as we view attempts to purchase these kinds of developments 
all over the country? Have we learned some lessons here?
    Mr. Montgomery. Absolutely. And I want to paraphrase 
something that Chairman Towns said. It is fortunate--
    Mr. Towns. They can't hear you in the back.
    Mr. Montgomery. I am paraphrasing what Chairman Towns said. 
It is fortunate in this case that the tenants here, that the 
residents here, led by Ms. Marie Purnell and others, asked the 
right questions. They united as a voice. The two parties--in 
reference to bipartisanship in this, we worked together. I want 
to say that we knew the principles and we did the right thing.
    So the lessons learned: Obviously, we need to define 
exactly what is in the proposal--I am just reiterating what I 
said earlier. We are not interested in entertaining other 
proposals that remove the affordability from this property.
    Chairwoman Waters. Thank you very much.
    So, in essence, what you just said was the activism, the 
concerns of the residents here, organizing, asking the right 
questions, making sure that everybody understood what their 
concerns were certainly did help you in reviewing this project 
and understanding what had to be done.
    Is that what you are telling us?
    Mr. Montgomery. Absolutely. Having a clear and united 
voice, hearing your concerns. In speaking for the Secretary, he 
made two visits up here. He personally heard many of those 
concerns firsthand. And I can't say enough how much that played 
in making his decision.
    Chairwoman Waters. All right. The power of the people. 
Okay. Thank you.
    Next, I will call on my colleague from Connecticut, Mr. 
Shays, for his questions.
    Mr. Shays. Madam Chairwoman, with your permission, I will 
yield my time to Congressman Ed Towns with regard to this.
    Chairwoman Waters. Oh, thank you very much.
    Mr. Towns?
    Mr. Towns. Let me thank my colleague, Congressman Shays, 
for yielding to me. And of course, I am delighted that he is 
here in Brooklyn; he is our next-door neighbor, as you know, 
from Connecticut.
    Let me just begin by asking a question in terms of the word 
``incentive'' that has been used. What kind of incentives do 
you think might be used to keep Starrett City affordable?
    Mr. Montgomery. Well, I will give you an answer not just 
for Starrett City, but as to all these properties, the 
thousands of them across the country that have mortgages on 
them. And part of those mortgages--
    Mr. Towns. I am sorry. They can't hear you in the back.
    Mr. Montgomery. Here we go.
    Mr. Towns. Okay.
    Mr. Montgomery. A lot of properties across the country, 
including Starrett City, have mortgages, and these mortgages 
will eventually mature in time. It is critical that before 
mortgages mature, we offer incentives, whether we restructure a 
financial transaction, whether we provide more rental 
assistance, that we give the right incentive to the property 
owner to keep it affordable.
    And so as the population is growing and the demographics 
are changing, we have to be very aware in following those 
changing demographics, to make sure that we have more 
affordable housing.
    We can speak a lot for the production of new affordable 
housing, but I promise you that we are going to be doing 
everything we can to hold on to what we have.
    Mr. Towns. Yes, let me be--enhanced vouchers have been used 
in terms of ways and methods so that it will stay affordable. 
But my understanding of enhanced vouchers is that it is tied to 
the tenant, and that if the tenant moves--and I am not sure 
exactly the number of people who move out of Starrett per year, 
but what happens if the person who moves has an enhanced 
voucher? Does that voucher stay with the apartment, or does it 
go with the person?
    Mr. Montgomery. Yes and no. It depends on whether it is a 
project-based property or a tenant-based property.
    But let me add one thing to your point, if I could, Mr. 
Chairman, and that is, many times the families will take a 
voucher because someone says, ``Well, here, take a voucher. You 
can choose the apartment you need.'' In the same way, maybe 
they are working and living downtown, and maybe they work in a 
hospital, or maybe they are a school teacher, and the housing 
market is so dense and tight in the downtown area that the only 
option that they have now is to move way out into the suburbs. 
And they may not want that. So now they are spending more time 
and more money in commuting.
    And my personal opinion is, there is a good place for 
vouchers, enhanced or not, but it is not a cure-all, in many 
cases, for particular family situations, especially when they 
have to move way out of the city's central area.
    Mr. Towns. Let me make sure that I phrase this properly, 
that--you know, sometimes we have owners who will give poor 
service to try and force tenants out. And once they force them 
out, then they can increase the rent for that apartment.
    So they are saying, if I don't give them services, and I 
don't give them heat, then they will move, and when they move, 
then I can get more money for the apartment.
    What do you have to guard against that kind of activity? 
Because we know of things like that here in the Borough of 
Brooklyn.
    Mr. Montgomery. Well, I have to say that we have a very 
good staff at HUD who look out for that sort of activity. We do 
not allow that. And there have been cases where that has 
happened, where property owners purposely let projects run 
down, and then they say, look how bad the property is here. I 
need more money to rehab, or whatever, and then they are trying 
to raise the rent on folks. That just doesn't make sense to us.
    So working with our fair housing staff, working with our 
field office staff, we try to enforce those rules, to make sure 
that doesn't happen. But of course, you are right; it does 
happen.
    Mr. Towns. Let me--and you might not be able to answer this 
on the spot, but I would like to have it answered at some 
point.
    How much would it cost the government to replace the 
current subsidies with enhanced vouchers here at Starrett City? 
How much would that cost? Do you have any idea?
    Mr. Montgomery. Mr. Chairman, I do not have that off the 
top of my head, but I can get that for you.
    Mr. Towns. We would like to know that.
    So, Madam Chairwoman, on that note, I will yield back. And 
I would like to thank the gentleman from Connecticut for 
allowing me to go first, not being a member of the 
subcommittee. Thank you for your courtesy that you have 
extended to me.
    Mr. Shays. Thank you.
    Chairwoman Waters. Next, I will call on Congresswoman 
Velazquez for questions.
    Ms. Velazquez. Thank you, Madam Chairwoman.
    Mr. Montgomery, I want to ask you the right question. And 
that is, yes, you are saying that, for a second time, this sale 
has been rejected by HUD. But yet the New York Times, in an 
article that appeared today, said that the owners of Starrett 
City have announced that they will pay the mortgage to withdraw 
from the Mitchell-Lama program.
    If that happens, then what? Where do we go?
    Mr. Montgomery. I just want to reiterate my previous 
warning: People can talk all they want. They can say all they 
want, the New York Times and others. Unless, whether it is the 
current Clipper Equity, or someone in the future, unless they 
bring a proposal to us that keeps this property affordable, we 
are not going to entertain that proposal.
    Ms. Velazquez. How could you prevent them from paying or 
withdrawing from their mortgage?
    Mr. Montgomery. Well, at some point, there will be, 
certainly, a mortgage on the property. At some point, it will 
mature. And let me say that this is happening to properties all 
over the country, but more than 90 percent of owners elect to 
stay in the program. We are embarking on a way to provide those 
tools to keep the property affordable, to keep the rents 
affordable.
    If and when that ever happens here--it could be 10 years, 
50 years, or whatever--I can't speak for who may be in HUD, but 
it will be our goal to keep this affordable for the long term.
    Ms. Velazquez. Assistant Secretary Montgomery, HUD has not 
issued clarified regulations on the administration of enhanced 
vouchers, especially in terms of the owners' obligation to 
accept the voucher, and family unit size mismatches.
    When is HUD planning to announce a clarification to the 
regulation, especially since the owner of Starrett City relied 
heavily on enhanced vouchers? And if there is a third proposal, 
will it rely again on enhanced vouchers?
    Mr. Montgomery. Congresswoman, that program is administered 
through another office and not through mine. But I can 
certainly get the answer to that question.
    Ms. Velazquez. Well, I don't want an answer, Mr. 
Montgomery. I want HUD to understand that this is a very 
important issue, if we want to keep affordability.
    Mr. Montgomery. Yes, ma'am.
    Ms. Velazquez. That is it for now. Thank you.
    Chairwoman Waters. Thank you very much. I would like to 
turn to Congresswoman Yvette Clarke for questions.
    Ms. Clarke. I would like to thank the gentleman from 
Connecticut for yielding his time to another nonmember of this 
committee, and to just ask a couple of questions of the 
Assistant Secretary.
    Mr. Montgomery, you mentioned that in order to sort of 
prevent this type of occurrence around the Nation in urban 
areas, there is a way that we could monitor more centrally. I 
want to ask whether the establishment of that practice has been 
embedded at HUD yet.
    And have you put a mechanism in place that would actually 
monitor maturing mortgages to expedite negotiation and 
intervention, so that we can mitigate any practices of 
predatory speculation?
    You know, when I was on the New York City Council, we had 
the unfortunate incident of a huge sale of affordable housing, 
called Stuyvesant Town and Peter Cooper Village. That sent a 
chilling effect to working people in the City of New York. And 
then, on the heels of that, we have this struggle out here at 
Starrett City.
    My concern is that the Agency itself recognize that we are 
in a totally new climate and that best practices are embedded 
in the agency itself, so that we don't come to the table like 
this 3 years from now or 5 years from now.
    Would you speak to that, sir?
    Mr. Montgomery. Well, I am sure this won't surprise you, 
but we are not perfect at that by a long stretch. And 
referencing affordable housing proposals made over the last 
month, and obviously someone who attended that spoke to your 
staff, that this issue was front and center among three or four 
presentations that day.
    Yes, we do a much better job monitoring those mortgages 
that are close to maturing, to make sure that we don't reach 
within the last 3 or the last 6 months. We have been working, I 
think, with a group representing the tenants, the folks in 
these apartments, to make sure that we can have a better early 
warning system to do everything we can--and it may be that the 
owner wants to get out after the mortgage matures--so that we 
could be doing a better job to make sure we get to the owners, 
so that we can keep them.
    As I mentioned before, we have a pretty good success rate 
at keeping that property affordable.
    Ms. Velazquez. Sir, are you saying that HUD is committed to 
establishing a unit within the bureaucracy that will be focused 
on this?
    Mr. Montgomery. Whether it is called a unit, or an office 
or staff, we are committed to doing a much better job of doing 
this. And as I said, we got an earful of all those various 
things, those subjects last month, so--
    Ms. Velazquez. Yes. Will there be a point person that we 
can turn to, who would have their finger on the pulse of what 
is happening, not only in Brooklyn, but in Detroit, in Oakland, 
and in Minneapolis?
    Mr. Montgomery. Well, right now, we are able to do it, but 
not probably as well as you are envisioning. But we do commit 
to you that we will do a much better job of organizing that, in 
an effort within our multifamily office.
    Ms. Velazquez. Thank you very much.
    Madam Chairwoman, I would like to suggest that we sort of 
pursue this particular issue, and hold these folks accountable 
for not getting to the point where we want to go forward and 
not be ready.
    So I want to thank you, once again, for having this 
hearing.
    Chairwoman Waters. Thank you.
    Ladies and gentlemen, I mentioned that another member of 
the committee would be joining us. He has joined us. Please 
welcome for questions Mr. Keith Ellison from Minnesota, one of 
our newer members.
    Mr. Ellison. Thank you, Madam Chairwoman.
    It is an honor and a pleasure to be here with you at this 
important subcommittee hearing. It is also wonderful to be in 
Brooklyn. I am honored to be on this panel with my colleagues, 
and very, very honored to be here with all of you.
    No doubt about it, your excellent attention to affordable 
housing is going to radiate throughout the country. And no 
question about it, coming out, standing up, sticking close to 
the issue is going to send a signal throughout the entire 
country, and let everyone know, even as far as Minnesota, that 
Brooklyn is setting a good pace for affordable housing in the 
United States.
    So, again, thank you all for your attention--everyone, one 
and all.
    Mr. Montgomery, I would like to ask you just a few 
questions. Given that the attempted sale at the Starrett 
housing development, given that it is the largest housing 
development in the United States, how does the effort to 
maintain housing affordability here impact the rest of our 
country?
    Mr. Montgomery. I think that the key thing is in reference 
to what Congresswoman Clarke said, a better job on an early 
warning system. And we do know how many properties now are in 
our inventory. But the key thing is that we, as a Department, 
have triage efforts. Many of these properties do have mortgages 
that aren't maturing, so that we can get to the owner or owners 
who have fulfilled their obligation to the government, by the 
way. They have had these mortgages 20 or 30 or 40 years that 
they have been paying on, and many of these owners just want to 
get out of the business.
    Preservation is one of our top priorities now. This is the 
Mark-to-Market program. This will be in connection with keeping 
these properties affordable, especially in high-cost markets 
like we have up here.
    Mr. Ellison. Can you talk about the importance of programs 
that have helped people stay in their homes, such as rent 
assistance programs, Section 8 programs, that have helped 
supplement people's incomes, so that they could stay in their 
homes?
    And what do you believe is the future of these programs? 
What is HUD's commitment to maintaining the subsidy programs 
that help people maintain their status in their homes?
    Mr. Montgomery. There is a wonderful Federal program that 
we are all familiar with, called the Low-Income Housing Tax 
Credit. It has been around since 1986. A bipartisan group 
passed that legislation 21 years ago.
    Now, while it is good at helping some families, some 
moderate and lower-income families, to have a roof over their 
heads, for those families with lower income--30 percent of 
median, 40 percent of median--it is not enough to have the 
subsidy to construct the property. We have to have the rental 
assistance. For many of the families, they have to have the 
rental assistance.
    The same is true for our section 202 program for elderly 
housing, and our section 811 program for persons with 
disabilities. We have to have at least those two programs to 
continue. If the only program is the tax credit, and we are 
going to help extremely lower-income people, we have to have 
the rental assistance as well.
    Mr. Ellison. Can you talk a little bit about the importance 
of senior housing? How much of the housing in the Starrett 
project is senior housing, and what are you doing to help our 
seniors maintain themselves in their homes here?
    Mr. Montgomery. I am not aware of the exact number, but I 
know that it is in the hundreds, not the thousands, of seniors 
who live here. By the year 2030, it will 25 percent. Think 
about that; one out of four Americans will be over 65. And this 
is one issue I talk about a lot. John McCain talks about it, 
ultimately, so we can work to improve it.
    And when you think about it, not every senior is wealthy. 
You know, we have a great program for seniors who may be house 
rich but cash poor, a reverse mortgage. But there are a lot of 
low-income seniors who rely on affordable rental housing.
    The section 202 program, we think, will make a provision, 
so as to marry that better with the Low-Income Housing Tax 
Credit program. A lot of States have--not enough, but many 
States have figured out how to do this on their own.
    We, as the Federal Government, are working--in fact, we 
have, as part of our retirement project, to marry those 
resources together so that HUD is not paying 100 percent of the 
cost of it. We may be paying 30 percent or 60 percent; the tax 
credits or States are making up the balance of it. And guess 
what happened? We were able to produce more housing. And that 
is something that we are working on very hard as part of our 
overall projects, the pilot program to do that for 202.
    Mr. Ellison. Madam Chairwoman, I just want to thank you 
again for holding this committee hearing. I am looking forward 
to more dialogue.
    And I just want to congratulate the residents again for 
their active participation, because, when people get involved, 
that is when changes happen. When politicians feel the heat, 
they see the light, and I think that this kind of hearing does 
that very well.
    Thank you.
    Chairwoman Waters. Thank you very much.
    The Chair notes that some of us may have additional 
questions.
    Yes. I am sorry. Mr. Shays.
    Mr. Shays. Thank you. I do want to get to the next panel, 
but I wanted to ask you a few questions.
    Starrett City worked because there was a mortgage paid, 
financed by the Federal Government; there were tax incentives, 
write-offs, and there was rental assistance. And it seems to 
me, what gives you the power to reject this agreement was, in 
part, that there are still obligations that the owner has under 
existing requirements.
    That is not true in some instances, because in some cases, 
you may just have a mortgage. Or you may just have tax write-
offs, or you may have rental assistance, but not all three.
    Congresswoman Velazquez asked a question that I need you to 
get into a little more deeply. In this case, you have a number 
of years where you have some leverage over the owners. In some 
places, in Connecticut and elsewhere, you are losing all that 
leverage. Now, one of the ways you are trying to keep this in 
affordable housing is in Mark-to-Market; that is one of your 
programs.
    But tell me, what tools do you need in order to be able to 
add other units still in affordable housing?
    Mr. Montgomery. I will give you another example. We may 
have another--again, it is there approximately for 30 years--to 
fulfill these obligations. They have a new owner identified. 
The property is 30 years old and needs some rehab, it needs 
some updating; it may not have dishwashers, or whatever.
    The new owner comes in and has a very fair proposal. Also, 
he needs some equity, cash to help him with the rehab. He needs 
or she needs to raise those rents below--not a lot--to a level 
to offset the cost of that, but that has a cost to it. And it 
pains me when we have to turn down those sorts of budget-based 
rent increases because we can't even afford to cover a modest 
increase in the amount of rent.
    Now, despite having said that, again a lot of owners are 
opting to stay in the program. But I believe, in my heart of 
hearts, you know, there has to be more for us, looking at the 
shift in demographics, the aging population. It has been a sort 
of a patchwork of programs now that has kept it together, but 
there is more that we have to be doing.
    And that is just one example right now.
    Mr. Shays. I want you to react to something I am going to 
say.
    It seems to me that what we should be doing is actively 
going to all the owners, particularly those that still have 5, 
10, or 15 years, and say, ``We would like to renegotiate now. I 
will give you an opportunity to have a little better terms, put 
something in place, but have a guarantee that you will be in 
this market much, much longer.''
    Is that a part of the strategy of HUD, to go to these 
owners before we have lost all leverage with them?
    Mr. Montgomery. Absolutely. And in the case of the 
properties that offer fair market rent, in the Mark-to-Market 
program. On the other side of that coin, with the other market 
programs, we protected some 100,000 units of housing.
    It worked well in that instance, but in the instance where 
you don't have those sorts of plans in place yet, we need to be 
doing, as I referenced earlier, a better job of identifying 
those properties in the market 5 or 10 years down the road, so 
we can maintain those affordable units.
    Mr. Shays. Thank you.
    Let me just conclude by thanking you for being here, and 
thanking Secretary Jackson for listening first to the tenants, 
showing, as a Republican, it is very important to lead, to see 
an Administration that is responsive to this.
    So I am particularly grateful to the Secretary and to you 
also for listening to our chairman and working so closely.
    My understanding is that Ed Towns can be a pain, but I 
wouldn't describe our chairwoman that way. I understand that 
she has weekly visits with the Secretary. I have seen that 
occur.
    Thank you very much.
    Chairwoman Waters. That is called ``keeping it real.''
    The Chair notes that some members may have additional 
questions for this witness which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions to this 
witness, and to place his responses in the record.
    This panel--Mr. Montgomery, thank you so very much--is now 
dismissed. And I would like to welcome our second panel. Thank 
you very much. Thank you.
    I am pleased to welcome our distinguished second panel. Our 
first witness will be Ms. Deborah VanAmerongen, commissioner, 
New York State Division of Housing and Community Renewal.
    Our second witness will be Mr. Shaun Donovan, commissioner, 
New York City Department of Housing Preservation and 
Development.
    Our third witness will be Mr. Frederick C. Arriaga, 
counsel, Borough of Brooklyn.
    Our fourth witness will be Ms. Marie Purnell, president, 
Starrett City Tenants Association.
    Our fifth witness will be Ms. Jerilyn Perine, executive 
director, Citizens Housing and Planning Council.
    Our sixth witness will be Mr. Rafael Cestero, senior vice 
president, Enterprise Community Partners.
    And our final witness will be Ms. Shirley Pazant, Starrett 
City resident and ACORN member.
    Without objection, your written statements will be made 
part of the record.
    I will now recognize each of you for a 5-minute summary of 
your testimony. And we are going to go back to Ms. 
VanAmerongen.
    Tell me how to pronounce your name.
    Ms. VanAmerongen. It is van-amer-on-gen.
    Chairwoman Waters. VanAmerongen. We will start with you. 
Thank you very much. You are recognized for a 5-minute summary.

STATEMENT OF DEBORAH VANAMERONGEN, COMMISSIONER, NEW YORK STATE 
           DIVISION OF HOUSING AND COMMUNITY RENEWAL

    Ms. VanAmerongen. Thank you, Madam Chairwoman, and 
distinguished members of the subcommittee, particularly our 
Representatives from here in New York State, Congresswoman 
Velazquez, Congressman Towns, and Congresswoman Clarke. And I 
would like to thank you for your leadership on these issues in 
Washington.
    It is a pleasure to provide testimony regarding Starrett 
City and New York State's efforts to preserve affordable 
housing opportunities for our citizens.
    My name is Deborah VanAmerongen, and I am the commissioner 
of the New York State Division of Housing and Community 
Renewal. We are an agency that is dedicated to developing 
partnerships and supporting community efforts to provide equal 
access to safe, decent, and affordable housing.
    The State Division of Housing administers housing 
development and community preservation programs, oversees and 
regulates the State's public and publicly assisted rental 
housing, administers the rent regulation system in the City of 
New York and surrounding counties, and also oversees the 
Mitchell-Lama housing stock.
    Prior to becoming commissioner of the State Division of 
Housing, I was a HUD Director of Multi-Family Housing for the 
New York City Region. From there, I oversaw the portfolio of 
federally financed affordable housing the New York City area. 
And in my role at HUD, I became very familiar with Starrett 
City and its unique character.
    I am both humbled and honored that Governor Spitzer 
selected me to serve the people of the State of New York as 
commissioner of DHCR. I am humbled to be charged with the 
responsibilities of this position at a time when we face a 
critical shortage of affordable housing. And I am honored to be 
part of an administration that clearly recognizes the 
significance of our existing affordable housing stock, and is 
committed to preserving it.
    There is no doubt that housing is vital to the future of 
our Nation. And as Governor Spitzer has stated, the 
affordability crisis we face threatens to, as he stated, 
strangle future economic growth and crush the dreams of 
families, young and old.
    The Mitchell-Lama program, of which Starrett City is a 
part, has helped us address this problem, and has provided 
affordable housing opportunities to hundreds of thousands of 
middle-income families.
    Mitchell-Lama was established in 1955 to serve low- and 
moderate-income New Yorkers. It was named for the legislation's 
sponsors, Senator Mitchell and Assemblyman Lama, and it serves 
as a national model for successful affordable housing.
    Despite its successes, the Mitchell-Lama program now faces 
grave threats that demand creative solutions. From the original 
portfolio of 270 State-financed Mitchell-Lama developments, 190 
remain under DHCR's supervision. Many of these are in dire need 
of costly repairs, updates, or major overhauls of heating 
systems, roofs, or elevators.
    The maelstrom that resulted over Clipper Equity's proposed 
sale of Starrett City is a perfect illustration of the 
challenges we face. We cannot build our way out of our housing 
crisis. We must maintain and preserve what we have.
    It was in my first week as Commissioner that Clipper Equity 
signed its contract to purchase Starrett City. The purchase 
price, an astronomical $1.3 billion, raised immediate concerns 
that the purchaser would be unable to retain Starrett City's 
long-term affordability and continue the high-quality 
maintenance of the complex.
    As a regulating agency, DHCR was asked, along with HUD, to 
review Clipper Equity's proposal and approve the sale and the 
refinancing of Starrett City, making us a central figure in the 
battle to protect Starrett City's residents and keep its nearly 
6,000 units affordable.
    DHCR concluded that in addition to a purchase price that 
was far too high to support the mortgage at current rent 
levels, the plan failed to adequately ensure long-term 
affordability at Starrett City. We therefore rejected the 
proposal and have not been approached again, thank you.
    Perhaps the most significant lesson that we learned from 
Starrett City is that when various levels of government speak 
with one voice to protect the public, we can accomplish great 
things.
    DHCR, HUD, the New York State Housing Finance Agency, which 
holds the mortgage on Starrett City, and the New York City 
Department of Housing Preservation and Development, under the 
leadership of Shaun Donovan, mobilized together to communicate 
the importance of Starrett City's long-term affordability to 
the community, the owners, the prospective buyer, and the 
tenants. I am convinced that this unprecedented level of 
cooperation and coordination was a major factor in our success 
in keeping Starrett City as viable, affordable housing.
    I am equally confident that this experience will serve to 
make us an even stronger force together in the face of any 
future challenges to our affordable housing stock.
    I have to thank Senator Schumer for his steadfast support 
and commitment to preserving Starrett City and protecting its 
residents. He was instrumental in this effort. Senator Schumer, 
along with Congressman Towns, City Council President Quinn, 
Assemblyman Lopez, and Councilman Barron really provided 
extraordinary leadership, and they led the charge to rally the 
tenant organizations in opposing the sale. Their support was 
invaluable.
    I also have to acknowledge the extraordinary leadership of 
Marie Purnell of the Tenants Association and of ACORN. They 
worked together to organize an extremely effective campaign to 
oppose this sale.
    As DHCR forges ahead with our mission to provide access to 
safe, affordable housing, we do so with renewed energy and a 
clear mandate for change. Governor Spitzer has declared the 
preservation of affordable housing a top priority of his 
administration. Our agency is now proactively engaged in a 
long-term strategy to seek and develop opportunities for 
preservation.
    New York State has been a leader in the creation of 
affordable housing, and now we must lead the way towards its 
preservation for the future. I would like to briefly share with 
you some of the things that we are doing at the State level to 
answer the Governor's call.
    We are working closely with the Housing Finance Agency to 
assess the State's Mitchell-Lama portfolio. And I think this 
goes to some of the conversations you were just having with 
Assistant Secretary Montgomery. We are trying to take a 
proactive approach to our Mitchell-Lama housing stock, and to 
look at those developments before a sales contract is entered 
into. Before we hear about something in the newspaper, we are 
reaching out to the owners of those developments to say we want 
to talk to you about preservation, about what tools we can 
bring to the table.
    We are collaborating to find the most effective 
preservation tools to encourage those owners to remain in our 
affordable housing programs.
    We are also in the process of closely reviewing the 
properties financed in the early years of the Low-Income 
Housing Tax Credit program. We currently have more than 2,000 
units that are beyond their first 15 years of occupancy, and 
another 15,000 set to pass that mark in the next 5 years. We 
are looking closely at this portfolio, as well, to determine 
which of those properties may need rehabilitation or should be 
targeted for other preservation efforts.
    Chairwoman Waters. I am sorry. The time has expired.
    Ms. VanAmerongen. Okay.
    Chairwoman Waters. We have to make sure we get all of our 
panel in today.
    Ms. VanAmerongen. All right. Thank you.
    Chairwoman Waters. So we have to move on. Thank you very 
much.
    [The prepared statement of Ms. VanAmerongen can be found on 
page 78 of the appendix.]
    Chairwoman Waters. Next, Mr. Shaun Donovan. Commissioner, 
thank you. We are going to ask you to keep your testimony to 5 
minutes.

    STATEMENT OF SHAUN DONOVAN, COMMISSIONER, NEW YORK CITY 
       DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT

    Mr. Donovan. Good morning, Chairwoman Waters, and members 
of the subcommittee. I am Shaun Donovan, commissioner of the 
New York City Department of Housing Preservation and 
Development, or HPD, and I appreciate the opportunity to 
testify today about affordable housing preservation, and 
Starrett City, in particular.
    It is a testament to the subcommittee's commitment to 
affordable housing preservation, and to the advocacy of our 
wonderful New York City delegation, that you are here today.
    HPD's mission is to promote quality housing and viable 
neighborhoods for New Yorkers. As the Nation's largest 
municipal housing development agency, we partner with private, 
public, and community stakeholders to strengthen the 
neighborhoods of our City.
    To meet that challenge, Mayor Bloomberg has undertaken the 
10-year New Housing Marketplace Plan to fund the construction 
and rehabilitation of 165,000 affordable apartments and homes 
by 2013. We have already reached almost 40 percent of our goal. 
Nearly 65,000 new or preserved units of affordable housing have 
been funded, as of the end of June.
    Keeping Starrett City affordable is a priority for Mayor 
Bloomberg and the City of New York. Starrett City is one of the 
most complex and heavily subsidized properties in the country, 
and there are many lessons to be learned here.
    Nearly three-quarters of the units in Starrett City receive 
a J-51 property tax exemption from the City, which supported 
rehabilitation of the property and makes the units subject to 
rent stabilization if the complex were to buy out of the 
Mitchell-Lama program. That is something that hasn't been 
mentioned before today, that I think is extremely important.
    Given all of the public investment in Starrett City, the 
number of units in the development, and the strong desire on 
the part of the current residents to remain here, it is easy to 
see why so many public officials support keeping Starrett City 
affordable. While HPD does not have the same right of approval 
for a potential sale of Starrett City as the State and Federal 
housing agencies, we have been working closely with our 
governmental partners to evaluate the potential sale. This has 
been an ongoing and particularly effective collaboration and is 
a great example of the impact that various levels of government 
can have when we work together, as Congresswoman Velazquez 
stated earlier.
    We are very concerned that there is no viable way for 
Starrett City to remain affordable and well-maintained at the 
proposed sale price of $1.3 billion. This view is reinforced by 
Clipper's own plan for the property. They are asking to raise 
the rent above what is allowed by current regulations, despite 
the fact that the large majority of the units are covered by 
the J-51 program that I mentioned, which requires them to 
remain at affordable Mitchell-Lama rents or in rent 
stabilization. At the same time, they are asking for a 
continuation of the $50 million tax abate--property tax 
abatement from the City.
    In short, the only way for this proposal to work is for the 
proposed buyer to obtain rents that are market rate, and to 
obtain a maximum infusion of subsidies from the Federal, State, 
and city governments. This will not occur. Clipper Equity's 
proposal is a mistake for affordable housing and a mistake for 
taxpayers.
    We are extremely pleased with HUD Secretary Jackson's 
decision to deny Clipper Equity the right to buy the 
development and the similar determination by the New York State 
Division of Housing and Community Renewal to reject it, as 
well. And let me say, I am particularly encouraged by the new 
focus on preservation that the Spitzer administration has 
brought, and Deborah VanAmerongen has brought.
    I also would have to say that HUD has been an absolutely 
critical partner in New York City's preservation efforts, as 
Assistant Secretary Montgomery talked about in his testimony. 
Yet, we believe there are many more opportunities for 
cooperation, especially if Congress were to pass affordable 
housing preservation legislation.
    As I mentioned, over 2,300 units in Starrett receive rental 
assistance payments, or RAP, which pay the difference between 
what a low- or moderate-income tenant can afford to pay and the 
actual contract rent paid to the owner. RAP, along with its 
counterpart program, rent supplement, or Rent Supp, is decades 
old and antiquated.
    There are more than 35,000 RAP and Rent Supp units 
nationwide, across 34 States. Unlike the newer, project-based 
Section 8 program that replaced them, RAP and Rent Supplement 
contracts can be terminated at any time and are not renewable. 
The RAP contract ends at Starrett in 2016, along with the 
guarantee of affordable housing for 2,300 families.
    A solution would be legislation that allows owners with RAP 
or Rent Supp contracts to convert to project-based Section 8. 
There are benefits to both owners and tenants. Owners get the 
option of getting fair rents from HUD at no cost to the tenants 
and the option to renew the contract, a very appealing option 
in strong markets such as New York and California. Tenants get 
better protection, because there are greater incentives for an 
owner to continue in the Federal program, and should the owner 
choose to leave the program, the tenants are guaranteed a 
housing voucher that allows them to stay in their home.
    Converting the RAP contract at Starrett to a project-based 
Section 8 contract is, in my view, the single most effective 
way to preserve affordability at Starrett City.
    While opt-outs pose a major threat to the Federal stock of 
affordable housing in strong market areas, there is also the 
problem of HUD-insured distressed housing in danger of 
foreclosure. While, in the past, units of local government were 
able to exercise their statutory right of first refusal to 
purchase these properties from HUD and maintain them as 
affordable housing, changes in HUD's property valuation 
methodology have effectively suspended the program.
    HUD is interpreting language in the Deficit Reduction Act 
of 2005, the DRA, as requiring them to disregard the repair 
needs of a property when valuing it for a right of first 
refusal. This change has meant that HUD is asking above market 
price for properties. As a result, no properties have been sold 
under right of first refusal in the entire country since 
passage of the DRA. Legislation, as contained in Congresswoman 
Velazquez's bill, H.R. 44, and in H.R. 1852, is needed to 
require HUD to fairly value properties when selling to units of 
local government.
    And let me just take a moment to compliment Congresswoman 
Velazquez for her focus on housing preservation and 
affordability. Senator Schumer has also been very helpful in 
trying to find a solution to this problem in the Senate. In New 
York City alone, we believe we can preserve thousands of units 
of affordable housing if the right of first refusal were 
reinstated.
    There are a number of other potential preservation measures 
that we recommend in my written testimony, and I will leave 
those for the record later.
    In closing, I would like to thank you for the opportunity 
to testify and for prioritizing affordable housing 
preservation. The subcommittee's leadership has been crucial to 
the success we have had in developing and preserving affordable 
housing in New York City, and across the Nation.
    Thank you.
    [The prepared statement of Mr. Donovan can be found on page 
60 of the appendix.]
    Chairwoman Waters. Thank you very much. Thank you, 
Commissioner.
    Mr. Arriaga?

STATEMENT OF FREDERICK C. ARRIAGA, COUNSEL, BOROUGH OF BROOKLYN

    Mr. Arriaga. Thank you. Good morning, Chairwoman Waters, 
members of the subcommittee, and Members of Congress.
    My name is Frederick C. Arriaga. I am counsel for Brooklyn 
Borough President Marty Markowitz, and I am here on behalf of 
Borough President Markowitz, to read the following testimony:
    Thank you for holding this hearing at Starrett City, which, 
as we know, is the epicenter of the fight to preserve 
affordable housing in New York City and America.
    Starrett City is the epitome of successful, modern, 
diverse, and affordable urban living anywhere. And make no 
mistake, as Starrett City goes, so goes affordable housing in 
this Nation.
    Starrett City has over 16,000 tenants, 5,881 units in 56 
buildings on 153 acres of land. In fact, the development is so 
large that it has its own security force, and publishes a 
newspaper called The Spring Creek Sun.
    And yet, Starrett City's immensity is humanized by its 
remarkable sense of community. Every day in Starrett City, 
thousands of tenants of different races, religions, 
ethnicities, national origins, and incomes live peacefully, 
side-by-side.
    Starrett City is an example of how partnerships between 
tenants and government agencies can build, maintain, and 
preserve quality affordable housing.
    And by the way, the Starrett City Tenants Association and 
its President, Marie Purnell, are to be commended for their 
tireless efforts to preserve affordable housing and to improve 
our quality of life.
    We are here today because the very existence of Starrett 
City and other affordable housing developments is threatened. 
Seven months ago, when Starrett City was put up for sale, I 
joined a group comprised of residents, housing advocates and 
elected officials at every level of government to learn more 
about the proposed sale and what its impact would be on 
residents and the future of the development.
    We were dismayed that the sale would be conducted through a 
secret bidding process in which bidders signed confidentiality 
agreements with the seller. Without transparency, there was no 
way to communicate to the prospective bidders the importance of 
maintaining Starrett City as affordable housing.
    We were shocked when we learned of the winning bid, since 
we knew that the final bid of $1.3 billion would threaten the 
long-term affordability of the development. Fortunately, the 
Federal and State governments agreed with that conclusion and 
rejected the proposed sale.
    By the way, I commend and offer my continued support to HUD 
Secretary Alphonso Jackson and New York State Division of 
Housing and Community Renewal Commissioner Deborah VanAmerongen 
for their decisive action to reject the proposed sale.
    While the successful bidder has made assurances that 
Starrett City will remain affordable, I cannot help but join 
residents who are concerned about the realization of those 
assurances in the future. We all fear that Starrett City will 
not be affordable for our children or our children's children.
    The proposed sale of Starrett City has taught us the 
following:
    Voluntary plans to keep housing affordable do not guarantee 
affordability. When the homes of people who have resided in 
them for 30 years are at stake, we need laws that determine 
affordability, not just the promises of developers.
    Government and regulatory agencies must continue to be 
vigilant in scrutinizing proposed sales of developments in 
affordable housing programs like Mitchell-Lama, both here in 
New York State, and in the project-based Section 8 program 
nationwide.
    HUD, DHCR, and other State housing agencies must retain 
oversight and regulatory jurisdiction over affordable housing 
programs. In fact, the scope of that jurisdiction needs to be 
expanded and strengthened, so that owners comply with all 
affordable housing regulations. Furthermore, Federal and State 
government agencies must be given a mandate, and must have the 
authority to guarantee that owners provide tenants with not 
only affordable housing, but housing that is also clean, safe, 
and secure.
    We need legislation on the books to protect tenants in 
buildings whose owners do leave Mitchell-Lama and project-based 
Section 8 programs. Long-standing tenants should not be 
subjected to market rate rents if their developments opt out of 
an affordable housing program.
    With regard to vouchers, while enhanced vouchers allow 
eligible tenants to pay rent increases after a development opts 
out of a program, vouchers present three significant 
deficiencies:
    Vouchers do not guarantee that the unit remains affordable 
for future tenants when the voucher is issued to the current 
tenant and is portable.
    And even tenants who are eligible for enhanced vouchers may 
lose their vouchers for failing to certify, a complicated and 
often harrowing process. Other tenants may run the risk of 
losing their eligibility because of the dizzying variety of 
factors that affect that eligibility.
    And the third deficiency regarding vouchers is the fact 
that they are subject to funding. What happens if funds for 
enhanced vouchers are reduced or eliminated? How will tenants 
pay the increases that result from their development, leaving 
the Mitchell-Lama program?
    Until these issues regarding enhanced vouchers are 
addressed, tenants in Mitchell-Lama developments who face 
potential buyouts are not fully protected.
    And finally, in closing, New York's booming real estate 
market has made affordable housing very appealing to real 
estate developers. Many developers pledge that the buildings 
will remain affordable after purchase, but we cannot rely 
solely on those promises. There is too much at stake.
    Starrett City is the pride of Brooklyn, and I applaud the 
Congress Members' efforts to preserve affordable housing.
    Thank you.
    [The prepared statement of Mr. Arriaga can be found on page 
49 of the appendix.]
    Chairwoman Waters. Thank you.
    Next, we will hear from Ms. Marie Purnell, the president of 
the Starrett City Tenants Association.

 STATEMENT OF MARIE PURNELL, PRESIDENT, STARRETT CITY TENANTS 
                          ASSOCIATION

    Ms. Purnell. Good afternoon, Chairwoman Waters. Thank you 
so much for coming to Starrett City, and I also thank all of 
the members of your board. I can't read all the names, so I am 
just going to leave it at that, and thank you from the bottom 
of my heart.
    Chairwoman Waters. You are welcome.
    Ms. Purnell. My testimony is a little different from the 
ones you have been hearing. It is more of a human nature type 
of thing.
    I have lived in the East New York section of Brooklyn for 
about 50 years. I lived in the Cypress Hills city projects for 
about 20 years. I remember that letters had gone out to check 
for the public's interest if a condominium or cooperative 
development were to be built on the vacant land by Jamaica Bay. 
Eventually, the decision was made to build affordable housing, 
Starrett City.
    My son, who had seen the Starrett development go up, asked 
me why we couldn't live there. I told him that it was not 
affordable for us. At the time, my rent at Cypress Hills was 
$155 a month. Moving to Starrett would have cost $285 for a 
two-bedroom apartment with a terrace.
    I knew I had to do what was necessary, so I saved and cut 
corners to make sure that if the interview process was 
successful, I would be able to manage this. I saw the model 
apartments in 1975, and in 1976, my son and I moved into the 
development.
    Starrett City is my home, plain and simple. My family has 
always been happy and content here. My son grew up, got 
married, and moved into his own apartment in Starrett, where he 
raised his daughter. As a teenager, my granddaughter got her 
first job at Starrett City, and I got involved in all the 
activities, such as the Judo Club, the teen basketball club, 
the Lions Club, and within 5 years, I became involved with the 
Starrett City Tenants Association, Inc.
    Coming to Starrett in my mid-40's let me feel like I had a 
second chance at providing a good lifestyle for my family, and 
30 years later, I feel that I have succeeded. I was working 
full time at Chase Manhattan Bank, where I eventually became an 
assistant treasurer, and I was able to commute to work on a 
private bus line, now being run by the MTA bus service, to 
Manhattan. Shopping was convenient. I felt that I was providing 
properly for my family and the quality of life was great. My 
son and I knew that once we crossed Flatlands Avenue into 
Starrett, we were safe, thanks to the private security in place 
at Starrett City.
    When I retired from the bank, I became more active in the 
Tenants Association and took the position of building rep at my 
building where I live.
    My main concern with the sale of Starrett City is the 
changes that clearly will have to occur. I don't see how the 
rent would stay affordable. I am concerned about services that 
are in place, such as maintenance, security, and the 
accessibility to management.
    My neighbors have expressed the same concern. There are 
many unknowns, and that makes people nervous, resistant, and 
apprehensive. It is very difficult to engage with such an 
audience.
    My quality of life is excellent, as I have indicated 
before. Something as simple as a terrace and a garage to park 
safely give me so much pride. And I am renting, but I feel like 
an owner. I am concerned about the services being cut, 
particularly security and maintenance. If one needed repairs 
within the apartment, a simple phone call to the maintenance 
office was all that had to be done.
    Public Service, as we are now calling our security, is also 
on call for all situations of unbelievable occurrence. I recall 
having a personal medical situation, and before EMS could 
arrive on the scene, Starrett's security officers were with me, 
comforting me, and I felt so much safer knowing that this was 
possible because of where I lived.
    To further the quality of life issue, I think that the 
relationship among the tenants should be noted. Again, I had a 
personal experience tied to my medical emergency that I had 
just spoken of, where I was bedridden for approximately 3 
months. My next-door neighbor, who has roots back to Russia, 
literally prepared and fed me breakfast for my entire time of 
disability. She cared for me every single day, among other 
tenants. This type of country-like atmosphere can only be 
fostered in a neighborhood where the tenants truly care for 
each other and will step up and treat each other with the 
respect and dignity that one would find in a family.
    As far as the sale is concerned, I don't see how a $1.3 
billion price tag could not affect the quality of my life. 
Where is the money coming from to pay for the services if so 
much money is being paid for the development? How many people 
will be forced to move, thus changing the entire mission of the 
Starrett community?
    I have to believe that I will definitely get a rent 
increase. Depending on the percentage, it is doubtful that I 
could remain here. I am already paying 30 percent of my Social 
Security and retirement income. A high increase will definitely 
affect my ability to reside in the home that I have been in for 
over 30 years.
    I think that there will definitely be a change to the 
subsidies. I don't have enough detail about Mitchell-Lama, but 
the owner opting out of the program clearly cannot be 
beneficial to the tenants who are participating in the program. 
I am currently a participant in the RAP program and do not know 
if this program will stay in effect.
    As far as prepaying the mortgage, I don't have enough 
information--I have it now, though--to testify to this. Truth 
be told, I do not know who holds the mortgage right now. We 
were thrown into a situation, and we are learning day-by-day as 
to the rules, regulations, and repercussions behind the sale, 
housing laws, etc.
    Management did assure us, however, that Starrett would not 
be sold back in September 2006. They also said that 90 percent 
of the tenants would not be affected. However, in December 
2006, just before the holidays, we learned on the news that a 
deal was being made to sell the development. We had three 
meetings at this time with Carol Deane, representing her 
husband/owner, Disque Deane, their nephew, Kurt Deane, who is 
apparently managing the business operations and--
    Chairwoman Waters. Ms. Purnell? I am so sorry. Your time 
has expired. Could you wrap it up for us?
    Ms. Purnell. Yes, I can.
    A single meeting, which basically consisted of a meeting 
that we had of a PowerPoint presentation by Clipper, ACORN, and 
the Office of the City Council. Clipper, however, didn't say 
much of anything which would yield any constructive information 
in the opinion of the STA, but they did promise future 
meetings, none of which materialized.
    They would not give the STA Board clear answers, and this 
is why we turned down the tenants' meeting. Tenants were really 
feeling concerned about the information we were receiving.
    The first thing that is pertinent to the tenants is the 
immediate end of the secrecy by owners and potential buyers. 
Transparency is critical. There should be notices available to 
tenants, just like we have right now, when they want to inform 
us of rent increases. The Starrett Tenants' Association is 
willing to work with management to keep tenants in the loop.
    We should acknowledge that the sale will go on, no matter, 
to someone. It should be expected that some things will change. 
What we in Starrett have grown used to will change.
    Chairwoman Waters. Ms. Purnell?
    Ms. Purnell. However, retention of all subsidy programs 
should be a priority.
    Chairwoman Waters. Ms. Purnell, we are going to have to 
hear the rest of--we will get your testimony, and we will 
insert it in the record.
    Ms. Purnell. Okay.
    Chairwoman Waters. We got the point. You did it well. Thank 
you very, very much.
    Ms. Purnell. Okay. Thank you.
    Chairwoman Waters. Next, we will hear from Ms. Jerilyn 
Perine, executive director, Citizens Housing and Planning 
Council.

   STATEMENT OF JERILYN PERINE, EXECUTIVE DIRECTOR, CITIZENS 
                  HOUSING AND PLANNING COUNCIL

    Ms. Perine. Good morning. My name is Jerilyn Perine, and I 
am the executive director of the Citizens Housing and Planning 
Council, one of New York City's oldest civilian research and 
policy organizations. Thank you so much for giving me the 
opportunity to testify. And I particularly would like to 
welcome our members from outside of New York to Brooklyn.
    The sale of Starrett City raises a primary public policy 
issue. What is the role of government when government-financed 
programs come to the end of their term?
    In Starrett City, and in many other projects, there is a 
widespread concern that the proposed purchase price is simply 
too high to allow for proper capital investment, maintenance, 
and the operation, raising questions about the intent of the 
proposed new owners and the future of the project's physical 
and financial viability. Starrett City is but one example of a 
growing trend of high-cost purchases which raise grave 
questions as to the continued viability of such housing.
    In the case of Starrett City, as many as 20,000 people may 
bear the consequences. As this phenomenon grows, many more 
people are facing the same problem.
    Starrett City is the largest subsidized housing development 
in the United States, and has achieved affordability through a 
cornucopia of subsidy programs from every level of government. 
As a result, 62 percent of the households in Starrett City 
currently receive direct rental assistance. Another 1,600 of 
the apartments are restricted to households earning less than 
80 percent of the area median. In total, 88 percent of Starrett 
City's households earn less than 80 percent of the HUD area 
minimum.
    While it is clear that the government has a valid interest 
in this project, unfortunately most regulations are not 
currently designed to prevent potentially bad owners from 
purchasing such projects, nor do they mitigate against highly 
speculative prices which may call into question the future 
viability of the projects. And while Starrett City shows 
clearly what can happen when tenants are organized and can 
mobilize political pressure, legislative changes are required 
to ensure that the sale of all projects which were the 
beneficiary of significant government investment are properly 
reviewed and protected.
    That review should have two objectives: One, to evaluate 
the track record of the proposed purchaser; and two, to 
determine if the sale price is based on sound financial 
principles.
    Currently, HUD does have a process for that review. And in 
this case, they have determined that the proposed purchase 
would threaten the project's future affordability. However, the 
review process is flawed.
    HUD currently reviews the new owner's participation in 
other HUD projects, whether they are debarred by the Federal 
Government, whether they have been convicted of a crime, or 
whether they have defaulted on Federal or local housing finance 
agency loans. There is, however, a need to go further. And by 
going further, this needs to be codified in law and in rule.
    Congress did make some changes in 2004. However, they did 
not mandate a similar review where HUD-financed projects, not 
just HUD-owned projects like this one, were transferred from 
one owner to another. Congress should require such a review. 
Without such a mandated review, projects without the attention 
that Starrett City received will continue to be subject to a 
case-by-case review, sometimes with a good outcome, but not 
necessarily so.
    In New York City, as a result of an extremely hot real 
estate market, we have seen numerous purchases of rental 
housing, both regulated and unregulated, at prices that raise 
serious questions about the continuing viability of the 
buildings.
    Owners of subsidized projects such as Starrett City have a 
right to ask that the governments live up to their original 
deal, allowing an end to the restriction periods that were 
originally agreed to. At the same time, it is not unreasonable 
for the government to seek to ensure that its considerable 
investment remains financially and physically viable into the 
future. If additional affordability is desired, owners should 
be compensated.
    The State of New York is considering legislation to make 
reforms to their process. The details are in my written 
testimony.
    At the Federal level, Congress should mandate that the 
review of purchasers of federally subsidized housing should 
include the track record of the new owner beyond HUD-subsidized 
housing. The new owner's performance on housing maintenance and 
construction should be reviewed by HUD in concert with local 
authorities, prior to HUD approving any such purchase. HUD 
should also review the purchase price to ensure that it is 
based on a reasonable expectation of rental income and future 
capital appreciation.
    This principle has been included in H.R. 44, introduced by 
Congresswoman Nydia Velazquez in January of this year. Congress 
should pass it and the President should sign it.
    Last and most important, it is time to consider how to 
reconfigure some of our rent and tax subsidy programs, to 
target assistance to tenants in projects that may be sold. The 
Section 8 enhanced voucher program does this in part. However, 
it should be expanded to non-federally assisted projects such 
as Mitchell-Lama. The City and State should also consider real 
estate tax abatement programs that are geared to rewarding 
owners for keeping rents affordable.
    We are hopeful that your interest in the sale of this 
project will extend to all federally funded projects, and that 
you will pass H.R. 44.
    Thank you.
    [The prepared statement of Ms. Perine can be found on page 
75 of the appendix.]
    Chairwoman Waters. Thank you.
    Mr. Rafael Cestero, senior vice president, Enterprise 
Community Partners.

STATEMENT OF RAFAEL CESTERO, SENIOR VICE PRESIDENT, ENTERPRISE 
                    COMMUNITY PARTNERS, INC.

    Mr. Cestero. Thank you, Chairwoman Waters, and 
distinguished members of the committee, for the opportunity to 
speak to you today.
    My name is Rafael Cestero, and I am the senior vice 
president for field operations and program support at 
Enterprise Community Partners.
    Enterprise is a national organization, founded in 1982, 
that works with thousands of nonprofit organizations, local 
governments, financial institutions, and private corporations 
around the country to create and preserve over 215,000 homes, 
and has invested over $8 billion in communities across the 
country in the last 25 years.
    The past decade has not been friendly to preserving 
affordable housing. Approximately 170,000 public housing units 
have been lost to neglect and deterioration, while much of the 
remaining public housing stock is in need of substantial 
renovation and rehabilitation. At the same time, 1.4 million 
units of privately owned, federally subsidized housing face 
preservation and rehabilitation challenges.
    The loss of affordable housing units is primarily due to 
owners who choose not to renew subsidized contracts, 
gentrifying markets, a continued uncertainty over tenant and 
project-based Section 8 appropriations, and tax depreciation 
recapture issues faced by many investors.
    However, despite these obstacles, Enterprise is committed 
to finding solutions to preserve affordable housing nationwide. 
In 2006 alone, we have refinanced over 30 properties that had 
HUD financing or subsidies. These properties will now remain 
affordable for another 30 years, and the proceeds from 
refinancing will allow additional capital investment, increased 
support services, and are used to create more affordable 
housing units.
    Our experience shows that it costs much less to preserve 
than to replace. We estimate that the tax credit equity needed 
to rehabilitate an apartment is half of that needed to create a 
new one.
    We have also created partnerships with local, State, and 
Federal Government, which are making great strides towards 
preserving housing in those cities and States.
    Six years ago, only six States set aside 9 percent Low-
Income Housing Tax Credits for affordable housing preservation. 
Today, 46 States set aside credits in their qualified 
allocation plans. New York State and New York City allocate 
significant amounts of the 9 percent tax credit allocation in 
their tax-exempt bond volume cap to preserve affordable 
housing. And over the last several years, this has led to the 
preservation of 40,000 units in New York City.
    One of the most crucial elements in preserving affordable 
housing is the ability to find capital to acquire property. To 
meet these needs, we have launched acquisition funds in New 
York City, the District of Columbia, and hope to close funds 
soon in Los Angeles and Atlanta, to allow nonprofit 
organizations to acquire affordable housing projects.
    In the District of Columbia Preservation Fund is an 
acquisition loan product which is strictly for preserving 
multifamily housing. This $28 million fund, with a combination 
of private and public funds, provides acquisition and 
predevelopment financing for nonprofit sponsors. To date, this 
fund has preserved 600 units of housing in the District of 
Columbia.
    As in the District of Columbia, the affordable housing 
challenge in New York City has never been more severe than 
today. While unsubsidized rents and affordability restrictions 
in programs like Mitchell-Lama are ended, the housing stock is 
quickly trending to rates only the wealthiest can afford. In 
2004, Enterprise pledged $1 billion to create and preserve 
15,000 homes by 2008, in support of Mayor Michael Bloomberg's 
New Housing Marketplace Plan. We are now more than halfway 
there.
    Enterprise is committed to doing all it can to preserve 
such affordable housing complexes like Starrett City. We 
conducted an analysis in partnership with ACORN that is in my 
written testimony, that shows very clearly that $1.3 billion is 
not supported.
    We urge the passage of H.R. 44, as other members have, as 
well as the Federal laws that have been talked about in other 
testimony presented today.
    Chairwoman Waters. I am sorry. Your time has expired.
    Mr. Cestero. Thank you.
    Chairwoman Waters. Thank you very much.
    [The prepared statement of Mr. Cestero can be found on page 
54 of the appendix.]
    Chairwoman Waters. Representing ACORN, Ms. Pazant.

           STATEMENT OF SHIRLEY PAZANT, ACORN MEMBER

    Ms. Pazant. Thank you, Chairwoman Waters, Members of 
Congress, Congressman Towns, and members of the committee. I 
thank you so much for the opportunity to testify today about 
the affordable housing situation in Starrett City.
    My name is Shirley Pazant, and I am a retired nurse. I have 
lived in Starrett for 8 years, and I am a very active member of 
the Association of Community Organizations for Reform, known as 
ACORN, and also a member of the Starrett City STA.
    I had attempted to move into Starrett City for 10 years, 
and when I finally got the call and I was able to move in, I 
was very, very happy. As a woman living on a fixed income, I 
feel it is safe and secure living here. I know that if we--
whoever has to move, there will be nothing out there that will 
be as beautiful as Starrett, and nothing that would work for 
our income level.
    My grandchildren, and my great-grandchildren, look forward 
to coming to visit from Bed-Stuy because of the safe places 
available for them to run around and be children; that is 
really hard to come by in their home neighborhoods.
    Starrett City is truly our home. The neighbors come 
together as one big, happy family, regardless of race and 
culture. We have built a home here that could not be duplicated 
any other place. The community is a wonderful place not only 
for those of us who have retired here, but for every person at 
any stage of their life.
    So affordability has allowed parents to save for their 
children to go to college. Affordable rents and a welcoming, 
diverse community benefits everyone who has the pleasure of 
calling Starrett City their home.
    My testimony today will focus on the community's concern 
with Clipper Equity as a potential owner of Starrett, 
especially in regard to affordability, as well as our group's 
recommendations to local, State, and Federal representatives. 
Whether it be Clipper or another owner, many of our concerns 
are constructive as we look forward to what we will have to 
miss.
    The cornerstone of all of this is affordability. Ninety 
percent of the tenants here rely not only on low rent, but on 
the variety of rental assistance programs that have been 
available all these years. I am currently enrolled in the 
Section 8 program, as are other residents, many of whom are 
seniors. As seniors, we are very troubled by the idea that 
someone could come in here and displace our community by 
pricing us out.
    The research that ACORN and its partners have conducted 
shows that in order for Clipper Equity to keep Starrett 
affordable, they would have to receive huge additional 
government subsidies, reduce service, and raise rents. This is 
not a solution at all as far as we tenants are concerned.
    When it was announced that Clipper Equity would be buying 
Starrett, we decided to gather research on Clipper's other 
complex in Brooklyn, the East Flatbush Gardens, better known as 
Vanderveer. We looked at the buildings' department records for 
any violations, and we knocked on doors and talked to tenants. 
We got information about complaints about the lack of heat and 
hot water, holes in the ceilings, and unsanitary living 
conditions.
    In the process of our work, we discovered that Flatbush 
Gardens had almost 8,106 building code violations, and over 
1,400 new violations logged in since Clipper took the property. 
I have copies here of a PowerPoint presentation about what we 
found, if anyone would like them.
    Starrett City is special not only because it is affordable, 
safe, and diverse, but because the grounds and buildings are 
beautiful and well maintained. If something goes wrong in our 
apartments, it gets fixed right away. This is clearly not the 
case at Clipper's other properties.
    We know that there are economically viable and profitable 
solutions to keep Starrett City affordable that will not 
overburden the government and, more importantly, will allow the 
tenants to keep our homes, continue to receive key maintenance 
services, and maintain the economic diversity of Starrett City 
into the future.
    ACORN and the Starrett City Tenants Association stand 
united in our fight to make sure that Starrett City remains 
affordable, especially for future generations.
    Over the years, government has stepped in through a 
patchwork of subsidies that have allowed this development to 
develop into a place with such economic and racial diversity. 
Now, right now, we need local, State, and Federal legislation 
to protect tenants like us all around the country. We need you, 
and we need you now, to protect not only this generation of 
tenants, but also future generations from developers looking 
only to make a profit off of the communities.
    Chairwoman Waters. Ms. Pazant--
    Ms. Pazant. We have asked New York State to pass 
legislation so that any--
    Chairwoman Waters. Ms. Pazant--
    Ms. Pazant. --owner opting out of the Mitchell-Lama program 
be coupled by rent regulation--
    Chairwoman Waters. Ms. Pazant, I am sorry. Your time has 
expired. You did a great job. Thank you very, very much. And 
thanks to ACORN all over the country. You are doing a fabulous 
job.
    Ms. Pazant. I want to thank you for taking the time to 
listen to me and those I represent, ACORN, Starrett City, and 
the people who have worked hard all our lives.
    Thank you.
    Chairwoman Waters. Thank you.
    [The prepared statement of Ms. Pazant can be found on page 
71 of the appendix.]
    Chairwoman Waters. Now, I want to take most of my 5 minutes 
to thank each of you. This has been an extraordinary example of 
what cooperation can and will do.
    And I think that you mentioned in your testimony, Ms. 
VanAmerongen--I am going to get this right--
    Mr. Towns. VanAmerongen--
    Chairwoman Waters. --you mentioned in your testimony that 
this was a baptism by fire.
    Ms. VanAmerongen. Yes, it was.
    Chairwoman Waters. It was in your written testimony, 
rather, but you alluded to the fact that this overall proposal 
was really trying to get you to act beyond your statutory 
authority.
    Could you just give us an example of what that means, 
quickly?
    Ms. VanAmerongen. What we found in the Clipper Equity 
proposal was that they were suggesting that we should allow 
them to call themselves Mitchell-Lama and claim to be 
maintaining affordability, to actually treat it differently 
than any other Mitchell-Lama, or differently than what we 
believe our statutory authority allowed us to do.
    So, for instance, every Mitchell-Lama has to go through a 
budget-based rent increase process, and a review of the 
operations of the building, to try to keep the rents as low as 
possible, but provide enough money for them to operate. They 
wanted to have all of the rents set at market, and then subject 
to rent-stabilized, guarantee-type increases going forward.
    So those are the kinds of things that they were asking us 
to do, so that they continue to claim their real property tax 
benefits from the City of New York, and to say that they are 
maintaining affordability, call themselves a Mitchell-Lama, but 
they really would not have been.
    Chairwoman Waters. Thank you very much.
    Mr. Donovan, I know you are going to have to leave by 1:00, 
but you mentioned something that I think we certainly should be 
paying attention to as far as legislation, the conversion of 
RAP to Section 8.
    I didn't realize we had such a program where there was some 
difference being paid between what was afforded by the tenant 
and the market rate in some way. It certainly should all be one 
program, and there may be some room for legislation here.
    Do you want to expound on that, before you go?
    Mr. Donovan. Absolutely. And I would say, in deference to 
HUD, one of the most effective things that they have done in 
New York City--and Deborah at the New York local office was 
instrumental in doing this--thousands of units of HUD housing 
have been preserved around New York City by the Mark-to-Market 
program.
    That program is only available to project-based Section 8 
properties; it is not available to RAP and Rent Supp 
properties. So it is not just critical that the conversion of 
these old, antiquated--they really were the predecessors to the 
project-based Section 8 program, and it was fixed decades ago 
by inventing the new project-based Section 8 program. But these 
two dinosaurs, really, are still around.
    Not only can they not be renewed, as I said, so once it is 
gone, it is gone, and there is no chance for long-term 
preservation of the property for low-income people; in addition 
to that, there are all kinds of preservation opportunities 
available to project-based Section 8 properties that could help 
not only stop the Clipper proposal, but in fact, could for the 
current owner, or any new owner, make it more attractive 
financially to remain a low-income property than to convert to 
market rate.
    So again, I think that is particularly important. With this 
flexibility, the owners could win and the tenants could win, by 
continuing with the affordability of the property.
    Chairwoman Waters. Thank you so very much. And thank you 
for being here today. The cooperation between you and the State 
and the Feds is wonderful. We know you have to leave, but we 
really appreciate your presence. Thank you.
    Mr. Donovan. Thank you. And let me compliment you and your 
staff on all the hard work you have been doing around the 
country.
    Chairwoman Waters. Well, you are certainly welcome.
    Mr. Donovan. Thank you.
    Chairwoman Waters. Well, again, I will wrap up by thanking 
each of you. You see the power of the residents and the 
tenants, and because you decided to take leadership, you made 
something happen here. You should be very, very proud of that.
    So, Ms. Purnell and Ms. Pazant, I want to thank you very 
much.
    To our others who are represented here today, I want to 
mention to you--I don't know if it was you, Mr. Arriaga, who 
mentioned that part of this agreement was supposedly 
confidential, and we didn't know who the other buyers were.
    We should wipe that out. We should not allow that to happen 
on these kinds of proposed sales. We want to know who it is who 
is supposedly buying these. And so maybe that has some room for 
legislation, too, and I want to thank you very much for that.
    Again, here, we have the cooperation of a nonprofit in the 
business of providing affordable housing. Enterprise, you are 
showing up everywhere. You are showing up good. We thank you 
very much for your participation.
    Again, the residents are primary in everything. So thank 
you all very much, and I just appreciate your participation. 
Thank you.
    And I will turn to my colleague, Mr. Shays, for questions.
    Mr. Shays. Thank you, Madam Chairwoman.
    I do not have any questions, but I want to thank the 
government officials for being here. And I thank those in the 
community for coming to testify.
    I was struck by the fact that all the presentations were 
informative, they were forceful, and they were kind. It is very 
clear to me that Starrett City is a lovely place to live.
    I wanted to particularly thank you for the gentleness with 
which you are talking about a very emotional issue. That is a 
much better way to communicate and to make your points, and so 
I found that tremendous.
    I enjoyed talking with three young men who were sitting on 
the floor--one was in 2nd grade, one was in 4th grade, and one 
was going into 5th grade--and they just told me how much they 
love living in this wonderful community. You clearly are a 
family, and I look forward to seeing this family have a long 
and prosperous life. So thank you for having me.
    And thank you, again, Madam Chairwoman. And Mr. Towns, and 
to my other New York colleagues, congratulations on a job well 
done.
    Chairwoman Waters. Thank you so very much, Mr. Shays, for 
being here. It shows you that we have cooperation on both sides 
of the aisle. We don't always get along on everything, but on 
Starrett City, we are together.
    All right. We are going to turn to Mr. Ellison for 
questions.
    Mr. Ellison, yes.
    Mr. Ellison. My question for Mr. Cestero is this:
    Obviously, while Starrett City is the largest federally 
subsidized community, there are others around the country. What 
are your recommendations going forward?
    As we go forward, and we see that other such communities 
could be purchased, what are some of the things that we need to 
bear in mind? What are some of the proposals that you have to 
make sure that we can maintain affordability?
    Mr. Cestero. It is quite clear, as you look around the 
country--and you have heard it here today--that Starrett City 
is a unique property in many ways: It is unique in its size; it 
is unique in the kind of community that it is; and it is unique 
in the myriad of subsidies that have all come together in one 
place.
    But I do think that there are some lessons that we can 
learn from this and that we can learn from preservation 
activity that has happened in this State, in this City, and 
across the country. One I talked about in my testimony, which 
is access to acquisition capital. The reality is that nonprofit 
affordable housing groups around the country that are 
interested in preserving these types of properties don't have 
the same access to capital that private owners do, so we need 
to continue to make that capital available.
    There are a number of proposals that have been put forth in 
Congress that I would urge you to consider, because they would 
have an enormous effect on preservation around the country. The 
restoration of a grant program, the Section 8, the project-
based Section 8 that Commissioner Donovan spoke about, is 
incredibly important.
    And the early warning system that was talked about earlier 
is also incredibly important, so that we know what the 
properties are and when they are coming up.
    Mr. Ellison. What about the proposal for a housing trust 
fund in the legislation chiefly authored by Congresswoman 
Waters? Have you thought about that? And what sort of help it 
could be to maintain affordability?
    Mr. Cestero. There is no question that at the end of the 
day, more money makes the difference. And so the trust fund 
proposal that is put forth would bring more resources to the 
preservation of these projects; it can't be done without an 
infusion of additional capital.
    And, in particular, the smaller properties are often in 
need of more rehabilitation, which means that we need 
additional subsidy dollars to be put on the table up front, in 
the form of a capital subsidy, that a trust fund would do.
    We are lucky in New York State. In New York City, we have a 
City government that puts an enormous amount of money into 
affordable housing. We have a State government that has been at 
the table and a leader in the affordable housing movement. For 
the rest of the country, that don't have access to those 
resources, the national trust fund would provide more of those 
opportunities.
    Mr. Ellison. Well, Madam Chairwoman, I just want to thank 
you again for allowing me to be a part of this important 
subcommittee hearing. Your leadership--you amaze me every 
single time I see you, Madam Chairwoman.
    And I just want to thank my colleagues, as well. And on my 
first trip to Brooklyn, I have had a great time so far. Thanks, 
everybody.
    Chairwoman Waters. Thank you.
    Mr. Towns. Thank you, everybody.
    Let me again begin by thanking the chairwoman for this 
hearing in Brooklyn, and to say to Congressman Ellison that I 
am proud that I was a part of the history, in terms of bringing 
him to Brooklyn.
    And I would just share one other first with you. I also was 
the first one to bring Bill Clinton to Brooklyn. I want you to 
know that, too.
    Let me direct my questions to, of course, Deborah 
VanAmerongen. I know you have been involved in housing for a 
number of years, and you have done great things. And some of 
the things we are talking about today that have sort of helped 
us along the way, are things that you have put in place.
    And let me ask you this: What do you suggest, as Members of 
Congress--let's say we reverse positions, you know, for a 
moment--what do you think that we need to do, as Members of the 
United States Congress, to bring about affordable housing? To 
make certain that we keep affordable housing, what can we do?
    Ms. VanAmerongen. I appreciate your compliment, 
Congressman, and it has been a pleasure working with you on 
many developments here in Brooklyn over the years, both at HUD 
and now at the State Division of Housing.
    I think a lot of the legislative initiatives we have heard 
discussed here today would be of tremendous importance in being 
able to preserve housing. As Commissioner Donovan talked about, 
and it is something that, while I was at HUD, I talked to a lot 
of people about as well, the conversion of the older contracts 
to project-based Section 8.
    Addressing some of what the problems are in the HUD 
programs, in terms of the up-front grants, and the sale of HUD 
foreclosed properties, would be--as you know, we have had a 
number of those go through foreclosure, which is great that HUD 
is aggressively going after bad owners to try to take 
properties away from them. But we have to work to ensure that 
they end up with people who are going to be responsible owners 
and maintain them as affordable housing.
    And as the Congresswoman was talking about, the housing 
trust fund, which obviously we are very supportive of--and 
don't mistake what Rafael said in saying that New York doesn't 
need it. We need it, too.
    Chairwoman Waters. We know that.
    Ms. VanAmerongen. Even though we have great State and City 
programs, we would love to see a national housing trust fund be 
brought to our State, as well.
    I would like to see the work that HUD is talking about in 
terms of integrating their programs better with other programs. 
Getting section 202 and section 811 to work with the Low-Income 
Housing Tax Credit program is something that I am committed to 
doing, from the State perspective, as an administrator of the 
Low-Income Housing Tax Credit program. And the New York 
Regional Office has been in direct contact with us, and we have 
been talking about how to make that work here in New York.
    But there is--it could be done on the national level, and 
it would make it easier, but we would have to do a State-by-
State solution to overcoming those kinds of problems.
    So again, keep working with HUD, bring in whatever 
resources you could to the table in advance, and some of those 
legislative initiatives that have been discussed would all be 
of great importance here in New York.
    Mr. Towns. Let me--just to bring my colleagues up to date. 
The State had a hearing, as well, which I insisted they have. 
The State had the hearing here, had 10 members of the Assembly, 
you know, in this room, talking about housing.
    The one thing that came out of that, which I thought was 
quite interesting--and I want to take comments very quickly--
they indicated that if a person is wanting to sell, they should 
give at least a 3-year notice. Now, I would like to just run 
down the line real quickly, on a sort of yea or nay, you know, 
type of thing.
    Do you think that that might help the problem? Because what 
they said, basically, is that if the seller gives notice, then 
the various agencies would have an opportunity to put things in 
place that would protect the tenants.
    Because what happens now, with the fact that there is no 
transparency, is that the only time you know about what is 
happening is when somebody has already made a bid. So--and that 
doesn't give the agencies a lot of time to be able to correct 
or to make certain that people are protected.
    We have people in Starrett who have been there for over 30 
years--senior citizens, many of them on disability, who are 
scared to death, and can't sleep at night, because they are 
concerned about the fact that their apartments might not be 
there.
    Ms. VanAmerongen. I had not heard of the 3-year proposal. 
One of the things that I know people are giving some thought to 
currently is, if you wanted to opt out or buy out of the 
program, you must give a 1-year notification, which is State 
law. And I think that it would be appropriate to look at 
whether we should apply that same notification to sales, as 
well.
    And I think, again it goes to what I was talking about in 
terms of us being proactive as agencies, though, in doing the 
outreach to owners. It is something that I didn't have a chance 
to insert into my testimony, but it came up earlier, so I 
wanted to mention it, in terms of the mention in the New York 
Times today about what might happen if this sale does not go 
through.
    I think what we have--the word proactive isn't just talk. 
We have reached out to the owners of Starrett City, and have 
said, you know, the time under their existing contract--they 
had 6 months to get government approvals on this sale. So that 
time has almost elapsed; early August is the end of that 6-
month period.
    What we have done is reached out to them proactively, to 
say, before you make any other decisions about the future of 
this development, come and talk to us. Don't make up your mind 
and go and sell it to somebody else, and we will have to go 
through this whole mess again. We want to be at the table, 
engaged in those conversations, address the needs of tenants, 
and that is--we have--that is the same thing we have to do with 
other owners in our portfolio. And as I said, we are reaching 
out proactively to many of them to talk about the future of 
their developments.
    Mr. Towns. Thank you very much, Madam Chairwoman.
    And on that note, let me just thank all of you for your 
testimony. I really appreciate, you know, being allowed. I know 
I had asked the question earlier down the line, but I am going 
to have to pass on it. The chairwoman gave me a look, so--
    Chairwoman Waters. Next, we will hear from our other 
Congresswoman, who came here today to give support to you in 
this district in what you are doing, Congresswoman Yvette 
Clarke.
    Ms. Clarke. Let me first thank you, Madam Chairwoman, again 
for coming. And let me say that Congressman Towns is truly a 
visionary. He has brought Keith Ellison here for his first 
visit. He brought Bill Clinton. He leads the fight. He is 
certainly a visionary, and I am just hitching my star to his 
wagon.
    But let me say this, that when Maxine Waters comes to 
Brooklyn, you know it is about to be something.
    I wanted, first of all, to congratulate you, Commissioner.
    Ms. VanAmerongen. Thank you.
    Ms. Clarke. This is my first opportunity to actually meet 
you and to hear you, and I am encouraged.
    One of the things that I kind of get hung up on, being a 
new Member, is how ``yesterday'' the rules and regulations are 
in governing our lives and the way that we go about doing 
business in the United States of America. There is a lot of 
drag back into the 20th century, and I am glad to see the type 
of innovation and enthusiasm you have in terms of making the 
transition which is in keeping with how modern we are as a 
society.
    I wanted to ask you, because I have heard over and over 
again--and I have tried to distill best practices--I have 
heard, you know, from my constituents, from housing advocates, 
that there is a lot of pull in project-based Section 8.
    Can you give us any indication of where the State is going 
with respect to how it will be rolled out? What type of 
assistance you would need from the Federal Government to really 
embed that as the way for us to get out of the old traditions 
that are no longer applicable for community preservation and 
affordable housing?
    Ms. VanAmerongen. I am not sure. Are you asking about how 
we would use project-based Section 8 to preserve our housing?
    Ms. Clarke. We talked about the fact that RAP and--
    Ms. VanAmerongen. The Rental Assistance Program.
    Ms. Clarke. Right. It is antiquated?
    Ms. VanAmerongen. Yes.
    Ms. Clarke. --and that we want to look at how we can do 
these conversions, and I don't think you alluded to that point.
    Have you successfully done that already? Is there something 
that we need to do in Congress to make this happen? Because it 
is older cities, like New York City and some of the oldest 
cities around the Nation, that are stuck in between right now.
    Ms. VanAmerongen. Yes. Thank you for the clarification.
    It actually was done once before. In the beginning years of 
the project-based Section 8 program, HUD offered owners who had 
those older forms of subsidies that they could convert, and 
many of them took them up on the offer. But project-based 
Section 8 was new, and I think some of them weren't sure about 
exactly what it meant and how it would work, so some of them 
didn't do it.
    Ms. Clarke. Yes.
    Ms. VanAmerongen. What they are saying, what we are saying 
now--and it would require congressional action to allow HUD to 
do that conversion, and it would reach out to the owners of 
those buildings; it would have no impact on the tenants--the 
rents of the tenants are set the same way under those older 
programs as they are in the project-based Section 8, and 
tenants pay 30 percent of their income.
    But what it would give HUD the opportunity to do--and all 
of us are working to preserve this housing stock--is the 
opportunity to reach out to those owners proactively and say, 
here are the preservation tools we have available under the 
project-based program, and we want to talk to you about how to 
do a long-term extension of that, mark the project up, do a 
restructure of the mortgage, whatever needs to be done.
    Ms. Clarke. Thank you. I think that is a strategy that we 
have to aggressively pursue, as we look at the erosion.
    I heard the gentleman from Enterprise talk about 
Washington, D.C., and as a new resident, I know exactly what 
the people of Washington, D.C., are going through right now in 
their housing market, and we see that increasingly here in New 
York City.
    Let me just close by saying to everyone here, specifically 
to the tenant leadership, how very proud I am to be here with 
you as a witness, as an advocate with you. I can see this going 
forward, how children will be able to talk of the day when you 
women and men took the time to sacrifice for them, to make your 
voices heard, to let people know that there are people who have 
made the sacrifice, and who have given their time, time and 
time again, and all they request is housing with dignity.
    You all have done that in royal style. I am so very proud 
to be here, and I will be here until the end.
    Thank you very much, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The Chair notes that some members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions to these 
witnesses and to place their responses in the record.
    Before we dismiss the panel, I would like to acknowledge 
Mr. Earl Williams and Ms. Jean Holden--where are you--and all 
of the staff at the Brooklyn Sports Club for your assistance in 
making this hearing possible.
    Also, before we adjourn, the written statements of the 
following individuals will be made part of the record of this 
hearing:
    Mr. David Bistricer, on behalf of Clipper Equity, and Mr. 
Disque Deane, on behalf of Starrett City Associates.
    To the residents, thank you for understanding your power. 
Thank you for having good representation in Mr. Towns and Mr. 
Schumer and others. Thank you for having great leaders in the 
agencies from the City, from the State, and of course, from the 
Federal Government, who have come together and cooperated to 
make all of this happen.
    This is what I like to see, when government is using its 
power to assist people in the way that we should be doing. I 
feel so very good about being here. This is a beautiful 
development. You are wonderful representatives. We are 
dedicated and committed to the proposition that we can do this 
not only here at Starrett, but all over the country.
    Thank you very much.
    The meeting is adjourned. Thank you.
    [Whereupon, at 1:05 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             July 10, 2007
[GRAPHIC] [TIFF OMITTED] 38387.045

[GRAPHIC] [TIFF OMITTED] 38387.046

[GRAPHIC] [TIFF OMITTED] 38387.047

[GRAPHIC] [TIFF OMITTED] 38387.048

[GRAPHIC] [TIFF OMITTED] 38387.049

[GRAPHIC] [TIFF OMITTED] 38387.001

[GRAPHIC] [TIFF OMITTED] 38387.002

[GRAPHIC] [TIFF OMITTED] 38387.003

[GRAPHIC] [TIFF OMITTED] 38387.004

[GRAPHIC] [TIFF OMITTED] 38387.005

[GRAPHIC] [TIFF OMITTED] 38387.006

[GRAPHIC] [TIFF OMITTED] 38387.007

[GRAPHIC] [TIFF OMITTED] 38387.008

[GRAPHIC] [TIFF OMITTED] 38387.009

[GRAPHIC] [TIFF OMITTED] 38387.010

[GRAPHIC] [TIFF OMITTED] 38387.011

[GRAPHIC] [TIFF OMITTED] 38387.012

[GRAPHIC] [TIFF OMITTED] 38387.013

[GRAPHIC] [TIFF OMITTED] 38387.014

[GRAPHIC] [TIFF OMITTED] 38387.015

[GRAPHIC] [TIFF OMITTED] 38387.016

[GRAPHIC] [TIFF OMITTED] 38387.017

[GRAPHIC] [TIFF OMITTED] 38387.018

[GRAPHIC] [TIFF OMITTED] 38387.019

[GRAPHIC] [TIFF OMITTED] 38387.020

[GRAPHIC] [TIFF OMITTED] 38387.021

[GRAPHIC] [TIFF OMITTED] 38387.022

[GRAPHIC] [TIFF OMITTED] 38387.023

[GRAPHIC] [TIFF OMITTED] 38387.024

[GRAPHIC] [TIFF OMITTED] 38387.025

[GRAPHIC] [TIFF OMITTED] 38387.026

[GRAPHIC] [TIFF OMITTED] 38387.027

[GRAPHIC] [TIFF OMITTED] 38387.028

[GRAPHIC] [TIFF OMITTED] 38387.029

[GRAPHIC] [TIFF OMITTED] 38387.030

[GRAPHIC] [TIFF OMITTED] 38387.031

[GRAPHIC] [TIFF OMITTED] 38387.032

[GRAPHIC] [TIFF OMITTED] 38387.033

[GRAPHIC] [TIFF OMITTED] 38387.034

[GRAPHIC] [TIFF OMITTED] 38387.035

[GRAPHIC] [TIFF OMITTED] 38387.036

[GRAPHIC] [TIFF OMITTED] 38387.037

[GRAPHIC] [TIFF OMITTED] 38387.038

[GRAPHIC] [TIFF OMITTED] 38387.039

[GRAPHIC] [TIFF OMITTED] 38387.040

[GRAPHIC] [TIFF OMITTED] 38387.041

[GRAPHIC] [TIFF OMITTED] 38387.042

[GRAPHIC] [TIFF OMITTED] 38387.043

[GRAPHIC] [TIFF OMITTED] 38387.044

