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

                       H.R. 2895, THE NATIONAL AFFORDABLE
                         HOUSING TRUST FUND ACT OF 2007

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

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 19, 2007

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 110-53

                         U.S. GOVERNMENT PRINTING OFFICE

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                     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 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               KENNY MARCHANT, Texas
    JIM MARSHALL, Georgia                THADDEUS G. McCOTTER, Michigan
    DAN BOREN, Oklahoma

            Jeanne M. Roslanowick, Staff Director and Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        July 19, 2007................................................     1
    Appendix:
        July 19, 2007................................................    71

                                   WITNESSES
                            Thursday, July 19, 2007

    Alberghini, Lisa B., Director, Planning Office for Urban Affairs,
      Archdiocese of Boston..........................................    47
    Cisneros, Henry, Executive Chairman, CityView....................    41
    Crowley, Sheila, President, National Low Income Housing Coalition    43
    Euille, Hon. William D., Mayor, Alexandria, Virginia, on behalf
      of the U.S. Conference of Mayors...............................    45
    Montgomery, Hon. Brian D., Assistant Secretary for Housing-
      Federal Housing Commissioner, U.S. Department of Housing and
      Urban Development..............................................    13
    Myer, Joe L., Executive Director, NCALL Research, Inc., on behalf
      of the National Rural Housing Coalition........................    68
    Poole, JoAnne, Broker/Owner, Poole Realty, on behalf of the
      National Association of Realtors...............................    49
    Roberts, David I., Chief Executive Officer and President of
      Lutheran Homes Society.........................................    61
    Sandel, Dr. Megan, Assistant Professor of Pediatrics, Boston
      University School of Medicine..................................    66
    Shelton, Hilary O., Director, Washington Bureau, National
      Association for the Advancement of Colored People..............    64
    Thompson, Barbara, Executive Director, National Council of State
      Housing Agencies...............................................    62

                                    APPENDIX

    Prepared statements:
        Brown-Waite, Hon. Ginny......................................    72
        Gillmor, Hon. Paul E.........................................    73
        Alberghini, Lisa B...........................................    74
        Cisneros, Henry..............................................    80
        Crowley, Sheila..............................................    87
        Euille, Hon. William D.......................................    96
        Montgomery, Hon. Brian D.....................................   109
        Myer, Joe L..................................................   113
        Poole, JoAnne................................................   119
        Roberts, David I.............................................   126
        Sandel, Dr. Megan............................................   138
        Shelton, Hilary O............................................   143
        Thompson, Barbara............................................   146

                  Additional Material Submitted for the Record

    Frank, Hon. Barney:
        Statement of Habitat for Humanity............................   151
        Letter from the Mortgage Bankers Association.................   155
        Statement of the National Association of Home Builders.......   157
        New York Times editorial.....................................   166

                       H.R. 2895, THE NATIONAL AFFORDABLE

                         HOUSING TRUST FUND ACT OF 2007

                                  ----------

                            Thursday, July 19, 2007

                 U.S. House of Representatives,
                       Committee on Financial Services,
                                                       Washington, D.C.
        The committee met, pursuant to notice, at 10:04 a.m., in
    room 2128, Rayburn House Office Building, Hon. Barney Frank
    [chairman of the committee] presiding.
        Present: Representatives Frank, Waters, Velazquez, Watt,
    Moore of Kansas, Capuano, McCarthy, Baca, Lynch, Green,
    Cleaver, Sires, Ellison, Klein, Boren; Bachus, Castle, Royce,
    Gillmor, Biggert, Shays, Miller of California, Feeney,
    Hensarling, Garrett, McHenry, and Bachmann.
        The Chairman. This hearing of the Financial Services
    Committee will come to order. For those of you who were paying
    attention to yesterday's hearing, I'm going to deviate from the
    precedent set yesterday, and wait for the opening statements
    before I ask my first question. That will be a change from
    yesterday's procedure.
        In fact, I may not even be here for the first question
    because this is an issue, the National Housing Trust Fund, on
    which the gentlewoman from California, the chairwoman of the
    Housing and Community Opportunity Subcommittee, and I have been
    very much engaged in an equal partnership, and she will be
    presiding over the hearing.
        I will in fact be going over to stop in at the press
    conference being held by the Homeless Coalition, which
    recognizes this bill as an important part of their program
    since the main cure for homelessness is a home, the absence of
    which is hard to overcome.
        I do want to say that this bill is, in my mind, one of the
    most important we will be considering. I think expanding the
    Children's Health Insurance Program is the single greatest
    contribution this Congress can make to improving the quality of
    life for some of our fellow citizens who are most in need of
    compassionate assistance. But I believe if we get this bill
    done it will be the second most important institutional
    response.
        In any one year, the number of units may not look huge, but
    housing units, as well-constructed as we believe they will be
    under this program, will last for 30 and 40 and 50 years so
    that at the end of a dozen or 15 years this bill will have made
    a significant contribution to alleviating one of the great
    shortages in this country, which is affordable housing.
        I will leave all the details for later. I do want to
    acknowledge Commissioner Montgomery, and he is the appointee of
    an Administration with whom we have some philosophical
    differences. Within that framework we have been able to
    cooperate with the Commissioner in ways that I think have been
    mutually beneficial. I want to acknowledge the assistance he
    has given, and I want to say that even on areas where I know we
    might have had some ultimate policy disagreement, we've been
    able to trust fully what he told us, and we appreciate that.
        I do want to comment on one point which is that some have
    suggested that one of the contributions to the fund--and let me
    just talk about the money for the fund, not from
    appropriations, but from other housing related activities, some
    of it comes from Fannie Mae and Freddie Mac. Now I do find a
    great inconsistency on the part of some who have been arguing
    for years that Federal legislation gives Fannie Mae and Freddie
    Mac an undue advantage, that they are able to borrow cheaply in
    the marketplace because of this perception of a Federal backup
    that I think is an inaccurate perception, and that Fannie and
    Freddie benefit too much from this and don't do enough for the
    public.
        Agreeing with that, we responded by saying, yes, we will
    take a small percentage of the money that they make, far less
    than they get from these advantages, and require it to go to
    affordable housing. Having done that, some of the same people
    who told us we were letting Fannie and Freddie get away with
    murder now say we are being unfair to the murderers.
        Somehow it is no longer a case of Fannie and Freddie
    getting too much from these advantages, but us preying on these
    poor, unsuspecting private corporations. They are not wholly
    private corporations. They are quasi-public entities and we
    think that the alternative of reducing the advantages they get
    and diminishing the amount of money that's available for
    housing is not a good one. The other choice, of course, is to
    leave the status quo in which they get more benefit than they
    should and that they pay back.
        And we've taken what we think is the middle course. We
    leave the benefits, although with greatly increased regulation,
    but we use some of that money for good public purpose.
    Similarly with the FHA, our bill, contrary to suggestions that
    it's going to lead to FHA fee increases, in the bill that our
    committee passed we seek to prevent the Bush Administration
    from increasing FHA fees not because there is a need to do that
    to do FHA business but to help benefit the general Treasury.
        And section 30 of the bill would prohibit HUD from
    increasing any FHA premium above the level that was in effect
    at the beginning of this fiscal year unless the Secretary shows
    that in the absence of an increase the program would require a
    subsidy from the Congress. So we, in fact, strengthen the
    resistance to FHA fee increases, and that applies to what we're
    doing here.
        If anything in this legislation that we have passed on the
    FHA that would get incorporated here were to cause a fee
    increase that would kick in. So we in fact prohibit fee
    increases. In fact our bill says no money goes to the housing
    fund if it were threatened, a fee increase. So the truth is
    that the bill that we passed already on the FHA, and it's all
    part of one package conceptually, prevents a fee increase that
    is being contemplated.
        And I will say, and I don't ask for any comment on this,
    that my sense is that the desire for this fee increase did not
    come from the FHA and that it did not come from HUD, but it
    came from OMB. That is to be the FHA's contribution to the war
    in Iraq. And we make it very clear that the FHA fee should
    increase only if there was a need to do that for FHA business.
        With that, I am going to move on. I do want to say that I
    can appreciate that within these differences we've been able to
    work with the Commissioner. I am sorry that I will have to miss
    our former Secretary, Secretary Cisneros. I had a privilege of
    working as a committee member under the regime of the two
    Henrys, Henry B and Henry C; Henry B. Gonzalez, who is up here,
    and Henry Cisneros, our two Texas housing champions, whose very
    fruitful collaboration continues to benefit this country today.
        I thank the witnesses in advance for all that they have
    done, and I will now turn the hearing over to the gentlewoman
    from California. First, I'll recognize the gentleman from
    Alabama.
        Mr. Bachus. Thank you, Mr. Chairman, for holding today's
    hearing on your legislation to establish a National Affordable
    Housing Trust Fund. We truly do have an all-star lineup of
    witnesses, and expect this to be a very good hearing. This is
    not the first time that this committee has had occasion to
    consider creating a National Affordable Housing Trust Fund.
        Our other hearings on that matter--and I want to say again
    today, no one questions the chairman's commitment, nor the
    majority or members of the minority's commitment to affordable
    housing needs of low-income Americans. I certainly share the
    chairman's belief that for many of our citizens those needs are
    going unmet currently.
        In our debates on creating a National Housing Fund in the
    past, in those debates--we had them when the GSE reform bill
    came before us, which included creating a National Affordable
    Housing Fund. When the FHA modernization legislation came
    before us it also had provisions creating a National Affordable
    Housing Fund.
        During those debates members on this side of the aisle
    questioned the wisdom of diverting resources from middle-class
    homeowners and from the surplus generated by FHA programs to
    fund other housing needs. And while these arguments certainly
    apply to the legislation that is the subject of today's
    hearing, I want to direct my concerns on this legislation to a
    different set of concerns.
        The chairman and I do not differ on outcomes. We both--as I
    said earlier in my statement, and I think the FHA and most of
    the witnesses, we all agreed that the needs of low-income
    housing citizens need to be addressed, and in some cases they
    are unmet. But what the chairman and many of the majority and
    those of us on this side of the aisle--and there are those with
    different opinions. We have some on this side of the aisle who
    are actually cosponsors of the chairman's legislation but many
    of us--we don't differ on the outcome or the goal, what we
    differ on is the means of achieving the goal, of meeting the
    needs of our low-income citizens.
        Rather than creating yet another housing bureaucracy or
    another housing program, I believe that our focus ought to be
    on increasing the efficiency of the existing programs. In this
    regard it is worth remembering that HUD already administers
    over 30 separate Federal programs designed to promote
    affordable housing opportunities for lower-income Americans and
    that these programs consumed the bulk of HUD's $35 billion
    budget during the last fiscal year.
        Indeed, the Affordable Housing Trust Fund outlined in
    Chairman Frank's bill is modeled to a great degree on one of
    those HUD initiatives, the Home Investment Partnership Program.
        The latest Federal Block Grant for States--I mean, I'm
    sorry, the largest Federal Block Grant for State and local
    government, HOME is designed to create affordable housing for
    low-income households. It is a successful program. It has a
    proven track record.
        Establishing another, a new housing trust fund, separate
    and apart from HOME and promulgating new regulations and rules
    at HUD could take months or years to properly implement. HOME
    is already up and running with 50 States, 585 local
    governments, and four insular areas presently administering the
    existing successful program.
        Rather than reinventing the wheel, I believe a better
    approach would be to take this opportunity to make an already
    successful Federal program work better by using HOME to
    increase production and preservation of mixed income and rental
    housing affordable to very-low and extremely-low-income
    families.
        Mr. Chairman, members of the committee, let me conclude by
    once again reiterating that I believe most of the members of
    this committee, both Republican and Democrat, are committed to
    finding resources to help low- and very-low-income families.
    However the difference is in whether we create a new program or
    utilize an existing program. I thank the chairman and the
    subcommittee chairman for holding this hearing, I thank our
    witnesses for taking time to be with us this morning, and I
    look forward to your testimony.
        Ms. Waters. [presiding] Thank you very much. I will
    recognize myself for 5 minutes.
        I'd first like to thank Mr. Barney Frank for holding this
    hearing and for all of his work on this critical piece of
    legislation. It is truly his vision that has brought us to this
    point. What Mr. Frank has done in bringing this bill to the
    House and to the Congress of the United States has opened up
    new opportunities to increase the housing stock for low- and
    moderate-income people, and I'm very grateful for his vision,
    his leadership, and the opportunity to work with him.
        I want to mention briefly the event I just came from
    because it is relevant to the hearing today. Over in the Cannon
    Building, a few of us joined national homeless organizations
    and some formerly homeless individuals helped by the programs
    of the McKinney-Vento Homeless Assistance Act, an event marking
    the 25th anniversary of that bill's enactment in July of 1987.
        I say the event marked the 20th anniversary of the
    McKinney-Vento Act because this is hardly a birthday that calls
    for celebration. Indeed there is more stinging indictment of
    recent Federal housing policy than the fact that widespread
    homelessness persists in the wealthiest nation on the planet 20
    years after the Federal Government officially recognized its
    first reoccurrence since the Great Depression.
        I don't mean to suggest that no progress has been made in
    addressing homelessness in the last 2 decades, as we will
    explore in depth in a series of Housing Subcommittee hearings
    on homelessness, which I will convene after Congress returns
    from the August recess. We know much more about the how to meet
    the needs of various homeless households with different needs.
    We will build on that knowledge in the subcommittee.
        But the bottom line on homelessness is the bottom line,
    which is that we haven't made demonstrable progress in reducing
    the number of households experiencing homelessness nationwide
    since 1987. Indeed, despite lots of heartwarming individual
    success stories and a dedicated nonprofit field across the
    country, we may very well have lost ground.
        Homeless people are notoriously difficult to count for
    obvious reasons but there is little evidence that the 800,000
    or so people whom we know pretty reliably to be homeless on any
    given night, over 10 percent of them in Los Angeles alone, are
    a lower number than the day the McKinney-Vento Act was past.
    And it's almost certainly not a reduction compared to the first
    rigorous national homeless count conducted in 1996.
        Sadly one reason for this is easy to identify. While some
    homeless people face personal challenges like mental illness,
    HIV/AIDS, or histories of trauma that require social services,
    health, or other support, every homeless individual and family
    shares one need in common, housing they can afford, and there
    simply is not enough of it right now.
        To give one example, there are 9 million renter households
    who earn less than 30 percent of area median income, but only
    7.2 million affordable units are available to them. You don't
    need to have the math skills of Federal Reserve Chairman
    Bernanke, who joined us yesterday, to know that the inevitable
    results of subtracting these figures is widespread
    homelessness.
        For too long, the Federal Government has abdicated this
    responsibility to close this gap. I'm going to read to you a
    sentence from the Congressional Record, a quote, ``If we in
    Congress had not succumbed to the administration's efforts to
    slash, cut and terminate our assisted housing programs many of
    the people on our streets today would not be there.''
        This might well have been plucked randomly from most of the
    homelessness and housing hearings over the past 7 years. In
    fact, it is a quote from the late Housing Subcommittee and
    later full committee chair, Henry Gonzales, rising on the House
    Floor on March 5, 1987, to speak in support of the bill that
    would become the McKinney-Vento Homeless Assistance Act.
        He goes on to call for the Federal Government to couple
    emergency homeless assistance with restoration of cuts to major
    Federal housing production programs. To all of the members who
    are present today, I think we should all really thank Chairman
    Frank for introducing legislation that finally gets the Federal
    Government back in the affordable housing production business.
        And I share the chairman's insistence that we invest in
    affordable housing stock creation and not simply more demand-
    side or tenant-based subsidies. As badly needed as such
    subsidies are, they just don't get the job done alone,
    especially in tight rental markets like Los Angeles. In such
    places, it is difficult to get private landlords to accept
    vouchers at HUD's fair market rent, particularly if you're
    someone with a troubled housing credit or other history as many
    homeless individuals and families are. These households need
    access to housing specifically targeted to them, and the only
    way for that to happen is to have cities, States, and
    nonprofits develop it.
        Like the chairman, I recognize that the bill merits further
    conversation, and I look forward to hearing from our panels of
    witnesses. A lot of thought has already gone into balancing
    priorities and its targeting of resources, eligible uses,
    control over distribution, and other heavily discussed
    provisions. But I'm very interested in the witnesses'
    perspectives.
        I do though want to make sure that we keep our eye on the
    ball. Simply put, if the Federal Government does not reengage
    on affordable housing at the scale of the National Affordable
    Housing Trust Fund and more, one of my successes as Housing
    Subcommittee Chair will be attending an event marking the 40th
    anniversary of the McKinney-Vento Act in 2027.
        I yield 5 minutes to Representative Biggert, the ranking
    member of the Subcommittee on Housing and Community
    Opportunity.
        Mrs. Biggert. Thank you Chairwoman Waters, and thanks to
    Chairman Frank for holding this hearing today. Madam
    Chairwoman, as you'll recall from the number of hearings this
    committee held earlier this year on H.R. 1427, the Federal
    Housing Finance Reform Act, and H.R. 1852, the Expanding
    American Homeownership Act, I have a number of concerns with
    the creation of a National Housing Trust Fund.
        While I commend this committee's goal of increasing the
    amount of available, affordable housing, I do not believe that
    H.R. 2895 is an efficient means to achieve it. And I'll make
    three quick points to expand on this. First, because the trust
    fund is financed through self-defeating provisions in both the
    GSE reform bill and the FHA reauthorization bill, low- and
    middle-income Americans, including the elderly, will have to
    foot the bill.
        Specifically, it's estimated that Fannie Mae and Freddie
    Mac, two entities that purchased or securitized almost 80
    percent of American families' mortgages, will be taxed more
    than $3 billion over a 5-year period to help pay for the trust
    fund. As publicly traded companies accountable to their
    shareholders, Fannie Mae and Freddie Mac will inevitably seek
    to pass along these new assessments to their customers,
    America's low- and middle-income homeowners.
        This is unacceptable and will result in what amounts to a
    mortgage tax on these hardworking low- and middle-income
    Americans seeking to secure, maintain, or refinance their home
    mortgages. To me, it's robbing Peter to save Paul.
        And then second, CBO has estimated that FHA reauthorization
    bill could result in a $370 million surplus in 2008 and a $2.1
    billion surplus over the 2008 to 2012 period. Now normally we
    would say that the surplus is a good thing, but not in this
    case. In this case the surplus would come through overcharging
    seniors on their reverse mortgages, and I don't think that's
    right.
        By far the majority of this FHA surplus would come from
    reverse mortgages premiums paid by our seniors, suggesting that
    they have been overcharged. As you know I have supported the
    ideas aimed at giving the surplus back to our seniors in the
    form of reduced premiums, which this committee rejected. By
    using the reverse mortgage product as a moneymaker to finance a
    National Housing Trust Fund, this bill instead instructs FHA to
    continue overcharging and essentially taxing our seniors. Our
    seniors deserve better.
        At the same time, this bill removes all surplus funds out
    of FHA, which I believe threatens the solvency of the FHA fund
    and its ability to pay out on insurance claims.
        Third, a National Housing Trust Fund unnecessarily adds
    another Federal housing program to the over 100 programs that
    already exist. The National Low Income Housing Coalition cites
    nearly 600 housing trust funds that have been created in
    cities, counties, and States of this country generating more
    than $1.6 billion per year to support housing needs.
        For example, the Affordable Housing Trust Fund in Illinois
    allocates approximately $16 million to $20 million each year to
    benefit low- and very-low-income households. Additionally, the
    Illinois Rental Housing Support Program provides rent subsidies
    for an estimated 4,000 rent burdened households.
        I think that these regionally tailored programs work best
    because they allow funds to be tailored to localized housing
    and community development needs. Also, to the extent that
    Federal programs fall short in some way, I must point out the
    existing federally administered program designed to serve the
    housing needs of low-income Americans, the Home Investment
    Partnership Program. This program already has the personnel,
    systems, and regulatory oversight in place to accomplish the
    same objectives as the National Housing Trust Fund.
        Rather than create a new Federal bureaucracy to address
    low-income housing availability, we should instead focus our
    efforts on improving the HOME program.
        Madam Chairwoman, again, thank you for holding this
    hearing. I am pleased that we are finally holding a hearing on
    this matter even though the committee has twice already,
    preemptively, moved legislation on the issue, and I look
    forward to hearing from today's witnesses and thank them for
    their time and expertise. I yield back.
        Ms. Waters. Thank you very much. I will recognize the
    gentleman from Texas, Mr. Green, for 3 minutes.
        Mr. Green. Thank you, Madam Chairwoman and I thank the
    chair of the full committee for his outstanding efforts. I'm
    also honored to welcome again Mr. Montgomery, who has been a
    real friend, and been very helpful to us, as well as Secretary
    Cisneros, always good to be in his company, and of course
    Hilary Shelton with the NAACP.
        Madam Chairwoman, it is my belief that the greatness of a
    country will not hinge on how a country builds skyscrapers, but
    rather on how it shelters people. It won't be measured by how
    many tractors it constructs or how many farmers in the field
    but how many people it will feed.
        The greatness of a country will be measured by how it
    treats the least, the last, and the lost, not by how it treats
    the well-off, the well-heeled, and the well-to-do. The well-
    off, the well-heeled, and the well-to-do will always fare well.
    It is those who are in the streets of life that we have a duty
    to help.
        So I understand and I sympathize greatly with a lot of what
    has been said, but I also understand that right now we have
    141,000 homeless veterans, and there's a proposal to cut $450
    million from public housing. We have 170,000 homeless children
    and there's a proposal to cut Section 8 vouchers by $500
    million. We have 754,000 homeless sheltered and unsheltered
    people, and there's a proposal to cut CDBG by $736 million. We
    have 189,000 disabled homeless people, and there's a proposal
    to cut Section 811, disabled housing, by $112 million.
        We are the richest country in the world. One out of every
    110 Americans is a millionaire. We spend $329 million not per
    year, not per month, not per week, but per day on the war. We
    can afford to help the least, the last, and the lost. That is
    what this bill proposes to do.
        If we did not need it, the statistical information and
    empirical data would not indicate that we have this homeless
    problem in this country as well as a problem with affordable
    housing, so I'm honored to support this legislation because I
    believe in the final analysis, on the infinite continuum that
    we know as time, we will each have to give an accounting for
    the time that we spent on this island that we know as earth.
    And I want to say that I was there for the least, the last, and
    the lost. I thank you and I yield back my time.
        Ms. Waters. Thank you. I will now recognize the gentleman
    from California, Representative Royce, for 3 minutes.
        Mr. Royce. Thank you, Madam Chairwoman. Madam Chairwoman, I
    must again express my adamant opposition to this legislation
    and the idea here of creating what is called the Affordable
    Housing Fund. As I have expressed since its inception, this
    fund is straight out of Central Planning 101. This is really a
    step in the wrong direction.
        There appears here to be a clear conflict of vision. I
    think past government housing programs have actually done very
    little, if you look at the record, to increase homeownership
    levels in this country. We do not have much to show for the
    tens of billions of dollars we spent on housing through HUD and
    FHA, but there is a way to improve homeownership rates.
        They improve when real interest rates are low and when
    consumer incomes are high. Under that kind of an environment
    people can afford to frankly get into a position where they can
    buy their own home. I believe limited government and free
    market policies will generate these results; creeping socialism
    will not. It will work more as an anchor on the economy and
    prosperity. It will keep the private sector from becoming as
    vibrant and creating the opportunities for people so that they
    can move up.
        This fund will waste resources. It's going to provide false
    hope for those who wish to increase homeownership. Additionally
    this fund will create a terrible precedent, a terrible,
    terrible precedent for other industries in this country. As I
    said during the GSE and FHA debates, I hope that other
    financial institutions are watching this debate because you're
    going to be the next targets.
        Proponents of this concept are not going to stop at just
    assessing or taxing GSEs and the Federal Housing
    Administration. They're going to try to confiscate money once
    they set up this fund from any source they can get it.
        So again, thank you for holding this hearing, and I yield
    back the balance of my time, Madam Chairwoman.
        Ms. Waters. Thank you very much. I recognize the gentleman
    from New Jersey, Mr. Sires, for 2 minutes.
        Mr. Sires. Thank you, Madam Chairwoman. I'm here in support
    of this legislation. As a former mayor of a community where
    about 73 percent of the student body fell below the poverty
    level, one of the biggest issues I confronted in my 12 years as
    mayor was affordable housing. And it's beyond me how people in
    Washington keep insisting on cutting programs for the people
    who need it the most. I don't know where they get their
    information, but not necessarily everybody wants to be a
    homeowner. All these people need is a helping hand so their
    children can get educated in a decent home. And I don't know
    who advises this Administration on cuts of Section 8 on
    affordable housing, but the problems that I confronted
    certainly had to do with affordable housing. And I certainly
    think that as the richest country in the world, we could do a
    little bit more than we've been doing. All they need is a
    helping hand to access the American dream, and this is why I'm
    supporting so strongly this legislation.
        Thank you, Madam Chairwoman.
        Ms. Waters. Thank you very much. Now I will recognize the
    gentleman from Delaware, Representative Castle, for 2 minutes.
        Mr. Castle. Thank you, Madam Chairwoman. I'm pleased also
    to be here and pleased to see us taking up this legislation,
    the concept of which I certainly favor. I, too, am somewhat
    concerned about existing programs and other things that may
    need to be straightened out, and I'm delighted that we have the
    various witnesses and panels that we have here today, you know,
    the balance of rental versus ownership, and a variety of other
    things that need to be answered.
        I've looked at the panels, and there are three panels. I've
    looked at my schedule. I'm not sure I'm going to be here the
    entire time, so I'd like to talk about Joe Myer, on the last
    panel, who is from Delaware. I worked with Joe on housing
    issues for many, many years in a variety of capacities, and he
    is the executive director of the National Council on
    Agricultural Life and Labor Research (NCALL). He was one of the
    founders of that organization in 1976, and for the last 30
    years since then, he has provided financial and technical
    assistance for nonprofit housing developers in the Delmarva
    Peninsula. Under his direction, NCALL has assisted 6,000 first-
    time home buyers in mortgage closings in Delaware through
    homeownership education and counseling, leveraging $581 million
    in attractive mortgages and assistance and apartment
    communities as well.
        Joe is a very important player, and he and I have cut a lot
    of ribbons together and done a lot of things of that nature. He
    is an extremely significant player in this whole business of
    dealing with housing. And if anyone believes that the Federal
    Government or State governments or local governments can really
    make the difference in housing, they don't understand the
    importance of the role of the nonprofit agencies and the
    difference they have made in terms of low-income housing and
    needed housing throughout our country.
        I think Joe represents those interests as well as anybody,
    and I hope when it's time for Joe to testify that people will
    listen carefully to what their needs are and what they have to
    do. We have to make our programs tie into programs such as
    that, which have worked so extremely well. So we welcome Joe
    here, and I'm delighted to be able to participate to the extent
    that I can today. And I yield back, Madam Chairwoman.
        Ms. Waters. Thank you very much. I recognize the gentleman
    from Missouri, Mr. Cleaver, for 3 minutes.
        Mr. Cleaver. Thank you, Madam Chairwoman. I won't take 3
    minutes. I would like to express my appreciation to you, and of
    course to the chairman, Mr. Frank, and I think our ranking
    member, Mrs. Biggert, has been very cooperative even if we have
    some disagreements. I think this committee has perhaps been the
    busiest of any of the committees in Congress, and it's because
    we're trying to deal with issues of importance to the people in
    this country who need it the most.
        A couple of years ago, I think most observers of our
    society would have said that we're having one of the greatest
    housing booms ever. But as is always the case, that has
    dropped. We are now looking at an alarming drop in the number
    of homes purchased by citizens of our country. And of course
    the poor are always going to suffer the most. I am very, very
    supportive of the affordable housing fund, like my colleague,
    having served as Mayor of Kansas City, Missouri, one of the
    things I wanted to have as a legacy was the creation of housing
    so that people who grew up like I did in public housing would
    have the opportunity to live in a single family dwelling and
    become a part of the American dream.
        This housing fund is not perfect. The only thing I've seen
    perfect is Dick Clark's hair. But I am absolutely convinced
    that it is in the right direction and there is not--and we need
    to stop doing this in Congress because it hurts the body. There
    is no underlying scheme. There is no plan to bring in other
    funds. That is not on the table. Nobody is discussing that in
    the dark rooms of Congress.
        I think this is a good opportunity. If someone has an
    amendment to make it better, I will certainly support it. Thank
    you to Mr. Montgomery. We appreciate your spirit and, as we
    have been working with this, and, of course, my former
    colleague and Secretary, Mr. Cisneros, thank you.
        Ms. Waters. I will now recognize the gentleman from
    California for 2 minutes, Representative Miller.
        Mr. Miller of California. Thank you, Madam Chairwoman.
        Many hardworking families are unable to find decent
    affordable housing in communities where they work today. We
    need to consider new approaches to revitalizing neighborhoods
    so that working families can find affordable rental and
    homeownership opportunities in the communities where they're
    employed.
        If the Federal Government does not provide positive
    solutions to the lack of affordable housing opportunities the
    waiting list for Section 8 housing assistance will continue to
    grow. While I might not agree with 100 percent of the policy
    that has been proposed, Chairman Frank and Ranking Member
    Bachus have brokered compromise on many occasions and have
    produced legislation that Democrats and Republicans alike have
    ultimately strongly supported.
        I know there is a strong feeling on both sides of this
    housing trust fund legislation that we are here to consider
    today. As a fiscal conservative, I welcome ideas to promote
    affordable housing in ways that do not increase spending and
    that effectively leverage scarce Federal dollars for billions
    of private dollars.
        To be clear, the bill before us today is not about funding
    sources. The sources of GSE and FHA funds have been dedicated
    in previous legislation and have been considered in the past.
        The GSE bill passed the committee and the full House by a
    strong bipartisan vote. The FHA bill also passed in this
    committee by a strong bipartisan vote. It is no secret that I
    opposed the affordable trust fund in the GSE bill, but at the
    end of the day the fund was supported by a majority of my
    colleagues.
        It is also no secret that I supported the FHA bill to
    create the fund. I only supported this bill after an amendment
    I offered was accepted by the committee that essentially says
    that HUD must ensure FHA insurance premiums are as low as
    possible, that the insurance fund is solvent, and that any FHA
    needs are met before the excess dollars are sent to the housing
    fund.
        After that I firmly believe that the FHA fund should be
    used and dedicated to housing. We did this with the highway
    trust fund. We should also do it for FHA. The FHA money we are
    talking about is money that currently is going to the Treasury.
    So while I oppose the GSE fund, but support the FHA fund, the
    debate of whether we should set aside funds to create a
    national affordable housing trust fund is over for this
    committee.
        Today we are at this hearing to discuss how to allocate
    those dollars that will be set aside by the housing GSE and
    excess FHA funds. What we must now decide is how to allocate
    the dollars that have been set aside for affordable housing.
    Just as we offered amendments to both the GSE bill and the FHA
    bill to change the way housing fund dollars in this bill were
    distributed or how they were used, the bill before us today
    proposes solutions to those very questions.
        I must say that I strongly believe that we must ensure that
    this fund is geared towards development of quality mixed-income
    communities. We must target not only low-income families but
    moderate-income working families as well.
        I also firmly support the concept that we can help limited
    funds go further to help complete neighborhood revitalization
    efforts if we pursue a public-private partnership approach in
    this effort.
        We have an opportunity today to work together as
    Republicans and Democrats and hopefully the outcome of this
    legislation will benefit those in this country who have housing
    needs. I yield back the balance of my time.
        Ms. Waters. Thank you very much. I now recognize the
    gentleman from Texas, Mr. Hensarling, for 3 minutes.
        Mr. Hensarling. Thank you, Madam Chairwoman. In a little
    over 10 years, Federal housing assistance has almost doubled
    from $15.4 billion in 1995 to more recently $30 billion in
    2007. The rate of increase is higher than the Federal
    commitment that we have seen to veterans, education, energy,
    transportation, international affairs, or even Social Security
    over the same period.
        The Federal Government runs, I believe, over 80 different
    housing and community development programs through HUD, as our
    ranking member said, over 30 specifically geared towards
    affordable housing programs.
        And so today our committee response is not necessarily to
    improve or reform the old programs but instead to create a new
    program on top of the 80 that already exist. The second
    response of this committee apparently is to raise taxes on
    hardworking American people. Make no mistake about it. This
    bill would impose a very creative de facto mortgage tax on
    hardworking Americans trying to pay for their homes.
        Although I do not question people's motives and I believe
    their hearts and motives are pure, many on this committee with
    their votes have made housing less affordable. If we truly want
    to make housing more affordable, we need to realize there is no
    greater housing program in American than a good job. And since
    we have enacted pro-growth tax policies in 2003, we have had
    8.2 million new jobs created. And yet many in this House and
    many on the committee want the tax relief to go away. And, as
    you take away the tax relief, you begin to take away the jobs.
        Secondly, if we truly care about affordable housing, we
    need to realize how the single largest tax increase in American
    history contained within the Democrat budget resolution, how
    that impacts families who are trying to make their homes
    affordable.
        I hear from constituents in my district. I hear from the
    Brucker Family in Wills Point who writes, ``No increase in
    taxes. My family is only one breath away from losing our home
    as it is.''
        I hear from the Stevens Family in Forney, Texas, ``If our
    taxes increased $2,755, we would not be able to pay our
    mortgage.'' And the list goes on and on and on. We need to
    realize that more spending fuels more taxes which makes homes
    less affordable.
        Third, it seems ironic to me that we would increase taxes
    on some, make housing less affordable for many low- and middle-
    income Americans because we know that Fannie Mae and Freddie
    Mac are an effectively a government protected duopoly. They
    have great economic power to simply pass along these fees or
    taxes, if you will, ultimately to the consumer. And so this is
    a mortgage tax, pure and simple.
        And last but not least--I have to have 10 more seconds to
    close. Although I suspect we disagree on many issues, as a
    former resident of San Antonio, as a Texan, and as a fellow
    Texas Aggie, I did want to wish a very sincere welcome to
    former Secretary Cisneros.
        With that, I yield back.
        Ms. Waters. Thank you very much. Having exhausted the
    opening statements, I will now move to our first panel. And I
    would like to introduce our first panelist, Mr. Brian
    Montgomery, Assistant Secretary for Housing and the Federal
    Housing Commissioner at HUD.
        I would like to welcome you to the committee, Mr.
    Montgomery, and you will be recognized for 5 minutes for an
    oral summary of your written testimony to the committee which
    will be made part of the hearing record in its entirety. Let me
    just say that I would like to thank you for the tremendous
    cooperation that you have exhibited as you have worked with my
    subcommittee on the FHA Housing Reform Bill, on our Section 8
    work that we have done, and I am particularly pleased about the
    hearing that we had in New York on the Starrett Housing
    Development and the decision that was made by the HUD Secretary
    and you to help save that development.
        Having said all of that, I am not so sure we are going to
    remain friends for long, because while we welcome all of your
    cooperation, I am just afraid you are going to say something
    that is going to displease me today but if you do, you will
    know it. Thank you.
        With that, I would like to call on the Secretary for his 5-
    minute statement. Thank you.

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

        Mr. Montgomery. Well, thank you for that kind introduction,
    I hope. Madam Chairwoman, Ranking Member Bachus, and
    distinguished members of this committee, thank you for inviting
    me to testify on H.R. 2895. It is a pleasure to be with you
    this morning.
        I want to state at the outset that Secretary Jackson and I
    share your strong commitment to providing families with safe,
    decent, and affordable housing. That is why I am going to begin
    my testimony this morning by reminding the members of this
    committee that HUD, as you know, already has a number of
    programs aimed at providing affordable rental housing as well
    as homeownership opportunities.
        As you mentioned, Madam Chairwoman, I appeared before your
    field hearing in Brooklyn, New York, last week. By working
    together, we helped preserve the 16,000 units of housing
    occupied there at Starrett City. As you may recall, in my
    testimony I discussd the importance of preservation in general,
    and specifically, HUD's mark-to-market program which, as you
    know, has preserved more than 125,000 units of housing to date.
    And with the 5-year reauthorization passed by Congress earlier
    this year and signed into law by the President, we expect to
    preserve an additional 50,000 units of housing. I do want to
    thank the members of this committee, in particular,
    Congresswoman Waters and Congressman Price, as well as Chairman
    Frank, for supporting this legislation.
        In addition to preserving the existing affordable housing
    projects, the Department is committed to increasing the supply
    of new affordable housing. The majority of affordable housing
    projects today are built in part through the Low Income Housing
    Tax Credit. We have begun an initiative to identify and address
    ways in which HUD's financing programs including FHA 202 and
    811, can work more effectively and more efficiently with the
    Tax Credit program.
        We are streamlining our subsidy layering and processing
    procedures to improve the timing of HUD approvals so we can
    better meet the tax credit deadlines. And I am pleased to
    report to the committee that we will soon be releasing this
    updated document that has gone from 100 pages written in 1995,
    to just 7 pages today.
        We are also committed to funding the HOME Investment
    Partnership Program. Each year HOME allocates approximately $2
    billion in grants that allow communities, often in partnership
    with local groups, to fund a wide range of activities that
    build, buy and/or rehabilitate affordable housing for rent or
    home ownership as well as directing rental assistance to low-
    income families.
        Our Fiscal Year 2008 budget asks for $1.97 billion, which
    is a $200 million increase over the current year. The American
    Dream Downpayment Program is another successful initiative and
    I hope this committee continues its support for this program
    which has helped 24,000 low-income families purchase their
    first home.
        I mention all of the above programs because in addition to
    duplicating many of the services they provide, the trust fund
    under consideration today would actually compete. Let me
    stress, it would actually compete with our existing efforts to
    secure scarce resources.
        As you know, the trust fund would derive its funding from
    two sources. The first is the GSE bill passed by the House. The
    other is the pending FHA bill. As FHA Commissioner, I have to
    admit that I am a bit selfish and therefore I am very concerned
    about the latter.
        The FHA Modernization Bill authorizes appropriations equal
    to the sum, and I quote, ``The net increase in the negative
    credit subsidy for the mortgage insurance programs.'' This
    means that the source of funding would not be dedicated but
    rather subject to the regular appropriations process and all
    its competing demands and offsets. In other words, yes, I fear
    that we would be robbing Peter to pay Paul.
        You see, FHA receipts are already credited toward HUD
    appropriations and by authorizing a new program, you would be
    creating competition with other discretionary programs. Any
    deposits to the trust fund would have to be offset. And under
    H.R. 2895, we could find ourselves in the position where the
    affordable housing trust fund is funded but other higher
    priority programs including Project-based Section 8 might be
    cut.
        I mentioned the HOME program before and I want to come back
    to it for just a minute. They say imitation is the sincerest
    form of flattery because H.R. 2895 is clearly modeled after
    HOME. And I think a review of HOME's history and what it has
    produced might be instructive.
        In the 15-plus years of the HOME program, participating
    jurisdictions have expended $18.7 billion of $24 billion
    appropriated to date and produced more than 780,000 units of
    housing as well as assisting 165,000 families with tenant-base
    rental assistance. Now I do applaud the goal of this
    legislation. I have to say that with lower income funding
    levels, deeper income targeting, and longer affordability
    periods, I think it is unlikely that the trust fund would come
    close to producing 1.5 million units of affordable housing.
        I want to conclude my testimony by saying that almost all
    housing programs are discretionary. Short of creating a new
    entitlement program, we are all left only with the difficult
    choices of allocating scarce funding for many worthy programs.
    I know that is not an easy task.
        As the committee looks for ways to address the issue of
    affordable housing, as you know, we could immediately address
    and help millions of people without any additional cost to the
    taxpayers through the FHA Modernization bill, which this
    committee has done excellent work on. Thank you again for
    inviting me to testify here today. I will be happy to try to
    answer any questions you may have.
        [The prepared statement of Assistant Secretary Montgomery
    can be found on page 109 of the appendix.]
        Ms. Waters. Mr. Montgomery, without objection, your written
    statement will be made a part of the hearing record. I will now
    recognize myself for 5 minutes for questions.
        Let me start with your concerns about our GSEs. Help me to
    better understand your concerns about using funds generated
    under H.R. 1427 and H.R. 1852 to provide deposits to the trust
    fund. Why should we worry that the affordable housing fund in
    H.R. 1427 is tied to the GSE's mortgage portfolio? Is it not
    the case that H.R. 1427 and an incentive counterpart will set
    portfolio limits based on some public policy concerns quite
    apart from the affordable housing fund provisions?
        Mr. Montgomery. I will speak to the GSE portion first.
    Again, I share some of the concerns that would put downward
    pressure on both of these entities. And I might be fearful they
    would move beyond their mission. These are private corporations
    with shareholders and stock, and I think there would be, again,
    downward pressure put on them to produce. They have to find
    that money somewhere.
        As you know, we are conducting a financial activity review
    that we will be sharing soon, and we remain concerned. Getting
    back to the FHA for a second, again, while I laud the goals of
    this fund, I have to be a little selfish in saying those
    receipts offset HUD programs.
        If you look in the budget, you will clearly see that there
    is a bracket whereby FHA receipts are used to offset that. I
    just do not want to face the prospect where I am looking at
    taking funds from Section 8 or another program to fund an
    affordable housing fund.
        Ms. Waters. So you basically argue that to tie deposits to
    the trust fund to FHA's negative credit subsidy in part because
    this might create an incentive for FHA to overcharge its
    traditional customers higher premiums than is prudent. At the
    same time you argue that FHA receipts are critical to funding
    other HUD programs in the appropriations process, programs you
    say might be higher priority than a trust fund.
        Do not public policymakers already face whatever incentive
    they may have to overcharge FHA bars just in order to plug
    holes in each fiscal year's HUD budget?
        Mr. Montgomery. Well, speaking of FHA receipts, again this
    committee has done great work on the FHA bill and I appreciate
    it, but as it stands today, no FHA bill, I am looking at being
    $143 million in the red for the first time in FHA's history in
    Fiscal Year 2008. Now we all know why that has happened. That
    die was cast many years ago and I know this committee is trying
    to fix it.
        Ms. Waters. No, we do not. Would you explain that?
        Mr. Montgomery. Well, it is due in part to the Gift
    Downpayment programs which I know we had previous discussion
    about that are 2.3 times more likely to fail. And because a lot
    of hard-working families who have trouble saving money for a
    downpayment have to rely on that so-called gift downpayment,
    many families find themselves in a position of negative equity
    in their homes. And the truth is GAO has recognized that they
    are far more risky whereas an FHA product obviously with what
    the bill would offer with some downpayment assistance would not
    put families in that position.
        Ms. Waters. Your ``no downpayment'' aspect of the FHA
    program would not be synonymous to the gift downpayment?
        Mr. Montgomery. Not, not at all.
        Ms. Waters. Why not?
        Mr. Montgomery. Well, for one, the Gift Downpayment
    programs, unlike those last go-around, have an IRS Revenue
    ruling hanging over their heads. You do not have to take what I
    say about it, but the IRS has said these so-called gifts
    violate the detached and disinterested clause. When all of us
    write a check to charity, whether it is the American Cancer
    Society or the Girl Scouts, we do not expect anything in return
    except a good feeling. And it is clear through the IRS that
    these gift downpayments violate that detached and disinterested
    clause because there is obviously an expectation in there.
        Ms. Waters. What percentage of your portfolio came from
    those programs?
        Mr. Montgomery. Well, about 30 percent of our current
    borrowers rely on some assistance for downpayment through a
    government program or through a family member, but about 25
    percent are through these gift downpayments which again for the
    need that some people need some assistance on the downpayment
    again which this committee recognizes and has supported.
        Ms. Waters. Do you not have the ability to either support
    or not support the programs that you are referring to that make
    up 25 percent of your portfolio? The gift downpayment? I mean
    there is nothing in law or regulation that would force you to
    accept their participation. Is that right?
        Mr. Montgomery. Well, there is--we have to go through
    rulemaking. As you know, I cannot just withdraw a rule
    overnight. These gift downpayment programs have been around for
    10 years.
        Ms. Waters. Yes, but you have been using them. They have
    been utilizing FHA.
        Mr. Montgomery. Our law clearly states that our downpayment
    assistance has to involve nonprofits. Until the point in time
    that the IRS determines that ``XYZ'' foundation is not a bona
    fide 501(c)(3), then we have to continue to accept that at this
    time.
        Ms. Waters. I do not think there is anything in the law
    that would have prohibited you from not involving them, but you
    readily accept their participation, and they make up 25 percent
    of your portfolio. So what has caused you to change direction?
        Mr. Montgomery. Well, again, getting to the point of the
    IRS Revenue ruling, and if they are not a bona fide 501(c)(3)
    at what point in time, then we can no longer accept that form
    of assistance. HUD has previously tried to move to, during the
    previous Administration, move toward rulemaking to not accept
    that sort of assistance but was not successful.
        Ms. Waters. Thank you very much. We will talk about that
    some more a little bit later on. I would now like to recognize
    Ranking Member Bachus for questions.
        Mr. Bachus. Thank you, Madam Chairwoman. Commissioner,
    you--in my opening statement I talked about reservations about
    creating a program very similar to the HOME program. But as I
    understand it the program that is now before us would actually
    target or tend to go--have more emphasis on affordable rental
    property for the lowest income Americans. It sort of moves the
    target down; is that your analysis?
        Mr. Montgomery. Yes, this bill, as I understand it, would
    target 75 percent at 30 percent of AMFI and below. And HOME,
    while not having any written targeting, currently 40 percent of
    HOME funds go toward 30 percent of AMFI and below.
        Mr. Bachus. We talk about, you know, Federal housing
    programs. We talk about where the need is. One thing that I am
    struck by from time-to-time we do talk about programs for low-
    income Americans is that I have a home in Birmingham that's
    worth well over half-a-million dollars, and I have a home up
    here that's worth about half-a-million dollars, and I do
    receive a pretty hefty tax deduction on my home mortgage
    interest, so it's not as if even higher income Americans are
    not receiving what some could call a subsidy or a tax break.
        My concern is truly for the lowest income Americans, so--
    and I believe I can say that as a conservative. I think there's
    a debate among conservatives as to this whole question, but I
    make no apology for being both conservative and saying that if
    we're going to--if we're going to have Federal housing
    programs, we have all sorts of programs to create
    homeownership, but I think maybe what we've even found with
    some of the subprime situation is that not every American is
    suited or even wishes to own their own home. And I think the
    greatest need is in rental income for a rental housing, for
    extremely-low-income families. How can we do a better job on
    that or do you think it's necessary?
        Mr. Montgomery. Yes, I do think it's necessary. In fact, I
    will say up front that HUD's own worst case housing needs
    analysis shows that the number of low-income--and many of the
    families who will be targeted by this fund, the number of
    families who need that sort of assistance has gone up.
        Sadly that has gone up by 800,000 families between 2003 and
    2005. It's one of the reasons why we have proposed as part of
    our 2008 budget a demonstration program at least in the case of
    low-income seniors and persons with disabilities, the way that
    we can leverage our limited resources through tax credits and
    private activity bonds to use those funds, to spread them out
    perhaps as bridge funds so HUD is not the only funding source
    impossible.
        One of the areas that again is of most concern to me is
    housing for seniors and for persons with disabilities, and I do
    share in that goal of what the fund would try to do, and that
    is to help more families at the extremely-low-income figure, at
    30 percent and below.
        Mr. Bachus. Did you say the elderly and disabled are
    particularly two groups that--if anyone is deserving of Federal
    assistance or subsidy it would be those and very-low-income
    Americans, who often have large families. We do have a
    situation in this country that we'd all be blind if we didn't
    know that we can't have working households with two wage
    earners and they're still struggling to survive and to provide
    shelter for their children.
        I would say that with all the programs that the government
    funds, many of them are not directed at low-income Americans.
    Many of them benefit very high-income Americans, in fact. We
    should come together and try to find long-term solutions, long-
    term funding solutions for rental income, for extremely-low-
    income American families.
        Thank you, sir.
        The Chairman. Let me just ask on that, Mr. Montgomery, for
    families--I know we have some money for the elderly and some
    money for the disabled in terms of housing. I would note that
    the President has proposed to reduce those amounts every year
    from year-to-year; Congress has resisted that. So over the
    President's objection there has been more money for the
    disabled and elderly programs. But how much money is available
    annually--do you have a sense of this, if not you can get it to
    me later--for housing for families in which nobody is disabled?
    That would include single parents and children. How much
    Federal assistance is available for the construction, not
    Section 8, year-by-year vouchers, for the construction of
    housing for families who would be, say, at 50 percent of the
    median and below? Do you have any top-of-the-head notion?
        Mr. Montgomery. You said other than the 202 and 811
    programs?
        The Chairman. Right, I'm talking about for families without
    any disabled persons.
        Mr. Montgomery. Which is about a billion.
        The Chairman. Those are--yes, thanks to Congress. And the
    Administration has tried to cut those and we've resisted that.
    But how much is available for construction for families other
    than the elderly and the disabled?
        Mr. Montgomery. From Federal sources outside of tax
    credits, from pure production, as you know there's very little,
    if any, Federal commitment towards producing construction of
    affordable housing.
        The Chairman. Whatever you can kind of get out of the home,
    maybe. So I think that's the point we make is that when there's
    virtually no construction money for family housing available
    and even the tax credit as you know--and I was glad to see in
    your statement that we're working on parallel paths here, I've
    been working with the chairman of the Ways and Means Committee,
    by making the Low Income Housing Tax Credit Program
    interoperable easily with the appropriations-based programs. We
    can do a lot of good, save a lot of time and money, and get
    housing without any budget hit. We're both working on that
        But in my part of the country and many others, unaided,
    unsupplemented by another program, the Low Income Housing Tax
    Credit is not going to get rental levels down low enough for
    that segment of the population. So we are talking about in this
    bill whether or not the Federal Government ought to get back in
    the business of helping build affordable units for family
    rentals.
        But let me ask you a couple of other questions. One of the
    issues here is that while we might be causing the FHA fees to
    increase and I know you have not, but I assume you haven't
    accused us of that--statement because as you're aware the
    Administration has asked us, has announced, not even asked us
    that they're going to use the existing authority to raise the
    FHA fees. Would you describe the pending proposal to raise FHA
    fees and give us the rationale for it, since my understanding
    is that the FHA is already now generating a surplus for the
    Treasury. So what is the pending proposal to raise FHA fees and
    what's the rationale?
        Mr. Montgomery. Are you referring to the single family FHA
    fees?
        The Chairman. Yes.
        Mr. Montgomery. Well, our premiums right now are the same;
    we're at 1\1/2\ percent.
        The Chairman. Is there not a proposal pending to raise
    them?
        Mr. Montgomery. Well, the 2008 budget--so we can prevent
    from going positive on our credit subsidy--does note that we
    need a modest increase in premiums.
        The Chairman. You're acting like this is a surprise, Mr.
    Montgomery. You know what we're talking about.
        Mr. Montgomery. It's not a surprise. I've been talking
    about this a lot.
        The Chairman. What's the current request by the
    Administration for an increase? It's only for single-family,
    you're not asking for a multi-family increase?
        Mr. Montgomery. Let me address the single-family, 1.5
    percent. We would increase it to 1.66 so we don't go positive
    on the credit subsidy, which none of us want. Let me speak to
    what that dollar amount represents. Our average mortgage is
    about $129,000. That .66 increase is about $7 a month.
        The Chairman. All right. So you--is that something you're
    asking us to legislate or that you can do on your own?
        Mr. Montgomery. Well, the statutory cap for the premium is
    2\1/4\ percent. Two predecessors ago, Mr. Abgar, right before
    he actually left office, lowered the premium to 1.5 percent,
    which the Commissioner can do, and it has stayed at 1.5 percent
    since October of 2000.
        The Chairman. So you are not asking Congress to do this.
    This is something that the Administration proposes to do to
    undo this?
        Mr. Montgomery. The Commissioner has the authority to raise
    that premium--
        The Chairman. I understand, but can we get a little more
    direct in our answers here?
        Mr. Montgomery. That was pretty direct.
        The Chairman. Are you planning to do it?
        Mr. Montgomery. Sir, I have made a commitment, not before
    this committee but before the Senate Appropriations and House
    Appropriations Committees that the fund will not go positive
    under my watch. When it comes time--
        The Chairman. That may seem direct to you, but it doesn't
    to me. Are you planning in the near term to increase the FHA
    single family premium?
        Mr. Montgomery. So I don't have to ask Congress for $143
    million in appropriation. Yes, sir. That's what--
        The Chairman. You are planning to raise it? Okay. I cite
    that because we talk about where the fee increases. How about
    multifamily?
        Mr. Montgomery. Again, as part of the 2007 budget as well,
    a proposed increase on some multifamily programs. As you know,
    that rule was withdrawn. It came back. Some of the programs
    that would have been part of the original rule, as you know,
    were no longer part of the second.
        The Chairman. So what is the current status now of that
    proposal? It came back, that's an interesting sort of--
        Mr. Montgomery. Yes, it walked its way back--
        The Chairman. Yes. We have rules, we have autonomous rules,
    apparently. They walk, they talk, they feed. They come back,
    nobody--we'll do a movie now of the rule that walked and came
    back to us. What is that rule proposing itself to do right now?
        Mr. Montgomery. Well, the rule right now which is actually
    not out for public comment yet but will be soon--
        The Chairman. It's a shy rule.
        Mr. Montgomery. Yes, sir. It is, but it will appear before
    the end of the fiscal year. The increase would be for 221 D-3s
    and 221 D-4s; it would exempt tax credits in hospitals.
        The Chairman. And how much of an increase would you be
    talking?
        Mr. Montgomery. Well, the proposal last year, as you know,
    was 32 basis points. This year it is half of that. It would
    only be 16 basis points. But sir, I just want to make sure as
    last year there will be plenty of time for public comment.
        The Chairman. There is nothing pending on that now. All
    right, I appreciate it.
        Mr. Montgomery. That has not gone into effect, sir.
        The Chairman. I appreciate that. So we do have a potential
    for that to come forward. The next is Mr. Miller, a nice segue
    to Mr. Miller on the subject--
        Mr. Miller of California. Just to follow up on that
    because, Commissioner, the budget proposal that you're
    requesting is 35 percent on most of the multi-family housing
    programs. I mean that's what your budget proposal requests--a
    35 percent increase.
        Mr. Montgomery. OMB subsequently issued an errata sheet
    which corrected that.
        Mr. Miller of California. Was that after 100 of us mailed
    you guys a letter saying it is ridiculous that you guys make a
    profit every year? Was it maybe--
        Mr. Montgomery. Well, I just want to make sure you
    understand the proposal.
        Mr. Miller of California. You cut it from 35 percent of
    what, 35 percent of what, how low did you--
        Mr. Montgomery. Two years ago, it was 32 basis points. We
    withdrew that. In 2008 the proposal is 16 basis points.
        Mr. Miller of California. Okay. So now it's going to be
    half of 35 percent, let's say 17.5 percent. And yet you're
    making a profit.
        Now I know that in your testimony you're concerned about
    pressure on FHA premiums to provide money for the affordable
    housing fund, but you're wanting the 17.5 percent increase on
    the multifamily, which is increasing it, and yet every year FHA
    makes a profit and it goes to the Treasury basically.
        I guess one problem I have is--I'm not arguing but I have a
    real problem with the comment you made on the downpayment
    assistance program that it's very risky, and that's the private
    sector helping with downpayment assistance for an individual.
    Yet the American Dream Downpayment Assistance Act, which is the
    government giving people for a downpayment is good.
        It seems like if you use the same underwriting criteria
    that you would use for zero downpayment or the American Dream
    Downpayment Act, same criteria. Why would one be more risky
    than the other if the underwriting criteria is equal?
        Mr. Montgomery. Sir, there's a difference between apples
    and pineapples.
        Mr. Miller of California. Well, no. The difference between
    the downpayment assistance program in the private sector that
    they currently face is that HUD changed the ruling on what was
    considered a charity. Prior to HUD changing that ruling--
        Mr. Montgomery. It was the IRS.
        Mr. Miller of California. Well, the IRS had no problem with
    them prior to you guys changing the ruling, but once you
    changed the ruling that they were not a charity, per se, then
    they were in violation of the law and the IRS. But the point is
    that if you have $5,000 or $3,000 given to an individual from
    the government for downpayment assistance or you have $5,000
    from the private sector given to an individual for downpayment
    assistance, what's the difference?
        Mr. Montgomery. First and foremost, in the so-called gift
    downpayment programs, you repay that gift. The cost of that
    downpayment is put on your note. Sometimes it's done and
    families don't even know it. And a lot of those gifts are used
    in stagnating or declining markets where there's very little
    house appreciation. And as a result of that--
        Mr. Miller of California. Well, I know many of the--the
    committee, those were gifts, those were not put on somebody's
    notes, and nobody had an argument with that.
        Mr. Montgomery. I think the proof is in the pudding how
    those loans perform and they are almost 2\1/2\ times more
    likely to fail.
        Mr. Miller of California. But why?
        Mr. Montgomery. And that is one of the reasons that we are
    forced to raise our premiums.
        Mr. Miller of California. Please answer me. Why? Are you
    applying the same underwriting criteria? If you apply the same
    underwriting criteria on a $100,000 house if somebody got a
    $3,000 downpayment to buy, so they owe $97,000, versus somebody
    who bought through a zero downpayment, and they owe $100,000,
    if you apply the identical underwriting criteria, how can you
    convince us that somebody is better off owing $100,000 than
    they are owing $97,000 if the same underwriting criteria has
    been applied? You're skirting my--I'm not arguing; you're
    skirting my question.
        Mr. Montgomery. No, I'm not, sir. I'm just saying it's--in
    the case for that downpayment, the gift downpayment I only use
    the term ``gift'' because it's descriptive, is paid back, and a
    lot of families don't know that. Again, they're in stagnant or
    declining markets. They're in a negative equity position, and
    they're repaying it.
        Mr. Miller of California. So they're in the same position
    somebody with a zero downpayment is in?
        Mr. Montgomery. I'm sorry, sir?
        Mr. Miller of California. Are they in the same position as
    somebody with a zero downpayment?
        Mr. Montgomery. No, because it is clearly known at the
    outset that the family is in a certain equity position. The
    family may or may not elect to do that. Certainly the
    underwriting is there, but the truth is that a lot of families
    don't realize that they are paying this gift back. They thought
    it was, in fact, a gift. And sir, that is why the proof is in
    how they perform, and they fail 2\1/2\ times more often than
    the non-gift downpayment programs, and that is why I have to
    raise premiums.
        Mr. Miller of California. We'll continue to debate that. On
    targeting, where are most HUD funds currently targeted? To low-
    income or moderate-income families?
        Mr. Montgomery. Are you talking about FHA or all of it?
        Mr. Miller of California. Yes, HUD funds in general.
        Mr. Montgomery. It would depend on the program, but most of
    them are at 80 percent of AMFI and below.
        Mr. Miller of California. Most of them are low?
        Mr. Montgomery. The vast majority of them are.
        Mr. Miller of California. Do you see success in pursuing
    mixed income developments as might be proposed in this
    legislation?
        Mr. Montgomery. Oh, I think mixed-income developments have
    a place, dependent on the community and certain other
    demographics.
        Mr. Miller of California. Do you think that this fund
    should be mainly targeted heavily to low-income or give
    existing HUD programs that deal with it or should we maybe look
    at this program to service more the needs of even moderate-
    income working families if we're going to have a program?
        Mr. Montgomery. Well, as I mentioned previously, I think
    the goal of the fund, to help more families at 30 percent of
    AMFI and below, is a very good goal. Again my problem is just
    in the case that I now have to help fund that fund but I'm
    facing the prospect of whether I fund Section 8 or I fund an
    Affordable Housing Trust Fund, and that's a difficult decision.
        Mr. Miller of California. You mean you're funding it
    through the FHA excess premiums?
        Mr. Montgomery. All FHA receipts are credited toward HUD,
    but that's the point--
        Mr. Miller of California. Where do the excess premiums go
    today?
        Mr. Montgomery. They go to offsetting HUD's budget, every
    penny of them.
        Mr. Miller of California. And the language we've included
    in the bill allows that--but it says the excess funds, above
    solvency and those types of things that normally would go to
    the Treasury would go to this fund. But the appropriators use
    that excess and they credit it to our budget.
        Mr. Montgomery. Well, it would be either through--it would
    be us or Transportation. But the point, sir, is that since they
    credit those funds toward our budget, toward HUD's budget that
    we would face the prospect, do I fund Section 8, HOME, or do I
    give the funds to a trust fund? And as I reference in my
    remarks, I would selfishly want to fund HUD's programs first,
    and I would hope that everybody on this committee would share
    in that.
        I can make one last point. I think the reason State housing
    trust funds work well--some would say they refer to them as
    sort of benign revenue sources, but that's the coin of the
    realm of making trust funds work. States use document recording
    fees. They use real estate transfer taxes. They use interest
    from escrow accounts that have been returned to a State entity.
    That's a big jump from now taking on a Federal level, the
    possibility of taking funds out of a housing agency to go fund
    a housing trust fund.
        And again, I just want to be selfish that I am going to try
    to protect HUD's resources first. I would hope people would
    expect me to do that, and that's what I referred to earlier.
        Mr. Miller of California. Thank you very much.
        The Chairman. I recognize the gentleman from New York and I
    say we certainly are glad to work with you to protect HUD's
    resources, and the next time OMB comes calling, we'll be there.
        The gentlewoman from New York.
        Mrs. McCarthy. Thank you, Mr. Chairman. I guess the
    questions that I basically want to ask is what is HUD's--what
    are you looking at to the future? We are talking about housing
    for certainly the lowest of the incomes, those with
    disabilities, and our seniors.
        I happen to agree that we have a lot of middle-low-income
    families on Long Island. The problem is the jurisdiction on
    Long Island. Nobody wants low-income families in their
    neighborhoods, which is really a shame.
        I do not want to see warehousing of the lowest incomes into
    one area either, which I already have. I have a 23 percent
    minority area. I will be very honest with you. On the rentals
    in one of my areas, I would not put anybody in that. Those are
    Section 8 housing. I would not put anybody in those homes, in
    those particular apartment rentals. Looking at New York State,
    we have a shortage of 336,000 units of rental.
        Is HUD looking to the future with a bill like this that we
    could have like almost mixed rentals, where you would have
    young middle-income families or low-middle-income families with
    seniors, and people with disabilities, so there is a mixed
    community in one building?
        It seemed to work 20 or 30 years ago, versus what we are
    seeing today, warehousing the poorest of the poor in one area.
        Would that be more acceptable to say my villages, my towns?
        Mr. Montgomery. That is one of the primary goals of the
    demonstration program I referenced earlier with our Section 202
    and 811 programs. By blending them with the tax credit program,
    which is targeted at 80 percent of AMFI and below, using the
    economies of scale, we can better spread out our resources,
    combine them with State and local resources, whether it be a
    mixed income, as long as it is below that certain AMFI number,
    then we can produce more housing.
        I know it is a tough budget environment. That is one of the
    reasons that we moved to offer these two demonstration
    programs, which I want to add many of the folks who were here
    in this room today have helped us draft that pilot program, and
    I appreciate their effort.
        Again, Congresswoman, that is one of the goals of the
    program.
        Mrs. McCarthy. One of the concerns I have, my working poor,
    because they live on Long Island, I will even speak for myself,
    our utilities, our taxes, are extremely high. Even though the
    county has started helping with $10,000 downpayments--I think
    we have renovated maybe five or six homes in the last 5 or 6
    years. We pick one house a year, renovate it, and hopefully get
    a family in it. We work with our local groups that are trying
    to educate them.
        They can find the money for the downpayment on the homes,
    but then they find they cannot afford the taxes and they cannot
    afford the utilities. That is a problem.
        Yet with the rental apartments, which we do not have--
    Nassau County is one of the oldest counties in the country, and
    unfortunately there was no planning going back when we all
    started.
        Even to try to build the building and then have the
    community accept it, I will go back to should HUD also consider
    the percentage of affordable housing units in a jurisdiction
    when developing the formula for allowing the funding?
        Mr. Montgomery. That is some of what States do through
    their consolidated plans that help guide obviously where HOME
    funds go. Actually that is a lot of the goal of what the HOME
    program does. While I am sure there could be improvement in it,
    a lot of States are doing that currently as part of their
    consolidated plans.
        Mrs. McCarthy. I can see in my area also maybe you could
    build one building for what it would cost to put that building
    up versus in other parts of the country where they might be
    able to put up three or four buildings.
        It just seems that we always get caught not getting any, or
    as I said before, we are 336,000 units short. I am sure Long
    Island has a large proportion of that, even being close to New
    York City.
        I think we have to start thinking outside the box on how we
    are actually going to deal with high cost areas: California;
    Texas is certainly short of housing; and Florida comes in
    fourth.
        I think with everything that we have seen and certainly in
    my 11 years of trying to find housing for those who need it,
    even our young people when they first get out and have a job
    and it is a low-paying job, whether as a teacher or a nurse,
    they cannot stay on Long Island, and that is not good for the
    economy to keep the economy going on Long Island.
        I support this bill. I am just concerned about whether it
    is going to help an area like mine. Is it going to help areas
    that have a higher income which make false readings as far as I
    am concerned for some of my minority areas.
        Mr. Montgomery. Again, it targets most of the funds toward
    30 percent of AMFI or below. What you have described to me, it
    could be difficult, although I think we all agree that is a
    good goal, which is what we try to do under the HOME program as
    well.
        Mrs. McCarthy. I yield back the balance of the time.
        The Chairman. The gentlewoman from Minnesota.
        Mrs. Bachmann. Mr. Chairman, thank you for the opportunity
    to ask a question of the witness. I appreciate it and I thank
    you so much, Mr. Montgomery, for being here today. I appreciate
    it. It is an important issue that we are dealing with,
    affordable housing.
        The goal is worthy of the chairman's bill, and that is to
    construct and rehab and preserve 1.5 million dwelling units
    over the next 10 years. It is an ambitious goal.
        I am just wondering from your perspective--I was not here
    earlier and I apologize for that--do you think this is an
    achievable goal, first of all? I have other questions.
        Mr. Montgomery. We do have a good yardstick of comparison,
    the HOME program, which this is nearly identical to. Since
    1990, it has produced about 787,000 units of housing, another
    165,000 families have been assisted through tenant abates
    rental assistance, and that is about $18 billion of about $24
    billion that has been appropriated, by the way. I would say
    that while it is a worthy goal, using the HOME program as a
    basis of comparison, it might be difficult.
        Mrs. Bachmann. I appreciate your answer. You are right. I
    see there is a very strong similarity between the program that
    is now being proposed and the current HOME program. That is
    nearly a doubling of what we have seen in terms of a goal. I
    was wondering how reachable you thought that is. Thank you for
    that background.
        I am also wondering when we create a new program like this,
    it will necessitate that we create an entirely new bureaucracy,
    and that could take months, maybe even years to bring the
    necessary rules and regulations on line to put this program
    into practice.
        What I am wondering is, if the existing HOME program could
    supplement the existing trust funds without creating a new
    bureaucracy? Could we do more with what we have by tweaking and
    fine tuning the program that we now have so that we could be
    more ambitious in reaching greater goals so we could take care
    of the needs of more people, disabled people, low-income
    people?
        Mr. Montgomery. As a Commissioner, I used to work at a
    State housing finance agency in Texas, which by the way, we
    tried to get more funding for our State housing trust fund back
    then.
        I am fearful that some State housing finance agencies with
    a new program, as we would expect, it would take them a while
    to figure it out, so to speak. I think some States would go
    full speed ahead and spend it and hope for the best, relative
    to the compliance period and the monitoring of how the funds
    are spent.
        I think other States on the other hand would say wait a
    minute, we are not quite sure how to go into this, and do the
    opposite thing, be very hesitant to spend the funds.
        I suspect some States would say, is this not the HOME
    program? Again, recognizing the difference, which I want to be
    very careful to point out, between the target income levels.
        I think you will have States doing all sorts of different
    things, but again, it gets back to my point--I do not want to
    take more of your time.
        Mrs. Bachmann. That is fine. If you would like to finish,
    that is fine. I have one more question.
        Mr. Montgomery. Go ahead.
        Mrs. Bachmann. One study that I was curious about, and I do
    not know if you are familiar with it, from the Reason
    Foundation, and they found that oftentimes programs like the
    one that is being proposed actually fail. I am wondering what
    your response is.
        They said the reason why is not despite the housing trust
    fund's resources, it will fail because they said State and
    local land use restrictions result in less space and higher
    costs to build new units, which means that supply cannot meet
    demand.
        What I am wondering is, do you see in the current
    legislation that is being proposed before this committee,
    incentives for the State and for the local governments that you
    just referred to, to reduce the amount of regulation that it
    then imposes on the housing construction?
        Mr. Montgomery. I think there is a proposal for States that
    lower some of the regulatory barriers to waive some match
    provisions and things of that nature, which I think is good. I
    am not familiar with that particular study that you are
    referencing, so I cannot really comment on that.
        My own personal experience again with the Texas housing
    trust fund, which had an altogether different source of
    funding, that is the coin of the realm, where do you get the
    money, I think it was a successful program.
        Mrs. Bachmann. Do you think that is part of the reason for
    the success, the source of that funding, which is different
    from this proposal?
        Mr. Montgomery. Unfortunately, whether it is a State budget
    or Federal budget, there is no free lunch. To agree there is
    a--and I will use the term ``benign,'' for lack of better--
    funding source, since everybody has to answer to the
    appropriators and to the authorizers, if they can find that
    source, which many States have done, Florida has been able to
    raise $200- to $300 million through a real estate transfer tax,
    and some other States you will hear from later have done a
    wonderful job through document recording fees and other
    sources.
        I think it is very key. I think we all share in the goal of
    what the fund would do and what HUD does, but again, the key is
    what is the funding source.
        Mrs. Bachmann. Ten years from now if we all gather again
    for a reunion in this room, as we go review and do an audit of
    this bill, what are we going to find? Are we going to be
    talking about a success story?
        Mr. Montgomery. I do not know what is going to happen to
    the bill. That is not my job. I do not vote here. I would
    hope--
        Mrs. Bachmann. Based upon your experience with what you
    have done in the past, what do you foresee with what your
    knowledge is, how would you apply that to what you think the
    true success of this bill will be?
        Mr. Montgomery. I would say to the degree that it is HUD,
    State trust funds, or if there is a national housing trust, I
    would hope that at the end of the day, we are helping more
    people than we are today.
        Mrs. Bachmann. Could you be more responsive to my question?
    Do you foresee success or not?
        Mr. Montgomery. It is hard to say since this is just a
    proposal. Again, I would say since the bill does much of what
    is already in the HOME program, putting the funding issue
    aside, yes, I do think there would be some States that would do
    well, and other States that would not. You just cannot escape
    the argument that I made earlier, having us as a funding
    source, we are facing a difficult decision. Do we fund HUD
    programs or do we fund the trust fund?
        Mrs. Bachmann. Thank you, sir. Thank you, Mr. Chairman.
        The Chairman. The gentlewoman from New York.
        Ms. Velazquez. Thank you, Mr. Chairman.
        Assistant Secretary Montgomery, first and foremost, let me
    thank you for coming to New York, and the fact that you were
    there 2 weeks ago shows that we are facing a crisis when it
    comes to the shortage of affordable housing in New York City.
        Members of Congress, every time we go to our districts, we
    become case workers or we go policing to see what is going on.
        This last Saturday, I just held a housing town meeting, and
    more than 600 people showed up. It tells you that people are
    very concerned about the fact that we do not have affordable
    housing.
        You come here and you praise the goals of H.R. 2895 but
    also you raise concerns about the proposal under consideration.
    I would like to ask you to give us specific recommendations of
    how can we make the housing trust fund a workable project.
        Mr. Montgomery. Since it mirrors much of what you see in
    the HOME program, which our Administration asked for $200
    million more this year than last year, I would say beefing up
    the HOME program would be a good step.
        I do not know--
        Ms. Velazquez. How would you accomplish that?
        Mr. Montgomery. If I had a magic wand, it would be one
    thing. None of us do. There is a need for more funds for the
    HOME program.
        Ms. Velazquez. Did the Administration request more funds?
        Mr. Montgomery. We did request more, which the House
    Appropriations Committee cut $200 million from our request,
    unfortunately, last week.
        As far as how I would look at funding it, that is the
    problem. The States have sources that are not available at the
    Federal level and States have figured it out on their own and
    many have done a very good job funding housing trust funds.
        Ms. Velazquez. The difference is that unlike the Federal
    Government, States must pass a balanced budget, which will
    increase the possibility of instability to these funds.
        If the States have been able to manage the funds in that
    fiscal environment, why cannot we in the Federal Government do
    it?
        Mr. Montgomery. Again, it gets back to the point of what is
    the source of the funds. Someone just threw an idea out at me.
    The Federal Government settles lawsuits all the time. That
    revenue goes right back to the Treasury. Why could we not use
    that as a source?
        I said, well, I guess that is something you could look at,
    but again, it gets back to the source of since there is no free
    lunch here and every penny of the budget and then some is
    spoken for, where do the funds come from.
        Ms. Velazquez. H.R. 2895 clearly provides the source for
    the funds. That is why we should be supporting it.
        Thank you very much.
        Mr. Montgomery. Other than the fact that it takes the funds
    from HUD.
        The Chairman. I am going to recognize myself. What funds is
    HUD now getting in the absence of this FHA and housing trust
    fund bill that you would lose? Please identify them for me.
        Mr. Montgomery. We keep back a certain amount of receipts
    which by the way, I have no receipts for next year, as it--
        The Chairman. You are not answering my question and I am
    going to ask it again. How much are you now getting that you
    think this will take away from you and tell me where.
        Mr. Montgomery. If you look at the budget, receipts of
    about $700 million from this year are used to offset HUD--
        The Chairman. You are getting $700 million this year, you
    said, right?
        Mr. Montgomery. Every penny of it offsets HUD's budget.
        The Chairman. The bill that we passed, the combination of
    the FHA bill and the housing trust fund bill, how much of that
    $700 million would it take away from you? You said it would
    take money away from you. Would it take any of that money away
    from you?
        Mr. Montgomery. Well--
        The Chairman. It is a fairly straightforward question.
        Mr. Montgomery. It would take money away from HUD because
    every penny--
        The Chairman. Commissioner, please, you know better than
    that. I am asking you a straightforward question. The $700
    million you cited, would anything we are doing reduce that?
        Mr. Montgomery. Every penny of our receipts--
        The Chairman. Can you give me a straight answer?
        Mr. Montgomery. I am trying to.
        The Chairman. No, you are not. You are trying to evade it.
    You said you are getting $700 million now. What are we doing
    that--would anything we are doing diminish that current flow of
    funds?
        Mr. Montgomery. Maybe I am not understanding the question.
        The Chairman. Sure, you are.
        Mr. Montgomery. But every--
        The Chairman. In the bill, what would diminish the current
    flow of funds? What in the FHA bill--
        Mr. Montgomery. Because it has to be covered via the
    appropriation process.
        The Chairman. What has to be covered? The bill says, the
    FHA bill, that we increase revenues by raising the level of
    housing price you can go to and we take the capital off the
    HECMs. That would generate some additional revenue.
        It certainly does not affect any existing revenue. Does
    anything that is being contemplated--if we were not to pass
    either bill, you do not lose anything, do you?
        Mr. Montgomery. Sir, the point I was trying to make
    earlier--
        The Chairman. I understand the point, you are trying to
    evade.
        Mr. Montgomery. The appropriators--
        The Chairman. Excuse me, Commissioner.
        Mr. Montgomery. The HUD budget is those receipts, and that
    is the point I was trying to make earlier; there is no excess.
        The Chairman. In the first place, that is a fiction, when
    they do the appropriation. Secondly, the question is we are
    talking about generating additional revenues for the FHA.
        I really am disappointed that you evaded the question. I
    take it nothing we are doing would diminish your current flow
    of funds.
        Are you confident that if we were in fact to go ahead with
    these increased revenue sources for the FHA through taking a
    cap off home equity mortgages and raising the amount of
    mortgages you can insure, that the Administration would ask
    that all of that be credited to the FHA?
        Mr. Montgomery. Sir, I am sorry.
        The Chairman. No, I want an answer to that question.
        Mr. Montgomery. I think I understand your question now,
    sir, I am sorry. Yes. We have--
        The Chairman. Answer the question I just asked you. If we
    were to generate the new revenues that are in the bill and did
    not assign them to the housing trust fund, are you confident
    the Administration would ask they go to the FHA?
        Mr. Montgomery. Sir, we hold back what we need.
        The Chairman. Excuse me, Commissioner. You understand that
    is not an answer to the question I asked. You really do.
        Mr. Montgomery. No, I do not understand, sir. I am trying
    to answer your question here. Sir, my point is--
        The Chairman. No, you are not. This is disappointing to me.
        Mr. Montgomery. We hold back what we need to cover claims
    which vary year-to-year, the gift downpayment programs I
    referenced earlier.
        The Chairman. I am talking about HUD. You know you are
    switching ground. You said HUD gets credit--you keep switching
    between the FHA and HUD in general, for purposes of
    obfuscation, which disappoints me.
        You said that HUD gets credit for the additional revenues
    that the FHA generates, correct? You did say that?
        Mr. Montgomery. Yes.
        The Chairman. The legislation we are talking about doing
    would generate additional revenues for the FHA. You are aware
    of that?
        Mr. Montgomery. Yes. The point is that--
        The Chairman. No.
        Mr. Montgomery. They would have to go back to the HUD
    budget from the appropriators which is what they have always
    done.
        The Chairman. Yes. I have asked you this question which you
    pretend not to understand. Are you confident that if we were to
    generate these additional revenues by taking the cap off the
    home equity mortgages and raising the amount of mortgage you
    could insure, that the Administration would ask that HUD get
    the credit for that in its appropriation and that the
    appropriated amounts for HUD would increase?
        Mr. Montgomery. Sir, that, I do not know.
        The Chairman. You know the answer is no.
        Mr. Montgomery. I would say give it to the HOME program.
        The Chairman. I did not ask you what you would say. Again,
    you know you are deliberately not answering. I did not ask you
    what you would say. The point is this, what we have are
    constraints on the HUD budget and the notion that if we were to
    increase money for the FHA, that would be additive to the HUD
    budget, is not true. I believe you know it is not true. I am
    disappointed that you would even pretend that it might be the
    case.
        The HUD budget is constrained by other factors. In fact, it
    is the Administration that is trying to raise the FHA fees. We
    have legislation to prevent you from raising them. The
    legislation we are talking about says that if any of these
    revenue diversions were to jeopardize the FHA solvency and
    require more money from the appropriators, it would not go into
    effect.
        Your notion is that we would get a total additional for
    HUD, that HUD would get the credit for any additional FHA
    money, and that simply has not been the case. During your
    tenure, has that been the case? Has the HUD budget overall
    increased proportionately? Have FHA surpluses gone up?
        Mr. Montgomery. About $1.6 billion this year from the
    previous year.
        The Chairman. Did it go up proportionately because of the
    FHA getting more funds?
        Mr. Montgomery. The FHA is self-sufficient, sir.
        The Chairman. Commissioner, please, stop that. You said
    that the HUD gets--
        Mr. Montgomery. We are in the hole right now, sir. We are
    in the hole. I do not have any money.
        The Chairman. In the past, throughout your tenure, has the
    FHA been losing money?
        Mr. Montgomery. Sir, as you know, we are trying to fix FHA
    from being in the hole but it was not too long ago, including
    under Secretary Cisneros, FHA was generating a lot of money.
    That is not the case today. As we all know, and this committee
    was great in helping us get the FHA bill through--
        The Chairman. I agree with that. The point is there has
    been no correlation between the FHA surplus or deficit and the
    HUD budget. Here is your argument, that we should not take
    additional revenues we generate for the FHA and put them into
    affordable housing because otherwise it would have gone to the
    HUD budget. I do not think anybody in the world believes that
    is true. I am disappointed to hear you say it.
        Mr. Montgomery. Sir, I am just looking at the budget we
    publish every year, and it clearly has a credit for our
    receipts under the HUD budget. I know what you are trying to
    say, sir. Looking at what it has on our budget books--
        The Chairman. You said the FHA has been losing money
    recently.
        Mr. Montgomery. I am sorry, sir?
        The Chairman. It has been losing money, correct?
        Mr. Montgomery. We will start losing money in about 2
    months, sir.
        The Chairman. You told me you are losing money now. You
    said you were in the hole.
        Mr. Montgomery. The die has been cast, that we are not
    producing--
        The Chairman. You just said--Commissioner, I have never
    been more disappointed in somebody's testimony than yours. The
    notion that the HUD budget goes up, that there is a causal link
    between increased FHA revenues--of course, as my colleagues
    point out, this Administration keeps trying to cut the budget.
    We have been able to stop some of that.
        The notion that the additional FHA money would translate
    into additional funding for HOME or CDBG, if that is the
    argument against this bill, I look forward to the debate.
        I now recognize the gentleman from Connecticut.
        Mr. Shays. Mr. Chairman, thank you for waking all of us up
    here. I was happy to let this go on, because frankly I did not
    hear a straightforward answer candidly.
        I would like not to use my time right now, since I just got
    here, and let other members who have been waiting longer go,
    and then I would like to ask some questions.
        Who is next, Mr. Chairman? I need to wake you up.
        The Chairman. Are you finished?
        Mr. Shays. I am not going to use my time now. I would like
    to wait and let members who have been here a while ask
    questions.
        The Chairman. I apologize. We will recognize the gentleman
    from North Carolina.
        Mr. Watt. Thank you, Mr. Chairman.
        Mr. Montgomery, let me approach this a slightly different
    way because in reading your testimony and hearing the exchange
    that has taken place, it seems to me that what you are saying
    is that HUD has a certain budget and if we make more money
    available, that money is not likely to be used for this
    purpose. It is just going to be used as a substitute.
        Is that what you are saying?
        Mr. Montgomery. That is what the appropriators do.
        Mr. Shays. Say ``yes.''
        Mr. Watt. If that is what you are saying.
        Mr. Montgomery. Yes.
        Mr. Watt. It seems to me that the logical consequence of
    what you are saying is under those circumstances what we are
    doing will not inure to the purpose that we intend for it to
    inure to because the money is coming to HUD and consequently
    the inappropriate place to send the money is to HUD because if
    you send it to HUD, there is going to be a substitution for
    what HUD is already doing.
        I am not wedded to sending this money to HUD. I think the
    trust fund could be set up someplace else and the money sent
    someplace else if you are concerned about this money being
    substituted for money that HUD is already getting.
        The question I want to ask is, since you do not seem to
    think HUD ought to get this money under these circumstances,
    who would be the appropriate alternative beneficiaries to
    administer the housing trust fund other than HUD, since under
    your analysis, HUD ought not be getting it because it will just
    be a substitute for what you are already doing?
        Mr. Montgomery. Sir, my point was that I think HUD should.
        Mr. Watt. I did not ask you what your point was. You have
    made your point. I am trying to make my point now.
        Mr. Montgomery. Yes, sir.
        Mr. Watt. My point is who would be the other alternative
    beneficiaries to administer the housing trust fund other than
    HUD? You have obviously eliminated HUD now as an appropriate
    beneficiary of the funds, under your analysis.
        Who would be the other appropriate beneficiaries to
    administer a housing trust fund since the official position of
    HUD seems to be that you do not want it over there because it
    will conflict with other things?
        What are the alternatives that we have as to where to send
    this money?
        Mr. Montgomery. Sir, actually, I did want HUD to keep the
    funds, as they do now. That was a point I made in my remarks,
    which you missed, sir.
        Mr. Watt. I missed those remarks. In the exchange you just
    had, it sounded to me like you were saying, do not send this
    money over here.
        Mr. Montgomery. No, sir.
        Mr. Watt. Because it will be used for the purposes we are
    already achieving. If you want to add to those purposes, you
    need to send it somewhere else.
        Let's assume that is what you were saying because I think
    everybody in the room heard those conflicting things that you
    were saying, what would be some of the alternative places to
    send the money other than HUD?
        Mr. Montgomery. In the hypothetical sense, sir?
        Mr. Watt. In the hypothetical sense.
        Mr. Montgomery. I think some States are doing some
    wonderful jobs with their housing trust funds.
        Mr. Watt. If we set up a mechanism that said States do not
    substitute this for what you are already doing, put it on top,
    which is what Mr. Frank says we were going to do for HUD, you
    think the States would be able to apply that standard better
    than HUD would be able to apply it?
        Mr. Montgomery. The States could decide they want to use it
    for their HOME funds.
        Mr. Watt. No.
        Mr. Montgomery. Hypothetically, sir.
        Mr. Watt. We would tell them no, you cannot do that.
        Mr. Montgomery. Hypothetically, as well. Thinking
    hypothetically.
        Mr. Watt. We were trying to tell you no, you cannot do it.
    You cannot substitute it for HOME funds either. You are saying
    that we can tell the States that, but we cannot tell HUD that?
        Mr. Montgomery. Sir, that would obviously be a decision for
    you, but back to my point, I think States, whether it augments
    their trust fund, again hypothetically, I think many States are
    set up to do that right now. Some of them are testifying here
    later today. I think they would tell you.
        Mr. Watt. I am sure they are going to say yes, send the
    money to us. HUD is about the only place I know of that says,
    do not send money over here because it might substitute for
    some money we already have, which is what you seem to be
    saying.
        Mr. Montgomery. No, we would take any extra money obviously
    that the appropriators would give us, but in the case that we
    offset our budget with my receipts, that money would have to
    come from somewhere else if I did not offset that budget. That
    was the point I was trying to make earlier, sir. Thank you.
        Mr. Watt. I do not understand what you are saying.
        The Chairman. I have been working on HUD budgets for 27
    years. It has never been the position of the appropriators that
    the amount appropriated to HUD would rise or fall according to
    FHA receipts. It is a bookkeeping matter whereby FHA receipts
    are entered into the general fund, but no one has ever
    suggested that the budget of HUD goes up or down in any way
    dependent on net receipts and losses from the FHA. I have been
    working on HUD budgets since coming here.
        The gentleman from Missouri.
        Mr. Clay. No questions.
        The Chairman. The gentleman from Texas.
        Mr. Green. Thank you, Mr. Chairman. Earlier, I did not
    thank the ranking member of the full committee and the ranking
    member of the subcommittee, so I thank them at this time.
        Mr. Montgomery, thank you for some of the things you have
    done to be of assistance to us in Texas, and I thank the
    Secretary also for some things he has done to be of assistance
    to us.
        Mr. Montgomery, currently, we have as you have indicated, a
    number of programs. Let me just quickly ask you, is there a
    trust fund for the HOME program?
        Mr. Montgomery. You mean is there currently a trust fund
    within the HOME program?
        Mr. Green. Yes, sir.
        Mr. Montgomery. It is out of my purview at HUD, but I do
    not believe there is a trust fund, per se.
        Mr. Green. I will take that to mean, ``no.''
        Mr. Montgomery. Yes, sir. Given my familiarity, because it
    is not under my purview at HUD.
        Mr. Green. Is there a trust fund for CDBG?
        Mr. Montgomery. Not that I am aware of, sir.
        Mr. Green. I will take that to mean, ``no.''
        Mr. Montgomery, let me ask you this. Are you in a position
    to know whether there is a trust fund for CDBG?
        Mr. Montgomery. It is not under my purview at HUD, but I am
    not aware that there is.
        Mr. Green. Are you in a position--you are a high official
    in HUD and you do not know whether there is a trust fund for
    CDBG? Mr. Montgomery, this is not necessary.
        Mr. Montgomery. I agree, sir.
        Mr. Green. You are putting yourself in an awkward position
    if you persist with this. You really are.
        Mr. Montgomery, what is your title?
        Mr. Montgomery. I am the Assistant Secretary for Housing at
    the U.S. Department of Housing and Urban Development.
        Mr. Green. Mr. Montgomery, is it not true that in your
    official capacity, you work not only in the Office of HUD but
    you work directly with the Secretary; is that true?
        Mr. Montgomery. Yes, sir, that is true.
        Mr. Green. Is it not true that most of the business of HUD
    comes through that office such that you are familiar with it?
        Mr. Montgomery. Are you saying in working with the
    Secretary?
        Mr. Green. Yes, sir.
        Mr. Montgomery. Yes, sir, like all Cabinet agencies.
        Mr. Green. Is CDBG a program that is administered by HUD?
        Mr. Montgomery. Yes, sir. I just do not administer it.
    Pardon my ignorance on it. I do not administer it.
        Mr. Green. I understand. Is it the case that you are not
    mindful of what is happening to the extent that a reasonable
    and prudent person should be? Would you not agree that a
    secretary in your position ought to know?
        Mr. Montgomery. Whether or not there is a trust fund?
        Mr. Green. Yes, for CDBG.
        Mr. Montgomery. If you are implying my lack of
    sophistication on the subject, sir, I am sorry.
        Mr. Green. I believe you know there is not one. Is there a
    trust fund for the Section 515 rental housing program?
        Mr. Montgomery. That is at the U.S. Department of
    Agriculture. I do not believe there is, sir.
        Mr. Green. Is there a trust fund for Section 811 for the
    disabled?
        Mr. Montgomery. Again, sir, no, there is not.
        Mr. Green. 202 for the elderly?
        Mr. Montgomery. No, there is not a trust fund.
        Mr. Green. The truth of the matter is this will be the very
    first national affordable housing trust fund that you are aware
    of, true?
        Mr. Montgomery. Yes, sir. That is true.
        Mr. Green. Mr. Montgomery, it would seem to me that people
    who want persons to have affordable housing, who want housing
    preserved, housing rehabilitated, and housing produced, would
    say that happy days are here. We finally have a trust fund for
    housing.
        It would just seem to me that people would want to have
    parades and roll out a red carpet, sound the trumpets, go tell
    it on high, that we finally have a trust fund for housing.
        It just makes so much sense that somebody ought to be
    appreciated for this. It really does. I marvel at how we demean
    what is about to become a monumental accomplishment for the
    least, the last, the lost, for persons who cannot afford even
    affordable housing. It really is a marvelous circumstance that
    we are witnessing. It really is.
        My final comment is this, Mr. Montgomery. I think that some
    of us do not appreciate a very basic premise that impacts all
    of us, and this is the premise. No one deserves a status in
    life to which he or she is born. I am going to repeat that. No
    one deserves the status in life to which he or she is born.
        We are here today in these environments because we have
    just been blessed. There are others who are not so fortunate.
    This fund, this trust fund, is there for them.
        I thank Mr. Frank, Ms. Waters, and all who have supported
    this. Prior to my coming, I understand something similar was
    introduced. They deserve expressions of great appreciation for
    what they have been trying to do.
        I thank you for your efforts. Mr. Chairman, I thank you,
    and I yield back the balance of my time.
        Mr. Montgomery. It is for the reasons that you have
    articulated, Congressman, that I am working very hard to
    improve FHA. I am working very hard to get more funds for 202
    and 811. It is why I publicly say we have a production problem
    in this country, developing affordable housing. I have said it
    in many cases, and I will continue to say it.
        Mr. Green. I want to reclaim my time. Have you worked to
    establish a trust fund?
        Mr. Montgomery. Sir, I am working hard to keep what HUD has
    or to use as an offset towards our budget. I am working very
    hard to get more funds in my realm within HUD.
        Mr. Green. Do you believe that a trust fund would benefit
    poor people in this country?
        Mr. Montgomery. Absolutely, sir.
        Mr. Green. Thank you.
        Mr. Montgomery. Absolutely.
        The Chairman. Mr. Montgomery, while I continue to be
    somewhat frustrated by our previous exchange, I do want to
    acknowledge that yes, in our dealings together, your efforts
    within the constraints that you have have been ones that we
    appreciate.
        We have a disagreement here, but I think it is reasonable
    to stipulate that it does not extend to other areas where we
    have been and will continue to be cooperative. I do acknowledge
    that what you said has been accurate about your efforts. I
    recognize that you are here as a representative of the
    Administration.
        At this point, I want to insert into the record an
    editorial from the New York Times dated July 3rd, endorsing
    this idea; the testimony submitted by Jonathan Reckford, who is
    chief executive officer for Habitat for Humanity in support of
    the trust fund; and the statement of the National Association
    of Home Builders in favor of this trust fund.
        I ask if there is no objection, that all these be made part
    of the record.
        The Chairman. We will now go to Mr. Cleaver.
        Mr. Cleaver. Thank you, Mr. Chairman.
        Mr. Montgomery, sing with me, ``Kum Ba Ya''. You do not
    want to hear me sing. Sorry.
        The Chairman. The gentleman from Missouri can meet with the
    recorder later to make sure that is accurately transcribed.
        [Laughter]
        Mr. Cleaver. Mr. Montgomery, in November, I will be
    speaking to the mayors in Seattle at their conference. One of
    the things that mayors are always concerned about is whether
    Washington listens to them; I know this from experience.
        One of the things that has occurred to me is whether or not
    you can reconcile HUD's position with the position of the U.S.
    Conference of Mayors, Republicans and Democrats, who are on the
    ground every day, who support this legislation.
        Is there a way that you can reconcile HUD's position with
    their position, also with the position of the NAACP, which has
    provided a statement that I would like to have entered into the
    record as well.
        The Chairman. Without objection, it will be made part of
    the record. The NAACP will also be testifying.
        Mr. Montgomery. I think, at last count, because of Sheila
    Crowley's great efforts, that you have 5,495 supporters. I
    think you have the 37 States who have housing trust funds
    supporting the legislation. Again, the goals of what they are
    trying to accomplish, I support. So I do not cover old ground,
    in the interest of time, I just reference my concerns relative
    to the funding.
        Mr. Cleaver. So you cannot reconcile HUD's position with
    the position of the mayors?
        Mr. Montgomery. I have not read their official statement,
    but I know--
        Mr. Cleaver. They support it.
        Mr. Montgomery. Yes, sir. I am aware of that.
        Mr. Cleaver. They are on the ground. They are there every
    day on the ground.
        Mr. Montgomery. I visited with them in Los Angeles last
    month, sir.
        Mr. Cleaver. Can you reconcile HUD's--what is it that the
    mayors see that you cannot see?
        Mr. Montgomery. Again, sir, not to cover old ground in the
    interest of time, just my concern with the funding and how it
    would impact our budget, sir.
        Mr. Cleaver. Thank you.
        Mr. Montgomery. That is plain and simple.
        Mr. Cleaver. You said if we set up this fund, it would
    duplicate other programs.
        Mr. Montgomery. Yes.
        Mr. Cleaver. If that is true, are we saying the programs
    that are already in existence are ineffective? There must be a
    declaration at the same time that these programs are
    ineffective or we would not see a rise in the number of the
    homeless, and there would be no push to try to establish a
    housing trust fund.
        If those programs are effective, why are mayors confused?
    Why are people around the country confused who deal with the
    issues related to the homeless?
        Are those programs effective that you are concerned about
    duplicating?
        Mr. Montgomery. The HOME program is a very effective tool,
    sir. Again, I do want to support one of the goals in particular
    that this fund would do, and that would increase the level of
    funds that go to families at 30 percent of AMFI and below,
    above what the HOME program does.
        If we can find sources for that within HUD, I would support
    that 100 percent. I do not want you to think I do not support a
    lot of what this fund does. Quite the contrary, I do.
        Mr. Cleaver. The point I am trying to make, and perhaps
    poorly, is that if there are existing programs that this fund
    is going to duplicate, and the people who deal with the issues
    regarding this fund all believe we need it, then maybe the
    programs we have in HUD are ineffective.
        Mr. Montgomery. Sir, I do not think you will hear from
    States that they think the HOME program is ineffective. I think
    you would probably hear that they need more money.
        Mr. Cleaver. You disagree or agree with them declaring that
    they need more money?
        Mr. Montgomery. No, sir. I do not disagree that the States
    would need more money at all.
        Mr. Cleaver. You do support this bill?
        Mr. Montgomery. I support increasing affordable housing to
    the degree that it does not impact my budget, which
    unfortunately it does.
        Mr. Cleaver. I am going to sing ``Kum Ba Ya'' again.
        Mr. Montgomery. I am not trying to be difficult, sir, I
    promise you. I really am not.
        Mr. Cleaver. I give up.
        [Laughter]
        The Chairman. I remind people and again I want to say the
    gentlewoman from California and I have had a good working
    relationship with the Commissioner as he said, and we believe
    that he has been a diligent and compassionate supporter. There
    are constraints as to what he can and cannot say. Things do
    tend, as we said earlier with the rules, the rules do tend to
    walk into policy positions, things happen.
        The gentleman from Connecticut.
        Mr. Shays. Thank you very much. Mr. Montgomery, Chairman
    Frank asked you a question to which he did not think you were
    responsive.
        I am curious to know what your answer was going to be even
    though it was not responsive. I am just curious to know what
    you wanted to put on the record and then from that, I may ask
    another question.
        First off, tell me this. Tell me what you thought he asked
    you and then tell me what you wanted to say. I will not
    interrupt you.
        Mr. Montgomery. As I recall, he asked me do we have any
    excess receipts, do those go to the Treasury, do they go to
    HUD? I do not want to get into how the appropriating process
    works. I do know that when we have a budget that we submit, it
    is very clear they are offsetting the budget or the FHA
    receipts that go to pay other HUD programs. In the world of the
    appropriators, those receipts go to HUD and they are spoken
    for.
        Mr. Shays. I understand what you wanted to put on the
    record. He was not asking you what appropriators want to do.
        What I want to do is put it in my own words because I think
    you had a question that followed, he was trying to help you
    out, and you were not allowing him to help you out.
        Does this get to the issue of opportunity costs, that there
    is only so much money that HUD is going to be allowed to have,
    and therefore, you were saying if you give us more money here,
    appropriators are going to take it away somewhere else? Is that
    what you were basically trying to say?
        Mr. Montgomery. Historically, yes, sir. I think that is the
    case.
        Mr. Shays. In my judgment, that is something you should put
    on the record. It is our judgment as to what they will do. It
    is very clear to me that appropriators, whether they are
    Republicans or Democrats, if they see a department get more
    money in one place, they may take it out somewhere else because
    there is only so much they are going to allow HUD to have or
    any other department.
        I think it is fair to say with a Democratic Congress, you
    are going to see more money going to HUD. This, to me, seems
    like an opportunity for you to say you know, we would love this
    money, so long as you do not take it away from us somewhere
    else. That is kind of the way I would have answered it because
    the way you answered, it gives the impression that you do not
    want extra money.
        Mr. Montgomery. I am sorry if I left the committee with
    that impression. It was not my intent.
        Mr. Shays. That is the impression that you kind of left. I
    will give you a good example. This Congress decided, rightfully
    so, that it needed to put more money into the Department of
    State, but that in the foreign affairs budget, it wanted to put
    more money.
        What it did was it took a program dealing with Africa and
    the AIDS program and took some of that money out of the NIH
    budget. It looked like we were putting more into the NIH budget
    but we took $200 million out and gave it to a very worthy
    program that used to be in another department.
        We were struck by the fact that it looked like we were
    adding more to NIH and we were adding some more but not as much
    in reality because we were taking some of that and putting it
    into another program unrelated to the NIH budget.
        If your answer is that you feel this adds more money to
    HUD, it does, does it not?
        Mr. Montgomery. I am sorry. Are you talking about the trust
    fund?
        Mr. Shays. Yes. The housing trust fund gives more money to
    housing, correct? So long as Congress does not take it away
    somewhere else, is that not correct?
        Mr. Montgomery. I am a little foggy on what you are saying,
    sir. For purposes of time, I will agree with what you are
    saying. I am sorry.
        Mr. Shays. Tell me why you are foggy.
        Mr. Montgomery. Any receipts that I have beyond what I need
    to pay claims and things of that sort, again, we give back to
    the Treasury. Those funds are then credited toward HUD's
    budget, I should say. If that did not happen, which is the case
    for next year, the funds have to come from somewhere.
        Mr. Shays. If in fact that is correct, then you have the
    opportunity to say to Congress that we will only get extra
    money if you make sure that we are credited and they do not
    debit our account more as a result.
        Mr. Montgomery. Yes, sir, if I follow your line of
    reasoning, yes, sir.
        Mr. Shays. I am not saying it as well as I would like to,
    so I do understand a little of your confusion.
        The bottom line is that there is a solution to the problem
    that you may fear and that the best way, it seems to me, for
    you to deal with it is to say that so long as these things
    happen, we will be okay, but if Congress takes the money for
    other reasons, and does not let us realize this extra money for
    housing, it will just be something we do not benefit from.
        At any rate, that was my best attempt.
        Mr. Montgomery. Thank you, sir.
        The Chairman. By the way, less than half of the money in
    the trust fund comes from the FHA. The largest share comes from
    the GSEs and no one can argue that would go to HUD under any
    circumstances. That goes to the shareholders of Fannie Mae and
    Freddie Mac.
        Mr. Shays. Do you agree with that?
        Mr. Montgomery. I was not referencing--
        Mr. Shays. Do you agree with what Mr. Frank just said?
        Mr. Montgomery. If you could repeat it, sir. I am sorry.
        The Chairman. As we have the trust fund bill now, there are
    two revenue sources, much more than half would come from the
    GSEs, and no one could argue that any of that money would
    otherwise go to HUD. That is money from Fannie Mae and Freddie
    Mac's shareholders.
        Mr. Montgomery. I do not believe that is envisioned in the
    statutes, so I would agree. I do want to point out--
        The Chairman. I am sorry. You do not believe what?
        Mr. Montgomery. Were you talking about any excess from the
    GSEs that would go to HUD? I am not aware of that, sir.
        The Chairman. I said that in the trust fund bill, the
    larger share of the revenues that would go to the trust fund
    come from Fannie Mae and Freddie Mac.
        Mr. Montgomery. Yes, sir. That is absolutely correct.
        The Chairman. No one has argued that in the absence of the
    trust fund bill, any of that would go to HUD.
        Mr. Montgomery. Yes, sir. That is correct. I am sorry I
    misunderstood your question.
        The Chairman. Thank you. The gentleman from Oklahoma.
        Mr. Boren. Thank you, Mr. Chairman. It is a real pleasure
    to watch my colleague, Mr. Green, from Texas and another friend
    from Texas here--from an Oklahoma perspective, it is always
    nice to watch two Texans go after each other. We do that in
    October at the Cotton Bowl and it is a lot of fun to watch.
        I am going to have to step out before our next panel but I
    do want to thank Secretary Cisneros for being here. He is a
    great family friend and a great public servant to San Antonio,
    the State of Texas, and our country. Thank you for being here.
        I have one question. I am going to be very brief. Going
    back to the actual legislation and not going into the budgets
    and everything else, the paperwork that I have before me, the
    prohibited uses of the funds that would be in this trust fund
    in H.R. 2895 would be the bill includes prohibitions against
    any funds being used for administrative costs or expenses,
    political activities, advocacy lobbying, of course, I think
    that is a good thing.
        What we have seen with NAHASDA and what we have seen with
    some of the other pieces of housing legislation since I have
    been on this committee for just a short time, the impact on
    Native Americans.
        I represent eastern Oklahoma, 25 counties. We have 39
    federally recognized tribes. Tribes are not all alike. The
    Chickasaw Nation is different from the Choctaw Nation,
    different from the Miami tribe, different from the Wyandotte's.
    The Choctaw's and Chickasaw's have done very well from gaming.
    Some of the tribes in the northeastern part of my district have
    not done so well. Some do not have sources of funds from
    gaming. Some do. Smaller tribes like the Quapaws and other
    tribes, they have a very limited budget.
        My question to you is, this provision within the trust fund
    or any other pieces of legislation that deal with housing, do
    you think it is appropriate for any of these trust funds or any
    other funding mechanisms to go towards maybe smaller tribes so
    they can actually administer these funds? We have a real debt
    of home ownership in places like rural Oklahoma.
        Mr. Montgomery. I do know there is a set aside within H.R.
    2895 for tribes and other areas. I am not sure of the breakdown
    by the size of the tribes. I am sorry. I just do not know what
    that number would be.
        Mr. Boren. The funding is great. We are talking about very
    rural areas and maybe within a tribe, there might be one or two
    people who can carry out these programs. The tribe might not
    have the necessary funding so they can carry these programs
    out.
        Do you think it would be within the bounds of legislation--
    not just this piece of legislation, which I am very supportive
    of the chairman on--any other legislation, do you think it
    would be appropriate for funding to go to smaller tribes, to
    hire one or two people to administer housing programs? Let's
    just take it generally.
        Mr. Montgomery. Sir, in concept, I agree with what you are
    saying. Again, I am just not that familiar with that portion of
    the bill and the breakdown. I am sorry. I am not that familiar.
    In concept, I do agree with what you are saying.
        Mr. Boren. In the interest of time, I am going to yield
    back to the chairman. Thank you so much. Again, I thank all my
    Texas friends.
        The Chairman. The gentleman has yielded back. The gentleman
    from Connecticut has been very helpful in keeping me focused
    today--very unusual.
        Thank you, Commissioner. I know you have been here as a
    proxy for the Administration. We understand that. You have done
    your job as you were supposed to.
        We will call forward the next panel.
        Mr. Montgomery. Thank you, sir.
        The Chairman. Please be seated. The next panel consists of:
    the Honorable Henry Cisneros, former Mayor of San Antonio and
    Secretary of the Department of Housing and Urban Development;
    Sheila Crowley, president of the National Low Income Housing
    Coalition--the single most vigorous force behind this fund; the
    Honorable William Euille, Mayor of Alexandria, our neighbor,
    who is here on behalf of the U.S. Conference of Mayors--I guess
    the conference budget was tight, they did not want to pay a lot
    of airfare, so they gave him his Metro card and here he is--we
    are delighted to have the Mayor of our important neighbor here;
    Lisa Alberghini, whom I will note is the director of the
    Planning Office for Urban Affairs of the Archdiocese of Boston
    and the Archdiocese of Boston has been a great builder of
    housing, affordable housing, for many years--for anybody who
    decided they needed something called a ``faith based program,''
    I have been working with the Archdiocese and Office of Urban
    Affairs with Ms. Alberghini and her predecessor; and finally,
    JoAnne Poole, who is the owner of Poole Realty, and she is here
    importantly on behalf of one of our strong advocates for a good
    housing program, the National Association of Realtors.
        We will begin with Secretary Cisneros.

       STATEMENT OF HENRY CISNEROS, EXECUTIVE CHAIRMAN, CITYVIEW

        Mr. Cisneros. Mr. Chairman, thank you very much. Members of
    the committee, thank you for giving me the opportunity to come
    in and support H.R. 2895, the National Affordable Housing Trust
    Fund Act of 2007.
        Thank you, more importantly, for your leadership to
    organize the content of this bill, and your legislative skills
    to manage the strongest chance ever to create a national
    housing trust fund.
        I would like to acknowledge the long term advocacy and
    solid creative work done by many, many outside organizations,
    including the National Low Income Housing Coalition, the Center
    for Community Change, the Housing Trust Fund Project, the
    NAACP, and many others.
        I will use my time to make four succinct points. First, the
    national housing trust fund is important because it is such a
    focused tool. Across the entire spectrum of housing, starting
    with housing shelters and supportive housing and subsidized
    rentals and public housing, market rentals, entry level home
    ownership and move up housing across that entire continuum, the
    greatest need, the greatest suffering is among families,
    individuals, and households below 30 percent of median income,
    the extremely-low-income families of our country.
        To address their needs, to produce housing that touches the
    entire first part of this continuum, from homelessness through
    these various first steps, we need units, production, and
    housing stock, that low-income people can access.
        We need units so that homeless people can access the
    Housing First concept. We have to have housing units for them
    to be able to move out of homelessness.
        We need supportive housing with services. We need low-
    income rental stock. I am in the home ownership business
    personally, but I acknowledge the absolute most pressing need
    before the country in housing is the lowest income rental
    stock.
        We need housing that works with other programs, such as
    public housing, and we need housing that works in conjunction
    with market housing, so that flexibility is possible to take
    something like this fund and match it to market housing, 20
    percent or 25 percent of a market development.
        There is no Federal program today targeted precisely in
    this way or on this scale. We need this focused new production
    program. Point one.
        Point two. We can see from local housing trust funds that
    the concept works. There are over 600 local or State housing
    trust funds today. In big cities, such as New York City, the
    effort is underway to try to create or preserve 4,300 units
    with a trust fund. In Chicago, the goal is 5,500 rental
    subsidized units, not over 30 percent of median income, to meet
    the city-wide goal of producing affordable housing.
        In smaller communities, many that are in high-cost areas,
    such as Boulder, Colorado, the explicit goal of the City is to
    use a housing trust fund to make sure that 10 percent of the
    housing stock is permanently affordable. In Boulder, that
    amounts to 2,700 units of which 2,100 would be rental, and 600
    would be ownership.
        In another high-cost area, Mountain View, California, they
    are using the housing trust fund of Santa Clara County there
    where Catholic Charities just produced an award winning single
    room occupancy facility for people earning between $15,000 and
    $30,000 a year. That is 20 percent of average median income,
    using the flexibility that only a housing trust fund makes
    possible.
        At the State level, Washington State is considered as one
    of the most effective State housing trust funds. They have over
    the years amassed $500 million and leveraged $2 billion in
    32,000 units, mostly rental.
        The point is that housing trust funds work. The corollary
    point is that at the local level, they are symptomatic of why a
    national fund is needed. State and local housing trust funds
    exist because the stress of housing affordability is so great
    that existing programs cannot meet the need. There is a crisis.
        It is also true that they are patched together with chewing
    gum and baling wire in many places. Real estate transfer taxes,
    document reporting fees, linkage fees, unclaimed property
    funds, the need is great, the revenue base is inadequate, and
    the scale is not adequate.
        A national trust fund is needed.
        Third point quickly. H.R. 2895 incorporates the best
    elements of what we have learned in recent years from housing
    programs, the need for rental production, to focus on the very-
    low-income, economic integration, proximate to economic
    opportunities and transit, incorporation of green development
    ideas, State, rural, and Native American housing, the
    opportunity for faith-based institutions to work, the
    prohibitions on administrative costs and travel and political
    activities, the matching provisions that are incentivizing to
    local governments, the local discretion that unleashes
    creativity as we have seen from nonprofit and private best
    practice designs, and the use in conjunction with market
    projects, integrating low-income units. This is a great idea
    and this fund uniquely will make that possible.
        Finally, the fourth point is you identify revenues in H.R.
    2895 from new sources, Fannie Mae, Freddie Mac, and the FHA, in
    such a way as not to cannibalize other programs, and in such a
    way as not to exacerbate the Federal fiscal challenge.
    Therefore, it can generate and merits bipartisan support.
        I will close by simply saying that in the last years I have
    collaborated with my predecessor, a Republican HUD Secretary,
    Jack Kemp, in a number of studies and books. In our last
    project, we concluded about the housing trust fund, the
    following:
        ``We recognize the need for a source of capital for the
    production, preservation and rehabilitation of housing
    affordable to low-income households. We, therefore, recommend
    that the Administration and Congress establish a national
    housing trust fund for this purpose. Specifically, trust funds
    should be used to support the production, preservation and
    rehabilitation of 1.5 million affordable housing units over the
    next 10 years.'' A bipartisan statement, Mr. Chairman, my
    predecessor, Jack Kemp and I, together acknowledging the
    importance of a national bipartisan effort.
        We were able to talk about it. You thankfully are doing
    something about it. To answer one of the points that the
    Congresswoman asked earlier about what this will look like in
    10 years, those who participate in this and support it will
    have been responsible and should be justifiably proud in 10
    years of a major new productive and successful housing
    initiative.
        Thank you.
        [The prepared statement of Mr. Cisneros can be found on
    page 80 of the appendix.]
        The Chairman. Thank you, Mr. Secretary.
        Ms. Crowley?

      STATEMENT OF SHEILA CROWLEY, PRESIDENT, NATIONAL LOW INCOME
                           HOUSING COALITION

        Ms. Crowley. Thank you, Chairman Frank. It is a wonderful
    day that we are here today and having this opportunity to
    testify about a national housing trust fund, and it is a great
    honor to be on this panel with many fine people, but I
    especially want to thank our friend, Secretary Cisneros, for
    coming and making such an eloquent statement.
        The establishment of a national housing trust fund with
    dedicated sources of revenue for the production and
    preservation of affordable housing for people with the most
    serious housing problems has been the top priority of the
    National Low Income Housing Coalition since 2000, and in 2001,
    we joined with many other organizations to form the National
    Housing Trust Fund Campaign that is now over 5,600
    organizations strong.
        As Ms. Waters noted earlier today, we are observing the
    20th anniversary of the passage of the McKinney-Vento Homeless
    Assistance Act, an emergency response to the rapid growth of
    homelessness in the United States in the 1980's.
        Before coming to Washington, I worked at the community
    level for 20 years. I remember when homelessness was relatively
    rare, and I remember when homelessness accelerated in the
    1980's.
        I know that homelessness grew as the supply of low-cost
    housing diminished, and as the cost of rental housing
    increased, and as the support from the Federal Government began
    to wane.
        I know we have no hope of ending or preventing homelessness
    in the United States until we make a serious investment in
    housing that the lowest income people can afford, and that is
    what the national housing trust fund does.
        It is easy to understand the persistence of contemporary
    homelessness when we look at the mismatch between housing units
    and numbers of people. There are 9 million extremely-low-income
    renter households, and there are only 6.2 million rental units
    they can afford, if you use the standard of 30 percent of
    income for housing. Thus, we have an absolute shortage of 2.8
    million rental units for this income population nationwide. It
    is the only income group for whom there is an absolute
    shortage.
        If my poster could go up, that would be really great
    because you could see it quite graphically. This is the only
    group where we actually have a shortage. Who are extremely-low-
    income households?
        The Chairman. That is the group in the red?
        Ms. Crowley. The group in the red; yes. Below the line. Who
    are extremely-low-income households? In Washington, D.C., they
    are families with a total income of $27,000 a year or less. In
    Los Angeles, it is $16,860 a year or less. These are people who
    earn their living in the low-wage workforce. They are child
    care providers, nursing home aides, hotel housekeepers, office
    cleaners, retail clerks, and receptionists.
        Extremely-low-income households are also those who are
    elderly and disabled whose income is limited to Federal SSI
    payments. The Federal SSI benefit level in 2007 for an
    individual is $7,476 a year.
        What happens to real people under the circumstances of
    scarcity for a need as basic as housing? The main thing that
    happens is that they end up paying way too much of their income
    for their housing; 71 percent of extremely-low-income renters
    spend more than half of their income for their housing.
        Those who have the fewest coping skills and have the
    weakest social networks are the ones that are at higher risk of
    becoming homeless under these conditions of scarcity.
        Simply put, this bill makes capital resources available to
    developers who are willing and able to build and operate
    housing that extremely-low-income families can afford. There is
    no current Federal production housing program that is
    specifically targeted to this population.
        The trust fund dollars will not be used as the sole source
    of capital for any project. Rather, they will add enough to
    bring down the cost for a percentage of units in any given
    project such that they become affordable to the extremely-low-
    income households.
        The core intent of this bill is that the funds will be used
    for rental housing, but the bill fully supports using resources
    for home ownership. We understand that getting extremely-low-
    income households into home ownership is a challenge and in
    most cases may not be in their best financial interest.
        We strongly believe that the best home ownership program
    for people in the low wage workforce is to increase the supply
    of rental housing they can afford so that they have a much
    greater chance of becoming successful homeowners in the future
    after being stable and successful renters who can develop a
    good credit history and might even have the opportunity to save
    some money for a downpayment.
        The goal of the national housing trust fund and H.R. 2895
    is to produce and preserve 1.5 million homes over 10 years.
    This is indeed a very ambitious goal.
        The bill provides dedicated sources of funding. CBO
    estimates that the combined value of these would be no more
    than $1 billion a year, which is quite substantial, but to
    reach our goal, we are going to have to find other dedicated
    sources of revenue and the bill does allow for that, and we
    think there is any number of creative ways we can do that.
        Mr. Montgomery suggested one a few minutes ago.
        Let me close by saying this is one of the most important
    bills that this committee will take up in the 110th Congress
    and to my mind, the most important. We want to work with you to
    make it the best bill possible.
        I want to offer our heartfelt thanks to Chairman Frank and
    Mr. Shays and Mr. Miller and Chairwoman Waters and the other
    original co-sponsors of H.R. 2895 who once again have
    demonstrated that the very best low-income housing legislation
    is always bipartisan.
        Thank you.
        [The prepared statement of Ms. Crowley can be found on page
    87 of the appendix.]
        The Chairman. Thank you, Ms. Crowley.
        Mr. Mayor, who is the successor, not immediate, of one of
    our colleagues, I believe, Mr. Moran. We are glad to have you
    here.

    STATEMENT OF WILLIAM D. EUILLE, MAYOR, ALEXANDRIA, VIRGINIA, ON
                BEHALF OF THE U.S. CONFERENCE OF MAYORS

        Mr. Euille. Thank you, Mr. Chairman, and members of the
    committee. I am William D. Euille, the Mayor of the City of
    Alexandria, Virginia, a product of public housing, and a 15-
    year advocate for affordable housing. I am pleased to be here
    this morning to testify on behalf of the U.S. Conference of
    Mayors, the National Association of Counties, the National
    Community Development Association, the National Association of
    Local Housing Finance Agencies, and the National Association of
    County, Community and Economic Development.
        We strongly support H.R. 2895, the National Affordable
    Housing Trust Fund, and we appreciate this initiative and trust
    me, there will be parades and fireworks.
        We urge the Committee to adopt our recommendations and
    improve the legislation, and the U.S. House of Representatives
    to pass it.
        Over the last several years, mayors have called on Congress
    to adopt a national housing trust fund. In 2002, Boston Mayor
    Thomas Menino, who was then president of the Conference of
    Mayors, asked the Administration and Congress to create a
    national housing trust fund to meet the needs of low-income
    individuals and families through production and preservation of
    rental housing and that cities receive a direct allocation of
    funds.
        This policy statement was developed following a national
    housing forum convened by Mayor Menino and attended by most of
    the organizations supporting H.R. 2895.
        The Conference of Mayors also adopted a policy in 2003
    calling for passage of a national housing trust fund, and most
    recently, in Los Angeles, in June of this year, the
    organization adopted a policy reaffirming its support of a
    national housing trust fund, primarily, but not exclusively,
    designed to meet the needs of the very-low-income, i.e., 30
    percent of the AMFI or below, through the preservation and
    production of housing.
        The policy also asks that 60 percent of the national
    housing trust fund be allocated to localities. Similar policy
    statements have been adopted by the organizations that I
    testify on behalf of today.
        Local government interested in support for the national
    housing trust fund is based on several reasons. Mr. Chairman,
    some of these are exactly the same as those you state in
    purposes for the legislation. Local officials know firsthand
    that there is a lack of affordable housing for low-income
    families.
        Just yesterday, I met with a group of junior and senior
    high school students. One of the questions they asked me is,
    Mr. Mayor, where are we going to live once we graduate from
    high school? Of all the issues we are all concerned with as
    Americans, next to the war in Iraq, the next thing that folks
    are most concerned about is where they are going to live.
        The U.S. Conference of Mayors annual hunger and
    homelessness survey has repeatedly listed the shortage of
    affordable housing as the major cause of homelessness in
    America.
        We believe that you have chosen a laudable goal to
    construct, rehabilitate and preserve at least 1.5 million
    affordable housing units over the next 10 years.
        Just in the Washington metropolitan area, it is estimated
    that we need to build and preserve 50,000 units a year just to
    meet the needs. We can do this locally by redevelopment/
    development, higher density, and we can re-prioritize our
    efforts on home rentals.
        There are other studies and data which will be cited by
    others during this hearing which will leave no doubt that more
    affordable housing is needed. Most can cite the staggering
    number of unmet housing needs in our Nation, the difficulty
    that people with jobs have in finding affordable housing, and
    the fact that millions of low-income families must pay more
    than half of their income for housing.
        All of these offer substantial proof of the need for a
    national housing trust fund. This is about hope and prosperity
    for all. This is the American dream.
        As you know, Mr. Chairman, many localities have created
    their own housing trust fund. There is a great deal of
    experience across the Nation in cities and counties, as
    expressed by Secretary Cisneros.
        With that, first of all, I want to thank the committee for
    allowing us to be here this afternoon in support of H.R. 2895,
    the National Housing Trust Fund, and we, the Mayors of America,
    look forward to working with you for its passage.
        Thank you.
        [The prepared statement of Mayor Euille can be found on
    page 96 of the appendix.]
        The Chairman. Thank you, Mr. Mayor.
        Next is someone with whom I have been working, working with
    the cooperation of the Archdiocese to convert a church or use
    of a church into affordable housing, Lisa Alberghini, who is
    executive director of the Planning Office for Urban Affairs,
    which is affiliated with the Boston Catholic Archdiocese.
        Ms. Alberghini?

    STATEMENT OF LISA B. ALBERGHINI, DIRECTOR, PLANNING OFFICE FOR
                  URBAN AFFAIRS, ARCHDIOCESE OF BOSTON

        Ms. Alberghini. Chairman Frank, and Ranking Member Bachus,
    thank you for the opportunity to testify on this important
    legislation that will bring hope and homes to so many Americans
    across the country.
        Thank you especially to Chairman Frank for your tremendous
    leadership, and to the Low Income Housing Coalition and all of
    the advocates who have worked so hard on this bill.
        I am Lisa Alberghini, executive director of the Planning
    Office for Urban Affairs. We are a self-sustaining housing and
    social justice ministry affiliated with the Archdiocese of
    Boston.
        I am here to support this legislation on behalf of our
    office, the Archdiocese of Boston, and the people we serve who
    are in dire need of affordable housing.
        H.R. 2895 is also strongly supported by the U.S. Conference
    of Catholic Bishops, Catholic Charities U.S.A., and a wide
    range of faith-based organizations of many faith traditions
    across this country.
        The Planning Office is a private nonprofit developer
    created by the Archdiocese in 1968 to work for housing justice
    on behalf of the Church. Since that time, we have developed
    more than 2,300 units of affordable and mixed-income housing
    with debt and equity financing of nearly $300 million.
        We serve working families, the homeless, frail elders,
    veterans, people living with HIV/AIDS, and disabled
    individuals, by creating mixed-income communities, where all
    residents are treated equally, and the poor are not isolated in
    poverty.
        The need for affordable housing is great and well-
    documented. Rather than focusing on more statistics, I would
    like to get right to giving you our perspective about how this
    legislation can help and why it is so important.
        The Planning Office is a developer and a social justice
    ministry. We are directly involved as a practitioner in
    building affordable and mixed-income housing and have extensive
    experience using a wide array of financing programs that
    currently exist for this purpose. We know what works and what
    does not work.
        H.R. 2895 is a thoughtful piece of legislation that will
    benefit people in need across America, while using an efficient
    and industry proven funding method to supplement private sector
    activity.
        The proposed trust fund is efficient, meaningful, targeted,
    and based on a proven model. It is not creating a new untested
    tool. It has been purposely structured to use a system that we
    know works, and it will support public/private sector
    collaboration, while at the same time addressing a need that
    the private sector cannot possibly respond to on its own.
        In our view, this Act is the best of both worlds. It
    provides a tool but not a handout, and that is the difference
    between charity and justice. Justice relies upon empowering
    people. This legislation gives us that opportunity which is why
    there is significant bipartisan support for this Act.
        I would like to briefly describe a few of our developments
    and how the trust fund could help.
        Rollins Square is a 184 unit development we built in the
    south end of Boston, one of the City's highest income areas. It
    is very much the type of housing that Representative McCarthy
    noted as creating vibrant communities that we need more of.
        It includes 20 percent low-income units for families
    earning 30 percent of median income which is a key policy goal
    of the trust fund, 40 percent moderate-income units for first-
    time home buyers, and 40 percent market rate units.
        All of these units are fully integrated throughout the
    entire property, which means there are formerly homeless people
    living next to first-time home buyers, living next to people
    who paid more than $1 million for their condominiums, for their
    homes, and they are all living literally side-by-side as
    neighbors who share a common community.
        Our office has provided a lot of information on the work
    that we have done to the committee staff today, but if you have
    a minute to look at anything, pull out the least glamorous
    piece in the Rollins' package, which is just a one-page list of
    the profiles of the 37 formerly homeless families who now call
    Rollins Square their home, where they can get on with the
    business of living their lives.
        How could the trust fund have helped? Rollins Square was a
    $67 million deal that required 14 separate sources of funds and
    had problems closing the last financial gap, delaying the
    project for 18 months, which only drove up the costs more and
    created a cyclical problem.
        It is precisely the type of development that could have
    been funded through this Act, particularly given its targeting.
        If there were more Federal funds available, it would have
    meant a quicker development process and ultimately more public
    benefit.
        Our St. John of God & St. Jean Baptiste developments, also
    in Massachusetts, are very similar. They could have used this
    trust fund enormously.
        Finally, the Saint Aidan, which is a 59 unit mixed-income
    development located in Brookline, Massachusetts--in Brookline,
    by the way, the median family house price for a single family
    home last year was $1 million. With prices like that, what
    happens is that the teachers, firefighters, and librarians have
    to enter town in the morning and leave town at night; the
    people who serve you can no longer afford to live in the
    communities with you.
        Saint Aidan's, though, will be 60 percent affordable, and
    in this case we are fortunate enough to have had Chairman Frank
    as our Representative, with the benefit of his leadership to
    solve a number of problems with the project and for that, we,
    and the Archdiocese, are enormously grateful.
        The trust fund could have shortened a very long 7 years
    that it has taken us to get that development out of the ground,
    by giving us additional resources.
        Some might think that since these got built, why do we need
    the trust fund? The process took far too long, was far too
    inefficient, and offered far less public benefit than could
    have occurred with the trust fund in place.
        Most importantly, these developments represent the 1.5
    million homes that did not get built and would be if this Act
    were passed.
        A couple of last comments on the big picture here. Why is
    this so important to us as a country? More than 25 years ago,
    the Catholic Bishops of the United States issued a pastoral
    letter called, ``The Right to a Decent Home.'' It described
    decent housing as a human right and said its provision involved
    public responsibility and the partnership between private
    enterprise and government.
        This fund would create that and provide that
    unquestionably. There is a very broad coalition of people with
    common and diverse interests coming together in support of this
    legislation. We come from different faiths, different beliefs,
    and different backgrounds, because housing our neighbors in
    need is a moral imperative and concern for decency and fairness
    is a value we all share.
        We all know that having a decent home affects every aspect
    of our lives, and not having one devastates even the strongest
    among us.
        We would like to see this passed to help address the issues
    facing the 37 million people in America who are living in
    poverty, and as Father Snyder, the president of Catholic
    Charities U.S.A., told us, and I mentioned in Washington a
    couple of weeks ago, poverty remains our Nation's most serious
    political blind spot and a threat to the common good and future
    of our Nation; it is a human-made disaster, not a force of
    nature beyond our control, and we can make choices that change
    that. With this legislation, we will.
        Thank you, and we urge your support.
        [The prepared statement of Ms. Alberghini can be found on
    page 74 of the appendix.]
        The Chairman. Thank you. Finally, JoAnne Poole,
    representing the National Association of Realtors. Please, Ms.
    Poole.

       STATEMENT OF JOANNE POOLE, BROKER/OWNER, POOLE REALTY, ON
             BEHALF OF THE NATIONAL ASSOCIATION OF REALTORS

        Ms. Poole. Good afternoon, Chairman Frank, and members of
    the committee. I have been a Realtor for 21 years, and I am
    currently serving as part of the National Association of
    Realtors.
        We often refer to home ownership as the American dream, but
    I believe having a decent home in a suitable living environment
    should not be a dream. It is a basic need and it should be
    available to everyone.
        Every day, my fellow Realtors and I see working Americans
    like you and me who simply cannot afford a decent place to
    live. Less than half of our Nation's minority families own a
    home today. That is 25 percentage points below the national
    average.
        With the rapid rise in home prices in recent years, the so-
    called home ownership gap is likely to grow as more and more
    people are finding home ownership out of reach for them.
        Those who do manage to purchase a home face additional
    struggles. Studies show that minorities are 30 percent more
    likely to receive a higher priced loan than white borrowers,
    even after accounting for risk.
        Of course, housing affordability is not just a problem for
    minorities. People of all backgrounds are finding it harder and
    harder than ever to pay for housing.
        According to the Joint Center for Housing Studies at
    Harvard University, more than one in seven U.S. households
    spend more than half their income on housing.
        Finding affordable rental housing is another growing
    problem. In the 10 years between 1993 and 2003, two million
    affordable housing units were lost. HUD estimated in 2005 that
    they were only 77 units affordable and available for every 100
    low-income renters.
        That means nearly a quarter of low-income families do not
    have access to decent rental housing. Whether you look at the
    facts or consider personal experiences, the conclusion is the
    same. Affordable housing is no longer merely a problem, it is a
    crisis, and we must all do our part to address it.
        In 2002, the National Association of Realtors created our
    own housing opportunity program. Through this program, we
    provide local and State associations and individual Realtors
    with the resources they need to increase housing opportunities
    in their communities.
        The program also provides grants to State and local
    associations to help them establish their own local housing
    opportunity programs.
        During the past 5 years, our State and local Realtor
    associations have developed numerous programs and affordable
    housing funds that have helped meet the housing needs of
    thousands more low- and moderate-income families across the
    nation.
        These programs have had a tremendous impact on our
    communities and our lives. Sadly, they are not enough to
    address the growing problem.
        We need help and we need it now. Today, Realtors are
    pleased to lend our support to H.R. 2895. We believe this
    legislation will provide significant help in the form of
    additional funds to meet America's growing demand for
    affordable housing.
        We strongly support the division of funds outlined in the
    bill with 60 percent of monies going to cities and counties and
    the remaining 40 percent to States.
        We applaud you for allocating 25 percent of the funds for
    families who make up 80 percent of our median income, families
    who currently receive no Federal housing assistance.
        America's Realtors stand ready to work with you on this
    bill and on all efforts to make home ownership and affordable
    housing a reality for even more Americans in the years ahead.
        As John Adams once said, if your actions inspire others to
    dream more, learn more, do more, become more, you are a leader.
        Thank you again for helping to lead this important effort
    and for inspiring all of us to do more.
        Thank you very much for the opportunity.
        [The prepared statement of Ms. Poole can be found on page
    119 of the appendix.]
        The Chairman. Thank you, Ms. Poole. I have found in the
    ability to work with the Realtors, that these are people who
    are not just trying to make money off housing, but they have a
    genuine understanding of the importance of increasing housing
    resources, and I appreciate it.
        Let me say to this panel and the next panel, it may look
    kind of routine, there are not a lot of people here, but we are
    building a record here that is very important. Frankly, this is
    a ``no news is good news.'' This is rapidly becoming less
    controversial than it used to be, but it is because of this
    combined support. This is very useful.
        Let me make explicit what many have referred to almost
    explicitly, the importance of a trust fund. This really will go
    to Commissioner Montgomery. Even to a very good level of annual
    appropriations, we are talking about construction.
        You simply cannot expect, and we are dealing here with the
    private sector, the units that are built here are not going to
    be built by any Government agency. These are going to be built
    by the private sector in various forms of cooperation.
        You cannot expect the private sector to build, and we
    cannot expect the banks to lend, on an annual appropriations
    basis. If you are talking about getting housing constructed,
    you need to have a multi-year process.
        That is why a trust fund is appropriate here when it is not
    for other aspects of Federal programs. It is like the highway
    trust fund. Construction requires there to be a certainty that
    the flow of funds will be there. People who have to borrow
    money. People who have to do plans.
        Even if it were a case of taking appropriations that would
    otherwise be available for an annual appropriations process, it
    would be worthwhile. It is not, I want to repeat, in the 27
    years that I have been on this committee and focused on
    housing, no appropriator of either party has ever suggested to
    me that the appropriations go up or down depending on the
    receipts of the FHA. That simply has not been the case.
        In any case, there is a separate argument for doing it as a
    trust fund.
        Secondly, I want to say to the Mayor and also to some of
    the others, I appreciate your taking this serious enough to
    make some specific proposals for changes. We are going to be
    looking at these. We are not locked into this.
        I do make this plea. We have seen this happen, many of us.
    Let's make sure that our agreement, in principle, transcends
    any specific differences we have about how to do it.
        Having said that, I welcome these kind of suggestions and
    proposals, and they come from people who are supportive, and
    the Mayors are obviously very much in the forefront, and we
    will be looking at that.
        The last point I want to make is to underline what Lisa
    Alberghini said, and let me make this very explicit again. You
    said, Ms. Alberghini, a couple of times, ``to the public
    benefit.'' What you mean is too few affordable units, correct?
        Ms. Alberghini. That is right, Congressman.
        The Chairman. You get into a Catch-22. In the Town of
    Brookline, which I represent, where some of my friends and I
    have a disagreement over this, we now have people criticizing
    this project because they say there are not enough units that
    are affordable, and there are fewer affordable units than there
    should be or there would have been if we could have done it
    quicker.
        That is because they first succeeded in delaying it by
    various tactics, and delay in the housing business add costs.
        This is really people now complaining about the results of
    their own actions. To the extent that we have a trust fund,
    again, this ties into what I said, if you have a trust fund,
    you have a certainty of a flow of funds. You are not in the
    uncertainty period. You can do your construction planning
    thoughtfully. Stability of funds is very important for these
    private sector people.
        That is the point. It will help us maximize these units.
        I should add that we are also working closely with the
    chairman of the Ways and Means Committee and this committee on
    efforts so that the tax supported housing bonds and low-income
    housing tax credit programs will be fully interoperable with
    this and other programs, so we really think leveraging is very
    high.
        I am very appreciative of what you said, and of getting
    this across. We look forward to working with everybody.
        I would say to Secretary Cisneros, when you next talk to
    Mr. Kemp, tell him we are thinking of him.
        Mr. Mayor?
        Mr. Euille. Mr. Chairman, if I may add, in Alexandria, we
    have had a housing trust fund since 1993. Primarily, it was
    funded by developer voluntary contributions and then a few
    years ago, we dedicated one cent of our annual real estate tax
    rate to creating and continuing to fund our affordable housing
    trust fund.
        More recently, again through a public/private partnership,
    because Alexandria is so dense, but yet we have a critical need
    to meet our affordable housing objectives, we have the
    opportunity to build for the first time in more than 30 years a
    new fire station in our City, a new development area, and one
    of the solutions or compromise with the community in terms of
    building this four bay fire station was the need to ensure that
    we provided affordable housing and workforce housing.
        For the first time, we believe we are the first community
    in the Nation, we are building a new fire station that will
    have 64 units of public housing and workforce housing built on
    top of the fire station in a very growing community.
        We are very proud of that fact, but again, we would not be
    able to do that without the affordable housing trust fund.
        The Chairman. In my first 2 years of graduate school, I
    lived across the street in Cambridge, Massachusetts, from a
    fire station. You do learn to sleep through. Give them hope.
        [Laughter]
        The Chairman. The gentleman from Connecticut.
        Mr. Shays. I will yield to Mr. Green for a second.
        Mr. Green. Thank you. I want to thank all of the panel
    members for coming. Mr. Chairman, I have been blessed to be
    appointed to my first conference committee, and it is about to
    start. I must leave. No disrespect to anyone. I really wanted
    to stay for the entire time. God bless you. I yield back.
        Mr. Shays. Thank you. First, let me say, Mr. Cisneros, I
    loved working with you when I chaired a committee that oversaw
    housing, and I thank you for your service to the Government and
    particularly as Secretary of HUD, you were very willing to work
    with both sides of the aisle, and it was a pleasure to work
    with you, and it is a pleasure to have all of you here.
        Mayor, I remember the Titans. I have to tell you it is one
    of the great movies. If 60 percent of it were true, it is a
    great story. I have a feeling that more than 60 percent--you
    graduated a few years before, right? You graduated when?
        [Laughter]
        Mr. Shays. Let me just ask you, Mayor, to what extent do
    you think the impediment to housing is the result of local
    barriers such as zoning development fees, permits, and so on?
        Clearly, that plays a role in housing. There is an
    initiative by this Secretary to try to deal with that.
        One, do you think it is a problem, and two, are you trying
    to play a role in dealing with that?
        Mr. Euille. Yes, sir. It is indeed a problem. Through
    housing advocacy on the part of faith-based, nonprofits and the
    businesses and citizens coming together, there has to be a
    constant outreach and education initiative underway.
        Once citizens understand that when we talk about meeting
    affordable housing goals and objectives we are not just talking
    about the poorest of the poor, but we are talking about pretty
    much all of us. Many of us are just a couple of paychecks away
    from being homeless.
        As a result, when we show them and can prove to them that
    we are talking about the people we need to have in our
    communities to provide the day to day services and so forth, it
    is wake up, now I understand.
        Once you educate the community to accept the fact that
    there is a crisis and we all need to be working on this
    together, then secondly, local governments through their
    planning and zoning and code requirements are willing to loosen
    up so we can again think out of the box a little bit more,
    utilize best practices, like I mentioned with this one
    particular project with the fire station, and we can do some of
    these things to meet these objectives.
        Mr. Shays. Thank you. Secretary Cisneros, tell me how did
    you react to the testimony that was provided by Mr. Montgomery?
    What were your reactions, as you listened?
        Mr. Cisneros. I felt sorry for the man, for starters. I
    have been in that position.
        Mr. Shays. Because since Barney was speaking, you could not
    understand what Barney was saying?
        The Chairman. No, because he could.
        Mr. Shays. I know never to engage Barney in any dialogue
    because you always regret it, and why I did it just then, I do
    not understand.
        [Laughter]
        Mr. Cisneros. Clearly, this is mostly about coming up with
    sources of revenue that provide a new entity, which has new
    flexibilities, which is targeted in a way no other Federal
    program is today towards production for very-low-income
    persons.
        With respect to the Assistant Secretary's points, the fact
    that the money has been identified from the GSEs is very
    important. We know it is available. We know it is not onerous.
    We know they can afford it. We know they need to be doing
    something like this. The money is not going anywhere else.
        With respect to the FHA funds, because of what has been
    identified, again, new money, not presently allocated for any
    other purpose, I think this is just a great way to fund a
    housing trust fund which the country needs and has needed for a
    long time.
        Mr. Shays. To the others on the panel, I am just going to
    read something, just so you hear the argument against, it can
    be a pretty boring hearing since I am a co-sponsor of the bill,
    we like it, but let me have you respond to the concerns:
        ``The establishment of a new housing trust fund would
    require the creation of a huge new Federal bureaucracy and
    would not be an effective means to promote home ownership for
    low-income families.
        The creation of such a trust fund would require HUD to
    devise and administer a new set of rules and regulations,
    taking resources and time away from its other established
    affordable housing programs such as HOME, Section 8 vouchers
    and CDBG.
        It is important that the proposal in H.R. 2895 is a model
    to a great degree on HUD's HOME investment partnership program.
    The trust fund is so similar in its requirements, i.e., rents,
    income targeting, affordability periods, etc., to the HOME
    program, that it prompts the question why is it necessary to
    create a new Federal bureaucracy to administer essentially the
    same program.''
        Maybe one last paragraph: ``Instead of establishing a
    national housing trust fund, one approach would be to fine tune
    the existing HOME program to include additional requirements
    for deeper targeting of the HOME program that could be used to
    address the lower income families.''
        Those of you whom I have not asked, maybe you could
    respond.
        Mr. Cisneros. Let me just, very quickly speak to those
    points, very, very quickly. First, it does not have to be a big
    bureaucracy. This can be done very leanly. The precedent exists
    at the State and local trust funds. A trust fund is by
    definition a different entity than a standard Federal
    bureaucracy and it can be done using very entrepreneurial kind
    of private sector models and done very straightforwardly.
        The HOME program is not deep enough. It does not get to the
    30 percent in the way it is operated in most communities. It is
    not operative in that way.
        A trust fund further adds greater flexibilities than the
    HOME fund, just tweaking the HOME program is not breaking new
    ground the way a trust fund can do. That would be my response
    to those points.
        Mr. Shays. With your indulgence, Mr. Chairman.
        The Chairman. Yes.
        Ms. Alberghini. From the perspective of a developer, I
    think they are very different things. The HOME program has an
    enormous level of complication in its regulations, and one of
    the things we appreciate Chairman Frank working on is trying to
    help simplify and streamline some of these regulations, but
    they are very different even with the deeper targeting in the
    HOME program, it is not nearly as flexible as the trust fund.
        The trust fund can be used for project-based rental
    assistance, for example. It can be used for a variety of
    different things that the HOME funds currently are not
    structured in the same way to use.
        So from a developer's perspective, I think that it is more
    flexible, even with deeper targeting in the HOME program, there
    is such a level of complication with that at this point that I
    think we are better off starting fresh with a proven tool in a
    trust fund with the flexibility this would provide.
        Ms. Crowley. Actually, I was at the table when the proposal
    got developed. And I can tell you we actually did not model it
    on the HOME program. To the extent that it does resemble it,
    that is coincidental.
        But the thing that is different that is essential, which is
    what Mr. Frank pointed out, is that a trust fund has dedicated
    sources of revenue, and that the State and local trust funds
    that this actually does more closely resemble, the ones that
    have been the most successful and the ones that have been
    sustainable and the ones that have been able to really make a
    huge difference, are the ones that have dedicated sources of
    revenue.
        And generally, that is where folks have moved to. So we
    have just heard Mayor Euille describe what they did eventually
    to get to what it is that they are putting in there. And so
    that is why you create this and then you figure out what you
    are going to do with it.
        There are two objectives: One, getting more production
    dollars for ELI households; and two, having dedicated sources
    of revenue that we can rely on over time.
        Mr. Shays. Thank you very much. Thank you, Mr. Chairman.
        The Chairman. Thank you. Let me just point out a couple of
    things. There is one other model that we have been using. It
    has existed at the Federal Home Loan Banks created by this
    committee, and that is the Affordable Housing Fund of the Home
    Loan Banks. I don't think anybody thinks that is a big
    bureaucracy.
        But this, in particular, this is the most anti-bureaucratic
    program we have ever had. This creates no new bureaucracy, and
    it will use HUD to distribute funds, the existing HUD, to
    existing trust funds. So the bureaucracy argument is totally
    off the point. This is simply going to be a pass-through.
        The gentlewoman from New York.
        Mrs. McCarthy. Thank you, Mr. Frank. And thank you again
    for the testimony of all the witnesses. Now I am going to
    apologize up-front; most of us try to allot 3 to 4 hours for a
    hearing, but at 1 p.m., I am supposed to be somewhere else.
        I have to say hearing from you, and I did read a lot of the
    testimony, and I was happy to see that you built an affordable
    housing area or rentals, anyhow, in a wealthy area because I
    will be very honest. Nassau County is an extremely unique area
    in many ways. It is probably one of the wealthiest communities
    in the country.
        And yet I have the poorest of the poor, and they are all
    segregated. And that is something that I would like to see
    change, only because of schooling. Where are my worst schools?
    They are in my underserved areas. And I would like to see that
    change over the years.
        But with all the affordable--that was the thing that we
    were trying to do on Long Island. We kept trying to sell
    everything as affordable housing. Of course, every community
    said no because they were looking at the old models and they
    didn't want that kind of housing in their community.
        So we started going with workforce and tried to explain, it
    is your daughter who just graduated and can't get a job. And I
    think that is the only way that I am going to be able to sell
    it to my mayors in my area, that we can bring in good housing
    for the new workforce who are coming out of the colleges, but
    yet take care of our people with disabilities, our poorest of
    the poor, and have a mixed community.
        With that being said, I tell my staff all the time, I know
    you can't afford to buy a home. Buy a condominium. At least it
    is a lower price. You build up equity. Is there housing that
    will have become condominiums so first-time home buyers,
    especially those who would be on the lower income would be able
    to actually afford that? Could they use the vouchers for that
    so that they would be building equity in the condominium to be
    able to buy a home in the future?
        I am just trying to think outside the box on where we are
    going in the future.
        Mr. Cisneros. My reading of the proposed legislation is
    that many different modes of many types of housing can be done.
    And to the extent that there will be some of this fund that
    could be used for home ownership, using it in a condominium
    structure makes more sense than single family detached homes.
    And then when matched to things like the use of vouchers for
    home ownership, the kind of thing you are suggesting is
    possible.
        What you are describing in Nassau is not that unique any
    more. Many, many areas of the country have this mixture of
    upper income and then working people who cannot afford to live
    there and who live in substandard or overcrowded conditions. We
    see this all over the country.
        One of the great things about this fund is that it will
    allow local solutions, people to come together with a project
    that mixes 25 percent very-low-income in a building in a
    community that has higher income. It speaks very wisely, I
    think, to issues like proximity, to economic opportunity, and
    income integration in projects. These are lessons we have
    learned from HOPE VI and other things in recent years, low-
    income tax credits, the way they are done.
        I think the beauty of this fund is it is going to allow for
    a lot of local innovation, a lot of local creation. Just as
    wise as people can be in designing good projects, this funding
    will make it possible to carry it out.
        Mrs. McCarthy. Just as the Secretary said, there is a lot
    of opportunity for innovation. The bill has a very specific
    statement about promoting the development of two- to four-unit
    owner-occupied housing. And so that is my notion of the sort of
    perfect elements, is if you develop a duplex that is owned by a
    very-low-income person who is developing equity, but that has
    an apartment in it that can be rented by an extremely-low-
    income person.
        So that person has an affordable unit and eventually could
    be able to then save up to buy the house across the street, so
    that you are maximizing all of those things, and that we are
    getting out away from the homogenized notions of what
    neighborhoods should be, and that we are creating diverse forms
    of housing in neighborhoods so that people at all stages of the
    life cycle and different incomes can all live there together.
        Ms. Alberghini. Representative, one other note. The funds
    can clearly be used for downpayment and closing cost assistance
    for moderate-income first-time home buyers also. And one of the
    concerns that you mentioned in some of your earlier comments
    about the targeting, as a supporter of the bill still, the
    deepness of the targeting, and the targeting for the 30 percent
    of median income folks, that can happen. And you want it to
    happen within the context of these mixed-income communities
    that you describe as what makes a vibrant, genuine town.
        I think the key to eliminating the concentrations of
    poverty that you see, and creating a vibrant community, is to
    be able to take the funds that are targeted at those very-low-
    income households making 30 percent of median or less, and use
    those in developments that also have the first-time home buyers
    and the market rate condominiums, and use the pieces of the
    tool that are allowed, given its flexibility in the Trust Fund
    Act, for the moderate-income component as well--the downpayment
    assistance, construction costs.
        I mean, it is all the same development, and you can use
    that money for construction costs, for acquisition, for
    downpayment assistance, and for closing cost assistance. So I
    think there is a lot of attention still in the bill to helping
    that moderate-income group, but it does it in a way that you
    can integrate it with the very-low-income as well.
        Mrs. McCarthy. Thank you. And with that, I apologize to the
    third panel. As Chairman Frank has said, we all care about this
    issue, and even when we are not here, we have been working on
    it.
        The Chairman. The gentlewoman is right. Unlike some
    hearings, I must say not this one, at which I have been present
    in person, but not in spirit.
        The gentleman from Minnesota.
        Mr. Ellison. Mr. Chairman, thank you and all the original
    cosponsors. I think this is fabulous, and I am so honored to be
    here with this distinguished panel.
        Yesterday I introduced a bill to try to address predatory
    lending. But if it ever gets passed, or if any version of it
    does, it will help people going forward. What about the people
    who are already in crisis? Do you think this legislation could
    help prevent foreclosure and maybe help bail people out who are
    right there in the midst of losing their home?
        Ms. Crowley. The bill is very specifically dedicated to
    capital funds for construction, and so it is a production bill.
    There are some provisions for providing operating assistance,
    but I don't envision it as something that could prevent
    foreclosure for somebody who is in foreclosure now.
        Mr. Cisneros. I think that is right. And I would simply say
    that my admonition or counsel would be not to try to do
    everything with this trust fund. It is focused on production of
    units that presently are not being produced. I think that is
    its strength. And there will be other means to address the
    foreclosure issues and the predatory lending and the subprime
    issues.
        Mr. Ellison. Well, when you talk about preservation of
    housing, do you think that that might be--would that strain the
    definition of preservation too much to say that foreclosure
    prevention might be a way to help preserve housing? Because, of
    course, we have been talking about construction, preservation,
    rehabilitation.
        Mr. Mayor?
        Mr. Euille. I was just going to add, that maybe--you could
    perhaps stretch it, the preservation part of the legislation,
    to include what your concerns are. But I would add that having
    a National Housing Trust Fund, again, that can help supplement
    what we do on a State and local level will afford an
    opportunity for localities then to use their own tax general
    revenue dollars to help meet the needs of those who are being
    affected or impacted by predatory lending schemes and/or
    foreclosure.
        So it has a lot of benefits. But perhaps this piece of
    legislation will not directly address those needs, but
    certainly afford an opportunity for localities to then utilize
    some of their own dollars.
        Mr. Ellison. As we are trying to construct, preserve, and
    rehabilitate new housing, and I am so fully in favor of that,
    how does that important and noble goal square with the record
    losses of housing units we are seeing, given the foreclosure
    crisis? How do they fit together?
        I mean it seems like at one point people are losing their
    homes, on the one hand. I mean, in my own town of Minneapolis,
    there are certain neighborhoods where we have 50 percent
    foreclosure rates in certain low-income neighborhoods. Is it
    possible we could be building them on one hand and people will
    be losing them on the other?
        Mr. Cisneros. Sure. They do absolutely fit together.
        Mr. Ellison. Could you talk about that?
        Mr. Cisneros. One has to think about the big picture. And
    different programs have different purposes.
        Mr. Ellison. Right.
        Mr. Cisneros. So this particular fund isn't the answer on
    the foreclosure question. But one in making comprehensive
    national or local housing policy needs to think about
    sustainability in the home, sustainable home ownership.
        Mr. Ellison. Right.
        Mr. Cisneros. And the foreclosure problem, the subprime
    issue, obviously goes to that. So steps will have to be taken
    to help people at the local level.
        Mr. Ellison. Sure.
        Mr. Cisneros. And the GSEs, and the regulators, and perhaps
    the Congress and HUD to step in and help people to be able to
    stay in their homes.
        Mr. Ellison. Well, thank you, Mr. Secretary. I think it is
    right that if anything, it will free up dollars that can be
    used from other sources to address that. So that is important.
        One of the things that concerns me a lot is how poor
    children do in school. And it seems like if they don't have a
    stable housing situation, and they are having to move
    constantly, then they are in a new school district and they
    find themselves trying to catch up. Is that one of the
    important residual effects of trying to address this low-income
    housing crisis?
        Mr. Cisneros. There is very solid scientific evidence that
    shows that children in stable housing do better, not just in
    school but psychologically and in other ways. There is actual
    medical evidence that shows health conditions improve with the
    decency and stability and safety of housing. Overcrowding,
    substandard conditions, unsafe housing, lead paint problems,
    all of those impact children.
        I think it was Sheila's group that just published or at
    least published another group's report that said that actually,
    among minorities, they cite the quality of their marriage is
    impacted first and foremost by the quality of housing, more
    than any other factor but how much disposable income you have.
    The stability of the family is impacted by the quality of the
    housing.
        Mr. Ellison. Well, if you are giving up 50 percent of your
    income in housing, that impacts your ability to--
        Mr. Cisneros. Afford anything else.
        The Chairman. If the gentleman would yield, let me just say
    he has been very prescient in this because on the next panel we
    do have Dr. Megan Sandel, who is an M.D., and a master of
    public health, who is specifically going to talk about the
    impact on children of homes as opposed to homelessness. So the
    gentleman has very correctly focused on a very important topic.
        Ms. Crowley. If I could just add one quick things about
    schools. You are absolutely right that the data all show that
    children whose families can't afford basic housing are in
    constant motion, and so they are moving from school to school,
    which means they get further and further behind.
        But it is not just the kids who are moving that are
    affected. It is the other kids in the classroom and the
    teachers because when you have a lot of churning in schools and
    you have new kids coming into the classroom mid-year, two or
    three times a year, the teachers have to double back to pick
    those kids up, which means the other kids are getting less
    attention.
        And it ultimately means that those schools, their test
    scores don't keep up. Their test scores go down, which means
    that higher-income people aren't going to go to that school. It
    all has a spiraling-down effect, so I think that it is
    important to understand the systematic impact beyond the
    individual child to the entire educational system. And there is
    a fair amount of research in the education literature that
    really gets at all of that.
        Mr. Ellison. Just one last question. If families are paying
    upwards of 50 percent of their income in housing, what happens
    to the retail sector in the neighborhoods in which they live? I
    mean, is there enough money to sustain furniture businesses in
    the neighborhood, or good decent grocery stores where there are
    good fresh foods? What happens to those neighborhoods where
    there is just sort of a drain on income because so much of it
    is going into housing?
        Mr. Cisneros. Unfortunately, there is a market for payday
    lenders, check cashers, and other people who prey on the
    stressed financial circumstances that develop when people have
    to pay that much for housing.
        Ms. Alberghini. I think that is another good reason also to
    try to create economic diversity in the residential communities
    because that only helps strengthen the retail sectors in the
    surrounding area. And so the notion of creating these mixed-
    income communities that can then support retail areas, and at
    the same time break down the concentrations of poverty, is the
    way to go.
        One last comment on your last point. I think that the
    schools issue is another reason to try to get homeless or
    formerly homeless people into permanent housing right away.
    Ultimately, we would have an objective to eliminate the shelter
    system, to be able to get them into permanent homes so they are
    not moving around. And that again is often something that can
    be accomplished in the mixed income model.
        Mr. Ellison. Let me thank all the panelists very much. I
    just really want to commend everyone. Thank you very much.
        The Chairman. And one final thing. I am reminded by staff,
    too, that the gentleman from California is going to be having
    some hearings on the reauthorization of the McKinney Act, and
    one in the subcommittee will be specifically on the impact of
    homelessness on children. So again, the gentleman from
    Minnesota has correctly pointed to an issue.
        I thank all the panelists for past work, present testimony,
    and most important, future work come September when this bill
    comes to the Floor.
        We will now call up the next panel with my deep gratitude
    for their patience. Again, my reminder that their persistence
    is going to help when this bill gets passed, and I very much
    appreciate them staying.
        I now have to request that we include in the record a
    letter from the mortgage bankers. And if I don't object, then
    there will be unanimous consent, and it will go in the record.
    So since I don't object, it goes in the record.
        I thank the panel. We have Mr. Dave Roberts, who is the
    chief executive officer and president of the Lutheran Homes
    Society; Barbara Thompson, a frequent collaborator with this
    committee, who is the executive director of the National
    Council of State Housing Agencies; another very familiar face
    to many of us, Hilary Shelton, who is the director of the
    Washington Bureau of the NAACP; the aforementioned Dr. Megan
    Sandel, who had previously been here for a forum arranged by
    the Speaker on children, and several of us were impressed at
    that time by the relevance of her testimony to the housing
    issue; and Mr. Joe Myer, a very important part of our
    coalition.
        We always want to remind people when we talk about housing,
    yes, the cities are important, but there are other issues. And
    I am very proud of the effect of the work this committee has
    done on rural housing, Native American housing, and other kinds
    of housing that are sometimes left out.
        So please, Mr. Roberts, we will begin with you. And I very
    much appreciate your forbearance and patience.

      STATEMENT OF DAVID I. ROBERTS, CHIEF EXECUTIVE OFFICER AND
                  PRESIDENT OF LUTHERAN HOMES SOCIETY

        Mr. Roberts. Thank you, Mr. Chairman, and members of the
    committee. I am David Roberts, president and CEO of Lutheran
    Homes Society of Southeast Michigan and Northwest Ohio. On
    behalf of Lutheran Services in America, Lutheran Services in
    America/Ohio, and Lutheran Homes Society, we would like to
    thank you for the opportunity to testify about the National
    Affordable Housing Trust Fund Act of 2007, H.R. 2895. We would
    also like to thank the committee for their interest in
    affordable housing.
        We strongly support passage of H.R. 2895. The passage of
    this bill would make a significant difference in the lives of
    those in need of affordable housing, those who have low incomes
    as a result of disability or loss of a spouse.
        I speak for Lutheran Homes Society (LHS), a 147-year-old
    agency that began serving in 1860, a year before the start of
    the Civil War. Since that time, LHS has served hundreds of
    thousands of youth and elderly in a variety of residential
    settings. In 2006, we provided a total of 773 individuals for
    our affordable housing ministry.
        I am currently president of LSA Ohio, which is a coalition
    of 17 agencies serving virtually every social need. Our
    agencies in Ohio provided over 1,700 units of affordable
    housing in 35 locations, and we have a waiting list of over
    1,200 people.
        These Ohio agencies are members of our national
    association, Lutheran Services of America (LSA). LSA is
    comprised of nearly 300 member agencies, delivering more than
    9.5 billion in services to six million people in the United
    States. LSA nationally provides over 16,000 units of affordable
    housing for low-income people.
        But honored members, this testimony and this legislation is
    not about LSA, LSA Ohio, or Lutheran Homes Society. It is about
    elders and families and people with disabilities who need a
    home, and your opportunity to give it to them through this
    legislation. Here are two examples of elderly persons whom LHS
    affordable housing has helped.
        Sister Agnes, aged 72, has an annual income of $4,535. She
    has no assets to her name. Her rental expense is $103 a month,
    and she was living in multi-family housing before coming to us.
    But because the rent was getting too high, Sister Agnes came to
    us. And she says that, ``living here has allowed me to help in
    my volunteer services.''
        Helen, aged 67, has an annual income of $1,357, and pays
    $34 a month in rent. She came to live at Windy Acres in New
    London, Ohio, because she had no contact with her family, was
    homeless, and was living in her car at that time.
        Lutheran Homes Society believes that the investment in and
    the development of affordable housing should be a partnership
    between government and the developer. As evidence of this
    commitment, Lutheran Homes Society, in our newest HUD 202
    project in Oregon, Ohio, is including our donation of land
    valued at $290,000. This fund would help with gap financing by
    creating a new funding source for capital development and
    improvement.
        I commend those who conceived of and wrote this legislation
    because it addresses the continuum of housing needs, which
    includes rental and home ownership. It is important to remember
    that not everyone fits in the same mold, and people have
    different needs. I believe that the National Affordable Housing
    Trust Fund would address that continuum.
        Today, LHS alone has over 500 people waiting for our
    affordable housing at our various sites. Additionally, we have
    an interest list for housing that is not yet built. Here is an
    example of someone who is waiting on that list.
        Catherine is an 81-year-old widow, and although she can
    take care of herself, she is unable to maintain her home and
    her yard. The older home that she lives in is in serious need
    of repair, and she lacks the funds to do so. Since the death of
    her husband, Catherine has depleted her savings and barely
    survives on her monthly income of $449, which is less her
    Medicare deduction.
        She struggles with the necessities of life, like food and
    prescription co-pays. Obviously, her low income prevents her
    from being able to afford market-rate housing. Catherine is a
    real person, and unfortunately, there are so many others out
    there just like her who do not have the means to increase their
    income. This legislation, if enacted, will help Catherine and
    those like her by giving her a home that they can afford. I
    believe that they will, like Sister Agnes, help others in need.
        I would like to thank the committee, and especially
    Chairman Frank, for your legislative efforts on behalf of these
    low-income people by supporting H.R. 2895. Thank you again for
    this opportunity to speak with you and to bring to you these
    real examples of real people and the thousands of others who
    need affordable housing.
        [The prepared statement of Mr. Roberts can be found on page
    126 of the appendix.]
        The Chairman. Thank you, Mr. Roberts.
        Ms. Thompson?

      STATEMENT OF BARBARA THOMPSON, EXECUTIVE DIRECTOR, NATIONAL
                   COUNCIL OF STATE HOUSING AGENCIES

        Ms. Thompson. Thank you, Chairman Frank, for the
    opportunity to testify today on behalf of the National Council
    of State Housing Agencies (NCSHA) in support of the Affordable
    Housing Trust Fund Act of 2007.
        NCSHA has long advocated for new, flexible, State-
    administered affordable housing production resources to
    leverage those States now administer, like the Low Income
    Housing Tax Credit, to reach even lower income families than
    those resources can reach on their own.
        NCSHA represents the Housing Finance Agencies (HFAs) of the
    50 States, the District of Columbia, Puerto Rico, and the U.S.
    Virgin Islands. HFAs allocate the Low Income Housing Tax
    Credit. They issue private activity bonds, administer home
    funds, operate Section 8 vouchers, and many of their own State
    funds and credits to support affordable housing production.
        NCSHA is very grateful to you, Mr. Frank, for your
    commitment to establishing new, reliable, dedicated sources of
    Federal support for affordable housing. We also appreciate your
    recognition of the interdependence of Federal housing programs
    and the importance of facilitating their use together.
        We applaud your unprecedented effort to reach across
    jurisdictional lines to Ways & Means Committee Chairman Rangel
    to work with him to remove barriers to the effect combination
    of taxed base housing programs like the housing credit and HUD
    programs.
        NCSHA strongly supports the chairman's interest in
    concentrating trust fund resources on the housing needs of
    extremely-low-income families. States are increasingly
    challenged to meet the needs of these families with available
    resources.
        And as you are acutely aware, Mr. Chairman, those
    resources--the credits, HOME, and other resources that are
    often combined to reach our lowest income families, must be
    combined to reach our lowest income families--are increasingly
    scarce.
        To bring the full force of scarce housing trust funds and
    all funds to bear on these urgent housing programs, we do offer
    four general suggestions for the committee's consideration:
        First, we suggest you allocate housing trust funds through
    the States as they can most effectively and efficiently
    leverage them with the housing credit and other production
    resources they administer in amounts sufficient to make a
    difference, and direct these resources to the greatest relative
    needs within their jurisdictions.
        Second, we suggest that you eliminate overly complex and
    unnecessary rules that will limit State flexibility, will be
    barriers to the combination of other trust funds with other
    housing resources, and add time and therefore cost to the
    development and compliance process.
        Third, we suggest to the committee that you make the match
    requirement sufficiently flexible that it does not deny
    jurisdictions funding they want and need by, for example,
    limiting it to 25 percent, as the HOME program requires, and
    giving States equal credit for investment of Federal and non-
    Federal resources in trust properties and programs.
        And finally, and very importantly, Mr. Chairman we suggest
    this committee and Congress create a source of long-term
    operating support for rental properties housing extremely-low-
    income families. This is the largest barrier to their
    development, and short-term operating subsidies such as those
    permitted under the trust legislation will not overcome this
    barrier.
        Rents that are affordable to extremely-low-income families
    and families who are well below 30 percent of area median
    income simply will not be sufficient to support the continuing
    operation over the long term of these properties.
        Thank you, Mr. Chairman, for the opportunity to share our
    views. NCSHA and the Nation's State HFAs stand with you and
    look forward to working with you to ensure that the trust fund
    lives up to its potential.
        [The prepared statement of Ms. Thompson can be found on
    page 146 of the appendix.]
        The Chairman. Thank you, Ms. Thompson.
        Mr. Shelton?

     STATEMENT OF HILARY O. SHELTON, DIRECTOR, WASHINGTON BUREAU,
       NATIONAL ASSOCIATION FOR THE ADVANCEMENT OF COLORED PEOPLE

        Mr. Shelton. Good afternoon, Mr. Chairman. My name is
    Hilary Shelton, and I am here on behalf of the NAACP, our
    Nation's oldest and largest and most widely recognized
    grassroots-based civil rights organization. I serve as director
    of the NAACP's Washington Bureau, our public policy and Federal
    legislative advocacy arm.
        I am here because the guarantee of safe, secure, and
    affordable housing for all Americans has long been the
    cornerstone of the NAACP's legislative policy agenda. While we
    continue to struggle against housing discrimination, Americans
    are also finding it increasingly difficult to obtain affordable
    housing in a safe and secure community that allows us to raise
    our families on the modest income that so many hard-working
    Americans take home.
        This is especially true for low-income Americans and racial
    and ethnic minorities, and so our struggle continues. Before I
    talk about that, however, I would like to first thank
    Congressman Frank, you, sir, and Congresswoman Waters and the
    other members of this committee and this Congress who have
    worked so hard and for so long to address the critical housing
    shortage that is facing too many low-income people. I would
    also like to thank our partners at the National Low Income
    Housing Coalition and others who have worked diligently on
    behalf of the National Affordable Housing Trust Fund.
        The NAACP strongly supports H.R. 2895, legislation to
    establish a national housing trust fund. For close to half of
    all American families, owning an affordable home, or even
    finding a safe, decent rental unit is financially unattainable.
    And although to many who may appear to be of common sense, it
    bears stating here that a safe, secure, and affordable home,
    whether it be owned or rented, is key to a stable family life,
    which in turn can only benefit communities.
        Safe, secure, and affordable housing leads to, among other
    benefits, lower health care costs. Children who live in
    substandard housing are more likely to suffer from debilitating
    health conditions, including asthma and lead poisoning.
        But sadly, finding a safe and affordable home is becoming
    increasingly difficult for many Americans, and is proving to be
    especially hard for extremely-low-income Americans.
    Unfortunately, a disproportionate number of these people are
    African Americans and other racial and ethnic minorities.
        Currently only 46 percent of African Americans own their
    own homes, compared to more than 70 percent of white Americans.
    Perhaps more troubling than that statistic, however, is the
    disparate number of African Americans who spend too much of
    their income, which is already at the low end of the wage
    scale, on housing and utilities.
        The most current numbers we have indicate that 23 percent
    of African Americans fall into the extremely-low-income
    category. These men, women, children, and families have severe
    housing needs. In other words, they spend more than 50 percent
    of their income of housing and utilities.
        In summary, half of all African Americans live in
    unaffordable, inadequate, and/or crowded housing. But of
    course, this is not only a problem for African Americans.
    Seventy-one percent of Hispanic Americans who fall into the
    extremely-low-income category have severe housing needs, and 66
    percent of extremely-low-income Caucasians pay more than 50
    percent of their income to ensure they have a roof over their
    heads. All these numbers add up to one alarming fact: Too many
    Americans of all races and ethnic backgrounds are too often
    forced to choose between shelter over their heads or food on
    their tables.
        If these numbers do not convince you of the clear need for
    a National Affordable Housing Trust Fund as established in this
    bill, let me also tell you that the situation is getting worse.
    In 2003, the U.S. Department of Housing and Urban Development
    estimated that there was a deficit of two million extremely-
    low-income rental units. In 2005, that deficit had grown to
    four million.
        In 2003, HUD estimated that there were 44 affordable rental
    units available for every 100 extremely-low-income families.
    That number dropped to 40 units available in 2005, and the
    number continues to worsen.
        Unfortunately, the number of extremely-low-income
    households continues to grow as the number of affordable rental
    units decreases. As a matter of fact, of the 5.8 million black
    households reporting housing problems in 2003, 4.9 million
    cited housing affordability as their biggest problem.
        It is because of this growing need that the NAACP strongly
    supports the establishment of a National Affordable Housing
    Trust Fund, and especially one that targets the needs of
    extremely-low-income Americans. I would remind you that we are
    talking about men and women who usually work at or near the
    minimum wage, or those who are on Social Security. These are
    the people who most need our help, and unfortunately are often
    the last to receive it.
        Under H.R. 2895, we would establish Federal housing funds
    to be used to meet the nationwide goal of producing,
    rehabilitating, and preserving at least 1.5 million units of
    affordable housing over the next 10 years. It would be based on
    more than 270 State and local trust funds across the Nation
    that have already produced hundreds of thousands of units.
        Furthermore, as a direct result of H.R. 2895, approximately
    180,000 much-needed jobs will be created to help produce,
    rehabilitate, and preserve this new housing. That is about $5
    billion in wage creation which will grow about 1.7 million
    residual jobs.
        So, in the eyes of the NAACP, this bill is not only much-
    needed, it is a great idea. The NAACP is thus pleased to
    strongly support H.R. 2895, and I would once again like to
    thank all the Members of Congress who have worked so hard to
    bring us this far. The NAACP stands ready to make the National
    Affordable Housing Trust Fund a reality. And with that, I look
    forward to your questions.
        [The prepared statement of Mr. Shelton can be found on page
    143 of the appendix.]
        The Chairman. Thank you.
        Dr. Sandel.

         STATEMENT OF DR. MEGAN SANDEL, ASSISTANT PROFESSOR OF
            PEDIATRICS, BOSTON UNIVERSITY SCHOOL OF MEDICINE

        Dr. Sandel. Good afternoon, Mr. Chairman, and members of
    the committee. I wanted to thank you for the invitation to
    speak today. As a pediatrician, I am not among the usual
    suspects to testify, and I wanted to say that I am here today
    to support H.R. 2895, the National Affordable Housing Trust
    Fund.
        I am also here today to share new evidence that shows that
    housing is the foundation to excellent child health. I hope to
    convince you that the best medical intervention for children is
    often finding them an affordable home, and it is within your
    power to keep kids healthy through housing.
        As many of you know, there are millions of families on
    affordable housing waiting lists. And in Boston, it is not
    unusual for waiting lists to actually close because there are
    so many families who are waiting and therefore they can't even
    apply. Even families in homeless shelters are often there for
    over a year-and-a-half before they can get a home that they can
    afford. And often families who are on the waiting lists are
    forced to make terrible choices between rent and food, or
    settling on a home with severe housing problems like
    infestations or mold or lead paint because simply that is all
    that they can afford.
        We know from the Children's Sentinel Nutrition Assessment
    Program, which is commonly known as CSNAP, that food-insecure
    children who are eligible but don't receive housing subsidies
    are twice as likely as those who do receive housing subsidies
    to have stunted growth by WHO criteria. It is an important
    aspect of this bill because it targets the lowest income
    families, the ones that are most likely to have food-insecure
    children, and that by giving them an affordable home, you may
    be able to prevent stunting from occurring.
        As you know, stunting not only limits children's physical
    growth in the short term, but it stunts their lifelong
    potential because we know that if your body is not growing,
    your mind is not growing as well.
        Because many families have very limited choices of homes
    that they can afford and have to make tradeoffs, they often
    live in substandard conditions. For instance, I think that the
    cockroach infestation is an excellent example of how that
    affects health. We know that children who have asthma who are
    exposed to cockroaches in their home and are allergic are 3
    times more likely to end up in the hospital.
        It is also known that 30 percent of children who live in
    the urban areas are allergic, but it may be surprising to note
    that 20 percent of suburban children are also exposed and are
    allergic to cockroaches. And further, new data suggests that
    exposure to cockroaches in early life may actually cause immune
    system changes that can lead to the development of wheezing or
    asthma.
        Young children who live with other substandard exposures,
    such as lead paint from older homes, can also lead to problems
    with development, and recent estimates have estimated that this
    leads to billions of dollars in education and other costs.
        Lastly, families who have difficulty affording rent may
    double up with other families, resulting in crowding, or these
    families may frequently move. We know children who stay in the
    same home and do not more frequently have better child
    development outcomes and do better in school.
        Another aspect of the bill that I think is excellent is the
    local flexibility. From my experience working in Boston with
    the Boston Public Health Commission, local community
    development corporations, and some State-funded housing
    developments, the ability for State or local governments to
    match the best local solution to the greatest housing needs
    makes the most sense.
        In some instances, rental housing needs are the most
    pressing. In others, home ownership may be the best outcome.
    And research has consistently shown that home ownership makes
    housing more stable and is better for overall health. In
    pediatrics, the best therapies are often tailored, and this
    bill clearly accommodates that. I urge you to support H.R.
    2895, the National Affordable Housing Trust Fund bill, because
    it can ensure that our most vulnerable population, our
    children, have safe, decent, and affordable homes.
        I leave you with the idea that a safe, decent, affordable
    home is like a vaccine. It literally prevents disease. A safe
    home can prevent mental health and developmental problems. A
    decent home may prevent asthma or lead poisoning. An affordable
    home may prevent stunted growth and unnecessary
    hospitalizations. This bill's goal is 1.5 million affordable
    homes over the next 10 years, and that can mean literally 1.5
    million children who are healthier.
        I would like to end with a story that drives home why I
    think housing can be a medical intervention and can make kids
    better and keep them healthy. In my pediatric practice, I take
    care of a child, Whitney, whom I met when she was 9 months old.
    Her family was homeless at the time because they could not
    afford an apartment.
        At the time, she was falling off her growth chart. She
    already was having trouble growing. And over the next 3 months,
    she literally gained less than a pound. I needed to hospitalize
    her because she had become dangerously malnourished.
        She ended up needing to be transferred to a rehabilitation
    hospital because she had an underlying problem with swallowing,
    and she stayed there for over a month. You can imagine the cost
    of that to insurance. When she was at the rehabilitation
    hospital, she was able to gain weight, but as soon as she went
    back to the shelter, she began to lose weight again.
        After advocating with lawyers from our medico-legal
    partnership at Boston Medical Center, Whitney and her family
    were finally offered an affordable home at a local public
    housing development. Once in her new apartment and she was
    living there, she was able to gain weight, and within months
    her developmental delays improved and she was able to thrive. I
    recently saw Whitney at her physical a few months ago, and at 4
    years old, she was starting to learn to read.
        I tried my best to treat Whitney. I gave her all my medical
    expertise, including very expensive medical care during
    hospitalizations. But the best medical intervention for her,
    the one that eventually made her well, was a safe, decent,
    affordable home.
        It is actually Whitney's birthday today, July 19th. And I
    can think of nothing better to help her and kids like her to
    stay healthy than to pass H.R. 2895, the National Affordable
    Housing Trust bill. Thank you.
        [The prepared statement of Dr. Sandel can be found on page
    138 of the appendix.]
        The Chairman. Thank you.
        Mr. Myer.

     STATEMENT OF JOE L. MYER, EXECUTIVE DIRECTOR, NCALL RESEARCH,
        INC., ON BEHALF OF THE NATIONAL RURAL HOUSING COALITION

        Mr. Myer. Chairman Frank, and members of the committee, my
    home State is Delaware; I want to acknowledge the introduction
    that Mike Castle gave me earlier. You should know that as
    Governor, Mike Castle implemented a very successful housing
    trust fund which is operating today and has done a lot of good,
    and he is a great friend of affordable housing.
        My name is Joe Myer, and I am executive director of NCALL
    Research and a current board member of the National Rural
    Housing Coalition. The National Rural Housing Coalition is a
    membership organization, a national one, that advocates for
    Federal policies which improve housing and community facilities
    in rural America. We appreciate the opportunity to testify
    today on rural housing issues and H.R. 2895, the National
    Affordable Housing Trust Fund.
        NCALL is a multi-faceted nonprofit housing operation in
    Dover, Delaware, and we offer a variety of housing development
    services to nonprofit organizations along with direct education
    services to lower income households. To that end, we have
    helped to develop 45 apartment communities for families,
    elderly, and migrant and seasonal farm workers. And we also
    just reached a milestone of 6,000 first-time home buyers.
        We work regularly to develop apartments serving very-low-
    income persons, and frankly, these require complicated
    patchwork quilts of leveraging and financing to secure low
    income housing tax credits. We believe the National Housing
    Trust Fund assistance to rural Delaware will help to provide
    financing leverage needed to access other Federal, State, and
    private partners.
        Rural housing need: America's rural communities suffer from
    elevated poverty rates and substandard housing. Rural
    households on average are poorer, and according to the 2000
    census, the poverty rate in rural America is 14 percent higher
    than the national rate.
        Likewise, Delaware's rural counties have higher poverty
    rates than the State average, and experience similar
    conditions. For instance, 57 percent of all workers statewide
    have insufficient income to afford a two-bedroom apartment in
    their county of employment.
        There is a deficit in this small State of 12,000 affordable
    housing units for those with extremely low incomes. A majority
    of Delaware's 20,000 substandard housing units in need of major
    repair or actual repayment exist in rural counties. And the
    median incomes in our rural counties are 30 percent lower than
    our metro county.
        In face of this need, rural housing spending for USDA
    programs has dropped 20 percent over the past 3 years. The
    Administration's Fiscal Year 2008 budget request calls for
    elimination of most rural housing programs serving low-income
    households.
        NCALL has been directly hit with the impact of such
    reductions, which have slowed rural housing really to a
    trickle. Increased affordability gaps at the same time have
    created more demand than ever.
        Availability of other Federal programs for rural areas:
    Even though a disproportionate amount of the Nation's
    substandard housing is in rural areas, they are less likely to
    receive government-assisted mortgages. For instance, 22 percent
    of the Nation's population is in rural areas, but less than 7
    percent of FHA assistance goes to non-metro areas. Only 10
    percent of Veterans Affairs assistance reaches non-metro areas.
    Only 12 percent of Section 8 funds go to non-metro areas. And
    in 2003, of the 9 million families assisted by Fannie Mae, only
    11 percent lived in rural America.
        We are very pleased to support the National Affordable
    Housing Trust Fund Act. Reinvigoration of Federal housing
    policy is long overdue. The resources that this legislation
    makes available will definitely have a positive impact on both
    the quality and the quantity of affordable housing across the
    Nation.
        Given the high levels of housing distress in rural areas
    and recent reductions in Federal assistance, the National Rural
    Housing Coalition is especially pleased to endorse this
    legislation. The National Housing Trust Fund Act will help
    provide resources for affordable housing that are desperately
    needed to help bridge increasing affordability gaps, especially
    in rural areas.
        We have a few comments and recommendations regarding the
    legislation, and these are aimed at facilitating the use of the
    trust fund in rural areas. Under targeting requirements, we are
    pleased to support the targeting requirements established in
    legislation.
        We do want to share and make the important point that the
    targeting required anticipates the availability of a level of
    subsidy that we have typically not seen much of in rural
    America. It is extremely difficult to assemble subsidies
    adequate for housing extremely low-income households at 30
    percent of median and below. We support this provision, and we
    hope to work with the committee to be sure that rural America
    is adequately served.
        Secondly, use of the trust fund allocations for rural
    areas: Currently, the provision does not provide sufficient
    direction to States or participating jurisdictions on the
    definition of need. As a result, there is no uniform standard
    for allocating funds to rural communities. We will be pleased
    to work with the committee in designing a formula that provides
    a fair share of the trust fund resources for rural America.
        Again, we are pleased to support this legislation, and urge
    the committee to act on it promptly. On behalf of the National
    Rural Housing Coalition and NCALL, we support H.R. 2895 and the
    implementation of a National Housing Trust Fund. Thank you.
        [The prepared statement of Mr. Myer can be found on page
    113 of the appendix.]
        The Chairman. Thank you all, and this has been very
    helpful. Let me just say, because we are going to be talking
    next week, and we will be talking informally with you, we do
    hope to vote this bill out of committee before we break in
    August and have it on the Floor in September.
        And there were some specific proposals. The mayors had
    some, the State housing authorities, and the rural people. Now,
    as you understand, they are not all obviously compatible. There
    are some conflicts there. And I begin by hoping everybody will
    remember that something is going to be better than perfection,
    and we will work on this.
        I will say, and I know again there is also some other--we
    are trying to maximize the funds. I am sympathetic to the
    matching fund issue. I wish we were in a situation in which I
    wouldn't have to be as much, but there are problems in State
    and local areas. And so we will be approaching the matching
    fund issue.
        I will say, with regard to the rural, there are going to be
    limits on our being too prescriptive because this is an
    argument for pass-through, and some of this is going to have to
    be done at the State level. It is going to be hard for us to be
    in some ways as prescriptive as others might like.
        And then the question of the mayors versus the States and
    the others, we will work on all that and we will try to do our
    best. I will also say this. With some of these things, this is
    not going to be forever. The trust fund will be. One thing I am
    confident of, once this starts, nobody is ever going to let it
    go away. For one thing, we will have ongoing projects. At no
    given time, would you be able to stop it without the flow of
    funds.
        But some of the operations we will talk to, so we will be
    available. The staff will be available. We will working out
    some of the specifics. And we really do look forward to your
    help in our getting this bill forward. I thank you all. The
    testimony has been useful, the proposals for some changes are
    also useful, and we will go forward.
        The hearing is adjourned.
        [Whereupon, at 1:37 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                 July 19, 2007

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