[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

38-393 PDF                 WASHINGTON DC:  2007
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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.]



















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                             July 19, 2007

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