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

                     H.R. 2930, THE SECTION 202 SUPPORTIVE

                      HOUSING FOR THE ELDERLY ACT OF 2007

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                       HOUSING AND COMMUNITY OPPORTUNITY

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 6, 2007

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 110-59

                         U.S. GOVERNMENT PRINTING OFFICE

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                     BARNEY FRANK, Massachusetts, Chairman

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

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

                     MAXINE WATERS, California, Chairwoman

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

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        September 6, 2007............................................     1
    Appendix:
        September 6, 2007............................................    37

                                   WITNESSES
                          Thursday, September 6, 2007

    Allton, Terry, Vice President of Support Services, National
      Church Residences..............................................    27
    Feingold, Ellen, President, Jewish Community Housing for the
      Elderly, Boston, Massachusetts.................................    22
    Frigo, Michael, Vice President, Mayslake Village, Westmont,
      Illinois.......................................................    23
    Garvin, John, Senior Advisor to the FHA Commissioner, and Acting
      Deputy Assistant Secretary for Multi-Family Housing, U.S.
      Department of Housing and Urban Development....................     7
    Kondor, Deje, Executive Director, Presbyterian Homes and Housing
      Foundation of Florida, Inc.....................................    20
    Lizarraga, David C., President and CEO, TELACU/Millennium, LLC...    16
    Protulis, Steve, Executive Director, Elderly Housing Development
      and Operations Corporation (EHDOC).............................    25
    Slemmer, Thomas W., Board Chair-Elect, The American Association
      of Homes and Services for the Aging............................    18

                                    APPENDIX

    Prepared statements:
        Maloney, Hon. Carolyn B......................................    38
        Allton, Terry................................................    39
        Feingold, Ellen,.............................................    46
        Frigo, Michael...............................................    65
        Garvin, John.................................................    67
        Kondor, Deje.................................................    72
        Lizarraga, David C...........................................    79
        Protulis, Steve..............................................    86
        Slemmer, Thomas W............................................    97

                     H.R. 2930, THE SECTION 202 SUPPORTIVE

                      HOUSING FOR THE ELDERLY ACT OF 2007

                                  ----------

                          Thursday, September 6, 2007

                 U.S. House of Representatives,
                            Subcommittee on Housing and
                                 Community Opportunity,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 10:10 a.m., in
    room 2128, Rayburn House Office Building, Hon. Maxine Waters
    [chairwoman of the subcommittee] presiding.
        Members present: Representatives Waters, Maloney, Clay,
    Sires, Ellison; Biggert, and Capito.
        Ex officio: Chairman Frank.
        Also present: Representative Mahoney.
        Chairwoman Waters. This hearing of the Subcommittee on
    Housing and Community Opportunity will come to order.
        Good morning, ladies and gentlemen. I'd first like to thank
    Ranking Member Judy Biggert for being here today and the
    members of the Subcommittee on Housing and Community
    Opportunity for joining me for today's hearing on H.R. 2930,
    the Section 202 Supportive Housing for the Elderly Act of 2007.
        I'd like to start by noting that without objection, Mr.
    Mahoney will be considered a member of the subcommittee for the
    duration of this hearing. Also without objection, all members'
    opening statements will be made part of the record.
        I am looking forward to hearing from the two panels of
    witnesses today, because the Section 202 program is such a
    cornerstone of our Federal response to the needs of our
    Nation's most vulnerable elderly households.
        I appreciate the work of Mr. Mahoney in crafting H.R. 2930,
    which is designed to ensure that Section 202 retains its
    vitality. Today over 6,000 projects, containing over 310,000
    units nationwide, receive assistance under this program.
    Enacted as Section 202 of the Housing Act of 1959, it is among
    our oldest Federal subsidized housing programs, and the only
    HUD program with the sole focus on meeting the needs of the
    poor elderly.
        I'd like to start with the good news about the 202 program:
    it works. By this I mean that the combination of affordable
    housing and coordinated supportive services provided by 202
    project sponsors has been proven to enable elderly tenants with
    a median age of 76 to live as independently as possible for as
    long as possible. This goal, referred to as helping seniors age
    in place, is part of what I regard as almost a technological
    revolution over the last few decades in meeting the health and
    housing needs of many vulnerable populations.
        At one time, the frail elderly, the mentally ill, and the
    otherwise disabled could expect to live for long periods in
    institutional settings, because those were the only places
    equipped to meet their needs for long-term support. Today,
    entrepreneurial nonprofits have worked with government at all
    levels to develop housing plus services models that instead
    promote more independent living. And these new models make
    sense physically as well as morally, while preserving
    individual dignity, a principle on which our Nation was
    founded, and that would alone justify preferring independence
    over institutionalization.
        It turns out that it also generally costs more to do their
    own thing, just as cycling chronically homeless, often mentally
    ill individuals through detoxes, shelters, hospitals, and jails
    is far more expensive than providing them with supportive
    housing. So, too, are nursing home settings and frequent
    hospitalizations in comparison to 202 supportive housing
    projects for the elderly who are still well enough to live in
    them. Simply put, the longer we can help seniors to stay on the
    more independent end of the housing and services continuum, the
    better it is for them, and the better it is for taxpayers.
        But the 202 program does face major challenges. First, the
    current 202 portfolio doesn't come close to meeting the need. A
    2006 AARP survey of 202 project sponsors found an average of 10
    seniors waiting for each unit that becomes available. And in
    202, a bipartisan, congressionally appointed commission on
    senior housing and health needs, with which I know several of
    today's witnesses were involved, called for the creation of an
    additional 730,000 units of affordable housing by 2020.
        In light of this overwhelming need for more elderly
    housing, I'm compelled to note that the Administration's recent
    budget request for HUD's housing for the elderly appropriations
    account, which includes 202, have consistently sought to cut
    the program significantly. This includes a reduction from the
    Fiscal Year 2007 funding level of $735 million to only $575
    million in the President's Fiscal Year 2008 request.
        Fortunately, the appropriators have to date declined to
    make these cuts. I hope this hearing plays a part in moving the
    202 program to a firmer footing, both programmatically and
    financially. In any event, Title I of H.R. 2930 seeks to
    streamline the new construction process of the new 202 program.
    Since 1990, the 202 program has operated as a capital advance
    and an associated rental assistance stream known as PRAC, which
    combine to meet the development and ongoing operating costs of
    the project.
        Title I responds to the concerns I have heard, namely, that
    as now administered, the 202 program imposes on potential
    sponsors all the inflexibility and bureaucracy that might
    conceivably be justified in a funding stream that pays a
    project's full freight in a program that no longer does. In
    order to use scarce resources to reduce more units, HUD has
    made the understandable policy decision to thrust 202 sponsors
    into a world of mixed finance.
        Title I proposes to ease that transition by, among other
    things, requiring HUD to make adjustments to the PRAC to
    reflect certain unexpected increases and project operating
    costs, consider delegating some administrative responsibilities
    in mixed finance transactions to State or local housing
    agencies with strong underwriting expertise, and develop new,
    more responsible, development cost estimates.
        I am interested in today's witnesses' experiences with the
    current process. In particular, I hope to hear about their
    ideas about meting project funding needs in the area of
    services and services coordination, a thing that not only runs
    through H.R. 2930, but also resonates across a number of issues
    the subcommittee will be addressing this fall.
        Second, as one might expect in a program of 202's vintage,
    much work must be done simply to preserve the existing stock of
    projects. At particular risk are the 40,000 to 45,000 units
    funded prior to 1974, when the program was structured as a 50-
    year, 3 percent loan, many of which do not have any rental
    assistance attached to them. Nearly 10 percent of those units
    are in California. To serve low- income seniors as these
    projects head into their second half- century will require some
    sort of ongoing funding beyond affordable tenant rents. H.R.
    2930 would create a senior preservation rental assistance
    program for this purpose. If HUD or other witnesses have viable
    alternatives to that approach, I'm certainly open to hearing
    them.
        Additionally, these projects need access to new capital to
    undertake needed repairs and program improvements. Fortunately,
    today's lower interest rate environment offers a real
    opportunity to refinance and recapitalize them. I understand,
    however, that HUD and many 202 nonprofit sponsors disagree
    about the flexibility these organizations should have in using
    the proceeds of such refinancing. Title II of H.R. 2930
    provides additional flexibility, including lifting the current
    cap for their use for supportive services permitting
    developers' fees for nonprofits and enabling nonprofit sponsors
    to reallocate funds generated by refinancing an individual
    project's refinancing to a broader range of activities
    consistent with a nonprofit mission.
        I'm interested to hear HUD's views on these measures, as
    well as the other provisions of the bill, whose original co-
    sponsors I again wish to thank for their bold proposals to
    address the needs of this critical housing program for the
    elderly.
        At this time, I would like to call on Ranking Member
    Biggert to present her opening statement, for 5 minutes.
        Mrs. Biggert. Thank you, Chairwoman Waters, for holding
    this important hearing on the Section 202 Supportive Housing
    for the Elderly Amendments Act.
        I'll keep my remarks brief, as I'm interested in hearing
    from our witnesses this morning about how we can best
    streamline and simplify the development of affordable housing
    for our seniors. As we all know, the Baby Boomer generation has
    begun to reach retirement, and that means more and more elderly
    Americans need access to affordable housing.
        They also need housing that is coupled with supportive
    services and features that promote independence for aging
    residents. Section 202, the primary Federal housing program for
    seniors, is designed to do just that. Our goal today is to
    examine what changes we can make to this program to satisfy the
    growth and demand for affordable senior housing and better meet
    the needs of seniors across the country.
        Specifically, we will evaluate whether H.R. 2930 provides
    the necessary flexibility to the Section 202 program so that
    local community groups can best serve the needs of our seniors.
    And I thank the bill's sponsor, Mr. Mahoney, for being with us
    today.
        Also, we'll propose changes to the Section 202 program to
    enable better use of mixed financing, tax credits, grants, and
    loans to preserve and build housing for seniors.
        Finally, I'm interested in learning more about the impact
    of the provisions in Title II of H.R. 2930, which is intended
    to expand refinancing opportunities for older Section 202
    properties. How can the changes in Title II benefit taxpayers,
    our community organizations, and most importantly, seniors?
        I'm confident that this morning's witnesses will be able to
    answer these questions, and more. I know this because we have
    the privilege of welcoming to this morning's hearing a
    constituent of mine, Mr. Michael Frigo, who is vice president
    of Mayslake Village. And with him is Father Larry Dreffein,
    President of Mayslake Village. Welcome. And I'll formally
    introduce Mr. Frigo when the second panel begins, but I can say
    that I visited Mayslake Village many times, and I have seen
    firsthand the wonderful work they are doing for seniors in Du
    Page County in Illinois.
        In 1960, what is now Mayslake Village, was a ministry
    started by the Chicago area Franciscan friar community with the
    goal of serving the needs of low- and moderate-income seniors.
    Today's Mayslake is a model facility of over 600 units of
    affordable housing to low- and moderate-income seniors in my
    congressional district.
        So I look forward to hearing from Mr. Frigo about the ways
    that we can amend the Section 202 program to help his
    organization, and others like it, provide even better housing
    and improve our services to the Nation's seniors.
        I'd also like to welcome HUD acting Deputy Assistant
    Secretary Garvin and all of this morning's witnesses, and I
    look forward to your testimonies.
        I yield back.
        Chairwoman Waters. Thank you very much, Ranking Member
    Biggert.
        I would now like to recognize for 3 minutes the chairwoman
    of the Subcommittee on Financial Institutions and Consumer
    Credit, Mrs. Maloney.
        Mrs. Maloney. Thank you, Chairwoman Waters and Ranking
    Member Biggert. I would like very much to be associated with
    the comments of both of the distinguished leaders of this
    committee. There is no program that's more important to
    seniors, and I want to congratulate the leadership of
    Congressman Tim Mahoney for introducing this legislation, which
    not only reauthorizes the program, but also adds a series of
    improvements that will help expand the supply of affordable
    housing to the elderly.
        I would say in New York, Chairwoman Waters, there are
    probably 20 or 30 seniors waiting to get into each 202 project
    or each 202 apartment. There is no other program that is more
    beloved, that provides more assistance and help and allows our
    elderly to retire with great dignity. It happens to be my
    favorite housing program. Every year, I have many, many
    requests for 202 housing projects. We never have enough dollars
    for it. This reauthorization is extremely important, and I
    would say that the seniors of this country are indebted to your
    leadership, Mr. Mahoney, for moving this forward and making
    this happen.
        I have a list of statements about the improvements in the
    program, and I would ask unanimous consent to place it in the
    record. I look forward to the testimony, particularly of the
    community groups, the religious organizations that are on the
    ground working hard to provide this housing, and of course,
    HUD; we appreciate your leadership. And we're so glad that
    you're here, Mr. Garvin. I look forward to your testimony, and
    I'd like to put my statement in the record.
        Just to close, I'd like to say that with the rapid increase
    in housing prices over the last decade, we have seen in my
    community, and probably many other communities across this
    country, that many seniors are priced out of the communities
    that they helped build. This is wrong. 202 housing and the
    reauthorization of this program will help provide more
    affordable housing options to seniors and afford opportunities
    for safe, affordable housing.
        Again, I congratulate Mr. Mahoney and the chairwoman for
    moving this forward, and the ranking member for her support.
    Thank you so much.
        Chairwoman Waters. Thank you. Without objection, your
    information will be accepted in the record.
        Mrs. Capito, for 3 minutes?
        Mrs. Capito. Thank you, Madam Chairwoman, I just want to
    welcome the witnesses. I look forward to this extremely
    important topic, certainly, across the country. My State of
    West Virginia has a high amount of low-income elderly who are
    in great need of not only affordable, but safe and better
    quality housing. And I appreciate the opportunity. I want to
    thank the chairwoman and the ranking member for bringing this
    forward today.
        Chairwoman Waters. Thank you very much.
        Mr. Sires, for 3 minutes.
        Mr. Sires. Thank you, Madam Chairwoman. I also want to
    congratulate my colleague on this legislation. It's certainly
    needed.
        Having been a mayor for 12 years, I can tell you that
    there's no grater need than housing for seniors. I used to kid
    people. I used to say, ``You know, you don't need money to get
    reelected anymore, all you need is housing for seniors,''
    because the need was so great.
        I happen to come from an urban area. People were not well
    off, and this 202 is a lifesaver. You could see in their faces
    after they moved in and you went by their buildings how happy
    they were that they had a roof over their heads. So I really
    want to commend my colleague and the chairwoman for having this
    hearing. And any help that I can provide to my colleague on
    this issue to expand the program, please count on it.
        I also would like to say that I think more in the future of
    the private sector and government sector combined to do some of
    these senior programs, and also I think it's something we
    should look at. So thank you very much.
        Chairwoman Waters. Thank you, very much, Mr. Sires.
        Now, Mr. Ellison, for 3 minutes?
        Mr. Ellison. Thank you, Madam Chairwoman.
        I just want to lend my voice to other colleagues and
    members who have commended Mr. Mahoney on this excellent piece
    of legislation. I am a supporter of it and look forward to
    hearing the witnesses. I will also make this comment, and that
    is that our seniors are the people who have blazed the trails
    for the rest of us. They have knocked down barriers and built
    up bridges so all the rest of us could walk across, and a
    decent, caring nation should care for them, as well.
        I think Section 202 advances the improvements that
    Congressman Mahoney has proposed, and we'll improve and
    strengthen that, as well. So I just want to commend him and
    look forward to hearing the witnesses.
        Thank you. I yield back.
        Chairwoman Waters. Thank you very much.
        And now for the man of the hour. The author of H.R. 2930,
    one of our new members from the State of Florida, who makes us
    all very proud with the introduction of this legislation, Mr.
    Mahoney.
        Mr. Mahoney. Thank you, Chairwoman Waters.
        I'd like to thank Ranking Member Biggert, and to say that
    I'm really humbled to be here with my colleagues, working
    together for seniors. I'd like to point out that Chairwoman
    Waters, you have provided unbelievable leadership on housing
    issues, not only for seniors, but also for victims of Hurricane
    Katrina, and you have been a real inspiration for me.
        I'd also like to thank Chairman Frank for his tireless
    leadership in addressing the affordable housing crisis that's
    gripping our Nation.
        I'd also like to welcome Ms. Deje Kondor, who will be
    participating in today's hearing. Ms. Kondor is the executive
    director of the Presbyterian Homes and Housing Foundation of
    Florida, which manages 19 affordable housing communities for
    over 3,500 seniors, comprised of more than 3,000 apartments
    throughout Florida. And earlier this year, I had the pleasure
    and opportunity to visit one of the facilities located in my
    district, Presbyterian Homes of Port Charlotte.
        As our elderly population grows, the need for affordable
    housing will increase. In 2005, there were approximately 37
    million Americans over the age of 65. According to the U.S.
    Census Bureau, the number of seniors is expected to grow
    rapidly during the next several decades.
        Despite this increase in demand, the number of affordable
    housing units is shrinking. According to the Joint Center for
    Housing, for every unit of affordable housing constructed, two
    are lost, either by a conversion of affordable to market rate
    housing or by sponsors of Section 202 housing opting out of the
    program when their contracts expire.
        In 2002, Congress created a bipartisan commission to study
    the need for affordable housing in support of services for the
    elderly. In the Commission's report to Congress, entitled, ``A
    Quiet Crisis in America,'' they stated that, ``This nation,
    despite competing demands for national resources, must respond
    to the critical need for affordable housing and home and
    community-based supportive services with substantial financial
    commitment and effective policies.''
        The report also concluded that all seniors, no matter what
    their individual circumstances and resources, should be able to
    continue to live where they prefer, regardless of their income,
    with services that they need to maintain personal dignity and
    quality of life.
        One of the most important responsibilities we have as a
    society is to ensure that our seniors have safe and affordable
    places to live. The Section 202 Supportive Housing for the
    Elderly Act is the first step in achieving this goal. This
    important piece of legislation will give owners of 202
    facilities the ability to leverage the property's equity,
    access much needed capital, and benefit from low interest rates
    from private lenders.
        By doing so, this legislation will ensure that these
    facilities are preserved and improved to meet the changing
    needs of seniors. In addition, the bill allows for funding to
    be used to increase the services that Section 202 communities
    provide for the residents, allowing them to live a more
    independent life.
        Finally, this bill will assist seniors living in older
    section 202 facilities by extending them rental assistance.
        I look forward to working with members of the committee on
    this legislation, and again, I would like to thank Chairwoman
    Waters, and I look forward to hearing the testimony of our
    witnesses today.
        I yield back the balance of my time.
        Chairwoman Waters. Thank you very much.
        At this time, I'd like to introduce our first panel, which
    consists of Mr. John Garvin, Senior Advisor to the Assistant
    Secretary for the Office of Housing, and Acting Deputy
    Assistant Secretary for the Office of Multifamily Housing.
    Deputy Assistant Secretary Garvin, I want to thank you for
    appearing before the subcommittee today, and without objection,
    your written statement will be made part of the record. You
    will now be recognized for a 5-minute summary of your
    testimony.

          STATEMENT OF JOHN GARVIN, SENIOR ADVISOR TO THE FHA
     COMMISSIONER, AND ACTING DEPUTY ASSISTANT SECRETARY FOR MULTI-
         FAMILY HOUSING, U.S. DEPARTMENT OF HOUSING AND URBAN
                              DEVELOPMENT

        Mr. Garvin. Thank you very much, Chairwoman Waters, Ranking
    Member Biggert, and distinguished members of this committee.
    Thank you for the opportunity to testify today on H.R. 2930.
        As you mentioned, my name is John Garvin, and I am the
    Senior Advisor to the Assistant Secretary of Housing, Federal
    Housing, Mr. Brian Montgomery, who sends his regrets that he
    can't be here today. I also, for the last few months, have been
    serving as Acting Deputy Assistant Secretary for Multi-family
    Housing, and in this role, oversee the Section 202 program.
        I would like to start by also thanking Congressman Mahoney
    for recognizing the need to address services and affordable
    housing options for seniors.
        The 202 program is one of the Nation's major sources for
    providing safe and affordable housing to America's very-low-
    income seniors. The program funds construction, rental
    assistance, and in many cases, service coordinators. Within
    Section 202, there is also an assisted living conversion
    program, the goal of which is to modify 202 developments to
    better serve frail seniors who require a higher level of
    services to be able to age in place.
        Section 202 is a very comprehensive program, and one that
    serves many frail seniors, as well. As Chairwoman Waters
    mentioned, it has proven a great program since 1959. I would
    like to take this opportunity to commend HUD staff nationwide,
    as well as our industry stakeholders, many of whom are here
    today, for their complete dedication to this program and their
    hard work in making this program the success that it is.
        The average age of a 202 resident is approximately 75 or 76
    years old, and they have an annual average income of around
    $9,500. To date, we have more than 300,000 Section 202 units in
    our portfolio. Section 202 units are limited to serving seniors
    aged 62 or older, who have incomes of less than 50 percent of
    an area's median income, or, as mentioned before, a very low
    income.
        Each year while providing continued rental assistance, HUD
    also provides construction funding for approximately 4,500 new
    units. Unfortunately, over the last 12 years, production in the
    Section 202 program has decreased by almost 50 percent, from
    7,800 units in 1995, to 4,200 units in 2006. The main reason
    for this decrease is as we renew rental assistance, that money
    comes out of the construction pool. So as we produce more, more
    rental assistance is required to be renewed annually, and that
    takes away from what we can use to increase production.
        I don't need to tell this committee about the growing need
    for affordable housing options for seniors, as Chairwoman
    Waters also mentioned the AARP survey that said there are 10
    seniors waiting for every one unit that becomes available, and
    Congresswoman Maloney mentioned that she thinks it's more like
    30 in New York. Obviously, the need is there. We don't have to
    debate that issue.
        Secretary Jackson and Commissioner Montgomery are very
    committed to preserving existing 202 units. Moreover, they want
    to increase production of new units to address the ever-growing
    demographics of seniors in need of affordable housing. One of
    the main reasons Commissioner Montgomery hired me to come to
    HUD from the multi-family industry is to bring about some
    changes to the 202 program so as to make it leverage better
    with the low income housing tax credit, both 9 percent and 4
    percent credits.
        While I mentioned that I am extremely impressed with the
    HUD staff nationwide, and their work on the 202 program, and
    industry stakeholders, we need to do more. There are a lot of
    changes we can make to streamline the program, making it more
    attractive to tax credit sponsors. Right now, there are many
    barriers--unintentional, most of them--that get in the way of
    tax credit developers using 202. If we could get that
    utilization strong, we could increase the production of 202
    units, leverage with tax credits and the services that the 202
    program bring in, and we could do that exponentially.
        Christian Montgomery asked us to come up with a
    demonstration program which we all saw in the 2008 budget,
    which was basically addressing some of the need for
    streamlining in the 202 program. We got together with the
    American Association of Homes and Services for the Aging, and a
    lot of the stakeholders in this room today, to come up with a
    good report which recommended several changes to the 202
    program.
        While the 2008 demonstration program in the 2008 budget did
    not make it through markup, HUD's staff has proposed guidance
    to break down many of these barriers that we'll discuss here
    today. We will continue this effort administratively and will
    take into serious consideration any sound proposal that eases
    the way to leveraging other sources of funding with 202 and to
    preserve and create more units.
        We value our partnership with the American Association of
    Homes and Services for the Aging and look forward to our
    continuing work with them and other organizations to increase
    affordable housing options for seniors.
        Again, thank you for the opportunity to be here today, and
    I welcome any questions you may have.
        [The prepared statement of Mr. Garvin can be found on page
    67 of the appendix.]
        Chairwoman Waters. Thank you very much, Mr. Garvin.
        We have been joined by the chairman of the Financial
    Services Committee, Mr. Barney Frank.
        I will recognize him for as much time as he may need.
        The Chairman. Thank you, Madam Chairwoman.
        I apologize, because I will have to go to the Floor. The
    Native American Housing bill is on the Floor, and we will be
    dealing with a number of issues, including, I will say, an
    amendment I found somewhat intriguing to the Native American
    Housing bill. This is a program that provides housing for
    Indian tribes, and we will have an amendment dealing with
    illegal immigration. And I'm afraid the Indians' response is
    going to be, ``Why didn't we think of that?''
        [Laughter]
        The Chairman. I am pleased to be here today, Madam
    Chairwoman, and this is a further example of the leadership you
    have given as chairwoman of this subcommittee. Working with you
    on a range of issues has been a great pleasure.
        And I'm also glad to be here at the start of ``Tim Mahoney
    day'' at our committee, because the gentleman from Florida is
    the sponsor of this bill. And this afternoon, the bill that he
    has created and co-sponsored with his Florida colleague, Mr.
    Klein, will be having a hearing, and in both cases, responding
    to real needs. I see a lot of friends who are active in the
    elderly housing field, and I am glad to be here. I hope we can
    get a bipartisan movement here, because we are talking about
    making a good program better.
        We don't control the amount of money, but we do have the
    responsibility to make it go further. And I do think when many
    of us go to the appropriators and say, let's have more money
    for this program, the fact that we will have helped to improve
    it, and made it more flexible and more efficient, should stand
    us in good stead.
        I am very glad to be here and see so many friends, and I
    will go over to the Floor knowing that under the chairmanship
    of the gentlewoman from California, and my other colleagues
    here, and the ranking member, with whom we've been able to work
    very constructively in a lot of ways--the gentlewoman from
    Illinois--things are in good hands.
        Thank you, Madam Chairwoman.
        Chairwoman Waters. Thank you, Mr. Chairman, and we are all
    appreciative for your leadership and the assistance that you
    have given to Mr. Mahoney. We are very proud. Thank you very
    much.
        Mr. Garvin, we gave you a list of questions that we would
    have you respond to at this hearing. Your testimony did not
    match the questions we had asked you to deal with, so we are
    perhaps going to have to ask some of those questions at some
    time during this hearing.
        But first, let me start on the issue of removing some of
    the bureaucratic delay in mixed finance 202 projects. There
    seems to be some level of agreement that it makes sense not to
    duplicate every administrative process at HUD and every other
    public finance agency involved.
        You have proposed a demonstration program involving tax
    credits and tax housing agencies, and H.R. 2930 seems to
    provide somewhat more room for delegating underwriting and
    other functions to State and local agencies. Can you describe
    for me your understanding of the difference between your
    proposed demonstration program and what the bill would allow?
    Specifically, I'm interested in knowing what specific kinds of
    delegation H.R. 2930 would allow and what circumstances HUD
    would not be comfortable with and why?
        Mr. Garvin. First, Chairwoman Waters, I would like to say
    we did get your questions and we have formal answers to each of
    them. I think a lot of those questions would take a half hour
    to answer; they're very technical. But we will submit those to
    you.
        On the delegation to the local housing agencies, in our
    demonstration program we were considering when it came to the
    use of tax credits and tax-exempt bond financing of having the
    State housing agency that allocates the credits, the
    underwriter, and HUD would approve the underwriting. That would
    take away one step. H.R. 2930 has a similar concept, but it
    seems to move all of Section 202 to housing agencies within a
    90-mile radius of a proposed development. I think that is a
    little far-reaching right now.
        We would like to analyze it a little bit more and get a
    better grasp on how many agencies would be administering 202 if
    that proposal were successful. We just have a feeling that it
    might take a lot longer to get local housing agencies up-to-
    speed on how this program works, and we feel that it would be
    losing a little bit of our responsibility as a strong fiduciary
    with that.
        Chairwoman Waters. Thank you very much. On the issue of the
    use of proceeds from refinancing, can you tell me why HUD views
    it as critical that excess proceeds only be used for pretty
    limited purposes in the same project? What would be the concern
    if nonprofits were able to use these proceeds more broadly, as
    H.R. 2930 envisions?
        Mr. Garvin. We just see such a shortage of affordable
    housing funds that we think to use excess proceeds from
    recapitalization to do non-housing, while mission-driven, while
    good nonprofit, mission-driven purposes, we think that there's
    such a shortage of affordable housing, and as you mentioned, a
    lot of these older properties are in need of fixing up. But we
    think the proceeds need to stay on that property for housing
    needs.
        Chairwoman Waters. Thank you very much, Mr. Secretary.
        I am going to recognize our ranking member for 5 minutes
    for questioning.
        Mrs. Biggert. Thank you, Madam Chairwoman.
        Mr. Garvin, what do you perceive to be the major challenges
    facing HUD in furthering the goal of preserving these existing
    202 properties?
        Mr. Garvin. I think that along the line with what
    Commissioner Montgomery asked me to do when I first came to HUD
    is figure out ways to make the 202 program more attractive to
    the housing tax credit sponsor. There are a lot of excellent
    nonprofit developers out there that are already mixing 202s
    with tax credits. But as I'm sure many of them will bring to
    your attention right after I finish, there are a lot of issues
    that need to be worked out to make this program a little bit
    more seamless. If we could make it a more seamless program,
    then we could do a lot more, and more importantly, do it a lot
    faster.
        Mrs. Biggert. What is HUD currently doing to address the
    need for elderly housing preservation?
        Mr. Garvin. As I mentioned before, we have a really good
    rapport with all recommendations from a group of stakeholders,
    many of which are here, that we are going through, and we
    proposed it in our 2008 budget. But the demonstration program
    didn't make it through the 2008 budget. It doesn't mean we're
    not continuing to do what we can do administratively to take a
    lot of these. I know we've talked about increased costs. We
    have done quite a few things to make it a smoother program.
        Mrs. Biggert. Do you think that the bill that's been
    introduced will help to be able to move that forward?
        Mr. Garvin. Again, we haven't had the time to do a proper
    comprehensive assessment, but the bill does have very similar
    proposals to what was in the study group's recommendations.
        Mrs. Biggert. Mr. Frigo, from my district, is going to
    testify.
        Is this a concern that comes up all over the country as far
    as the aging properties have small, you know--
        Mr. Garvin. Efficiency?
        Mrs. Biggert. --efficiency units, and, you know, people
    find that very hard to live in? Is this a problem across the
    country? And will the bill, as you know, will that help to
    address that issue and maybe solve that problem?
        Mr. Garvin. With or without the bill, we hear about the
    issue quite a bit. We don't hear from it in places like New
    York or something where efficiencies are still marketable, but
    we do have serious concerns. We see it all over the country.
    There will be 40 vacant efficiency units and the sponsor would
    like to refinance and rehab the building and make it 21
    bedrooms. And we're firmly of the belief that 40 vacant units
    do not need to be subsidized. I'd rather be subsidizing 20
    occupied units than 40 vacant units.
        So yes, we're on the same exact page on that issue.
        Mrs. Biggert. Well, with the buildings that are the older
    buildings to be revamped, restored, there's been a difference
    in those because of the date that they were built, so there
    aren't any rent subsidies. Is there going to be a change in
    that if these buildings are restored? Would that change,
    whether they would receive a rent subsidy in those buildings?
        Mr. Garvin. That wouldn't. We would have to seek new
    authority to come up with a rental program for those units.
        Mrs. Biggert. Do you think that's a good idea, to match
    them up? I think one of the problems is if they cost more than
    a one-bedroom in a newer building, it seems unfair that people
    should be paying more.
        Mr. Garvin. Exactly.
        Mrs. Biggert. All right. With that, I yield back.
        Chairwoman Waters. Thank you very much.
        I would like to go straight to Mr. Mahoney so that he can
    have an opportunity to ask some questions of the Secretary.
        And so, Mr. Mahoney, let me give you an opportunity to
    question our witness.
        Mr. Mahoney. Thank you for your courtesy, Madam Chairwoman.
        Mr. Garvin, thank you for being here today. I appreciate
    it.
        You know, in the written testimony that you provided the
    committee, I noted that HUD estimates that there are over 1
    million senior renters experiencing worst case housing needs,
    and you went on to cite statistics from the Commission on
    Affordable Housing and health facility needs for seniors in the
    21st Century that indicated that an additional 730,000 rent-
    assisted units will be needed by 2020.
        You also indicated that HUD is researching ways of
    addressing the declining numbers of Section 202 units, all of
    which are included in H.R. 2930. My concern, and the main
    reason why I introduced the legislation, you know, is that it
    is taking way too long. You indicated that we began witnessing
    the decline in Section 202 housing in 1995, yet here we are in
    2007, 12 years later, and we're still researching ways to
    reverse this dangerous trend.
        And now you're saying that one of the things you just
    brought up here today is the fact that part of the issue is,
    you know, an increase in units increases the amount of rental
    assistance, so therefore that's going down. That indicates that
    there has to be a priority problem, too, because we're talking
    about a budget issue. We're talking about Mr. Frank saying that
    we could provide some ideas on how to make the program better.
    But at the end of the day, it's the Administration's
    responsibility to address the needs in terms of the budget and
    the funding and so on and so forth.
        My question is, when are we going to start taking this
    seriously for our seniors? I mean, this is a situation where
    for every person who is in one of these homes, there are
    anywhere--in my district, 20 to 30 people waiting, and these
    are crises. I mean, these are people in crisis. This is
    somebody's grandmother who cannot afford to live. You said it
    yourself--living on $9,500 a year. When does this become a
    priority for this Administration to do something about this?
        Now, why does a guy like me have to get involved in working
    with the committee to, you know, bring it to your attention? I
    mean, it's unbelievable to me that you came here, and this bill
    has been out now for 2 months, and you haven't done an
    assessment on it? Can you explain that? What's going on? What's
    happening with the priorities there?
        Mr. Garvin. It is definitely a priority of this
    Administration to address this. That's why we really need to
    find the ways to use the biggest producer of affordable
    housing, which is lowering the housing tax credit. That's why
    we put it in our budget. That's why we continue--even though it
    didn't pass in the 2008 budget markup--to do whatever we can
    administratively.
        I give you my word; I have been at HUD for about a year-
    and-a-half. It has been my top priority the whole time I've
    been there, as it is the Commissioner's and the Secretary's.
        Mr. Mahoney. Well, I recognize that you're here, and you've
    taken on this responsibility because you're passionate about
    it. But, at the same time, you know, what's happening with the
    budget, and how successful are you getting the resources that
    you need from this Administration to do something about this
    problem?
        Mr. Garvin. Well, we want to make sure the resources we do
    get, budgetary resources, are used in their best way. We have
    issues right now of some of the 202. And let me preface this by
    saying that the overwhelming majority of the 202 sponsors are
    excellent, on-time producers. Unfortunately, we have a large
    amount of money that's in the pipeline, and we just don't feel
    fiscally responsible asking for more and more money while we
    have funds.
        We have some developments that have been funded in 1999
    that still aren't completed, and we needed to get that money
    worked out. And I think a lot of the changes--some of the
    reasons for the slowness was because of the bureaucratic red
    tape we were talking about earlier.
        So we're dual-tracking both. We're trying to streamline our
    efforts as your bill does--recognizes it as well.
        Mr. Mahoney. But you recognize that HUD has been
    streamlining their efforts for what, 10 years?
        Mr. Garvin. I don't know if we've been streamlining for 10
    years.
        Mr. Mahoney. I mean, it has been going on since the 1990's.
    When does it become critical? When does something happen in the
    Administration that makes people jump up and say, ``We have to
    reverse this?'' We know it's a problem.
        Mr. Garvin. We have jumped up and said we have to reverse
    it, in January of 2006, when Commissioner Montgomery charged us
    to get moving on this.
        Chairwoman Waters. Thank you very much, Mr. Mahoney.
        I'd like to call on Mr. Sires now for questions, and
    following his questions, we have to break and go to the Floor.
        We do not want to keep you, Secretary Garvin. At the end of
    that time, you may be dismissed.
        Mr. Garvin. Thank you.
        Chairwoman Waters. Mr. Sires?
        Mr. Sires. Well, Mr. Garvin, I guess you could say, ``saved
    by the bell.''
        [Laughter]
        Mr. Sires. But I have to tell you, I have a combination of
    a statement and a question, and I could not agree more with my
    colleague. As a former mayor, I cannot tell you how hard it was
    trying to put a senior project together in dealing with HUD.
        I think all the gray hairs that I had during my
    administration was dealing, trying to put together a project.
    It was impossible. You may say whatever you may here, but I
    lived it. I was in the trenches. I had the people in my office
    every day, and it is really a shame, in a country where the
    population is getting older, that our responsibility to take
    care of them sometimes is not looked upon as very important. I
    tell you that for seniors, the need is great. The need is great
    for seniors who are handicapped, and seniors who are blind.
        We have to find a way to streamline the process. I did tax
    credits. Between trying to get the property, trying to deal
    with you, trying to get the finances, trying to get--it took me
    more than a year, and I don't know what we can do, and I'm
    hoping that this bill helps streamline the process, but when
    you make a statement that has been the reduction from a peak of
    creating 8,200 units to 4,500 units, that, to me, is very
    bothersome.
        And to try to expedite this process, I think it should be
    in everybody's interest. You use the money that you have there.
    Why is it so difficult for municipalities to put together a
    project to build a senior citizen project? Because you know
    what happens? Many people just surrender. Many municipalities
    give up on the process because they feel that HUD doesn't care
    and they feel that it's too hard to put it together. And by the
    time you finish the project and I'll tell you my experience,
    your cost is 20 percent more, because construction goes up,
    property value goes up, so all I can say to you is that somehow
    we have to find a way to streamline the process and make it
    faster--put it on some sort of a fast track.
        Because there is a list. My housing authority had a list of
    about 2,500 to 3,000 people, a waiting list. And I can tell you
    that more than half of those were seniors.
        So I guess that's a statement, and it's like I said to you
    before, you probably were saved by the bell.
        Do you have any comments about that?
        Mr. Garvin. I just want to reiterate that we do care, and
    the issue of capacity is something we recognize deeply. We do
    have a predevelopment fund out there to get municipalities on
    board, so we'll cover the cost for them to learn the program
    and do the predevelopment work on the deal. So, hopefully, that
    will add some of the local governments.
        Mr. Sires. Well, Mr. Garvin, when you came in, you said
    from the peak of 8,200 units to 4,500 units.
        Mr. Garvin. That's annual production, though. I hope you
    recognize that within that, we are still funding rental
    assistance at tens of thousands, if not hundreds of thousands,
    of dollars.
        Mr. Sires. You see, you bring a lot of memories. I hate to
    interrupt. For one of the things we had to do, and HUD gave us
    permission for, is to bond in the future so we could fix the
    units, because there was no money for units to be fixed.
        So HUD gave the authorities permission to bond so they
    could fix up some of those units. That's also something you
    have to look at.
        Chairwoman Waters. Thank you very much.
        The Chair notes that some members may have additional
    questions for this witness, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 30 days for members to submit written questions and to
    place the responses in the record.
        This panel is now dismissed, and we would like to get to
    the Floor for the vote. I think it's going to be about 20 or 25
    minutes, and then we will return for the second panel. We thank
    you for your patience.
        [Recess]
        Chairwoman Waters. The subcommittee will come to order, and
    we're going to call on our second panel.
        Please come forward. Is Mr. David Lizarraga here?
        Oh, there he is. This is our first witness, Mr. David
    Lizarraga, president and chief executive officer of TELACU, a
    friend that I've known for many, many years, who has done
    tremendous work, not only on behalf of seniors, but on behalf
    of poor people, working people, and housing and community
    programs. I'm very pleased to introduce Mr. Lizarraga, who has
    served as chairman, president, and chief executive officer of
    TELACU for nearly 4 decades.
        With over $500 million in assets, TELACU operates the
    Nation's largest community development corporation and is the
    44th largest Hispanic business in the entire United States.
    Under Mr. Lizarraga's leadership, TELACU has innovated in a
    wide range of areas, including its core approach of ensuring
    that its core for-profit businesses in the areas of financial
    services, real estate development, and construction themselves
    benefit the community as well as support TELACU's nonprofit
    entities.
        In particular, TELACU has been a leader in leading the
    housing and social services needs of California's elderly,
    including under the 202 program. Indeed, TELACU developed and
    operated two excellent 202 projects in my area--TELACU Terrace
    and TELACU Senior Housing. Therefore, I know, Mr. Lizarraga,
    that you will make a valuable contribution today to this
    subcommittee hearing, and consideration of H.R. 2930. I
    certainly look forward to your testimony.
        Also, we have Mr. Slemmer; a second witness will be Mr.
    Thomas Slemmer, chief executive officer of the National Church
    Residences.
        And is Ms. Maloney here? I think she would like to
    introduce our next witness, Ms. Kondor.
        Ms. Maloney? Ms. Maloney, would you like to introduce Ms.
    Kondor? No, is that Mr. Slemmer?
        Mrs. Maloney. Mr. Mahoney does.
        Chairwoman Waters. Oh, I'm sorry.
        Mr. Mahoney. That's okay.
        Chairwoman Waters. Go right ahead.
        Mr. Mahoney. I'm really excited about the fact that we have
    the executive director of Presbyterian Homes and Housing
    Foundation of Florida, Deje Kondor, with us. And I'm really
    very, very pleased, because there's a lot of talk about working
    with faith-based organizations and concerns about Democrats and
    our commitment to working with organizations like this.
        And whether it be the Presbyterian Homes or the Catholic
    housing organizations over on the East Coast and Martin County,
    we have great organizations doing a wonderful job and we have
    great leadership. And I'm really pleased that Ms. Kondor is
    here from my district.
        Chairwoman Waters. Thank you very much.
        Chairman Frank is not present, but I know that had he been
    here, he would like to have introduced Ms. Feingold. So, Ms.
    Feingold, thank you for being here. She's our fourth witness,
    and she's the president of the Jewish Community Housing for the
    Elderly. And Ranking Member Biggert, I know there's someone you
    would like to introduce, Mr. Frigo.
        Mrs. Biggert. Thank you, Chairwoman Waters.
        Yes, I am delighted to introduce Michael Frigo, and I
    mentioned him before, but he is the vice president of Mayslake
    Village, which is located in Westmont, in my district, the 13th
    Congressional District. And Mayslake is a nonprofit
    organization which operates a low-income housing project, with
    620 apartments on a 40-acre campus. And he's managed this
    facility and during his tenure, has worked to complete six
    renovation projects at Mayslake, including projects with the
    help of HUD Section 202 program--replace 1960's buildings with
    new buildings that could better serve the needs of seniors at
    Mayslake. And they just recently opened a new facility in Will
    County in Plainfield, Cedar Lake.
        Since 1992, he has been the vice president and he is a CPA,
    having worked at McGladry & Pullen as partner in charge of
    auditing and accounting services before coming to Mayslake. I'm
    happy to welcome him here.
        Chairwoman Waters. Thank you very much.
        Our sixth witness will be Mr. Steve Protulis, president,
    Elderly Housing Development and Operations Corporation.
        Our final witness will be Ms. Terry Allton, vice president
    of support services, National Church Residences.
        Without objection, your written testimony will be made part
    of the record. You will now be recognized for a 5-minute
    summary of your testimony.
        We'll start with Mr. Lizarraga of TELACU.

      STATEMENT OF DAVID C. LIZARRAGA, PRESIDENT AND CEO, TELACU/
                            MILLENNIUM, LLC

        Mr. Lizarraga. Good morning, Chairwoman Waters, and thank
    you for your outstanding leadership over the years in every
    level of housing legislation, and many others as well. They
    have been very important to all our communities.
        Ranking Member Biggert and other members of the committee,
    thank you so much for giving us the opportunity to speak to you
    today.
        My name is David Lizarraga, and TELACU began developing
    senior housing in 1975. Today we own and operate Section 202
    and tax credit-financed housing communities that serve
    thousands and thousands of low-income seniors and families in
    the greater Los Angeles area. The Section 202 program provides
    funding to address a particularly vulnerable group of seniors,
    those living on very low incomes and below 30 percent of the
    area median income level.
        However, while the Section 202 program is a very good and
    important program, it is in need of certain improvements that
    will allow it to much more effectively serve senior Americans.
    In TELACU's extensive experience in the 202 program over the
    years, we have found that the repeated underfunding of the
    Section 202 development awards, and operational subsidies, have
    made development more difficult to accomplish in recent years.
    The cumbersome process of working with HUD at both the local
    and headquarters level increases project delays by sending the
    developer through a very complicated process of underwriting.
        Currently, we must go through layers and layers of
    approval, including repeated requests for waivers from obsolete
    program provisions. H.R. 2930 will allow more discretion at the
    field office level where HUD staff members are much more
    familiar with projects and local conditions that require a
    variation from HUD policies. TELACU, like most nonprofit
    developers, spends a great deal of time looking for additional
    or ``gap'' financing from other programs and local governments
    to make up for shortfalls for HUD funding. It is not unusual
    for an average TELACU-sponsored 202 project to require funding
    from at least four different sources to cover shortages in
    project funding.
        May of those ``gap'' financing sources are awarded on a
    competitive basis and in funding rounds that rarely correspond
    with a Section 202 NOFA process. This means that TELACU's
    development team must prepare additional applications and wait
    for award announcements before, during and after the Section
    202 application process. As delays increase and construction
    costs rise, we now find that the amount of ``gap'' financing we
    ultimately need often turns out to be far greater than
    anticipated, forcing us and our team to return to those
    entities that made initial commitments to a project to ask for
    more additional funding.
        Many of the local governments we work with have expressed
    frustration that the Section 202 projects are beginning to feel
    like a ``bait and switch,'' with the developer returning to the
    city and making greater demands on their decreasing pools of
    resources. We believe that the additional discretion at the
    local level, as provided for in H.R. 2930, will help to reduce
    delays and consequently the gap we must fill to make projects a
    reality.
        It is a fact that nonprofit developers, HUD, and Congress
    must be more creative in using our resources to further our
    joint goal of providing more affordable housing. To this end, 2
    years ago, TELACU made a proposal to HUD that would have
    allowed TELACU to refinance seven of our older Section 202
    properties through a private funding source. This transaction
    would have generated approximately $800,000 annually in
    savings.
        We proposed that after repaying HUD's debt, performing
    capital improvements on our senior housing, and increasing our
    building reserves, TELACU be allowed to create a revolving
    equity fund from its interest savings. That money would enable
    TELACU to leverage other financing to develop affordable homes
    for low-income, first-time home buyers. Home sales proceeds
    would have replenished the fund for new projects, and each
    year, this fund would have increased by another $800,000
    generated by the interest savings from the 202 refinancing.
        Despite the fact that our plan at that time was
    overwhelmingly supported at the local level as a highly-
    creative model for expanding housing resources, and was looked
    upon very favorably by Secretary Jackson, TELACU waited a year-
    and-a-half to have our request denied by HUD headquarters
    staff. We were informed that HUD did not want to approve the
    utilization of interest cost savings from 202 housing projects
    to benefit home ownership for low-income individuals, and given
    the recent events in the credit markets that will negatively
    impact millions of low income homeowners, we find this decision
    to have been very unfortunate.
        While the refinancing provisions in H.R. 2930 may not allow
    TELACU savings from refinancing to be used as originally
    proposed, then TELACU would be able to now use 202 section
    refinancing proceeds in excess of our project capital repair to
    repair our housing, to reinvest it in our housing, and to
    address the funding gaps, our new senior housing projects, and
    to hire additional coordinators.
        You know, we get about 1,000 applicants for 75 units every
    time we build the 75 units. We literally have to go to a
    baseball field and have a lottery, so that in some way we not
    discriminate as to who is selected. But that's the need that's
    out there. This added flexibility will allow housing providers
    to meet the needs of their various communities with clear,
    focused direction, as opposed to a vague, drawn-out process of
    submitting requests to HUD with no idea if they fall within
    permissible policy or not.
        TELACU believes that H.R. 2930 will not only improve the
    ability of nonprofit organizations to develop new 202
    properties, but that it will advance our collective goal of
    addressing the affordable housing shortage and the needs of
    senior Americans in an increasingly complex development
    environment. We must bring the 202 program into the 21st
    century with creativity, vision, and fiscal responsibility.
        I would like to express my gratitude to Representative
    Mahoney--thank you very much for your very, very enlightened
    legislation that really addresses the need--Chairwoman Waters,
    and Ranking Member Biggert, and the members of the subcommittee
    present here today, for your leadership in making this
    possible.
        Thank you very much.
        [The prepared statement of Mr. Lizarraga can be found on
    page 79 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Mr. Slemmer.

    STATEMENT OF THOMAS W. SLEMMER, BOARD CHAIR-ELECT, THE AMERICAN
            ASSOCIATION OF HOMES AND SERVICES FOR THE AGING

        Mr. Slemmer. Thank you, Chairwoman Waters, and Ranking
    Member Biggert. And Mr. Mahoney, thank you very much for
    introducing this legislation.
        I am testifying this morning on behalf of the American
    Association of Homes and Services for the Aging. I am honored
    to be the chair-elect and serving on their board of trustees.
    We have 5700 members in the American Association of Homes and
    Services for the Aging, all not-for-profits, 70 percent faith-
    based. We are a big proponent of affordable housing for
    seniors. Today, we are serving about 2 million seniors, so I
    come before you supporting this legislation and thanking you
    for your leadership in addressing what we think is a really
    critical issue here for us.
        I do serve as executive director for National Church
    Residences. We are one of the larger not-for-profit developers
    and operators of affordable senior housing in the country. We
    have two facilities in your district, Mr. Mahoney--one in
    Sebring, I believe, and Grove City--and also one in St. Louis,
    Roosevelt Apartments. And what we're finding is an incredible
    need to make some changes in the 202 program because of the
    aging portfolio. We've talked about the demand here today, lots
    and lots of demand. We see that not only as a demand for
    housing, but also for services.
        Our organization operates healthcare facilities, hospice,
    service coordination, assisted living, and nursing facilities.
    We have homeless housing, and what we see is that housing is
    really a solution of a lot of problems that are out there
    facing our aging consumers.
        So thank you so much for your support of this sorely needed
    legislation.
        I just want to quickly give you an overview of what this
    legislation does. One of the things it addresses is that we
    believe we're losing affordable housing at a rate that is
    alarming. We think maybe we're losing twice as fast as we're
    building it--market rate forces in the areas where these
    communities are located, where there's a lot of interest in
    market rate housing and also aging buildings. And H.R. 2930
    provides an opportunity for you, I think, as well as our
    providers, to develop a financially-sound development and
    preserve this housing.
        I testified before a subcommittee like this about 5 years
    ago, and I said the 202 program was one of the best programs
    that the government ever came up with. I could not tell you
    that today. It's not the case, and it's primarily because of
    the complexity of the transactions that made development and
    preservation of these projects under the 202 program kind of a
    Herculean effort.
        The program needs an overhaul, and H.R. 2930 does that. The
    key provision that we're looking at here is delegated
    processing. We're suggesting that this legislation really
    addresses a major problem with HUD processing by shifting the
    processing of HUD funds over to State housing finance agencies
    and other State development agencies. The reason for that is
    that the tax credit program now accounts for the biggest
    development effort under affordable housing; and the 202
    program oftentimes, the tail-wagging of the dog, where we have
    multiple sources of financing and yet the HUD regulations are
    getting in the way of sound development. In more and more
    deals, Section 202 funding is fully matched or even exceeded by
    other sources.
        Ideally, agencies that are administering HOME funds now and
    CDBG are maybe better prepared to serve as an allocating agency
    for the Section 202 grants. It's particularly important if
    you're going to do any kind of mixed financing with tax credits
    that we have kind of a simultaneous processing of 202 funds as
    well as other State and local and tax credit funding.
        HUD staff admit to us that they don't understand tax
    credits and the complexities that go along with that. They
    don't really have the time or the resources to learn it, and
    HUD rules are not well-suited to tax credit transactions.
        The other problem that this legislation addresses, the
    development cost limits, let's just say very clearly, they
    don't work. Everybody knows they don't work. The pipeline
    problem often is caused by the underfunding of development
    costs as well as PRAC allocations.
        That's the reason the pipeline is so long, because it
    requires sponsors to go out looking for funding and trying to
    pull together multiple sources of funding to make the program
    work. I don't think 202 was intended to be that way when it was
    originated and certainly really requires a major problem to be
    addressed today.
        I would also say that this legislation addresses
    preservation. Preserving this housing stock is really
    important. In our written testimony, we talk about some of the
    examples of this. The older 202 housing stock is really in need
    of preservation, and H.R. 2930 goes a long way to address this,
    primarily by coming up with a preservation voucher for 202
    program sponsors that would allow lower income residents to
    stay in these buildings as we renovate them to the tax credit
    program.
        We discuss a lot more in our written testimony. I can't go
    into all of it, but I would be glad to answer any questions
    about it. I thank you, Chairwoman Waters, and also Congressman
    Mahoney, for your leadership in sponsoring this legislation is
    sorely needed.
        [The prepared statement of Mr. Slemmer can be found on page
    97 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Ms. Kondor?

      STATEMENT OF DEJE KONDOR, EXECUTIVE DIRECTOR, PRESBYTERIAN
             HOMES AND HOUSING FOUNDATION OF FLORIDA, INC.

        Ms. Kondor. Good morning, Chairwoman Waters, Ranking Member
    Biggert, and distinguished members of the committee. And my
    special thanks to Congressman Mahoney.
        My name is Deje Kondor, and I am the executive director of
    Presbyterian Homes and Housing Foundation of Florida. I am
    honored to speak to you today as a member of FAHSA, the Florida
    affiliate of AAHSA, the American Association of Homes and
    Services for the Aging.
        We are a faith-based nonprofit organization dedicated to
    serving the housing needs of low-income seniors for over 40
    years on the west coast of Florida. We receive our sponsorship
    through the Presbyterian Church, U.S.A., specifically two
    presbyteries, the presbytery of Tampa Bay and Peace River
    presbyteries.
        The Presbyterian Church does not provide us with any
    funding whatsoever. With over 3,000 units in 19 different
    communities in the State, we are the largest nonprofit sponsor
    of HUD housing in Florida. Of our 19 communities, 9 of them are
    202s. H.R. 2930 can provide us with the tools to preserve our
    senior communities and build new ones.
        I want to talk first about our old 202s. We have four of
    those, totaling 816 units, but in those 816 units, only 43 of
    those units benefit from project-based, Section 8 rental
    assistance.
        The other very-low-income residents in those buildings
    would not be able to afford to stay there if we did substantial
    rehabilitation to the buildings, because the rent would have to
    go up.
        If H.R. 2930 were to become law, those very-low-income
    seniors would receive project-based rental assistance. We had,
    2 years ago, received two low-interest, 1 percent, 15-year
    loans from the State of Florida to do elevator rehab at two of
    our old 202s. This past year, we applied and also were granted
    another 1 percent, 15-year loan at our community for over
    $500,000 from the State of Florida.
        We were told by HUD that we could not accept this loan,
    because the only moneys that we had to repay the loan were
    through operational funds derived from tenant rent. The HUD
    staff in Jacksonville told us that the sponsor could pay the
    mortgage payments on this low-interest loan, but not the
    community itself. So therefore, we had to tell the State of
    Florida that we could not accept the 500,000, 1 percent loan.
        If this legislation were enacted, we could refinance the
    mortgages and accomplish the substantial rehabilitation that is
    necessary in these old 202s instead of a piecemeal approach.
        Refinancing. We refinanced two of our three 202s. It was an
    extremely laborious and complicated process and took much
    longer than projected. The direction provided by H.R. 2930
    would make refinancing more direct and a lot easier.
        Our new development. We have experienced what every Section
    202 PRAC sponsor has experienced: insufficient construction
    dollars; insufficient initial budgets; and long time delays.
    Our newest property, which is Trinity Apartments of Lakeland,
    was opened in December of this past year. It's a 70-unit, 5-
    story building with 73 seniors currently living there.
        Before the building was even begun, the concrete costs were
    $359,000 more than originally budgeted. In addition to that, we
    felt that there was good cause to have an emergency generator
    at the property. It's five stories. It's located in Lakeland.
    It was hard hit in 2004 by Hurricane Charlie, Francis, and
    Jean. They had power outages for over 10 days.
        We were refused $30,000 for an emergency generator in a 5-
    story, senior high-rise. We feel that local and State housing
    authorities could be more realistic at assessing what the needs
    of those communities are.
        I want to talk briefly about the obligations that HUD has
    to provide rent increases to cover operating costs, which of
    course include insurance. Our organization from 2004, we spent
    a little under $700,000 in insurance premiums. Our October 1,
    2006, bill was $1.25 million. HUD has repeatedly refused to
    grant us rent increases to cover these deficits in funding to
    pay our insurance premiums.
        We are hopeful that Congress will demonstrate some
    direction and national policy to support affordable senior
    housing. We believe that H.R. 2930 offers a ray of hope for
    assuring the future of all Section 202 senior communities.
        Thank you for considering this legislation, and I encourage
    you to support H.R. 2930.
        [The prepared statement of Ms. Kondor can be found on page
    72 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Ms. Feingold?

       STATEMENT OF ELLEN FEINGOLD, PRESIDENT, JEWISH COMMUNITY
             HOUSING FOR THE ELDERLY, BOSTON, MASSACHUSETTS

        Ms. Feingold. Thank you very much for inviting me to appear
    before you, Chairwoman Waters and Ranking Member Biggert, and
    all our heartfelt thanks to Congressman Mahoney for his work on
    bringing this bill forward.
        I am Ellen Feingold, the president of Jewish Community
    Housing for the Elderly in Massachusetts. And in 2001 and 2002,
    I was co-chair of the congressionally mandated Commission on
    Affordable Housing and Health Facility Needs for Seniors in the
    21st Century that really set the context for this legislation,
    which JCHE strongly supports.
        We have developed and operate over 1,050 apartments for
    low-income elderly in Boston and Newton, Massachusetts, and are
    currently developing another 150 units in Framingham. We have
    1,300 people on our waiting list. We've also refinanced and are
    close to the end of renovating one of our developments, an
    occupied building that opened in 1973 with 256 apartments.
        For years, it's been our mission to enable our frail, low-
    income, elderly residents to live out their lives in the JCHE
    homes without having to move to a higher care facility. We've
    been exceptionally successful; only 2 to 3 percent of our
    residents move to a nursing home. The average age in our
    buildings is over 80; the average income is under $9,000 a
    year, and on average, people live in our buildings over 11
    years. That is what a 202 program can do.
        We are very grateful to the committee for drafting this
    legislation. It covers a lot of issues we wrestle with. Many of
    us on this panel are faith-based, non-sectarian, large and
    small, dedicated to providing decent and supportive housing to
    elderly people with low incomes. But our job has gotten harder
    and harder over the past decade, to the point that where our
    public policy and programs are intended to produce this kind of
    housing, in practice the obstacles tell a different story.
        When we started, we built our first 202 development with
    243 apartments in 1971 with one 202 mortgage that paid every
    penny we needed to complete the building, which is still 100
    percent occupied. Today, we are in the process of developing a
    150-unit, mixed-income building with 50 Section 202 units, 40
    tax credit units, and 60 market units. But that's not all.
    We'll have a State housing finance agency mortgage, grants from
    the State's Priority Development Fund and Affordable Housing
    Trust Fund, two other State housing grants, grants from
    foundations that support ``green'' buildings, a sponsored
    contribution of the developers fee, plus $5 million we've had
    to raise from foundations and other donors to make the pro
    forma work; nine sources with all of the inconsistencies and
    timetables, etc.
        One little contradiction, an example. The HUD 202 maximum
    unit size is smaller than the tax credit minimum unit size.
    Both agencies look at each other and say, we're right. But the
    major result is pipeline delays that have caused an inflation
    of cost for this project of 50 percent over the past 2\1/2\
    years. You know, if HUD can't fully finance the low-income
    housing that is its mandate, it has to help mixed financing
    work. And I have a lot of respect for Secretary Garvin, but the
    fact of the matter is they have not helped mixed financing
    work.
        Our organization, helped by Congressman Frank, whom we
    salute, and Congressman Capuano, put the mixed income financing
    on the books. That was 6 years ago. HUD has not helped make it
    work. It is counterproductive, wastefully expensive, and unfair
    to make organizations like us resolve these conflicts. H.R.
    2930 addresses many of the problems we faced. HUD has
    historically taken the position that nonprofits are incompetent
    to manage their own money.
        As the committee well knows, the developers over the years
    of 202 housing have had the fewest problems of any government-
    supported housing. Yet HUD's effort to keep the money under
    control has reached an extreme where organizations like ours
    find ourselves with our surplus proceeds, which are investor
    contributions, now locked up in a Section 8 set-aside for
    future Section 8 needs.
        In other words, investors in a tax credit program designed
    to create new housing, more housing, that money is replacing
    money that HUD should be spending on Section 8. My written
    testimony gives you a blow-by-blow description of the woeful
    process that we went through to get to this point, but we were
    not even permitted to use the funds for cost overruns in the
    rehabilitation and for hiring additional support staff to
    assist tenants in their 80's and 90's to pack their belongings,
    cover their furniture, and leave their apartments at 8 a.m.
    each day while the construction was in process. Why is that not
    an appropriate use of investor proceeds?
        One other issue I would just like to raise is that many of
    us around the table who use the 202 program have also used
    other Federal and State housing finance agency programs to
    develop housing and run it as if it were a 202. All of our
    buildings are funded under five different Federal and State
    programs, and all utilize Section 8 subsidies for the rents.
        I want to thank you again for having us here. It's a
    pleasure.
        [The prepared statement of Ms. Feingold can be found on
    page 46 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Mr. Frigo?

     STATEMENT OF MICHAEL FRIGO, VICE PRESIDENT, MAYSLAKE VILLAGE,
                           WESTMONT, ILLINOIS

        Mr. Frigo. Chairwoman Waters, Ranking Member Biggert, and
    the entire committee and staff, I'd like to thank you for
    giving me the opportunity today to speak to you regarding this
    very important matter of senior housing.
        My name is Mike Frigo, and I'm the vice president of
    Mayslake Village, which is located in Westmont, Illinois,
    approximately 15 miles west of downtown Chicago. Mayslake
    Village has been a partner with HUD since 1960. We currently
    have five different HUD-sponsored buildings with 622 apartments
    on our campus. Our oldest building goes back to 1971. In 1971,
    the subsidy on this building was a 3 percent mortgage with a
    50-year amortization and no rent assistance.
        The main reason I am here today is to discuss H.R. 2930,
    which speaks of some very important, exciting amendments to the
    HUD Section 202 program. All of the proposed items mentioned in
    this amendment make a great deal of sense and will allow us to
    preserve our oldest project, which is in deep financial
    trouble. This oldest project is known as the Center Building.
    It is functionally obsolete. It has 100 efficiency apartments
    that are no longer rentable. These are the only efficiencies
    among the 622 apartments on the campus. This building also has
    50 one-bedroom apartments, for a grand total of 150 apartments
    in the Center Building.
        The efficiency apartment's living space is only 300 square
    feet, compared to the one-bedroom apartments, that are 540
    square feet in size or more on our campus. We have no demand
    for the efficiency apartments, and there is no waiting list for
    them, either. Currently, 85 of the 100 efficiency apartments
    are sitting empty, and as our older residents vacate these 15
    units, we expect that they, too, will become empty.
        Our problem at Mayslake Village in renting these efficiency
    apartments is so bad that 2 years ago, after Hurricane Katrina
    hit New Orleans, we had five senior citizens who had evacuated
    from New Orleans come to Mayslake Village seeking shelter. Of
    these five senior citizens, only two would accept the
    efficiency apartment. The other three informed me that they
    would rather squeeze in and stay with their families than move
    into a 300-square-foot efficiency apartment.
        Today, only one of those two people still lives at
    Mayslake, as the other person moved out a few months after
    moving into our facility, stating to me that the small space
    was driving her crazy. Since we have such a large number of
    empty apartments in this building, we have experienced
    significant financial losses over the last 5 years, totalling
    $1.58 million. We have used our own funds to cover these losses
    so the building could remain solvent. However, we are running
    out of funds. For the last year ended June 30, 2007, we have
    put $400,000 of our own money into this building to keep it
    afloat.
        We do have a practical and efficient plan prepared to
    rehabilitate this building. It calls for taking two efficiency
    apartments and combining them into a one-bedroom apartment,
    which would measure approximately 600 square feet. Ultimately,
    this would result in creating 50 one-bedroom apartments, which
    I know we would be able to rent immediately. In addition to
    that, we would also need to modernize the existing 50 one-
    bedroom apartments, because they have the original bathrooms
    and kitchens from 1971.
        We have been working on this rehabilitation project for the
    past 3 years with our architects, engineers, and consultants,
    and they inform me that if we were to start this construction
    today, it would cost approximately $10 million. In contrast, I
    have also been told by our experts that if we were to construct
    a new building with 100 one-bedroom apartments, it would cost
    approximately $15 million. Thus, by rehabilitating this
    building, we would save approximately $5 million.
        H.R. 2930 would create a senior preservation rental
    assistance contract which would allow our property to be
    refinanced and rehabilitated. Additionally, this amendment
    would give our residents a rental assistance program, which we
    have never had for this building since its inception in 1971.
    Both the funding to rehabilitate and a rental assistance
    program would enable us to keep this building going for another
    40 years.
        In closing, I would like to again thank you for giving me
    this opportunity to speak to you about Mayslake Village and the
    importance of passing H.R. 2930. These changes will benefit all
    of our low-income seniors in the United States.
        I thank you.
        [The prepared statement of Mr. Frigo can be found on page
    65 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Mr. Protulis?

       STATEMENT OF STEVE PROTULIS, EXECUTIVE DIRECTOR, ELDERLY
         HOUSING DEVELOPMENT AND OPERATIONS CORPORATION (EHDOC)

        Mr. Protulis. Good morning, Chairwoman Waters.
        First of all, let me just thank you for giving us the
    opportunity to speak to such wonderful persons as yourself and
    the ranking member of the minority.
        Let me just say to you the following thing: I am not going
    to read my statement, because I am going to speak from my
    heart.
        The organization I represented many years ago in Washington
    was the National Council of Senior Citizens. And about 10 years
    ago, I became the CEO of a company that created a lot of 202s
    through participation from the Congress. I learned a new
    experience, and I learned the unbelievable crisis that we have
    in this country. I got a little bit upset when after spending
    18 months after Senator Sarbanes appointed me to the commission
    to review affordable housing for seniors.
        We spent unbelievable energy between Republicans and
    Democrats, appointed by both sides, from this book, and what
    happened to this book remains on the shelves. No one ever
    bothered to open it up and study the hard work of citizens like
    ourselves, to learn and to help each other. And we had several
    debates; our co-chair can tell you. We spent hours and hours,
    debate on both sides of both groups, trying to find a common
    ground.
        One of the things that we recommended was that 40,000 units
    were needed every year to even come close to the need of
    Section 202, the best-running program in this country. There's
    never been a single scandal ever in Section 202 at any point of
    mismanagement by anyone in this country.
        So what happened now? We get less than 4,000 units for the
    whole country, and properties in 14 States I have, like in the
    State of Florida, I have over 1,000 people in each property
    waiting.
        And let me just tell you what happened to me yesterday. I
    flew in from Cleveland. I spent 5 years to finish a project of
    40 units in the most devastated part of Cleveland. And I could
    not have enough money from the Federal Government to finish the
    202, and I was lucky enough, because of my background with the
    labor unions, to get the City of Cleveland to donate $257,000
    worth of project and the State of Ohio to donate $600,000 so we
    can make the ends meet.
        So yesterday we cut the ribbon. We have 40 units in there.
    We have 40 seniors, happy as hell, for living in dignity in
    their olden days. And what happened to us? We have to have a
    part-time manager, because there's not enough resource in the
    program to have a full-time manager, a part-time maintenance
    person. And guess what? No money for the service coordinator.
    So we, in our organization, subsidize those people so they can
    serve those seniors after the money and the project was given
    by the government. It doesn't make sense.
        The way we do it now is we have so little money for so few
    applications to be approved, that the government cuts the units
    to a lower level. Everybody at this table can tell you, if you
    get less than 60 units, you are going to lose money the first 5
    years. It is impossible to continue saying that we support
    Section 202, and we tighten everything. And then we deal with a
    bureaucracy of the HUD government, where in my opinion, one of
    the things you're going to find is a lot of people have left
    HUD and retired.
        And the brains and the memories of the efforts that were
    made, do you realize that 5 years ago, they cancelled the
    library in HUD so there's no history of things that can be
    asked for people that are experts of the government to help
    people like ourselves?
        I can tell you. I can go on or not. I know one thing: you
    give me 5 minutes of my life to come and tell you, I can spend
    5 hours, and the rest of us can do the same. It's about time.
        I am so pleased to introduce this legislation and I promise
    you not only that, but if you look behind me, when I was
    testifying as a member, I always bring seniors. The seniors
    behind me come from Council House, and they have come up here
    and demonstrated and testified many times about many issues
    before, and are ready to go on the streets and do what it takes
    to make sure that we take care of the seniors' indignity and
    the government's sponsor.
        You know, I don't know anything about tax-graded, and I had
    to learn about tax-graded, because what has happened from HUD?
    They're pushing more tax-graded, because that seems to be the
    direction they want to go, and I couldn't believe when the
    Secretary of HUD said one day when he testified that that's the
    direction we should go in housing.
        I don't believe that's the direction we should go. We can
    use the entrepreneurs. We can use the tax-graded, but we should
    not abandon a 202 Section. It's the best program ever created
    in this country.
        Thank you very much. I appreciate that.
        [The prepared statement of Mr. Protulis can be found on
    page 86 of the appendix.]
        Chairwoman Waters. Thank you. Thank you very much.
        Mr. Allton?

    STATEMENT OF TERRY ALLTON, VICE PRESIDENT OF SUPPORT SERVICES,
                       NATIONAL CHURCH RESIDENCES

        Good morning, Chairwoman Waters, Ranking Member Biggert,
    and other members of the committee. Thank you very much for
    inviting us here today.
        My name is Terry Allton, and I am vice president of support
    services at National Church Residences. That means that I have
    the responsibility of making sure that our 160 service
    coordinators that we have in 28 States across the Nation have
    adequate tools and resources so that they can go and help the
    seniors who live in our buildings.
        My primary job is working with service coordinators, and so
    that's what I want to take a minute to talk to you about. The
    reason we're so excited about this particular legislation is
    it's going to provide and open up a revenue stream of funding
    for service coordination that doesn't currently exist.
        Congress provided appropriations for HUD service
    coordinator grants in Section 202s; however, HUD refused to
    allow PRACs to be eligible for the service coordinator grants.
    So there is very little cash and very little ability to finance
    service coordinators in those PRAC Section 202 communities,
    which is very challenging for us. And I wanted to make sure
    that you understood how important service coordination is. And
    the best way for me to tell you that is to share a story.
        Marsha Powell, who is a service coordinator in Clinton,
    North Carolina, shared a story with me about a resident who
    came to our building. This gentleman, an elderly gentleman,
    lived in a tobacco barn. He took a bath in a stream. That's
    where he got his drinking water. He ate meals at a gas station
    where the local gas station owner would provide him food and
    let him use the rest room. The gas station owner became very
    concerned about him. It was going to get cold. Winter was
    coming, and he happened to hear about a property down the
    street that was for low-income elderly, and the gas station
    owner came down and got an application for the gentleman. He
    was eligible to move in. We were very fortunate to have a
    vacancy, so he was able to take that. Now, that's not where the
    story ends. This gentleman had nothing. He had no furniture. He
    had no clothes. He has no food. He has no forks, knives,
    utensils. And the service coordinator (this is where they're so
    important and where they come into play) was able to get
    donations from local churches. She brought in different
    agencies, different volunteer programs, and was able to provide
    this gentleman with a furnished apartment with clothes, food,
    pantry. And that's why this program is so important.
        We do a great job providing the housing, but if you are our
    average resident, aged 79, your average income is a little bit
    more than Mr. Garvin said. It's around $10,018 a year. And 40
    percent of the residents who live in our building are frail, so
    they don't have a lot coming in. So the housing is the one big
    piece, but the second big piece is how are they going to
    continue to live and not have to choose between food, rent, and
    prescription drugs.
        And in our organization, we found that it's very important
    to make sure that if we're going to take that money from the
    Federal Government, we need to show that we have positive
    outcomes. And we know that when a resident works with one of
    our service coordinators, 91 percent of the time, those
    residents are able to age in place. It is excruciatingly
    important that they do not have to go to nursing homes
    unnecessarily, and that they do not have to go to the hospital
    unnecessarily. We are able to take care of them in their home
    where they want to live, and in many cases, our residents live
    in our buildings for 20 or 25 years.
        The other thing that is very important for us to know is
    that when a resident works with a service coordinator, they're
    able to save that resident on average $279 a month in expenses.
    And if you remember, I just said their average annual income is
    $10,000. That's a third of their annual income. That is huge
    for them, and that's why residents will say when you go and
    talk to them about their property they're very blessed and very
    thankful to have that unit that they know they're able to live
    in. But they are even more grateful that they have the service
    coordinator, because it allows them to live in a safe place,
    but then also have food, prescription drugs, clothing,
    furniture, and all those other things that are excruciatingly
    important.
        So I thank you very much for allowing this bill to be
    presented. We are strongly supportive of it. We hope that we
    continue to find more avenues to fund service coordination and
    affordable housing, because housing with services is going to
    be able to have the potential to save Medicare and Medicaid
    hundreds of thousands, if not millions of dollars if we can
    really invest in that type of program.
        So thank you very much for the time.
        [The prepared statement of Ms. Allton can be found on page
    39 of the appendix.]
        Chairwoman Waters. Thank you very much.
        Let me thank all of you for the services that you are
    providing, the leadership that you are providing, and for being
    here today to help us understand better what we can do to be of
    assistance to you as you provide these housing opportunities
    for our seniors.
        Let me start with, I think, Mr. David Lizarraga, because I
    want to make sure I understand. I personally am interested in
    flexibility. I think that in order to be creative, you need
    flexibility.
        You have described in so many ways how some of the rules
    and regulations of HUD just do not allow you to be able to do
    the best job. I think I'm interested in the refinancing aspect
    of all of this, and I believe that your ability to refinance
    perhaps could go a long way toward helping to rehab and
    revitalize these projects. And I want to make sure that we do
    everything that we can to do that.
        But in addition to revitalization, if you had the
    flexibility to use funds from the refinancing efforts, what are
    the other kinds of things you would do with that? Starting with
    Mr. David Lizarraga.
        Mr. Lizarraga. Thank you, Madam Chairwoman.
        Well, first of all, we would have to utilize those sources
    to meet the major need. That major need is making sure that the
    senior housing stock that we have built in the last 30 years is
    still meeting all the standards and needs that HUD requires.
        Chairwoman Waters. Okay.
        Mr. Lizarraga. And so that would be the first priority. The
    second priority we use would be you use some of those resources
    for additional services for those seniors who so badly need the
    supportive services. In any event, you know, as I indicated,
    the model that we presented 3 years ago, and you've heard the
    message, that was then and this is now. Right?
        Chairwoman Waters. Yes, Mr. Frank says it all the time.
        Mr. Lizarraga. Yes. That was a concept that met the
    approval of the staff at HUD at every level. And at the end
    they finally said, you know what? We don't like the idea,
    because we shouldn't be leveraging dollars for other than
    senior housing.
        That's okay with us. I saw at the need at that time that
    maybe there would be a more varied response to the utilization
    of those dollars, however, the fact is that that equity is
    lying there, sitting there, providing no service to anybody.
    And that money can be leveraged with additional dollars to meet
    the tremendous need. And it's revenue-neutral. It doesn't cost
    the government one single dollar more. Okay?
        So what would we be doing? We'd be accessing capital and
    leveraging assets on the properties. We would be accessing
    lower rates. Okay?
        In addition to that, we would be raising the cap on
    supportive services. All those are the things that seniors
    need, and it's just lying there dormant. In addition to
    refining, I think, the outdated legislation that's there and
    rules and regulations that are there, to streamline the
    process. You have heard testimony after testimony after
    testimony about how we need to be gatherers.
        You know, the HUD dollars simply do not meet that need, so
    we have to go to 20 percent set-aside redevelopment dollars. We
    have to go to other sources of funding, like in the County of
    Los Angeles, as you know, in the City of Los Angeles, we use
    industry dollars. Other cities that don't want to use their 20
    percent set-aside dollars for any type of senior housing or
    low-income housing, grant it to the county so that they can
    deliver it in other areas other than themselves.
        So that's what we have to do, and this would be another way
    of leveraging dollars that in other words would not be
    utilized.
        Chairwoman Waters. Thank you so much.
        I wanted to ask, I think it is Mr. Frigo. You described
    these efficiencies that you would simply like to combine two
    and get 600 feet of space. You have the plans. You know what
    you need to do, and I know that you need to have resources to
    do it with. You are continuing with the plans. Does this bill
    help you to be able to do that and to make good sense out of
    it? The idea that those properties are sitting vacant just
    tears me apart.
        Mr. Frigo. Yes, Chairwoman Waters, it does. We have been
    meeting with HUD, and they basically have said that you can
    look to pay off the mortgage and go find some other financing.
    And we've looked for other financing through the housing
    development authority, but that would raise the rents, as one
    of my other colleagues said, ``considerably,'' so it would no
    longer be affordable.
        So this bill would greatly help us because it would allow
    us to refinance and then allow us to take those efficiencies
    and convert them.
        As I mentioned in my testimony, as soon as we convert them
    to one-bedrooms, they would be rented.
        Chairwoman Waters. Wow, that's great.
        Mr. Lizarraga. So that would be very helpful.
        Chairwoman Waters. Thank you very, very much.
        I think, Mr. Slemmer, you had your hand up. You wanted to
    share something with us?
        Mr. Slemmer. Well, I just wanted to support the other
    testimony, as HUD already has the discretion, we believe, to
    allow excess funds to be put in a trust fund. There are
    examples that happened around the country where HUD could put
    restrictions on it for use for affordable housing development
    or land acquisition for affordable housing development to have
    sign-off control.
        So it's not like the money is going to be squandered at
    all. In fact, it's a waste of money, we believe. Transactions
    we did in California where you have excess funds available, HUD
    requires you to just put it in reserve for a property that
    doesn't need it. So it really is kind of ridiculous, and we
    think this legislation will solve that problem.
        Chairwoman Waters. That's excellent. Thank you very much.
        I'm going to recognize Ranking Member Biggert for
    questions.
        Mrs. Biggert. Thank you.
        Mr. Slemmer, you said that there was going to be a need for
    an additional 730,000 units by 2020. The program has been flat-
    funded, although there was a cut by the Administration and then
    the appropriations authorization has going up to being flat-
    funded from 2007 to 2008 in the appropriations bill.
        What role can the program play to meet the need then, the
    202 program?
        Mr. Frigo. Thank you very much.
        The program, I think, provides a vital piece of affordable
    housing spectrum in that it really serves very-low-income
    seniors with services in that housing. There are other
    programs. There are voucher programs that you are funding, as
    well as the tax credit program. But we think this legislation
    allows you to leverage the 202 funding so they can really
    provide more housing than it's producing now and also provide
    more services.
        Right now there are so many bottlenecks that prevent this
    program from being efficiently operated that we think it can be
    used and the money can be added to this to really provide a
    very significant piece of that 730,000 units that are going to
    be needed.
        Mrs. Biggert. Thank you.
        And Mr. Frigo, you know, I've been to see these
    efficiencies, and they really are small. But the building
    itself seems to be in pretty good shape and not quite as nice
    as the new facilities that you built recently. So, do you think
    it's more economical to refurbish those units rather than to
    start over again?
        Mr. Frigo. Yes, Congresswoman. We actually had our
    engineers look at the building and they came back and they
    said, you do not want to waste the money to tear this building
    down. It lends itself very nicely for rehabilitation, and it
    would be a crime to tear the building down because it is
    structurally sound.
        Mrs. Biggert. Is there any rule or regulation? It just
    seems to come to mind that if you refurbish, you have to
    provide the same number of units, like a one-for-one unit?
        Mr. Frigo. There is.
        Mrs. Biggert. And is that the problem that you have?
        Mr. Frigo. That's one of our problems. So in our case,
    where we have 100 efficiency apartments and we convert them
    into 50 one-bedrooms, we would have to find 50 units to replace
    the 50 that disappeared with the conversion. And when I first
    heard that rule, I thought it was a joke. And when no one was
    smiling from the other side from HUD, I said, so how do you do
    this?
        It was analogous to me of the Wizard of Oz, where they say,
    go find the witch's broom. I thought, how do you do this? So
    we've been trying to work that through, too, but that is a very
    difficult requirement to meet, for obvious reasons.
        Mrs. Biggert. So do you think this bill that's been
    introduced will alleviate that?
        Mr. Frigo. It would greatly assist us in what we're trying
    to do, absolutely.
        Mrs. Biggert. But what does it do for the one-for-one. Does
    it change the regulation? Is it a regulation?
        Mr. Frigo. My understanding that it makes it easier to take
    those efficiencies and convert them into one-bedrooms. So I
    don't know the specifics of all of it, and maybe somebody in
    the room does. But my understanding is that it would eliminate
    that roadblock of the one for one replacement, is my
    understanding.
        Mrs. Biggert. What we've seen thus far, it says that it's
    going to clarify that the reconfiguration of efficiencies to
    one-bedroom apartments is permissible where projects are
    struggling with vacancies and obsolete units. So it sounds like
    it, but I'm going to have to check out the language, and maybe
    Mr. Mahoney knows a little bit more about that.
        Mr. Slemmer. I don't believe it's in the statute now. I
    think this basically allows HUD not to require that one-for-one
    provision, so I think it directly deals with this and would
    solve the problem.
        Mrs. Biggert. Thank you. Would it also enable you to have
    the rent assistance so that it matches what the other buildings
    are?
        Mr. Frigo. The rent assistance would be invaluable, because
    currently the rent in that building is about $400 a unit, and
    it's not based on the individual's income. So we often have
    residents who come to us who want the existing one-bedrooms in
    that building, and because of their incomes, the rent would be
    in excess of 30 percent.
        So we're fortunate enough to be able to put them in other
    buildings, but the rent assistance would be the other wonderful
    portion of that, changing the bill to allow us to offer that to
    the residents.
        Mrs. Biggert. So in some cases the efficiency could cost
    more than a one-bedroom.
        Mr. Frigo. Absolutely, absolutely. And again, when you try
    to explain this to an elderly person, they look at you like you
    have three heads. And they say, ``Well, how can that be?'' And
    I said it's a HUD rule. That's why we're fortunate enough with
    the other buildings on our campus to say, well, let's not have
    you move into the Center Building. Perhaps you could move into
    one of our other buildings where there is the rent assistance.
        Mrs. Biggert. Do you have waiting lists for the other
    buildings?
        Mr. Frigo. Yes, we get five to ten phone calls a day, and
    like the rest of my colleagues here, we have a wait list of
    over a couple hundred. And we stop it and cap it off;
    otherwise, we would be up into the thousands.
        Mrs. Biggert. All right. Mr. Protulis, where do these
    people go? I mean, what do they do until they get off the wait
    list?
        Mr. Protulis. I'd like to, first of all, wish that you
    could come to one of our properties and see their faces when
    they call us after a couple of weeks and find out their name
    moved up in the list. And I'd like you to see also in South
    Beach, in one of the most wonderful areas, most expensive real
    estate, we have two gorgeous properties where our poor seniors
    live, where they're among the rich and famous. And I want you
    to see sometimes in the evening when a senior brings their meal
    from the room and they feed the homeless people who sleep
    between cars.
        I mean, that's the real world where we live every day. And
    I hope that you don't take my passion as who is a lunatic, but
    as an American who fought in Vietnam, and believes in the
    strong America that we have.
        To your question earlier, what this bill does to the
    increase of the need, the answer is that it doesn't do
    anything. We are trying to find resources to maintain what we
    have today, because in the study we have in our commission, 33
    percent of the stock that we have on 202s are being opted out.
        In many cases, a lot of people don't even have the
    opportunity to learn what we know in this organization, because
    we have multi-properties. They are single individuals. They
    have work from a church or from a group. They are actually
    starving to find ways, and there is no resolve from anyone to
    help that hundred units.
        So where do the seniors go? I tell you where they go. They
    go to their families. They go to shelters, like in some cases
    cities provide them. And in most cases, they are individuals.
    They actually live in multi-couples and sleeping two or three
    of them at a time.
        I promise you that if you see some of the seniors, when
    they take that first step to a brand new room, you will never
    forget their faces, because it's almost like a new day for
    them. And remember, some of us have been in this business. We
    have an age population between 79 to 82 years old. And as the
    fastest-growing age population, and we have the baby boomers
    coming, so.
        Mrs. Biggert. Well, thank you very much for your passion.
        Thank you. I yield back.
        Chairwoman Waters. Thank you so very much.
        Mr. Clay?
        Mr. Clay. Thank you, Madam Chairwoman, and let me thank you
    for conducting this hearing as well as thank my colleague from
    Florida, Mr. Mahoney, for the introduction of this bill.
        I'd like to start the questioning with Mr. Slemmer, who has
    a property in the City of St. Louis you mentioned, Roosevelt
    Apartments, and Roosevelt happens to be across the street from
    my district office. A wonderful facility, I notice that the
    residents appreciate living there.
        I heard one witness say that it's more cost-effective to
    renovate an older building. Have you found that to be the case,
    that it's more cost-effective to renovate than to build new?
        Mr. Slemmer. Right. It's considerably less expensive. We
    average, I think, about $70,000 a unit hard cost in 202s. It's
    a lot more in other parts of the country, Los Angeles, I'm
    sure. But the renovations are coming in at $20- to $30,000 a
    unit, and many of these older properties for $20- to $30,000 a
    unit, you can get another 30 years of life, so it's
    significantly less expensive.
        Mr. Clay. I raise the issue, because in St. Louis, we have
    a troubled property for aging seniors called Council Towers,
    built in the mid-1960's. It is now roach-infested, rodent-
    infested, and has broken elevators. And what is HUD's initial
    reaction when you bring this to their attention, that these are
    problem properties? What has been your experience with HUD?
        Mr. Slemmer. Well, it varies across the country. Some HUD
    offices are better than others. But the primary problem we have
    with HUD is that they are kind of trapped by their own set of
    regulations. So we have a property like you mentioned in
    Sandusky, Ohio, and it's a property that was sponsored by the
    Kiwanis Club. It's built back in the late 1960's, and we have
    several problems that arise.
        Will there be existing HUD debt on that property that has
    to be forgiven or somehow subordinated? That's a big problem
    for HUD. Oftentimes, you reconfigure units. That's a big
    problem for HUD. So you get trapped in the HUD regulations
    oftentimes, and trying to combine the tax credit timing cycles
    with HUD ability to make approvals is really a serious problem.
        Secretary Garvin talked about HUD being interested in
    preservation. I think they are. They're talking about it. I
    think they need an ombudsman or somebody that really expedites
    this process, because preserving affordable housing is
    complicated. It's tricky. And HUD regulations need to be
    interpreted, and they don't have anybody on their staff that
    knows how to do that, really.
        Mr. Clay. Thank you for that response.
        Ms. Feingold, HUD has said that there is a 30 percent
    increase in the 2008 Section 202 request. Is this enough money?
    And, if not, what funding level is needed?
        Ms. Feingold. Thank you for that question, Congressman. In
    the Seniors Commission Report in our research, we documented
    that in 2002, there was a shortage of 6.1 million units of
    housing to serve people with the most serious needs, either
    financial needs or health needs or the condition of their
    housing needs. And we projected that the need would go up to
    $7.5 million in 2020, if we didn't do anything. And the truth
    is, we haven't done anything since 2002.
        The minority report of the Seniors Commission recommended
    that we develop 60,000 units of 202 a year. That won't fill the
    gap, but it at least will show a commitment to trying to fill
    the gap and it will begin to house the serious need we see
    right now.
        The question was raised, what happens to people when their
    rents go up. With another of my hats, I'm a founder of
    something called the Committee to End Elder Homelessness in
    Boston. The number of elder homeless has doubled in the last 5
    years. And what happens to elderly people who are homeless? You
    know the answer. They die. We are consigning old people to
    death with some of the things we're doing for lack of
    commitment to a serious attempt to meet the needs that we have
    now, and they are growing into the future.
        I'll stop. I get excited.
        Mr. Clay. Thank you so much for your response. I thank the
    panel for their testimony.
        Thank you, Madam Chairwoman. I yield back.
        Chairwoman Waters. Thank you very much, Congressman Clay.
        And now, we're going to go to the author of the
    legislation, who should be feeling tremendously proud based on
    the testimony that we have heard here today. This bill is going
    to indeed change lives, protect people, and provide
    opportunities that never would have been available, but for
    what you are doing.
        And I want you to know that if what you have heard today,
    that there is a need to additionally do a little bit more
    amending or adding, you have the support of your colleagues to
    do that. And I certainly hope that we do everything that we can
    to give the flexibility and allow for the creativity in order
    to preserve and expand, and provide more services to you, Mr.
    Mahoney.
        Mr. Mahoney. Thank you, Madam Chairwoman.
        I'm going to quickly ask you each a question, and then I'm
    going to make some comments. And then I'm going to come back to
    you, and I want it to be very succinct.
        My interest is, and I appreciate the support for many of
    the comments, but I want to know from each of you very
    succinctly, what is one thing that we could do to make this
    bill better, that would make life better? And while you're
    thinking about that, I just want to say that, you know, I
    appreciate it.
        I mean, I was a businessman 2 years ago, and you know,
    there's a large part of life you don't see. And I'm blessed to
    have had the opportunity to do some public service and to go
    out into the community and to see the needs. And I think
    America is blessed to have people like yourself who are
    battling for them. But I'm also blessed to have the leadership
    of Chairwoman Waters and the people on this committee who not
    only allow you to see problems, but to have the wisdom and
    experience of working so many years on this issue to be able to
    help people like myself do something meaningful.
        The other thing I'm going to say is that this is an issue
    of dignity. This is a national moral issue. This is an issue of
    priorities. This country has the resources to take care of its
    people with dignity without raising taxes. Not everything in
    life can be fixed by a tax cut and a prayer. Okay? And this is
    one of these issues that needs to be done.
        So my question is, what is the one thing that we could do
    to make this a better bill, to cut through the bureaucracy, to
    whatever, to make this more meaningful so that you can do your
    jobs?
        Mr. Lizarraga?
        Mr. Lizarraga. Yes. Allow us to refinance and leverage
    these dormant assets in order we can reinvest back into the
    housing stock and the service of the seniors.
        Mr. Mahoney. Thank you.
        Mr. Slemmer. I think the most important piece of
    legislation is a voucher or preservation voucher so that the
    older 202s, when they're rehabbed, the residents in there can
    stay in place at the same rent. That needs to be strengthened,
    I think, a little bit.
        Ms. Kondor. I also have seven 236 properties with very
    little Section 8 assistance in those properties, as well. We
    have many very-low-income seniors who don't receive it, and I'd
    like to see those Section 236 people be able to benefit, too,
    in the event we refinance those facilities.
        Ms. Feingold. I would like to broaden what my colleague
    just said. I think the single most important thing that you can
    build into this bill is ways to make the regulations of the
    various programs work better together. For example, we're
    talking about helping the refinancing and the use of surplus
    resources for 202s. We need the same rights for 236.
        That's the problem my organization has dealt with, the tax
    credit programs. These are regulated by IRS. Somebody has to
    sit down and put together the necessary regulations and
    statutory requirements of those programs so that they work
    together. It should not be so hard to make these things work
    together.
        Mr. Mahoney. Thank you.
        Mr. Frigo. I'm going to stay on the Section 236 theme a
    little bit, because we have the same situation with another
    building that we did not discuss today. And that would be very
    helpful, again.
        Oftentimes, we have to refer people from that building--
    that's the 236--to another building, because of the Section 8.
    But as far as what you put together here, I would like to
    commend you again, because it greatly helps us with our
    efficiency problem. So thank you.
        Mr. Protulis. My God, asking me for one statement is like
    asking if it's going to--
        Mr. Mahoney. We're all praying.
        [Laughter]
        Mr. Protulis. I will try to say to you that the fully
    funding of construction of the way the program is working
    today, we are already behind the eight-ball when you get your
    award. It is unbelievable that those of us that worked so hard
    to get a meager 40 or 50 units, we have to go hustle extra
    money because the government does not want to give us a full-
    funded construction for properties that we deserve and we show
    a need. And the government seems to know when they give us the
    money, that we're already behind the eight ball, and they say
    well, that's what you get. You don't want it, I have somebody
    else waiting for it.
        That, in my opinion, is wrong.
        Ms. Allton. I would just add that in the legislation I'm
    very thrilled to see that funding would be allowed to use for
    service coordination. What I would like to see is that it's
    not--it's a nice allowance, but it's an absolute requirement.
        Because what tends to happen is when developers or owners
    are looking at their budgets, they will tend to opt-out of that
    service coordination line item, because it costs too much money
    in a very competitive environment.
        So to put everybody at the same table, you know, around the
    table, to make it a requirement, not an option.
        Mr. Mahoney. Could you do me a great favor and put this in
    writing and send that to me so we can look at things to do to
    amend?
        And again, Chairwoman Waters and Ranking Member Biggert, I
    am honored to be here today to be part of this hearing. It's
    very gratifying, and it's again wonderful to be working under
    your leadership. Thank you.
        Chairwoman Waters. Thank you so much, Mr. Mahoney. And I
    want to congratulate you for putting together a wonderful piece
    of legislation that's so desperately needed. And again, I want
    to congratulate you for raising that last question of what else
    possibly can be done to make it even a stronger bill. And we
    await your leadership with whatever additions, amendments,
    again. I certainly believe that you're going to have support
    from both sides of the aisle.
        Don't you think, Mrs. Biggert?
        [Laughter]
        Chairwoman Waters. Thank you all very much.
        The Chair notes that some members may have additional
    questions for this panel, which they may wish to submit in
    writing.
        Without objection, the hearing record will remain open for
    30 days for members to submit written questions to these
    witnesses and to place their responses in the record. Thank you
    so much. The panel is now dismissed.
        [Whereupon, at 12:38 p.m., the hearing was adjourned.]

                                A P P E N D I X

                               September 6, 2007

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