[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
39-538 PDF WASHINGTON DC: 2007
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California RICHARD H. BAKER, Louisiana
CAROLYN B. MALONEY, New York DEBORAH PRYCE, Ohio
LUIS V. GUTIERREZ, Illinois MICHAEL N. CASTLE, Delaware
NYDIA M. VELAZQUEZ, New York PETER T. KING, New York
MELVIN L. WATT, North Carolina EDWARD R. ROYCE, California
GARY L. ACKERMAN, New York FRANK D. LUCAS, Oklahoma
JULIA CARSON, Indiana RON PAUL, Texas
BRAD SHERMAN, California PAUL E. GILLMOR, Ohio
GREGORY W. MEEKS, New York STEVEN C. LaTOURETTE, Ohio
DENNIS MOORE, Kansas DONALD A. MANZULLO, Illinois
MICHAEL E. CAPUANO, Massachusetts WALTER B. JONES, Jr., North
RUBEN HINOJOSA, Texas Carolina
WM. LACY CLAY, Missouri JUDY BIGGERT, Illinois
CAROLYN McCARTHY, New York CHRISTOPHER SHAYS, Connecticut
JOE BACA, California GARY G. MILLER, California
STEPHEN F. LYNCH, Massachusetts SHELLEY MOORE CAPITO, West
BRAD MILLER, North Carolina Virginia
DAVID SCOTT, Georgia TOM FEENEY, Florida
AL GREEN, Texas JEB HENSARLING, Texas
EMANUEL CLEAVER, Missouri SCOTT GARRETT, New Jersey
MELISSA L. BEAN, Illinois GINNY BROWN-WAITE, Florida
GWEN MOORE, Wisconsin, J. GRESHAM BARRETT, South Carolina
LINCOLN DAVIS, Tennessee JIM GERLACH, Pennsylvania
ALBIO SIRES, New Jersey STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota TOM PRICE, Georgia
RON KLEIN, Florida GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida PATRICK T. McHENRY, North Carolina
CHARLES 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
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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
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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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