[Senate Hearing 110-918]
[From the U.S. Government Publishing Office]
S. Hrg. 110-918
REAUTHORIZATION OF THE HOPE VI PROGRAM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
HOUSING, TRANSPORTATION, AND COMMUNITY DEVELOPMENT
OF THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
ON
THE HOPE VI IMPROVEMENT AND REAUTHORIZATION ACT OF 2007
__________
WEDNESDAY, JUNE 20, 2007
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York WAYNE ALLARD, Colorado
EVAN BAYH, Indiana MICHAEL B. ENZI, Wyoming
THOMAS R. CARPER, Delaware CHUCK HAGEL, Nebraska
ROBERT MENENDEZ, New Jersey JIM BUNNING, Kentucky
DANIEL K. AKAKA, Hawaii MIKE CRAPO, Idaho
SHERROD BROWN, Ohio JOHN E. SUNUNU, New Hampshire
ROBERT P. CASEY, Pennsylvania ELIZABETH DOLE, North Carolina
JON TESTER, Montana MEL MARTINEZ, Florida
Shawn Maher, Staff Director
William D. Duhnke, Republican Staff Director and Counsel
Jennifer Fogel-Bublick, Counsel
Mark A. Calabria, Republican Senior Professional Staff Member
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George Whittle, Editor
------
Subcommittee on Housing, Transportation, and Community Development
CHARLES E. SCHUMER, New York, Chairman
MIKE CRAPO, Idaho, Ranking Member
DANIEL K. AKAKA, Hawaii ELIZABETH DOLE, North Carolina
ROBERT P. CASEY, Pennsylvania MEL MARTINEZ, Florida
JACK REED, Rhode Island WAYNE ALLARD, Colorado
THOMAS R. CARPER, Delaware MICHAEL B. ENZI, Wyoming
SHERROD BROWN, Ohio CHUCK HAGEL, Nebraska
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
ROBERT MENENDEZ, New Jersey
Carmencita N. Whonder, Staff Director
Gregg A. Richard, Republican Staff Director
C O N T E N T S
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WEDNESDAY, JUNE 20, 2007
Page
Opening statement of Chairman Schumer............................ 6
Opening statements, comments, or prepared statements of:
Senator Dole................................................. 5
Senator Crapo................................................ 6
Senator Allard............................................... 7
Senator Martinez
Prepared statement....................................... 34
WITNESSES
Barbara Mikulski, U.S. Senator from Maryland..................... 1
Orlando J. Cabrera, Assistant Secretary for Public and Indian
Housing, Department of Housing and Urban Development........... 8
Prepared statement........................................... 35
Dave Wood, Director of Financial Markets and Community
Investment, Government Accountability Office................... 20
Prepared statement........................................... 45
Richard Baron, Chairman and Chief Executive Officer, McCormack,
Baron, and Salazar............................................. 21
Prepared statement........................................... 61
Sue Popkin, Ph.D., Principal Research Associate, Metropolitan
Housing and Communities Policy Center, Urban Institute......... 22
Prepared statement........................................... 64
Charles Elsesser, Jr., Member of the Board of Directors, National
Low Income Housing Coalition................................... 24
Prepared statement........................................... 87
Sandra Henriquez, Administrator and Chief Executive Officer,
Boston Housing Authority....................................... 25
Prepared statement........................................... 100
REAUTHORIZATION OF THE HOPE VI PROGRAM
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WEDNESDAY, JUNE 20, 2007
U.S. Senate,
Subcommittee on Housing, Transportation, and
Community Development,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The subcommittee met at 2:10 p.m., in room SD-538, Dirksen
Senate Office Building, Senator Charles E. Schumer (Chairman of
the Subcommittee) presiding.
Chairman Schumer. I will call the hearing to order, and
because Senator Mikulski has been waiting and because I was
late, I would like to make up the lost time for her, and we
will do our opening statements, if that is OK with the
Committee, after we hear from our first witness, who has been
such an active and strong leader in the HOPE VI Program.
STATEMENT OF BARBARA MIKULSKI, U.S. SENATOR FROM MARYLAND
Senator Mikulski. Mr. Chairman, knowing how compelling and
charismatic both you and Senator Crapo are, I am happy to
listen, but I accept the professional courtesy. I think I will
be treated to the charisma and compelling later on.
But, in all seriousness----
Chairman Schumer. We are still trying to find our charisma.
Right, Mike?
Senator Crapo. Right.
Senator Mikulski. In all seriousness, though, Mr. Chairman
and Senator Crapo, I really want to thank you for holding this
hearing on the reauthorization of HOPE VI. The bill that we
want to present to you today, Senate bill 829, has been the
result of serious work on the part of a task force well versed
in the issues of HOPE VI, and truly the preparation of the bill
has been done on a bipartisan basis. We have worked very
closely with Senator Jack Reed and also with Senator Martinez
himself, where we worked with him hands on in his capacity as
Secretary of HUD and now on this Committee.
Mr. Chairman, we are here today because we want to present
to you what we think a modern HOPE VI bill should be and also
to have a sense of urgency that this is the right time to pass
it because of the compelling need in the community and the
strong bipartisan support in both the U.S. Senate as well as in
the House of Representatives.
Mr. Chairman and colleagues, HOPE VI has been one of the
most important Federal programs created for HUD for the
revitalization of communities, lowering the concentration of
poverty, and creating a self-help, self-sufficiency momentum
for people who have lived in public housing. HOPE VI has
offered real opportunity for public housing residents and new
hope for the communities around the public housing.
I created this program in 1992. At that time Jack Kemp was
Secretary of HUD, and he was full of a lot of innovative ideas.
One of the things that he wanted to do was to sell public
housing to the poor, like Maggie Thatcher was doing in England.
But the difference was public housing in the United States at
that time was very distressed and very dilapidated. I knew that
the poor did not want to buy 100,000 units of public housing
where we, the Federal Government, was one of the biggest slum
landlords. Why should we sell the slums to those least able to
transform it? But we wanted to have new thinking and new ideas,
and working with Dr. Art Naparstek and the Commission on
Distressed Housing, we came up with the idea of HOPE VI.
No. 1, tear down the highrises, and the whole point of
tearing down the highrises was to lower the concentration of
poverty, which in and of itself created zip codes of poverty
and other social pathology--crime, low graduation rates, high
rates of illegitimacy. By reducing that, we also knew that what
we wanted to do was change not only the physical architecture
but create a new social architecture, moving people to self-
sufficiency. We knew that public housing should not be a way of
life but a way to a better life. So that was the whole
thought--new surroundings related to mixed income and then, No.
2, the processes involved would also move to self-sufficiency.
It has been a tremendous success. There have been lessons
learned, problems not anticipated, but we are ready to move on.
What our legislation does is not only reauthorize but it
reforms public housing, it refreshes it, and it reinvigorates
it. If this legislation is passed, it will be better for the
taxpayer, we will get more out of it; and it will be better for
the beneficiaries because they will have more to work with.
This legislation codifies best practices from the programs
that really work, and it corrects those issues that we
identified are really problems. It is what we need to do to
empower communities and the hard-working people who live in it.
Just a quick look at what this program has already meant.
Since HOPE VI was created, 63,000 old units have been
demolished. But that is not the real story. What has been the
real story is the transformation of communities, the
transformation in the lives of people, and the transformation
of communities around it. Secretary/Senator Martinez also
helped keep this program going during very dark times.
Now, later on you are going to be hearing from Urban
Institute. They have been the keeper of the data base. When we
created this program, we wanted to gather data to make sure we
were on the right track, and we wanted to make sure it was done
outside of Government so that we could have an independent
evaluation. So if you want to have really the hard data, they
are going to be the group that will also be able to tell you
that.
But as we looked ahead, we really wanted to talk about the
practitioners who really knew what worked and what did not.
That is why we asked Ms. Renee Glover, the Executive Director
of the Atlanta Housing Authority, and Eleanor Bacon to pull
together a task force. Ms. Glover by all accounts is one of the
national leaders in how to make best use of HOPE VI, and
Eleanor Bacon was the pioneering director of HOPE VI at HUD.
This was the finest 30 HOPE VI minds that we could put
together.
So, Mr. Chairman, in a nutshell, though, what does the new
revitalized, reinvigorated HOPE VI do? First of all, we wanted
to continue to end the concentration of the poor in distressed
neighborhoods. No. 3, we know that the best way to do that is
to create mixed-income communities. But housing is not enough.
One of the most important lessons learned was school system,
school system, school system. That is what attracts the middle
class to live in a mixed-income unit, and that is also the
turbo motor to move the poor ahead.
We do not try to reform entire school systems. We leave
that to mayors and school boards. What we do say is that if you
want the HOPE VI money, you have to make sure that the school
in that neighborhood is also in the process of transforming
itself so it can transform the life of the children. So we
encourage that HOPE VI grant recipients be in partnerships with
the local school superintendent to make sure school
transformation is underway.
The second thing is we want to make sure that mayors are
involved, that this is not just a bucket of free Federal bucks
for them to do real estate development. This is not a bill for
the developers. We are into the development of human capital,
not for Federal funds to go to developers. We want the
developers because they bring private sector know-how, but it
has got to be tied to a mayor so that we get that comprehensive
social service effort to move people to self-sufficiency.
We do also provide adequate support services because the
emphasis is self-sufficiency for the adults, education for the
children, transformation of lives, as well as the physical
attributes. We feel that those are some of the great building
blocks of this program. We hope to change these older
neighborhoods.
We think that what we have for you is lessons learned on
the issues of relocation, the issues of time delays and
dragging it out. There are a lot of aspects here that require
reform, one of which is the issue of relocation, the right to
return, as well as wise use of dollars, making sure that a
mayor is involved along with the developer.
Again, Mr. Chairman, I want to say that I have done a lot
of things in the Congress, and when I look at what are some of
my proudest accomplishments, HOPE VI has been one. And the
reason I say that, it is not about what I did. What I did was
help create a Federal framework. Then all who did it--the
executive branch making sure that it was administered properly,
but it was the ingenuity and resourcefulness of local
government, responsible developers, and the grit of the poor
themselves--the grit of the poor themselves--that have made
this a success. Now it is time to look at it, refresh it,
reform it, face the problems, but I think we owe it to the poor
and we owe it to the taxpayer to pass this legislation.
I will be happy to answer any questions you have.
Chairman Schumer. Thank you, Senator Mikulski. First I want
to thank you for your leadership. You created this program, but
you have also followed it almost day to day to make sure that
it is a success, and your recommendations and the
recommendations of your task force will be really taken very
seriously and are going to be part of the legislation that we
hope to move out of this Committee. So thank you.
Senator Mikulski. Well, Mr. Chairman, I want to thank you
and your staff and Secretary Martinez and Senator Reed. They
have really been outstanding. My staff and I also express that.
You know, when we work together, we can really do it right,
and we have worked together.
Chairman Schumer. Thank you, and we will work with you to
continue to do that. Thank you, Senator Mikulski.
Senator Martinez. Mr. Chairman, if I may just say a word?
Chairman Schumer. Please.
Senator Martinez. I just wanted to thank the Senator for
her comments and particularly as directed to me. But I just
wanted to tell you it has been a real pleasure working with
you. I know how passionate you are about this program. You are,
it is often said, the ``Mother of HOPE VI,'' and I believe that
is appropriately so. You have really done so much not just for
the--I thought that the words you said were perfect, not only
the physical architecture but the social architecture. And
people do not always understand that, because as we see a
miserable 10-story high-rise go down and something new and more
attractive rebuilt, what people may sometimes not understand is
what a difference it makes in the lives of people that are
touched by both of these architectures. And so you have been
wise enough to lead us in that direction, and I just wanted to
thank you for your passion and your continued involvement in
this issue.
Chairman Schumer. Thank you.
Senator Reed.
Senator Reed. Can I simply commend the Senator for her
vision and her leadership and her unflinching support for this
great program, and I associate myself with your comments and
Secretary/Senator Martinez's comments.
Thank you, Mr. Chairman.
Chairman Schumer. Thank you.
Thank you so much, Senator Mikulski, for this and all the
things that you do. And the record will show that all of us, if
the rules had allowed, would have applauded, would have joined
the sole person in the back of the room applauding. But we do
not allow that around here.
[Laughter.]
For those who came in later, we went right to Senator
Mikulski so she could get on with her busy schedule. Senator
Dole has a--I know the Judiciary Committee has judicial
nominees, and she is introducing some. So if the Committee does
not mind, we will let Senator Dole make the first opening
statement and we will not make any of our ours.
STATEMENT OF SENATOR ELIZABETH DOLE
Senator Dole. Thank you. Thank you very much, Mr. Chairman
and Ranking Member Crapo, for holding this very important
hearing regarding the HOPE VI Program, and I am just so pleased
to cosponsor Senator Mikulski's bill, the HOPE VI Improvement
and Reauthorization Act of 2007, which would extend HOPE VI to
fiscal year 2016 and add education and relocation-related
benefits to the program.
As many on this Committee have seen firsthand, the HOPE VI
Program provides grant funding to local housing authorities to
renovate or demolish and replace existing public housing, as we
have heard, and transform it into new mixed-income housing.
This program has been credited with eliminating some of the
most dangerous and dilapidated neighborhoods in my home State
of North Carolina, thus providing safer environments for
families and creating positive ripple effects throughout the
community.
For example, a study of eight HOPE VI sites nationwide by
the Housing Research Foundation found that in communities
surrounding recent HOPE VI developments, per capita incomes
were up, neighborhood unemployment rates were down; and
compared to the overall city, commercial and residential
lending increased faster and crime rates declined more sharply.
Since the program's inception, North Carolina has received
more than $300 million in HOPE VI grant funding, more than all
but six States. And as a result, we are home to a number of
very successful developments. For example, last August I was
privileged to attend the opening of Willow Oaks in Greensboro.
With the help of a $26 million HOPE VI grant from HUD, this
thriving, safe community has risen up from a site once
overwhelmed by poverty and ridden with crime, and this grant
was leveraged into $100 million in private investment.
In addition to affordable, safe housing, Willow Oaks offers
residents job training, counseling, child care, and other
critical services. The people living here not only have keys to
a home, they have keys to a better quality of life and a
brighter future.
Piedmont Courts in Charlotte and Capital Park in Raleigh
are also shining examples of thriving HOPE VI developments that
I have toured. The year before Capital Park was torn down, the
onsite police station received more than 1,500 calls, including
two reports of officer-related shootings. Remarkably, in the
year after Capital Park was built, there were just two calls to
the police--one to report a break-in, the other to turn in a
man stealing out of unlocked cars.
The innovative thinking that has made North Carolina's HOPE
VI developments such resounding successes should be replicated
by housing authorities elsewhere, both in my home State and
across the Nation, and this Committee must do its part to
ensure this program continues to flourish.
The HOPE VI Program also provides the opportunity for
residents to get on track to becoming homeowners. For example,
many developments provide financial planning workshops that
stress savings for downpayments and unexpected costs. I simply
cannot say enough about the positive effects of homeownership.
Parents who own their own home provide more stable environments
for their children. These children do better in school. They
become more involved in the community. These families are able
to build wealth, many for the first time, thereby helping
secure funds for retirement and for higher education. Families
who own their own homes also are more likely to spend the money
necessary to properly maintain those homes. These positive
results, again, extend throughout the community and the
economy.
Homeownership in this country is at record levels, and we
should continue to focus our efforts on raising it even higher,
especially minority homeownership.
So, again, Mr. Chairman, I thank you for holding this
hearing for a program that is very near and dear to my heart,
and that is because it is making a difference to so many people
in North Carolina and across the Nation.
Thank you very much.
Chairman Schumer. Well, thank you, Senator Dole, and I very
much appreciate your remarks.
OPENING STATEMENT OF CHAIRMAN CHARLES E. SCHUMER
Chairman Schumer. Now, I am going to ask unanimous consent
put my remarks in the record, because I know we want to get on
to the witnesses, and Senator Mikulski and Senator Dole have
summed up much of what I would say. I just do want to say that
in New York HOPE VI has been the same success it has been in
other places across the country. We have six HOPE VI projects--
in Albany, in Niagara Falls, in Buffalo, in Utica, in Yonkers,
and in New York City. They have been extremely successful doing
just what HOPE VI is intended to do, which is, A, provide a
much better physical environment, but even more important, a
much better social environment where we have a mixture of all
different kinds of people. And that is why I think Senator
Mikulski's legislation--I know Senator Reed, Senator Martinez,
and everyone here who has provided such leadership here--really
important.
I call on Senator Crapo.
STATEMENT OF SENATOR MIKE CRAPO
Senator Crapo. Well, thank you very much, Chairman Schumer,
and I will do the same and just make brief remarks.
This is probably the first opportunity I have had to
publicly in one of our hearings tell you how glad I am to be
able to work with you on this Subcommittee. I continue to
appreciate the work that we have done together with Senator
Reed, Senator Allard, and the other Members of the
Subcommittee, who have given such great leadership in the past.
Truly, the remarks that have already been made by Senator
Mikulski and Senator Dole and yourself, Mr. Chairman, have laid
out the important goals we have for strong public housing
programs. And my objective here today will be to see if we can
continue to extend that.
I think everybody knows that there are those who contend
that there are some inefficiencies, or some improvements that
can certainly be made in the approach that the HOPE VI Program
has, and my focus today is going to be to learn about those
suggestions and see if there are ways, as Senator Mikulski
said, that we can reform and revise but continue to move
forward aggressively to make the maximum use of the dollars we
have available for supporting and strengthening public housing.
Chairman Schumer. I would also ask unanimous consent that
Senator Martinez's full statement be put in the record.
Senator Reed.
Senator Reed. Thank you for convening the hearing. And once
again, I think we all are saluting, very appropriately, Senator
Mikulski for her leadership.
Thank you, Mr. Chairman.
Chairman Schumer. Thank you, and thank you for your
leadership as Chair of this Committee and your advocacy for
HOPE VI as well. I know you have worked with Senator Mikulski
closely on this issue.
Senator Allard.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Mr. Chairman, I have a short statement I
would like to make. It brings in a little different perspective
than what everybody else has been commenting on. And I
appreciate the opportunity to participate in the hearing on
HOPE VI programs.
In 1992, the National Commission on Severely Distressed
Public Housing estimated that 86,000 federally subsidized
public housing units were severely distressed and subjecting
the families residing in them to extreme poverty and
intolerable conditions. The HOPE VI Program was created to
demolish these units, later expanded to a total of 100,000,
transforming them into mixed-income communities by 2003.
The program was also designed to contribute to the
improvement of the surrounding neighborhood, provide housing
that will avoid or decrease the concentration of very low-
income families, and create opportunities for residents to
achieve self-sufficiency. And it is hard to argue with these
goals. However, goals alone do not create a good Federal
Government program.
To define success, we must examine outcomes. Unfortunately,
the HOPE VI Program does not have such a good track record on
the outcomes side. Of the $5.8 billion in grants awarded, more
than $1.4 billion remains unspent. Many guarantees have
significant delays.
We must also consider the costs, especially the opportunity
costs, when evaluating the success of HOPE VI. According to the
General Accounting Office, the HOPE VI Program costs
significantly more per family than other Federal housing
assistance programs. While the HOPE VI goals are laudable, how
many more families could have been provided decent, safe,
sanitary, and affordable housing had the same taxpayer dollars
been devoted to other programs?
These, along with a number of other factors, have led the
administration to give the HOPE VI program a rating of
``ineffective'' under the PART Program. This is where they
measure outcomes. And what does ``ineffective'' mean? According
to the administration, programs receiving this rating are not
using their tax dollars effectively. Ineffective programs have
been unable to achieve results due to a lack of clarity
regarding the program's purpose or goals, poor management, or
some other significant weakness. A program meeting this
description does not sound like the best way to assist low-
income people to me.
I recognize that HOPE VI projects have been completed on
time, on budget, and would be considered successful in meeting
the program goals. We perhaps ought to spend some time in
looking at those successful projects, and I congratulate those
cities and housing authorities for their work.
Unfortunately, the success of a few projects is not
sufficient justification to extend an inefficient program in
its current form. Today's hearing will be an opportunity for
this Subcommittee to examine both the successes and
shortcomings of the HOPE VI Program, and this information will
be helpful, I am sure, as we move forward, and I look forward
to the witnesses' testimony.
Thank you, Mr. Chairman.
Chairman Schumer. Thank you, Senator Allard.
Now let me ask our second witness to come forward, and he
is Orlando Cabrera. He is the Assistant Secretary of Public and
Indian Housing at the Department of Housing and Urban
Development. Mr. Cabrera has held his position since 2005, and
prior to that he had various positions with the Florida Housing
Finance Corporation, including its Vice Chairman, Chairman, and
Executive Director.
Mr. Cabrera, your entire statement will be read into the
record, and you may proceed. You have about 5 minutes.
STATEMENT OF ORLANDO J. CABRERA, ASSISTANT SECRETARY FOR PUBLIC
AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. Cabrera. Thank you, Mr. Chairman, Senator Crapo, and
Members of the Committee. My name is Orlando Cabrera, for the
record, and I am Assistant Secretary for Public and Indian
Housing at the Department of Housing and Urban Development.
Thank you for inviting HUD to present its views on issues
relating to the HOPE VI Program.
Our written statement sets forth many of our thoughts on
HOPE VI. This oral statement will focus on our hope for HOPE
VI.
No HOPE VI deal gets done simply on its own as a Federal
grant. Many other levels of financing need to be brought into
the HOPE VI transaction for that transaction to work and
produce housing. We believe that HOPE VI is hard enough to use
and, if the program would be reauthorized by Congress, that the
path to its greater success is greater simplicity and not
additional complexity.
For example, many States struggled in their policy decision
on how to treat HOPE VI deals because the complexity of HOPE VI
deals prolonged the development process, causing the low-income
housing tax credit to go stale, if you will, thereby hurting
States in two ways.
First is lost opportunity; namely, HOPE VI transactions
historically demand a lot of tax credits, and so other low-
income housing tax credit units were not constructed because
the tax credit was committed to the HOPE VI transaction.
And, second, often, and particularly early on, the HOPE VI
Program applicant was a PHA with scant or no development
experience, meaning that the allocation would go in--I am
sorry, would go on or underutilized because of capacity issues.
The good news is that the second prong has been remedied in
many instances. PHAs have become better applicants and have
become better economic partners and, therefore, better
developers. Unfortunately, the first prong has not progressed
much. One reason for that is that HOPE VI deals are very
complex. As was previously noted, no HOPE VI deal can be funded
on its own. One thought we would suggest in the process of your
consideration of HOPE VI legislation is that simplicity,
wherever possible, be the mantra and to remember that every
time something outside of a housing context is added to a HOPE
VI deal, that deal's viability decreases because its costs are
increasing.
We would suggest that encouraging certain policy
prerogatives would make sense, but that such policy
prerogatives be accompanied by answering the following
questions:
If the prerogative is added, will it make a HOPE VI
transaction less viable because it has added costs? Has adding
the policy prerogative made the HOPE VI transaction less
competitive when it is postured for competition for tax
credits, private activity bonds, and/or if one would want to
delve this far down, other State subsidies that might be
available in a discrete State?
This is what we suggest would help the viability of HOPE
VI. My written statement sets forth many of the issues that
have hampered HOPE VI. If and when Congress acts to reauthorize
HOPE VI, we believe the approach proffered in this testimony
would add value to the program and, accordingly, offer it
respectfully.
Thank you once again for your invitation to testify before
the Committee. I would be happy to answer any questions that
you might have.
Chairman Schumer. Thank you, Mr. Secretary, and we will
begin the rounds. We will allow 5 minutes to each of us.
My first question is a very simple one. Do you agree that
HOPE VI is not just about bricks and mortar but also about
rebuilding communities and fostering self-sufficiency?
Mr. Cabrera. I think HOPE VI is primarily about bricks and
mortar, and when it is not about bricks and mortar, it is very
hard to do a HOPE VI deal. The more you move away from bricks
and mortar, the more likely that you are going to be in that
group of deals that is in the 70 percent or so that have not
yet been completed.
Chairman Schumer. Let me ask a second question. The Urban
Institute and others have estimated that there is still a
significant stock of severely distressed housing. Has HUD done
a comprehensive inventory of the public housing stock? And has
HUD determined that there are no severely distressed buildings?
Mr. Cabrera. I do not think HUD would ever determine that
there were no severely distressed buildings. The last study
that was done was in 1997. Recently, as part of our
appropriation package, we have put in as a first priority a
study or a revisiting of the study that was done in 1997.
Chairman Schumer. And what percentage of buildings then
were regarded as severely distressed in 1997?
Mr. Cabrera. Mr. Chairman, I do not recall, but I am happy
to answer that in a subsequent inquiry.
Now, as I understand it from your testimony, the HOPE VI
Program has exceeded HUD's goals on almost every count--
relocation, construction, and completed units. Is that correct?
Mr. Cabrera. In the last fiscal year, in the last fiscal
period for assessment.
Chairman Schumer. OK. So here is my question. Why then has
the administration proposed to terminate and rescind HOPE VI
funds, first? And, second, what is HUD's plan for revitalizing
the remaining distressed units across the country?
Mr. Cabrera. There are a variety of ways to address
distressed units. It is not just HOPE VI. HOPE VI as an engine
has had--I call it a ``Dickensian record'': very good, a lot of
very bad, very little in between. And the reason is because it
is very difficult to use, and so what you have is the capital
fund. You have access to low-income tax credits. You have
private activity bonds. You have State programs in many States
that have programs that would help rehabilitate and build new
units.
So the issue in most cases when you are dealing with the
asset of affordable housing, which is a much broader spectrum,
is to essentially use the full menu of what is out there.
Now, HOPE VI as a component of that is in some cases very
good. I think I can point to some very real successes in some
very important areas of the country. But I can point to a lot
of places where there has not been success and there has been a
very real problem.
Chairman Schumer. But does it not make sense then to build
on the successes and change the program? I have just been
informed there is a backlog of $18 billion in capital needs in
terms of public housing.
Mr. Cabrera. I think that is the Urban Institute number.
Chairman Schumer. I believe it is, yes. You do not want
HOPE VI. What specific programs replace it? Much of our public
housing was built in the 1940s, 1950s, 1960s. That is true in
my city where over 600,000 people live in public housing. You
are saying do not do HOPE VI, which many of us believe the
track record is better than the one that you have reported on.
But does HUD have a plan to deal with this distressed housing?
Mr. Cabrera. I think in most cases most PHAs would say
there might be a better and more broad application with more
simpler rules in other programs than there is in HOPE VI. So if
you were to use, for example, the capital fund, you do not have
the restrictions in many cases that you have in HOPE VI. HOPE
VI is a competitive grant. There are limits to what you can do
with HOPE VI. It never works well on its own. It needs a lot of
different subsidy, and, on average, it takes about 7\1/4\ years
to build.
When you try to develop product using the low-income
housing tax credit, just by way of example, I do not have a de
facto average, but just from my own experience, I can say that
that average would run between 2 and 3 years to build. So the
issue becomes one of trying to either make HOPE VI more
workable in the sense of trying to develop units so that the
spectrum works better, or I believe that the position would be
yes, that we have to revisit this. When you have 65--actually,
I think now it is 74 grant applications that have been
completed out of 237, it says something about the efficacy of
the program.
So I cannot argue with the successes, and I have not. In
fact, I have lauded them. But I have to really look at the
whole program.
Chairman Schumer. I would just make two points here,
because my time is expiring.
First, HOPE VI was not intended to be sort of a stand-alone
program. It was intended to need other help. It was intended to
bring a public-private mixture. It was intended to bring in
private funds to help, and it has done that. I can speak for
the places in New York. It has done that. So to say it cannot
do it on its own sort of is against both the concept and
reality of HOPE VI.
And, second, I would say this: At least my view--and I know
Senator Mikulski's and Senator Reed's view, who are not here--
is that HOPE VI has been far more successful than you are
willing to give it credit for.
But with that, let me call on Senator Crapo.
Senator Crapo. Well, thank you very much, Mr. Chairman.
Secretary Cabrera, the question I have is, as you have
indicated and as Senator Allard has indicated in his comments,
there are some studies and some analyses and some concerns
about the cost-effectiveness of the HOPE VI Program and whether
the Federal dollars we are committing there are really
achieving their purposes.
I do not think anybody on the Committee would disagree that
we want to have the most robust and dynamic and effective
public housing program that we can possibly develop and that we
want the best use out of our housing tax dollars.
So the question I have for you is this: Assuming that there
will be Federal housing dollars coming, do you believe that the
HOPE VI Program can be reformed, that the issues and the
concerns that have been raised with it are those that can be
fixed so that we can build on its strengths and literally
improve it to the point where it can receive the accolades from
all quarters that we would hope that it can? Or do you believe
that we should simply move these Federal dollars into other
Federal programs for housing?
Mr. Cabrera. I think that either is an option. I really
believe that is an issue for this body. But I will answer both.
Senator Crapo. OK.
Mr. Cabrera. If one were to reform it, the way that I think
we would suggest that it be reformed would be to address its
ability to be used quickly with other subsidy. So that, for
example, when I was Executive Director of Florida Housing, it
was very difficult to include HOPE VI as a line item in a set-
aside or a preference because we knew it was a black hole of
tax credits. The tax credits in a huge amount would go in and
may or may not be used, and if they were used, they would be
used way later than everything else, which meant, as I noted in
my oral statement, a huge opportunity cost in terms of other
units that have to come online. So if there were a way to
address that, I would say yes, that would be one way.
The other side of that, the latter half of your question,
would be if you were to take that money and give it to housing
authorities and say you can leverage this in the context of
capital funds because capital funds can essentially be
securitized, and they are securitized through what is
equivalent of a Garvey, and they go out and they borrow money
prospectively, you can actually leverage the money in much the
same way.
Now, I know that in the current legislation the objective
is to have a 2:1 leverage on HOPE VI, but just by way of
illustration, most leveraging, when you deal with low-income
housing tax credit deals or private activity bond deals, is far
in excess of 2:1. In most cases--certainly in the case of the
State of Florida--the ratio is more like 6:1. And so the issue
is--and, incidentally, Florida is not alone. Some other States
are actually more successful than Florida in terms of
leveraging.
So the issue is both efficacy of use and actual production
of units. That would be where I would focus the matter. I hope
that is responsive.
Senator Crapo. Yes, it was very responsive. In the context
of your answer to the first part of the question, in terms of
making the program, if it were to be retained but improved,
making it more effective and I think you said make the benefits
of the program more easily used at the front end of projects.
Is that basically the----
Mr. Cabrera. Readiness to proceed in the context of HOPE VI
is critical. If you have an applicant that is not ready to
proceed, it is not a worthwhile endeavor to try to give them a
grant, which at one point was very common in this program.
Senator Crapo. So how would we solve that just structurally
with the HOPE VI Program? What kinds of specific changes could
be made to accomplish that?
Mr. Cabrera. A lot of that has already been done in a
regulatory way, which predates me. I had nothing to do with it.
It happened roughly in 2002, and a lot of that had to do with
things that you would otherwise look at in a development
context. The first one that comes to mind is simple site
control. You know, do you have site control? Where that might
not have been something that was examined before, the
readiness, not just the site control. So that would be one.
But beyond that, I mean, you know, 2 weeks ago I testified
in front of Ways and Means, and the subject upon which I am
about to speak is not properly in front of this Committee. It
is properly in front of Senate Finance. But, you know, a big
issue in HOPE VI is mixed income, and a big impediment is
dealing with the--it is a tax issue dealing with net cash-flows
that come out of naming certain units one thing--namely, ``low-
income housing tax credit units''--and other units ``market
units.'' And so if there were a mechanism to allow an indicia
of interest that is different for the private sector units, the
market units, than those that are subsidized with a low-income
housing tax credit, that would be a big help for HOPE VI. It
would encourage quicker and better investment. Currently, that
is not permitted.
Senator Crapo. All right. Thank you. I see my time has
expired.
Chairman Schumer. Senator Menendez.
Senator Menendez. Well, thank you, Mr. Chairman. I
appreciate you and the Ranking Member calling this hearing.
You know, Mr. Secretary, we have a different experience in
New Jersey on HOPE VI. The reality is that it is an ambitious
program to start off with because it is not just about changing
housing, although that is clearly a fundamental part of it. It
is also about transforming communities. It is about
transforming lives. It is about economic empowerment. It is
about a whole host of other things.
Now, when I got to Newark and see Archbishop Walsh Homes
and see the transformation of that, I say to myself, ``Those
people's lives have been transformed dramatically,'' in which
they are no longer warehoused, as we used to do in public
housing, but they live in communities, in places they can
really call home--``home,'' a place where we are brought to
when we are born, a place where we are nurtured during the
growth of our lives, a place where we share good and bad times,
a place where, in fact, most of our life takes the center of.
And those people's lives have been transformed rather
dramatically, and the ripple effect on the economic side as
well has been very important not only for those who lived in
what was Archbishop Walsh Homes but across the spectrum.
In Elizabeth, in the Elizabethport section, one of the most
incredibly run-down sections of the city of Elizabeth, again,
transformation. Transformation has taken place.
So I do not quite understand--you know, I read your
testimony, and I hear what you say here. I have been watching
it from my office while I had somebody there. I am trying to
understand. You know, I get the sense of it is either great or
it is lousy. You know, you have had a series of things in your
written testimony that you cite successes on. And at the same
time, I hear your testimony and it is rather negative. So in my
mind, our experience is quite different.
Now, I do not know whether that is the experience across
the country, but we have clearly made dramatic impact as a
result of HOPE VI in communities like Newark, the State's
largest city; in a community like Elizabeth, the State's third
largest city, with people who largely were warehoused and
forgotten by HUD. And their lives have been transformed, and
the ripple effects economically in those neighborhoods have
also been seen far beyond HOPE VI money.
So I have a different vision of it, and let me just ask
you, your testimony indicates that you would not like to see
congressionally imposed sanctions on HOPE VI grantees if they
do not meet certain deadlines and benchmarks, but you would
leave that discretion to impose the sanctions to the Secretary.
Has HUD sanctioned HOPE VI grantees, to your knowledge?
Mr. Cabrera. No. There are limits to our ability to
sanction anybody as that legislation is currently drafted.
Senator Menendez. Now, you have also said in your testimony
that one-for-one replacement of public housing is not feasible
because of the costs. And, in fact, you indicate that HOPE VI
would cost 33 percent more if it included one-for-one
replacement.
Has the Department requested additional funding needed to
ensure that there is no loss of affordable housing?
Mr. Cabrera. I think there is a distinction, Senator,
between public housing and affordable housing. One of the
things that--I have spoken on HOPE VI often, beyond testimony,
and I would just note for the record that my comments are not
so much negative, they are critical. And a lot of people have
been critical. I do not think that that is unique to HUD. And I
think that the reason is because the outcomes which you have
mentioned are absolutely so in those places where it succeeded,
but the problem is that there is a lack of those outcomes in
those places where nothing has occurred.
So I have been in--let us see. In the case of the $1.4
billion, which is down $1 billion from the date that I was
confirmed by this panel, have $500 million that was granted
prior to 2001, and in most of those cases dirt has not even
been broken.
So I struggle with that, and I also struggle with the idea
that somehow this should be a one-to-one ratio of public
housing. I do not think anybody would have--I think it is a
much easier thing to discuss a one-to-one ratio of affordable
housing.
Senator Menendez. Well, Mr. Secretary, let me tell you what
I struggle with. What I struggle with is an administration that
says let us zero out HOPE VI and have no new iteration of it.
What I struggle with is a budget that undermines public housing
the way it is today in a variety of ways. What I struggle with
is a lack of affordable housing elements in States like my own
that have such a high cost of housing.
So, you know, I do not hear a positive program being
promoted by this administration to achieve both the public
housing goals and the affordable housing goals. And I think
that the reauthorization of HOPE VI is critically important to
communities like those that have been transformed in my home
State. And I have a much different opinion of it, but I see my
time is up, and I appreciate the Chair's indulgence.
Chairman Schumer. Thank you, Senator Menendez.
I want to thank Senator Menendez. He is going to take over
the chair in a few minutes because I have some prior scheduled
thing that I must go to.
Senator Allard.
Senator Allard. Mr. Chairman, thank you very much.
As the former Chairman on this Committee, we worked hard
with the administration to put in place a lot of affordable
housing programs, working with Senator Reed as a partner in
that effort. One is the American Downpayment Dream Act or Dream
Downpayment Act--I forget what that was. It provided an
opportunity for people to get into homes and actually have
homeownership. And our feeling was that they took good care of
their real estate and it made them better members of the
community. And on the Committee, it is difficult, I think, to
be critical of a program when it has such laudable goals. But I
do think that we need to look at it carefully, and the General
Accounting Office is an objective observer. They look at
programs throughout the whole spectrum of the Government. Some
of them they give a sterling report. Some of them they rate as
effective. Some they rate as ineffective. And some they rate as
no results demonstrated because the heads of those programs do
not do anything to even try and create any accountability as to
how taxpayer dollars are being spent.
So I applaud you for looking at this in a critical manner,
and to me, your testimony means a lot because you have had to
work with these programs personally, and you can speak from a
point of personal experience, and that means a lot to me.
Mr. Cabrera. Thank you.
Senator Allard. Let me ask you, how much grant money
remains unspent on the HOPE VI Program?
Mr. Cabrera. $1.4 billion.
Senator Allard. OK. And how does this percentage----
Mr. Cabrera. Approximately, Senator.
Senator Allard. OK, yes. And how does this percentage
compare to other HUD-assisted housing programs?
Mr. Cabrera. It is difficult to compare simply because of
the way that the grants are undertaken, but the comparison
would be with the gross number, and the gross number of HOPE VI
grants is $5.8 billion. So the $1.4 billion is significant.
Now, that is down from $2.4 billion a year and a half ago,
so we have made some real progress.
Senator Allard. And I know that the HUD agency at one time
was considered at risk by the same evaluation that we value
here. Now it is characterized as a successful program, and I
know that you have looked hard at some of these programs. And I
appreciate your willingness to do that.
Why do you think grantees are so behind schedule in this
program compared with other HUD programs?
Mr. Cabrera. I think for that generation of grants that
occurred roughly between the time they were signed in 1994 and
2001, there were essentially two big issues.
One of them was that the readiness to proceed was not
assured, and so the grant was undertaken and that was it. And
the grant agreement is what rules this relationship. So unlike
other areas of HUD, HUD has very few regulatory abilities with
HOPE VI outside of the legal relationship of the grant
agreement.
The second thing is capacity, so that for decades, public
health authorities were very much pure and pristine property
managers. That is what they did. Public housing authorities
were not developers, and to this day, development is most cases
for public housing authorities is a new experience. It is still
being worked out. Those that have been successful I think have
really come along on the curve of becoming better developers.
Those that I have in mind are Atlanta. You will hear--I believe
you will hear from Renee Glover later today, I think, or
Seattle, King County, Cambridge, there are very specific places
where development is an intensive relationship. In those places
where it is not, where it is something else, that is where the
struggle has--Chicago is another. That is where the struggle
has really been tough.
Senator Allard. Now, if money from the HOPE VI Program were
to be redirected into other HUD-assisted housing programs, do
you believe that more low-income families would be assisted, or
fewer? And if you could quantify that, I think that might be
helpful?
Mr. Cabrera. I do not think that it is a question of being
more or fewer assisted families, although when you do take HOPE
VI or anything else that has to do with reconstructing units
that are going to be affordable units, you will generate a
voucher. That voucher will house another family. So that will
create more voucher holders by definition.
What I think it will do is create a more stable platform
for development than HOPE VI is, on the one hand. On the other
hand, it would need--the one thing I do have to say about when
HOPE VI is used and used well, it is that it really does work
well when it either is trying to address a very acute problem--
i.e., demolition--or when it is trying to deal with a very
narrow scope--demolition plus the development of multi-family
units or even homeownership. It has worked well in certain
areas, those areas that I noted earlier. So that is really the
balance that has to be struck.
Senator Allard. Mr. Chairman, are you having another round
of questions?
Senator Menendez [presiding]. Yes.
Mr. Secretary, I just have one other area I want to cover
with you. This suggestion by the Department that we can
leverage public housing capital funds to meet our challenges,
the $8 billion that is floating out there that I think is
pretty well recognized as being an infrastructure challenge in
public housing, how is it that we are going to supposedly--and
that is another reason we do not necessarily need to continue
on HOPE VI.
How are we going to do that when, if you look at the fiscal
year 2008 request versus the fiscal year 2007 enacted, is a 17
percent cut?
Mr. Cabrera. The capacity to leverage is different than the
actual appropriation.
Senator Menendez. Well, without the appropriations,
capacity means nothing.
Mr. Cabrera. The appropriation has not disappeared, Mr.
Chairman. I believe that the appropriation is still there. It
has to lower. But it is still a $2 billion appropriation.
And it is not the case that this is not already happening.
This has been happening for the last--I believe the last 4
years, where public housing authorities can leverage the
capital fund. The question is trying to create a better
liquidity for the public housing authority to act more
flexibly.
The issue, the issue that most public housing authorities
face when it comes to HOPE VI or development more generally is
the inflexibility that currently exists in the rubric of law.
That is really what is happening.
And so if you give them the ability to develop, they will
use it. The good thing, I mean in some cases--I am trying to
remember--one of the reasons I think that Atlanta has succeeded
so well is Atlanta is something called an MTW jurisdiction. So
it has even more flexibility. And so if they can work out their
own numbers and if they can have the flexibility to deal with a
product that they have to produce, they generally succeed in
that. It is when it becomes narrowed that it becomes more
difficult.
Senator Menendez. Mr. Secretary, let me just tell you, I
trust people who have the experience of doing this day in and
day out, who are on the front lines, who have been doing it for
quite some period of time and are some of the greatest
innovators. Because of necessity, they innovate.
I have to be honest with you, I have not met one housing
authority director, large or small, in the State of New Jersey
who has told me that between asset management and the asset-
based test that the Department is pursuing, or that flexibility
in terms of operating funds is going to do anything when they,
in fact, still have a global economic challenge of how much
they have to do in terms of capital needs of their project.
Flexibility, ultimately, the common sense is if I have X
billions of dollars in need and I only have so much money,
flexibility does not help me meet my overall challenge. It may
let me triage but it does not ultimately do very much in terms
of helping me meet my challenge.
Mr. Cabrera. Mr. Chairman, I think most who are doing
development would tell you that the flexibility is something
that they would welcome. I guess the spectrum of PHAs that I
deal with, which is 4,200 of them, I would say the vast
majority of them would say that that flexibility is extremely
important to them. And trying to develop legislation in the
context of HOPE VI or anything else that gives them the
flexibility to act in a more nimble way than they have
historically is, I think, something that they would welcome.
Certainly the stakeholder groups that represent them would
probably agree with that. They have stated that publicly.
Senator Menendez. But at the end of the day, dollars are
dollars. And if I only have X dollars, I can have all the
flexibility to try to leverage but I can only leverage so much.
And so the core question is if you have a 17 percent cut, then
I have lost at least, for starters, 17 percent of my leverage
ability.
Mr. Cabrera. I do not think you have lost 17 percent of it.
I think there is a component of it which is the capital grant
which is not a 17 percent cut. I cannot remember what the
number is off the top of my head----
Senator Menendez. Everything is hunky-dory is what you are
telling me?
Mr. Cabrera. No, I think what I am trying to say is----
Senator Menendez. Is there anything that the Department
needs to do and the Congress needs to do that it is not doing
to try to make sure that people in this country are more
protected in public housing, that they have a greater quality
in public housing than they have today?
Mr. Cabrera. Mr. Chairman, I think anything that can be
done with respect to development that would allow PHAs to act
more flexibly would be great. I just hope at the end of the
day----
Senator Menendez. So flexibility is the only thing we need?
Mr. Cabrera. I do not think it is the only thing but I
think it would certainly help.
Senator Menendez. Do we need any more resources?
Mr. Cabrera. Mr. Chairman, I think that we have proposed
the budgets that we have proposed and we have had much
testimony on that. I am here to discuss basically HOPE VI
legislation. So at the end of the day----
Senator Menendez. HOPE VI is also about providing resource
at the end of the day, reauthorizing it and then providing
extra resources.
Mr. Cabrera. I understand that, Mr. Chairman.
Senator Menendez. You are against that.
Mr. Cabrera. But it is also about the actual legislation
itself.
Senator Menendez. But you are against that?
Mr. Cabrera. Against what?
Senator Menendez. You are against reauthorization of HOPE
VI; is that correct?
Mr. Cabrera. The Administration's position is that it is
against reauthorization of HOPE VI. And I thought I was being
asked if it were reauthorized what would be the things that
might help. And I think that is what I am trying to answer.
Senator Menendez. Senator Allard.
Senator Allard. Mr. Chairman, if I might continue with the
line of questioning that I had. Has the HOPE VI program
accomplished its original purpose of demolishing the 100,000
most severely distressed public housing units?
Mr. Cabrera. It has.
Senator Allard. So the proponents--and now the proponents
of the program point to current need. Do you believe those
units meet the same standard of severely distressed as the
original 100,000 identified by the Commission?
Mr. Cabrera. That is a very difficult answer to give you,
Senator, or give everybody. The reason is because every PHA is
different. So the needs of Chicago, when they address the
issues of Cabrini Green or Robert Taylor Homes, is different
than say the needs of Waveland, Mississippi which has a whole
different product. Or for that matter, the needs of Miami,
Florida which produced a completely different kind of public
housing unit.
Senator Allard. The point I am trying to get to is is there
a shifting definition of distress?
Mr. Cabrera. I do not know. I do not believe that there is
so much a shifting definition of distressed as a real need to
revisit the 1997 study.
Senator Allard. Do you believe that the job will ever be
done in the eyes of some?
Mr. Cabrera. It, cannot. It is real estate. You will never
get to a point where you will not be addressing some form of
distressed housing. Housing is an asset. The asset becomes
obsolete, either functionally because it is bricks and mortar
or actually because of technology. That is just a question of
time.
Senator Allard. Do you believe that a flexible funding
approach would better address the needs of both tenants and
housing authorities?
Mr. Cabrera. Absolutely. I think if you deal with the
greater flexibility within the context of the legislation, the
issue is how well does that particular subsidy marry with other
subsidies that it is absolutely required to have in order for a
development to succeed? That is the biggest issue.
Senator Allard. So you are saying that it would better make
sense to allow the housing authority to determine when to
demolish and rebuild public housing?
Mr. Cabrera. A lot of that is already done, Senator.
Senator Allard. And when to give tenant vouchers. I was
kind of surprised when I first came on the Banking Committee.
We had a vote here on vouchers and I have always been a strong
supporter of vouchers. All the Democrats of here voted for
vouchers and all of my Republican colleagues voted against it.
So it is interesting but I do think it is a way of approaching
flexibility.
Are there other ways to best accomplish the goal of
providing decent, safe, sanitary, and affordable housing?
Mr. Cabrera. I think the best way to do it is to provide
people in public housing authorities with a full spate of tools
that they need to address the needs in their particular
communities and give them the flexibility to do it.
Senator Allard. Mr. Chairman, I have completed my role of
questioning. Thank you for your courtesy.
Senator Menendez. Thank you, Senator.
Thank you, Mr. Secretary, for your testimony. We appreciate
it.
Mr. Cabrera. Thank you, Mr. Chairman.
Senator Menendez. Let me call up our next panel. Our last
panel has five witnesses. As the Secretary departs, I would ask
David Wood, a Director in the Financial Markets and Community
Investment Program at the Government Accountability Office to
come forward. He is also responsible for leading GAO audits and
evaluations concerning a range of Federal housing and financial
issues, policies, and programs.
Also Mr. Mr. Richard Baron, who is one of the Nation's most
successful developers of inner city mixed income communities.
He is co-founder, chairman and chief executive officer of
McCormick, Baron and Salazar, Inc., MBS in St. Louis, Missouri,
a for-profit firm that specializes in the development of
economically integrated urban neighborhoods.
Dr. Susan Popkin, who is the principal research associate
in the Metropolitan Housing and Communities Policy Center at
the Urban Institute. She has co-authored or authored research
papers while at the Urban Institute on public and assisted
housing, including one on the HOPE VI program.
Charles Elsesser, Jr. is an attorney with the Florida Legal
Services and also serves as a member of the Board of Directors
of the National Low Income Housing Coalition. He has more than
30 years experience advocating on behalf of low income tenants
and homeowners and recently has been active in assisting public
housing resident organizations attempting to gain input and
influence in the HOPE VI process.
Sandra Brooks Henriquez is the administrator and chief
executive officer of the Boston Housing Authority, a position
she has held since April 1996. During her tenure Ms. Henriquez
has overseen two HOPE VI revitalization projects.
Let me thank all of our witnesses for taking time out of
their busy schedules to come here to testify before the
Subcommittee. And let me say we look forward to hearing from
you, to engage in a lively discussion.
With that let me start off with Mr. Wood and work our way
down the panel. Mr. Wood.
Your full statement will be included in the record and we
ask you to summarize approximately 3 minutes or so.
STATEMENT OF DAVE WOOD, DIRECTOR OF FINANCIAL MARKETS AND
COMMUNITY INVESTMENT, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Wood. Thank you, Mr. Chairman, for inviting me today.
My statement is based primarily on a series of three
reports issued between November 2002 and November 2003. In
those reports, we examined three broad topics: the financing of
HOPE VI projects, including the amounts of funds leveraged from
other sources; HUD's oversight and management of the program;
and the program's effects on residents and surrounding
neighborhoods. While the work is now somewhat dated, the topics
remain pertinent.
Regarding financing, we found that among projects that
received grants through 2001, grantees expected to leverage for
each HOPE VI dollar about $1.85 cents from other courses. The
majority of the funds were expected to come from Federal
sources. For example, among the 85 projects for which detailed
information was available at that time, 79 percent of all
budgeted funds were from Federal sources including 27 percent
from Federal low income housing tax credits.
We recommended that HUD prepare annual reports to the
Congress, as it was required by law to do, showing HOPE VI
project financing sources and amounts. HUD began issuing those
reports in 2002 and has continued to do so.
Regarding the management of the program, we found that
HUD's oversight had been inconsistent due to several factors,
including limited numbers of grant managers and field office
staff, confusion about the role of field offices in project
oversight, and lack of a clear enforcement policy regarding
grantees who missed deadlines. And at that time the majorities
of grantees had missed one or more deadlines in their grant
agreements.
In response to our recommendations HUD, among other things,
published new guidance for its field offices, continued its
policy of taking housing authorities' performance on existing
grants into account whenever they applied for a new one, and
notified grantees of the conditions that HUD would consider a
default of grant agreements.
Because we have not examined HUD's oversight of the program
since the 2003 report, we do not know the extent to which HUD's
actions have corrected the problems we identified.
Finally, regarding the program's effects, we found that
about half of the 49,000 former residents that had been
relocated were expected to return to rebuilt HOPE VI sites. The
supportive services they had been provided, such as job
training and home ownership counseling, appear to have yielded
some benefits and neighborhoods surrounding selected projects
we reviewed had experienced improvements according to measures
such as education, income, and housing conditions.
However, for both the effects of the supportive services on
residents and of the program generally on neighborhoods, we
were unable to determine the extent to which HOPE VI alone was
responsible.
Mr. Chairman, that concludes my prepared statement. I will
be glad to take questions.
Senator Menendez. Thank you, Mr. Wood.
Mr. Baron.
STATEMENT OF RICHARD BARON, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, McCORMACK, BARON, AND SALAZAR
Mr. Baron. Mr. Chairman, ranking member Crapo, and other
members, I am here today to testify in support of the
reauthorization.
My firm has been involved in developing mixed income
communities since the late 1970's. I started my career as a
legal services attorney in St. Louis working with public
housing. I spent a great deal of time working, as a matter of
fact, with Bob Rigby in Jersey City, and you were actually at
the groundbreaking of a small HOPE VI we did there.
We began our conversations with former HUD Secretary
Cisneros about transforming what were then the regs on HOPE VI
to allow for mixed finance because I was convinced that the
ability to leverage funds and to involve other public agencies,
particularly state housing finance agencies which had not been
involved whatsoever in financing low-income housing, only tax
credit affordable housing, and the potential which is borne out
in many of the communities where we have worked now. We have
done 19 HOPE VI projects, 40 phases, almost 10,000 units
ourselves. We have enlisted the support of local philanthropies
which have not been mentioned here today and have been an
enormous source of support for the work that has been going on
in terms of the human capital development as part of the HOPE
VI program.
I think that the important part about these developments
that has been mentioned by many of your remarks already has
been the secondary and tertiary benefits of stabilizing areas
of cities which have been severely distressed, high crime, poor
schools with other kinds of investment that has followed now
because these areas have been literally cleaned up, so to
speak. Home ownership has happened. We have seen it over and
over again.
We do not find the complexity to be particularly difficult.
We have been dealing in layered financing for years. And when I
suggested to former HUD Secretary Cisneros that HUD was simply
not leveraging its funds and that there was a way to use
Federal dollars to catalyze private investment, that that was
something that really ought to happen and, indeed, has
happened.
The kind of infusion of local dollars from cities in
supporting the restructuring of streets and roads and utilities
systems to allow new development to occur in many of these
areas that had been blighted for decades, as well as local
philanthropies who have come in to support human capital
programs, who have supported reforming local schools, job
training efforts that we have seen across the country, the
program has been an extraordinary success.
In my 40 years, very frankly, dealing with all of the range
of Federal housing programs, I have not found any that has
worked more effectively than the HOPE VI program.
To the extent that there are issues related to the
management of it by local housing authorities and local
communities that are not ready to really do it, I think
sanctioning is a very easy thing to do. I mean, if people apply
for grants and they are not really ready and the dollars need
to be moved, then the Department ought to have the flexibility
to move it to communities that are prepared to go forward. We
have that same problem with tax credits and we have a 2-year
placed in service rule as part of that program. And everybody
who is in the development business that does low income housing
with tax credits understands what that means.
I do not see any problem at all in writing that into the
law if that is an issue because they cannot move the money.
There are some communities that simply are not going to be
prepared to undertake it and they can hire consultants and they
can bring others that have the expertise to do it.
But I mean what I find extraordinary is the baby with the
bathwater syndrome, when all of us have seen in city after city
after city, with Republican mayors, Democratic mayors,
extraordinary successes that have outstripped any of our
expectations in terms of what the program could deliver.
And certainly the community and supportive services aspect
of it, in terms of the human capital aspects of these
developments, is just critical. And it has been very important.
We have learned a lot about it and we continue to learn.
I am now down working in New Orleans with one of those
sites. And the Department has told us that we cannot use any of
the capital dollars for community and supportive services, as
we can in the other HOPE VI programs. I am just mystified by
that kind of approach when we have seen so much good that has
come out of this. I am sure there are plenty of agencies that
have not done as well as others. But it does not mean that we
ought to scuttle the program.
Essentially, some of these issues on replacement housing I
would be glad to deal with in the questioning.
Thank you, Mr. Chairman.
Senator Menendez. Thank you. Dr. Popkin.
STATEMENT OF SUE POPKIN, Ph.D., PRINCIPAL RESEARCH ASSOCIATE,
METROPOLITAN HOUSING AND COMMUNITIES POLICY CENTER, URBAN
INSTITUTE
Ms. Popkin. Thank you, Mr. Chairman and members of the
Committee.
I am going to speak today based on findings from the Urban
Institute's HOPE VI Panel Study. This research, which was
started with support from Senator Mikulski, is the only
national study of outcomes for HOPE VI families and addresses
basic questions about where residents move and how HOPE VI
affects their overall well-being.
First, most of the residents in our study have not yet
moved back. The largest number, about 43 percent, have received
housing choice vouchers. Another third are in traditional
public housing developments, some still in their original
development, and only 5 percent are living in the new mixed
income communities. These sites are not yet complete and the
number of returning residents will likely increase but there
are fewer public housing units for them to return to and some
sites have imposed screening criteria that excludes some former
residents.
On the positive side, many residents who have moved on are
satisifed with their new housing and are not interested in
returning.
Voucher movers and those in mixed income communities are
living in better housing and safer neighborhoods. There is no
question that the enormous improvement in safety and the
reduction in fear of crime has been the biggest benefit for
most movers and has very important implications for their
quality of life.
Children who have moved to these safer neighborhoods are
also doing better in important ways. However, those who have
been left behind in traditional public housing, especially
teenage girls, are struggling and are increasingly likely to be
involved in delinquent behavior.
While residents who have moved with vouchers are doing well
overall, many are having trouble making ends meet and are
struggling to pay their utilities.
Poor health is an extremely serious problem for these
residents and probably the most important finding from the
study. They suffer conditions like hypertension, diabetes, and
depression at rates more than twice the average for black women
nationally. More than half of them have multiple serious health
problems. And the death rate of HOPE VI residents far exceeds
the national average for black women with the gap increasing
dramatically at older ages.
Residents' health problems impede their ability to work.
Because of these barriers, we found HOPE VI had no overall
impact on employment. Addressing these health barriers could be
seen as employment initiative in helping people become self-
sufficient.
HOPE VI did not increase homelessness. Less than 2 percent
of these residents experienced homelessness at some point
during the 4 years that we tracked them. That is comparable to
other public housing populations.
And finally, HOPE VI is not a solution for the hard to
house families coping with problems such as mental illness,
severe physical illness, substance abuse, poor work histories,
and criminal records. Housing authorities should offer
meaningful relocation counseling to help residents make
informed choices and should provide long-term support to help
more families succeed in the private market or return to the
new mixed income housing.
Housing authorities should also provide effective case
management and better supportive services for the most
vulnerable residents: children, the elderly, and those with
health problems both during and after relocation.
In conclusion, HOPE VI has done much to improve the living
conditions of many former residents but there are still tens of
thousands of public housing units that are severely distressed.
These findings clearly indicate the need to continue to fund
the revitalization of the remaining stock of distressed public
housing.
Senator Menendez. Mr. Elsesser.
STATEMENT OF CHARLES ELSESSER, JR., MEMBER OF THE BOARD OF
DIRECTORS, NATIONAL LOW INCOME HOUSING COALITION
Mr. Elsesser. Thank you, Mr. Chairman. I would like to
thank you and ranking member Crapo and other members of the
Subcommittee for inviting me to testify today on this very
important HUD program.
My name is Charles Elsesser. I work for Florida Legal
Services in Miami and I am here today representing the National
Low Income Housing Coalition, on whose board I have served
since 2004.
The Coalition appreciates the Subcommittee's deep attention
to public housing and we believe in the preservation of public
housing as a vital resource for the Nation's very poorest
families. We also believe deeply in the initial purpose of the
HOPE VI program, that is improving the living environment of
existing public housing residents.
However, we believe that the existing HOPE VI program has
failed to fulfill this purpose, and unfortunately Senate Bill
829 does not address our concerns.
With the goal of working with the Subcommittee on
improvements to the bill as it moves forward, I would like to
review our most serious concerns with the HOPE VI program by
describing how it impacted public housing residents in Miami.
In 1999 Miami-Dade Housing Agency received a HOPE VI grant
to redevelop the 850 unit Scott Carver Public Housing Low Rise
Project in Miami. The plan proposed the demolition of all the
existing units, replaced with only 80 units of traditional
public housing, the remainder being some form of mixed income
or ownership units. All these tenants were relocated by 2004,
mostly through Section 8 vouchers. The housing was demolished
and today the site is still virtually vacant.
About a year ago, a community organization tried to locate
the former residents, particularly those with vouchers. They
learned that almost half were no longer listed by the PHA as
receiving any type of housing assistance. So there was a
massive outreach. The community organization found several
hundred of these missing families and their stories were
horrific. These were families that had lived in public housing
for a long time without any problems and yet, in a few years
after relocation, they had lost their vouchers and were often
doubled up or living in shelters.
Often the problems related not to the first move but to the
second voucher move, forced by foreclosures, by failed HQS
inspections or lease terminations. Many were unable to find
that second apartment. They did not have the security deposit,
potentially $2,000 for a new apartment. They could not find a
suitable unit, or failed to comply with some unfamiliar Section
8 rule and they lost their vouchers.
So instead of improving their lives, for many of these
families in Miami, HOPE VI created homelessness. These problems
are not unique to Miami but they are inherent in the structure
of the current HOPE VI program.
Based on these and similar experiences across the country
our recommendations for reform would include the following: one
is one for one replacement, that all public housing units
demolished should be replaced on a one for one basis with new
public housing units.
A right of return without the imposition of new reoccupancy
requirements or new screening.
And an intensified emphasis on relocation planning, the
applicability of the Uniform Relocation Act, with particular
attention to the hard to house and possibly even an emphasis on
phased relocation, where people can move out of the units into
newly completed units.
Other issues are raised in our written testimony.
If the HOPE VI program cannot be reformed, the Coalition
would rather see the HOPE VI money directed to the Public
Housing Capital Fund so at least we can preserve the housing
that we have.
Thank you again for inviting us to testify. I would be
happy to answer any questions.
Senator Menendez. Thank you. Ms. Henriquez.
STATEMENT OF SANDRA HENRIQUEZ, ADMINISTRATOR AND CHIEF
EXECUTIVE OFFICER, BOSTON HOUSING AUTHORITY
Ms. Henriquez. Mr. Chairman and ranking members, and
members of the committee, thank you very much for this
opportunity. My name is Sandra Henriquez and I operate the
Boston Housing Authority in Massachusetts.
The BHA serves a total of 10 percent of the city's
population, 5 percent in its 12,000 public housing units with
the remaining rental assistance through over 11,000 Section 8
housing choice vouchers. And we are the single largest landlord
in the city of Boston and we are the single largest developer
of affordable housing in the Commonwealth of Massachusetts.
I am also the president of the Council of Large Public
Housing Authorities, whose 60 members represent virtually every
major metropolitan area in the country.
On any given day we are the frontline practitioners. Our
members are serving more than 1 million households and together
we manage almost half of the Nation's multibillion dollars
public housing stock, as well as 30 percent of the Section 8
voucher program. And we are in the vanguard of housing
providers and community developers.
I am pleased here to testify on behalf of this
reauthorization, and more specifically Senate Bill 829, and I
commend Senator Mikulski and all of the sponsors for
introducing this bill and showing such strong support for the
program.
HOPE VI has been used in the city of Boston. We have three
such developments and we have even used the HOPE VI model to do
a state assisted revitalization where we have acted as our own
developer. This program appeals to urban, suburban, and rural
and metropolitan communities as well as non-metropolitan
communities and shows and enjoys the strong aisle-crossing
bipartisan support.
The $5.8 billion in HOPE VI grants awarded by HUD have
leveraged an additional $12.1 billion in other public and
private investments. And these are critical first-in seed money
to let us have the regulatory flexibility and allow housing
authorities to build first-time partnership with private
developers, city and State Governments, colleges, universities,
school systems, all sorts of other partners, including in
Boston the health care system.
As a result, this new market has created really, I would
say, the energy and the support of private investors and
lenders who now view mixed income, mixed finance public housing
as a good investment.
In the city of Boston, are three HOPE VI's have totaled
$115 million and we have been able to raise an additional $293
million in non-HOPE VI funds to complete the redevelopment of
these sites. For every $1 of HOPE VI, we have leveraged $2.55
in non-HOPE funds and we have developed a total of 1,130
affordable rental units. 108 of those are affordable
homeownership units, which include 51 loan to purchaser
transactions as part of our Maverick Landing and 181 market
rate rental units, as well.
Revitalization efforts in Boston have had a profound effect
on the surrounding neighborhoods. Prior to the Orchard Park
HOPE VI program, 36 percent of the residents at that
development were employed and 90 percent had incomes of less
than $20,000. Since the onset of that program, household
incomes have increased by 70 percent and the average assessed
property values in the surrounding neighborhood has increased
by almost 32 percent and another $293 million has been invested
in the neighborhood including main streets, revitalizing the
economic corridor in that community, as well as bringing back
office buildings, restaurants, new housing and new landscaping
and transforming the streetscape in that neighborhood.
Maverick Landing in East Boston was named the overall best
development by the Affordable Housing Magazine in 2006 and was
the recipient of the Massachusetts Governor's Smart Growth
Award in 2005. It combines renewable energy and innovative
urban design. We are leading the market then in East Boston for
other private developers to now decide to come in and look at
what might be done in that community.
We have linked the HOPE VI program with educational
opportunities in a variety of forms, computer training classes,
providing low and middle income high school youth access to
college-based education and training in video production,
fashion design, civil engineering, social activism. We are
providing education and training for hundreds of frontline
workers in health care and research. We link high school
students with college opportunities. I mention this because
schools is a significant feature of Senate Bill 829 and its
linkage with educational reform.
I appreciate and understand the sentiments which give rise
to the provisions of this legislation on linkages to education,
but I do think some of those provisions are too restrictive and
we need to think about having flexibility to figure out what
happens and what's best in the local marketplace in a
particular city, neighborhood and community.
Perhaps a better way of approaching the retention of
educational objectives in the legislation is to encourage those
linkages and let us develop applications that look at that
strategy and how we want to employ that.
I contend that we will not fully know the benefits of the
HOPE VI program unless and until we calculate things like the
decreases in health care due to healthier building materials,
decreases in utility costs because of use of energy
technologies in construction, decreases in pollution when
redevelopment is also transit-oriented, and rising household
incomes that allow for greater opportunities for families and
children. Perhaps we will never be able to calculate the
transformative impact HOPE VI has on the human potential.
You have heard HUD, and I will talk about its disturbing
approach----
Senator Menendez. Ms. Henriquez, I gave you extra time
because you represent all those large housing authorities, so I
figured extra time for all of those large housing others. But
if you can sum up and then we will get to some of your points
in questions.
Ms. Henriquez. In conclusion, I want to thank you for this
opportunity and also to say that this is a program that needs
to continue. There is much work to be done and we are on the
ground doing this every day and will continue to use those
funds in the best possible way to serve residents in public
housing and the citizens in this Nation.
Thank you.
Senator Menendez. Thank you. Thank you all for your
testimony.
Let me start off where I cut you off, because I knew I was
going to ask you that so I figured we would do it.
You heard the Assistant Secretary has a much different view
than the one you just described. Where is it that you and your
colleagues across the country who have experience with HOPE VI
would disagree with the Administration on this?
Ms. Henriquez. There are a number of points we would
disagree. One is that the program needs to continue. it has
done a lot of good work. And I would invite anyone to Atlanta,
Chicago, Boston across the country to see the successes and to
talk to the residents who are the beneficiaries of that. That
is No. 1. So it is an issue of resource allocation needs to
continue.
I would also say that issues around flexibility are
important but flexibility to the point that let us develop in
our own locales. What works in Boston may not work in Atlanta
and vice versa. What happens in Atlanta may not work in
Chicago, per example.
But if we are to, as housing authorities, really be major
players in revitalizing both our public housing and the
surrounding neighborhoods and communities, we need to do that
in the context in which we operate. And we need the flexibility
to do that.
I would also say that while the Assistant Secretary talked
about flexibility with the capital program, and indeed there is
some ability to use capital funds to do revitalization and
redevelopment, and we are doing some of that in the city of
Boston, I would say that the continued decrease in funding
allocations in the capital bond program--in the capital
program, puts all of that flexibility at risk.
In order to do a capital bond program with our money, we
have had to get rated by Standard & Poor's. We are working with
Lehman Brothers as a consultant to put our program together. It
needs HUD approval, which we fully expect to get later on in
the summer. However, they have already raised a question,
looking at what has been proposed in the Federal budget, as to
can we really do this deal because we will be getting less
money than we normally would be getting if the funding goes
through as proposed by the Administration.
So our ability to do these deals with increased risk means
we will have less money, it will have a greater cost, it will
go less far than we anticipated. And so all of those things
together really do put a damper on our ability to this program.
Senator Menendez. So flexibility without the appropriate
resources at the end of the day is somewhat of a hollow
promise?
Ms. Henriquez. It is a very hollow promise.
Senator Menendez. Dr. Popkin, I appreciate your testimony,
as well as the study that you came up with. We heard from Mr.--
am I pronouncing your name----
Mr. Elsesser. Elsesser.
Senator Menendez. Mr. Elsesser, I'm sorry--Mr. Elsesser,
about some unfortunate stories of relocated families who lost
assistance within a few years. But your research did not seem
to have that breadth of scope. Maybe there are some.
Ms. Popkin. We have five sites in our study, so that is the
average across five sites. Fortunately, Miami is an extremely
awful site. We did have one of our five sites that was similar,
where the rates of homelessness were much higher, where there
were financial shenanigans at the housing authority.
There is no question that implementation matters and that
when there is that kind of situation the residents get harmed.
The other four sites that we----
Senator Menendez. That is not a programmatic issue, that
is----
Ms. Popkin. That was the housing authority.
Senator Menendez [continuing]. A question of implementation
and oversight at the end of the day.
Ms. Popkin. I would say in our data that is what it looked
like because we had four other sites that had their struggles,
but they did not have anywhere near the same rate of
homelessness.
Senator Menendez. Because I think I wrote down in your
testimony you said generally speaking better housing, safer
neighborhoods.
Ms. Popkin. Dramatically safer. The proportion of people
reporting big problems with crime went from 90 percent at the
beginning to 16 percent when we found them again for the people
who have moved on.
Now unfortunately, there are still about 16 percent of the
residents who were still living in their original development
and their situation is as bad or worse as it was at the outset.
Senator Menendez. Mr. Baron, we heard from Ms. Henriquez
about the ripple effect of HOPE VI. Considering how many you
have done, can you talk to us a little bit about that
leveraging?
Mr. Baron. Yes. Well, it has been extraordinary. It was
precisely what I thought would happen when I made the
suggestion to Secretary Cisneros that they change the regs to
allow for mixed finance. And many cities have been shut down in
areas that had very, very highly distressed public housing. We
saw that when I was on the National Commission for Severely
Distressed Public Housing in the early 1990's and why we
recommended the HOPE VI program.
It has taken the form of new retail and more homeownership
and new opportunities for other investment. Boston is a
terrific example, Atlanta. It has happened all around our
sites. The kind of retail that serves low and moderate income
families that had never been in these neighborhoods is coming
in now. And some of us have been able to use new markets tax
credits, another program to help again further enhance that
kind of development.
So I think at every level the developments we have been
associated with and those that are all over the country now
have seen these same dramatic results and it has been terrific
in terms of community building and knitting new neighborhoods.
Senator Menendez. Thank you. Senator Crapo.
Senator Crapo. Thank you very much, Mr. Chairman.
To all members of the panel, as I am listening to the
testimony that has been presented today and the answers to some
of the questions that have been asked, it seems to me there are
two broad pieces to this question.
Ms. Henriquez, you indicated one of the concerns you had
with the Public Housing Capital Fund was the lack of ability to
be confident in its funding levels. It seems to me that there
is being raised by many a very real question of whether if HOPE
VI is not reauthorized whether the funding that is allocated to
HOPE VI will simply disappear. It would seem to me that a lot
of people could be concerned that that would happen here in
Congress and that that might be a strong reason for advocating
for reauthorizing HOPE VI to keep a stream of money going to
public housing.
And I understand that. That is more of a budget issue,
though, than a substance issue in terms of the housing program
as I see it.
The question I want to ask each of you to consider is this:
I am not committed to or wedded to any particular program in
terms of just wanting to insist that it continue or not
continue. What I want to do is to figure out, assuming whatever
level of budget authority we have and that we are going to give
to public housing, assuming that if HOPE VI were not
reauthorized that the dollars allocated to HOPE VI would be put
into some other form of public housing, would we still want to
reauthorize HOPE VI? Or would we then want to evaluate whether
there are better ways to utilize those dollars?
In other words, is this a budget issue? Or is it a
programmatic issue? Anybody want to jump in on that?
Mr. Baron. I would be glad to respond. I think it is both.
I think the programmatic aspects of it are that it is targeted
and it is focused. I think the leverage that has been described
by various witnesses is the kind of thing that is not going to
happen if you take $100 million and you park it, or $200
million, in a general budget for the Department. You will never
see the kind of impacts that we have gotten out of targeted
resources in HOPE VI.
I mention again the private philanthropy. The fact is that
local authorities, working in partnership with private sector
firms or nonprofits and city government and private
philanthropies have leveraged up these funds tremendously. And
it would not have happened without the kind of imprimateur that
HOPE VI has given. State housing finance agencies would have
never gotten involved.
Senator Crapo. Mr. Elsesser, I assume from your testimony
that you might feel that if the same dollars--whatever the
dollar figure is--were put into the capital fund, that you
would be able to get better result. Is that correct?
Mr. Elsesser. I believe it is a programmatic problem and I
believe that if the HOPE VI is reformed to include the reforms
that we are concerned with, which is one for one replacement,
which is a right to return, which is an increased emphasis on
the hard to house, then I think it is an effective program.
Without that, I think it leads to the shrinkage of the
public housing, of the public housing that is available for the
poorest families. And I do not think that serves those clients
well.
Senator Crapo. Mr. Wood, did you want to jump in on that?
Mr. Wood. I do not know--I think I would yield primarily to
the practitioners that are at the table. But if I understand
your question, you are basically saying if we have an extra
dollar is it better to put it into the capital fund or to
devote it to HOPE VI?
That is a tough question to answer because they are really
accomplishing, in my mind, somewhat different goals. HOPE VI is
much broader because it has this, as someone referred to it,
the social architecture aspect whereas the capital fund program
basically is to maintain buildings and structures on an
existing approach.
Mr. Baron. Senator, could I just say the other aspect of
this that is critical is the mixed income aspect of it and
changing the economics of these communities. The issue with
respect to one-to-one is that there is a tremendous need for
low-income housing in communities like Miami, all over, St.
Louis, other places where we work.
The problem is that if you write in a one-to-one
requirement in HOPE VI and you do not fund it, then it is an
unfunded mandate. And what is going to happen locally is that
authorities and all of us that are working together, legal
services programs, resident organizations, are going to be shut
down. And that is what happened when it was in the law before.
So if one is going to go that way, there is plenty of
ground to build low income housing with market and mixed income
communities. You got to make sure you fund it. If you do not
fund it, nothing is going to happen. And that is the box.
Many of these sites are obsolete. A lot of them that were
built with studio units to old standards back in the 1940's and
1950's. And to argue that a one-bedroom, 350-square-foot
apartment in a site that was built in 1940 is holding up the
development of three-bedroom townhouses is a real important
point to understand.
So all I am suggesting, I have no problem with one-to-one
ever, and never have. It is just that it is never funded.
Senator Crapo. I just want to follow up on that point and
then I will be done with my questions.
I think that I am focused on the issue that you are raising
here, Mr. Baron and Mr. Elsesser, with my question with regard
to the study that you are probably all familiar with done by
Michael Brazley and John Gilderbloom with regard to the Park
DuValle Revitalization Project in Louisville, Kentucky.
This study was reported in the American Journal of
Economics and Sociology. And in the first paragraph of that
study it concludes that HOPE VI tends to serve the needs of
non-public housing tenants, 80 percent of whom are now
residents of Park DuValle development and does not help the
vast majority of residents who are displaced.
That gets to your one-to-one issue and I think it gets to
your mixed income issue, as well.
Mr. Wood. Right.
Senator Crapo. The study says, and I will just read the
last paragraph. It says in conclusion, the research implies
that Hope VI enhances the lives of only a small number of
public housing residents that it impacts and that the non-
public housing residents seem to occupy a large majority of the
housing units.
This study says a better way to spend the Federal money
would have been to fund grassroots community nonprofits
building more housing at a significantly lower cost and
achieving the objective of building within established urban
areas near good jobs, services and recreational opportunities.
I bet I have generated some comment there. Go ahead, Mr.
Elsesser. We will give everybody a chance.
Mr. Elsesser. Senator, if I may, without commenting on that
specific study because I think that there are two questions
that are separate. One is does the HOPE VI revitalize that
community? Does it lead to office buildings, to markets, to
other things in that community?
The other is what happens to the people that were there?
Those are two very separate questions and answerable different.
In Miami, they failed both. But in some places they have
done very well on the one. But I think that the question on the
second as to who benefits and as to the benefit for the
residents is a much more difficult question. And that is the
thrust for the one for one and the right to return and the hard
to house.
Senator Crapo. I know I am using up too much time, but Ms.
Henriquez and Mr. Baron, just quickly.
Ms. Henriquez. Thank you. If I might, the Boston experience
is very different. First of all, one-for-one replacement, I
have no place else to build except on the footprint of the
development that I am now going to revitalize.
Second of all, at the Boston Housing Authority
redevelopment deals on HOPE VI, 75 to 78 percent of all of our
units have come back as public housing units. So that we do not
displace people. And if we are building less numbers of units
back, we run a lottery, we very carefully work and have a
basket of services of relocation and needs and programs around
each specific family. So we have not lost people in that
regard. So some of those kinds of one-for-one replacements and
those kinds of restrictions will make it much more difficult
for us to operate in our community.
Senator Crapo. Thank you. Mr. Baron, and then I better turn
it back.
Ms. Popkin. I actually was the one who was trying to pop
in.
Senator Crapo. OK, Dr. Popkin.
Ms. Popkin. I had two responses. First of all, most of the
people who have moved on have gotten vouchers and they are
doing very well. And they are not interested in returning. So
their not coming back is not necessarily a bad outcome. I think
we need to factor that in as well.
I think the other issue you raised about whether we should
just continue funding public housing is that about a third of
the people in our study are still in traditional public
housing. Many of them were relocated there, more of the hard to
house families. And they are not doing well. And they are now
all concentrated in these traditional public housing
developments. And there are very few working families left,
even worse than there were before.
And it is only going to get worse. You are going to have
more distressed public housing because of that situation. So I
do not see that as a solution for the kinds of problems you get
for concentrating poverty. If you just fund only that program,
that is exactly what you are going to end up with.
Senator Crapo. Thank you. And thank you, Mr. Chairman, for
your indulgence.
Senator Menendez. Thank you, Senator Crapo.
Let me just go to one or two last questions and then we
will let you go for the day.
I think Mr. Baron hit it on the nail, it seems to me. And
that is that if, at the end of the day, we zero out HOPE VI and
we cut capital funds then the result, even in Mr. Elsesser's
desirable goal, just does not happen. And so that is the
fundamental question. If you zero out HOPE VI and then you also
have what we have, which is the cut in the capital funds, then
you ultimately do not achieve any of these goals.
I think the second thing that is important to recognize as
we move forward in the debate over reauthorization is what Dr.
Popkin just raised, which is that it is about housing for
people. But it is also about quality of housing and life. If
warehousing people for the sake of having a place is something
that we are willing to accept as a society, I think that is
wrong. We have gone to that experiment and it has not been a
good one.
Second, if concentration of poverty is something that we
think is good, then I think we can continue with the lessons of
the past versus changing them.
In HOPE VI we had a very ambitious goal and maybe it is
very ambitious and we should continue to be very ambitious. But
we need to have the resources at the end of the day to meet
that ambition, which is about providing decent quality
affordable housing that people can truly call home in the
context of a neighborhood, not a concentration of both poverty
and warehousing of people.
Second, and how do we create ripple effects in communities
that can give those people access to opportunities? We talk
about that the ripple effect on the economic side is for
someone else. It seems to me that very often it can provide--at
least my own personal experience in New Jersey--is it can
provide opportunity for the very people in those communities,
the citizens of that public housing who then were able to avail
themselves of employment and break some of the cycle of poverty
that existed and look at the training and look at the other
aspects of this.
So I think when we move forward in the debate we have to
think about those elements as well.
The one thing I do want to ask Mr. Wood, it appears from
your testimony that while some of these public housing
authorities have not met deadlines and some others have had
difficulties with HOPE VI, it seems to me that HUD itself has
not been adequately overseeing and monitoring HOPE VI projects.
As part of your review did you come up with a list of
recommendations to ensure that HUD is adequately monitoring
these grants?
Mr. Wood. We did and it is accurate that you are putting it
in the past. And I would stress that these reports are about 3
years old. But at the time we certainly did find a number of
weaknesses and made several recommendations which I alluded to
in the opening statement and that are outlined in the written
statement, basically clarify the guidance to their field staff
in terms of what their responsibilities were for oversight,
conducting required annual reviews of all of the projects that
were in their jurisdictions.
We also recommended that HUD continue its practice of
taking past grantee performance--if a grantee already had one
of the grants and was applying for another, that they look at
the performance on the first one when making a decision as to
whether to award another grant. HUD has continued to factor
that into annual funding notices.
Senator Menendez. Thank you.
With that, let me thank you all for your testimony. We
appreciate all of your insights and we look forward to
continuing to engage with you as we consider reauthorization.
With that, the hearing is adjourned.
[Whereupon, at 3:15 p.m., the hearing was adjourned.]
[Prepared statements and additional material supplied for
the record follow:]
PREPARED STATEMENT OF SENATOR MEL MARTINEZ
Good Afternoon Chairman Schumer and Ranking Member Crapo. Thank you
for holding this afternoon's subcommittee hearing on a topic of utmost
importance--reauthorization of the HOPE VI program.
HOPE VI has been credited with eliminating and replacing some of
the most dangerous and dilapidated public housing in the country. As a
former Secretary of HUD, I know firsthand that this program works. HOPE
VI provides funds to renovate or demolish existing public housing and
replace it with mixed-income communities. The benefit is that we can
take neighborhoods that have been underserved, underdeveloped, and left
without the resources residents need and raise the living standards of
their communities so that they thrive.
I am pleased that Senator Mikulski is able to join us today to lend
her expertise to this conversation. Since the early 1990's, Senator
Mikulski has championed the effort to preserve HOPE VI, and I am very
glad to be joined with her on legislation that would reauthorize and
improve the program.
The legislation we have introduced builds on the past success of
the program, affirms continuing need for the program, and makes several
pragmatic adjustments based on the considerable experience that public
housing agencies and their private sector partners have had in
implementing HOPE VI for over a decade.
I am confident that today's hearing will highlight these points and
reaffirm the need for Congress to act on this issue. I would like to
thank my fellow committee members, Senators Dole, Reed, Schumer,
Menendez, and Brown, for supporting this legislation.
I would also like to extend a warm welcome to my good friend and
fellow Floridian, HUD Assistant Secretary Orlando Cabrera, who will
join us on the second panel. The Administration and I have not always
seen eye to eye on this specific program, but I am glad that we will
have the opportunity to openly discuss some of the concerns that have
been raised and hopefully put many of them to rest.
I know that we will continue to hear arguments from all sides as to
what is the most effective way to fund public housing. I would like to
stress that the HOPE VI program does so much more than just rebuild
public housing stock; it revitalizes neighborhoods, makes investments
in human capital, and forges sustainable communities.
I would like to welcome our other witnesses--particularly Mr.
Elsesser also a Floridian. I look forward to hearing from all of you
and engaging in a discussion about the merits of a program that fosters
community development and involvement. Thank you.
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