[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

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


     Available at: http: //www.access.gpo.gov/congress/senate/
                            senate05sh.html



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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

                              ----------                              

                        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

                              ----------                              


                        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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