[Senate Hearing 110-973]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-973
 
            OVERSIGHT OF HUD AND ITS FISCAL YEAR 2009 BUDGET 

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   ON

     THE ADMINISTRATION'S BUDGET REQUEST FOR HOUSING AND COMMUNITY 
                          DEVELOPMENT PROGRAMS


                               __________

                       WEDNESDAY, MARCH 12, 2008

                               __________

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


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                            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                  ELIZABETH DOLE, North Carolina
ROBERT P. CASEY, Pennsylvania        MEL MARTINEZ, Florida
JON TESTER, Montana                  BOB CORKER, Tennessee

                      Shawn Maher, Staff Director
        William D. Duhnke, Republican Staff Director and Counsel
                       Dawn Ratliff, Chief Clerk
                      Shelvin Simmons, IT Director
                          Jim Crowell, Editor























                            C O N T E N T S

                              ----------                              

                       WEDNESDAY, MARCH 12, 2008

                                                                   Page

Opening statement of Chairman Dodd...............................     1

Opening statements, comments, or prepared statements of:
    Senator Shelby...............................................     3
    Senator Casey................................................     4
    Senator Allard...............................................     4
    Senator Brown................................................     5
    Senator Martinez.............................................     7
    Senator Menendez.............................................     8
    Senator Carper...............................................     9
    Senator Reed.................................................    11

                               WITNESSES

Alphonso R. Jackson, Secretary, Department of Housing and Urban 
  Development....................................................    12
    Prepared statement...........................................    47
    Response to written questions of:
        Senator Akaka............................................   158
        Senator Reed.............................................   159
Michael Kelly, Executive Director, District of Columbia Housing 
  Authority......................................................    33
    Prepared statement...........................................    56
    Response to written questions of:
        Senator Reed.............................................   169
Hector Pinero, Senior Vice President, Related Management Company, 
  LLC, representing the National Multi Housing Council and the 
  National Leased Housing Association............................    35
    Prepared statement...........................................    64
Diane Randall, Director, Partnership for Strong Communities......    37
    Prepared statement...........................................    76
    Response to written questions of:
        Senator Reed.............................................   169
Edgar O. Olsen, Professor, Department of Economics, University of 
  Virginia.......................................................    38
    Prepared statement...........................................    81
Barbara Sard, Director of Housing Policy, Center on Budget and 
  Policy Priorities..............................................    40
    Prepared statement...........................................   129
    Response to written questions of:
        Senator Reed.............................................   170

              Additional Material Submitted for the Record

Chart of requested HUD FY 2009 Appropriations....................   173


            OVERSIGHT OF HUD AND ITS FISCAL YEAR 2009 BUDGET

                              ----------                              


                       WEDNESDAY, MARCH 12, 2008

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:04 a.m., in room SD-538, Dirksen 
Senate Office Building, Senator Christopher J. Dodd (Chairman 
of the Committee) presiding.

       OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD

    Chairman Dodd. The Committee will come to order.
    I want to welcome everyone here this morning to a very 
important hearing to conduct oversight of the U.S. Department 
of Housing and Urban Development and examine the 
administration's proposed budget for fiscal year 2009. The 
Department of Housing and Urban Development, or HUD, plays a 
vital role, as all of us know, in the lives of millions of 
Americans around the country, both through direct housing 
assistance and initiatives which strengthen entire communities.
    Unfortunately, the administration's budget once again 
contains significant cuts to our investments in working 
families, their housing, and their communities. This budget, in 
my view, fails to recognize the realities confronting many of 
our citizens across the country. Our Nation is confronting a 
dual housing crisis.
    One is the crisis of foreclosures, falling home prices, and 
the deterioration of the overall housing market. Obviously, we 
are working quickly, or trying to, to stop the rising tide of 
foreclosures and to restore confidence in the housing market.
    The other housing crisis, what I call a ``silent crisis,'' 
if you will, has been affecting low-income families for years. 
As rents and home prices have significantly risen over the last 
decade, millions of low-income families have been priced out 
and are unable to afford rising housing costs. The gap between 
the wages of working Americans and their housing costs 
continues to widen.
    The Joint Center for Housing Studies found in their report, 
``The State of the Nation's Housing 2007,'' that in just 1 
year, the number of severely cost-burdened households, those 
that pay more than half of their income toward rent, jumped by 
1.2 million, to a total of 17 million. This is one in seven 
U.S. households. These families struggle to pay rent while also 
paying for food, medications, transportation, child care, and 
other family necessities.
    In my view, the administration has failed to address this 
silent housing crisis in its budget for fiscal year 2009. This 
budget contains serious and harmful cuts, in my view. 
Investment in public housing capital needs is cut by $415 
million. That is a 17-percent reduction. HOPE VI is eliminated. 
That program has been a huge benefit to millions of people 
across the country, including in my own State of Connecticut. 
Housing for people with disabilities is cut by $77 million, or 
32 percent. Housing for senior citizens is cut by $195 million; 
that is a 27-percent reduction. Community development block 
grants are cut by $659 million, an 18-percent reduction.
    I might point out that, given the first crisis I have 
mentioned of falling house prices and foreclosures, that 
community development block grant money can be a great 
assistance to mayors and county supervisors and their support 
teams in trying to provide some relief in rehabilitating homes 
that have been foreclosed and causing further deterioration in 
their communities.
    In addition, vouchers and project-based rental housing are 
both significantly underfunded. According to HUD, project-based 
housing, which provides 1.3 million affordable housing units, 
is short by $2.8 billion. Tenant-based vouchers are also 
underfunded. According to analysis of recent HUD data, the 
Center on Budget and Policy Priorities estimates that 100,000 
families, including thousands of children and seniors, could 
lose their voucher assistance and possibly their homes under 
this budget proposal.
    We must reaffirm our commitment to investing in housing for 
all Americans. I am old enough to remember when this issue did 
not have any partisan overtones to it. In fact, some of the 
strongest advocates for housing were some of the most 
ideologically conservative people who sat on this panel long 
before my colleague from Alabama and I were here. In fact, a 
predecessor from his very State was ``Mr. Housing'' in many 
ways, and it is tragic in a sense to watch this subject matter 
move into partisan politics and make it difficult for people 
who have the most fundamental of needs--decent shelter--to be 
met.
    Stable housing is the bedrock of families and communities. 
Without stable housing, children do less well in school and are 
more likely to have serious health problems, including asthma 
and lead poisoning. Parents need stable housing to access 
schools, employment, and health care. Whole communities suffer 
when residents are poorly housed. At a time when homeowners and 
renters are being forced out of their homes, our housing safety 
net should be strengthened. Unfortunately, the budget proposed 
by the administration significantly undermines, in my view, the 
ability of millions of low-income families to live in safe, 
decent housing and strong, stable communities.
    In addition to looking at the HUD budget, this hearing 
presents an opportunity to conduct needed oversight, and I want 
to suggest right at the outset that I am deeply troubled by 
reports over the past couple of years of impropriety at the 
Department at the highest levels. These allegations are serious 
and undermine the ability of the Department to effectively 
address the needs of people in communities around the country. 
We have a duty on this Committee to ensure that taxpayer 
dollars are being used properly, and we take these allegations 
very, very seriously and await the results of independent 
investigations into these matters.
    I want to serve notice, Mr. Secretary, that this 
Committee's oversight of you and the Department will be ongoing 
and rigorous. I watched the HUD scandals of the late 1980s, and 
I am not going to allow them to be repeated under my watch.
    In addition, I have been deeply disappointed by the 
responsiveness from the Department to Committee concerns. We 
have not received responses to a letter on the shortfall in 
Section 8 Project-Based rental assistance, sent in September of 
last year, nor have we received a response to a letter I sent 
with Senator Menendez on HUD's limited English proficiency 
policy that was sent last March, almost a year ago. These 
responses are just unacceptable and show a lack of respect for 
the oversight function of this Committee--a responsibility all 
of us here take very, very seriously.
    The investments made by the Federal Government as well as 
State and local governments in housing and community 
development not only assist families in need, these investments 
benefit all of us as a Nation. Safe, decent, affordable housing 
is critical to strong communities and a productive citizenry. 
These investments are investments in our parents as well as our 
children. And I look forward to hearing from the Secretary and 
from our very distinguished panelists on the second panel of 
witnesses on these important issues.
    Let me just say at the outset here--and I am going to stay 
as long as I can, but my sister-in-law's mother passed away 2 
days ago, and I am going to attend the funeral this morning. So 
I am going to stay as long as I can, but I will be going across 
town to a funeral service, and so I will not be able to stay as 
long as I would like to. And I have asked Senator Reed and 
Senator Menendez, who will be here shortly, to help chair this 
hearing, and obviously, Senator Shelby will be here, who has 
chaired this Committee and does so very effectively.
    And though I am not going to be able to stay, I also want 
to take a second, if I can, to welcome Diane Randall, who will 
be testifying. Diane Randall is the President of the 
Connecticut Partnership for Strong Communities. She has done 
impressive work in bringing people in my home State together to 
find affordable housing resources and to end homelessness. In 
addition to her work with the Partnership for Strong 
Communities, Diane is on the board of the Connecticut Housing 
Finance Agency, the Federal Home Loan Bank, Boston Affordable 
Housing Advisory Committee, and the United Way of Connecticut 
Board of Directors. She is a very significant citizen in our 
State and has made a significant contribution, and I apologize 
again if I am not here to listen to her testimony.
    With that, let me turn to Senator Shelby.

             STATEMENT OF SENATOR RICHARD C. SHELBY

    Senator Shelby. Thank you, Mr. Chairman. I want to also 
welcome to the Committee all of today's witnesses, particularly 
Secretary Jackson.
    While mortgage delinquencies have been largely concentrated 
in the private subprime market, FHA has not been immune from a 
similar increase in its own delinquencies. For the second year, 
OMB is estimating that FHA's single family program costs on a 
present value basis will exceed revenues, requiring either an 
appropriation or an increase in insurance premiums.
    According to a recent actuarial analysis, FHA's single 
family program has a present value of future cash-flows of 
negative $3.9 billion. Secretary Jackson, I am greatly 
concerned that if FHA continues on its current path, the 
American taxpayer will be presented with a rather large bill 
here. I am also concerned that some of FHA's financial problems 
are as a result of its lax attitude toward addressing fraud in 
its single family program.
    In January, HUD's Inspector General reported that staff in 
the homeownership centers did not consistently refer 
potentially fraudulent loans to the Office of Inspector General 
or require indemnification from the lenders when appropriate. 
Mr. Secretary, I hope this is an issue you will address in 
today's hearing, as Chairman Dodd has alluded to.
    Earlier this year, the Congress passed and the President 
signed into law a so-called economic stimulus package, intended 
to jump-start lagging economic growth. I have said before that 
the size of the stimulus package was not sufficient in my 
judgment to make any meaningful difference in a multi-trillion-
dollar economy. I hope I am wrong. Whether it has the desired 
effect remains to be seen.
    Some Members of the Senate, however, already have expressed 
a desire, Mr. Secretary, to pass a second stimulus package 
aimed directly at housing. As we have the administration's 
expert--you, Mr. Secretary--on housing here today, I look 
forward to hearing your views on the need for a housing 
stimulus package, if any.
    In addition, I look forward to hearing your thoughts on the 
recent increase in both the FHA's and the GSEs' loan limits. We 
welcome you again to the Committee, where you have spent a lot 
of time.
    Chairman Dodd. Thank you, Senator Shelby.
    Senator Casey.

              STATEMENT OF SENATOR ROBERT P. CASEY

    Senator Casey. Mr. Chairman, thank you very much for 
calling this hearing, and I will leave most of my time for 
questions, and a lot of us will be reviewing budget oversight 
matters in terms of the budget for your Department, Mr. 
Secretary. But I will have some questions that will pertain to 
other matters, and I will submit questions as to the budget 
oversight functions later. But I will leave my time for 
questions.
    Thank you.
    Chairman Dodd. Senator Allard.

               STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Mr. Chairman, I would like to thank you and 
also Ranking Member Shelby for holding this hearing to review 
the fiscal year 2009 budget of the Department of Housing and 
Urban Development. I would also like to welcome Secretary 
Jackson to the Committee. And, Secretary Jackson, we appreciate 
you making time in your busy schedule to be here.
    HUD has a long history of problems. For years, it was the 
only Cabinet-level agency on GAO's high-risk list. However, I 
want to take this opportunity to publicly commend Secretary 
Jackson and Secretary, now Senator, Martinez before him for 
their progress on this point. Last year, the remaining HUD 
programs were removed from GAO's high-risk list. This is a 
tremendous accomplishment and represents a great deal of work. 
I would encourage Secretary Jackson and all the dedicated staff 
at HUD to remain focused on maintaining this positive 
direction.
    Certainly one of the biggest challenges HUD faces is the 
tight fiscal scenario. This is a constraint shared by all 
agencies. No one denies that the budget for HUD--or any other 
agency, for that matter--is insufficient to meet every single 
perceived need in this country. Increasingly, the definition of 
need seems to be a bottomless well. I believe, though, that 
this budget strikes a reasonable balance at meeting the most 
pressing needs while still being responsible. I support the 
administration's decision to pursue fiscal responsibility in 
these times. It would be irresponsible to continue to overspend 
and leave American debt for future generations.
    It is easy to look at the proposed HUD budget and complain 
that it lacks money. Certainly needs are great, and in a 
perfect world, we would have the money to meet all needs. 
However, the administration has had to make some very difficult 
choices, and the choices at HUD were, I am sure, no exception 
in their difficulty. The budget is evidence of those difficult 
choices, and I commend the administration for facing reality 
and not simply taking the easy way out.
    I want to reiterate a position that I put forward at many 
previous hearings. HUD's success as an agency is not defined by 
a budget number. More money does not necessarily mean more 
programs, as determined--more money does not necessarily mean 
more people are served or that people are served any better. 
This would seem to be especially true when reviewing the 
effectiveness of HUD's programs as determined under the PART 
analysis. Forty-five percent of HUD's funding is spent on 
programs that we either know that are failing to produce 
results or we have no way to tell whether they are producing 
any results. Why do we talk at such length about dollars going 
to HUD but fail to look at what is coming out the other side? I 
for one intend to keep looking at both sides of the equation.
    I appreciate the opportunity to do so at this hearing. Mr. 
Secretary, your testimony will be helpful to this Committee, 
and thank you.
    Chairman Dodd. Thank you very much, Senator.
    Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Chairman Dodd, and I was 
intrigued by your comments that in your early days and your 
father's time in the Senate that housing was a bipartisan, non-
ideological issue. One of my predecessors, ``Mr. Republican,'' 
Bob Taft, perhaps the most conservative Member of the Senate in 
the 1930s, 1940s, and into the 1950s, was one of this 
Committee's and this Senate's best advocates on housing issues. 
So I think your comments were very well taken that way.
    Secretary Jackson, thank you for coming to Cleveland last 
month. Thank you for answering questions and working with us 
locally.
    I have had some 85 roundtables around table in 55 of the 88 
counties, asking 20, 25 people to sit around a table with me, 
and I asked them questions about all kinds of issues that 
affect them. And in almost every community, whether it is a 
community the size of Delaware or the size of Columbus, a 
medium-sized city like Lima or Canton, virtually everywhere 
people talk about housing and talk about foreclosures and all 
the problems that we face. And we all know that housing 
problems do not end with the problems, with the travesty and 
tragedy inflicted on those who actually have foreclosure thrust 
upon them, but the neighborhood and the community and the city 
government and the city service and police and fire and all 
that.
    Our responsibility is twofold: we must act to prevent 
future foreclosures, and we must help the people who have lost 
their homes.
    Last year, I worked with my colleague Senator Casey and 
also with Chairman Dodd and Senator Schumer to secure $180 
million in funding for foreclosure prevention counseling so 
fewer households would lose their homes. It would be 
irresponsible to cut this funding this year when the need for 
counseling is as great as ever. Neighborhoods continue to lose 
their value at a rapid rate. Without upkeep, or in some cases 
without knocking these homes down, we face further problems in 
that community. And the counseling services are so important, 
as are community development block grants. We have asked in 
this new legislation that Senator Shelby talks about, for an 
additional $4 billion for community development block grants, 
yet the President's budget cut CDBG by 22 percent.
    There are roughly 14 million households in our country 
paying more than 50 percent of their income toward housing, yet 
because of budget shortfalls at HUD, owners of project-based 
Section 8 properties are being granted short-term contracts 
rather than the year-long contracts they previously received. 
This coupled with late payments from HUD this summer, which 
forced many property owners to dip into personal saving or go 
further into debt to meet their monthly financial obligations, 
has discouraged property owners from renewing, as you know, 
those HUD contracts. Just last week, my office received notice 
of a project-based Section 8 property that would not be 
renewing its contract with HUD. By September, all residents in 
this Elyria property--a city of 50,000, 30 miles west of 
Cleveland, all residents in this Elyria property will be paying 
fair market rent. This will have a devastating effect on the 
192 tenants at a time when waiting lists for Section 8 housing 
are up to 2 to 3 years long in Ohio. The end result is that at 
a time when the demand for affordable housing is rising, 
property owners are losing confidence in HUD's ability to pay 
its share of low-income rents, and now property owners want to 
opt out, not because they don't want to provide affordable 
housing but simply because they can no longer afford to. Now is 
clearly the time to invest in affordable housing, not to cut 
the programs that serve Americans most in need.
    The Federal budget, as many have said, is a document that 
reflects the needs and priorities of this Nation. We are paying 
$3 billion a week in the war in Iraq, much of that going to 
subcontractors like Halliburton instead of spending that money 
in local business--or having local businesses rebuild 
Steubenville and Lima and Mansfield and Marion. With a growing 
elderly population, how can we afford to cut senior housing 
programs? How can we cut housing programs that assist disabled 
individuals? How can we turn our backs on families who, with 
counseling, could save their homes?
    Our needs are clear. I hope that you will reconsider as 
this process goes forward some of the President's, I believe, 
unfortunate cutbacks on programs that really matter and 
priorities that I think the majority of the people in this 
country hold dear.
    Thank you.
    Chairman Dodd. Thank you very much, Senator.
    Senator Martinez.

               STATEMENT OF SENATOR MEL MARTINEZ

    Senator Martinez. Thank you, Mr. Chairman, Senator Shelby.
    I welcome my colleague and good friend, Secretary Jackson. 
I am delighted to see you this morning, and I remember sitting 
where you sit today and hearing also about all the draconian 
and horrible things that we were doing at HUD, and actually I 
also know of the very many good things that you continue to do 
at HUD. I am particularly impressed with the efforts that are 
continuing to end homelessness in America. I want to begin with 
that because it is something that I thought was terribly 
important during the time that I was at HUD and the tremendous 
gains that have been made under the leadership of Philip 
Mangano and the great work that he has been doing, igniting 
across the country the passion for ending chronic homelessness. 
Many communities, and an increasing number of communities 
across the State of Florida, are each and every day moving 
forward to try to also within a local plan develop a way in 
which they can tackle the issue of chronic homelessness. That 
is only one of the many, many areas in which I know a lot of 
progress has been made.
    I also know we worked greatly to try to increase the 
homeownership of many, many American families, and as we did, 
we were doing that with a great passion for the American dream 
that it opens to many families to be able for the first time 
ever to own a home, also understanding that we were doing so 
for families that were moving out of a lifetime of renting into 
homeownership, sometimes with downpayment assistance, sometimes 
on a very fragile basis. And, unfortunately, through the work 
sometimes of people who would prey on the least informed, these 
folks are falling into bad loans, loans that they could never 
have sustained. As ARMs reset, adjustable rate mortgages that 
they never should have been given for increasing rates that 
they could not afford, we obviously are going to see some 
foreclosures. For some foreclosures there is no answer but 
foreclosure. But increasingly we know that there are many 
things which I know you have tackled to try to help families.
    Nothing we could do would be important to help struggling 
families to keep their home. I think far more important, 
frankly, than counseling money--I mean, because counseling is 
only going to bring people to the table to sit down and figure 
a way. But the most helpful way we could do it is to pass an 
FHA modernization so they might be able to refinance into an 
FHA loan. FHA modernization I think would help tremendously 
distressed families to be able to stay in their homes.
    We do face serious problems, and we have--in Florida, I 
know many families have great concern about the price of their 
homes and their mortgages; the high cost of casualty insurance 
after a spate of hurricanes some years ago, this has been a 
real problem; the high cost of property taxes; and, obviously, 
the slowdown in the Florida economy as a result of the subprime 
problem. We all know that the high record rates of foreclosures 
are hurting more than just families. They devastate a whole 
community and send shock waves through our financial 
institutions and markets.
    With the fiscal year 2009 HUD budget, we have the 
opportunity to advance proposals that will preserve and promote 
homeownership, respond to the troubled mortgage market, foster 
healthy and sustainable communities and end chronic 
homelessness, and give HUD the resources it needs to manage 
effective and efficient programs.
    I am pleased that the administration's budget continues to 
place a great emphasis on affordable rental housing, 
homelessness assistance, public housing operations, and 
promoting homeownership.
    There are areas where this budget does not go far enough to 
provide organizations in Florida and across the country with 
the resources they need to help build and maintain strong 
communities. I have been disappointed for some time that OMB 
has chosen to zero out funding for HOPE VI, and there is still 
a substantial need for this program. Senator Mikulski and I 
have introduced legislation to reauthorize and reform HOPE VI 
so that it can continue to revitalize neighborhoods and cities 
across the country.
    So, Mr. Secretary, I welcome you back to the Committee. I 
thank you for the great work that you are doing, and I look 
forward to hearing your testimony and how you intend to manage 
HUD for the next year.
    Chairman Dodd. Thank you, Senator Martinez, and my hope is 
that FHA modernization will also move along, and I probably 
need to chat with you a little bit about that at some point as 
well.
    Senator Menendez.

              STATEMENT OF SENATOR ROBERT MENENDEZ

    Senator Menendez. Thank you, Mr. Chairman. Let me thank you 
for holding a very important hearing. And, Mr. Secretary, thank 
you for your willingness to talk about our Nation's housing 
priorities here.
    Let me be quite frank. Based on this budget, I think we 
share a different set of priorities. While at first glance your 
budget seems to increase funding at HUD, this is one of those 
cases in which the devil is truly in the details. This 
administration cut some of the most critical and important 
housing programs, and at the end of the day, it seems to me 
that our seniors, our disabled, and our low-income families 
bear the brunt of those budget cuts.
    The public housing capital fund, which is our Nation's 
housing authorities' dependency, is cut by over $400 million. 
HOPE VI, as Senator Martinez said, which is essential--I have 
seen it in my home State of New Jersey, how it is not just 
changed public housing but transformed lives--is completely 
eliminated. Disabled and senior housing is cut by $77 million 
and $195 million, respectively.
    And these are just the national numbers. When you take a 
closer look at my home State of New Jersey, the cuts really 
become crystal clear to us. Under this administration's plan, 
New Jersey would lose almost $24 million in funding for the 
community development block grant programs, including over $1 
million individual cuts to Jersey City, Newark, Essex, and 
Union Counties. Furthermore, New Jersey would lose over 3,000 
Section 8 vouchers, and that is in addition to the fact that 
HUD is not paying present obligated payments to project-
specific--we keep hearing from representatives of NAMA who tell 
me that, ``I have got to pay my mortgage, I have got to pay my 
utilities, but I am not getting my payments that are already 
obligated--that are already obligated.'' And we would lose $14 
million in public housing capital funding.
    So the details of the budget are where the real damage is 
done, and those details are a difference between a place to 
call home and a place on the street.
    Now, I look forward to hearing what you have to say, but I 
simply do not understand how in this current housing crisis, 
the administration can defend these types of cuts to these 
types of programs. People are losing their homes all over this 
country, and this budget just seems to push more families out 
their front doors. As far as I am concerned, it is an 
embarrassment, and it is an insult to the American people. We 
are in a crisis, and the American people are looking to their 
Government to help save their homes, not to take more keys out 
of their hands. I think this budget does that.
    Finally, Mr. Secretary, I have to be honest with you. This 
is my 36th year of public service. If I waited a year to get an 
answer to a letter--this letter was sent March 15th, with the 
Chairman, of last year. Today is March 12th. March 12, 2008. 
This was March 2007. I certainly would not be here today if 
that is the way I responded. I think we deserve a response. 
Whatever your response is, I think we deserve a response. When 
our Nation is facing a true housing subprime crisis, I expected 
far more in this budget, and I am looking forward to see how 
you can justify it.
    Chairman Dodd. Thank you, Senator Menendez.
    Senator Carper.

             STATEMENT OF SENATOR THOMAS R. CARPER

    Senator Carper. Thank you. Thanks, Mr. Chairman. Thanks for 
pulling this together, and, Mr. Secretary, thanks for joining 
us. Who was your predecessor as HUD Secretary?
    Secretary Jackson. Senator Martinez.
    Senator Carper. Senator Martinez. As I walked in, I watched 
him questioning you, one generation questioning another 
generation. He really left you a mess over there at HUD, didn't 
he?
    [Laughter.]
    Senator Martinez. Wait a moment.
    Senator Carper. You are trying still to clean it up, I 
know, but we are glad that you are here. Thank you for joining 
us.
    Let's talk a little bit about the present situation that we 
face, and your folks have been very much involved in it. But 
the economic downturn that we are dealing with is many respects 
a direct result of years of predatory lending practices, of 
weak credit ratings in an ever rising market. The credit 
quality of customers was consistently swept under the rug by a 
lot of unscrupulous lenders. Loans were given to customers 
without a whole lot of regard to their ability to repay in many 
instances. These loans were bundled into securities and given a 
AAA credit rating and sold around the world. And investors 
around the world bought those magical securities that kept 
providing above-market returns. This all has led us to, for a 
lot of families, the end of the dream of homeownership. It has 
either ended it, or for a bunch of folks it has been 
indefinitely postponed.
    I want to turn to some new initiatives, and I want to 
acknowledge the work that you and some of your folks are doing, 
and others in the administration. FHASecure and Hope Now are 
steps in the right direction. Obviously, we have got to be 
creative, and we have to think of new ways to help homeowners 
that are in distress or those that are going to be in distress.
    Project Hope Now is, I think, a very good idea and well 
intentioned. It was moving slowly, and I realize it is moving 
faster, we are getting a little more pick-up on it. But still 
it is not moving fast enough.
    We are all trying very hard to put together some programs 
here in the Congress that communities can use to mitigate the 
foreclosure crisis.
    Secretary Paulson was before us about 3 weeks ago, along 
with Chairman Bernanke, and I asked Secretary Paulson, I said, 
What are your top three priorities, what are the 
administration's top three priorities for housing recovery? And 
this is what he mentioned. First, he said, a strong independent 
regulator for GSEs--Fannie and Freddie and the home loan banks; 
but, second, modernization of FHA, bring FHA into the 21st 
century. And he mentioned the idea of making it possible for 
housing authorities to issue--to actually give revenue bonds 
that could be used to help in some cases to refinance homes.
    I am glad that in your own testimony you have mentioned 
FHA, but I was disappointed that you made no reference to GSE 
regulatory reform. As HUD Secretary, part of the answer is 
there are sort of two masters, but you are clearly one of them, 
and the major one. But I read with alarm that the sales of GSE 
mortgage-backed securities are starting to slow down. We need 
to do everything possible to maintain a liquid market, and I 
applaud the Federal Reserve for their recent efforts on the 
monetary front.
    I encourage you to use your position to do more to 
strengthen the regulatory structure of the GSEs and protect the 
secondary market. Hopefully we will soon have an FHA bill, a 
consensus between the House and Senate. I know our Chairman and 
Senator Shelby have been working with counterparts in the House 
to get us there. And I look forward to working certainly with 
our Chairman and with my colleagues, but also with you and 
others in the administration on GSE regulatory reform and to 
make sure that they have a strong, independent regulator.
    The last thing I want to say is we had a wonderful public 
event at the University of Delaware earlier this week to 
announce, along with the Federal Home Loan Bank of Pittsburgh, 
the creation of--and funding--recognition of eight or nine 
blueprint communities, and the Home Loan Bank of Pittsburgh 
provided, I think, about $200,000 to nine communities in 
Delaware to help them to prepare their development and 
revitalization plans. It is a program that they call the 
blueprint community program. And I applaud the work of the 
Pittsburgh Home Loan Bank in funding the program. This funding 
is not from their affordable housing program, but it is a 
separate program that is funded solely from their profits, and 
each community team is made up of at least one resident, the 
banker and a nonprofit representative.
    I just want to encourage you, as a member of the Federal 
Housing Finance Board--and I think that is the regulator for 
the Federal home loan banks today--to encourage other Federal 
home loan banks to adopt similar programs, to model really what 
Pittsburgh has done.
    And, last, I want to say that one community in Wilmington 
called Riverside received a blueprint community grant to 
prepare a development plan. Across the street from Riverside 
was a blighted and crime-ridden neighborhood known as East 
Lake, about 2 miles from where I live in Wilmington, Delaware. 
And thanks to a $29 million HOPE VI grant, it is now a thriving 
and vibrant community, really a beautiful community. The folks 
at Riverside are going to need every penny of their $25,000 
grant to come up with a program to do what HOPE VI did. And I 
was disappointed--I mentioned this as well, but I was 
disappointed, really disappointed to see the program was 
eliminated entirely from the HUD budget. I think we are going 
to need more HOPE VI programs than less.
    Thanks very much for being here. We look forward to hearing 
from you today.
    Thanks, Mr. Chairman.
    Chairman Dodd. Thank you, Senator Carper.
    Senator Reed, any opening comments?

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Mr. Chairman, thank you. Mr. Secretary, let 
me, if I can--as I mentioned earlier, I am going to be 
departing, but let me, if I can, before you get to your 
statement, ask you a question. Senator Martinez raised the 
issue of FHA modernization, and as you know, the stimulus 
package raised the FHA loan limits for 1 year throughout the 
Nation. On December 31st, of course, they will go back to where 
they were. And I wonder if you would agree that it is important 
for FHA to be a significant long-term presence even in high-
cost communities around the country. What is the reaction?
    Secretary Jackson. First of all, Mr. Chairman, let me, 
before I answer that question, apologize to you and to Senator 
Menendez. I am not aware of the letter, but I take full 
responsibility, and I am extremely sorry that we have not 
gotten back to you on that process. And I will make sure that 
you get an answer very quickly. And I think each one of you 
really has the right to be very disturbed if it has been a year 
since we responded to you. That is not proper, nor is it 
correct, and I accept the full responsibility.
    Chairman Dodd. There is another letter, too, that is not as 
ancient as that one, but there is another letter we----
    Secretary Jackson. I will look at those.
    Chairman Dodd. Did you want to respond to the FHA issue? 
Because we are wrestling with these issues up here, and Senator 
Martinez raised it, and I would just like to, before I have to 
depart, get a quick answer.
    Secretary Jackson. I really think that as long as it is an 
acceptable level that can address the issues, especially in 
these high-cost markets--and we are talking about Virginia all 
the way back to Maine, we are talking about Utah all the way 
back to California. I think, yes, we should do everything in 
our power, because right now we are priced out of the market. 
And when I made the announcement last week while in California 
with the Governor talking about the new level for the next 10 
months in 729, it was received extremely positively in Los 
Angeles County, Orange County, where for the first time they 
knew we would be able to make loans to people under FHA, and 
they were extremely pleased.
    Chairman Dodd. I thank you for that, and it is helpful. 
Again, we are all conscious of these things, but obviously 
these programs are designed to work nationwide, and there are 
disparities, obviously.
    Secretary Jackson. That is correct.
    Chairman Dodd. And where you have higher costs, clearly to 
deprive the ability of FHA to make a difference there is 
certainly not what we ever intended with that. So I appreciate 
your answer to that question.
    And, Mr. Secretary, let me just also mention--I am not 
going to get into it here. Others may raise some questions. But 
I am going to submit a letter to you, if I can, involving Mr. 
William Hairston, regarding Columbia Residential and Michael 
Hollis, and I would like you to respond to inquiries about 
that. I will submit in the form of a letter rather than a 
question here this morning to the Committee at the appropriate 
time.
    With that, why don't we take your opening statement.

  STATEMENT OF ALPHONSO R. JACKSON, SECRETARY, DEPARTMENT OF 
                 HOUSING AND URBAN DEVELOPMENT

    Secretary Jackson. Thank you. Thank you very much, Chairman 
Dodd, and I want to thank the Ranking Member, Richard Shelby, 
and
    Chairman Dodd. I apologize for him. He has either a markup 
or the Defense Appropriations Subcommittee and he asked 
politely to be excused, and he will try to come back if he can. 
But that is a very important matter for him he has to attend to 
this morning.
    Secretary Jackson. Thank you. And the Members of the 
Committee for the opportunity to appear here before you today.
    Mr. Chairman, I am here to present the fiscal year 2009 HUD 
budget, but before I do that, Mr. Chairman, I want to thank you 
and the entire Committee for the priority given to the FHA 
modernization. We need this legislation right away. As you 
know, as you and your colleagues finish work on this important 
legislation, I should mention the administration's remaining 
priorities with respect to what the final bill looks like:
    First, the legislation must allow HUD to address the recent 
explosion in loans where sellers provide buyers downpayment 
assistance and then add the price to the homes. These loans 
have a foreclosure rate 2 to 3 times the norm. They are costing 
hard-working Americans their homes, and these types of loans 
have pushed FHA to the brink of insolvency.
    Second, Congress should allow FHA to proceed later this 
year with some flexibility in setting premiums. I assure you we 
would have no intentions of increasing premiums on our bread-
and-butter customers. But a few modest changes will strengthen 
FHA's ability to offer safe alternates to homeownership who 
want to refinance from the high-cost subprime loans. It will 
actually allow us to reduce the premiums for potential 
homeowners with low incomes. Such legislation would fit well 
with the general direction of the President's budget.
    The proposed budget is fiscally sound and represents a 
historical investment of $38.5 billion for programs at HUD. 
This is an increase of more than $3 billion, or 9 percent over 
last year. The budget is almost $1 billion more than our 
current budget authority. This funding will be timely and on 
target for the people who are served by the Department. We need 
this budget to maintain the current homeownership and stimulate 
new purchases. It will help us expand our current efforts.
    Let me put the budget in context. Last year, President Bush 
and I introduced FHASecure to help more Americans facing 
foreclosure refinance into a safer, more secure FHA loan. We 
did this using the current regulatory authority, and we have 
been able to make FHA available to more qualified families. 
There has been a noticeable increase in the number of closings. 
We believe that FHASecure will help about 300,000 families 
refinance into affordable FHA-insured mortgages. FHASecure has 
proven to be extremely valuable.
    Mr. Chairman, you should also know that in only 5 months, 
from September 2007 through January 2008, FHA has pumped more 
than $37.5 billion of much needed mortgage activity into the 
housing market, and more than $14.7 billion of that investment 
came through FHASecure. FHA modernization would greatly assist 
our efforts.
    As you know, the economic stimulus package provided a 
temporary 10-month window. We announced the new loan limits 
last week when I was in California. This will help hundreds of 
thousands of people nationwide, perhaps as many as 250,000. But 
this is no substitute, in my mind, for FHA modernization, which 
would waive the appropriate loan limits permanently and also 
provide other important changes that would benefit American 
homeowners.
    In addition to these actions, we are also taking steps to 
ensure it is easy for homeowners to understand the fine print 
when they do sign on the dotted line. That is why we are 
committed to RESPA reform. We are in the process now of 
publishing the Real Estate Settlement Procedures Act rules and 
hope it will bring much needed transparency to the homebuying 
process. Now the budget will work in concert with all other 
actions. For instance, the proposed budget appropriately 
increased the funding for housing counseling. America needs the 
President's request for $65 million in the budget for housing 
counseling. Those funds, in addition to NeighborWorks $180 
million, provide great services to those who want to own a 
home. Many Americans facing foreclosures would have greatly 
benefited from housing counseling. We know it works. Last year, 
96 percent of the households that saw HUD-approved housing 
counselors and completed the program avoided foreclosure. This 
fund will help partially address today's crisis and prevent 
such a situation from happening in the future.
    We also need to continue Government efforts to partner with 
the private sector to help build back the housing market. The 
Hope Now Alliance is a good example. Hope Now is a private 
sector volunteer industry effort to address foreclosure through 
freezing mortgage interest rates and working directly with 
financially troubled homeowners. I also commend the recent 
effort by the Hope Now Alliance members to provide temporary 
pause for homeownership in the foreclosure process. These 
actions provide direct assistance to those in need right now. 
They are the sort of responses that provide quick help for 
homeowners in need.
    As in the past, Mr. Chairman, the largest part of our 
budget is for affordable rental housing. Combined, this budget 
seeks more than $29 billion for our Rental Assistance Program, 
which we expect will be able to help more than 4.8 million 
households. We are mindful of the continuing need for more 
affordable rental housing, especially as low- and middle-income 
workers still find themselves priced out of the real estate 
market. We need to maintain the units currently available and 
expand the numbers. This budget will help us do that.
    Finally, Mr. Chairman, the homeless must not be forgotten. 
We are making strides and cutting the number of chronic 
homeless with our ``continuum of care'' approach. For the first 
time ever, we saw a decrease in the number of chronic homeless 
last year, a drop of 12 percent. We must continue the progress. 
Our budget once again seeks an increase for homeless programs 
to continue this good work.
    Mr. Chairman, I know that you are mindful of the need to 
help our Nation's homeless veterans. Americans are deeply, 
profoundly grateful for the service and sacrifice of our 
Nation's veterans. In the proposed budget, there is a request 
for $75 million for our Veterans Affairs Supportive Housing 
Program. Prior to 2008, this program had not been funded since 
1993. With the Veterans Administration, we will create an 
additional 9,800 vouchers for fiscal year 2009. This will bring 
the total to approximately 20,000 homeless veterans being 
served through housing and social services, double the number 
of available housing vouchers.
    Overall, this is a good budget for the Department--
balanced, reasonable, appropriate, and workable. It allows us 
to operate within a framework of cooperation and partnership 
with related Federal agencies, other levels of government, and 
the nonprofits.
    Mr. Chairman, as we proceed through the budget process, I 
look forward to working with you and Members of this Committee. 
Thank you so very much.
    Senator Reed [presiding]. Thank you, Mr. Secretary.
    I will first recognize Senator Casey, and then I will 
recognize Senator Allard. Senator Casey.
    Senator Casey. Mr. Chairman, thank you very much.
    Mr. Secretary, I listened to your opening statement, and I 
was looking at the text of it as well. And in the course of 
your opening, you covered a lot of important subject areas. You 
talked about FHA. You talked about your appropriation. You 
talked about the foreclosure crisis that has gripped the 
country and so many of our families. You talked about the Hope 
Now Alliance. You talked about homelessness. All of that and so 
much more of what is in your statement is critically important 
to the country, and it is important to the work that you do.
    But I was struck by one thing that was not--or one area, I 
should say, that was not in your statement, and that was about 
the controversy that has been swirling around your stewardship 
of this Department for too long. Among other publications, I am 
just reading from the National Journal, November of 2007, and 
that is a couple months back, but I think most of this is still 
relevant. It says, and I quote--I am looking at the third 
paragraph of this story, November 21, 2007. It says here, ``For 
several months, a Federal grand jury, Justice Department 
prosecutors, the FBI, and the HUD Inspector General's Office 
have been exploring''--and they refer to you--``Mr. Jackson's 
role in contracting decisions at the Housing Department.''
    I want to say two things about that. No. 1 is that even 
when there are allegations of that type, I think it would have 
been better for you to at least address that in your statement 
somehow, to inspire some confidence that even though these are 
ongoing investigations, that you take them very seriously and 
that you are going to try to deal with them and manage the 
Department in that context. But I am not going to ask you about 
that because my job here--I am not a prosecutor. I am not an 
investigator. I am a United States Senator who was elected by 
the people of Pennsylvania. I am an elected official. You are a 
public official appointed by another elected official. We have 
obligations every day to earn the public trust, and I mean 
that, every day. That is what I have to do, and that is what 
you have to do. And that is why not just because of my 
obligation as a Senator but my obligation as a public official 
who is very concerned about what is happening in Philadelphia 
right now. And we pick up the Washington Post today, on page 
A3, and it reads, ``HUD E-Mails Refer to Retaliation.'' I think 
you know what we are talking about here.
    I wanted to ask you specifically about those e-mails, in 
particular, e-mails that were sent between two Assistant 
Secretaries, Mr. Cabrera and Ms. Kendrick, both Assistant 
Secretaries, not low-ranking people in HUD. I will refer to 
three and then ask you about them.
    E-mail number 1 dated, dated January 12, 2007 at 4:52 p.m. 
from Mr. Cabrera to Kim Kendrick. It says, and I quote, ``Would 
you like me to make his life less happy?'' That is the first 
question, the ``his'' referring to the chairman of the 
Philadelphia Housing Authority, Mr. Carl Greene. So question 
No. 1 is, ``Would you like me to make his life less happy?'' 
And then there is a following question: ``If so, how?''
    One minute later, Kendrick responds to Cabrera, and I 
quote, another question: ``Take away all of his Federal 
dollars?''
    Then Cabrera responds to Kendrick at 5:04 p.m., some 11 
minutes later. Mr. Cabrera says, ``Let me look into that 
possibility.''
    Now, I was the Auditor General of Pennsylvania for 8 years. 
We did a lot of audits and investigations, and we were very, 
very tough on public officials and public agencies. I have 
never seen anything like that, at least at the level of State 
government, and I know how hard it is to run a department. You 
have got to balance budgets and all of that. I did that. But I 
want to know a couple of things about this.
    I want to know, first of all, when you were made aware of 
the content of these e-mails.
    Secretary Jackson. Senator, the PHA has now sued HUD 
regarding the accessibility obligations. The judge hearing this 
case has requested that the parties not attempt to try this 
case in the media. Since that time, despite the publication of 
additional stories in the media, we have complied with the 
judge's request. We regret that the PHA appears prepared to 
invoke legislative assistance, as well as the media, rather 
than simply pursuing the litigation that it has begun, or 
better yet, simply reach an agreement with HUD to meet the 
accessibility obligations. I will simply say that through the 
process, HUD's objective has always been to ensure that the PHA 
complied with the obligation to provide accessible units for 
persons with disabilities.
    And I would just say, Senator, I understand your concern, 
but I really would like to honor the request of the judge not 
to discuss this in the media or the press.
    Senator Casey. Well, Mr. Secretary, this is not a question 
that is coming from a reporter. This is a question coming from 
a United States Senator on the Banking Committee. I am not a 
member of the media. I have an obligation to ask questions like 
this, and I think it is incumbent upon you to answer a question 
like this not just in front of this Committee, but in the 
context of the people that you are supposed to serve and I am 
supposed to serve, some 84,000 clients, people who depend upon 
the housing programs that we have for the country--in 
Philadelphia in this case, 84,000.
    So I would ask you again: When did you become aware of the 
exchange of this e-mail?
    Secretary Jackson. I will say again, Senator, I truly 
respect your question, but at the----
    Senator Casey. Are you telling me you are not going to--I 
know you read a statement from----
    Secretary Jackson. At the request of the judge----
    Senator Casey. A statement that the lawyers give you to 
read, but are you telling me you are not going to answer this 
question?
    Secretary Jackson. I am saying to you that at the request 
of the judge and at the request of our General Counsel----
    Senator Casey. You are not going to answer the question.
    Secretary Jackson [continuing]. I am not going to----
    Senator Casey. Let me move on. I am almost out of time--in 
fact, over time. Let me ask you a second question. Once you 
became aware of this--you are obviously aware of it. Everyone 
is now. Once you became aware of this, did you take any action 
with regard to these two employees about what the content of 
this e-mail is about? Did you take any action at all? Or did 
anyone in the Department take action with regard to these e-
mails?
    Secretary Jackson. Senator, I just do not feel at ease 
discussing this based on what the judge has asked us and----
    Senator Casey. It is not a question of being at ease. It is 
a question of whether you are going to answer the question or 
not. And I think you are telling me--are you telling me you are 
not going to answer this question either?
    Secretary Jackson. Senator, I just don't believe that I am 
in a position to answer that question.
    Senator Casey. Well, I cannot compel you to answer the 
question sitting here today. But I will say this, and I am out 
of time, and I will try to come back. But let's assume that 
none of these allegations in these investigations are 
happening. Let's assume they never happened or they are all 
resolved and there is no problem here. Let's assume these never 
commenced at all. Let's assume that all of these things that 
you talked about today are not only funded at the level they 
should be funded but are working well. Let's assume all that. 
Let's assume that the Department is running perfectly.
    Despite all of that, it is this kind of stuff that 
undermines public confidence in public officials, and you 
cannot allow this to happen. You have to tear this out by the 
roots when it happens. And I would hope--I would hope--that 
someone in your position would take decisive action. In fact, I 
would hope that even before it happened, you would have 
policies in place and a culture in an agency like this which 
would be so strong against something like this that these 
employees would never even dream of putting this kind of 
information in an e-mail or threaten to threaten another player 
in the world of public housing with retaliation based upon--and 
using funding to use that retaliation. And I want to know more 
also about the Code of Conduct at HUD, who is in charge of it, 
whether it is being enforced. But I am minutes over my time.
    Thank you.
    Senator Reed. Thank you, Senator Casey.
    Senator Allard.
    Senator Allard. Thank you, Mr. Chairman.
    I compliment you for paying attention to the judge. I think 
the thing that needs to be pointed out is that to answer a 
question related to a subject he asked you not to talk about 
can hold you in contempt of court. And I am not an attorney, 
but I certainly--if I was in your position, I would certainly 
respect that. And I think the Senator from Pennsylvania knows 
that. And so, you know, you are in a tough position when you 
have to answer a question like that, and I think your 
priorities are in the right place.
    Secretary Jackson. Thank you.
    Senator Allard. I do have a question for you, Mr. 
Secretary. In your February 11, 2008, letter to Chairmen Frank 
and Dodd regarding our Committees' respective FHA bills, you 
stated the following, and I quote: ``HUD strongly supports the 
provision in Senate bill 2338 expressly prohibiting downpayment 
assistance from the seller or from any other person or entity 
that financially benefits from the transaction.''
    Is this still your position?
    Secretary Jackson. It is still our position.
    Senator Allard. OK. One other question. You also stated, 
``HUD supports the provisions of Senate bill 2338 that 
authorize a permanent increase in FHA loan limits from $364,790 
to $417,000, or 100 percent of the Federal Home Loan Mortgage 
Corporation conforming loan limit in high-cost areas and from 
$200,160 to $271,050 in lower-cost areas. And then you go on to 
say, ``HUD does not support the provisions of H.R. 1852 that 
authorize FHA to permanently guarantee loans greater than the 
conforming loan limit because FHA's single family program 
should remain targeted to traditionally underserved 
homebuyers.''
    Is this still your position?
    Secretary Jackson. Yes, it is, Senator.
    Senator Allard. Thank you. Mr. Secretary, as you know, I am 
a strong proponent of the PART program. I have warned you 
frequently that I will have some questions for you, likely, on 
PART. And I am certainly pleased with, you know, how you have 
progressed along, and I think that, you know, dollars into a 
program is not everything. I mean, there are Members on this 
Committee and in the Congress and in the administration that 
brag about the dollars. But to me, it is more than just 
dollars. It is whether that program is effective or not. And if 
it is not an effective program, you can put all the money in 
the world in it, and nothing is going to happen.
    And so I encourage you to clearly incorporate the PART 
assessment into your budget materials, and I have a booklet 
here put out by the Transportation Committee, Mary Peters, 
Cabinet member there, your colleague on the Cabinet. And she 
has actually put right at the very front of the book, ``Policy 
Performance and Program Outlook.'' And she has explained what 
each one of the ratings means, and that page here where she is 
taking each one of the agencies under control, and then also, 
you know, makes some suggestions on how they manage those 
results. And I noticed in yours that you had not put that in 
your budget, and I want to strongly suggest that you go ahead 
and do that. I think it helps you in your presentation, puts it 
right out front. I think it reflects in a positive way on your 
agency.
    Unfortunately, there are a number of programs that you have 
to deal with that still receive ineffective or results not 
demonstrated, and I think we just need to put them out there in 
the public and make them readily available to policymakers so 
that--you know, you cannot do this by yourself, and I think 
everybody on this Committee is interested in seeing results to 
the programs, you know, particularly if they are their favorite 
ones and ones that they support.
    So my question to you: How current are the PART ratings? 
For example, I would note that the ineffective rating assigned 
to the HOPE VI program came from an assessment conducted 5 
years ago. As you just noted, though, the Department has 
ongoing efforts to improve programs, especially the sub-par 
programs. What is the schedule to update the assessments? If 
you would answer the first two questions, I would appreciate 
it.
    Secretary Jackson. We are continually assessing the PART 
program. To give you an example--you just used the HOPE 
program. Of the 270 grants that we have given out in the HOPE 
VI program, only 75 have been completed in the last 12 to 14 
years. We are still looking at $1.4 billion outstanding, and 
clearly, one of the reasons that I have said that I really do 
not think HOPE VI should be funded at the level it has been is 
because of the outstanding money.
    What I would like to do--and I have discussed this with 
both sides of the aisle, both the House and the Senate, and I 
will get John Cox--is that let us recapture some of that money 
that is 5, 8, 9 years old and reallocate it.
    Senator Menendez said something that I thought was 
important. He has had a number of great HOPE VIs. So has 
Philadelphia. I think that where people have performed on it, 
we should recapture the money, give them the opportunity to do 
much better, and I still feel the same way. But we consistently 
make assessment.
    And the last thing I would say, Senator, is this: For 
almost 18 years, we were on the high-risk list. This is the 
first time that HUD has been off the high-risk list, because we 
are doing--and I do not take full responsibility because I have 
my colleague, my friend and my colleague, Senator Martinez, who 
started this process. So I think we are running the agency more 
efficient, more effective, and we are addressing many of the 
issues.
    When we walked in there, as the Senator can tell you, we 
had 400 different computer systems. Today we have about 109. So 
we have cut down tremendously, and we are consistently 
evaluating how we can best manage the program.
    John.
    Mr. Cox. Thank you, Mr. Secretary.
    Senator, just a quick answer to your question specifically 
for 2008, our Housing for Persons with Disabilities, our 
Housing for the Elderly, our Housing for Persons with AIDS, and 
our RAS Program, which is the Resident Assistance Program, are 
all scheduled to be PART'd. Three of those four are in the 
category of results not demonstrated. So we continue to work on 
PART-ing those programs.
    Senator Allard. Well, it is good to have that information.
    The next question I have, and I want to take a little extra 
time here because Senator Casey did, but I will not take a lot. 
I will not abuse the privilege. I just have one question here. 
Do you believe all the programs should be reassessed on the 
same schedule, or should deficient or key programs be evaluated 
more frequently?
    Secretary Jackson. I really think that we should have a 
continuum system where we go as we are using now, where we 
evaluate certain programs. This year, as John has said, we will 
evaluate those, and next year we will evaluate others. And we 
have tried to do that since we have been here at the minimum 
every 3 years. We have not been totally successful, but I would 
say that we are probably 80, 85 percent successful.
    Senator Allard. Yes, and I notice here on the Department of 
Transportation, some of them have been to 2002, so it has been 
longer than they have. I mean, the fact is that you are doing 
it, and that is the important first step, and then I think 
later on perhaps we can require--and people get more 
comfortable with it, we can perhaps maybe push for more 
frequency in most cases. But the fact that you are doing it is 
very appreciated, at least from this Senator.
    Secretary Jackson. I will tell you, Senator, that I did it 
when I was running the utility company, and as you know, I am 
probably in a very unique position because I am the only HUD 
Secretary that has ever run a housing authority, and I ran 
three of them. And I did it while I ran housing authorities. In 
fact, Senator Casey, I am the first person who had Carl Greene 
to be my information technology person when I was in 
Washington, D.C. And so I have a great relationship with him, 
at least I hope so.
    Senator Allard. Mr. Chairman, thank you for your patience, 
and sorry I ran over a little bit. Thank you.
    Senator Reed. That is quite all right.
    Mr. Secretary, you do not want to litigate this case in the 
press, and you just did a little litigation there. You have got 
to be consistent, at least.
    One comment before I recognize Senator Menendez. One of the 
major responsibilities of the Secretary is to be able to 
respond accurately and completely to the U.S. Senate.
    Secretary Jackson. Yes, sir.
    Senator Reed. And to the extent you cannot do that, I think 
you have to seriously ask how effective you can be in your 
role.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Secretary Jackson, first, just so you know, my name is 
Menendez.
    Secretary Jackson. Menendez.
    Senator Menendez. Second, I appreciate your response to the 
question in the letter, and we look forward to the answer.
    Third, I have to say I had no intention of speaking on 
Senator Casey's points, but if a Member of the U.S. Senate in 
an official hearing cannot get an answer from a Secretary on a 
critical issue such as Senator Casey has raised, there is a 
difference between a judge saying do not play it out in the 
press--that is about issuing press releases and fighting it out 
there. But at an official hearing of the U.S. Senate, if a 
Senator cannot expect that a member of the President's Cabinet, 
regardless of whose President that is, is not going to be 
responsive because they want to hide under the guise of 
something that is not a legal impediment, then we have a 
serious problem, because we have a fiduciary responsibility to 
the people who we represent, and we cannot pursue that 
responsibility if we cannot get answers. So I think Senator 
Casey has every right in the world to get an answer, and I do 
not see anything that, Mr. Secretary, you said that impedes it. 
There is a difference about having press releases and news 
conferences and fighting it out in the press. That is different 
than answering a Member of the U.S. Senate. And I would hope 
you would reconsider if Senator Casey has a second chance.
    Let me go to two specific issues, and I raised it in my 
opening statement: Project-Based Section 8. In a budget 
briefing a few weeks ago as well as in staff-level meetings, 
HUD has now admitted to what we have been saying for some time, 
that the Section 8 Project-Based Rental Assistance Program is 
short by $2.8 billion. Now, I am concerned that HUD's solution 
of signing short-term contracts with owners will lead to the 
loss of thousands of affordable housing units. In fact, 50 
organizations, including investors, lenders, housing finance 
agencies, local governments, and housing developers have 
registered similar concerns. They believe that investors and 
lenders will be unwilling to provide long-term financing for 
these properties and owners will opt out of the program as soon 
as possible, putting up to 500,000 affordable housing units at 
risk.
    I know there is one in my home State in Jersey City, a 
condominium developed right next door, getting fantastic rates, 
same type of building, next to it is Project-Based Section 8. 
There is no reason in the world, as these people are not 
getting paid, that they should ultimately not pursue a market-
based approach, and we will lose all of those people's ability 
to find a place to call home.
    So the administration's request of $400 million in advance 
appropriations, according to the HUD staff, will only cover an 
additional month or so of funding, will not allow HUD to sign 
long-term contracts. The Chairman and a group of us have sent--
23 of us, as a matter of fact, to the Budget Committee, of 
which I am a member, requesting $2.8 billion, and we have that 
in the budget that we are debating on the floor.
    Wouldn't that help ensure that these 1.3 million units 
continue to remain affordable?
    Secretary Jackson. You are absolutely correct, and we have 
assured the owners of those properties that they will be 
covered all the way into 2009. And we agree with you, Senator, 
that that has been a problem, that we have been short-funded. 
But we are correcting that problem, and we are working with 
both the Senate and the House to make sure that that is done.
    Senator Menendez. Let me ask you this: Owners in the 
project-based program have gone through periods where payments 
from HUD were late. Last summer, owners went unpaid for up to 3 
months.
    Secretary Jackson. And, again, you are correct, and I 
cannot debate that with you----
    Senator Menendez. Without any official notification from 
HUD. Now, GAO has documented HUD's challenges in making timely 
payments to owners, and they offer three recommendations: 
streamlining automatic contract renewal process, developing 
systemic means to better estimate the amounts that should be 
allocated, go on and on, notifying owners if their payments are 
going to be late.
    It is my understanding these recommendations have not been 
implemented, and, in fact, when payments were late last year, 
owners were not told when to expect payments.
    Have you implemented the recommendations?
    Secretary Jackson. Senator, that is not true. The owners 
knew when the payments--and, second, we are implementing those.
    Senator Menendez. You are implementing. You have not 
implemented them.
    Secretary Jackson. We have implemented it to the point that 
the owners know now that they are going to be paid all the way 
into 2009.
    Senator Menendez. Can you send me in writing how you have 
implemented the three recommendations of the GAO?
    Secretary Jackson. I will.
    Senator Menendez. In the Fiscal Year 2008 Consolidated 
Appropriations Act, Section 235 of the HUD bill requires the 
Department within 60 days of enactment to submit various 
things, complete and accurate accounting of the actual project-
based renewal costs for 2007 and 2008, revised estimates of the 
funding needed to fully fund all 12 months of all project-based 
contracts under Section 8--it goes on--for those dates, 
identification of all sources. Have you submitted this report 
to Congress?
    Secretary Jackson. We have submitted it.
    Senator Menendez. OK. So we can get a copy of that. I have 
not seen it yet. If we need a copy, I am sure we can get it 
from you.
    Secretary Jackson. And if not, we will make sure that--we 
will send it to you.
    Senator Menendez. That would be very helpful.
    Finally, Mr. Chairman, if I just may, one last question. 
You know, I visit with the public housing authorities across my 
State, and I have to be honest with you. These are exceptional 
people doing exceptional jobs with enormous challenges. And at 
81 percent funding of your public housing operating fund, that 
just simply--this is the lowest operating proration in history. 
Now, it is really even lower when the fact that some expenses, 
such as utilities, cannot be pro rated since agencies have to 
pay utility companies 100 percent of their bills, and we have 
seen the rising costs of that on both electricity as well as 
heating. This is the equivalent of saying that some housing 
authorities have got to shut down 19 percent of your 
operations.
    I mean, how is it that we continue to take this view that 
you have a streamlined operating process because HUD has worked 
very hard at getting these entities, some of them have the 
highest ratings that you give. And yet you take--and you say, 
you know what? Nineteen percent of your operating capacity, we 
are just not going to fund it. How do you expect these people 
to make ends meet?
    Secretary Jackson. Senator, I truly believe that at the 
funding level that we are operating at, that many have 
reserves. They can make the ends meet. As I said a few minutes 
ago, I think that the--I cannot remember distinctly, but the 
last housing authority that I ran was in Dallas, Texas, and I 
think at that point in time we were 86 or 88 percent of our 
budget. And I realized that I has to look at this from a 
position where asset management--many of these housing 
authorities have units that they want to be paid on that are 
not being used. And I will say this about the person that I had 
an opportunity to talk with, Mayor Booker and his housing 
authority director. I think the person that they have hired in 
Newark is doing, in my mind, a very phenomenal job. And I think 
he is using his reserves well. He is using many other aspects 
of his budget well.
    Senator Menendez. Well, Mr. Secretary, he would be--and I 
will stop, Mr. Chairman. He would be the first one. I say to 
you, hey, I am doing everything I can----
    Secretary Jackson. And you are absolutely----
    Senator Menendez [continuing]. I am using all my assets, I 
am doing asset management, but you keep chopping 19, 20 percent 
off of me, and I have only got so many assets to move around at 
the end of the day. As a matter of fact, here is the history. 
Here is the decline. And you talk about using money in 
reserves. Those reserves are getting depleted.
    So we need to revisit this, but I will not prolong it, Mr. 
Chairman. I appreciate the Chair's courtesy.
    Senator Reed. Thank you, Senator Menendez.
    As you have noticed, Senator Martinez, we have been 
somewhat lenient on the time, and that lenience will also be 
extended to you. Senator Martinez.
    Senator Martinez. Thank you, Senator Reed. Thank you very 
much.
    Well, let me begin, because I really am loath to delve into 
some of these issues, but I cannot help but sit here and 
reminisce about the day that I first met Alphonso Jackson. I 
was looking for good people to help me run the Department of 
Housing and Urban Development. I had been appointed by the 
President. We were in the midst of a transition. When you get 
to a place where there are 10,000 employees, a budget of $30 
billion, and the resources of a transition require you to move 
immediately to try to find good people, I remember meeting 
Alphonso Jackson and having had experience in running a couple 
of housing authorities, was not looking for a job in the 
Government, was, in fact, not interested, and--but I heard he 
was a good man, and I heard that he had a lot of experience. 
And I felt it was important to bring someone into the 
Department to be my Deputy Secretary who had actually hands-on 
experience.
    He not only had experience in public housing, but he also 
had private sector experience, and he was good enough to accept 
my offer to him. He left a lucrative, well-paying job in the 
private sector to come and serve our Nation and serve the 
public.
    And while I know that all of us humans have frailties and 
none of us are perfect, and from time to time mistakes can be 
made, I know Alphonso Jackson to be an honest man. I also know 
him to be a good man, I know a caring man, and I think a person 
that is diligently trying to manage a Department of Government 
that has a history of being very difficult to manage, with many 
demands and not always all of the resources available.
    With all of that, I also believe that it is important when 
someone sits in that chair to be very mindful not only of 
responding to Congress and responding to questions that might 
come from Congress, but also to be very mindful to respond and 
answer and the dictates of your General Counsel because that is 
one way you can avoid getting in trouble.
    And so Secretary Jackson is in an untenable position here 
where he is being told by his General Counsel that he should 
not answer these questions because there is a judge's order 
suggesting that this ought to not be discussed outside the 
courtroom. I do not think the judge's orders typically, in my 
experience as an attorney, talk about whether you can hold a 
press conference or not, but talk about whether matters should 
be kept within the confines of the judicial proceeding. And so, 
on the other hand, he has an obligation to answer questions 
from a Senator.
    So what is a man to do? He cannot satisfy both bosses. He 
cannot follow the dictates and the suggestions of his General 
Counsel, nor can he answer the question from a Senator. And 
those are the kinds of situations that those of us who choose 
to serve the public interest and serve the public in Government 
sometimes find ourselves in. And, Mr. Secretary, I am sorry you 
are in this position, and I wish you the best. And I know you 
are good man, and I know you are trying hard to do a difficult 
job.
    Let me talk to you about some of the issues relating to HUD 
and how we are going to help the American people through this 
housing crisis. It is not going to be about discussing one 
piece of litigation of the many pieces of litigation that HUD 
may face, but also to talk about the issues that face the 
American people today.
    When we talk about the FHA modernization bill that I am 
very committed to--and I am so delighted that the Chairman is 
also so committed to seeing this become a reality--I want to 
continue to work with HUD to hear what will help you in this 
instance. You mentioned that seller-provided downpayment 
assistance has had a foreclosure rate of 25 percent. Now, the 
typical foreclosure rate on FHA lending is approximately what? 
Three percent?
    Secretary Jackson. About 3 percent.
    Senator Martinez. Mr. Montgomery, Housing Commissioner?
    Mr. Montgomery. Thank you, sir. Our actual foreclosure rate 
right now is 2.16 percent.
    Senator Martinez. So instead of 2.16 percent, these types 
of loans have a 25-percent foreclosures rate.
    Mr. Montgomery. Slight correction. They have a cumulative 
claim rate of 25 percent over the life of their loans.
    Senator Martinez. So the point is----
    Mr. Montgomery. They are 2\1/2\ times more likely to fail 
than loans that do not have that type of----
    Senator Martinez. So 2 \1/2\ times, which for a firm like 
the FHA, which is actuarially to be kept sound, you charge a 
premium, you cannot really put on the backs of the regulate 
premium payer the kinds of risks that these types of loans are 
bringing about to HUD.
    Mr. Montgomery. That is correct.
    Senator Martinez. So it would be helpful, you think, in an 
FHA modernization if we eliminated from the FHA lending these 
types of downpayment-assisted--seller-downpayment-assisted type 
loans.
    Mr. Montgomery. Absolutely, and that is why I appreciate 
the courage of this Committee to take this issue head on, and 
it has included language to that effect in the bill they passed 
in December.
    Senator Martinez. The other issue I would ask on the FHA 
bill, on the FHA issue, is about downpayments and whether we 
should have a small downpayment contribution in FHA lending, 
and what is your position or HUD's position on that?
    Mr. Montgomery. We currently support the provisions in the 
Senate bill that have the 1.5 percent minimum cash investment. 
The current is 3 percent. And we feel, given what has been 
going on in the market--this is a departure from the bill in 
2006, by the way, that borrowers should have some skin in the 
game, so to speak, and have a cash investment.
    Secretary Jackson. And we truly believe that because it was 
raised by an issue with Senator Bond, and we assured him that 
we would do everything in our power to make sure that a person 
made a cash investment in this process.
    Senator Martinez. On the FHA, is there anything else, 
Commissioner Montgomery, that you would like to----
    Mr. Montgomery. That is it, sir.
    Senator Martinez. OK. I was going to say, I think overall 
it sounds to me like the Senate bill is more in keeping with 
what you believe you need in order to have the FHA play a 
significant role in the current mortgage crisis that our 
country is facing.
    Mr. Montgomery. Yes, and I just would want to add something 
to what the Secretary said earlier on the loan limits. We are 
obviously very mindful that the stimulus package raised those. 
Certainly today we feel the 417 is a good number. But we have 
to say given what the stimulus does, we will continue to 
consult with Members of this Committee to see what that number 
is.
    Senator Martinez. And it is too soon to see any experience 
with it?
    Mr. Montgomery. It is probably too soon. Let me point out 
there are 3,300 counties in the country; 75 of them are at the 
highest limit; 600 are somewhere between $271,000 and $729,000; 
2,500 counties are at the 271. So the vast majority of America 
is capped at $271,000. But as I have said before--I am a Texan, 
but I have been trying to look out for the State of California 
in that I think they need to have the opportunity to use the 
Nation's flagship homebuying program. So I just want to 
continue----
    Senator Martinez. So if you do not have a higher loan 
limit, you are really leaving out certain marketplaces from 
participating in FHA housing.
    Secretary Jackson. Actually, yes. If we look from Utah all 
the way back to the West Coast, we are going to leave out quite 
a bit. And if we look at Virginia all the way back to Maine and 
New Hampshire, we are going to leave out quite a number of 
people.
    Senator Martinez. But with that geography, you are 
forgetting Miami, also a high-cost area.
    Secretary Jackson. Miami.
    [Laughter.]
    Senator Martinez. Mr. Secretary, I want to commend you for 
tackling the issue of RESPA reform. You know how much I bled 
over this issue while I was at HUD, and I appreciate the fact 
that you have continued to struggle with that, because as we 
look at the--and I know, I am mindful of my time, Mr. Chairman. 
We really have an issue when it comes to the mortgage problem 
relating to how people get into the mortgages in the first 
place. And I think part of it is the information, part of it is 
the amount of paperwork, part of it is the fees they get 
charged, not always clearly delineated.
    Secretary Jackson. That is correct
    Senator Martinez. And I commend you for that, and I wanted 
to ask you where you are on a rule, on a RESPA rule, and what 
you anticipate coming that----
    Secretary Jackson. The rule is coming out I think very 
soon, and comments--when are we having it by? Is it coming out?
    Immediately it is going to be out.
    Senator Martinez. The rule will be out immediately?
    Secretary Jackson. The proposed rule.
    Senator Martinez. The proposed rule. For comment?
    Secretary Jackson. Yes.
    Senator Martinez. Very good. Well, I commend you and 
congratulate you for that. I know it is a major achievement, 
and it was a promise you made me when I left, actually, that 
you would see through RESPA reform. So I thank you for 
persevering on something that I know is very, very difficult 
and very controversial and contentious.
    Secretary Jackson. Thank you.
    Senator Martinez. Thank you, Senator Menendez.
    Senator Menendez [presiding]. Thank you, Senator Martinez.
    Senator Martinez. Senator, I should tell you that I tried 
to teach Secretary Jackson a lot, but pronouncing Spanish was 
not one of them.
    Senator Menendez. And if I did not say anything, he would 
not know, so I----
    Senator Martinez. He called me ``MAR-ti-nez'' a time or 
two.
    Secretary Jackson. I appreciate that.
    Senator Menendez. If he called me Martinez, I would get 
better answers.
    [Laughter.]
    Secretary Jackson. I am not sure.
    Senator Menendez. Let me just tell the Committee, I know 
that Secretary Jackson has told Chairman Dodd that he has to 
leave by 11:45. I still think we will accommodate everybody. 
There is plenty of time. But I just want everybody to know. And 
before I turn to Senator Carper, Mr. Secretary, I assume that 
court order that you referred to with reference to Senator 
Casey is a public court order, is it not? That court order is 
not public?
    Secretary Jackson. I have to ask--I know that----
    Senator Menendez. Well, I assume if the judge said--if you 
are telling us that the order is that you cannot speak or have 
the public--that the order somehow is not public to tell you--
--
    Secretary Jackson. This is our General Counsel, Rob Couch.
    Mr. Couch. No, sir, it is not an order--an issued written 
order. It was the request by the judge in the case. The case 
is----
    Senator Menendez. It was an oral request?
    Mr. Couch. Yes, sir.
    Senator Menendez. In open court?
    Mr. Couch. I cannot answer that, sir. I was not there.
    Senator Menendez. If you would look at it, if it is an oral 
request in open court, would you get a copy of the transcript 
to the Committee of that?
    Mr. Couch. Yes, sir.
    Senator Menendez. So we can see what the language of that 
was all about.
    Mr. Couch. Yes.
    Senator Menendez. Senator Carper.
    Senator Carper. Before Senator Martinez leaves the room, I 
just want to ask, having sat in this seat you now hold and in 
the seat where Secretary Jackson is sitting, which seat do you 
prefer?
    Senator Martinez. Sir, this seat over here is much more 
comfortable.
    [Laughter.]
    I remember the first time I sat here, I thought it was a 
whole lot easier to ask the questions than it is to answer 
them.
    Senator Carper. Thank you for your candor.
    One of the things that Senator Martinez and I have been 
working on, along with others on the Committee, the Chairman 
and Senator Reed and Senator Bennett, is the matter of trying 
to make sure we have got a strong, independent regulator for 
Government-sponsored enterprises--Fannie Mae, Freddie Mac, and 
the home loan banks.
    When Secretary Paulson sat before us 3 weeks ago, in the 
seat that you now hold, I asked him to tell us what his 
priorities and maybe the priorities of the administration might 
be as we attempt to craft a housing recovery package, a 
legislative housing recovery package. What would be your 
priorities? In the package that we have been putting together--
well, I will just hold off saying what are the proposals that 
our leadership put together. We have not had a chance yet to 
debate them fully on the floor, but my hope is that we will 
soon.
    But Secretary Paulson said three priorities: No. 1, we need 
a strong, independent regulator for our GSEs, for Fannie Mae, 
Freddie Mac, and our Federal home loan banks; No. 2, we need to 
take FHA and bring it into the 21st century, modernize it, make 
it relevant for today's needs and marketplace; and, No. 3, he 
said he would like to see the housing authorities for our State 
and local governments be able to issue tax-exempt revenue 
bonds, not just for first-time homebuyers, not just for multi-
family rental housing, but also to be of help with respect to 
refinancing homes and homes that are in foreclosure or 
threatening to go to foreclosure. Those are what his top three 
priorities would be.
    Let me just ask of you the same question. What would be 
your top priorities as we take up--and I think when we come 
back from our recess later this month, one of the first items 
that we will take up in the Senate will be a housing recovery 
package. And it would be nice to have the input of the 
administration, and we are already getting that from our 
Republican and Democratic colleagues as well.
    Secretary Jackson. Thank you, Senator. The first thing I 
would say is to have the Senate and the House reconcile the FHA 
modernization legislation. That is critical to what Senator 
Martinez just said. I think we will be able to reach markets 
today we cannot reach, and I think that is very critical.
    Second----
    Senator Carper. Let me just ask, there has been, as you 
probably know, some negotiations that have been going on behind 
the scenes involving our Chairman and Ranking Member, along 
with the Chairman and Ranking Member from the House sister 
committee over there. Has HUD been a part of those discussions? 
And if so, where do you see the sticking point? I am told there 
is maybe one sticking point. Where do you see that sticking 
point?
    Secretary Jackson. We have not been, and yesterday at the 
hearing with Chairman Frank, he said that they were pretty 
close to resolving the situation, he and Chairman Dodd. So I 
will--that is all I know about that.
    Senator Carper. Well, knowing how high a priority this is 
for HUD, for you, you may want to invite yourself into a 
conversation with some of those principals and see what kind of 
encouragement of guidance or counsel you can impart to them.
    Secretary Jackson. Thanks.
    Senator Carper. I would urge you to do that.
    Secretary Jackson. OK. And the second one I would say is 
RESPA reform, because I think that it should be transparent. 
What people do, when they enter into a contract as to what they 
are going to pay for a home, it should not change drastically 
from what the initial cost was. I think that is very important.
    And, last, I agree with my colleague Secretary Paulson. The 
only difference is it is not only housing authorities issue 
bonds. I would like to see the counties and cities issue bonds 
based on their creditworthiness to help people buy homes. And 
we have said that before.
    I think it is very important. We are facing a major crisis. 
I think we can do so much, and then we have to look to the 
private sector, and that is why we created the Hope Now 
Alliance, is to try to address that issue.
    I want to say this, though, because this is very important 
to understand, that 80 percent of the subprime loans in this 
country are going to be OK. But we are looking at 20 percent, 
which is about 2.1 million. And I think we can address this if 
we all work together. I have been in different cities, Mr. 
Chairman, in Newark, where I have seen blocks of homes which I 
detest. And I think that between the two Senators and Mayor 
Booker, I think we have an opportunity to bring Newark back. 
And I want to do everything in my power to help them do it.
    Senator Carper. Give us some advice on GSE regulatory 
reform, please.
    Secretary Jackson. I think we must have a strong regulator, 
and it is clear that they want the regulator to be independent, 
not out of HUD, not out of any other agency, but similar in 
many ways to the Federal Reserve. And I have no objections to 
that at all.
    Senator Carper. Beyond that, what advice would you have for 
us?
    Secretary Jackson. I wish I could answer some of the 
questions that were asked of me this morning.
    Senator Carper. OK. How are we doing with respect to Hope 
Now? And how----
    Secretary Jackson. We are doing very well, but between 
Secretary Paulson and I, we have had to, in essence, use a lot 
more moral courage to entice people to do what they should be 
doing. It is one thing to say what you are going to do. It is 
another thing to do it. And we are consistently pushing, 
pushing, to make sure that they carry out their responsibility.
    Senator Carper. One of the elements that is in the housing 
recovery package that our leadership attempted to bring to the 
floor earlier this month was some additional money for housing 
counselors and some additional money for CDBG. Would you just 
comment on both of those elements?
    Secretary Jackson. Let me say that housing counseling is so 
important. Ninety-six percent of the people that receive 
counseling did not go into foreclosure. We have increased 
housing counseling from $10 million in 2001 to the 2009 budget 
of about $65 million. We have also funded NeighborWorks at $180 
million. We are seeing the results.
    Let me tell you, I was in Cleveland and Detroit, and I was 
just in Santa Ana, California, last week, where more than 1,000 
people who were facing foreclosure came in, and each case we 
were able to save 80, 85 percent of those people, only because 
their housing counselors were looking at everything. We are 
asking banks to renegotiate, refinance. We are asking banks to 
cut the amount of the loan because a lot of the homes now are 
underwater, and when we say underwater, Senator, that means 
they are--with the mortgage note that they have, it is not 
worth that much. And so we are working with them.
    The same thing in Cleveland. When I was in Cleveland and 
Detroit, we had more than 600 people there, and we helped more 
than 85 percent of those people stay in their homes.
    Senator Carper. Let me interrupt you. I think the dollar 
amount that was put in our housing recovery package for 
additional counselors was, I think, $200 million, in addition 
to the $180 million that you have mentioned. And I would like 
to know if some additional funds could be helpful.
    Secretary Jackson. I think that we are doing very well, and 
I think that whatever the Senate makes--the House and Senate 
makes a decision, we will use the money judiciously. I mean, I 
think that now we have 2,300 counseling centers where when we 
came in, we had about 500 all around the country. And 
NeighborWorks is all around the country at this point in time.
    I think that we see the importance of this crisis that we 
are facing, and it is important, in my mind, to help people 
stay in their homes. And we are not talking about wealthy 
people. We are talking about policemen, nurses, teachers, fire 
people. I mean, these are regular people who have invested 
every penny they have into their homes. And I think it is 
cynical to let them lose their homes. I had one person when we 
were in Cleveland that had been in a home for about 15 years 
and was losing it.
    Senator Carper. Let me just conclude by saying this: Our 
Leader, the Majority Leader, Senator Reid, said yesterday that 
when we return to session following the 2-week recess, one of 
the first items that we are going to take up is a housing 
recovery package. It will include some of the elements that 
both you and Secretary Paulson seem to embrace. It will include 
a number of proposals that we embrace. I would urge you to be 
an active participant in working with both the Senate and the 
House and the relevant Committees and leaders of the Committees 
to help fashion that package to make sure that it meets the 
needs that you think are there.
    Secretary Jackson. I will only say to you, Senator Carper, 
that I believe if we pass FHA modernization, we will address 
that issue head on. We will be able to help a lot more people.
    Senator Carper. All right. Thanks very much.
    Senator Menendez. Senator Schumer.
    Senator Schumer. Thank you, Mr. Chairman, and thank you, 
Mr. Secretary. First, I want to thank you for the good work. 
Your office and you personally have worked closely with my 
office on saving a whole lot of affordable housing in New York: 
Castleton Park in Staten Island, a recent example; Starrett 
City, where we are moving along. I know that HUD has gone along 
with the plan that everybody has put together. We still have to 
get OMB to go along, but your commitment has been great.
    Secretary Jackson. Thank you.
    Senator Schumer. You have put your money where your mouth 
is in terms of affordable housing and saving housing in New 
York, and we very much appreciate that.
    I would like to discuss briefly with you the way that HUD 
handles the disposition of properties that it controls. I wrote 
you last month urging you to re-examine HUD's policies of 
allowing contractors to sell homes to speculators and absentee 
landlords. After only 15 days, these landlords, the 
speculators, they buy these homes--we have this problem in 
Buffalo and in Rochester and in Syracuse and in many of our 
upstate cities. There is a large number of vacant homes, and 
what happens is, yes, for the first 5 days, somebody can buy it 
at a discount, then for 10 more days, a policeman, a fireman, 
somebody can buy it, and then after 15 days--only 15 days after 
it goes on the rolls--anyone can buy it for just about any 
price, and it almost always ends up being speculators who are 
just holding it in hopes that they can flip it and make a 
couple hundred dollars.
    Now, in your response letter--I just received this 
yesterday--you make no mention of this policy, let alone--even 
though we wrote you about this, let alone a decision to re-
examine it. The letter goes through what else you are doing, 
and that is great. But you recognize the success of the asset 
control area program in redeveloping properties in Buffalo and 
Rochester--in Rochester. Note that Buffalo has an application.
    First, can we get some action on changing this policy to 
give those who will live in the homes a discount for a longer 
period of time--5 days is too much--and those who are 
policemen, firemen, and others the same? In other words, I 
think they should stay on the rolls for that program for, say, 
6 months so somebody can buy them. We are finding in parts of 
Rochester, parts of Buffalo, people do want to buy them. But 
quickly they are sold and the speculators come in. Would you 
seriously----
    Secretary Jackson. I would be happy to look into that 
because I am in agreement with you. I think that they should be 
owner-occupied, not speculation.
    Senator Schumer. The policy you have is a good one. It is 
just so quick.
    Secretary Jackson. OK.
    Senator Schumer. So without giving me a certain answer, you 
will agree, looking at the top of it, it should be a longer 
period?
    Secretary Jackson. I agree, and I want to say that I will 
have Commissioner Montgomery talk to you personally. We have 
been working with him.
    Senator Schumer. OK. Second, I hope you will seriously 
consider the asset control area for Buffalo. Rochester, you 
have done it. It has done a good job. Everyone is getting 
plaudits on it. Could you please consider that for Buffalo as 
well?
    Secretary Jackson. Surely.
    Senator Schumer. Very, very important. OK. Good. Those are 
two helpful things.
    HOPE VI, which you gave a grant to Niagara Falls nearby, is 
working already and working well. I do not have any complaints 
about HUD in terms of--well, I always have complaints, but I 
think HUD has done a good job overall in focusing on some of 
the toughest parts of my State in terms of housing and in terms 
of upstate New York.
    Second, I want to just follow up briefly on Senator 
Carper's question. Would the administration--I know you do not 
support the whole package that we have offered, and we are 
willing to work with Senator McConnell and other Republicans to 
come up with some kind of compromise, and Senator Carper has 
been a leader on that. Actually, so have Senator Casey and 
Senator Menendez, sitting here with me. Would you consider at 
least supporting the $200 million--you know, the $180 million 
that we allocated, that you and Secretary Paulson agreed was a 
good idea, was an amendment originally offered by myself, 
Senator Casey, and Senator Brown; 130 or 140 of that has been 
used up already. It is working, you are right.
    Secretary Jackson. That is correct.
    Senator Schumer. Would you consider supporting an 
additional $200 million? As you have said, the statistic I had 
never heard, but it is astounding if it is true: 96 percent of 
those who have counseling do not go into foreclosure.
    Secretary Jackson. That is correct.
    Senator Schumer. So wouldn't that be logical that now that 
this 180 is almost used up that the administration support an 
additional allocation? I wanted 500--we wanted $500 million. We 
put in the bill $200 million to help win you guys over.
    Secretary Jackson. May I get back to you on that?
    Senator Schumer. Yes. Thank you. Would you? I hope you will 
privately recommend that.
    Secretary Jackson. OK.
    Senator Schumer. My time has expired, and I very much 
appreciate your time, Mr. Chairman.
    Secretary Jackson. Chairman, may I address an issue that 
you and Chairman Dodd addressed? I got a notice back that the 
project-based Section 8 letter that Chairman Dodd referred to 
from September 2007 was responded to you all on December 8, 
2007. And I will make sure you get a copy of the letter.
    Senator Menendez. That was a letter that Senator Dodd--that 
was the second letter that he referred to.
    Secretary Jackson. OK.
    Senator Menendez. The letter on LEP that I was referring 
to, I do not have an answer.
    Secretary Jackson. OK. Then I will get it for you.
    Senator Menendez. But I am sure that his staff is here and 
will----
    Secretary Jackson. And, again, accept my apology.
    Senator Menendez. I appreciate that, and as long as we get 
an answer. I know for 1 minute Senator Casey has a personal 
request, Mr. Secretary, and I will acknowledge him for that 
purpose.
    Senator Casey. Thank you, Mr. Chairman. I know we are out 
of time. Two things. One is I will be sending a set of 
questions to you, Mr. Secretary, to respond to for the record. 
And we are out of time to pursue this further today, but I 
would just say to my colleague from Colorado, Senator Allard, 
that I think it would be helpful in a setting like this that 
you do not make public statements about what I know or do not 
know. You said, ``Senator Casey knows what the judge's order 
says.'' We do not have that on the record here. What I do know 
is that the Washington Post refers to a press statement from 
HUD where they say, and I quote, ``The judge presiding in the 
lawsuit has asked the parties not to speak to the news media.'' 
That is the only public written version of what the judge may 
have said or not said. I just ask the Senator from Colorado to 
speak to things that he knows, not what he presumes others to 
know.
    Senator Allard. Mr. Chairman, if I can respond, my intent 
was not to question your knowledge as far as the subject 
matter. I meant to refer to you as a very competent attorney, 
and so I thought--I am not an attorney. I thought as a very 
competent attorney you understood the importance of a court 
order, and so I just made that point. And it was not directed 
at you personally. I just was--in a way, I was trying to 
compliment you.
    Senator Casey. Well, I appreciate that. I think it is 
important, though, in light of what Senator Menendez said 
earlier, that we have on the record the testimony--or the 
transcript, I should say, from the judge to complete the 
record.
    Thank you very much.
    Senator Menendez. Thank you. Thank you, Mr. Secretary.
    Secretary Jackson. Thank you.
    Senator Menendez. We look forward to some of your answers 
to the questions.
    Secretary Jackson. Thank you.
    Senator Menendez. With that, let me welcome the next panel, 
and we thank them for their forbearing. Mr. Michael Kelly, the 
Executive Director of the District of Columbia Housing 
Authority, and the President of the Council of Large Public 
Housing Agencies; Mr. Hector Pinero, Senior Vice President of 
the Related Management Company, representing the National Multi 
Housing Council and the National Leased Housing Association; 
Ms. Diane Randall, who is the President of the Connecticut 
Partnership for Strong Communities--and if you would come up as 
we are introducing you. Ms. Randall served as the first 
Executive Director of the Connecticut AIDS Residence Coalition 
and is a member of the Connecticut Housing Finance Authority 
Board of Directors.
    Mr. Edgar Olsen, who is a professor in the Department of 
Economics at the University of Virginia. And if we could have--
those who want to engage, if you could engage outside, we would 
appreciate it.
    Mr. Edgar Olsen, as I was saying, professor in the 
Department of Economics at the University of Virginia, who has 
conducted research on low-income housing programs for many 
years and has served as a consultant to HUD in six 
administrations.
    And Ms. Barbara Sard, who is Director of Housing Policy at 
the Center on Budget and Policy Priorities, and prior to that, 
she was a senior managing attorney of the Housing Unit in the 
Greater Boston Legal Services, where she has worked for more 
than 19 years.
    Let me welcome all of you today. Because of the extended 
nature of the Secretary's visit with us, and because Senator 
Dodd had to go to a funeral and has asked me to chair until we 
get all of your testimony in, but I have to preside at 12:30, 
so we are going to ask you to try to limit your comments. We 
will include all of your testimony for the record. In order to 
engage in some questions that may be had by members who are 
here and who may come, I am going to ask you to try to 
summarize in about 4 minutes or so, if you can. And, with that, 
let me thank you all and recognize Mr. Kelly.

  STATEMENT OF MICHAEL KELLY, EXECUTIVE DIRECTOR, DISTRICT OF 
  COLUMBIA HOUSING AUTHORITY AND PRESIDENT, COUNCIL OF LARGE 
                   PUBLIC HOUSING AUTHORITIES

    Mr. Kelly. Mr. Chairman, Ranking Member, and members of the 
Committee, my name is Michael Kelly. I am the Executive 
Director of the District of Columbia Housing Authority here in 
the Nation's capital. And I am also President of the Council of 
Large Public Housing Authorities.
    Thank you for your invitation to testify today on the 
fiscal year 2009 budget request by the Department of Housing 
and Urban Development.
    The D.C. Housing Authority owns and manages 8,000 public 
housing units and we provide vouchers to over 10,000 families. 
With six awards, the DCHA is the fourth largest recipient of 
the HOPE VI awards across the country.
    CLPHA's 60 members represent most major metropolitan areas 
of the country, and on any given day CLPHA members serve more 
than 1 million households. Together, they manage almost half 
the Nation's multi-billion dollar public housing stock and 
administer 30 percent of the Section 8 voucher program.
    Regrettably, the Administration's proposed budget is a 
continuation of a now 8 year effort to cripple, dismantle, 
devalue, and defund public housing. From cruel budget cuts to 
the evisceration and elimination of programs, this budget, in 
Congressman John Olver's words, is an ``assault on public 
housing.'' Allow me to elaborate.
    The Administration's proposal of $4.3 billion for the 
operating fund reflects only 81 percent of need. HUD's own 
budget justifications indicate that $5.3 billion is needed, $1 
billion more than what they are asking. Coupled with 
underfunding, the transition to HUD's asset management has 
dramatically increased the administrative burden on housing 
authorities.
    We thank Congress for reaffirming in legislation that 
housing authorities may use a portion of their capital fund to 
pay for some central office costs. However, we are concerned 
that the continued funding shortfalls will make the transition 
to asset management needlessly difficult, resulting in negative 
consequences for resident services.
    When viewed in this context, the Administration's request 
for only 81 percent of need is both inadequate and 
indefensible, given the monumental need for affordable housing 
in this country, and most certainly here in the Nation's 
capital.
    If I can, Senators, you know more than I the need. But if I 
can share with you for the record a letter that I received very 
recently. ``Mr. Kelly, my name is Ms. Sota and I am writing to 
you for help. I have four kids who have motivated me on my 
journey. I have been working full-time as a dental assistant 
for 4 years. The only thing that is missing is a safe place for 
our own.''
    ``My kids and I have been living from house to house for 
three-and-a-half years. I hate the fact that my kids are asking 
where housing we are staying over tonight. My kids hate leaving 
school because they have learned that after school there is no 
home. I cannot really buy food because I am never at one place 
for too long.''
    ``I want to give my babies comfort, stability, and security 
but I need help. Please, Mr. Kelly, help us find a place that 
is safe to call home.''
    Again, you know more than I what the need is, Senators, and 
I want to thank you for your continued efforts in this.
    In short, CLPHA and the D.C. Housing Authority recommend 
funding the operating fund for the industry recommended level 
of $5.3 billion for fiscal year 2009.
    For the capital fund, in recent testimony before a House 
Appropriations Subcommittee, HUD Secretary Jackson claimed 
housing authorities have sufficient capital fund reserves. As a 
housing authority director, I am baffled by the Secretary's 
remarks but can say that we do not have capital fund reserves 
and are, in fact, prohibited from maintaining reserves. And 
under this budget, we will not have sufficient capital funds.
    At the D.C. Housing Authority, we have a backlog of 
modernization needs totaling $150 million. In light of 
decreased capital funding, the DCHA sought assistance from the 
private sector and collateralized future capital resources to 
receive $80 million bond funding. This fund was used to repair 
and replace major systems. Despite this, we still have 14 
developments that require major physical improvements.
    With reduced capital funding, our ability to return to the 
private sector to secure additional funds to treat these sites 
is greatly restricted. Underfunding the capital fund will cause 
private lenders to shy away from future investment in public 
housing neighborhoods.
    For these reasons, DCHA and CLPHA recommend funding the 
capital fund at the industry requested level of $3.5 billion.
    Also, last year HUD said it would conduct a national 
modernization needs study to develop a modernization assessment 
protocol. A year has now passed. This year, once again, HUD 
says it will conduct a capital needs study of public housing. 
And DCHA and CLPHA urge HUD to complete this study so we can 
have a more complete understanding of the state of capital 
needs, including the current number of severely distressed 
units.
    HOPE VI, as was noted earlier, is one of the most 
significant neighborhood revitalization strategies that we 
have. At the housing authority, we assume the role of real 
estate developer and community builder. With our six HOPE VI 
sites and our revitalization efforts, along with our partners, 
we have generated over $2 billion in economic development here 
in the District. We have been able to increase the net number 
of affordable housing to over 1,500.
    In fact, the DCHA was recently named the fourth most active 
developer in the District of Columbia by the Washington 
Economic Development Partnership.
    In 1993, when the program was first authorized, the stated 
goal was to demolish severely distressed public housing, 
estimated at that time to be 100,000 units. Today, 15 years 
later, we are still faced with a substantial number of severely 
distressed public housing units. And as I mentioned earlier, 
the DCHA has 14 such public housing communities that need these 
vital revitalization dollars.
    Senator Menendez. Mr. Kelly, if I could ask you to 
summarize for us.
    Mr. Kelly. Again, on the Federal voucher side, we expect 
that vouchers are greatly needed. We support the passage of 
Senate Bill 2523, the National Affordable Housing Trust Fund 
Act. It is an important fund for resources to continue 
development of public housing.
    And to summarize, it is past time for this Administration 
to stop the assault on public housing and low-income families 
through these budget decisions.
    I thank you for this opportunity.
    Senator Menendez. Thank you.
    Mr. Pinero.

  STATEMENT OF HECTOR PINERO, SENIOR VICE PRESIDENT, RELATED 
  MANAGEMENT COMPANY, REPRESENTING THE NATIONAL MULTI HOUSING 
      COUNCIL AND THE NATIONAL LEASED HOUSING ASSOCIATION

    Mr. Pinero. Mr. Chairman, members of the Committee, my name 
is Hector Pinero. I am Senior Vice President of Related 
Management Company. We have our headquarters in New York City 
and own and manage approximately 26,000 units of multifamily 
housing in 13 States from New York to California.
    I appear here today on behalf of the National Leased 
Housing Association, the National Multi Housing Council, and 
the National Apartment Association. I will use my few minutes 
to focus on HUD's budget as it relates to the Section 8 
project-based assistance program and the recent funding 
shortfalls that have raised serious concerns about the ability 
of the Federal Government to honor its contracts.
    In our opinion, the Section 8 subsidy mechanism is the most 
effective housing subsidy ever devised by Congress. It is an 
elastic subsidy that can reach the very poorest families and 
keep their rent burden proportional to the same as the rent 
burden of families with higher income.
    Related Management's Section 8 project-based portfolio 
inventory totals 12,000 units in 69 developments. For Section 8 
to continue to be an effective program, HUD must comply with 
its contractual promises to owners to make timely monthly 
assistance payments. In recent months, these payments have been 
as many as 2 to 9 months in arrears.
    While HUD has been late sporadically in making payments 
over the past several years, it was not until the summer of 
2007 that a major disruption occurred. From June through 
September, late payments were widespread over most parts of the 
country. In case of our portfolio, we billed HUD in June of 
2007 $9.8 million in assistance payments for the month of July. 
Almost one-third of our bill, or $3.1 million, was not paid by 
July 31st. And about 20 percent, or $2 million, remained unpaid 
until November.
    Owners do what they can to cope during these periods of 
non-payment, such as drawing funds from reserves, if they 
exist, borrowing funds, delaying payments to vendors, and 
making personal contributions. However, not all properties have 
the ability to make ends meet when HUD fails to make timely 
payments, resulting in notices of default, inability to pay 
operating expenses, and deferred maintenance.
    Late HUD payments not only affect the operations of a 
property, but also make difficult the preservation of these 
aging projects through sales and rehabilitation. Purchasers, 
lenders, and tax credit investors have now been put on alert 
that the Government may not perform under its contracts. And 
they will act accordingly to protect their interest, assuming 
they continue to participate at all.
    We have attached to our testimony a list of 19 adverse 
consequences of delayed or insufficient HUD funding.
    HUD has responded to the budget shortfall in the later part 
of fiscal year 2007 and fiscal year 2008 by entering into 
renewal contracts that no longer even purport to make a 
commitment for 1 year of funding, but rather obligate HUD only 
for a period of a few months with a promise to extend the short 
period for an indeterminate amount of time, when and if 
sufficient appropriations become available.
    Our review of the HUD fiscal year 2009 budget proposal 
indicates that HUD plans to continue this short-term or 
incremental funding approach, which does not assuage the 
concerns of the industry.
    What can this Committee to do help rectify the damage to 
the Section 8 portfolio? First, it can exercise closer 
oversight over the process HUD uses to make Section 8 
assistance payments, as well as how budgetary needs are 
calculated. The Secretary should be directed to use a portion 
of the appropriated working capital funds for this purpose.
    Second, legislation is being enacted to impose a penalty on 
HUD when its payments are more than 30 days late, remove 
requirements that owners receive HUD permission in advance to 
use project reserves to pay mortgages and/or employers, require 
HUD to notify owners when the late payments are anticipated.
    Third, the Committee should urge that sufficient 
appropriations be provided for fiscal year 2009 to avert the 
succession of short-term funding obligations by HUD, including 
supporting any emergency funding of fiscal year 2008 to achieve 
that goal.
    The industry stands ready to work with this Committee on 
these and other important housing issues and we appreciate your 
support.
    Thank you for allowing me to air our views.
    Senator Menendez. Thank you, Mr. Pinero.
    Ms. Randall.

 STATEMENT OF DIANE RANDALL, DIRECTOR, PARTNERSHIP FOR STRONG 
                          COMMUNITIES

    Ms. Randall. Thank you, very much. I am Diane Randall. I am 
Director of the Partnership for Strong Communities, which is a 
Hartford, Connecticut-based housing policy and advocacy 
organization. We promote solutions to chronic homelessness, 
affordable housing, and the development of vibrant communities.
    We are a program arm of the Melville Charitable Trust, 
which is a Connecticut-based foundation investing in solutions 
to homelessness and community development.
    I want to talk just briefly today about the impact of the 
Federal budget, the HUD budget, on a single State and how that 
money that the Federal Government grants to communities across 
the State of Connecticut intersects with the kinds of 
investments that our own State and philanthropic leaders are 
making in the State. And why it is so vital that we have 
continued stability of the kinds of programs that my colleagues 
here have talked about, the stability of the project-based 
Section 8 program, as well as the significant funding for the 
tenant-based Section 8.
    We have worked extensively on solutions to homelessness, 
and I appreciate Senator Martinez's remarks about the 
leadership of Mr. Bognanno, and really, what we have seen 
across the country where citizens from local communities have 
engaged in creating plans to end chronic homelessness. These 
are very exciting and they are a sense of restoration of hope, 
of really addressing an intransigent problem in our country.
    And yet there is a real belief that we can make a 
difference. But I am here to tell you, that difference will not 
be made unless this HUD budget is fully funded. And that 
includes significantly the funding for Section 8. This is one 
of the mainstream programs that we use to address chronic 
homelessness and that we use to prevent homelessness in our 
country. And it is just a critical need.
    Likewise, the investment in public housing is a critical 
need. This is really one of the mainstays for how people who 
are very low income have housing. And if that budget continues 
to be short-funded at 81 percent, we will see increasing 
homelessness.
    As Senator Dodd mentioned in his opening remarks, we have a 
dual housing crisis right now in this country. It is the 
subprime crisis, but it is the continuing crisis that very low 
income families have faced really for decades. And yet, there 
are signs of hope in the ability to address that. But the 
Federal budget is so critical.
    I want to say just one thing about--I do sit on our State 
quasi-public housing finance authority board of directors. We 
administer the Federal Low-Income Housing Tax Credit Program in 
our State. We get a little bit over $6 million a year. That 
really has been the work horse for the production of 
multifamily housing across the country.
    Increasingly, the demands from our public housing 
authorities to revitalize both our State and Federal public 
housing using these dollars is extraordinary. We cannot 
continue to have a production pipeline for creation of new 
affordable housing to address elderly needs or people with 
disabilities without the continued infusion of public dollars.
    Another issue I just want to touch on, and I will leave the 
rest of them in my written remarks. But I want to touch on the 
role of philanthropic investments, because I work closely with 
a foundation. Philanthropy stands ready to look at best 
practices and try to stimulate change. But obviously, 
philanthropy alone cannot address this, nor can State 
governments.
    In our State, we had bipartisan support from our State 
treasurer and our Governor to create a State housing trust fund 
of $110 million to be spent over a 5-year period. Again, this 
barely begins to really address the true need. And yet, this is 
a substantial investment. So without increased Federal 
investments, we cannot make headway that we know is vital to 
address the needs of thousands of citizens across the country.
    The other issue I want to just say something about is the 
bipartisan nature, because there has been some reference in 
this committee about--particularly how housing has been a 
bipartisan issue. I am happy to say that in our State we see 
bipartisan support for solutions to homelessness in the 
production of affordable housing. What we would like is to see 
it ranked a little bit higher on the priority list. And I would 
say the same here, that it is critical that these issues get 
addressed because they affect so many people throughout the 
country.
    Senator Menendez. Thank you very much.
    Mr. Olsen.

 STATEMENT OF EDGAR OLSEN, PROFESSOR, DEPARTMENT OF ECONOMICS, 
                     UNIVERSITY OF VIRGINIA

    Mr. Olsen. Thank you, Mr. Chairman.
    I welcome this opportunity to talk with you and the members 
of your Committee about the HUD budget. I speak from the 
perspective of a taxpayer who wants to help low-income 
families, albeit a taxpayer who has spent the last 40 years 
studying the effects of low-income housing programs. The views 
that I express should not be attributed to any of the 
organizations with which I am affiliated.
    My testimony will focus on the HUD budget for low-income 
housing assistance.
    Given the current economic slowdown and the added expense 
of fighting international terrorism, it is clear that little 
additional money will be available for low-income housing 
programs over the next few years.
    The question is how can we continue to serve equally well 
the families who currently receive housing assistance and serve 
more of the poorest families who have not been offered 
assistance?
    The answer is that we must use the money available more 
wisely. Research on the effects of housing programs provides 
clear guidance on this matter. It shows that tenant-based 
housing vouchers have a much lower total cost than any type of 
project-based assistance when they provide equally desirable 
housing. My written testimony contains references to these 
studies and a brief description of them.
    The results imply that we can serve current recipients 
equally well, that is provide them with equally good housing 
for the same rent, and serve many additional families, without 
any increase in the budget by shifting resources from project-
based to tenant-based assistance.
    The magnitude of the gain from this shift would be 
substantial. Jeff Tebbs and I have estimated that a total shift 
from project-based to tenant-based assistance would ultimately 
enable HUD to serve 2 million additional families with no 
additional budget. The results are in line with the results of 
the best previous studies of the excessive costs of project-
based assistance.
    The key to achieving these large gains is a transition to 
the new system that hurts few, if any, current recipients of 
housing assistance. My written testimony contains a number of 
proposals along these lines. I will focus my oral testimony on 
a proposal for public housing reform that would significantly 
improve upon the HOPE VI approach, would greatly expand on the 
vouchering out provisions of the 1998 Housing Act, and would 
benefit many current public housing tenants.
    My proposal requires no additional Federal funds. It is a 
proposal to better use the funds and assets currently available 
to housing authorities.
    The proposal would allocate to each housing agency the same 
amount of Federal money as it would have received in operating 
and modernization subsidies under the current system, so that 
no housing authority could argue against the proposal on the 
grounds that it would have less to serve its clients.
    With one exception it would require every housing agency to 
offer each current public housing tenant the option of a 
portable housing voucher or remaining in its current unit on 
the previous terms. The latter provision ensures that no public 
housing tenant would be harmed by the legislation. Families 
that accept the voucher would benefit from it. They would move 
to housing that they prefer to their public housing units.
    These vouchers would be funded from the current budget for 
public housing and they would not necessarily be as generous as 
the current Section 8 vouchers. Housing agencies would be 
allowed to charge whatever rent the market would bear for units 
vacated by families that accept the voucher offer and sell any 
of their projects to the highest bidder. This would generate 
the maximum amount of money to operate and modernize their 
remaining projects or offer vouchers to additional families. It 
would also avoid scandals associated with sweetheart deals.
    When a project is sold, the remaining tenants in that 
project would be offered the choice between vacant units in 
other public housing projects or housing vouchers.
    When a former public housing tenant that had accepted a 
voucher gives it up, the housing agency would be required to 
offer a housing voucher to a family from its waiting list. This 
ensures that the housing agency would continue to provide 
housing assistance to at least as many families and, indeed, 
the same types of families.
    If the preceding proposal is adopted, the public housing 
program in its current form would wither, but public housing 
agencies would do a much better job in helping low-income 
families with their housing.
    I appreciate the willingness of the members of the 
Committee to listen to the views of a taxpayer whose only 
interest in the matters under consideration is to see that tax 
revenues are used effectively and efficiently to help low-
income families.
    Senator Menendez. Thank you, Mr. Olsen.
    Ms. Sard.

 STATEMENT OF BARBARA SARD, DIRECTOR OF HOUSING POLICY, CENTER 
                ON BUDGET AND POLICY PRIORITIES

    Ms. Sard. Thank you, Senator Menendez. And thank the 
Committee for holding the hearing today, and for the Committee 
to conduct this important oversight.
    Appropriators can decide how much to spend on each program. 
They are good at that. But what this Committee really needs to 
do is to analyze the impact that the substantial shortfalls in 
this budget would have on HUD programs and whether, in future 
years, the harm would be so great that we could not just easily 
recover.
    Unfortunately, I think this is such a budget. The Center 
estimates that the magnitude of the shortfall this year is 
approximately $6.5 billion less than the amount needed to 
maintain current programs. And that is without doing a thing to 
touch the unmet and growing need for housing assistance, as the 
Chairman addressed in his opening remarks.
    Why? Why is the shortfall so big this year? No one has 
mentioned this yet, and this is very important. This is the 
first year in more than a decade that the HUD budget is no 
longer padded by a cushion of approximately $2 billion in 
rescissions from the project-based or tenant-based Section 8 
programs. The Administration did not propose such a rescission 
this year because those funds are no longer available.
    There are complicated reasons, which we can get into it in 
questions, if you like. But the fact is that this year we need 
$2 billion just as an accounting adjustment to get to zero, 
before we even make up for the shortfalls in the particular 
programs. And you have heard a great deal already about the 
shortfalls in a number of the programs.
    I beg to differ with Mr. Olsen, for whom I have a lot of 
respect and appreciate his backing of the tenant-based Section 
8 program, but I doubt very much that this proposal would meet 
the needs of the public housing program, or that his voucher 
idea would work.
    I want to focus for a few minutes on the needs of the 
housing voucher program. The Center estimates that we need $868 
million more than in 2008, or $1.3 billion more than the 
Administration requested, to maintain the vouchers in use in 
2008 into 2009. There are two main reasons why we need this 
increase. The first is simple, inflation. Housing costs are 
going up at more than the ordinary rate of inflation. And just 
HUD's inflation adjustment alone in the voucher program 
requires an increase of about $600 million.
    The additional funds are needed because there are more 
vouchers to renew in 2009 than in 2008, because Congress 
expanded the program in 2008 but funded the new vouchers only 
for a year. So those vouchers have to be renewed. And because 
the changes in the renewal funding policy, which Congress has 
finally done in the last 2 years' appropriations acts, are 
beginning to show progress and more vouchers are getting used, 
that will increase the number of vouchers in need of renewal.
    As Chairman Dodd said, without this increase, we estimate 
that there would be about 100,000 vouchers in use that would be 
cut next year. There is a table at the end of my testimony that 
shows the estimated cuts in every State. Unfortunately, 
however, even that figure is probably low because it depends on 
the availability of $600 million in reserves from agencies' 
funds. If Congress chooses not to use those reserves, as it 
well might not do, then the shortfall could be as much as one 
in 10 vouchers in use not being funded next year.
    My time has run out, so I just want to emphasize that the 
voucher program has been subject to enormous volatility in the 
last several years, which has caused the loss of over $150,000 
vouchers. The reason for that is the key policies, such as the 
annual renewal formula and the proper amount of reserves have 
not been incorporated in the authorizing law. It is critical 
that the Section 8 Voucher Reform Act, of which you are a 
cosponsor, is acted on by this Committee as soon as possible, 
so that these policy changes can be made this year.
    Thank you very much.
    Senator Menendez. Thank you very much. Thank you all. We 
appreciate your testimony.
    I have some questions. I am also tempted to ask, with no 
one else here to ask, for a series of unanimous consent 
requests. But I will not do that. The Chairman will never let 
me back.
    [Laughter.]
    Just kidding. Just kidding.
    But I do have a series of questions. I want to take 
advantage of your expertise for the time we have left here.
    Mr. Kelly, you are representing the large public housing 
authorities. You heard our interchange, my interchange as well 
as others, with Secretary Jackson. I appreciate his, you know, 
he is here on behalf of the Administration and basically, I 
guess, pursuing their standards.
    But for my purposes of this hearing to draw facts, the 
Administration makes a couple of arguments. You heard some of 
them here today. They say--and I would like to hear your 
responses here.
    One is that they say that many distressed housing units 
have been demolished so the capital needs in the program have 
decreased. Two, that access to private capital has also 
decreased the need for Federal funds for capital improvements. 
Third, that you heard in my interchange about the 81 percent of 
the cost of actual operations being funded, which is all-time 
low. That in fact, asset management, reserves, all of this is 
going to take care of that challenge.
    Do you want to--I would love to hear from you, maybe Ms. 
Sard, if you could respond to it, as well. What are your 
responses? Because that is what we are being told as Members of 
Congress, this is not a problem.
    Mr. Kelly. Senator, thank you so much for allowing me to 
respond.
    At the District of Columbia, which I run the program here, 
as I testified, we have been as creative as we possibly can be. 
We have been the most successful, or as successful in the HOPE 
VI award process as any housing authority across the country. 
We have redeveloped six neighborhoods dramatically through that 
means.
    We have gone to the bond market with what capital dollars 
that have been available and have stretched that. Wall Street 
has given us $80 million of that, leaving very little money 
left after loan payments available for the remainder of the 
program to modernize major systems.
    And we are, at this point, tapped out. We have 14 sites 
that desperately need modernization work or major 
revitalization with no avenue. We turn to the city as best we 
can. Within our own resources we are then required to look at 
our maintenance and modernization budgets, our maintenance 
budgets, to keep these places up.
    With the shortfall at almost 20 percent now, we are 
continuing to lose that battle. We are, in many cases across 
the Nation--not just myself but my able colleagues across the 
country--we are given a very tough choice. One, to ensure that 
our public housing stock meets housing quality standards and 
are livable. At the same time, with decreased resources, what 
we are doing is stretching things out. Garbage does not get 
picked up as quick as possible. Work orders do not get 
responded to as quick as we would like them to be. And 
incrementally, we were losing that battle with the deferred 
maintenance.
    At some point, I think if there is not an infusion of 
modernization development funds to counteract that, we will be 
in a position of actually losing hard units of public housing 
and increasing the stress between need and resources.
    Senator Menendez. Ms. Sard.
    Ms. Sard. There has been a very serious loss of public 
housing over the last decade. We estimate that there has been a 
reduction of 177,000 units from 1995 to 2007. So that is true.
    But on the operating side, HUD's own budget documents say 
that the operating subsidy need for these remaining units, 
after that loss is taken into account, is over $5 billion and 
substantially more than the Administration has requested.
    So it is their own formula that says this is the need. And 
my colleague has already explained why arguing that PHAS can 
rely on reserves is foolish.
    On the capital side, endnote 12 of my testimony explains 
that we adjusted the last capital needs study that HUD had 
published for the reduction in units since that time. And it 
analyzes further the shortfall that nonetheless remains.
    Senator Menendez. Thank you.
    Mr. Pinero, let me ask you, I am concerned--as I raised in 
my opening statement with the Secretary, but then I heard you 
echo it, about the possibility of owners being less willing to 
stay in project-based programs and continue to provide housing 
to low-income families as a result of the shortfall and HUD's 
insistence in signing short-term contracts.
    How real do you think is that concern, if we were to 
continue on the same course that we are on?
    Mr. Pinero. Owners want to be able to----
    Senator Menendez. If you could put your microphone on, 
first.
    Mr. Pinero. Owners want to be able to service their 
residents. And they also want to be able to meet their 
financial responsibilities. So if there is uncertainty on the 
monies and the funds that are going to be available, then 
investors, owners will be reluctant to participate in these 
programs.
    And if they are able to go to market to achieve the same 
goals without having to rely on the subsidy, they will choose 
that option. They will choose that option.
    Related is committed to affordable housing, but if we 
cannot rely on the funding when we are going to see--we may 
have to seek other options. We do not want to do that. And I 
believe that is the most owners that are in the affordable 
housing business want to stay in the program. But we need some 
certainty. And three and 4 months does not provide anyone 
reassurance.
    We have contracts for 1 year but we are only funded for 
three or 4 months, and that creates that problem.
    Senator Menendez. I heard from someone in your field--not 
your company, but in your field--who tell me well, we were told 
before, don't take from the reserve of one entity to, in 
essence, cross-subsidize another. That was definitely a no-no. 
And now we are told, because they do not have the money, by all 
means, go ahead and take the money and cross-subsidize.
    Is that happening?
    Mr. Pinero. We are not doing that. We are not taking from 
one pot to another pot. But we are finding ourselves during 
that shortfall, when we were not receiving funds, having to put 
our own money in to make sure that we are properly servicing 
residents while we waited to get the funds for many months. In 
one case, we did not receive $875,000, which was for a period 
of July and November, on a property in San Diego.
    Senator Menendez. Is the letter that Chairman Dodd and 
about 24 of us sent, asking for $2.8 billion in fiscal year 
2008, would that go a long way toward solving this problem?
    Mr. Pinero. Absolutely. We believe that if it is funded in 
the fiscal year 2009 budget, it will bring everybody whole and 
they will be able to fund the 12-month contracts, which is what 
the industry will have some comfort with.
    Senator Menendez. Thank you.
    Ms. Randall, I am impressed by your work in Connecticut. 
One of my questions certainly, while the Administration 
continues to request small increases in homeless assistance, we 
want to move from homelessness to the different part of the--
through the fulfillment of the spectrum, which is moving toward 
a place to call home.
    And I am wondering, most homeless resources are not used 
for permanent housing. Your work, in terms of trying to create 
the connections with opportunities for housing in the long-term 
so that people will move from homeless to a place to call home, 
how do you see some of these programs interacting? What are 
some of the challenges?
    Ms. Randall. I think some of your questions really speak to 
that, because we believe that it is critical to have both 
opportunities to combine tenant-based vouchers with supportive 
services that could be funded through HRSA, could be funded 
through State grants, could be funded through a variety of 
Medicaid resources. But we really promote the permanent 
supportive housing as a solution of chronic homelessness.
    So the availability of an adequate supply of tenant-based 
vouchers is critical. In Connecticut, when our State Department 
of Social Services, which is the largest public housing 
authority administering housing-based vouchers opened its 
waiting list last summer, we had nearly 50,000 households apply 
for those vouchers and for rental assistance, State-based 
rental assistance. A waiting list of about 12,000 was 
established. We have nowhere near that number to serve the 
population.
    The other need, though, is absolutely the funding of 
project-based vouchers, because we have an inadequate supply, 
as I think you probably are familiar with in your own State. 
There is an absolute need for production, because tenant-based 
vouchers alone are not feasible in very high markets like 
Fairfield County, for example. A very wealthy county but an 
individual who is living at $20,000 income or an individual 
living on disability or an elderly person on a fixed income, 
simply cannot afford often to use a tenant-based voucher.
    So the stability of the project-based voucher program is 
incredibly important.
    I want to say one more thing, the 8-11 program, which I 
know has a lot of criticism, is a program that we think could 
be better utilized. I know that Congressman Murphy from 
Connecticut is looking at proposals to try to restructure that 
program slightly to make it more amenable so that people with 
disabilities would have access to permanent supportive housing.
    Senator Menendez. Thank you very much.
    Mr. Olsen, I know you advocate giving vouchers to many 
families, including current residents of public housing. And I 
certainly agree with you that vouchers can be an effective 
tool. But there is one point that I think we gloss over in the 
voucher context, and I would like to hear what you think about 
it.
    While agencies are able to use most of their vouchers, they 
over issue vouchers, planning on having many families who will 
be unable to find housing. This is similar to what airlines do, 
for example, in over booking flights.
    While this is effective in getting most vouchers used, it 
is clearly not a strategy that works for the families who are 
unable to find housing. Unlike stranded passengers, there is no 
next flight, so to speak. And so if they cannot find housing in 
a given time, their vouchers are taken away from them.
    So under your plan, some of the hardest to house people 
would get left out, would they not? If there is no other public 
housing or other public housing or project-based housing 
assistance?
    Mr. Olsen. For the public housing reform that I just talked 
about a few minutes ago, no, because I offer them the option. 
Everyone in public housing is offered the option, the voucher 
or stay in your current unit on the current terms. And so if 
there are some areas of the country where it is hard to use 
vouchers, then relatively few will use them. In other areas, 
more will use them. So I think that solves that problem.
    Senator Menendez. So then you continue to support the 
existing public housing----
    Mr. Olsen. What I would like to see is when a person moves 
out of public housing with a voucher, that unit would be 
occupied by someone at market rent. We are continuing to serve 
the same number of people. It is just the mix between how many 
get their assistance in a public housing project versus getting 
it with vouchers.
    So part of my proposal is to make sure that we continue to 
serve at least as many people. And actually, there will be 
savings involved here, so that the housing authority could 
serve more people if they wanted to.
    Senator Menendez. Although, certainly, if you are offering 
it at market rent, if someone could pay market rent they might 
look at a different venue to pursue their market rent than a--
--
    Mr. Olsen. There is a market rent. There is a highest rent 
the housing authority can get for every unit.
    Senator Menendez. Ms. Sard, you had made a comment earlier 
about Mr. Olsen's views. On this point, do you have a different 
view?
    Ms. Sard. Two points that I would like to make. I think 
that some of what Mr. Olsen is talking about could be done 
right. But two things would be needed that would make it 
probably more expensive than the current set of programs. The 
first is you would have to fix up the public housing so that 
there would be a viable rent that a person would be willing to 
pay, who was not getting any rental assistance. And it would 
have to be an amount that was adequate to maintain the unit. 
Otherwise they are simply leading to the further deterioration 
of the project.
    The second is I do not believe there is any evidence to 
support the assertion that much less costly vouchers would 
actually work. As you just said, we already have the problem 
with voucher subsidies pegged to fair market rents, that 
everyone is not able to find housing. The idea that you can 
find housing that meets quality standards at hundreds of 
dollars less per month simply has no evidence to support it.
    I think that the--particularly since you are on the Budget 
Committee, Senator, I think the important takeaway from this 
panel has got to be that the budget that the Senate, and then 
the House and Senate, agree on has got to be at the highest 
possible level.
    We are seriously concerned that neither the House nor the 
Senate budget actually has enough room under it for the kind of 
discretionary funding increase that is needed, compared to 2008 
or compared to the Administration's budget for these key 
programs. We need roughly triple the boost to the HUD budget 
this year, compared to the increase the Congress provided in 
2008. We are very concerned that the steps taken in the next 
few weeks in resolving the budget will basically tie the hands 
of the Congress in coming up with the adequate funding levels 
that we have expressed the need for.
    Mr. Olsen. Could I add to what Ms. Sard said?
    Senator Menendez. Surely.
    Mr. Olsen. We do have some experience with offering 
vouchers to people in the worst public housing. We have the 
Moving to Opportunity experiment that has been going on for a 
long time. And it gives compelling evidence that people you 
give vouchers to end up in better housing, safer neighborhoods, 
and their mental health is better.
    We have a similar experience with the HOPE VI program where 
we offer people the option: voucher or public housing. And 
there is a big difference in the outcome. The people who use 
the vouchers end up in much better housing, safer neighborhoods 
and so on.
    So we have some experience in doing this.
    Senator Menendez. Well, I appreciate those views. I will 
take your takeaway point to Senator Conrad, as the Chairman of 
the Budget Committee.
    Let me thank you all for your testimony.
    Let me make two statements for the record before we 
adjourn. Secretary Jackson told us this morning that HUD has 
submitted the required reports on Section 8. Last year's 
appropriations bill required them within 60 days. We have yet, 
as we understand it, according to Appropriations staff, 
confirmed that that report has been received. So we hope it 
will be today. I thought the answer was that it had already 
been done. We hope it will be today. If not, we will pursue it.
    Let me also inform our witnesses that the record will 
remain open for 1 week so that other members who may not have 
been able to be here because they had conflicting hearings may 
ask questions in writing. If, in fact, you should get one of 
those questions, we would ask you to respond within 7 days.
    With our thanks, on behalf of the Chairman, this hearing is 
adjourned. Thank you.
    [Whereupon, at 12:25 p.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

RESPONSE TO WRITTEN QUESTIONS OF SENATOR AKAKA FROM ALPHONSO R. 
                            JACKSON

Foreclosure Prevention

Q.1. Foreclosure and financial hardship can result in shame 
that, in turn, can prevent families from seeking the help and 
information they need to maintain ownership. Families are most 
likely to contact organizations they know and trust. These 
organizations may have specialized knowledge or abilities that 
can more effectively meet the needs of their communities. For 
example, there are social justice and housing development 
organizations within Asian American and Pacific Islander 
communities that effectively reach working families in their 
communities. How are HUD and its funding recipient, 
NeighborWorks, reaching out to these community organizations to 
ensure that effective financial assistance is available? What 
will be done to ensure that culturally and linguistically 
isolated populations will receive necessary foreclosure 
mitigation assistance?

A.1. HUD recognizes that families facing default and 
foreclosure are more likely to reach out to community-based 
organizations they know and trust. Several organizations with 
specialized knowledge, ability and experience serving the Asian 
American and Pacific Islander communities participate in HUD's 
Housing Counseling Program. For example, Asian Americans for 
Equality in New York, the Center for Pan Asian Community 
Services, Inc., in Georgia, and the Union of Pan Asian 
Communities in California, all provide critical default 
counseling, supported by HUD housing counseling grant funding 
and/or counselor training assistance. These organizations and 
others ensure that default counseling is available in multiple 
languages, including Cantonese, Mandarin, Korean, Vietnamese, 
and Hmong.
    In order to more effectively reach out to and serve these 
culturally and linguistically isolated communities, in February 
2008, HUD met with Lisa Hasegawa, the Executive Director of the 
National Coalition for Asian Pacific American Community 
Development (CAPACD), to discuss how CAPACD could become 
approved by HUD as a housing counseling intermediary and how 
organizations serving the Asian American and Pacific Islander 
communities could more effectively access HUD Housing 
Counseling Program resources. Also attending the meeting were 
Michelle Kauhane, the Executive Director of Hawaiian Community 
Assets, Susan Taoka, Executive Director of the Seattle 
Chinatown International District, and Robin Puanani Danner, 
President and CEO of the Council for Native Hawaiian 
Advancement. The meeting was an important step in building more 
effective partnerships between HUD and each of these 
organizations, and providing them access to the financial 
assistance they need to provide effective foreclosure 
mitigation assistance and other housing counseling services.
    Moreover, the meeting with CAPACD in February was also 
attended by Jenifer Iba, a Senior Advisor at NeighborWorks 
America. NeighborWorks is a HUD-approved Housing Counseling 
Intermediary that received a HUD housing counseling grant of 
approximately $1.5 million for fiscal year 2008, and a housing 
counseling training grant for approximately $2.5 million. 
NeighborWorks uses these funds to provide various housing 
counseling services, including default counseling, and supports 
several affiliate organizations that serve Asian American and 
Pacific Islander communities. For example, with their HUD 
housing counseling grant, NeighborWorks makes sub-grants to 
three organizations that provide services in Hmong, 
NeighborWorks Greenbay (WI), Community Neighborhood Housing 
Services (MN), and Dayton's Bluff Neighborhood Housing Services 
(MN). NHS of the Silicon Valley (CA), which offers services in 
Vietnamese, and the Hawaii Homeownership Center, also receive 
HUD sub-grant funding from NeighborWorks. In fiscal year 2007, 
NeighborWorks reported providing housing counseling services to 
approximately 3,000 Asian Americans and Pacific Islanders.
    At the February meeting, Ms. Iba discussed with CAPACD and 
the other attendees the $180 million the Congress appropriated 
directly to NeighborWorks through the Neighborhood Reinvestment 
Corporation, for the purpose of foreclosure prevention 
counseling. Because these funds were not appropriated to HUD, 
the Department was only able to play a minor, advisory, role in 
the awarding of those funds. Consequently, HUD is unaware of 
the steps NeighborWorks is taking to reach out to and fund 
organizations serving the Asian American and Pacific Islander 
communities with non-HUD funding. Questions regarding 
NeighborWorks, their National Foreclosure Mitigation Program, 
and how they are administering the $180 million appropriated 
directly to them, should be directed to NeighborWorks.
                                ------                                


RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM ALPHONSO R. 
                            JACKSON

Unfair Processes

Q.1. Whether they prove to be true or not, the fact remains 
that recent allegations about the allocation of HUD contracts 
have given many Americans the impression that HUD's selection 
processes for public housing are not fair. What is HUD doing to 
make sure that unfair processes are not taking place now, and 
will not take place in the future?

A.1. Contract support for Public Housing Agencies (PHA) can 
occur in two ways.
    The most common services are provided by the PHAs 
themselves, wherein they solicit and obtain bids and proposals 
and award contracts in compliance with Federal requirements 
(including 24 CFR 85.36) and state and local laws and 
regulations. In general, PHAs are required to obtain the 
contract support in a competitive environment. The Office of 
Public and Indian Housing oversees the compliance of PHAs with 
the requirements in their contracting. If requested, the Office 
of the Chief Procurement Officer (OCPO) staff also assists in 
providing procurement training and, occasionally, the reviews 
of PHA procurements.
    The secondary way of providing contract support to PHAs is 
through direct contracts awarded by HUD. We have a variety of 
methods that can be used to provide contract support, all of 
which are stated in the Federal Acquisition Regulation (FAR), 
and which are closely adhered to by Contracting Officers (COs) 
within HUD.
    The determination of the acquisition strategy is highly 
dependent on a number of variables in every acquisition. This 
would include the type of support needed, the time available to 
procure the necessary support, and the availability of sources 
to perform the requirements. Advance acquisition planning is 
important to ensure the proper methods are utilized. However, 
it is also understood that long lead times are not always 
available in urgent situations.
    The acquisition methods available to the CO include full 
and open competitive contracts, competition after exclusion of 
sources (such as for set-aside programs), competition utilizing 
GSA schedules, sole source contracts authorized by statute 
(such as the 8(a) program), multiple award indefinite delivery, 
indefinite quantity (IDIQ) contracts, and simplified 
acquisitions. All of these methods are clearly defined in the 
FAR. As a last resort, a CO could also award a sole source 
contract to a firm based on very specific circumstances that 
must be well documented. HUD COs have effectively utilized all 
of the available procurement methods in full compliance with 
the FAR.
    To ensure full compliance, a number of oversight and 
internal control processes are in place. In order to obtain a 
CO warrant, staff must meet certain requirements to ensure they 
are adequately trained and are knowledgeable in their field. 
Whereas this authority and responsibility had once resided in 
the various field offices, within the past 2 years, OCPO has 
centralized the function for overseeing the issuance of CO 
warrants to ensure continuity and compliance with necessary 
requirements.
    There are also various thresholds in place for multiple 
levels of reviews, depending on the dollar value of the 
procurement action. Most actions are also required to be 
reviewed by HUD's Office of General Counsel (OGC) for legal 
sufficiency. OCPO has also instituted an oversight process of 
reviewing a sampling of actions in each of our procurement 
offices through annual program management reviews (PMR). 
Through these reviews, we identify areas of weakness in 
operational contracting and focus on improving these areas 
through training and, if necessary, additional oversight. One 
additional tool for ensuring compliance with regulatory 
requirements is reviews conducted by the Office of the 
Inspector General (OIG). While prior OIG reviews have found 
weaknesses in various areas, most recently in areas of contract 
administration after the awarding of the contracts, OCPO has 
worked diligently to improve those areas. We are proud to point 
out that, despite consistent severe staffing shortages, OIG 
reviews have not identified any area where OCPO staff has 
violated any statutory or regulatory requirements.
    OCPO personnel are very careful to ensure full compliance 
with regulatory requirements. While there may be individual 
contractors that do not believe they have an opportunity to 
compete for contracts, HUD has mechanisms in place to provide 
widespread dissemination of information, including the annual 
Forecast of Opportunities issued by our Office of Small and 
Disadvantaged Business Utilization (OSDBU) and the use of 
FedBizOpps by COs when appropriate. Contractors also routinely 
market themselves for opportunities that are noted on the 
forecast, especially for opportunities for sole source 8(a) 
awards. For any sole source award, whether under the 8(a) 
program or other reasons, actions are fully documented as to 
why the source was selected. If appropriate, the CO will also 
obtain OGC review.

Violence Against Women Act

Q.2. The Violence Against Women Act (VAWA) creates obligations 
for Public Housing Authorities and landlords and owners who 
accept Section 8 subsidies to refrain from discriminating 
against victims of domestic violence, dating violence and 
stalking in admission, and prohibits evictions of victims based 
on domestic violence, dating violence or stalking. It also 
requires Public Housing Authorities to include statements about 
VAWA implementation and services provided to victims of 
domestic violence, dating violence, sexual assault, or stalking 
in their Annual and Five-Year Plans. In spite of these legal 
requirements, HUD has approved plans without these statements, 
has distributed information through at least one of its 
regional offices stating that VAWA does not apply to Project-
Based Section 8, and has failed to issue regulations to ensure 
consistent application of the law. Why has HUD failed to 
request funds to oversee the implementation of this law by the 
Housing Authorities, landlords, and owners that accept Section 
8 that it oversees?

A.2. HUD-PIH guidance issued several notices to Public Housing 
Authorities (PHAs) to inform them of VAWA requirements. The 
Office of General Counsel has drafted VAWA regulations which 
should be published in the Federal Register by fiscal year 
ending September 30, 2008. HUD will issue additional guidance 
to reinforce the requirement to include VAWA protections and 
services in PHA plans; and provide technical assistance to HUD 
field offices that have the responsibility of approving PHA 
plans. The Department will determine in the near future any 
financial and human resources necessary to monitor PHA 
implementation and review of modified PHA plans.

Energy Efficient Housing

Q.3. ``Energy efficient'' housing is not necessarily synonymous 
with ``healthy'' housing. What will, and is HUD doing to ensure 
that the move to more energy efficient manufactured, public and 
assisted housing does not compromise indoor environmental 
quality,

A.3. Within Public and Indian (PIH), we are reformatting and 
broadening our and Public Housing Website from Public Housing 
Energy conservation Clearinghouse to the Public Housing 
Environmental and Conservation Clearinghouse (PHECC) to address 
and integrate healthy and energy efficient housing solutions. 
For example, PLR is working closely with the Department's 
Office of Healthy Homes and Lead Hazard Control on a PIH 
Notice--Renewable Energy and Green Construction Practices in 
Public Housing to coordinate renewable energy and health 
issues. Also, PIH NOTICE 2007-12 focuses on integrated pest 
management; the goal is to manage pest damage by the most 
economical means, with the least possible hazard to people, 
property, and the environment. In addition, in the Green Issue 
of our monthly PHECC newsletter, we speak on topics such as the 
use of formaldehyde-free plywood, as well as paints and 
adhesives with fewer Volatile Organic Compounds (VOCs), in 
order to reduce atmospheric pollution.
    Historically, residential buildings did not have specific 
requirements for ventilation, because leakage in envelope 
components and natural ventilation were considered adequate. 
HUD agrees that envelope construction practice has improved, 
and with greater emphasis on air sealing as a central component 
of energy efficient construction or housing rehabilitation, the 
need to control air quality in the home has also increased, and 
greater attention needs to be paid to selection of materials 
that are healthy for building occupants.
    Indoor Air Quality and the International Energy 
Conservation Code: HUD is in the process of implementing the 
new requirement set by Congress in the Energy Independence and 
Security Act of 2007 to establish the 2006 International Energy 
Conservation Code (IECC) as the standard for new construction 
of HUD-assisted and HUD-insured properties. With the exception 
of Section 402.4.2 (Fenestration Air Leakage), the 2006 
International Energy Conservation Code does not provide 
specific direction on air infiltration and leakage rates, nor 
has HUD adopted or established specific ventilation 
requirements beyond those referenced in locally adopted codes. 
Most localities have adopted more advanced versions of the IECC 
than the 1992 Model Energy Code that remains HUD's current 
minimum standard for energy efficiency in public, assisted and 
insured housing (with the exception of HOPE VI, which is 
currently set at the 2003 IECC).
    Indoor Air Quality and Energy Star for New Homes. HUD's 
Energy Action Plan, as reported to Congress in August 2006, 
sets Energy Star for New Homes as the preferred (but voluntary) 
standard for new construction and gut rehabilitation financed 
through HUD's programs (15 percent more efficient than the 2004 
International Residential Code). The Energy Star for New Homes 
label requires an extensive by-pass sealing procedure to 
minimize air leakage in the home.
    The standard for Energy Star for New Homes requires 
mechanical ventilation to be provided if the home tests at 
lower than .35 ACH (air changes per hour), in compliance with 
ANSVASHRAE 62.2, Ventilation and Acceptable Indoor Air Quality 
in Low-Rise Residential Buildings. ASHRAE 62.2 provides a 
higher standard for ventilation and indoor air quality than the 
current requirements for the International Residential Code. 
The standard requires source-control measures that exhaust 
pollutants from specific rooms before the pollutants enter the 
rest of the household. In addition, whole-house ventilation 
brings fresh air into the house, diluting that are difficult to 
control at the source.
    Other HUD Actions Related to Indoor Air Quality and Healthy 
Housing: In addition to ensuring adequate ventilation, if the 
building envelope is tightened in order to minimize heat loss 
or gain, greater attention needs to be paid to selection of 
materials that limit out-gassing of formaldehydes and other 
potentially harmful substances, including mold, that could be 
harmful to building occupants. Several HUD programs are 
encouraging the use of ``green'' building measures that that 
contribute to improved indoor air quality.
    These include:

      The Office of Native American Programs (ONAP) is 
offering extensive training on indoor air quality, moisture and 
mold control and other green building practices to Indian 
tribes. Workshops on ``Creating Energy Efficient, Comfortable 
and Healthy Tribal Homes'' have been held as follows:


Santa Fe, NM..............................  December 11-12, 2007
Denver, CO................................  February 27-28, 2008
Seattle, WA...............................  March 18-19, 2008
Portsmouth NH.............................  April 15-16, 2008
Anchorage, AK.............................  May 5-6, 2008

    A national conference on this subject is scheduled for June 
17-19 in Reno, NV.

      The PATH (Partnership for Advancing Technology in 
Housing) Mold Safe House in Chesterfield, New Hampshire is a 
demonstration of the use of paperless drywall, drainage and 
other construction techniques that eliminate the potential for 
mold and moisture buildup in the home (see www.oathnet.org). In 
addition, the PATH Concept Home in Omaha, NE includes several 
sustainability features, including mold-resistant gypsum wall 
board and a whole house mechanical ventilation that includes 
Energy Star qualified ``smart'' exhaust fans.

      The HOME program has developed a new efficiency 
and green building training curriculum that addresses indoor 
air quality and selection of healthy materials. The curriculum 
is expected to be introduced later this year.

      A National Healthy Homes conference sponsored by 
the Office of Healthy Homes and Lead Paint Control (OHHLC) to 
be held this fall will include a track on ``Mainstreaming 
Healthy Housing,'' which will address the issue of bringing 
healthy homes criteria to HUD-assisted housing.

      The Mark-to-Market green remodeling initiative 
(www.oaho.net) provides an incentive for property owners to 
``go green'' as part of Mark-to-Market debt restructuring in 
existing multifamily properties. The program does not specify 
ventilation requirements. As outlined in its November 2007 
Green Guide, in addition to a mandatory Integrated Pest 
Management Program the program provides for a number of 
discretionary air quality measures that include the following:

          Green Variable Significant Additions: OAHP 
        requires the PAE use the following guidelines to 
        consider such other Green rehabilitation items as may 
        be appropriate for the property:

                  Kitchen and bath exhaust, using 
                ENERGY STAR-rated exhaust fans, vented to the 
                outside (or ENERGY STAR exhaust fan that runs 
                continuously or on a timer)--generally 
                recommended if feasible at reasonable cost.

                  Carbon monoxide alarm on each 
                occupied floor of the property, near the 
                bedroom--generally recommended if feasible at 
                reasonable cost.

                  Low or no VOC materials for any 
                rehabilitation involving paint, primers, 
                adhesives, caulk, and sealants--generally 
                recommended.

                  Replacement of carpet with a smooth 
                and cleanable surface--generally recommended 
                only if: (i) the owner concurs and either (ii) 
                the carpet to be replaced has reached the end 
                of its useful life or (iii) there is a sound 
                economic or health justification for early 
                replacement of carpet that has not reached the 
                end of its useful life.

                  Low VOC carpet--if the carpet is 
                being replaced with new carpet, generally 
                recommended if the increased cost is less than 
                10 percent.

        (PAE = Participating Administrative Entity)

      The Office of Public and Indian Housing (PIH)is 
reformatting and broadening its Public Housing Energy 
Conservation Clearinghouse to the Public Housing Environmental 
and Conservation Clearing house (PHECC), to address and 
integrate healthy and energy efficient housing solutions. A 
recent Green Issue of the monthly PHECC newsletter speaks to 
topics such as ``Engineers and architects agreed on foam 
building insulation instead of the more common batt insulation. 
Builders also used formaldehyde-free plywood, as well as paints 
and adhesives with fewer VOCs, in order to reduce atmospheric 
pollution.'' PIH is also working closely with the Department's 
Office of Healthy Homes and Lead Hazard Control on a PIH 
Notice--Renewable Energy and Green Construction Practices in 
Public Housing, to coordinate renewable energy and health 
issues. PIH has also issued Notice on Integrated Pest 
management 2007-12.

Energy Independence and Security Act of 2007

Q.4. The recently enacted Energy Independence and Security Act 
of 2007 has numerous HUD-related provisions, including energy 
code improvements applicable to manufactured housing, the 
application of the International Energy Conservation Code to 
public and assisted housing, and training federal contracting 
officers to negotiate energy efficiency contracts. These energy 
provisions do not seem to be accounted for in your FY 2009 
Budget Request. What steps is HUD taking and what resources is 
HUD mobilizing to ensure that these required energy 
improvements are met in a timely manner?

A.4. The Energy Independence and Security Act of 2000 (the Act) 
moves the responsibility for setting energy standards for 
manufactured homes from HUD to the Department of Energy (DOE). 
The Act specifically requires DOE to establish (by 2012) energy 
standards for manufactured housing that are based on the most 
recent version of the International Energy Conservation Code. 
Though this responsibility has now been given to DOE, HUD's 
Office of Manufactured Housing Programs has met with DOE to 
discuss ways in which HUD can assist in this effort and how the 
two agencies can cooperate on the implementation and 
enforcement when the DOE standards are published.
    Also, HUD is in the process of drafting a revised 24 CFR 
965. The draft regulation is intended to implement the 
International Energy Conservation Code (IECC) contained in the 
Energy Independence and Security Act of 2007. HUD does not 
negotiate energy efficiency contracts, but training on energy 
performance contracting is provided to public housing agencies. 
The President's 2009 Budget is sufficient to cover these staff 
and training costs.
    Actions taken by HUD related to specific sections are 
below:

      Section 413, Energy Code Improvements Applicable 
to Manufactured Housing. This section establishes the most 
recent International Energy Conservation Code as the standard 
for HUD-Code manufactured housing. It requires the Department 
of Energy (DOE), in consultation with HUD to establish the 
standard by regulation, within 4 years from the date of 
enactment of the Act. HUD is coordinating with DOE to 
facilitate timely action and consultation with the Manufactured 
Housing Consensus Committee.

      Section 481, Application of the 2006 
International Energy Conservation Code to Public and Assisted 
Housing.

    Section 481 of the Act amends and updates Section 109 of 
the Cranston-Gonzalez National Affordable Housing Act (42 
U.S.C. 12709) to require that HUD assisted and insured 
properties ``meet or exceed'' the 2006 International Energy 
Conservation Code. HUD is planning to publish an Advance Notice 
of Proposed Rulemaking to solicit public comment on the changes 
required by Section 481. HUD anticipates that comments on the 
Advanced Notice will provide guidance on the appropriate 
standard for each program area.

    In addition, the Office of Public and Indian Housing (PIH) 
has in draft a revision to 24 CFR 965. This regulation is in 
clearance within PIH. The draft regulation is intended to 
implement the IECC code provision contained in Section 481.

      Section 517. Training Federal Contracting 
Officers to Negotiate Energy Efficiency Contracts.

    Section 517 requires HUD personnel to receive training 
under the Federal Energy Management Program, designed to 
educate Federal contract negotiation and contract management 
personnel so that contract officers are prepared to: (1) 
negotiate energy savings performance contracts; (2) conclude 
effective and timely contracts for energy efficiency services 
with all companies offering energy efficiency services; and (3) 
review Federal contracts for all products and services for the 
potential energy efficiency opportunities and implications of 
the contracts.
    HUD is in the final stages of successfully negotiating an 
energy performance contract with an energy services company 
(ESCO) that will reduce HUD's annual energy bill and provide 
guaranteed payback for its investments. The Scope of Work 
includes energy efficient lighting throughout, water 
conservation measures, a rooftop photovoltaic and solar thermal 
system, green roof, replacement of all windows with double-
glazed windows, and various other Energy Conservation Measures 
(ECM's). Section 517 directs DOE to create, and administer, a 
training program to educate Federal contract personnel. Section 
517 provides that DOE will perform this action not later than 1 
year after the date of enactment of EISA of 2007. EISA of 2007 
was signed into law on December 19, 2007, making the schedule 
date for establishment of a DOE training program December 19, 
2008.
    HUD will seek and provide training to contract officers and 
contract management personnel as necessary to implement and 
administer the current ESPC project. As the DOE program becomes 
available, HUD will select and send personnel for training.

      Sec. 494 Green Building Advisory Committee

    HUD shall serve as a representative to the Green Building 
Advisory Committee, which shall provide advice and expertise 
concerning the management of Federal building efficiency, 
leasing, and Federal green building performance.
    EISA of 2007 (H.R. 6, Sec. 494) requires the Federal 
Director (The Office of Federal High Performance Green 
Buildings (H.R. 6, Sec. 436 A)), in coordination with the 
Commercial Director (H.R. 6, Sec. 421), to establish the Green 
Building Advisory Committee comprised of the agencies referred 
to in H.R. 6, Sec. 421(e).
    Upon establishment of the committee, or notification of 
first scheduled meeting, HUD will participate as a member of 
the committee.

Cuts to Section 811

Q.5. All of the proposed $77 million cut to Section 811 funds 
for housing for the disabled would come from the capital 
advance-project-based side of the program that produces new 
units of permanent supportive housing a cut of more than 70%. 
What justification does HUD have for such a radical shift of 
funding within 811 away from: a) production of new accessible 
units that provide a direct link to supportive services such as 
medical care, transportation, employment, etc.? b) individuals 
with more severe disabilities who have higher support needs and 
face an enormous struggle in trying to find housing using only 
tenant-based A assistance?

A.5. The Department is aware of the need for additional 
supportive housing for persons with disabilities. However, 
limiting the cut to new production ensures that those persons 
with disabilities currently receiving the benefits of 
assistance, including those with mainstream vouchers and others 
in housing developed under the Section 811 program, will not be 
at risk of losing their affordable housing. The limited funds 
will be used to renew mainstream vouchers and for renewal of 
project rental assistance contracts in existing Section 811 
developments.

Low-Income Housing Tax Credit

Q.6. The Administration's request for FY 2009 for Section 811 
includes a proposed $10 million demonstration program that 
would allow funding from the Low-Income Housing Tax Credit 
(LIHTC) program to be layered into 811 developments. Last year, 
HUD made a similar proposal as part of its FY 2008, but never 
formally submitted it to either this Subcommittee or the 
authorizing committee. When do you anticipate having this 
demonstration proposal ready for Congress? How many permanent 
supportive housing units do you anticipate this demonstration 
proposal producing in FY 2009?

A.6. The Department provided information on the proposed 
demonstration in its fiscal year 2009 budget submittal so that 
all interested parties, including Congress, can review and 
comment on. Based on our experience and consultation with the 
industry, we estimate that a $10 million demonstration could 
fund the cost of affordable housing for 150 to 300 persons with 
disabilities. The 150 would represent 100 percent of the funds 
utilized in the traditional method of developing Section 811 
housing units and leveraging additional units through the tax 
credit program. The 300 represents the case where 100 percent 
of the funds are utilized to fund 5-year subsidy contracts that 
would be awarded to low-income housing tax credit projects to 
ensure that the projects were affordable to person with 
disabilities.

Incremental Voucher Targeted To Non-Elderly People With Disabilities

Q.7. For FY 2008, Congress appropriated $30 million for 
incremental vouchers targeted to non-elderly people with 
disabilities. As you know, these funds were not requested by 
the President. Can you update the Subcommittee on the progress 
in developing the funding announcement for these vouchers? What 
is HUD planning to do to ensure that applicant housing agencies 
target these vouchers to people with severe disabilities who 
are not on Section 8 waiting lists, e.g., individuals in 
nursing homes and institutional settings, adults living with 
aging parents, etc.?

A.7. HUD is in the process of preparing the Notice of Funding 
Availability (NOFA) for the target disabled population. It is 
anticipated that the clearance process will begin in mid-to-
late May 2008; however, final NOFA publications are not 
anticipated until the fall. HUD is currently evaluating the 
various criteria used to ensure that vouchers will be targeted 
to non-elderly persons with disabilities, and this will take 
into account individuals in nursing homes and institutional 
settings, as well as adults living with aging parents.

Tenant-Based Rental Assistance For Non-Elderly

Q.8. Between FY 1997 and FY 2002, Congress annually 
appropriated funding for tenant-based rental assistance for 
non-elderly people with disabilities adversely impacted by the 
designation of public and assisted housing as ``elderly only.'' 
There are approximately 62,000 of these non-elderly disabled 
vouchers--also known as Frelinghuysen vouchers--in use. 
Unfortunately, HUD was slow to develop a tracking system to 
ensure that they continue to be targeted to the population for 
which Congress intended. In February 2005, the Office of Public 
and Indian Housing (PIH) issued Notice 2005-5 relating to 
issuance and preservation of these vouchers. This PIH Guidance 
also covers ``mainstream'' tenant-based rental assistance for 
non-elderly people with disabilities funded under the Section 
811 program.
    However, due to the lack of guidance until 2005, there is 
considerable uncertainty as to how many of these vouchers 
remain targeted to non-elderly people with disabilities as 
Congress originally intended.
    Can you please provide the Subcommittee with estimates of 
how both the Frelinghuysen vouchers and Section 811 
``mainstream'' tenant-based assistance have been targeted--and 
remain targeted towards the intended population?

A.8. PIH Notice 2005-5 issued implementation guidance to enable 
Public Housing Authorities (PHAs) and HUD field staff on 
initiatives to assist non-elderly people with disabilities in 
their search for housing under the Housing Choice Voucher 
Program. In addition, this notice clarifies issues related to 
issuance and preservation of certain types of special purpose 
vouchers, i.e. Frelinghuysen and 811 Mainstream Vouchers. By 
requiring PHAs to electronically report using the Form HUD-
50058, HUD monitors these vouchers to ensure they are targeted 
to the intended population. The Department continues to work 
with these agencies to ensure that all special purpose vouchers 
are used for their intended purpose.

Q.9. Can you please update the Subcommittee on steps that PIH 
has taken to ensure housing agencies that have these non-
elderly disabled vouchers are meeting their obligations under 
PIH Notice 2005-5?

A.9. To ensure that non-elderly vouchers are meeting their 
obligations under the PIN Notice 2005-5, HUD is tracking 
monthly usage of these non-elderly vouchers though its Voucher 
Management System (VMS). The Department is also working with 
the PHAs to ensure that all special purpose vouchers are used 
for their intended purpose. Failure to serve disabled families 
as required will result in forfeiture of the vouchers.

Project-Based Units For The Disabled

Q.10. Do you anticipate being able to make an allocation of 
$143.2 million available for new capital advance/project-based 
units for the disabled in FY 2008? When can we expect the 
FY2008 NOFA to be issued?

A.10. We anticipate making approximately $100 million available 
for new capital advance/project-based units for persons with 
disabilities. We note that in addition to funding amendments 
and renewals for tenant based assistance (mainstream vouchers) 
funded prior to fiscal year 2005, the appropriated funds must 
cover capital advance and project rental assistance contract 
amendments for projects currently being developed and project 
rental assistance contract renewals. The fiscal year 2008 NOFA 
is available at GRANTS.GOV and was published in the Federal 
Register on May 12, 2008.

Modernization of FHA

Q.11. In light of the pending modernization of FHA, is HUD 
ready to implement all the proposed aspects of the bill? 
Specifically, does FHA have enough staff, with the right skill-
sets, and adequate IT funding to upgrade your aging FHA 
systems? If not, what if anything, does Congress need to do to 
help?

A.11. From a staffing perspective, we are in good shape because 
the FHA business process is so automated that we can 
accommodate substantial increases in program volume. It should 
be noted, however, that upgrades to FHA's systems and staffing 
are an on-going process, and we continue to make improvements 
in both.
                                ------                                --
----


  RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM MICHAEL 
                             KELLY

Q.1. Mr. Kelly, as you are aware, D.C. hosts the 4th largest 
HOPE VI program in the country, having received $140.9 million. 
How do you anticipate the HOPE VI cut proposed in this budget 
request will affect D.C.'s progress towards neighborhood 
revitalization? Other large public housing authorities?

A.1. The administration's proposed cuts to the HOPE VI program 
would seriously undermine the ability of large urban housing 
authorities, like the District of Columbia Housing Authority 
(``DCHA''), to revitalize distressed public housing and improve 
the quality of life for residents. There is simply no other 
means for public housing authorities to make the significant 
up-front investment needed in these severely distressed 
projects.
    Without an up-front commitment of HOPE VI funds, public 
housing authorities are unable to leverage the private and 
local investment necessary to reverse the decline in their most 
distressed properties. In Washington, DC, for example, the loss 
of DCHA's previous HOPE VI grants, totaling $140.9 million in 
federal dollars, would translate to a loss of $800 million in 
total direct investment in our most disadvantaged communities.
    A major contributing factor to the most severe public 
housing challenges is HUD's chronic underfunding of the Capital 
Fund. This underfunding has placed further demand for HOPE VI 
in communities across the country. As I noted in my testimony 
on March 12, 2008, the Administration's Capital Fund budget 
request would actually underfund current accrual needs 
nationwide by more than $700 million in FY09. It is this 
ongoing, annual disinvestment by the federal government over 
time that has caused continued severe distress in public 
housing.
    A 2005 study by the Urban Institute estimated that up to 
82,000 severely distressed public housing units still exist 
nationally--many of them having become severely distressed 
since the creation of the HOPE VI program in 1993. It is 
important to remember that this distress is not simply in one 
or two physical properties, but has typically gripped the 
surrounding neighborhood as well. Without the HOPE VI program, 
public housing authorities have no other tools that are 
adequate to reverse this distress and achieve sustainable 
neighborhood revitalization.
                                ------                                --
----


   RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM DIANE 
                            RANDALL

Q.1. On the surface, it appears that the FY 2009 budget 
proposal calls for a $50 million increase in funding for 
homeless assistance programs. Your organization has estimated, 
however, that this funding level is still inadequate, since 
permanent housing renewals alone will increase by at least $75 
million. Should we be concerned about homeless program funding 
in this year's budget request? Please explain why or why not.

A.1. Yes, you should be concerned about this year's budget 
request. The Department of Housing and Urban Development (HUD) 
estimates that the cost of renewals alone will be approximately 
$1.5 billion. A funding level of $2 billion is needed to renew 
existing projects while providing new resources for communities 
to address the unmet housing and service needs of millions. 
Therefore, little of the President's request would be available 
for new projects, and the thousands of Americans experiencing 
homelessness will not have the opportunity to receive critical 
shelter or services. In order to meet the national goal of 
establishing 150,000 new units of permanent housing by 2012, 
Congress and the Administration will need to allocate 
significant additional funding.
    In the United States, on any given night, 744,000 people 
experience homelessness, and approximately 3.5 million people 
will experience homelessness at some point during the year. 
Alarmingly, approximately 44 percent of homeless individuals 
are unsheltered--literally living in parks, cars and campsites. 
The homeless population is made up of families with children, 
veterans, individuals with disabilities, survivors of domestic 
violence, unaccompanied youth and working poor single adults. 
And without housing assistance, these individuals and families 
will cycle in and out of emergency rooms, be unable to hold 
steady employment, their children will not be able to regularly 
attend school, and most importantly, they will not have safe 
and affordable housing.
    Service providers who receive and rely on HUD homeless 
assistance funds work to create a safety net and also 
permanent, independent and affordable housing for families and 
individuals experiencing homelessness and provide homelessness 
prevention.
                                ------                                


RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM BARBARA SARD

Q.1. Some would argue that the drastic cuts to housing programs 
proposed under the FY 2009 budget request are justified, citing 
an increase in domestic discretionary spending in recent years. 
I am afraid that it is this line of reasoning, in fact, that 
has cost the CDBG program $659 million in this year's request. 
What would be your response to the suggestion that domestic 
spending has increased dramatically in recent years?

A.1. After accounting for inflation and population growth, we 
see that appropriations for the non-security portion of the 
budget hardly rose at all from 2001 through 2008. Specifically, 
this category of funding rose only 1.6%, from $399 to $405 
billion. (The non-security portion of the budget consists of 
appropriations for all programs except National Defense 
(function 050), International Affairs (function 150), Veterans 
Benefits and Services (function 700), and homeland security 
amounts outside those three functions.) Every other set of 
programs in the budget grew more and faster, as the following 
table shows.


------------------------------------------------------------------------
                                           Dollar growth
                Programs                   (in billions)  Percent growth
------------------------------------------------------------------------
Non-security appropriations.............              $6             1.6
Security appropriations.................             340              72
Medicaid................................              41              25
Social Security.........................              55              11
Medicare................................             109              40
Entitlements other than ``Big 3''.......              45              15
------------------------------------------------------------------------

    I would add that non-security appropriations are the only 
category of the budget that shrank as a share of the economy 
during this period. Thus, aiming at housing programs, or any 
other non-security programs, on the grounds of excessive growth 
seems wildly off-target.

Q.2. We are often inclined to simply compare this year's budget 
request to last year's--but maybe we are missing some larger 
patterns. What longer term funding level trends have you 
identified for housing programs?

A.2. HUD budget trends must be understood within the context of 
the unique funding needs of HUD programs. In particular, 
because of the nature of HUD's affordable housing and community 
development programs and the manner by which Congress has 
chosen to fund some of these programs historically, the amount 
of funding needed to maintain current levels of assistance 
increases year-to-year at rates that generally exceed the 
overall rate of inflation. This is true for three reasons:

    First, in each of the last several years, Congress has used 
roughly $2 billion in recaptured Section 8 funds from earlier 
years to help finance HUD programs. For a variety of reasons, 
such funds will not be available in 2009 (or future years), 
which means that funding for HUD will have to increase by $2 
billion (or 5.3 percent) in 2009 simply to sustain HUD 
affordable housing and community development programs at 2008 
funding levels, unadjusted for inflation.
    Second, nearly 300,000 low-income families receive rental 
assistance under long-term project-based Section 8 contracts 
between HUD and private property owners. These contracts are 
currently funded with budget authority approved decades ago by 
Congress. Yet every year, contracts governing 20,000 to 40,000 
of these Section 8 apartments expire and are converted to 
contracts that require new annual appropriations by Congress. 
The cost of these conversions, which is in addition to the 
appropriations needed to renew the 1 million Section 8 
apartments that are already funded annually, ranges from $100 
million to $300 million annually in new budget authority. 
(Outlays are not affected by the shift from long-term contracts 
to annual renewals.)
    Finally, HUD funding needs are closely tied to the costs of 
rental housing and utilities. In recent years, rents and 
utility costs have risen at rates that exceed the general 
inflation rate (and the CBO baseline inflation rates) by a 
significant amount.
    With this budgetary context in mind, budget data show that 
overall funding for HUD programs has risen modestly in recent 
years, once funding levels are adjusted for inflation and 
population growth, yet has fallen as a share of the overall 
economy. Even more troubling, some core HUD programs have 
experienced deep cuts.
    After accounting for inflation and population growth, 
appropriations for the Dept. of Housing and Urban Development 
rose by 6.4 percent from 2001 to 2008, less than 1 percent per 
year. This rate of growth is much lower than the growth rates 
of defense, other security programs, and entitlement programs. 
From 2004 to 2008, funding for HUD actually fell slightly, 
after adjusting for inflation and population growth. 
Appropriations for HUD also fell by 4.5 percent as a share of 
the overall economy from 2001 to 2008.
    These general trends mask deep cuts in some core housing 
and community development programs over the long term. Funding 
for public housing in 2008 is $1.8 billion (or 21.3 percent) 
below the 2001 level, adjusted for inflation only. Indeed, 2008 
is the 7th straight year that funding for the Public Housing 
Capital Fund has been frozen or cut, and the 6th straight year 
that the Public Housing Operating Fund has been funded at a 
level below the amount required according to HUD's operating 
cost formula. These cuts would continue under the President's 
budget request for 2009: housing agencies would receive only 84 
percent of the operating funding required according to the HUD 
formula, while the Capital Fund would be cut for the 8th 
straight year.
    In 2008, funding for formula grants under the Community 
Development Block Grant program will be $2 billion (or 35.8 
percent) below the 2001 level, adjusted for inflation and 
population growth. Block grant funding under the HOME program 
will be $609 million (or 27.2 percent) below the adjusted 2001 
level. The President's budget has proposed deep cuts for CDBG 
again in 2009.
    Funding for supportive housing for the elderly and people 
with disabilities has also experienced deep cuts. The 2008 
funding level for Section 202 elderly housing is $253 million 
(or 25.6 percent) below funding in 2001, adjusted for inflation 
and population growth, while that for Section 811 supportive 
housing for people with disabilities is $39 million, or 14.1 
percent, below the 2001 level.

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