[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




                    THE SECTION 8 VOUCHER REFORM ACT
=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 21, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-36









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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
ED PERLMUTTER, Colorado              BILL POSEY, Florida
JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
JACKIE SPEIER, California            LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel














                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 21, 2009.................................................     1
Appendix:
    May 21, 2009.................................................    31

                               WITNESSES
                         Thursday, May 21, 2009

Donovan, Hon. Shaun, Secretary, U.S. Department of Housing and 
  Urban Development..............................................     7

                                APPENDIX

Prepared statements:
    Donovan, Hon. Shaun..........................................    32

 
                    THE SECTION 8 VOUCHER REFORM ACT

                              ----------                              


                         Thursday, May 21, 2009

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 2:35 p.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Waters, Velazquez, 
Sherman, Moore of Kansas, Baca, Miller of North Carolina, 
Scott, Green, Cleaver, Klein, Donnelly, Carson; Biggert, Miller 
of California, Capito, Price, McCarthy of California, Jenkins, 
Lee, Paulsen, and Lance.
    The Chairman. The hearing will come to order.
    We are very pleased to be joined--and I think this is his 
first appearance before us--by the Secretary of Housing and 
Urban Development, Secretary Donovan. He is someone familiar to 
many of us because he was, for years, in the City of New York a 
leading housing administrator, and he comes to this job--I 
believe Mel Martinez, who was the first Secretary of HUD under 
President Bush, graciously noted that Secretary Donovan came to 
the job far better prepared than he, and I think far better 
prepared than any other Secretary.
    We are very happy to have him, and we have already begun a 
very fruitful collaboration. The bill we sent to the President 
this week involving mortgages and housing was at the very last 
minute improved by suggestions dealing with the second mortgage 
situation. So we are very pleased to have the Secretary here.
    And I will also inject a personal note to say that this is 
at least one of the first hearings when the Assistant Secretary 
for Congressional Relations, Mr. Kovar, is with us, who was 
previously my administrative assistant/chief of staff. So he is 
also familiar with much of the business of the committee and 
the members.
    Mr. Secretary, we appreciate having you here. The 
particular issue is the Section 8 Voucher Reform Act. It is one 
in which there has been a good deal of bipartisan cooperation. 
We had a version of this, I believe, that passed last year. We 
are back at it, and I am very pleased that we have the 
opportunity to begin this hearing with you on this subject. We 
think that this is a piece of legislation that significantly 
improves an already well-run program and a very important 
program. And it is essential that we update things, and that is 
essentially what this is. So I welcome you.
    And I will now recognize the ranking member of the 
Subcommittee on Housing, the gentlewoman from West Virginia, 
Mrs. Capito.
    Mrs. Capito. Thank you, Mr. Chairman. Thanks for holding 
this important hearing on the Section 8 Voucher program.
    Secretary Donovan, we are really glad to see you here 
today. I want to congratulate you on your new position as the 
Secretary of HUD. You certainly have your work cut out for you 
with the many challenges we have on a variety of issues.
    Today's hearing focuses on the Housing Choice Voucher 
Program, or Section 8, as we call it and as it is more commonly 
known. The Federal Housing Voucher Assistance Program provides 
assistance to approximately 2 million low-income families and 
individuals each year and is administered by more than 2,500 
local Public Housing Authorities.
    As you know, this is not the first time that we have tried 
to reform Section 8. The chairman mentioned that we grappled 
with these issues over the last two Congresses, and we worked 
with this in a bipartisan manner to make this program more 
efficient and more cost-effective. Unfortunately, we haven't 
gotten all the way through. So reforming Section 8 is critical 
to both the future of the Program and to the HUD budget in 
general.
    Over the last several years, the cost of the Housing Choice 
Voucher Program has continued to increase. In 1998, the Housing 
Certificate Fund consumed 42 percent of HUD's annual budget, 
but by 2005, it was consuming 62 percent of HUD's budget. And 
the new Administration's budget envisions additional new 
vouchers and several changes to encourage PHAs to use their 
reserves and to put out as many vouchers on the street as 
possible.
    While I understand the importance of this program to many 
families, and it serves millions of families, I remain 
concerned about the long-term costs associated with new 
vouchers and the impact the Section 8 funding costs will have 
on the overall HUD budget and the many other programs within 
the HUD budget.
    In addition to Section 8--you knew I wasn't going to just 
talk about just Section 8--HUD faces other challenges in other 
areas, such as the future viability of the FHA program. The 
Fiscal Year 2010 HUD budget requests $798 million in credit 
subsidy for the Reverse Mortgage Program, an important program 
for HUD and for those that provide equity for seniors seeking 
to stay in their homes. Many reverse mortgages were made in an 
appreciating market, but they are now being paid out in a 
depreciating market that ultimately would have serious 
implications, I think, for the solvency of the FHA. I have 
heard some refer to this Reverse Mortgage Program as the next 
housing crisis, and I would like to get your comments on that 
later on in the hearing.
    In addition, many of the mortgage origination recovery 
efforts have fallen on the FHA program due to the fact that the 
standard conventional mortgage markets are not functioning at 
normal capacity. Lenders are understandably skittish about 
making loans in a depreciating housing market, and 
consequently, lenders are gravitating to the FHA program, 
seeking the 100 percent government guarantee on the mortgages 
they generate.
    Transparency and accountability of the counseling programs 
are important to me--we had a hearing with the counseling 
entities last week--and the newly established Neighborhood 
Stabilization Program are important and require your attention 
and diligence. These programs have received huge cash infusions 
over the last couple of years, and we want to make sure that 
the taxpayers' money is being properly used to achieve results.
    Finally, as you know, Representative Gary Miller and I 
recently wrote to you urging the monetization of the $8,000 
first-time home buyer tax credit subsidy currently available 
for FHA mortgages. There seemed to be more progress on the 
issue; however, there has not been a final rule, to my 
knowledge. It is my hope that we can continue to work together 
on this issue.
    While I know we will not have time to discuss all of these 
issues, I trust that Chairman Frank is planning another meeting 
in the near future to give members of this committee the 
opportunity to fully discuss the challenges ahead for the 
Department.
    Thank you again for being here and for your service. I look 
forward to working with you in your capacity.
    The Chairman. The gentlewoman from California, the Chair of 
the Housing Subcommittee, is recognized for 4 minutes. She is a 
major author of this bill.
    Ms. Waters. Thank you very much, Chairman Frank, for 
convening today's hearing on the Section 8 Voucher Reform Act.
    Last Congress, I introduced the Section 8 Voucher Reform 
Act. This legislation, which reformed and expanded the Section 
8 program, passed the House on a bipartisan vote of 333-83. The 
Senate failed to take any action on this legislation. However, 
I hope, as we begin this process again, that we are able to 
provide a bill to the President for signature. This legislation 
has been a long time in coming, and it is badly needed by the 2 
million low-income families who depend upon Section 8 housing.
    Through the Section 8 Program, qualifying low-income 
families generally pay 30 percent of their income in rent; the 
Section 8 voucher covers the difference between that amount and 
the market rent. Although that explanation is simple, over the 
years, the Section 8 Program has become increasingly 
complicated for residents and the 2,500 PHAs that administer 
the program.
    For example, in order to determine the amount of rent paid 
by a Section 8 resident each year, or at any time if there is 
the slightest change in income, the resident must submit 
various pay stubs, tax forms, and other documents to prove 
their income. This is required even for those living on fixed 
incomes. PHAs have to process this information in a time-
consuming process that is fraught with errors. In fact, 
according to HUD, in 2004, over 40 percent of subsidies were 
erroneously calculated, meaning that the residents were charged 
either too much or not enough rent. The proposed bill would 
simplify this process by streamlining the rent determination 
process and requiring these certifications of incomes less 
often.
    The proposed bill also addresses the funding formula for 
the Section 8 Program. Several years ago, the Bush 
Administration changed how vouchers were funded, providing a 
budget-based allocation instead of funding PHAs based on their 
actual cost. This has resulted in the loss of over 150,000 
vouchers.
    In addition, the change also puts stress on the ability of 
voucher holders to move, portability. The ability of a person 
with a voucher to move anywhere in the United States is 
essential for not only deconcentralizing poverty but also 
allowing voucher families to move closer to jobs, schools, and 
other opportunities. It provides them with the same freedom of 
movement that people living in non-subsidized housing enjoy. 
However, the cost of the shortfalls generated by the funding 
formula and the complicated billing process, PHAs must endure 
reported vouchers. Many PHAs began to severely limit the 
ability of voucher holders to move.
    I am pleased that one of the first actions of the 
Democratic Congress was to correct this funding formula so that 
it more accurately reflects PHA costs. However, the Section 8 
Program still has not recovered from the shock caused by the 
imposition of a budget-based formula. The legislation before us 
would establish in statute a sustainable and equitable formula 
that would ensure that PHAs have the resources they need in 
order to continue to provide housing assistance to those with 
vouchers.
    While this bill is comprehensive, the draft we will be 
discussing today does not include the Moving to Work Program 
which allows about 30 PHAs to waive most of the rules that 
govern public housing in Section 8. Although the chairman and I 
have agreed that there will be a moving-to-work component to 
this bill, I have several concerns about the Moving to Work 
Program.
    First, I am deeply concerned about the imposition of time 
limits and work requirements by Moving to Work agencies. For 
example, six agencies have time limits, and another four have 
work requirements. The success of these policies is unproven 
while their impact could be harmful to residents.
    Second, I am aware that there has been a substantial 
decrease in the number of vouchers issued by Moving to Work 
agencies. According to one estimate, Moving to Work agencies 
have failed to lease up 24,000 vouchers, even when they had the 
funding for them.
    Lastly, while Moving to Work has been in existence since 
1996, there has never been a thorough evaluation of the 
program. In short, we don't know what works and what doesn't 
work. We don't know what is hurting residents and what could be 
helping them. We are hearing that many residents are distressed 
about the policies being implemented by Moving to Work 
agencies, and they are frustrated that these policies seem to 
go unchecked because of the lack of regulation of Moving to 
Work agencies.
    So I look forward to hearing Secretary Donovan's views on 
these important issues, and I thank you. I yield back the 
balance of my time.
    And, Mr. Chairman, may I just say that I am pleased that 
the Secretary is here today. He started his work; he has gotten 
off to a good start. He has been all over the United States, 
and so far he has done a good job.
    The Chairman. The gentleman from Mr. California, Mr. 
Miller, is recognized for 2 minutes.
    Mr. Miller of California. Mr. Secretary, welcome.
    And I think Chairman Frank is wrong; you do look older than 
16, no matter what he says. We are welcome to have you here and 
look forward to working with you.
    Over the years, we have debated the issue of downpayment, 
the difficulty individuals have with downpayments and the 
difficulty public housing has, whether it is government, 
private sector, nonprofits, that try to provide that, and how 
it is provided to those who need assistance and how we get 
people out of public housing to homeownership, which is the 
goal of most individuals, and the concept of being able to 
accumulate Section 8 vouchers and use those for downpayments.
    Mrs. Capito mentioned that we had sent you a letter talking 
about being able to use the $8,000 tax credit to short-term 
bridge loans. You responded, I think, fairly favorably in your 
comments. And I hope you have time to address your intent or 
the Department's intent to move forward on this; and, if you 
think so, what is the timeframe for the Department doing that?
    But we are at an unusual transition in this country where a 
lot of people are losing their homes, many people are out there 
trying to buy homes for the first time or just who have lost a 
home and trying to buy a home. And they might be very 
creditworthy, and we look to those who are creditworthy and 
say, how can we assist those individuals? I think we have done 
certain things, by eliminating downpayment assistance programs, 
whether it be seller-funded or other options we might have 
available to us.
    We have, I think, in some cases, made it more difficult for 
people who really could make the payment if they could get in 
the house. And I hope in the future you think about options 
that are available to us on that and options about including 
the private sector. It is good to have the government involved, 
but how do you involve the private sector in dealing with the 
problem that deals with the private sector, those who need 
homes?
    So I hope you take a broad brush and look at this and say, 
what options are available to us? How can we get the biggest 
bang for the buck? And that biggest bang would be not only 
including HUD's efforts but the private sector funds at the 
same time.
    So I am looking forward to your testimony today, and I am 
looking forward to having an opportunity to ask you questions.
    And you do look older than 16, I don't care what he says. 
Welcome. Thank you.
    Ms. Waters. [presiding] Thank you very much.
    Mr. Green?
    Mr. Green. Thank you, Madam Chairwoman.
    Madam Chairwoman and Chairman Frank, there are times when 
indicating that you would like to associate yourself with the 
remarks of another is not enough. And on such occasions, 
persons such as the Honorable Emmanuel Cleaver, who is seated 
next to me, and I, we would probably say, ``Amen.''
    And as to the Chair's comments, Chairman Frank's comments, 
I would like to simply say, ``Amen.''
    And as to Chairwoman Waters' comments, I would like to say 
``A-woman,'' because I am greatly appreciative that she has 
given us a clear sense of vision and has been very helpful, as 
you know, Secretary Donovan, with a number of issues.
    We are appreciative that you were able to come to Houston, 
Texas, and visit the Ninth Congressional District that I happen 
to represent. You were at the DHAP Center there, and 
Congresswoman Waters was very much instrumental in helping us 
to facilitate that visit. So I thank you, and I thank her.
    And I am most appreciative for the fast start, the way you 
really hit the ground--actually, you didn't hit the ground 
running; you hit the ground flying, because you were trying to 
traverse the entirety of the country. And it seems to me that 
you have done a stellar job. So I thank you for what you have 
done thus far, and look forward to working with you.
    And, Madam Chairwoman, I will give some time back to you. I 
yield back the balance of my time.
    Ms. Waters. Mr. Cleaver?
    Mr. Cleaver. Thank you, Madam Chairwoman.
    And thank you for this hearing.
    Thank you, Mr. Secretary, for being here. I think the 
Section 8 Voucher Reform Act is extremely important, and I am 
finally excited about the response that this committee is 
giving to the inconsistencies in the Section 8 Voucher Program. 
We have had problems that are now legend over the past few 
years.
    This program impacts millions of people. Mr. Secretary, I 
lived in public housing. And I can remember my mother, father, 
three sisters, and me living in a two-room apartment, sharing 
the bathroom with another family living in a two-room apartment 
as we waited and prayed. I don't mean the kind of praying that 
they talk about on TV, like, ``I am praying for you.'' I mean, 
we prayed that someone would come off the list so that we could 
move into the public housing unit.
    My father worked three jobs. And I guess, sometimes, I get 
offended in this committee when I hear people put down people 
who live in public housing, and realize that my family lived in 
public housing, with my father working three jobs and my mother 
going to college and sending four children through college. So 
I do come with and I try to keep myself calm no matter what I 
hear. But we do have a problem.
    Kansas City, Missouri; Independence, Missouri; Lee's 
Summit; the three largest cities in my district, we have 
suffered enormously, particularly when the Administration 
zeroed out in some instances, and in other instances just 
severely underfunded the housing programs. And so we are 
suffering from a wave of foreclosures like everyone else.
    But if you look at what has happened with the people who 
are in public housing, or looking for Section 8 housing, some 
of them who have made it out of public housing, like our family 
eventually did, and then they were lured into some kind of 
subprime loan. And now, and this is not talked about enough, 
now they find themselves, after going into that first home with 
joy and pride, they find themselves now out again. And instead 
of looking for another home, they can't, because their credit 
has been ruined, and so they find themselves now standing in 
line again for a Section 8 voucher.
    And so, Mr. Secretary, I am pleased that you are here. I 
think this is a very serious problem that I take very seriously 
and personally. And I know of your history and know that you 
take it very seriously. So I am excited about what is going on, 
and I am so pleased that our Chair has pushed this initiative. 
Thank you.
    I yield back the balance of my time.
    Ms. Waters. Thank you very much. There are no more opening 
statements.
    And at this time, I would like to call upon our witness 
today, our only witness, the Honorable Shaun Donovan, 
Secretary, U.S. Department of Housing and Urban Development.
    Welcome, Mr. Secretary. We are delighted that you are here, 
and we are pleased that you were able to make it on this day, 
your first hearing before this committee.
    Thank you.

   STATEMENT OF THE HONORABLE SHAUN DONOVAN, SECRETARY, U.S. 
          DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Secretary Donovan. Thank you, Madam Chairwoman.
    Thank you to Chairman Frank as well as to Ranking Member 
Capito for a warm welcome and to all the members of the 
committee for having me here today.
    I am very, very pleased to be here to testify on the draft 
of the Section 8 Voucher Reform Act, which is very, very 
important legislation, from my perspective.
    Between the Housing Choice Voucher Program and public 
housing, HUD helps provide affordable housing to over 3.2 
million very-low-income families. This legislation would be a 
key step in improving that assistance.
    I agree that the Housing Choice Voucher Program needs to be 
reformed to specifically provide a predictable and improved 
funding formula for the Rental Voucher Program, to reduce 
administrative burdens on Public Housing Authorities and 
Section 8 landlords, and to provide protections to residents.
    The following are aspects of SEVRA that improve the current 
program, and I look forward to working with the committee to 
reform the program.
    First and foremost, SEVRA largely establishes a 
predictable, transparent voucher formula that will encourage 
PHAs to increase the utilization of funding. As you are well 
aware, beginning in 2003, Congress began to impose different 
renewal calculation formulas each year through the 
Appropriations Act in a bid to arrest the growth in cost to 
renew Section 8 voucher funding. These efforts did more than 
just arrest growth, but contributed to a slide in funding 
utilization, beginning in 2004.
    While funding utilization has shown modest improvements in 
recent years, ensuring that renewal in 2010 will be sufficient 
to renew both incremental vouchers and the number of families 
that PHAs were actually assisting at the end of 2008 is a key 
component to not only stabilizing and continued improvement in 
voucher leasing as well as in utilization rates. The formula 
contained in this draft legislation substantially achieves 
these objectives.
    SEVRA also provides HUD with the authority to reallocate 
excess funding among PHAs. This provision is long overdue. It 
would reward the PHAs that are high performers and will serve 
additional families by reallocating additional budget authority 
to those PHAs that will put the funding to use.
    The formula also would allow HUD to make adjustments to the 
formula based on changes in voucher utilization rates and 
voucher costs related to natural and other major disasters. 
This in turn would give PHAs much needed flexibility to 
accommodate those situations where PHAs must adjust to 
situations out of their control.
    I also applaud the draft bill's effort to reduce many 
burdensome requirements on PHAs and landlords while improving 
access to affordable housing for tenants. For example, the bill 
would only require biennial instead of annual inspections. This 
would allow PHAs to concentrate their inspection resources on 
the more marginal and higher-risk units but does not prevent 
them from performing annual inspections should they choose.
    The bill would also permit PHAs to make assistance payments 
to landlords while the owner makes minor repairs in cases where 
the rental home failed the initial inspection for only non-
life-threatening conditions. This change would expand potential 
housing opportunities for families and would be particularly 
helpful for families in low-vacancy markets.
    The draft legislation also proposes to reform the current 
income and rent calculation system. This is a good thing, 
because these systems are overly complex and administratively 
burdensome. SEVRA would represent an improvement over the 
current system. The draft bill would allow PHAs to defer the 
income reexamination of families with fixed incomes for up to 3 
years while imposing a simple asset cap for eligibility in lieu 
of the current complicated and burdensome computation of 
returns on assets from income.
    Additionally, the earned income disregard provision will 
provide a positive incentive to reward working families and 
encourage self-sufficiency efforts on behalf of families. We 
look forward to working with the committee to further 
streamline rent structures.
    Another item of interest is the administrative fee 
provisions. Administrative fees are a vital component of the 
Housing Choice Voucher Program. These funds provide PHAs with 
the resources necessary to administer the program. Approving 
units, evaluating tenant eligibility, and reviewing 
applications are personnel-intensive processes for PHAs. These 
fees are necessary to maintain an effective level of service 
delivery and ensure that the right benefits go to the right 
people.
    The draft provisions would provide HUD the flexibility to 
utilize either a per-unit fee structure of the 2003 rates 
inflated annually or a HUD regulation that accounts for the 
costs of administering the Housing Choice Voucher Program and 
could include performance incentives. In fact, we have 
initiated a research study on administrative fees relating to 
the Housing Choice Voucher Program. Eventually, this study will 
help determine the distribution of administrative fees based on 
the number of families assisted by a PHA.
    The provisions in this draft bill will not only fully fund 
administration of the Housing Choice Voucher Program in the 
near term but allow us to develop a more accurate distribution 
formula in the future.
    Finally, I would like to take a moment to discuss the 
Moving to Work Program. I understand that the committee's 
commitment to MTW, or Moving to Work, is still under 
discussion, and thus this draft does not yet include provisions 
for the Program. I believe that all the other provisions of 
this draft, however, are testament to the need for flexibility 
and innovation that MTW has provided us. And that innovation 
cannot be confirmed or replicated, however, without rigorous 
research and study, such as we proposed as part of the HUD 
transformation initiative that is found in our 2010 budget 
proposal, and, of course, tenant protections that ensure 
families are benefited and not undermined by innovation.
    For all of these reasons, I am optimistic about the efforts 
to reform the Housing Choice Voucher Program. I have long 
worked for passage of many of these provisions in the bill, and 
I am grateful to you for this opportunity to continue that work 
and look forward to taking advantage of your leadership in this 
regard. Thank you.
    [The prepared statement of Secretary Donovan can be found 
on page 32 of the appendix.]
    Ms. Waters. Thank you very much.
    I will now recognize myself for 5 minutes.
    Secretary Donovan, last week, I was visited by a person who 
had received a voucher from the Atlantic City Housing 
Authority. While he was out looking for a unit to rent with the 
voucher, the Housing Authority cancelled his voucher, along 
with the vouchers of 150 other searchers. This person is now 
homeless and has no housing resources available to him.
    I don't know if you have heard about this case up in 
Atlantic City. Did you find out, if you have heard about it, 
why the Housing Authority cancelled his voucher? Is this a 
funding issue or an administrative issue? And what is HUD going 
to do to make sure that person and others who had their 
vouchers pulled back will receive housing assistance? What 
legislation, if any, is needed to protect tenants in this 
regard?
    Secretary Donovan. Thank you, Chairwoman Waters, for the 
question.
    First of all, to the specifics of this case, we have begun 
investigating it. Thus far, what I would say is that what we 
have found shows us that there were significant administrative 
issues in the oversight of the program in Atlantic City, and 
that we will come back to you as quickly as we possibly can to 
give you a full report on what we have found there.
    More broadly what I would say, though, is that there is the 
risk of a similar outcome for many families around the country 
for funding reasons, and specifically as a result of the 
inconsistency and the changes in the Section 8 voucher formula 
that we have seen over the past years.
    In my prior role in New York, I oversaw the fourth largest 
voucher program in the country, and so I know very directly the 
experience of constantly changing rules and what that can mean 
for the ineffective management of the program and ultimately to 
the risk that families would not be able to use their vouchers 
should there need to be a rapid change in the number of 
families who can be served based on the funding formula.
    So I believe many of the provisions in this bill, whether 
it be the stability of the funding system going forward, the 2 
percent reserve allowance that can be used to give some more 
flexibility to housing authorities to better plan and manage 
the use of their program. All of those aspects of this bill can 
be very helpful in avoiding this kind of situation from 
happening more broadly.
    Ms. Waters. Thank you very much.
    There is a section of Los Angeles County where the Section 
8 residents are constantly singled out by law enforcement. As a 
matter of fact, when calls are made to the police, for example, 
when they come out, they ask people if they are on Section 8. 
In an attempt to try and get the Section 8 tenants out of the 
City, they harass them. Is there anything in HUD that deals 
with representing citizens who are being discriminated against, 
who are being put upon, who have been harassed by local 
authorities because they would rather not have them in their 
cities? Do you know of anything that is available to these 
citizens? Or should they try and go through the regular legal 
processes in order to try and receive some support?
    Secretary Donovan. One of the most important functions of 
HUD is to enforce the Fair Housing Laws. And one of the things 
I am proudest of in our budget proposal this year is that we 
are proposing a substantial increase in funding for our 
enforcement of fair housing. So I believe that we should make 
sure that there is a partnership established. We have local 
fair housing partners across the country, including across 
California, and I think it is important that we ensure that 
those residents know the resources that are available to them, 
legal protections that are available to them should it be a 
case of discrimination against them, and that we would be happy 
to follow up with you about that issue.
    Ms. Waters. Thank you very much. It has been going on for 
some time, and I am thinking of holding a hearing in that area 
in order to go ahead and start to address these problems. But I 
thank you very much.
    And with that, Mrs. Capito.
    Mrs. Capito. Thank you, Mr. Secretary. I would like to ask 
a couple of questions that I alluded to in my opening 
statement.
    First of all, let's talk about, just in general, the 
funding for the Section 8 Program taking up a really large part 
of HUD's annual budget, going from 42 percent in 1998 to as 
much as 62 percent in 2005. There is an expansion in the new 
budget of 2010. What is your opinion on this, or how are you 
feeling about the trend, and what do you see for the future of 
this and other important programs?
    Secretary Donovan. I would like to make a couple of 
comments on that, because obviously, the cost of this program 
has been increasing, and I think there are a number of elements 
relative to that that are important.
    First of all, I think this bill can contribute to helping 
to control the cost of administering and overseeing this 
program. One of the problems that we have seen with the program 
is the complexity, whether it is in the rent calculations or in 
a range of other areas. I believe this bill can contribute to 
significant cost savings in the oversight administration of the 
program.
    One of the other things that has been contributing 
significantly to the increasing costs of the voucher program, 
much of that is driven by replacement vouchers, that replace 
either assisted-housing units that opt-out or leave the program 
as well as public housing units that leave the program. I think 
it is important--and in many cases, those vouchers can be more 
expensive than the funding that was required for the original 
public housing or assisted housing. So I think preservation 
efforts are quite important in terms of investing in existing 
public housing that is an important resource and being able to 
limit the growth of vouchers as a replacement for other housing 
that should be preserved.
    Finally, I would say that I think we should and we will 
continue as we are doing in this, as you are attempting to do 
in this bill, to control the costs of the program to make the 
program more efficient. But I think, particularly at a moment 
where renters in particular have been hard hit by the 
foreclosure crisis, where unemployment and other issues are 
affecting not only owners but renters, one of the little known 
facts about the foreclosure crisis is that 40 percent of the 
victims of foreclosures who are evicted are renters.
    And I am very happy that the President signed a bill 
yesterday that would protect those renters in the case of 
foreclosures. I believe that now is a good time for us to be 
investing in the Section 8 Voucher Program because it does 
provide a critical protection to families who are most at risk 
in these economic times.
    Mrs. Capito. I appreciate that. Would it be a mistake to 
say that, once a voucher goes out the door from HUD, there is 
no pulling back on the numbers? I think that is pretty much a 
standard thought I would have. So I guess my follow-up question 
would be, as you are achieving cost savings through this bill 
and other methods, and I applaud that, I think it is great, I 
would assume that you are going to expand the playing field on 
the number of vouchers and the number of people who are going 
to be able to have a voucher. Would that be a correct 
assumption?
    Secretary Donovan. In the end, obviously, it is up to 
Congress to decide the funding level for the program, which 
drives the number of vouchers that are used. We did actually 
see some years where the number of vouchers available shrunk 
over the past few years, largely as a result of the uncertainty 
in the funding formula. So ultimately we have proposed a budget 
where we would want to see the number of vouchers grow because 
we think that is appropriate at this time. We have long waiting 
lists and far fewer people able to use vouchers than are 
eligible. But ultimately the decision rests with Congress about 
the number of vouchers to fund, and the program can grow or, 
frankly, shrink as it has, depending on the funding.
    Mrs. Capito. Right, and I am aware of the lists. That 
exists in my State.
    Let me go back, this is on a different topic, one that 
Congressman Miller and I are concerned about, and that is the 
$8,000 tax credit, whether it gets monetized for first-time 
homebuyers with FHA improved mortgages. Can you expand on that? 
I know you made some statements last week or the week before. 
Could you give us an update on that, please?
    Secretary Donovan. Just generally, I would say that the 
Administration has been supportive of that, was supportive of 
it when it was included in the recovery bill. Secretary 
Geithner recently discussed the fact that already more than $3 
billion has been used to support that tax credit.
    I am supportive of making sure that FHA can be part of 
helping families be able to become homeowners and, as you have 
rightly said, to be able to support the recovery of the housing 
market more broadly. We have some technical details that we 
have been working out, and frankly, we want to make sure that 
our implementation of this is consistent with HERA and other 
provisions.
    We also want to make sure, frankly, that this is not 
something that is abused. We want to make sure that we are part 
of the solution with FHA and that we are bringing folks who are 
going to use the tax credit who might be at risk of some of the 
scams and other people who are trying to take advantage of the 
credit, we want to bring them into FHA and make sure that we do 
it in a way that protects against fraud and abuse. So we are 
finalizing those details, and I would expect to have something 
released very shortly.
    Mrs. Capito. Thank you.
    The Chairman. Mr. Secretary, first let me get to the 
question of whether Section 8 has been increasing part of the 
budget. Of course, there are two aspects of that. One is, has 
Section 8 gone up? The other is, has everything else gone down? 
I would be more impressed with an absolute measure, because we 
have had a period when much of the rest of the budget was 
reduced.
    In part, Section 8 went up because there was a policy 
involved, which I very much agreed with, and I think you did, 
people in power who believed it, to shift units from the 
inventory of affordable units to market units occupied by a 
Section 8 tenant with an enhanced voucher. So when you let the 
unit go technically out of the affordable inventory and you 
then fill it with a Section 8 tenant with an enhanced voucher, 
two things happen: The Section 8 budget goes up; and the other 
part of the budget goes down. So, yes, I would like to see the 
Section 8 percentage be reduced partly by restoring funding to 
things like public housing and other efforts to build units 
that we have lost.
    Now, I have one specific issue that concerns me--the 
gentleman from California has raised it as well, Mr. Miller--
and that is the Catch-22 we have with condominium financing. 
Now, you have it at the FHA. You have it even more at Fannie 
Mae and Freddie Mac. We have policies that say you can't get 
financing for a unit in a condominium unless the building is 70 
percent already owner-occupied finance. But then, because we 
have that restriction, you can't get them. So we never get 
there.
    And the notion that qualified buyers who can meet every 
other test are turned down for financing, I think is unfair to 
the buyer, and is hurting us with the condominium piece. I 
thought that was going to get reduced to 50 percent. And I know 
Fannie Mae and Freddie Mac are not under your jurisdiction, but 
I do know that they respect, Mr. Lockhart and others, your 
housing expertise. I would strongly urge you to look at that 
policy because it is a Catch-22, and it is resulting in 
difficulty in getting that kind of financing.
    I was also told particularly that there was some problem 
with the eligibility of units, three-decker units, which as you 
know is a very important form of housing in the New England 
area. So we are going to ask you to look at that.
    Then the last point, just one question. I would assume we 
are in agreement that you presided very ably in a City where 
there was a good deal of affordable housing subsidized by the 
Federal Government, by the State government, and even sitting 
somewhat uniquely in New York with City funds. I believe that 
preserving that existing stock is the best use we can have of 
any given dollar, probably because by preserving existing 
affordable units, you get away from the whole question of where 
do you build it and people who don't like you living next door 
to them.
    So I do want to note, the argument that if you have 
affordable housing built in your neighborhood, that ruins the 
neighborhood, is somewhat undercut by the fact that our biggest 
problem with that kind of housing now is that the people who 
used to object to it, at least the same kind of people, now 
want to move into it and bid the poor people out.
    I just want to note, in the City of Boston, on the corner 
of Arlington and Tremont Streets, there exists one of the first 
of the 221(d)(3) projects, the Castle Square project, which has 
in the middle of it an elderly housing public housing project. 
And so this is affordable housing and public housing.
    Across Tremont Street is Atelier, where I think the monthly 
fee for concierge services is greater than the rent you pay for 
the whole shebang across the street. So we have, across the 
street from one of the oldest 221(d)(3) public housing 
combines, private residential housing that is as expensive as 
any I think in the country, and certainly in Massachusetts.
    I wonder, the preservation, the only question would be 
this. Much of it was Federal. The practice in the past has been 
to focus on preserving the federally funded part. But we are 
not just doing this because of our previous investment; we are 
doing this to protect housing units.
    Can we be working together so that we expand these programs 
so that the role of the Federal Government is to help preserve 
that affordable inventory no matter how it was originally 
financed, that we work, whether it is or Michelama or Mass 
Housing or any of these other? And I would hope we could agree 
that we could do that. As I said, dollar for dollar and in 
terms of politics of location, preserving existing affordable 
units, and that is, again, why we have a higher budget for 
Section 8.
    The policy previously of the Administration and the 
majority in power from that period was: Don't preserve the 
units; just give the tenant an enhanced voucher until either 
she dies or moves.
    I would like us to get into the preservation of units, and 
include units no matter how financed.
    Secretary Donovan. As you rightly say, Mr. Chairman, that 
is a very, very important resource in certain parts of the 
country. It is a resource that I know very well from my own 
experience in New York.
    What I would say is a couple of things. First of all, we 
have a lot of work to do, I think, at HUD. And you and Chairman 
Rangel have already begun down that path to make all of our 
programs work more effectively together. One of the big 
barriers to this is that we have too many different sets of 
rules, even within the Federal programs, much less the 
flexibility to allow the Federal programs to work effectively 
with State and local programs. And I think this also goes to 
Ranking Member Capito's point about the cost of our programs.
    Frankly, we are spending too much on administration and 
legal fees and other parts of the programs because of the 
complexity and the lack of their ability to work together. So 
one of my priorities is to try to simplify, as you are 
proposing to do here with the Section 8 Voucher Program, to 
simplify more broadly the program so they can work more 
effectively and more flexibly together.
    The Chairman. I apologize. I thought the gentleman from 
California already asked his questions.
    Mr. Miller of California. No.
    Are you ignoring me again, Mr. Chairman?
    The Chairman. Not successfully. No.
    Mr. Miller of California. It is good to have you here. When 
I was a younger man, I was a builder, contractor, developer. In 
my 20s, I did some HUD work. I just have a strong feeling that 
you are doing what you can to help people gain the opportunity 
of homeownership. And I understand that not everybody is ready 
for homeownership all the time, but you try to do what you can 
to assist people in that direction.
    And a good friend of mine, former Secretary Alfonso 
Jackson, whom I really respect, came to me during the first 
term of President Bush and he asked me to support the American 
Dream Down Payment Initiative. And in his argument for why HUD 
should get involved in this from the government, he showed me 
how the seller-funded downpayment assistance program was 
working in the private sector, and he said, we will pattern it 
after that, and we can get double the bang for the buck. We can 
not only get the benefit from the private sector dollars, but 
we have the government involved in a program. So I supported it 
and got behind it and voted for it.
    The next thing I knew, within a few years, the government 
was trying to put the seller-funded nonprofit assistance 
programs out of business, which meant only HUD could do the 
work. And I know there was litigation over that situation.
    I had asked HUD, if there is a high propensity of 
foreclosures in the seller-funded versus the government-funded, 
could you please send me the documents to demonstrate that? And 
nobody ever could. I am not imputing anybody in saying that, 
but I think a judge in a private lawsuit asked the same 
question of HUD, and HUD never could, either. And I mean no 
disrespect for HUD. But I wanted to see the data, because it 
didn't make sense to me why the government could do something 
if we used the same appraisal per forma, we used the same 
underwriting standards, that the private sector couldn't do. 
And a group of us here got together on numerous occasions and 
tried to introduce legislation to rectify what we thought was 
an injustice, to allow the private sector to continue to work 
in that arena yet provide good underwriting standards that 
never put the HUD budget at risk through guaranteeing FHA 
loans.
    We introduced H.R. 600, which we believed would do that as 
the FHA Seller-Funded Down Payment Reform Act. And we tried to 
make sure in drafting the bill that it was budget neutral, so 
that we did not put the government at risk of any loss. And it 
basically helps creditworthy homeowners, ready families to 
become homeowners.
    Have you taken a position on that?
    Secretary Donovan. I have not taken a position on that 
bill. I will make a couple of comments on that, Congressman.
    First of all, I do believe that downpayment assistance can 
be an effective tool if done right. From my own experience as a 
local housing official, we created or preserved 17,000 units of 
homeownership for low- and moderate-income people. And when I 
left my job, we had only 5 foreclosures among those 17,000. We 
used downpayment assistance fairly widely, but I think one of 
the key things among the ways that I think that was implemented 
safely was that there was real equity created for those 
homeowners by the downpayment assistance.
    Mr. Miller of California. That is making sure the appraisal 
is done properly.
    Secretary Donovan. That, but also, the downpayment 
effectively becomes equity for that homeowner. So it is not 
just that the appraisal was done correctly, but that you don't 
end up with effectively 100 percent or even more of the true 
value of the house financed.
    And the second thing I would say is, I would be very happy 
to share the facts as we know them with you about the 
performance of the seller-funded downpayment assistance. From 
my look at it, at the time when we did the last review of the 
FHA Fund, despite the fact that seller-funded downpayment loans 
represented only 14 percent of the loans in the portfolio, they 
represented more than 30 percent of the losses and the 
foreclosures. And so, to me, that demonstrates that there is 
some real danger in the way that program had been implemented. 
And at this point, that has been by HERA as you know last 
summer disallowed, that we are not able to offer that. And, 
frankly, given the performance of those loans, I understand the 
reason that those practices were ended.
    So I want to make clear, I think there are safe ways to 
provide downpayment assistance.
    Mr. Miller of California. And you said, ``if they are done 
right.'' If you could please work with us on your 
interpretation of, ``if they are done right,'' so we at least 
have a criteria we know in which to work, we would really 
appreciate it. And I will let you finish your comments there.
    Secretary Donovan. Okay.
    Mr. Miller of California. And if you would have a time to 
have your staff read H.R. 600 to see if you think we are on the 
right track and if you think there are some modifications that 
can be made to that. Because I know there are Members on both 
sides of the aisle here who believe it can be a viable program 
if it is handled properly and under the proper underwriting 
criteria. But we would love to work with you on that and get 
your opinion as to how you would see that program working and 
how we can do it for the betterment of HUD and for the people 
who need the assistance.
    Thank you. I yield back.
    The Chairman. The gentleman from California, Mr. Baca.
    Mr. Baca. Thank you very much, Mr. Chairman.
    Thank you very much for being here, Mr. Secretary.
    It seems to me that one of the biggest problems with the 
Section 8 Program is the transferring of the vouchers. Because 
of the administrative headaches and cost of transferring a 
voucher from one jurisdiction to another, public housing 
agencies often end up limiting the transferability of the 
voucher, which can prevent a person and their family from 
pursuing opportunities elsewhere, like good-paying jobs. What 
are some of the possible solutions to this problem that you 
would advocate or like to see explored during this process? I 
know you mentioned, ``simplified,'' but what is your definition 
of ``simplified?''
    Secretary Donovan. On this point, I think one of the 
positive things about the bill, I didn't mention it in my 
testimony, but we are supportive of it, is it gives HUD the 
authority to work out a vastly simplified way to make sure that 
what we call portability, the ability to take a voucher from 
one jurisdiction to another, is simplified and in fact 
encouraged. There is no question one of the benefits of the 
voucher program is the ability to take that voucher, even if it 
means to a different city or a different part of the country.
    So I would be happy to work with you more on the specifics 
of how we would think about doing it. The bill would give us 
the ability to set rules around that. Much of this has to do 
with providing, getting rid of some of the barriers to doing 
that right now the way that the funding is provided. And there 
are lots of other details that make it quite complex to do it 
at this point. We would be happy to share more information with 
you.
    Mr. Baca. Thank you. And we look forward to working with 
you to make sure we keep more people in their homes or the 
opportunity to stay in their home.
    Another question that I have, do you think that the changes 
to the inspection process would do enough to relieve the 
landlords' reluctance to participate in the vouchers program, 
which is question number one? And, number two, can you think of 
any other incentives that would be used to increase 
participation and put more people in housing instead of being 
homeless?
    Secretary Donovan. I think the provision you talked about 
and many other provisions in the bill will help to encourage 
landlord participation in the program. There is no question in 
my mind that this will go a long way to do that. I do think 
there are additional steps that we could take, and I look 
forward to working with the committee on trying to implement a 
number of those going forward.
    Mr. Baca. We look forward to hearing about those additional 
steps so this way we can go forward. Until we hear from them, 
then it is hard to tell our constituents what those steps are 
and what they need to do. So I look forward to hearing that.
    The third is, last year in San Bernardino County, and that 
is the area that I represent, in California, over 8,000 Section 
8 vouchers were issued. However, it is my understanding that 
these vouchers were issued to people who had been previously 
enrolled in the program. A new applicant may in some cases have 
to wait years to get relief from their local Public Housing 
Authority. Surely there must be something that can be done to 
improve the situation so they don't have to wait for long. 
Unfortunately, because of the tough economic times, more and 
more people are experiencing the harsh reality of not being 
able to make their rent or mortgage payment. This program as it 
stands now seems to be silent on that issue. What steps can be 
taken to improve access to people who really need that relief?
    Secretary Donovan. I am not familiar with the specific list 
of folks that you are talking about who might have previously 
been eligible. I would love to get more information from you 
about that.
    I do think that one of the challenges that we have seen in 
many parts of the country is that the current funding formula 
restricts the ability for many housing authorities that are 
strong performing housing authorities and have been effective, 
to use their reserves because they are already using 100 
percent of the number of units that they are authorized. So, 
currently, we have both a cap on units as well as on budget. 
Massachusetts is one of those agencies, and there are others 
around the country as well.
    We are proposing in our budget, just as the funding formula 
in the SEVRA bill would do, to lift the unit cap to allow more 
flexibility where there are adequate budget resources to be 
able to increase the number of people who are served. So that 
is one way that I think this bill could help to do that, and I 
would love to get more information about it.
    Mr. Baca. Thank you. Because the majority of the priorities 
are given to those who are already receiving it versus those 
who need to receive assistance. So we need to have a balance 
between those who are on that, who want to continue to have the 
voucher aid, but those also who need to get voucher aid as 
well. So I think if we can look for a balance, we look forward 
to working with you.
    Again, thank you very much.
    The Chairman. Let me just take the last few seconds to ask 
the Secretary, I want to re-emphasize the point, I had not 
fully focused on it, but if you have a cap both on units and on 
reserves, to some extent the benefit an authority gets from 
finding cheaper rents is vitiated, because if it saves money on 
the rents, but uses up all its units, it doesn't get to use 
that. Now, in an ideal world, that wouldn't be a factor, but I 
don't live in one. So it does seem to me what you say, and that 
is very important, to make it a cap on funds, not on units, 
which further incentivizes people to find cheaper units and 
then get some benefit.
    Secretary Donovan. It also, I would say, Mr. Chairman, 
incentivizes housing authorities to be more efficient. Right 
now any of the benefits of saved costs won't allow them to 
serve more people. So there aren't the incentives that there 
should be for cost savings in the program. And I think that, 
again, goes to the point of this will help to increase the 
efficiency and the cost-effectiveness.
    The Chairman. Thank you.
    The gentleman from New Jersey.
    Mr. Lance. Thank you very much, Mr. Chairman.
    Good afternoon to you, Mr. Secretary. I must say Cabinet 
officers are looking younger and younger.
    Secretary Donovan. You should have seen me before the first 
100 days.
    Mr. Lance. First 100 days. Touche.
    Regarding the billion dollars in the Affordable Housing 
Trust Fund, that money was originally supposed to come from 
profits in GSEs. You remember profits in GSEs. Since that is no 
longer the case, how will you be requesting the money since we 
can no longer rely on profits from GSEs?
    Secretary Donovan. We are proposing a billion-dollar 
injection for the National Housing Trust Fund--
    Mr. Lance. Yes.
    Secretary Donovan. --in our budget. And we are already 
discussing and working with the Appropriations Committee to 
find the necessary offset for that in the budget. So we haven't 
determined precisely where that would come from.
    Mr. Lance. So it is a work in progress, and you will have 
an answer to that by sometime in the autumn?
    Secretary Donovan. Obviously, it would have to be resolved 
as part of the budget discussions leading up to the passage of 
the Fiscal Year 2010 budget, hopefully by the beginning of the 
fiscal year.
    Mr. Lance. Thank you for that answer.
    On another issue, on reverse mortgages, the reverse 
mortgage program, as I understand it, the budget contains 
roughly $800 million in credit subsidies for that. Is the 
change in home price assumptions the only reason the 
Administration feels the need to ask for credit subsidy for 
that program?
    Secretary Donovan. One point for context that I would make, 
overall in the FHA programs, and to focus for a moment on the 
FHA Forward Program, the main single family program that is 
used in the FHA single family fund, we expect the loans 
originated during Fiscal Year 2010 to produce a surplus of $1.7 
billion. So overall, I want to be clear that FHA continues to 
make money for the taxpayer on that when you include all the 
programs together.
    With the HECM program, the reverse mortgage program, it is 
the sensitivity to house prices that is driving that request. 
We felt that given the way that the reverse mortgage program 
operates, and its far more greater sensitivity to house prices, 
that using a relatively conservative projection over the long 
term of where house prices would go, that this was a reasonable 
estimate of what the costs would be. We further felt that given 
the economic climate that seniors are facing today, that it 
would be better to continue the program, particularly in light 
of the overall profitability of FHA, at the current premiums 
rather than raising premiums for seniors as a proposal and 
having a cost-neutral program for 2010.
    Mr. Lance. Thank you very much.
    I yield back the balance of my time, Mr. Chairman.
    The Chairman. I thank the gentleman.
    The gentlewoman from New York.
    Ms. Velazquez. Thank you, Mr. Chairman.
    And thank you, Secretary Donovan.
    Secretary Donovan. It is good to see you.
    Ms. Velazquez. New Yorkers are very proud of your service, 
and we know you are going to bring strong leadership for this 
agency that is in such a need. I would like to ask you, last 
Congress the House passed a Section 8 reform bill that included 
significant changes to the Moving to Work Program. Although 
this draft that we are considering doesn't include enhancement 
to MTW, can you explain why a program like that will be good 
for PHAs and residents?
    Secretary Donovan. Well, as I alluded to in my testimony, 
with the right kind of measurement and analysis that would 
demonstrate where the innovations are actually working in MTW, 
how they are working so that those could be replicated, in 
addition with tenant protections that would ensure families are 
served at an equal level and that particularly the lowest-
income families continue to be served by the voucher program, I 
do believe that Moving to Work can be an effective tool for 
creating more flexibility and innovation for strong housing 
authorities. And so, again, I do think it can be, just as this 
broader bill itself, an important tool for innovation with the 
right kinds of safeguards.
    And I would just say, Congresswoman, very much like--as you 
know, we had a lengthy discussion with your staff, with many 
advocates in New York and others about the best way for New 
York to implement the Moving to Work, or the HIP program as it 
would be known, with the changes. I believe that is the kind of 
model that we could think about more broadly for the country.
    Ms. Velazquez. So in terms of timing, do you suggest that 
we delay any expansion of MTW until appropriate evaluations are 
conducted, or should we go ahead and authorize an expansion 
that includes a strong evaluation component for participating 
PHAs?
    Secretary Donovan. Obviously that is, I know, a decision 
that Congress has been thinking about and ultimately will be 
part of the resolution. I do believe that there is some value 
in expanding the number somewhat. I don't have any exact 
estimate of what we would think that would be at this point. 
But again, that has to come with the kind of protections and 
the kind of evaluation that we have talked about.
    Ms. Velazquez. Okay. And in terms of the appropriation for 
150,000 incremental vouchers for the period of 2010 through 
2014, given the economic downturn and the fact that 
homelessness is on the rise, is 150,000 new vouchers 
sufficient? I guess that you are going to say that is up to 
Congress to say, to decide, but let me ask you, you saw the 
question, could you describe how we should best allocate these 
incremental vouchers?
    Secretary Donovan. So, first of all, I do believe, and the 
President believes very strongly, that providing funding for 
more vouchers is important. It is the reason we proposed an 
equivalent of a $1.8 billion increase in the voucher program in 
our 2010 budget proposal.
    I believe that--and this is really the direction that our 
budget went--that given the uncertainty of the formula funding 
over the last few years, given the way that many housing 
authorities have now eaten into their reserves significantly, 
the kind of situations that we talked about earlier in Atlantic 
City which are the result not of administrative issues as they 
are there, but of an inability to access reserves and other 
problems, I believe a general expansion of the funding for 
existing vouchers makes the most sense, and that is the way we 
have proposed it in our budget; and that the kind of funding 
formula that is in this bill supports exactly the right kind of 
incentives for housing authorities to fully utilize their 
vouchers, and if they don't, to be able to reallocate that 
funding to places that will use it.
    Ms. Velazquez. Thank you.
    Secretary Donovan. Thank you.
    Mr. Moore of Kansas. [presiding.] Mrs. Biggert, you are 
recognized, please.
    Mrs. Biggert. Thank you, Mr. Chairman.
    And thank you for being here, Mr. Secretary. I have a 
couple of questions. I want to get through them.
    And following up on the Moving to Work, I know there are 
housing authorities in my district that are very interested in 
getting into that program. I think it is a very useful program.
    I also wanted to ask you about the Family Self-Sufficiency 
program that was put in by Congress just not too long ago. Is 
that going to be something that is really going to help to move 
people out of public housing and into finding homes on their 
own?
    Secretary Donovan. From my own experience, Family Self-
Sufficiency is a very important effort. And, in fact, we 
supported in New York a significant expansion of Family Self-
Sufficiency with City dollars in addition to Federal funding. I 
think one of the issues there, like the MTW, is that despite 
the success that I saw with my own eyes, that I think 
anecdotally we have seen in many parts of the country, we 
haven't had comprehensive research about the program to show 
what works best and what doesn't.
    So I certainly am excited about seeing Family Self-
Sufficiency continue and expand, but also I think we need to do 
some rigorous research about it to make sure that the best 
models are being replicated in other places.
    Mrs. Biggert. And do you see an expansion of the Moving to 
Work Program?
    Secretary Donovan. Again, I do believe that it is warranted 
that there be some expansion. I can't give you an exact number. 
But, again, I do believe it has to be paired with the right 
kind of evaluation and the right kind of tenant protections.
    Mrs. Biggert. Okay. Then this is a question that comes up, 
I think, every time that the Secretary of HUD is here, and that 
is the technology, the outdated technology to do all of these 
programs. Are you going to move forward; is there budget for 
improving the technology for information?
    Secretary Donovan. I couldn't agree more that this is an 
issue. Thankfully, Congress appropriated in the 2009 budget $4 
million to do a comprehensive technology study for the 
Department. That is now underway. And in addition, in the 2010 
budget we are proposing a--we are calling it a transformation 
initiative that would give us significantly increased and more 
flexible funding to allow us to provide greater technology and 
greater integration of systems for the Department. So I 
couldn't agree more that this is a serious issue.
    Mrs. Biggert. Okay. Then RESPA. As the Federal Reserve is 
moving forward with their new disclosure rules under the Truth 
in Lending Act, and they won't be ready for probably another 
year, there was a proposal to delay RESPA so that the two 
bodies, you and the Fed, could work together. Do you foresee 
changing any parts of RESPA, or do you see that it might be--to 
wait and see and work together, or how is that going to resolve 
itself with them both working on the same thing?
    Secretary Donovan. I would say there is no question that 
President Obama and I, and more broadly the Administration, are 
committed to really taking a hard look at our regulatory 
structure overall. Chairman Frank, and many others, have been 
engaged already in this discussion. And as part of that, 
Chairman Bernanke and I have already begun discussions; our 
staffs have started working together on ensuring that while we 
are strengthening our regulatory system, we are also 
simplifying it.
    I think we could both benefit consumers, while also making 
a more efficient and effective market for industry at the same 
time on many issues, and I think this is one of them. So we are 
committed to that, creating a joint process, and we have begun 
work on that.
    What I would also say, and I announced this just recently, 
is that I don't believe, given some of the benefits of the 
recent RESPA rule, that we should delay implementation of that 
pending those discussions. I don't think it is an either/or. 
And therefore, we have withdrawn one portion of the RESPA rule 
that has to do with something called required use, because 
there was some unclear language there. We are re-drafting that, 
and we will re-release it. But pending that, we are moving 
forward with the rest of the rule towards implementation, while 
at the same time ensuring for the long term that we harmonize 
our RESPA and TILA more effectively.
    Mrs. Biggert. Thank you.
    And then just one more quick question, and that is on the 
homeless children. That was discussed at the bill signing 
yesterday as part of the inclusion in one of those bills. Are 
you going to be working with Secretary Duncan to make sure that 
no child falls through the cracks with the housing, and they 
will get the help that they will need?
    Secretary Donovan. Absolutely. And, in fact, we have 
already begun work. There was important funding in the recovery 
bill as well to help us better track and make sure exactly, as 
you say, that homeless children don't fall through the cracks. 
We have made a lot of progress in the last few years in this 
country around chronic homelessness, but we have seen an 
increase in family homelessness in many places. There was a 
billion-and-a-half dollars in the recovery bill that we are 
implementing that can be used in a new way in our programs to 
prevent homelessness rather than just fighting it once it has 
occurred.
    And so that prevention and rapid rehousing effort is 
already underway. We have released a notice on it, and we are 
working with communities to get that funding out as quickly as 
possible. Obviously, helping those families stay housed will 
help to prevent children from becoming homeless in the first 
place.
    Mrs. Biggert. Thank you. This has been a very important 
issue for me. So I would love to work with you, if possible.
    Secretary Donovan. I would love to work with you. Thank 
you.
    Mrs. Biggert. Thank you.
    Mr. Moore of Kansas. Thank you.
    The Chair next recognizes Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    Thank you again, Mr. Secretary.
    Mr. Secretary, notwithstanding high unemployment, 
notwithstanding the high rate of foreclosures, we still have 
persons who can afford to make a monthly mortgage payment, but 
who cannot afford a downpayment. And Mr. Miller, Representative 
Miller on the committee, mentioned this earlier. The seller-
assisted downpayment program may be something that cannot only 
help people, but also help the economy in this recovery that we 
are trying to achieve.
    I was very pleased to hear you say that you have some 
degree of flexibility, and that you want to see real equity in 
the homes that are purchased with these seller-assisted 
downpayments. I think that is fair.
    I also would like for you to know that we have looked at 
this and looked at risk-based pricing as a means of making sure 
that the premiums paid will cover the cost of the program. I 
think that this is a means by which we can have a program that 
is totally self-sufficient, that doesn't require government 
intervention other than to monitor the program, and will cause 
a good number of persons to move into homes who are now paying 
rent that may very well be higher than the mortgage payment 
that they will ultimately have after having received some 
assistance from the seller.
    Now, the empirical evidence that I have had an opportunity 
to peruse seems to indicate that the difference between the 
downpayment being paid by the buyer versus a relative of the 
buyer, which is still in place, or some municipality or some 
agency of the government, there is a difference, but it is not 
so vastly different that it would merit our not taking another 
look at this. So I am pleased that you have indicated that you 
are willing to.
    And what I would like to do is have an opportunity to visit 
with you about this at some point in the near future. I know 
you are really busy, but if you can make some time for us to 
visit, maybe we can fashion a program that will be of great 
benefit to the many persons who truly can afford to make these 
payments--I don't want to see a program where we put persons in 
homes who cannot afford them--when they will have the equity 
that you have made reference to, and also wherein we will start 
to impact the economy in a positive way by getting many of 
these homes that are going to be at some point on the market at 
reasonable prices. The time to start to buy is probably 
yesterday or today or tomorrow, but sometime right away. And 
many persons will be able to move into these.
    So I would ask you to give a response, and then I have one 
other issue that I will broach.
    Secretary Donovan. As I said, I would be happy to review 
the legislation and to look at it. I do have serious concerns 
about the evidence that I have looked at that shows that the 
seller-funded downpayment loans were more than twice as likely 
to default as the average loans in the FHA portfolio. And I 
think the important difference about traditional downpayment 
assistance as it has been provided through the HOME program, as 
we provided it in my own experience, is that it didn't require 
repayment, that there was no premium associated with it, and 
therefore that it created effectively real equity for the 
buyer. And so that would certainly be the principle that I 
would bring to look at it.
    Mr. Green. Thank you. I would gladly work with you around 
that principle of real equity in the home.
    Now I would like to move to one additional area, and it has 
to do with the waiting lists that we have. In some places, they 
actually shut these waiting lists down. They don't continue to 
allow persons to become a part of a list after a while, because 
my assumption is that they know that they can never get to some 
people who are on the list. Has this been your experience?
    Secretary Donovan. Yes, it has. And I think it is fairly 
traditional around the country that waiting lists are closed 
partly because if you have families who are on the waiting list 
for a significant period of time, that information about those 
families is often outdated or not useful and requires opening 
up the waiting list again or reaching back out to them. So it 
has been the traditional practice of housing authorities to 
open and close waiting lists depending upon the availability of 
vouchers.
    Mr. Green. Have you used the waiting lists to ascertain the 
number of people who are actually waiting? Do you do that? I am 
not sure how that is used in terms of empirical evidence.
    Secretary Donovan. I am not aware of any comprehensive 
tracking of that. Those numbers are kept individually by the 
more than 3,100 housing authorities around the country. I am 
not aware that we have those numbers, but I will certainly go 
back and check and see if we do and provide them to you.
    Mr. Green. If we are not--and I am hurrying because my time 
is up--if we are not, would that be beneficial to have a means 
by which we could get that empirical evidence into your office 
so that you could--
    Secretary Donovan. It is an interesting thought. Let me 
talk with the folks in the program about whether we have a way 
to do that and how useful that might be.
    Mr. Green. Thank you very much. I look forward to visiting 
with you.
    Mr. Moore of Kansas. The gentleman's time has expired. 
Thank you.
    Mr. Paulsen, you are up, sir.
    Mr. Paulsen. Thank you, Mr. Chairman.
    Mr. Secretary, there has been a lot of reports in the media 
about the financial solvency or financial stability, I should 
say, of the FHA program. Is the FHA program in financial 
trouble?
    Secretary Donovan. Generally, what I would say is that like 
every other loan product in this market, we have seen increases 
in our delinquency and our losses, and that I do have some 
concerns, particularly around improving FHA systems, our 
staffing, our resources, a range of others. And we have begun 
that process, thanks in large part to assistance from Congress 
in our recent budget.
    Having said that, I would make two fundamental points. 
There are places where I have seen FHA referred to as the next 
subprime, and I think that that is, frankly, inflammatory and 
incorrect, because FHA has continued through this entire crisis 
that we have seen in the mortgage market to offer fixed-rate, 
30-year financing and safe, longer-term adjustable-rate 
products, and have never offered the kind of subprime or 
exploding fees, optional ARMs, the kind of products that got us 
into trouble in the first place. And in fact, while our 
defaults and our delinquencies have increased, they remain one-
third of the level in the subprime market. So it is a very 
different situation than we have seen in the subprime lenders.
    Our loans are concentrated in areas of the country that had 
seen much less run-up in the market. We do not have heavy 
concentration in California, in Florida, and Arizona, Nevada, 
those parts of the market. It is much more in other parts of 
the country that have not seen the same kind of run-up and then 
declines.
    And also with the recent changes to eliminate the seller-
funded downpayment program, we believe that will save the FHA, 
that change alone, roughly $2.5 billion in 2010. And as a 
result of that and the other things I have talked about, we 
expect the FHA--new FHA originations in the single family 
program to earn the taxpayer $1.7 billion in the new loans 
originated in 2010.
    So I think overall what that says is we should all be 
concerned and watching closely, particularly focused on fraud 
and other issues. The President signed a bill yesterday that is 
going to significantly increase our powers to stop fraud. But I 
think overall the signs are encouraging that the FHA can 
continue to be an active player in the market very safely.
    Mr. Paulsen. So, Mr. Secretary, and I don't know the 
details of the budget request, and so you are saying that the 
money--because, you know, Congress has been asked to come back 
over and over for additional bailouts in many different facets 
of the financial sector and service area. And so with the FHA 
area in particular, there is a request, right, and it is not 
necessarily to increase premiums to borrowers, but there is a 
component from the budget, but you are saying there will be a 
net gain for the taxpayer?
    Secretary Donovan. That is correct. There is an $800 
million request for the reverse mortgage program for seniors, 
which really operates much more like an annuity than it does as 
a traditional mortgage product. So it is quite different. But 
savings to the taxpayer of $1.7 billion for loans we expect to 
be originated in 2010.
    Just one other note I would make. The 2010 budget really 
focuses on new loans that will be made in 2010. Another 
important measure is the actuarial review that we do of the FHA 
Fund every year. That will be completed over the summer, and I 
think that will also be an important measure of the health of 
the Fund. Based on our latest projections, we would expect that 
the Fund remains above the minimum 2 percent reserve required 
by Congress. But I think depending on where the housing market 
goes in the next few months, I do have some concern that we 
might drop below that. That does not mean we would need a 
``bailout;'' that just simply means we would reach a level that 
would heighten our concern about the level of reserves for the 
FHA Fund, and that we may need to make some changes to the Fund 
at that point.
    So I think encouraging news about the 2010 budget, but we 
continue to watch it closely, and we would be back to Congress 
with more information this summer.
    Mr. Paulsen. Okay. I have no further questions. I yield 
back my time.
    Mr. Moore of Kansas. Thank you.
    Mr. Secretary, I want to--before I ask you a question, I 
just wanted to thank and commend Subcommittee Chairwoman Maxine 
Waters for her work on housing issues, and for her work 
specifically on the issues we are talking about today.
    Mr. Secretary, thank you for your testimony this afternoon. 
It seems that this draft bill improving the Section 8 Voucher 
Program makes a lot of sense. But I want to ask you a question 
about HUD programs more broadly than just the bill here. Is 
there sufficient transparency and oversight built into HUD 
programs to protect against waste, fraud, and abuse, in your 
estimation, sir?
    Secretary Donovan. First of all, I would echo your comments 
about the chairwoman and the importance of her work broadly, 
and particularly this bill that we are discussing today.
    Mr. Moore of Kansas. Thank you.
    Secretary Donovan. I believe, and I would particularly 
focus on the FHA programs, that we do need to do more to 
strengthen our oversight of HUD's programs, and I am absolutely 
committed to doing that. And, in fact, one important step in 
that direction was taken yesterday when the President signed a 
bill that will allow us in FHA to take more aggressive action 
against fraudulent behavior, as well as to increase funding for 
oversight against fraud.
    We have also proposed in our 2010 budget a $37 million 
initiative to increase our efforts to look at mortgage fraud 
within our programs, and, frankly, more broadly across the 
market through our fair lending efforts. Those will complement 
with efforts of the Justice Department, the Treasury 
Department, the Federal Trade Commission, and a number of 
others who also, through the bill signed yesterday, will get 
increased resources and powers to go after fraud.
    I think the most important element of that is that we have 
not previously had the authority to go after many of the non-
bank institutions that were responsible for a large share of 
the subprime lending and the defaults. The bill signed 
yesterday gives us those powers. So I do think we have made an 
important step in our budget and in the bill signed yesterday.
    Mr. Moore of Kansas. As chairman of the Subcommittee on 
Oversight and Investigations, and as a former prosecutor myself 
before I came to Congress, I really appreciate what you are 
doing there, because I think it is very important. I think the 
public has just had it up to here with people who have abused 
some of our Federal programs. So I appreciate the strong steps 
that you have taken that you talked to about right here.
    I yield back my time, and you are next, Ms. Jenkins.
    Ms. Jenkins. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for joining us today.
    As you know, manufactured housing, regulated by you, 
provides affordable, non-subsidized homeownership for millions 
of Americans and consumers, particularly lower- and moderate-
income families. Back in 2000, Congress passed the Manufactured 
Housing Improvement Act in order to reform and modernize key 
aspects of the HUD regulatory program for manufactured housing, 
and among those reforms was a provision to require and fund a 
noncareer appointed official to administer the program. We have 
been advised, though, that this position has not yet been 
filled. Do you intend to fill the position with a political 
appointee?
    Secretary Donovan. I would say honestly, Congresswoman, 
that is not a decision that has been made at this point. We are 
still evaluating our overall funding and staffing levels. As 
you know, an important part of the last few months has been 
staffing-up, understanding the budget that we have, as well as 
the number of political slots versus career slots. And so I 
have not made a decision about that at this point. I would be 
happy to discuss with you further your interest in that, and 
will make sure when we have made that decision to let you know.
    Ms. Jenkins. Okay. Any timeline?
    Secretary Donovan. I don't have a specific timeline at this 
point. Given your interest, I will certainly pledge to you to 
get back to you quickly on it.
    Ms. Jenkins. Okay. Excellent.
    Could you also comment on how you view the Department's 
implementation of the Manufactured Housing Improvement Act? And 
are there any aspects of the legislation that need to be 
improved upon?
    Secretary Donovan. Well, one of the early issues that I 
faced when I arrived as Secretary is that there were important 
provisions in Title II that were passed last summer that had 
not yet been implemented. And, in fact, there was concern 
within the Department that we might need an extended rulemaking 
process to implement those, despite the wishes of Congress to 
move quickly on that. We evaluated that, made the decision that 
we would not go through a full rulemaking process, and that we 
are finalizing a mortgagee letter around that that will 
implement those provisions. So that, I think, was the most 
significant concern I had heard and dealt with when I arrived 
as Secretary, and we are moving forward on that.
    Ms. Jenkins. Okay. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman. I yield back the remainder of my 
time.
    Mr. Moore of Kansas. Thank you, Ms. Jenkins. Thank you very 
much.
    Mr. Sherman, you are next, sir.
    Mr. Sherman. Thank you.
    I have asked my district staff to focus on the problems in 
our own area dealing with the Section 8 Program. And, Mr. 
Secretary, they basically say you folks are doing a good job. 
The concerns all tend to focus--and I have talked to people in 
other parts of the country as well--on favoritism and 
inefficiency with the local folks who are involved in the 
administration of Section 8. And so I hope that your people 
would be doing all proper controls and exercising those 
controls with an eye toward making sure that these Federal 
dollars are spent well and without favoritism.
    One particular area in the area of local control where it 
could clash with Federal objectives is the area of portability. 
Obviously we want people to live as close to their jobs as 
possible, especially given today's costs of transportation, the 
effect on the environment, etc. We want people who are 
struggling to get by to live close to their support systems, to 
their family. We want them to be able to go where the jobs are. 
Nothing would be worse than a labor market screaming for 
employees in one place, but people feel compelled to live 
somewhere else. So portability is an important Federal 
objective, yet I hear story after story of disputes, situations 
where the two agencies fight between themselves in just 
processing this transfer. And the problem might be remedied by 
greater enforcement by HUD. We might even want to see local 
housing agencies fined or penalized in some way if they cause 
repeated inordinate delays in the processing of transfers.
    I realize you have been on the job, I think, less than 100 
days, so I don't know if this has percolated up to you, but 
what do we do to make sure that people with Section 8 vouchers 
can live where they need to live?
    Secretary Donovan. So before I answer that, Congressman, I 
just wanted to note--Congresswoman Jenkins just left--I have 
been informed by my staff that as usual they are ahead of me, 
and the mortgagee letter I just referenced has already been 
released. So I just wanted to make sure that the record 
reflected that. We will obviously get in touch with the 
Congresswoman's office directly.
    On this issue of portability, it is a significant issue. I 
believe very strongly that one of the benefits of the voucher 
program is, just as you say, Congressman, to allow the freedom 
of choice to move to new communities, to follow jobs, or 
whatever other reasons there may be to move, and to ensure that 
access to opportunity is one of the hallmarks of the voucher 
program. And I believe strongly that there is a very positive 
provision in this bill that will allow HUD to remove a number 
of the current barriers to effective portability. There simply 
are--in terms of the way we fund and reimburse housing 
authorities for those, frankly, it is somewhat understandable 
the kind of squabbles that you talked about that we end up with 
between housing authorities. So the flexibility that this bill 
would give us to do that, I think, is very, very important, and 
we would implement those as quickly as possible.
    Mr. Sherman. So if we pass the bill you want, you will 
solve this problem.
    Secretary Donovan. More than that, the provisions in this 
bill are good provisions that would help us to solve it.
    Mr. Sherman. I yield back.
    Mr. Moore of Kansas. Thank you, Mr. Sherman.
    The Chair next recognizes Congressman Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Secretary, thank you again for being here. My first 
question that really doesn't have much to do with the voucher 
program, tangentially, but have you decided yet whether you are 
going to have regional Secretaries? Secretary Cuomo had 
regional representatives. Have you made a decision?
    Secretary Donovan. We will certainly have--they are 
currently called regional director positions. We will be 
hiring, and, in fact, have begun looking at candidates for 
those positions around the country.
    I also, frankly, believe that those positions need to be 
higher profile and more effective in the field. One of the 
issues, I think, frankly, is that HUD has operated too much in 
silos, where we have different programs that don't effectively 
work together on the ground, the staff doesn't communicate as 
effectively as needed. And therefore, having a strong leader on 
the ground that really understands not just programs and 
process, but people and places and how to bring the programs 
together is very important. So I do believe those roles not 
only need to be filled, but to be even more important and a 
focus for my efforts.
    Mr. Cleaver. Connected to that is there has been a long-
standing argument about whether or not the rent basis, the 
income-based rents should be done on a regional level because 
of the dramatic difference in housing across the Nation. And, I 
mean, there has been a long-standing argument. I was mayor 
during the 1990's in Kansas City, Missouri. It was an argument 
then. And it is brought on in part because what happens--and it 
is terrible, I suffered from it from having lived in public 
housing--when you start doing Section 8 vouchers in many of the 
cities, you will end up having a little enclave of Section 8 
vouchers. And so the children who grow up there, they are 
recognized, pointed out, and in many instances discriminated 
against because they come from--there is one near our house. I 
had to stop my own children from referring to the area as the 
children from the valley. And it happens, you know, all over 
the country. And it is because, you know, there is a certain 
allotment for the acquisition of the property or, you know, how 
much we will subsidize the owner of the property who uses the 
property for Section 8. And it turns out that the only 
affordable properties are usually in minority neighborhoods, 
low-income neighborhoods.
    So then you bring in--I am telling you stuff you already 
know. You did it in New York. So you understand the issue. And 
at some point, Mr. Secretary, we need to change. Something 
needs to happen. I don't know if we need to go to a greater 
flexibility based on regions, or whether or not we, you know, 
use more dollars so that we can do more what used to be called 
scattered-site housing, which didn't scatter very well.
    But do you have any ideas on how we can stop this? The kids 
who grow up in those areas, I mean, the teachers in the 
schools, they all know them. Everybody knows them. The buses 
stop in those areas. And it is just really one of the most 
unfair things. I was a kid who grew up in the projects. You 
know, look at that little Cleaver boy. He came from the 
projects.
    Secretary Donovan. Congressman, I appreciate your passion 
about this issue and the personal connection you have to it. I 
couldn't agree more that this is an issue. It is not just in 
the voucher program, but broadly across HUD's programs that we 
need to attack. And I think there are ways, and I would love to 
discuss more--whether in this bill or in other ways, there are 
ways that we could do that.
    I do think there are two things I would mention on this. I 
think we have begun, particularly in the focus with HOPE VI on 
public housing, to focus on really undoing some of that damage 
in public housing, and that work has been effective. And, in 
fact, we have proposed in our budget an expansion and change to 
HOPE VI into an effort we call Choice Neighborhoods, which 
would be aimed not just at expanding the funding available, but 
also allowing not just public housing, but also assisted 
housing and even private housing in neighborhoods of 
concentrated poverty to be eligible for these comprehensive 
efforts.
    But the other end of the spectrum, and I think you point 
this out as well, we have to create a broader geography of 
opportunity in our metropolitan areas by focusing as well on 
areas that currently don't have affordable housing available. 
This is something that I worked very hard on in New York to 
create through inclusionary zoning and other efforts, mixed-
income housing in neighborhoods that otherwise would have been 
100 percent market rate or luxury housing.
    And so I think there are a range of ways that we need to 
approach this. And our budget also has some efforts that would 
support it. It is an initiative we call Sustainable 
Communities, which will support local efforts, whether it is 
through inclusionary zoning or others, to do exactly what you 
are talking about.
    So I couldn't agree more, and I think we have to work on 
that in many, many different ways, not just in the voucher 
program.
    Mr. Moore of Kansas. The gentleman's time has expired.
    Mr. Secretary, I do appreciate your coming here today. We 
all appreciate your testifying and your answering questions of 
the Members today.
    The Chair notes that some members may have additional 
questions for this witness that they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions to the 
witness and to place his responses in the record.
    We do again appreciate your being here.
    The hearing is adjourned.
    Secretary Donovan. Thank you very much.
    [Whereupon, at 4:10 p.m., the hearing was adjourned.]





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