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



 
                    THE ADMINISTRATION'S PROPOSAL TO

                 REVITALIZE SEVERELY DISTRESSED PUBLIC

                       AND ASSISTED HOUSING: THE

                    CHOICE NEIGHBORHOODS INITIATIVE

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



                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 17, 2010

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-113



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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:
    March 17, 2010...............................................     1
Appendix:
    March 17, 2010...............................................    47

                               WITNESSES
                       Wednesday, March 17, 2010

Cabrera, Hon. Orlando, former Assistant Secretary for Public and 
  Indian Housing, U.S. Department of Housing and Urban 
  Development, and CEO, National Community Renaissance...........    20
Crowley, Sheila, President, National Low Income Housing Coalition    22
Donovan, Hon. Shaun, Secretary, U.S. Department of Housing and 
  Urban Development..............................................     5
Eldridge, Nancy Rockett, Executive Director, Cathedral Square 
  Corporation, on behalf of the American Association of Homes and 
  Services for the Aging (AAHSA).................................    25
Goetz, Edward G., Director, Center for Urban and Regional 
  Affairs, University of Minnesota...............................    23
Khadduri, Jill, Principal Associate, Abt Associates Inc..........    27
Ramirez, Saul N., Jr., Executive Director, National Association 
  of Housing and Redevelopment Officials (NAHRO).................    28
Siglin, Kristin, Vice President and Senior Policy Advisor, 
  Enterprise Community Partners..................................    30

                                APPENDIX

Prepared statements:
    Cabrera, Hon. Orlando........................................    48
    Crowley, Sheila..............................................    52
    Donovan, Hon. Shaun..........................................    59
    Eldridge, Nancy Rockett......................................    67
    Goetz, Edward G..............................................    75
    Khadduri, Jill...............................................    88
    Ramirez, Saul N., Jr.........................................    95
    Siglin, Kristin..............................................   112

              Additional Material Submitted for the Record

Written statement of Dr. Deirdre A. Oakley, Associate Professor, 
  Dr. Erin Ruel, Assistant Professor, and Dr. Lesley W. Reid, 
  Associate Professor, Department of Sociology, Georgia State 
  University.....................................................   121


                    THE ADMINISTRATION'S PROPOSAL TO


                 REVITALIZE SEVERELY DISTRESSED PUBLIC


                       AND ASSISTED HOUSING: THE

                    CHOICE NEIGHBORHOODS INITIATIVE

                              ----------                              

                       Wednesday, March 17, 2010

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Waters, Watt, Moore 
of Kansas, Hinojosa, Clay, Baca, Scott, Green, Klein, 
Perlmutter, Donnelly, Carson, Adler; Bachus, Miller of 
California, Capito, Neugebauer, Marchant, Jenkins, and Paulsen.
    The Chairman. The hearing will come to order. We are here 
today on a very important initiative of the Obama 
Administration. The HOPE VI Program has been one that has 
frankly been protected on a bipartisan basis by Congress. The 
previous Administration tried to de-fund it. On both sides of 
the aisle here, there was strong support for keeping it going, 
but there is a recognition that there is room for significant 
improvement. I appreciate the fact that the Secretary has 
indicated in a statement that he is not going to be doing away 
with HOPE VI and that in fact more will go in the continuing 
HOPE VI issue as we work on this.
    The committee is glad to work with the Secretary. I would 
note with regard to the current fiscal year, obviously we did 
just get the legislation. We have had some indications here of 
what was coming. I should say I don't think given particularly 
the pace of things in the Senate that we're going to be able to 
get a whole new bill done by the end of the year, but I do 
intend for this committee in particular to have some 
significant input into this. And if this is ultimately going to 
be done in the Appropriations Committee, we will be insistent 
that the appropriators pay significant attention here. I would 
hope that we would have a markup here in the committee and be 
able to have our impact on the appropriators.
    With regard to the substance, I welcome the attention to 
public housing. We ought to be very clear that there are 
examples of public housing that should never have been built, 
that unfortunately are sometimes blamed on the victims, the 
people who live there. Nobody asked to live in 1,000-unit tower 
with no services in an isolated part of town. And it's 
important that we humanize those both for the people who live 
there and for the impact this has on the city and the 
surrounding neighborhoods. So we look towards cooperation.
    There were a couple of important points to myself and to 
the gentlewoman from California, the chairwoman of the Housing 
Subcommittee. One is that we do not want this to result in a 
net reduction in units available to lower-income people. I will 
go back to the previous years where I think one of the problems 
that we faced was a disrespect for rental housing and the view 
that the only acceptable way to provide housing for low-income 
people was to get them to be homeowners, leading to a 
significant overemphasis on that and to many people being put 
into homeownership who shouldn't have been there, who couldn't 
have afforded it, who weren't able to manage it. And 
appropriate attention to rental units is very important.
    So one of the issues we have here is the matter of 
replacement. Now I understand those in the housing authority 
feel, well, what are we going to replace it with? It is my hope 
that we will have things with which they can replace it, 
including, and I want to make it very clear as I just did to 
the Secretary privately, in my mind, funding the Low Income 
Housing Trust Fund is essential to our being able to do other 
things. That is the central piece. I can't support destruction 
of existing units without a fund that will provide replacement 
of those units, and that is not now possible with the resources 
we have made available. So funding the housing trust fund, 
beginning now and going forward, is very important.
    Secondly, and I have this concern which I have also 
expressed to the Secretary, I understand that when you provide 
housing for people, you also want to provide them with a decent 
living environment, a good education, public safety, 
recreational space, and transportation, but not out of a HUD 
budget that's already too limited. We have a HUD budget that is 
constrained. I agree with the comprehensive approach. I 
disagree strongly with the notion that these other services 
ought to be funded out of HUD. For example, transportation. 
Yes, adequate transportation is important. It can also be 
expensive. We have a transportation trust fund, and I--as well 
as others on this committee--will have some serious concerns 
about the funding coming from the HUD budget for programs that 
ought to be funded out of other budgets.
    Now fortuitously, the Appropriations Subcommittee that's 
relevant here has both HUD and the Department of Transportation 
under it, and I intend to work closely with our colleague 
there, who has been very cooperative with us, so that if we're 
going to be talking about funding here, the funding has to come 
from more than one source. Obviously, there are some incidental 
overlaps that are unavoidable.
    But I don't see, in anything the Administration has sent 
me, requests that the Departments of Transportation, Health and 
Human Services, or Education provide some of their funds for 
housing. It seems to be a one-way street here. I understand 
there's a need for some cooperation, but I will be very, very 
skeptical of efforts to deplete HUD funding, which is already, 
in my judgment, inadequate, not because of the Administration's 
fault, but because of budgetary realities for other purposes.
    The gentleman from Alabama is recognized for 5 minutes.
    Mr. Bachus. Thank you, Mr. Chairman. Secretary Donovan, I 
welcome you to the committee to again testify about the 
Administration's Choice Neighborhoods Initiative. I also 
appreciate your willingness to work with both sides of the 
aisle. On more than one occasion, you have proposed 
constructive changes to HUD programs. Having said that, I do 
have some concerns about HUD's programs, and I want to express 
those. Many of my concerns date back obviously before your 
tenure as Secretary.
    But first of all, let me talk about the Choice 
Neighborhoods Initiative. It is a newly constructed government 
funding grant program, and it's designed to replace the 
existing HOPE VI Program. Like HOPE VI, Choice Neighborhoods' 
stated goal is to transform neighborhoods of extreme poverty 
into sustainable mixed-income neighborhoods. And I believe that 
Choice Neighborhoods, at least in my opinion, is an improvement 
over HOPE VI, and I want to acknowledge that. At the same time, 
it does continue a program, HOPE VI, that some say has reached 
its stated purpose. So before we continue a program, and I 
acknowledge that this proposal is an improvement in my mind, we 
need to consider whether we just extend it at all, particularly 
in light of an unsustainable Federal budget deficit and a 
multi-trillion-dollar national debt.
    One particular concern about HUD in general is that it has 
not done enough to stretch taxpayers' current housing 
investments and must address significant questions surrounding 
the accuracy of HUD's budget offset projections. Just last 
week, the CBO found that FHA and Ginnie Mae receipts would be 
$4.4 billion less than the Administration's $6.9 billion 
projection. As you know, HUD is claiming that the $6.9 billion 
was to offset the $48.5 billion HUD budget, reducing the HUD 
budget to $41.5 billion. Before we consider additional spending 
projects of any kind, HUD, along with other Executive Branch 
agencies, should be required to justify current programs and 
their budget allocations. The FY2011 budget requests an 
additional $250 million for Choice Neighborhoods on top of the 
$65 million Congress provided in HUD's FY2010 budget. Yet, the 
Choice Neighborhoods Initiative has yet to be authorized.
    Mr. Chairman, during the presidential campaign of 2008, 
President Obama committed to performing a top-down review of 
every government agency and program. HUD for some time has been 
notorious for slow spend-out rates in many of its programs and 
large unspent balances sitting in HUD accounts. How can we be 
assured that this new government program will be any more 
effective than HOPE VI when there are already millions of 
dollars sitting in an account waiting for some action or 
decision? Before we do create a new government-run program, 
even if it's better than the one it hopes to replace, a better 
course of action might be to perform the top-down review that 
the President promised in order to identify the types of 
reforms necessary to ensure HUD programs are administered in a 
cost-effective, efficient way.
    In closing, Secretary Donovan, thank you again for being 
here to testify on Choice Neighborhoods and for sharing your 
views. And I do think this proposal is a constructive proposal, 
but I think that the Administration should address funding 
issues, specifically the shortfall created by the lower-than-
expected FHA and Ginnie Mae receipts. I yield back the balance 
of my time.
    The Chairman. If the gentleman would yield me 30 seconds 
for an agreement with him. He talked about this not having been 
authorized. In fact, I think on behalf of both sides, I fought 
very hard against an effort by some of the appropriators, with 
the Administration's support at first, but they responded well, 
to fund this without the authorization. And ultimately, some 
money was put in at the insistence of the Senate, but less than 
expected, and our House colleagues respected it, and it is my 
intention that at the very least, we will have a markup in this 
committee before anything goes further. So I just wanted to 
express my--
    Mr. Bachus. Right. And then that would address some of my 
concerns.
    The Chairman. Yes. And, you know, I think frankly, if we 
work something out that probably would represent the House 
position, if the Senate committee wants to yield itself to the 
appropriators.
    Mr. Bachus. Right.
    The Chairman. We're not in charge of them.
    Mr. Bachus. Thank you.
    The Chairman. The gentleman from Indiana wanted a minute.
    Mr. Donnelly. Thank you, Mr. Chairman. I just want to thank 
the Secretary for coming here today and for your housing 
efforts that you have made on our behalf and to thank you for 
your interest and assistance in the manufactured housing 
markets I represent, that help provide affordable housing, and 
your assistance has been greatly appreciated. Thank you very 
much for being here today.
    The Chairman. The gentlewoman from West Virginia is 
recognized for 3 minutes.
    Mrs. Capito. Thank you, Mr. Chairman. I would like to thank 
the chairman for holding this hearing, and I would like to 
welcome Secretary Donovan back to the committee. Mr. Secretary, 
I'm certainly intrigued by many of the provisions included in 
the Choice Neighborhoods proposal, and I look forward to 
hearing your testimony today and learning more about it.
    The Choice Neighborhoods Initiative would replace the HOPE 
VI Program with a grant-funded program to revitalize 
neighborhoods characterized by extreme poverty into sustainable 
mixed-income neighborhoods. This program is designed to address 
the direct housing needs of the neighborhood and make available 
services to improve employment, educational opportunities, and 
public transportation, among other services.
    Given our current budget and deficit issue, it is 
imperative that we begin to take a fresh look at how best to 
resolve the capital needs of our aging affordable housing 
stock. I like the idea of expanding the pool of players that 
can participate to those in the private, nonprofit, and 
government sector. This proposal has the ability to help us 
address some of our preservation issues, and I look forward to 
learning more about this program and working with you and the 
chairman.
    While I know we're here today to discuss the Choice 
Neighborhoods proposal, I couldn't pass up the opportunity to 
raise the issues on the future of FHA. As you know, last week I 
introduced H.R. 4811, the FHA Safety and Soundness and Taxpayer 
Protection Act of 2010, which included the majority of the 
proposals that you have requested.
    First, does the Administration plan to have legislation 
introduced on their behalf? And second, when the Secretary 
presented the 2011 budget for HUD, $6.9 billion was estimated 
for receipts from Ginnie Mae and FHA, and recently, as you 
know, the CBO presented their own estimates, which were much 
lower than the $6.9 billion predicted by HUD. The $4.4 billion 
gap between CBO's numbers and those of HUD--and I raised these 
with the Commissioner last week--raise serious concern about 
the ability of HUD to begin new initiatives like Choice 
Neighborhoods.
    Lastly, the HOPE VI Program has traditionally benefitted 
large urban centers like New York, Chicago, and Los Angeles, 
although I think we did have a HOPE VI project in Wheeling, 
West Virginia. And since the creation of the program, my home 
State has received the one grant for the Wheeling Housing 
Authority. If the Choice Neighborhoods Initiative is truly an 
improvement over HOPE VI, then it should work towards ending 
the disparity of public housing revitalization between the 
urban and rural communities. The affordable housing challenges 
faced in rural America are different from those in urban 
communities. However, they are no less important and by no 
means no less difficult.
    I look forward to further discussions with Secretary 
Donovan on this issue and welcome the witnesses here today. 
Thank you.
    The Chairman. The gentleman from Texas is recognized for 1 
minute, and then I think we'll be ready to hear from the 
witnesses.
    Mr. Green. Thank you, Mr. Chairman, and I thank you, Mr. 
Secretary, for your appearance today. A brief comment about a 
program that we have bipartisan support for. As you know, 
Congressman Miller and I have been working on sell assisted 
downpayment. And I just want to thank you for continuing to 
work with us. We have not arrived at a final decision, but 
we're still working on the project. I also want to let you know 
that while I am eager to hear what you have to say on the 
Choice Neighborhoods Initiative, I have another hearing that 
they asked me to attend, so I'll be in and out. I do look 
forward to reading your testimony as well as reviewing the 
transcript. Thank you very much, and I yield back the balance 
of my time.
    The Chairman. Well, if the gentleman would yield. He is 
unfailingly courteous, and I understand him saying this, but I 
will tell him it is my experience that no Cabinet official has 
ever minded a Member not asking him a question.
    [laughter]
    The Chairman. Mr. Secretary?

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

    Secretary Donovan. Thank you, Chairman Frank, Ranking 
Members Bachus and Capito, and members of the committee, and I 
also want to say thank you to Chairwoman Waters for all of her 
leadership on housing issues and her work on this particular 
proposal as well and feedback. I welcome this opportunity to 
discuss our new proposed Choice Neighborhoods legislation and 
the HOPE VI Program, the history and promise of which we seek 
to build on today.
    Mr. Chairman, the HOPE VI Program has become one of our 
country's most powerful weapons to fight concentrated poverty 
and rebuild distressed housing. As you know, these problems are 
deeply interconnected. Neighborhoods of concentrated poverty 
are typically marked by high crime and unemployment rates, 
health disparities, struggling schools, and faltering civic 
institutions, making distressed public and assisted housing 
developments in these neighborhoods a significant barrier to 
access to opportunity for poor families.
    HOPE VI made the Federal Government a partner to local 
housing authorities and communities, emphasizing mixed-income 
communities, leveraged financing, and incorporating supportive 
services. At its best, HOPE VI changed the world outside the 
development gates: reducing neighborhood poverty, crime, and 
unemployment; increasing income and property values; and 
spurring investment, business growth, and jobs. Indeed, over 
time, HOPE VI transformed from a housing program into a process 
of learning from best practices, encouraging all the 
participants and stakeholders in a neighborhood to invest in 
the most catalytic and meaningful neighborhood impacts. It is 
that foundation, Mr. Chairman, that we seek to build upon today 
with Choice Neighborhoods.
    Choice Neighborhoods builds on HOPE VI's successes. It 
enshrines the lessons that we have learned, and it gives 
communities more tools to tackle their interconnected needs. By 
expanding the HOPE VI tool kit to allow for the redevelopment 
of private and federally assisted properties alongside public 
housing, Choice Neighborhoods will bring disinvested properties 
that had no tool for redevelopment under the HOPE VI umbrella.
    Let me explain why it's needed. Fifteen years ago, the 
media spotlight briefly focused on the nightmarish conditions 
in one Washington, D.C., neighborhood's large distressed 
housing developments: Frederick Douglass; Stanton Dwellings; 
Parkside Terrace; and Wheeler Terrace. Washington Highlands 
presented a worst-case scenario for HUD, because two separate 
and distinct HUD programs were contributing to deterioration of 
the neighborhood. Thanks to HOPE VI, the community could 
redevelop the public housing properties, and it secured other 
financing to build a new community center and an elementary 
school. But the two other housing developments in Washington 
Highlands were out of reach, simply because they were 
subsidized by different programs at HUD.
    Mr. Chairman, the media didn't make the distinction between 
public housing and project-based Section 8. The residents 
didn't make the distinction. Gangs and drug dealers certainly 
didn't make the distinction. And thankfully, the community 
leaders who were fighting to turn their neighborhood around 
didn't make the distinction either. The only one to make the 
distinction was HUD.
    Back in 1994, an internal reported noted that HUD had, ``no 
ready mechanism to deal with the problem of high concentrations 
of distressed public and assisted housing in a single 
neighborhood of concentrated poverty.'' Today, we do. It's 
called Choice Neighborhoods. Choice Neighborhoods allows the 
HOPE VI tools housing authorities use to remake public housing 
to be available for assisted and other blighted housing, 
housing that HOPE VI wasn't allowed to touch in Washington 
Highlands.
    HOPE VI taught us that absent a more comprehensive 
approach, housing interventions are often insufficient to 
improve the lives of poor families. That's why Choice 
Neighborhoods will provide funding flexibility for health and 
other service coordination, job supports and work incentives 
for adults, and to connect resident children to quality 
educational opportunities.
    Take, for example, the Murphy Park development in 
Chairwoman Waters' hometown of St. Louis, in which the 
developer not only raised an additional $5 million from private 
and philanthropic interests to modernize the troubled school, 
Jefferson Elementary, it also worked closely with residents and 
the school board to hire a new principal with a new curriculum 
and a new focus on technology and after-school programs.
    In the years following Murphy Park's completion, 
unemployment surrounding the development fell by 35 percent. 
Median household income rose more than 4 times as fast as the 
City as a whole. And Jefferson Elementary became one of the 
most in-demand schools in the community. In Choice 
Neighborhoods, we challenge communities to take this approach 
to scale. Of course, different communities are at different 
levels of preparedness for this kind of undertaking. That's why 
Choice Neighborhoods also dedicates a portion of the overall 
allocation for planning grants. These grants ensure communities 
that aren't yet fully able to undertake a successful 
neighborhood revitalization can start down that path. Residents 
should never be penalized simply because they live in 
communities that are not yet able to build and execute a strong 
transformational plan.
    We have learned other lessons as well. We learned from HOPE 
VI that even though it was possible to replace the entirety of 
units being redeveloped either in the neighborhood or elsewhere 
in the community, in some tight housing markets, desperately 
needed affordable homes were lost through demolition. That is 
why our proposed Choice Neighborhoods legislation includes a 
strengthened one-for-one replacement requirement in which 
demolished or disposed-of units must be replaced by hard units. 
Vouchers may serve as replacement units only in very limited 
cases where there is an adequate supply of affordable rental 
housing in areas of low poverty.
    We learned in HOPE VI that some households have been 
unfairly screened out of new developments, treated as little 
more than the sum of their FICO scores, precluded from 
returning to the new mixed-income communities. That's why with 
this legislation we will protect the right of least compliant 
residents to return to the redeveloped housing, while also 
ensuring that those who choose to move with a voucher benefit 
as well.
    HOPE VI has changed the face of public housing in America, 
and we have heard from communities across the country that they 
need those same successful tools to remake the other federally 
assisted housing that prevents their neighborhoods from turning 
the corner. Of the over 325,000 units of HUD public and 
assisted housing by early estimates that might be eligible for 
Choice Neighborhoods, more than three-quarters are public 
housing, but all need the tools that Choice Neighborhoods 
provides.
    I believe that when you choose a home, you don't just 
choose a home. You also choose transportation to work, schools 
for your children, and public safety. You choose a community 
and the choices available in that community. I'm committed to 
helping America's most distressed neighborhoods tackle their 
toughest challenges, from crime and disinvestment to the lack 
of educational and economic opportunity, to housing decay, be 
it public housing, Section 8 or other kinds of distressed 
housings. Because if a century of housing policy has taught us 
anything, it's that if there isn't equal access to safe, 
affordable housing in neighborhoods of choice, there isn't 
equal opportunity.
    And if 17 years of HOPE VI has taught us anything, it's 
that building communities in a more integrated and inclusive 
way isn't separate from advancing social and economic justice 
and the promise of America; it's absolutely essential to it. 
It's inseparable from the idea that in America, our children's 
hopes and our dreams should never be limited by where they 
live. Ensuring they never are is the goal of Choice 
Neighborhoods, indeed of all the work we do together.
    And with that, I would love to take any questions you may 
have.
    [The prepared statement of Secretary Donovan can be found 
on page 59 of the appendix.]
    The Chairman. Mr. Secretary, thank you, and we appreciate 
the chance to meet with you. The one-for-one replacement is 
very important. It doesn't obviously have to be on-site, 
although I must say, given the resistance to new sites, a 
certain amount of that will happen. But the one-for-one 
replacement is very important. The Federal Government should 
not at this point be in the business of diminishing the stock 
of affordable rental housing. And of course, we look forward to 
working with you, and you have been very helpful.
    In a related matter, this is largely public housing, we 
have a separate piece of legislation dealing with the 
preservation of assisted housing built with private, publicly-
subsidized funds, and that also is an area where we will try to 
preserve units. And the third piece of that is, as I said, new 
construction, and in particular the Low Income Housing Trust 
Fund, which I think will be essential to making the one-for-one 
replacement work. It's inappropriate for us to impose on 
housing authorities a requirement that they produce housing and 
not provide the funding.
    I also want to welcome the way this is done procedurally, 
because as you say here, reading the written statement, your 
intention would be, if everything worked well, that you would 
continue the HOPE VI process, so we don't stop the HOPE VI 
process, correct? And then assuming we can work this out, you 
would look to funding two or three applicants under the new 
program in early 2011. So for Fiscal Year 2010, which begins in 
October, this would be starting on a smaller basis. I think 
that's in part responsive to what the ranking member said, and 
I appreciate that.
    It will be my intention, and I have spoken to the chair of 
the subcommittee, who is of course very involved in this, and 
mentioned it to the ranking member of the full committee, to 
have a markup in this committee. The chances of getting 
something through by the end of the year, I'm not sure what 
they are, and they're not in our control. But I do think at 
least a committee markup would be important.
    So then let me get to the specifics. One of the concerns I 
had was that how we implement the one-for-one is important, and 
I appreciate we're getting I think some good common ground 
here. We're not insisting on one-for-one on-site, obviously, 
and hard units, not just vouchers because they take away from 
what we have. Secondly, although project-based vouchers, 
vouchers that are helpful in construction obviously meet that 
definition. And I should say, incidentally, as you know, I 
welcome your decision to simplify the various forms of 
vouchers, etc. I think that is way too complicated and allows 
people to game the system.
    There was a concern that some of the housing projects that 
should get some help might be too much in need of help to get 
helped, and the fact you're continuing HOPE VI, and we will be 
working on other things I know you have talked about, our 
agreement to do other things, well, I will say the House did in 
the bill. We passed on infrastructure, as you know, made some 
money available for repair and operation, repair and 
maintenance of public housing. We want to do that.
    So the last point, though, the one that may be somewhat 
contentious, is the funding. And I agree that these things need 
to be done together. I disagree that we should be allowing any 
substantial part of these funds from the HUD budget to be used 
for non-housing factors. There are very important issues. But 
again, this is going to help some housing projects and not 
others. And I do think that people who live in a dilapidated 
housing project somewhere else that doesn't meet the criteria 
for this or isn't selected for a variety of reasons shouldn't 
see money potentially available to fixing up their building 
going for transportation or other improvements elsewhere.
    So for this to work, it seems to me there needs to be a 
combined effort. So the question is, is there an interagency 
group here? Are you meeting with other Cabinet officials? I 
would hope that the Secretary of Education, the Secretary of 
Health and Human Services, and the Secretary of Transportation, 
at the least, would be involved and that there would be an 
agreement that there would be a joint funding request. Is that 
in the works?
    Secretary Donovan. We have been working very closely with a 
set of other agencies, the Department of Education, the 
Department of Transportation, and the Department of Justice to 
ensure that there are other funding sources that we can access 
and that they're coordinated. And we're working through the 
details on how NOFA processes might be connected through this, 
including with Promise Neighborhoods, which is an initiative at 
the Department of Education, to invest in the most 
underperforming schools.
    Let me just say generally, I agree strongly with you not 
only that we need to coordinate at the Federal level, but that 
we will be requiring significant investment at the local level 
for those other types of purposes. I do want to be clear, 
though, that there are two points where I think it's important, 
and HOPE VI has shown this very successfully, that making sure 
that the way that the housing investments are structured 
supports, whether it's opportunities for job creation in the 
neighborhood, things like the way we set our rent policies and 
others that encourage work and self-sufficiency, there are a 
range of things connected to social services and supports that 
are very important, and that has been true of HOPE VI. There 
has been significant flexibility to support those.
    The Chairman. There's no debate about that. The question 
is, are other funds being used for other programs?
    Secretary Donovan. The other point I would make is that we 
do, when we are comprehensively remaking a community, a public 
housing community in HOPE VI, we do support the outside space, 
the redevelopment of the outside space within that development. 
That includes small parks or other types of things that are 
part of that redevelopment. It's important that continue. And 
that there be connections and opportunities for other spaces. 
For example, we have made a number of changes to the bill due 
to feedback from you and other members of the committee, to try 
to place specific limits, but we want to avoid the kind of 
siloed separation that would, for example, stop us, and I have 
seen examples of this in my work prior to coming to HUD, where 
a local government wants to put a school building or a school 
within the building that contains the housing as well. And 
overly strict rules stop us from even being able to contribute 
to the walls or the columns that support the building. So we 
need to make sure--
    The Chairman. That's not, however, what we're worried 
about.
    Secretary Donovan. --that the coordination--
    The Chairman. I understand, but--
    Secretary Donovan. --works effectively so we don't put 
unneeded barriers in the way.
    The Chairman. I'm going to give myself 10 more seconds, and 
then I'm going to leave, but there's nothing stopping the 
Education Department from contributing as well. So I am worried 
that this is too one-sided as it comes forward, and that was 
what the Senate seemed to me to be doing. We agree in concept, 
but there has to be a wash on the money.
    The gentlewoman--
    Secretary Donovan. And we have proposed some limits in 
response to your comments. We would be happy to talk to you 
further about the specifics around those--
    The Chairman. Yes, and we'll be happy to write some of 
them, too. The gentlewoman from West Virginia.
    Mrs. Capito. Thank you, Mr. Chairman. Mr. Secretary, if I 
could ask you about one of the things I mentioned in my opening 
statement, and that is the dichotomy between urban and rural 
areas, and how you think this new Choice Neighborhoods 
Initiative would address rural areas and needs. I know there 
has to be a certain amount of density, but if you could just 
talk a little bit about that.
    Secretary Donovan. Absolutely. And I think this is a very 
important point in a couple of different areas. First of all, 
we have, and I personally have seen the incredible despair that 
exists in some rural communities in assisted housing. To be 
specific, some of the very first HUD developments I worked on 
early in my career were in communities like Idabel, Oklahoma, 
or Bunkie, Louisiana, where HUD assisted properties were the 
single most important source of issues in that neighborhood 
that needed to be overcome, and yet there has been no tool 
available to those properties.
    Many of those properties, I would add, are supported not 
just by HUD, by also by the Department of Agriculture through a 
range of their programs as well. And because there has been no 
comprehensive redevelopment tool, that has stood in the way of 
benefits coming to rural areas where often assisted housing is 
the most significant source of affordable housing in those 
communities rather than public housing. So I do think the 
expansion that we're proposing here has a real benefit to rural 
communities.
    A second thing I would say is we want to make sure that the 
way that we define neighborhood in this proposal is not so 
constrained that it wouldn't apply in rural areas. And we have 
tried to do that in the legislation. For example, sometimes HUD 
has defined a census tract or a very narrow definition of 
neighborhood that doesn't make sense for rural communities, and 
we want to work with the committee. We have tried to leave 
enough flexibility to make sure that we're defining 
neighborhoods in a way that rural communities would be eligible 
and would be benefitted, whether it's a community in West 
Virginia, the Colonias in Texas, or in other States, those are 
very important definitions that will allow the community, this 
bill to work well in rural communities.
    The last thing I would say is that one of the very 
important things we proposed and that we will begin to do with 
the $65 million in 2010 is to provide planning grants for 
communities. We have some rural communities that today are not 
in a position to win HOPE VI grants, and I think one of the 
reasons why some rural communities have been excluded is 
because they have not been able to pull together the resources 
to plan effectively and to win the competition. Having planning 
grants would give those communities a real benefit in terms of 
being able to support their planning efforts, to then come in 
and be able to compete and win in Choice Neighborhoods. So 
that's an important element of how we're targeting rural 
communities as well.
    Mrs. Capito. And I think that makes a lot of sense. The 
other aspect of this, and you touched on it with the chairman, 
is the job creation aspect. If you're going to create Choice 
Neighborhoods, if there are no jobs to sustain the folks who 
are living there and to maintain a certain lifestyle or 
eventually move out of those neighborhoods, it's doomed to 
failure. I think that's sort of what you alluded to in your 
opening statement.
    So I think that's going to be a real challenge. In the 
rural areas, that's obviously more of a challenge just because 
of the lack of diversity in the economy. But I think it's 
something that probably will be considered.
    Let me ask you, the other thing--one of the things, the 
PHAs are the only ones available for HOPE VI, but in this 
particular legislation or idea you open it up to include 
government entities, nonprofits, and for-profits. How do you 
think allowing competitors in that will improve this program?
    Secretary Donovan. Well, to be very clear, currently, 
housing authorities have formed very strong partnerships with 
for-profits and nonprofits in HOPE VI. And so I don't want to 
imply that there haven't been a range of other partners 
involved. Specifically because assisted housing is owned by 
either nonprofit or for-profit owners, there will be cases if 
assisted housing is the main focus of a redevelopment plan, 
that you might have a nonprofit or a for-profit that would be 
the lead applicant in this case rather than being part of a 
team with a housing authority. So it was important for us to 
provide some more flexibility in terms of who the lead 
applicant could be compared to HOPE VI.
    But I do want to come back and emphasize, based on our 
estimates, we believe that an overwhelming share, a very large 
share of Choice Neighborhoods grants would go still to PHAs 
because roughly three-quarters of the most distressed housing 
by an initial review that we have done is a public housing, and 
the 25 percent that's assisted housing, much of it is in 
neighborhood, about 30 percent, where you have both troubled 
public housing and assisted housing. So our expectation is in 
the large majority of cases, we would still have PHAs as the 
lead applicants for this.
    Mrs. Capito. All right. Thank you.
    Ms. Waters. [presiding] Thank you very much. I'm going to 
recognize myself for 5 minutes.
    Welcome, Mr. Secretary.
    Secretary Donovan. It is good to be with you again.
    Ms. Waters. We're delighted to see you. You have been 
talking about this Choice Neighborhoods Initiative ad nauseam, 
and so it is time for all of the members to have a thorough 
understanding of what Choice Neighborhoods is and how it works. 
I have talked with you extensively about it, and I think that 
Chairman Frank started with a line of questioning that speaks 
to our concerns and our need to understand it even better, of 
course.
    We understand, and you're absolutely correct, many of us 
appreciated some of the HOPE VI projects, not all of them, and 
we're worried about one-for-one replacement, as you know, and 
we're worried about continuing resources for public housing. 
Many of them have not received much in the way of capital 
investments to upgrade them or to maintain them properly. And 
we also are concerned, as he started to talk about, whether or 
not you have, or are developing, the kinds of relationships 
even with these demonstration projects with Transportation, 
with Education, and with other entities who will come with 
their own resources, working with you to develop these Choice 
Neighborhoods.
    So that's kind of three questions in one. Could you respond 
to that?
    Secretary Donovan. Sure. Let me first of all say that I am 
enormously committed, as you are, and as the President is, to 
ensuring the preservation of our public housing. That's why we 
included $4 billion with you in the Recovery Act for capital 
for public housing, and I strongly believe that we need to do 
more, and we are doing more to ensure the preservation of 
public housing more broadly.
    That's one of the reasons we felt strongly the need to 
strengthen the one-for-one replacement, and we have already 
begun to respond to some input from you and your staff, as well 
as other members of the committee, of ensuring we get that 
language right, ensuring that if the replacement housing can't 
be built on-site, that it is within a close distance to the 
site, and so we have made some changes in the language based on 
that.
    I also want to be very clear that we are proposing a 
replacement of the units as extremely low-income units, that 
they have to have, whether it's as public housing or, I think 
as you have done in your own HOPE VI reauthorization bill, 
project-based vouchers, which have the same income criteria and 
are available and make units affordable to the very lowest-
income families. That's a critical part of the one-for-one 
replacement as well. And I want to echo the chairman's comments 
that ensuring there are resources for building extremely low-
income units through the National Housing Trust Fund is also a 
critical piece. That's why we proposed it in our budget. That's 
why we continue to push to ensure that there is funding 
available for the trust fund.
    The last thing I would say on one-for-one is we have tried 
to define a very narrow group of cases where there could be 
vouchers as replacement housing only in communities, and we 
believe they will be a very small percentage, only in 
communities where there has been significant success in using 
vouchers in neighborhoods that are neighborhood of opportunity. 
And so I think that's very important as well. All of this, I 
think, enshrines some of the lessons that you have been very 
vocal about in places where HOPE VI has not provided adequate 
replacement housing within those communities.
    With that, let me also say, and echo some of the comments I 
made earlier with Chairman Frank, we have been working very 
closely with other agencies, particularly the Departments of 
Transportation, Education, and Justice around aligning funding 
streams, and we will have expectations that in the applications 
there are other resources brought from the local level on the 
transportation front and in other areas that will support the 
housing investments. And we have tried to put some reasonable 
limits on any funding that could be allocated for whatever 
crossover happens between the housing and transportation or 
other pieces, but look forward to having any further 
conversations about input you may have on how we structure 
those limits in the bill.
    Ms. Waters. I want to thank you, Mr. Secretary. My time is 
up, and I'm going to ask Mr. Neugebauer to take his 5 minutes.
    Mr. Neugebauer. Thank you, Madam Chairwoman. Mr. Secretary, 
this Choice Neighborhoods Initiative is modeled after HOPE VI, 
but would actually broaden HOPE VI, I think you testified, by 
offering competitive grants to revitalize really distressed 
neighborhoods, not limited necessarily to public housing.
    So how is this different, and what does this do, for 
example, for programs like CDBG and tax credit housing and 
other HUD programs? How is this going to be different?
    Secretary Donovan. I would distinguish it from tax credits 
or some of the other capital funding that might be available, 
for example, through the National Housing Trust Fund, as first 
of all larger-scale investments that also have somewhat more 
flexibility in their uses than say a tax credit would or any 
other traditional capital funding program that's available for 
these communities. And that flexibility I talked about earlier, 
the connection to job creation and services to other kinds of 
amenities in the community that might be, for example, open 
space, etc. So it has somewhat more flexibility there.
    I would distinguish it from CDBG or some of our other 
programs, again, first of all, in that it's a highly-targeted, 
larger-scale investment. It's available competitively. And that 
it has a more targeted use relative to CDBG, for example, to 
the capital construction and rebuilding of communities. CDBG 
has not been used widely for those kind of uses. It tends to go 
towards infrastructure, towards housing maintenance or other 
kinds of uses that are much more flexible. So it sits, in terms 
of its flexibility, I would say it sits somewhere between 
traditional capital programs and something, and it's much 
broader like CDBG, but by being targeted, larger scale and 
competitive, it allows for a much more extensive neighborhood 
transformation than CDBG would.
    Mr. Neugebauer. Mr. Secretary, as you're aware, we're 
projecting with the President's budget to have a deficit of 
somewhere in the neighborhood of $1.5 to $1.7 trillion, and 
that means that for every dollar we spend, we're going to 
borrow 40 cents. And I guess the question is, one, is this the 
time to be expanding programs when we don't have the money? And 
two, Mr. Secretary, have you looked through HUD to see if you 
think this is a greater priority than some of the other 
programs, have you looked within your own budget to see if you 
can find the resources for this program?
    Secretary Donovan. We had some very difficult choices that 
we did make in our budget proposal this year, and we have 
prioritized this over other investments or funding that we 
could make. And there's a list of other programs that we have 
had to take some painful cuts on for this budget year. And so, 
yes, my answer is we have prioritized this over other 
investments that we could make.
    The other point that I would make, and I have seen this 
very directly from my own work at the local level, is that 
these kind of investments in the long run lead to a whole range 
of benefits and in fact lower costs for communities. The 
impacts on crime, on property values, and a range of other 
areas in communities of concentrated poverty that we're focused 
on here have enormous human costs but also financial costs on 
those communities.
    We did extensive rebuilding, for example, in neighborhoods 
like the South Bronx where we were able to show that capital 
investments in the most distressed housing actually paid for 
themselves by increases in values in surrounding properties. 
And so I believe that this is not just about making difficult 
choices within the HUD budget, which we have done, but also how 
catalytic are these investments in terms of producing long-term 
savings and new revenues in those communities by the 
investments. And I believe that's why this Choice Neighborhoods 
Initiative is a good investment of taxpayer dollars.
    Mr. Neugebauer. I want to shift gears.
    Ms. Waters. Thank you. Mr. Watt, for 5 minutes.
    Mr. Watt. Thank you, Madam Chairwoman. Mr. Secretary, 
you're going to have to forgive me if I express reservations 
publicly that I have expressed to you privately about this 
whole concept.
    You may not recall, but early in your tenure you were still 
like a deer in the headlights, so a lot of things were coming 
at you, but I expressed some reservations about this whole 
concept at that time. And I want to try to express them to you 
publicly again, because I don't see the input that I gave you 
at that time reflected in the language of the proposed bill 
that you have sent over.
    I walked into the middle of HOPE VI in 1993 when I was 
first elected, and we have had a number of HOPE VI projects in 
my congressional district, the first one of which transformed a 
whole section of Charlotte in a very positive way, but at the 
expense of people who were dislocated, and so I want to 
reemphasize my strong commitment to one-for-one replacement. 
I'm glad that you all are addressing that. But what I see has 
happened over the years is at that time, the maximum HOPE VI 
grant was either $55 or $60 million. It then went to $40 
million. It then went to $30 million. It then went to $20 
million, and I think now it's at $15 million, the maximum you 
could get under HOPE VI, and all the while that we were 
shrinking the pot of money to do this HOPE VI revitalization, 
we were expanding the scope of what we wanted the HOPE VI 
revitalization to do, and this seems to me to be yet another 
expansion.
    First, I want to second the emotions that have been 
expressed by the Chair. Unless there's some money coming for 
all of these innovative things out of somebody else's budget, I 
don't know how you're going to do this. Second, it is clear to 
me that what works in some communities is not going to work in 
some southern communities because just looking at the language 
that you have proposed on page 6 of the bill, one of the things 
you say is, ``partnering with local educators and engaging''--
these are eligible activities--``partnering with local 
educators and engaging in local community planning to help 
increase access to place-based programs that combine a 
continuum of effective community services, including 
comprehensive education reform.'' We can spend a bunch of money 
on comprehensive education reform, and if you do it place-
based, it will be the most segregated education that we have in 
the south.
    When you talk about community-based education in my 
community, it is a nonstarter, because that means segregated 
housing, because the housing patterns will always be 
segregated. You can't get White people to move to one side of 
the community, I don't care what you do, I don't care how you 
revitalize that community, they are not coming, right? And 
unless you have some kind of education system in place, this is 
not going to work. It might work in Baltimore. I told Senator 
Mikulski that. Fine. It might work in Los Angeles, but in 
Charlotte, North Carolina, you're not going to make education a 
significant part of this because all you're doing is furthering 
the arguments of those who would like to have community 
schools, which means in my community, segregated schools going 
back to the 1960's. And so we have to figure out a way to 
address this. And this language doesn't address it. So, you 
know--
    Ms. Waters. Mr. Watt, do you want the Secretary to respond 
to that?
    Mr. Watt. Okay. Yes.
    Ms. Waters. Your time is up. Let's let him respond to that.
    Secretary Donovan. Congressman, thank you for a very 
important question, and I'm glad you raised it because I want 
to clarify. The language that you are reading from is an 
eligible use, and we have taken into account some of the 
concerns that I heard from you earlier on.
    We obviously need to spend a little more time talking 
through what is intended there, because in our view, what is 
important is not that it has to be place-based, that if in 
communities you are talking about, that a better strategy is to 
ensure access to educational opportunities that may not be 
place-based, not only is that allowable, but we would encourage 
that.
    We want to make sure that there is a comprehensive thinking 
about these issues for that neighborhood, but it does not mean 
that it has to be a community-based school or a physical 
rebuilding on that development site. I want to be very clear 
about that. What we were intending was eligible rather than 
required.
    Ms. Waters. Thank you, Mr. Secretary.
    Mr. Marchant?
    Mr. Marchant. Thank you, Madam Chairwoman.
    Mr. Secretary, in the area I live in, Dallas, the greater 
metropolitan Dallas area, for the last 20 years, our Federal 
judges have basically ordered that all of our public housing 
basically be taken to the ground, and all of the residents 
given Section 8 vouchers and dispersed into the community. So 
would you envision--how would this kind of a program to allow 
an existing public housing project to rebuild instead follow 
this court order?
    Secretary Donovan. Based on what I know about the legal 
decision that you are talking about, I don't believe that it 
would be inconsistent with this. I don't believe that the 
requirement is that every single unit be demolished and that 
everything be replaced by vouchers. I do think it requires 
locational mobility options for residents who are different. I 
would be happy to follow up with you more specifically on that.
    But I don't believe, to speak more broadly, that we need 
to, or we should choose, between ensuring real choice of 
existing communities being rebuilt in ways that they can be 
sustainable and long term and providing mobility options for 
residents. And in fact, should residents choose that mobility 
is a better option for them, we want to make sure that they are 
supported in making those decisions with mobility counseling 
and other tools that have proven to be effective in the Dallas 
case. But I don't think that means we can't or we shouldn't 
focus on rebuilding the neighborhoods themselves in ways that 
they can be sustainable long term.
    I look forward to following up on the specifics with you.
    Mr. Marchant. Something else I would request that you 
follow up with me on, on Sunday morning, I opened the 
newspaper, the Dallas Morning News, and the front-page article 
was about an apartment complex that had received over $1 
million of stimulus money through HUD, and this same apartment 
complex was embroiled in a--and still is in a lawsuit with the 
City of Dallas where the City of Dallas had basically deemed 
the apartments to be unlivable.
    And at the same time the City of Dallas is pursuing the 
owner to try to get the owner to bring the apartments up to a 
livable standard--and the average rent in these apartments is 
$25 to $50 a month, so it is largely subsidized--at the same 
time that was happening, HUD was writing checks to this same 
developer--his name is Campos, and there was a two page article 
in the Dallas Morning News last Sunday about it--without any 
regard at all to working with the City of Dallas to make sure 
those funds were put into upgrading the livability of the 
project. In fact, those funds went into paying the bills, the 
electric bills, and just the general maintenance of the 
project.
    So my concern is that there be a close coordination between 
the regional HUD offices and the developers and those that own 
these properties so that there is not this kind of tension that 
exists between HUD and the cities, and that this money is 
really going to improve the livability of these units.
    Secretary Donovan. I couldn't agree more about the need to 
ensure the decent, safe housing that those residents deserve.
    Just to be very clear, the money that you are talking about 
is part of a project-based Section 8 contract that goes to 
support the rent payments of the residents. So this is not 
money that provides any redevelopment or profit to the owner, 
these are Section 8 payments to the residents of that 
development to allow them to pay their rent. We are working 
very closely with the city at this point.
    It is always a difficult decision--it is a decision I have 
made a number of times in my career--to withdraw funding 
completely from a project-based Section 8 contract, which means 
that every one of those residents would be forced to move. And 
so we are working to try to avoid evictions of residents, while 
at the same time ensuring that the owner lives up to his or her 
responsibilities, and that is a difficult tension at times.
    But rest assured that we are very focused on this 
development and we will do everything that we can to ensure 
that the owner lives up to his responsibilities in terms of 
running that development safely.
    Mr. Marchant. Thank you, Mr. Secretary.
    Ms. Waters. Thank you very much.
    Mr. Secretary, you referred to my former hometown of St. 
Louis, Missouri, and I want you to know that my cousin does not 
like you referring to me and St. Louis, because that is where 
he is.
    Mr. Clay?
    Mr. Clay. Thank you so much, Madam Chairwoman.
    Mr. Secretary, you mentioned Murphy Park in the district 
that I represent, and I don't know if the Chair was born there. 
I was born there too, so that is my hometown too.
    Secretary Donovan. I was hoping you would show up. It is 
one of the reasons I wanted to make sure we mentioned Murphy 
Park, because it has been such a success.
    Mr. Clay. I know that you will be in St. Louis next month, 
so I want to invite you to go and look at a new development 
that is planned that is on the board to develop over 1,500 
acres in the urban core in an area that once housed Pruitt-
Igoe. Pruitt-Igoe, you know, was imploded in 1973, and there 
has been no major investment in this portion of my district in 
over 50 years, so I would love to have you come out while you 
are there for a conference and we can talk further about it.
    Secretary Donovan. I have already been briefed on the plan, 
met with many of the people working on it, and I have to say I 
have been very impressed by the work that they are doing.
    Mr. Clay. I am too, and I am very supportive.
    Let me ask about your Choice Neighborhoods proposal. St. 
Louis has embraced charter schools. The parents and the 
students have kind of migrated towards charters. And I was just 
wondering, under Choice Neighborhoods, will HUD embrace 
charters also, and could they be included as a part of the 
Choice Neighborhoods Initiative?
    Secretary Donovan. Two points I would make on that, and 
this goes back to the conversation I was having with 
Congressman Watt. We want to be very clear that we are not 
prescribing to local communities, whether it is a rural 
community or other types of communities, where the answer may 
be very different depending on the place. In communities where 
charter schools are the right answer, we would look forward to 
coordinating very closely with them.
    The amount of funding we would provide--I think in no case 
would we be able to completely build a charter school with this 
funding, but we would look forward to coordinating and 
ensuring, for example, that within the same structure with the 
housing if a charter school was going to be built, that we were 
able to support the construction of that building in other ways 
that we might link together with charter school development. We 
would certainly look forward to that.
    Mr. Clay. Okay, thank you for that.
    Share with the committee your vision of urban gardens 
located within urban food deserts. What do you envision as far 
as how the Choice Neighborhoods program could assist that in 
communities?
    Secretary Donovan. As you well know, in so many of the 
communities that Choice Neighborhoods would be focused on, the 
lack of access to fresh food is a major problem. High rates of 
obesity, asthma, diabetes, other--particularly among young 
people is a very disturbing trend. It is the reason why the 
First Lady has been so focused on this issue more broadly. We 
have been working very closely with her office on this issue of 
food deserts, and particularly access to fresh food in these 
communities.
    I could certainly envision--and again, we look forward to 
locally-based plans that work for those communities. But I 
could certainly imagine, and have worked on this directly in my 
own work prior to coming to HUD, where community gardens could 
be incorporated, whether it is on the roof of a development, 
within the open space in a development. That is something we 
would certainly want to encourage, and it is one of the reasons 
why felt it was important to have some flexibility in terms of 
the funding available through--
    Mr. Clay. I don't mean to cut you off, but do you know that 
there is also a job creation component of it and economic 
activity that goes along with this?
    Secretary Donovan. Absolutely. In fact, in St. Louis, there 
is a big focus in the redevelopment plan that you talked about 
on food as a main driver of the economy and of jobs, so that is 
another example.
    Mr. Clay. Really quickly, give us an example of community 
assets central to the sustainability of the neighborhood. What 
do you mean by that in your--
    Secretary Donovan. I think there have been great examples 
in HOPE VI. For example, in Charlotte, in Boston where there 
may be a university or a community college that is located 
nearby, there may be relatively good access through 
transportation or transit to the central business district and 
there have been strong connections made with employers nearby, 
that is what we mean by assets. How do you ensure that this 
isn't just about the bricks and mortar, but that we are 
ensuring opportunity for the residents.
    Mr. Clay. Thank you Mr. Secretary. I look forward to you 
coming to St. Louis.
    Secretary Donovan. I look forward to it as well.
    Ms. Waters. Mr. Moore?
    Mr. Moore of Kansas. Thank you, Madam Chairwoman.
    Mr. Secretary, I don't know if you have had a chance to 
review Ms. Eldridge's testimony, who will be testifying on the 
second panel, but I thought she made some good points in 
reminding us to keep seniors in mind as we consider this 
proposal.
    For example, on page 6 of her testimony, she says, 
``Neighborhoods where there are concentrations of seniors 
should be specifically identified as eligible neighborhoods. 
Neighborhoods where seniors are living, often without health or 
supportive services, are more likely to overwhelm the emergency 
response teams and hospitals as they cycle in and out of 
hospital emergency rooms and are every bit as distressed as 
neighborhoods with poor schools or high crime rates.''
    Do you have any response or any thoughts about her 
statement, and how can we ensure we are keeping seniors in mind 
as this committee considers the neighborhoods proposal?
    Secretary Donovan. I think this is another great example of 
why having some flexibility around services and the physical 
redevelopment of the property is so important, and let me give 
you an example why. One of the most powerful tools that we have 
had in assisted housing and in public housing is providing 
service coordinators where a senior, particularly as they 
become increasingly frail, needs assistance in link up to--
whether it is medical assistance, even things as simple as 
finding a way to get to a local supermarket to ensure they get 
their food, or a meals program that might be able to be brought 
to the development itself.
    And so the provision that we have for flexibility around 
service funding in this bill and that has really been an 
example in HOPE VI, I think, is very critical on the seniors 
front.
    Mr. Moore of Kansas. Thank you, sir, and I think we have to 
go vote now. At least, I have to. Thank you. Thank you, Madam 
Chairwoman.
    Ms. Waters. Thank you very much.
    Mr. Secretary, we have to go and take a couple of votes. I 
know that Mr. Perlmutter and Mr. Hinojosa had questions they 
would like to ask. I am going to ask them to do it in writing 
or to call you directly and talk with you about their concerns. 
Mr. Hinojosa, we are going to have to let the Secretary go 
while we take these votes.
    Thank you very much for coming today. We appreciate it.
    Secretary Donovan. It is great to be with you.
    Ms. Waters. This committee is in recess. We will come back 
and take the second panel.
    [recess]
    Ms. Waters. The committee will come to order, please. I am 
going to ask our second panel to come forward.
    Today, for our second panel, we have: the Honorable Orlando 
Cabrera, former Assistant Secretary for Public and Indian 
Housing, U.S. Department of Housing and Urban Development, and 
CEO of National Community Renaissance; Ms. Sheila Crowley, 
president and CEO, National Low Income Housing Coalition; Mr. 
Edward Goetz, director, Center for Urban and Regional Affairs, 
University of Minnesota; Ms. Nancy Rockett Eldridge, executive 
director, Cathedral Square Corporation, on behalf of the 
American Association of Homes and Services for the Aging; Ms. 
Jill Khadduri, principal associate, Abt Associates; Mr. Saul 
Ramirez, executive director, National Association of Housing 
and Redevelopment Officials; and Ms. Kristin Siglin, vice 
president and senior policy advisor, Enterprise Community 
Partners.
    Without objection, your written statements will be made a 
part of the record.
    Thank you. We will begin with the Honorable Orlando 
Cabrera.

 STATEMENT OF THE HONORABLE ORLANDO CABRERA, FORMER ASSISTANT 
  SECRETARY FOR PUBLIC AND INDIAN HOUSING, U.S. DEPARTMENT OF 
  HOUSING AND URBAN DEVELOPMENT, AND CEO, NATIONAL COMMUNITY 
                          RENAISSANCE

    Mr. Cabrera. Thank you, Madam Chairwoman, and members of 
the committee. My name is Orlando J. Cabrera, notwithstanding 
the sign. And it is really a funny story. In 1984, the Wall 
Street Journal made my name Orlando Cabrera, and to this day I 
receive junk mail to that effect.
    I am chief executive officer of National Community 
Renaissance, and I am the former Secretary for Public and 
Indian Housing at HUD. Thank you for inviting me to testify 
before the committee regarding the Administration's proposal to 
revitalize severely distressed public and assisted housing, and 
more specifically the Choice Neighborhoods Initiative.
    From a policy perspective, the Choice Neighborhoods 
Initiative is a worthy evolutionary step forward for the HOPE 
VI Program, provided it focuses on addressing and overcoming 
HOPE VI's significant shortcomings, and further focuses on 
encouraging local decision-making input over Federal concerns. 
Choice Neighborhoods is an initiative that allows the full 
spectrum of housing providers--nonprofits, for profits, local 
governments, and community development corporations--in 
addition to public housing authorities to improve public 
housing.
    With the exception of HOPE VI units, many public housing 
units are now over 70 years old, and not any newer than 30 
years old. HOPE VI was designed to address the rehabilitation 
of public housing units, but has struggled to be consistently 
efficient.
    HOPE VI has succeeded best when allocated to public housing 
authorities that are located in States where the workable Low 
Income Housing Tax Credit and private activity bond allocation 
systems, and with support of local governments. HOPE VI 
objectives have been challenged when they are located in local 
jurisdictions with a limited capacity and burdened by policy 
expectations that delay the building or rehabilitation of 
units. Choice Neighborhoods should focus on encouraging the 
allocation of resources to competitors that demonstrate that 
they can build what they represented they would build within 
the timeframe that they committed.
    The similarities between HOPE VI and Choice Neighborhoods 
are set forth in my written statement, and given time 
constraints, I thought it worthwhile to focus on the 
differences between the programs. The most important 
differences between HOPE VI and Choice Neighborhoods are the 
community-based focus of the grants, the expansion of the 
nature of the potential competitor beyond public housing 
authorities, and the added focus on assisted housing.
    The expansion into the realm of addressing communities and 
not just development is a goal that some on this committee have 
long sought from the HOPE VI Program. It is an important 
difference that will help communities and not just 
developments. Doubtlessly, it will be worrisome to some 
stakeholders that Choice Neighborhoods proposes to be open to 
competitors in addition to public housing authorities.
    It should not be. Allowing competitors to rehabilitate 
assisted housing units will better preserve affordable units 
over time for our Nation's communities and will allow for 
greater innovation within the program itself, provided that the 
focus is readiness to proceed and efficacy of process. Adding a 
competitive layer to Choice Neighborhoods has the potential of 
making the program still more efficient and better assures that 
the program addresses the utilization shortcomings of HOPE VI.
    Choice Neighborhoods would be improved by incorporating the 
idea that readiness to proceed--shovel readiness--is central to 
the initiative. Choice Neighborhood's allocations should 
primarily help the construction of developments by encouraging 
the thoughtfully quick and focused over the unfocused and 
unready, and by encouraging accountability.
    Invariably, every effort such as Choice Neighborhoods seeks 
to accomplish large, laudable objectives, and winds up serving 
the country less well if it loses focus on that which is 
important. Expanding coordination to other agencies on a 
Federal layer implies an added level of review, and that kind 
of cross-agency involvement will likely add time to the 
development timeline, which adds risk to both the program and 
the development. From a development perspective, not to speak 
of what one can safely presume are many State and local 
perspectives, short of an existing successful model, adding 
such a layer of cross-agency coordination gives one 
considerable pause.
    In closing, I would offer that this Congress would achieve 
a great deal by simply focusing on facilitating the largely 
private sector financing of the construction and preservation 
of affordable units in an economical and efficient way using 
the Choice Neighborhoods initiative, which for the taxpayer 
would be a significant achievement in and of itself. Certainly, 
the Choice Neighborhoods Initiative improves the HOPE VI 
Program's step in that direction.
    Again, thank you for inviting me to testify regarding 
Choice Neighborhoods. As always, I will happily answer any 
questions you may have.
    [The prepared statement of Mr. Cabrera can be found on page 
48 of the appendix.]
    Ms. Waters. Thank you.
    Ms. Sheila Crowley?

  STATEMENT OF SHEILA CROWLEY, PRESIDENT, NATIONAL LOW INCOME 
                       HOUSING COALITION

    Ms. Crowley. Good morning, Chairwoman Waters. Thank you 
very much for the opportunity to testify today on the 
Administration's proposed Choice Neighborhoods Initiative.
    The Choice Neighborhoods Initiative is offered by the Obama 
Administration as the next generation of intervention with 
severely distressed public and assisted housing as described as 
building on the success of HOPE VI. As you know very well, the 
National Low Income Housing Coalition and others have been 
highly critical of HOPE VI, and thus we approach this proposal 
with some skepticism.
    HOPE VI is widely praised for its transformation of many 
distressed public housing projects and the creation of well-
designed homes and attractive communities, but it also caused 
massive displacement. The disruption of a citizen's home that 
occurs when a move is not freely chosen is one of the most 
serious actions a government can take.
    In the history of the United States, it is poor people and 
people of color who have disproportionately been subjected to 
forced relocation. Involuntary relocation, even with the best 
of intentions, must be approached with extreme caution, and the 
first principle should always be to do no harm.
    As of September 30, 2008, 72,265 public housing families 
have been displaced by HOPE VI. Some of them were able to move 
to better homes and better communities. Others moved to homes 
and neighborhoods that were no better than or even worse than 
the ones that they vacated, and what happened to their many 
residents remains unknown today. As of September 30, 2008, only 
17,382 displaced families had returned to revitalized HOPE VI 
communities, a return rate of just 24 percent.
    The residents whose circumstances did not improve and may 
even be worse tend to be those with the most serious and 
complex problems, including old age, physical and mental 
illness, and educational and employment deficiencies. Even 
those moved to better neighborhoods still struggled to earn 
enough to be able to sustain their new homes.
    HOPE VI also reduced the number of homes that the lowest-
income people can afford, contributing to the serious shortage 
of such homes in our country. For every 100 extremely low-
income renter households today, there are just 37 rental homes 
that are affordable and available to them. These households pay 
precariously high portions of their income for their homes; 71 
percent of extremely low-income renter households spend over 
half of their income for their housing.
    Under your leadership, Ms. Waters, the House passed H.R. 
3524, the HOPE VI Improvement and Reauthorization Act of 2008. 
This bill provided far-reaching reforms to HOPE VI, including 
mandating evidence of severe distress, one-for-one replacement, 
resident right to return, resident involvement in services, and 
relocation services. In considering the proposed Choice 
Neighborhoods legislation, we urge the committee to make it as 
strong on these core issues as you did in H.R. 3524.
    The principal difference between Choice Neighborhoods and 
HOPE VI is that Choice Neighborhoods is not restricted to 
public housing redevelopment and can encompass other federally 
assisted housing and unassisted housing in the target 
neighborhood. Given the requirement that the potential Choice 
Neighborhoods be in proximity to high-functioning institutions 
and services, these are neighborhoods that are likely to be on 
the cusp of gentrification, which Choice Neighborhoods 
investment could fuel unless safeguards are included to 
preserve the homes and the affordability of the lowest-income 
unassisted households who are in these neighborhoods.
    The draft Choice Neighborhoods legislation asserts that 
one-for-one replacement of public and assisted housing is 
required, but with a very large loophole. Half of the hard 
units could be demolished and not replaced. Instead, residents 
would be given community tenant-based vouchers if the community 
met certain criteria. We think that if a community indeed has 
excess housing stock, then grant funds should be used to 
maximize the energy efficiency and long-term sustainability of 
these homes, and use project-based vouchers in order to assure 
affordability to the lowest-income households.
    Choice Neighborhoods can provide a range of services to 
residents to advance their social, physical, and economic well-
being. This is particularly important for the most vulnerable 
residents who have the potential to be displaced. Therefore, 
high quality, intensive case management services are required 
and these really should be a requirement of the grantee, not 
have it be dependent upon their ability to perhaps leverage 
scarce service resources that are already in the community. 
Therefore, grant funds that could be spent on services should 
not be limited to 15 percent. The amount going to services in 
each grant should be based on real cost based on the real needs 
of the residents who will be affected.
    Merits of Choice Neighborhoods notwithstanding--
    Thank you very much.
    [The prepared statement of Ms. Crowley can be found on page 
52 of the appendix.]
    Ms. Waters. Thank you.
    Next, we will hear from Edward Goetz.

 STATEMENT OF EDWARD G. GOETZ, DIRECTOR, CENTER FOR URBAN AND 
           REGIONAL AFFAIRS, UNIVERSITY OF MINNESOTA

    Mr. Goetz. Thank you very much, Madam Chairwoman, and 
members of the committee.
    Choice Neighborhoods is based on the considerable success 
of HOPE VI in transforming neighborhoods. These successes, 
however, have come at some expense to the very low-income 
families who have been living in public housing, and at some 
cost to the Nation's long-term ability to address the housing 
needs of the poor. Any attempt to expand HOPE VI to other forms 
of federally assisted housing should incorporate not only 
elements that will replicate the impressive neighborhood 
changes generated by HOPE VI, but also features that preserve 
assisted housing and protect the families currently living in 
those communities.
    Some of the lessons of HOPE VI have been incorporated into 
Choice Neighborhoods. Most of these, however, are related to 
the factors that make successful transformations of 
neighborhoods more likely. In other respects, the proposal 
discounts many of the lessons from HOPE VI, especially those 
lessons related to the experience of low-income families. Let 
me list a few that in my opinion are not adequately reflected 
in the Choice Neighborhoods proposal.
    First, not all families living in housing targeted by HOPE 
VI wished to move. When asked, more than half of residents 
typically responded that they would have preferred to remain in 
the public housing communities. For many residents, the favored 
solution to the conditions they lived in was to improve the 
community, not tear it down and force their own displacement. 
This is likely to be true for residents of communities targeted 
by Choice Neighborhoods, yet there is nothing in the program 
that speaks to minimizing displacement and demolition, nor of 
shaping the redevelopment plan according to the wishes and 
interests of residents.
    Second, displaced families tend not to relocate to other 
neighborhoods of choice, as optimistically envisioned by HOPE 
VI and the drafters of this bill. Instead, they typically 
relocate to other racially segregated neighborhoods with 
poverty rates above the average for the city and well above the 
average for their metropolitan areas.
    Third, only a small portion of original residents ever make 
it back to the redevelopment site. So few return, in fact, that 
it makes little sense to think of the redevelopment itself as 
one of the benefits for original residents. And though this 
proposal guarantees the return of all lease compliant who want 
to return, there is a potential conflict between that and the 
mixed-income objectives of the program, which almost inevitably 
result in a reduction in assisted units on site.
    Fourth, the HOPE VI Program was authorized after a national 
commission documented the extent of severely distressed public 
housing in the United States. The commission recommended a 
program of rehabilitation and modernization. HOPE VI as 
implemented, however, went well beyond the commission's vision 
in two ways: first, it very quickly morphed into a program of 
demolition and redevelopment instead of rehab and 
modernization; and second, it reached far beyond the number of 
units originally estimated to be severely distressed. The 
Program ignored examples of successful transformative public 
housing rehabilitation, and in too many cases demolished 
projects that were regarded by their tenants as well-
functioning communities.
    Fifth, the potential for Choice Neighborhoods to repeat 
this pattern in which functioning communities are unnecessarily 
eliminated in favor of a demolition approach that is calculated 
to produce the greatest amount of neighborhood change is, I 
believe, great. This is especially so since there has been no 
effort parallel to that undertaken by the national commission 
to document the number of distressed units of assisted housing 
that require the redevelopment model called for in this 
proposal. Therefore, Choice Neighborhoods risks repeating the 
HOPE VI mistake of reducing the stock of federally assisted 
low-cost housing. This, despite the fact that the need for such 
housing remains acute. The standards for establishing when 
vouchers are appropriate as a replacement are not particularly 
high in this proposal.
    Sixth, it is time to reassess the assumption that being 
displaced from their federally assisted housing is somehow good 
for very low-income families. There have been no self-
sufficiency, employment, or income benefits to the families 
displaced by public housing transformation. In fact, there is 
some evidence that displacement and the move to voucher housing 
disrupts employment and induces greater levels of economic 
insecurity.
    Families displaced by HOPE VI suffer disruptions in their 
support of social ties that they use to make ends meet, and the 
little evidence that exists on the operation of mixed-income 
communities indicates that the main advantage of life in such a 
community from the standpoint of a very low-income family is 
the improved property management that generally accompanies the 
presence of middle income families. All of these point to an 
emphasis on phased redevelopment, the construction of 
replacement housing before demolition occurs, provisions that 
are not currently in the proposed bill.
    In short, the program seems to be an attempt to replicate 
the positive neighborhood impacts of HOPE VI without 
incorporating meaningful provisions to protect or enhance the 
well-being of the very low-income families affected.
    Thank you.
    [The prepared statement of Mr. Goetz can be found on page 
75 of the appendix.]
    Ms. Waters. Thank you very much, Mr. Goetz.
    Ms. Nancy Rockett Eldridge?

   STATEMENT OF NANCY ROCKETT ELDRIDGE, EXECUTIVE DIRECTOR, 
    CATHEDRAL SQUARE CORPORATION, ON BEHALF OF THE AMERICAN 
    ASSOCIATION OF HOMES AND SERVICES FOR THE AGING (AAHSA)

    Ms. Eldridge. Good morning, Chairwoman Waters, and members 
of the committee. My name is Nancy Rockett Eldridge, and I'm 
the director of Vermont's Cathedral Square Corporation. 
Although I come from a very rural State, I remember vividly my 
years as a Vista volunteer in the Los Angeles area serving very 
low-income individuals. That was a long time ago, but I won't 
forget the needs of urban residents.
    I'm very pleased to be here today representing the American 
Association of Homes and Services for the Aging. AAHSA serves 
about 2 million people every single day, and includes about 
5,700 member organizations that provide adult daycare, senior 
affordable housing, assisted living, nursing homes, and 
continuing care retirement communities. We are not experts on 
HOPE VI because HOPE VI was not available to many of the senior 
affordable housing programs.
    I am here today to talk about Choice Neighborhoods and how 
we hope it will respond to the fastest growing sector of all of 
our neighbors, the elderly. For the past decade, Cathedral 
Square has been testing every single type of housing model you 
can imagine to try to ensure that seniors can remain in our 
housing. We have tried HUD assisted living, we have tried co-
location with adult day programs, housing-based wellness 
clinics, mixed-financing tax credit, and HUD 202 deals, and we 
have concluded that none of these individual models offers a 
comprehensive solution because none of these approaches on 
their own ensure that seniors can remain in our affordable 
housing as their mental health and healthcare needs grow 
significantly.
    Since Choice Neighborhoods is intended to be a 20-year 
solution, we believe it should implement strategies that 
anticipate a neighborhood's demographic changes over that 20-
year period, that anticipate the technologies that could 
transform communities for both youth and the elderly, and 
prepare for the budget environment that is likely to shape 
public education for children, health care for seniors, and the 
tax base for municipalities.
    Medicaid and Medicare money must be a part of Choice 
Neighborhoods--20 years from now, the elderly population is 
expected to double. We believe that the unmet healthcare needs 
of residents in senior housing is the biggest threat to the 
preservation of public and assisted housing. The level of unmet 
need is very troubling today. The need is invisible, and it is 
a cause of many unintended consequences with serious budget 
ramifications at the State and national level.
    We believe that the only way the needs of seniors will be 
met is through service networks developed at the neighborhood 
level, networks that are fully integrated with the 
neighborhood's employment strategies and education reforms. We 
call our approach SASH, Seniors Aging Safely at Home. AAHSA 
believes that Choice Neighborhoods should and could provide 
opportunities to advance aging in place strategies like SASH, 
but this does require that we change the way services are 
delivered, and that we move away from funding silos and look at 
how HUD resources matched with Medicaid and Medicare dollars 
can bend the cost curve in health care and long-term care 
spending while extending the value of HUD dollars invested in 
housing preservation.
    In many of our communities, as Representative Moore 
highlighted, there are concentrations of seniors whose demand 
for city and health services is an indicator of economic 
distress in much the say way as crime, joblessness, and poor 
education can be indicators of distress. Demand on emergency 
services is growing in direct proportion to aging in place. 
Care coordination at home can reduce that burden on cities, and 
multi-family housing can be the hub for providing that 
coordination throughout a neighborhood.
    In closing, as proposed, CNI fails to recognize the 
significant needs of the elderly, a shortcoming of HOPE VI that 
we should not repeat. We offer several recommendations. Please 
remember seniors in the Choice Neighborhoods program, remember 
rural areas, make sure housing is always one of the key 
partners in applications for CNI, and please don't lose ground 
on the existence of available public and assisted housing.
    Thank you very much.
    [The prepared statement of Ms. Eldridge can be found on 
page 67 of the appendix.]
    Ms. Waters. Thank you very much.
    Dr. Jill Khadduri?

STATEMENT OF JILL KHADDURI, PRINCIPAL ASSOCIATE, ABT ASSOCIATES 
                              INC.

    Ms. Khadduri. Thank you, Chairwoman Waters, and members of 
the committee, for giving me the opportunity to testify on the 
Obama Administration's Choice Neighborhood's proposal.
    As a principal associate at Abt Associates, a national 
policy research firm, I have studied places that have made 
school improvements a key part of neighborhood change, 
including Atlanta, St. Louis, St. Paul, Philadelphia, and 
Baltimore. These studies have been sponsored by the Ford 
Foundation, HUD, and most recently, by Enterprise Community 
Partners.
    The Choice Neighborhood's proposal has many strengths. 
First, its vision for neighborhood change recognizes that good 
housing without access to quality education and jobs will not 
break the cycle of poverty. Second, it insists that the 
neighborhoods selected for intensive Federal investment either 
already have assets, such as proximity to jobs and access to 
transportation, or demonstrate a serious commitment to building 
those assets. Third, it insists on effective relocation 
assistance for people who must move during the redevelopment 
process, and on a right to return for lease compliant tenants.
    The committee should consider the Choice Neighborhoods 
proposal in the context of another Obama Administration 
proposal, the transformation of rental assistance or TRA. Over 
time, the TRA could bring public housing out of isolation and 
break down concentrated poverty in a much broader set of 
locations than those that may be funded by Choice 
Neighborhoods.
    The Focus of the Choice Neighborhoods proposal on 
educational opportunity correctly recognizes that a major 
contributor to the cycle of poverty is the poor quality of the 
schools available to children who live in high poverty 
neighborhoods. However, the legislative proposal distributed 
last week could be improved in several ways. The Choice 
Neighborhoods proposal should insist on the creation of high 
quality schools, whether traditional public schools or charter 
schools, within the neighborhood where the housing is to be 
revitalized, not inside or outside of the neighborhood, as the 
legislative proposal now states.
    Mr. Watt, I have thought about your eloquent remarks on 
this point. What worries me about the outside the neighborhood 
option is that open enrollment programs and magnet schools may 
not present a real opportunity for parents who live in the 
neighborhood to get their kids into high-quality schools. Even 
if they are able to enroll their kids in schools outside the 
neighborhood that are good quality schools, the pressures of 
work, the pressures of parenting may be such that low-income 
families simply can't choose those options. They really need 
neighborhood schools. And the emphasis should be on early 
childhood and K through 6. For some reason, that emphasis was 
dropped in the most recent version of the proposal.
    The selection criteria for Choice Neighborhoods grants 
should favor applications from strong collaboratives that 
include institutions with a long-term stake in the neighborhood 
and end with political clout, for example, community-based 
foundations, universities, hospitals, and locally-based 
corporations. This collaboration is needed to bring resources 
to the school, to support the school's principal, and to make 
sure that the school improvement is sustained through changes 
of leadership at the school or district level. Having a meeting 
or two with the school system and demonstrating input from a 
broad range of stakeholders simply won't do it.
    The Choice Neighborhoods legislation should recognize that 
schools will need resources beyond the standard allocation of 
public school operating funds, for teacher training, for 
curriculum improvement, for programming beyond the basic 
curriculum, and for early childhood programs. The selection 
criteria in the current proposal has some leveraging language, 
but the emphasis is on housing resources. I would like to see 
requirements for leveraging State funds for school capital 
improvement and on other Federal resources, such as race to the 
top funds and the $4 billion made available for the recovery 
act for turning around low performing schools.
    The Choice Neighborhoods legislation should provide for an 
explicit role for education experts in the grantee selection 
process, probably a formal role for the U.S. Department of 
Education, and school quality should also be a key criterion in 
the definition of acceptable locations for replacement housing 
outside of the Choice Neighborhood.
    And finally, a comment that comes from my background as a 
researcher, the annual report requirement in the legislation 
asks HUD to report prematurely on the impact of grants on 
target neighborhoods. Instead, HUD should be required to 
document how grantees have demonstrated the neighborhood's 
potential for long-term viability and the activities that will 
build on that potential.
    Thank you once again, Madam Chairwoman. I have provided the 
committee with a more detailed version of this statement, and 
ask that you include it in the hearing record.
    [The prepared statement of Ms. Khadduri can be found on 
page 88 of the appendix.]
    Ms. Waters. Thank you very much.
    Mr. Ramirez?

STATEMENT OF SAUL N. RAMIREZ, JR., EXECUTIVE DIRECTOR, NATIONAL 
   ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS (NAHRO)

    Mr. Ramirez. Thank you very much, Madam Chairwoman, and 
distinguished members of the committee.
    I represent the National Association of Housing 
Redevelopment Officials, with over 25 individual housing 
authority community development departments and redevelopment 
agencies throughout the country. We serve and manage 
approximately 1.1 million units of public housing and over 2 
million tenant-based Section 8 vouchers and other assisted 
housing, and serve over 6 million citizens throughout our great 
Nation.
    We bring some general words of support for the Choice 
Neighborhoods Initiative that the Administration has proposed, 
but also some notes of concern. We applaud the Department's 
commitment to develop a comprehensive approach to achieving the 
transformation of neighborhoods with extreme poverty into 
sustainable mixed-income communities. While ambitious in some 
respects, NAHRO does believe that this is a laudable policy and 
one that aligns closely with our mission to create affordable 
housing and quality communities.
    Our support of broad-based objectives of this proposed 
initiative notwithstanding, we do have several overarching 
concerns. First, we have serious concerns about the absence of 
secured funding for public housing agencies as provided under 
the current HOPE VI Program. We note that the most recent CNI 
legislative proposal does not reserve a single dollar in 
funding for proposed projects that include public housing as 
the lead applicant, nor does it explicitly require that public 
housing authorities be involved in the development of 
applications for funding, despite HUD's own acknowledgment that 
three-quarters of the distressed properties that would be 
impacted by this program are public housing.
    Second, having served as the Deputy Secretary for the 
Department for several years, I can tell you firsthand that 
where a program resides matters, and this particular program 
has yet to have that clarity within its proposal. It would be 
preferable that this program be administered where the most 
would be served, and we believe that would be the Public 
Housing Office, but yet that has not been there. The confusion 
created with this additional uncertainty over where the program 
will reside will create the inability to adequately target the 
resources towards addressing the needs of those severely 
distressed public housing inventories that everyone has talked 
about.
    Third, the significantly broadened scope of the proposed 
program in terms of eligible applicants and expected outcomes 
is likely to support only a handful of grant awards given the 
recommended Fiscal Year 2011 appropriation request of $250 
million. As proposed, grantees would be involved in 
undertakings that are certainly resource intensive and include 
a great deal of promotion of economic self-sufficiency of 
residents and the creation of jobs around mass transit, 
education, and other programs, and as such, other Federal 
agencies have not stepped up with their own resources to make 
this truly a comprehensive neighborhood initiative that would 
change in a way that could have some dramatic impacts.
    Programmatic complexities, in combination with the limited 
availability of funding, does not bode well for completing the 
remaining work of HOPE VI, a program more narrowly targeted to 
revitalizing severely distressed public housing. Absent 
assurances that our other Federal agencies would immediately 
contribute significant financial resources to this new 
approach, we think it is premature at this time to fully 
endorse this initiative.
    With these thoughts in mind, we strongly recommend that 
funding for the Choice Neighborhoods Initiative at the 
currently proposed levels for Fiscal Year 2011 not occur unless 
or until authorizing legislation is considered and acted upon 
by Congress and signed into law. These steps should be taken 
with ongoing input from relevant stakeholders.
    We also believe Congress should wait for the $65 million 
that it has already set aside for the demonstration of Choice 
Neighborhoods under the Fiscal Year 2010 budget to be awarded 
and implemented, and by doing so, allow Congress and the 
Department to effectively assess the new data and information 
about program outcomes that are expected, and would arguably be 
in a better position to chart a responsible course forward with 
respect to dealing with severely distressed properties.
    We also feel that because of the inadequate vetting that 
has occurred, the most prudent approach at this time would be 
to: one, issue the NOFA and undertake the appropriate 
demonstration program that has been proposed; two, publish and 
execute the 2010 HOPE VI NOFA and move expeditiously with a 
proven program; and three, provide continued funding for the 
current HOPE VI Program in Fiscal Year 2011 as we continue to 
ultimately include the review of this proposal.
    And with that, I conclude my testimony, and thank you Madam 
Chairwoman.
    [The prepared statement of Mr. Ramirez can be found on page 
95 of the appendix.]
    Ms. Waters. Thank you very much.
    Ms. Kristin Siglin?

 STATEMENT OF KRISTIN SIGLIN, VICE PRESIDENT AND SENIOR POLICY 
             ADVISOR, ENTERPRISE COMMUNITY PARTNERS

    Ms. Siglin. Thank you very much, Chairwoman Waters. Thank 
you for this opportunity to testify about the Administration's 
Choice Neighborhoods Initiative.
    Ms. Waters. Could you bring the microphone a little bit 
closer to you, please?
    Ms. Siglin. There we go. Better?
    Ms. Waters. Yes.
    Ms. Siglin. Enterprise is a national nonprofit. For more 
than 25 years, Enterprise has invested over $10 billion to 
create more than 270,000 affordable homes and strengthen 
hundreds of communities across the country. We commend you for 
holding this hearing on the Choice Neighborhoods Initiative and 
encourage you to pass the legislation to authorize the 
Administration's proposal, with some changes and improvements.
    The feature of Choice Neighborhoods that is most critical 
for us is the explicit linkage between revitalized affordable 
housing and improvements to the schools that the children who 
live in the housing will attend. Enterprise has 15 years of 
experience working in a holistic way in a very low-income 
neighborhood in west Baltimore called Sandtown. Our work in 
Sandtown gives us some useful experience to comment on the 
proposed Choice Neighborhoods Initiative, which envisions a 
similar linking of affordable housing development to school 
improvement--
    [Interruption to proceedings.]
    Ms. Siglin. Sorry about that.
    Okay, then maybe I should stop reading.
    Enterprise had 15 years of experience working in a holistic 
way in west Baltimore, and we linked improvements to the 
affordable housing in the neighborhood with improvements to two 
local elementary schools, and my written statement goes into 
more details on what we did. We then followed this program work 
on the ground in Baltimore up with a research initiative in 
which we hired Abt Associates to write reports on and look into 
whether other community developers had the same experience that 
we had, that the community development work was strengthened by 
giving families a reason to live in the neighborhood, because 
they were happy with the school that their children attended. 
And we ended up calling it the model school-centered community 
revitalization.
    Thus, we were quite pleased to see the Choice Neighborhoods 
come forth as a means of fostering more comprehensive community 
revitalization projects in distressed neighborhoods across the 
Nation. It builds on the HOPE VI Program, as other witnesses 
have noted, but it differs from it in a couple ways. There is a 
broader universe of projects eligible for renovation. It has an 
explicit link to school improvement strategies--that is also 
new. And finally, the ambitions for the program are more broad 
than HOPE VI is. It is not just to revitalize the distressed 
housing, but to transform neighborhoods of extreme poverty into 
mixed-income neighborhoods of long-term viability.
    There are four ways we would like to see the legislation 
improved. The first was discussed somewhat on the first panel 
with the HUD Secretary, that it seems important that other 
Cabinet Departments come forward with resources for this work 
so that HUD's scarce money that is needed for affordable 
housing doesn't get bled into other activities.
    So there are two ways that we would like to see the 
Department of Education participate. One is that education 
experts should be reviewing the applications for Choice 
Neighborhoods to make sure that the school reform components 
are credible. The second thing is that--I was heartened to hear 
the Secretary talk about his work with the Department of 
Education because the notice of funding availability for Choice 
Neighborhoods should also include funding for school 
improvement, and the Department of Education should come 
forward with that money.
    A second point I would like to make where the legislation 
could be improved is that the selection criteria need to be 
more specific, that you really want partnerships with a 
longstanding interest in the neighborhood to win these grants. 
You don't want people who just have one or two meetings with 
local officials. You really want to look for these projects to 
be driven by people with a longstanding interest in the 
neighborhood. A third point, I think, is that the green 
building standard in the legislation should be stronger. We 
suggest that you use Enterprise's Green Communities Criteria.
    And then last, the draft legislation allows for the funding 
to be used for an evaluation, but doesn't require HUD to do an 
evaluation of this program, and we think that would be an 
important improvement as well.
    Thank you very much.
    [The prepared statement of Ms. Siglin can be found on page 
112 of the appendix.]
    Ms. Waters. Thank you very much. I appreciate the testimony 
from all of the panelists today, and I am going to recognize 
myself for 5 minutes.
    I have to tell you--and I'm sorry that the Secretary could 
not be present to hear this panel--the more I hear about your 
concerns, the less I like Choice Neighborhoods.
    I guess I'm going to go to Mr. Goetz because I found your 
testimony extremely compelling. You made several references to 
the possible problems of the Choice Neighborhoods proposal. I 
am worried about public housing. Without trying to assign 
motives to the Administration or anybody else, does this look 
like a plan to get rid of public housing to you, Mr. Goetz?
    Mr. Goetz. Without ascribing motives, it will--the HOPE VI 
Program, which is the track record we have to look at, has 
resulted in a significant diminishment of public housing in the 
United States. Public housing demolition has also been pursued 
outside the confines of HOPE VI. And I am concerned that the 
expansion of the HOPE VI model to non-public housing forms of 
federally assisted housing will have that same kind of impact 
in terms of reducing the stock of federally assisted housing.
    Ms. Waters. Ms. Crowley, I think you and perhaps Mr. Goetz 
also referred to where these residents who lived in public 
housing who were displaced or relocated in HOPE VI projects, 
where they ended up. And I think what I heard here today was 
that they didn't necessarily end up in better neighborhoods, 
they seemed to have gravitated to poor neighborhoods, and that 
the housing they ended up with was not as good as where they 
came from, or there were no resources there. Would you 
reiterate your thinking about what happens to displaced 
residents from public housing--or relocated?
    Ms. Crowley. One of the things that is important to know is 
that we really don't have a lot of--we don't have complete 
documentation about what happened to most people who were 
displaced by HOPE VI. And so what we have is some research that 
has been done in particular sites, and that research is varying 
in quality and has different kinds of results. But I guess the 
one that is looked at most often is the panel study done by the 
Urban Institute.
    And by the people who were able to move with vouchers and 
move to new communities, there has generally been some gain in 
terms of living in safer communities and higher quality 
housing, but no serious gains in terms of improvement of their 
economic well-being, and in fact, there is evidence that they 
had a much harder time sustaining those homes because their 
expenses were higher.
    The thing that is very compelling to look at is that there 
is a very large contingent of people who were in the HOPE VI 
project studied by the Urban Institute panel study who were 
what they call ``hard to house.'' It is not a term I like. I 
think anybody knows how to be housed. But their circumstances 
made them hard to conform to the expectations of the new 
program.
    Those were the people who were the poorest, the ones with 
multiple problems, large families, the people who had 
grandparents taking care of children, things like that. So that 
was a sizable group of people, and it ranged from 30 to 70 
percent of that population. That population is no better off 
now as a result of HOPE VI than they were, and they may in fact 
be worse off.
    And then there is a whole group of people that we have no 
idea what happened to them.
    Ms. Waters. I want to get this in before my time is up. We 
have had some members of this committee talk about Section 8 
housing vouchers that have been given in communities where they 
are not wanted. We have had even an attempt to legislate to 
stop the proliferation of Section 8 housing in certain 
communities. And it appears that on the one hand, with Choice 
Neighborhoods, they are talking about Section 8 vouchers to 
provide housing for those who may have lived in public housing, 
or to expand opportunities in privately owned housing, yet we 
know there are many neighborhoods who not only fight against 
Section 8 tenants being in their neighborhood, but they will 
rise up against some effort to expand the opportunity for these 
residents to come into their neighborhoods, and fight proposals 
like these.
    Who would like to tell me that you have some answer to 
where to develop Section 8 housing in other neighborhoods, 25, 
30 miles out and more from the neighborhoods that they have 
come from, and if it is possible, how do they maintain their 
community contacts that they had before? In poor neighborhoods, 
people rely on each other. They exchange babysitting, they 
borrow money from each other, they help go see about kids in 
school for each other. How is this done if they are moved out 
to other neighborhoods, and some where they are not really 
wanted, and they don't have those kinds of relationships? Mr. 
Goetz?
    Mr. Goetz. Well actually, in Minneapolis, pursuant to a 
Hollman v. Cisneros consent decree, there was a partnership of 
suburban HRAs and PHAs and foundation forces that got together 
and actually did build several hundred units of subsidized 
housing in the suburbs. It took many years, but it got done.
    The problem was that almost none of the displaced families 
from the Minneapolis projects that were torn down ever occupied 
those units. That is, they were marketed to those families, and 
after a few months of not being able to move families out to 
those units, then each of the suburbs was allowed to use its 
waiting list to fill the units. So it was a long, arduous task. 
The units got built over many years, but it did not serve the 
dispersal or de-concentration purposes of the lawsuit and the 
consent decree.
    Ms. Waters. Thank you very much.
    We have been joined by Mr. Miller. I would like to 
recognize you for 5 minutes.
    Mr. Miller of California. Thank you, Madam Chairwoman.
    Ms. Waters. Thank you.
    Mr. Miller of California. You and I both have enjoyed a 
relationship dealing with Section 8 and HOPE VI, and I'm kind 
of enjoying the difference in the discussion on the panel.
    In my district, you would not think there was a need for 
Section 8 housing and affordable housing, but there is. In 
fact, I just attended a grand opening a few weeks ago, Maxine, 
in a city. When you drove by the facility--and it was just an 
extension of a facility they have--you would never know it was 
affordable housing. You would never know the people living 
there were on vouchers. They have a community center--in fact, 
this group has one in every facility they have. They have 
swimming pools, open space. Cities are behind it. These are 
affluent cities that you would not expect to see public housing 
in. But this is a nonprofit.
    And when I looked at the rents that they are charging these 
people, I scratched my head wondering how they did it. But 
there are people in there on Section 8 vouchers in a community 
you would not think would have affordable housing, and I think 
that is something that is new. I have seen a lot of public 
housing facilities that are horrible. You drive by them, and 
you can look and say, ``That is public housing.'' Why would we 
relegate people to that? And I support Section 8 and HOPE VI as 
you do, but I think we need to be creative in this marketplace 
and say what are the private sector and the nonprofits doing 
out there that government is not doing?
    When I drive by this facility--and I have several in my 
district, and Congressman Driehaus has some in his, and I have 
looked at some of his and some other districts, Joe Baca has 
some in his--in communities where I looked at, the regular 
rental units were inferior to the nonprofit's units who were 
taking Section 8 vouchers. And I look at what little assistance 
they have received, and I think the bang for the buck we are 
getting for what little they received from the Federal 
Government is absolutely amazing. And when I know that these 
units are relegated to low-income people, those mainly on 
Section 8 and government assistance, because that was the 
mission they have, and it is--
    Mr. Cabrera, it is nice to see you wearing a different hat 
today, you are no longer with HUD.
    Mr. Cabrera. I know. No, it has been a while.
    Mr. Miller of California. It has, and I know that you have 
long argued for one-to-one replacement requiring either the 
footprint of the development or the adjacent neighborhoods to 
continue to supply public housing, and is this a feasible 
approach for a CNI development, and what allowing housing stock 
of nonprofit housing developers to meet that goal in certain 
criteria? What would you think about that?
    Mr. Cabrera. What I have argued for is one-to-one 
replacement of affordable housing, and the reason is because of 
financing. If we are talking about--and I think that is what is 
being contemplated now, which is terrific. But one of the 
benefits of Choice Neighborhoods, I believe, is it looks 
outside the footprint of the legal description of the public 
housing development.
    So my thinking on Choice Neighborhoods is that it is 
something I believe this committee has contemplated before in 
discussion during one of my hearings, and I think it is 
actually a beneficial thing. It is not a perfect thing. In 
housing, we are relegated to understanding there is nothing we 
can do to conceivably be perfect. So that is why when you look 
at Choice Neighborhoods and compare it to HOPE VI, a huge 
benefit is that it goes beyond the footprint of just public 
housing.
    Mr. Miller of California. In your previous life when you 
worked for HUD, you and I discussed HOPE VI. You always were a 
strong supporter of HOPE VI. Why do you support this concept 
more than you did HOPE VI originally?
    Mr. Cabrera. It's not that I don't support HOPE VI now. I 
do.
    Mr. Miller of California. No, I didn't say--but you support 
this new approach.
    Mr. Cabrera. I appreciate that, Congressman, I'm sorry. 
What I mean to say is HOPE VI is something I believe is good 
for public housing authorities and important for public housing 
authorities. I think the Choice Neighborhoods Initiative is 
good because it expands the field of housing modality that 
needs improvement. So we have assisted housing all over this 
country that has or needs help as well. They tend to be around 
public housing units. You can't just improve a public housing 
development and then expect the rest of the community around it 
to get better. Getting or having the ability to do it in a more 
subtle and nuanced way is more important.
    I think that the added idea of--through our Hope for 
Housing Foundation, which is something we are really proud of, 
we spend an awful lot of time with supportive services for 
people. This is what we do as our business model. We pay for 
it, we raise money for it, and it works well.
    And I think one of the things Choice Neighborhoods is 
saying, and I think a lot of the panelists are agreeing with, 
is that is an important thing to do. What is also important is 
to make sure that the pot comes from something other than 
housing. Housing is hard enough. If you start to diminish the 
housing pot, knowing what it takes to develop units, you will 
have a struggling development at best. So there has to be some 
care given to that.
    Mr. Miller of California. Madam Chairwoman, Ms. Waters, I 
would--my time is up, but I know what a supporter you are of 
the concept of public housing, the people who need that type of 
assistance in an interim period. I would really like you to 
come to perhaps Joe Baca's district, or my district, or David 
Driehaus's district, and I would like you to see what the 
nonprofits have done for public housing in our communities.
    And I think you are going to find--I think you will be 
absolutely shocked and happy. When you drive by these 
facilities, you would never think that people living on Section 
8 vouchers live there because they are that nice. The city 
councils love them, they work with them, the communities accept 
it. It is not any issue that is ever argued about at city 
council meetings about the neighborhoods becoming rougher, its 
being rundown.
    And I would like you to see what benefit there is in I 
think a new concept that we are seeing in this country that 
relies very little on government and more on the private 
sector. I think you would be greatly surprised. But I would 
like you to do that if you could, and I yield back the balance 
of my time.
    Ms. Waters. Thank you very much. And without objection, I 
am going to proceed with two more rounds, just the two of you. 
I'm sure everybody here wants to ask a lot of questions. And so 
I would like to recognize myself for another 5 minutes, and 
take the first half of that to kind of respond a little bit to 
your invitation.
    Let me just say, Mr. Miller, I am not so concerned about 
whether or not there is public housing that looks better in one 
community perhaps than another community. This is what I'm--
    Mr. Miller of California. I didn't mean to imply that. I 
meant the quality of life.
    Ms. Waters. I'm sure there is Section 8 housing that has 
been done very well. But what I'm concerned about in dealing 
with all the members is this. Well, first of all, I'm concerned 
that even with HOPE VI--and I like some of HOPE VI--that there 
was displacement. I look at Atlanta, for example. There was 
displacement. And I keep asking, ``Where are these people 
going? Where do they end up?'' And I'm getting more and more 
information about where they end up.
    It is one thing to have HOPE VI or public housing where you 
can get rid of a lot of the potential problems or design it in 
ways that you think you will not have problems, reduce the 
number of units, and have what looks like market rate and mixed 
use, but where are those people going, where do they end up? I 
am concerned about that.
    Number two, I'm concerned about services. For example, we 
do have people who move out or get assistance in getting 
housing miles away from where they came from, and what happens 
is all over the United States, they don't call their 
Representatives. They call in to the Congressional Black Caucus 
or the Latino Caucus. They call our office a lot. They call in 
from Georgia, they call us from Florida because, for some 
reason, many of their Representatives are not in tune to the 
needs of poor people. Some of these are poor pockets, and they 
relate more to the other parts of the district.
    I'm concerned about the lack of being connected to services 
and relationships and all of that. So I want to carry this out 
a little bit further--
    Mr. Miller of California. Can I respond with my time? Those 
are excellent--I will even take you to Little Rock, Arkansas, 
where I was born in Arkansas, and I can show you the same thing 
there. I can show you in my district individuals who came from 
low-income communities that they considered rougher, more 
violent to areas in my district where they can find jobs, and 
they found the communities safe, services available to them, 
and living in a community that they didn't think they would be 
able to live in on Section 8 vouchers. That is--
    Ms. Waters. That is great, but what do you say to Mr. 
McCarthy, for example, who raised this issue of Section 8? I 
know Lancaster very well, and I know the mayor of Lancaster, 
and I know what they are saying. Not only is there questionable 
treatment of Section 8 tenants in that area--also we have Mr. 
Driehaus who raised that same question about--he says, ``You 
are sending too many Section 8s in this economic meltdown that 
we have. We have investors who are buying property simply to 
put Section 8 people into them.''
    What do we say to them when we deal with this question of 
what happens and what we are doing with displaced and 
relocation? That is one of the political issues that I'm 
focused on. What do you say to them? ``Come to my district 
and''--
    Mr. Miller of California. Can I respond? I would love to 
respond. I would like you to call the mayor of Rialto, call the 
mayor of San Dimas, call the mayor of Yorba Linda, and ask them 
what they think of Section 8 individuals coming to their 
communities. They are perfectly happy with it because they--
    Ms. Waters. But they are not voting here. We have Mr. 
Driehaus and Mr. McCarthy who are sitting here considering what 
we are considering and saying to their caucus--to your caucus, 
``You have to help me. I can't go home if this continues in my 
district.'' And 9 times out of--
    Mr. Miller of California. Who said that?
    Ms. Waters. Were you here in the debate?
    Mr. Miller of California. I was listening on TV. But I 
can't speak for one person's district. I can speak for three 
individual's districts right now.
    Ms. Waters. Yes, but what I'm saying is I appreciate that, 
and I do know Mr. Baca's district quite well. I don't know your 
district quite as well. But what I'm saying--I'm trying to 
bring the political reality of the question of whether or not 
displaced and relocated public housing tenants are wanted and 
whether or not they have access to the services, and whether or 
not your caucus will support the idea.
    Mr. Miller of California. I can--I will use my time, 
because we only have 5 minutes apiece.
    I think if many of these communities saw what the nonprofit 
sector is doing in public housing and what they are providing 
for so-called--the stigma of people on Section 8, I think they 
would have a completely different attitude than they have 
today. But many of these communities have not seen what the 
private sector can do in providing housing to people who need 
it.
    And I think if more people took the time--and the reason I 
invited you--I would be happy to invite Mr. McCarthy out to our 
area and show him--to Mr. Baca's district, to Mr. Driehaus's 
district, and mine--and show him what the nonprofits are doing 
and the quality homes and lifestyle they are providing for 
people and how those people are integrating in the community 
and having the services they need and the requirements they 
expect in their life, and they are living on their own being 
able to get a job in a community that sometimes pays better 
wages and stuff, sometimes--not necessarily--has better 
schools. But they are in an area they feel that they are well 
accepted.
    I have seen no outcry at all from--and my office is right 
next to--probably 4 miles away from one of the facilities. I 
have zero complaints. I have no complaints from the city. In 
fact, the city council and the mayor have said quite the 
opposite. They are just happy to have them in the community 
because they are fulfilling a need the community has.
    And so I think the debate we are talking about today is 
healthy, and I think if we educated more of our colleagues on 
what is really occurring out there, specifically in the private 
sector on public housing, they would be shocked, and I think 
more supportive.
    I thank you for yielding me the time and--you guys, we 
don't care about you. We are having a nice conversation up 
here. Maxine and I, we might differ on a few things, but we 
have a goal of trying to do what we can for those people who 
need a helping hand at a given point in their life. And we even 
disagree on the length of it, but we do agree on a portion 
there that we could have commonality, and I yield back and 
thank the chairwoman.
    Ms. Waters. Thank you very much. And I'm appreciative of 
your comments and your observations, and of course I think all 
of us would like to see people have better opportunities, and 
I'm going to look forward to you to provide some leadership, 
and acquaint your colleagues with--take them to your district, 
do a tour, and come back and let me know what happens. Thank 
you so very much.
    I thank you for remaining with us. Because we do not have a 
lot of members here, I get an opportunity to kind of close this 
out with the last 5 minutes of questions, without objections.
    Let me say to Enterprise, as a nonprofit, do you believe 
that you could take what appears to be the description of a 
community in this Choice Neighborhoods proposal--and I'm not so 
sure that I know what makes up an eligible community or 
neighborhood--it is just not clear to me what the criteria is 
to be eligible for a Choice Neighborhood, but I'm going to 
assume that all of you know. I don't know. And we will continue 
to try to get the definition of that and the supporting 
documentation for that.
    But given what you know--what you think it is or what you 
know about it, are you saying that the government should allow 
you, or even a for-profit, to go into a whole community and 
make some determinations about what is to be preserved, what is 
to be re-developed, to bring in the supportive services on 
education, on transportation, to choose these neighborhoods? 
How does Enterprise see itself taking on this responsibility, 
and the government basically funding it and putting it in your 
hands?
    Ms. Siglin. I think that one of the pieces of the 
legislation that is most important for you to work on is 
figuring out this question of which communities are the best 
places to do this, because what is interesting about Choice 
Neighborhoods is that it is trying to use a real estate 
transaction to improve the affordable housing to leverage a 
broader program of community transformation.
    Enterprise wouldn't promise you that we would do this in 
places all over the country, because you have to have--HUD, 
when they choose Choice Neighborhoods, you have to select--you 
want local partnerships where there has been a deep, 
longstanding process of community engagement, so stakeholders 
have been working together on a neighborhood. There are only a 
few places around the country where our program goes that deep. 
So when you are working on the legislation, one of the 
suggestions in my testimony is to work on that section with the 
selection criteria.
    And all of--work for Enterprise looking at school-centered 
community revitalization projects, the ones that had the kind 
of outcomes you want, where people weren't displaced, where the 
residents had better housing and better schools, those were the 
results of stakeholders with deep roots in the neighborhood. So 
that would be a part of the bill I would particularly pay 
attention to.
    Ms. Waters. Thank you very much. I was particularly taken 
this morning with the Secretary's testimony on HOPE VI, how 
successful it was, how well it did, how it had support, and on 
and on and on. And I was thinking as I was going through some 
of the testimony and listening, if HOPE VI was so good, why 
don't we just improve that?
    Why don't we just take the problems that we saw with HOPE 
VI and correct them? Why don't we make sure that there is not 
this kind of displacement? Why don't we make sure that we are 
supplying the resources in the community since nobody is 
telling me where the money is going to come from for all of 
these additional resources, etc. And if HOPE VI was that good, 
why don't we just improve on HOPE VI?
    Does anyone want to respond to that? Yes, sir.
    Mr. Ramirez. We think that the HOPE VI model has flaws that 
are being addressed, and one of them was that when it was 
launched, it was launched to deal with some of the really most 
distressed public housing in our Nation as the catalyst for 
this program, with very little forethought as to what are the 
impacts that HOPE VI will have on the residents themselves. 
There has been a great deal of clarity around discussions that 
you have led that have brought us closer to better 
understanding how to deal with those dynamics.
    The reality of HOPE VI, though, is that for the last 8 
years, the investment into HOPE VI has diminished by six or 
seven-fold of what used to go into HOPE VI, and it was never 
really given the kind of push to be able to expand it. But a 
lot of the improvements that the panel has spoken about and 
that have been highlighted by several members of this committee 
are actually public housing developments.
    And with all due respect to former Assistant Secretary 
Cabrera, the reality is that the biggest property footprint in 
the most distressed areas, but HUD's own admission, are public 
housing properties. And why it is being removed and not 
considered in any way except to say go ahead and compete for 
these dollars with all these other entities without being a key 
player at the table in transforming your own property at the 
same time is really a question that needs to be answered.
    And so we kind of feel like, from our perspective, that the 
Department is out there celebrating the honoree and euthanizing 
them at the same time with this initiative is being proposed. 
If HOPE VI really is a step to a bigger transformation, then we 
should be taking what has been successful within HOPE VI, which 
is transforming the largest footprint of property in a 
development, a public asset that needs investment--because we 
all know that even Abt several years back said that there was 
already a $20 billion backlog in improvements for this $125 or 
$130 billion asset that we have in public housing as a nation. 
A study is being conducted again by Abt that is going to 
probably raise that number.
    And yet there is no money going into HOPE VI in the 
proposed 2011 budget. The Capital Fund dollars have been 
reduced, and yes there was some money that went into public 
housing, but it was long overdue to a long laundry list of 
needs that were there. And so I think that the policy 
perspective that the Secretary brings around Choice 
Neighborhoods is the right one, but it is missing the target in 
as much that it has removed probably the most critical piece 
from being the central piece around that effort.
    Ms. Waters. Mr. Goetz, you talked about a study, and I 
think you said it identified the distressed public housing 
units, and that you think that this study was then used to talk 
about more demolition than improvement, and that even as we 
look at this Choice Neighborhoods proposal, that a distinction 
is not being made between distressed public housing and public 
housing that could be invested in with capital improvements, 
etc.
    Is that what you said about--first, about the study, and 
that perhaps it is not being used correctly? Maybe it is being 
used to move forward with a new initiative that does not 
necessarily take into consideration saving some of this public 
housing.
    Mr. Goetz. Yes, I was referring to the National Commission 
on Severely Distressed Public Housing and their report in the 
early 1990's, which identified an estimated 86,000 unites of 
severely distressed public housing. And given, of course, that 
was an estimate--perhaps they were off a little bit--but of 
course HOPE VI has gone well beyond twice that amount in terms 
of the units that it has demolished and re-developed.
    And I think the notion of distressed public housing was 
then developed by HUD. There were some standards created for 
what constituted severely distressed housing, and my point was 
simply I don't see a replication of that, a careful replication 
of that for other forms of federally assisted housing. And in 
the absence of that, it is not clear which units would be 
eligible for the kind of Choice Neighborhoods redevelopment.
    And my other point was that very early on in the 
implementation of HOPE VI, it became a demolition program, and 
that became the one solution to a whole range of problems that 
public housing developments were having around the country, and 
it strikes me that in many cases, that approach was 
inappropriate.
    Ms. Waters. Thank you very much.
    Ms. Khadduri, I think you testified about education--some 
education research, and basically spoke to the role that having 
strong schools and all associated with that could help to make 
an initiative like this work. Do you feel that you know what 
Choice Neighborhoods is, what kinds of neighborhoods are going 
to be selected, and how this is all going to work, and where 
the resources are going to come from in order to make Choice 
Neighborhoods work in the way that it has been alluded to? Do 
you think you understand that? Have you--can you get your arms 
around this?
    Ms. Khadduri. I think I begin to understand what it is. I 
certainly look forward to reading the NOFA that HUD puts out 
for how they are going to use the funds that have already been 
made available to Choice Neighborhoods, because I think that 
there really is a lot to be looked at in the details. Some of 
the things that Kris Siglin talked about, what kind of 
partnerships with strong commitments to the neighborhood are 
going to be required, some of the things that I talked about, 
about the leveraging requirements, and are the resources that 
are going to be needed for the investments other than in 
housing really going to come forward? And just how carefully 
and thoughtfully the selection process is going to occur.
    I see the principles here, and some of the principles I 
like a lot, like building on the assets that a neighborhood 
already has, like making this holistic community development 
that doesn't just redevelop housing, that is not just about 
bricks and mortar. But I think this is very hard to do. Turning 
around a neighborhood is extremely difficult, re-developing the 
housing is difficult for reasons that have been talked about. 
Creating good schools in historically disadvantaged 
neighborhoods--
    Ms. Waters. I know how tough it is--if I may just 
intervene. I know how tough it is. I mean I understand how 
tough it is. What I'm really asking at this point is how much 
does each of you know about what is being proposed. When I say, 
``Can you get your arms around it,'' I'm still trying to 
understand the selection criteria. I don't want to have to 
learn later on after a process has begun that it didn't have 
this in it, that didn't make good sense, what were they talking 
about when they talked about the stakeholders already being 
organized and working, does that eliminate certain kinds of 
neighborhoods?
    These questions haven't been answered, and I thought maybe 
some of you had looked at this and you understood it a little 
bit better than I do at this point. I appreciate your concerns 
and I appreciate your identification of what is needed, but I 
want to understand--
    Mr. Cabrera, what do you know about the definition of a 
Choice Neighborhood? How will that selection be made? What is 
the criteria, and what is meant by neighborhoods that have 
stakeholders with deep roots working in ways to transform the 
neighborhood already, and where are these resources? How do you 
get L.A. unified, for example, that is broke?
    With all these dollars in deficit, school districts are 
talking about going to 4-day school districts. They're laying 
off teachers. Where are these resources coming from? Is this 
pie in the sky? Is this an intellectual kind of discussion that 
does not have any real basis in fact and reality based on what 
some of us know about communities? Do you know something we 
don't know?
    Mr. Cabrera. No, I don't think I know something that others 
don't know. I think that it's not pie in the sky. It's 
extremely real. I think a good beginning point is to remember 
that neither HOPE VI or Choice Neighborhoods will finance by 
itself a single unit of housing. They always have to be used 
with something else, some other tool. Tax credits that come 
from the private sector in terms of funding, bonds, the same 
thing, something else has to come in to make something 
possible.
    The second thing is when HUD uses the term assisted 
housing, Madam Chairwoman, that has a technical term within 
HUD. There are some things that won't be assisted housing, so 
current tax credit units, current units that were billed to 
private activity bonds by themselves are unlikely to be deemed 
assisted housing, whereas things like Section 202, which serves 
the elderly, will be. Section 11--811, excuse me--which serves 
people with special needs will be. 221(d)(3), 221(d)(4). These 
are defined terms institutionally within HUD. I think the 
question is valid. I understand, but I think in my head, 
knowing the institution by virtue of Saul and I did for some 
time, that has a pretty defined parameter. As to the community, 
I think that one of the efforts here is not trying to take--not 
trying to make one place a panacea and not help the rest of the 
community. I think that's the intent of Choice Neighborhoods.
    Ms. Waters. Ms. Crowley, if I may, I'm thinking about a 
particular community that's built along one of the main 
corridors in the greater Los Angeles area that leads to the 
airport. We have improved transportation with the green line or 
whatever it is that goes from north to south. It's centered 
right near several public housings projects in the greater Los 
Angeles area. You have stakeholders who have, you know, many of 
them have sacrificed many of their years trying to make the 
neighborhood stronger and better, but there's a lot of 
dilapidated housing in the area where we have one, two, three, 
four big public housing projects, Nickerson Gardens, Jordan 
Downs, Imperial Courts, and Donzack Village. They're all right 
there. We have some good features, like I said, the 
transportation corridor. We have a health center that's there, 
United Health, United Health Center, etc., but there's a lot of 
dilapidated housing around this area.
    So what do you do Enterprise, well before I go to 
Enterprise, I want to know do you go to get eminent domain, to 
tear down this housing and to improve the housing? Ms. Crowley 
first. What's your thought about all of this?
    Ms. Crowley. I'm interested in your question about have we 
put our arms around this, and which I think we'll get to the 
example that you just showed. When this proposal first came 
out, we had a very in-depth analysis of it led by our vice 
president for policy, Linda Couch. Many, many of our members 
came together and have studied this. There were numerous 
meetings and conference calls. We sent a lengthy letter to the 
Secretary with all of our concerns about the initial proposal, 
and then the most recent proposal just came out. Some of those 
concerns have been addressed in it, but most of them have not 
been. So we find it very vague. We think that there's a lack of 
specificity in the proposal that would provide the kinds of 
protections and answers that we sought for a very long time in 
HOPE VI. And in fact, what I frequently said to the folks at 
HUD, is please start with Ms. Waters' HOPE VI reauthorization 
bill, because that was hard fought to get to something that a 
wide variety of people could agree to. And so I don't think 
we're there yet at all. I do think that there is merit to the 
notion of saying that this is a--there's a public housing 
project that we want to redevelop or there's a project base 
Section 8 assisted housing that needs to be redeveloped, and 
what is it that we can do in order to make sure that we're 
doing that in a holistic way by looking at the broader 
community.
    But the nuts and bolts of how you do that, how it is that 
you go to, you know, you look at a dilapidated house that is 
owned by somebody who has abandoned it and has not shown up for 
years, is the city going to--
    Ms. Waters. I'm talking about dilapidated housing that 
people live in.
    Ms. Crowley. Or that people live in, and that is that maybe 
the homes that they own are is the proposal going to help them 
upgrade their homes, or is the idea to get rid of them and to 
move those folks out? We don't have answers to that.
    Ms. Waters. It's a mixed bag, Ms. Crowley. We have people 
who own dilapidated housing who have not had the money to 
upgrade the house. We have not had the programs to really 
assist them in doing that. We have absentee landlords. But 
again, I'm describing a neighborhood that's a mix of the good 
and the bad.
    Ms. Crowley. Right.
    Ms. Waters. We have this tremendously valuable public 
housing that's the major footprints in the neighborhood. We 
have a transportation corridor that leads--goes east and west 
to the airport, and we have the north-south development of 
trains, etc. We have a lot of dilapidated housing. Is this a 
Choice Neighborhoods potential? What would you do with this, 
Ms. Siglin?
    Ms. Siglin. If it was owner-occupied housing that was 
dilapidated, if it was--Choice Neighborhoods funding, as I read 
the proposal, can be used on public or assisted housing, but 
the local government would have to use a funding like CDBG to 
improve owner-occupied housing. I don't think that would be 
Choice Neighborhoods. You know, you're right to be asking these 
questions about, to be comfortable voting for something, you 
should really know how it works. So a question I would 
encourage you to ask the HUD Secretary is, you know, this is--I 
share the worry about HUD's scarce resources getting bled into 
other activities. I mean, absolutely, our experience has been 
that these initiatives work better when you can work more 
holistically, more comprehensively, but if you want to use 
Choice Neighborhoods to really deal with the problems in 
distressed neighborhoods, you have to get the Department of 
Education and HHS to come forward. So it was helpful you hear 
the Secretary talk this morning about a joint NOFA, and it 
would be useful to see the details on how that would work.
    Ms. Crowley. Ms. Waters, could I just--this is a point of, 
I think it's important--
    Ms. Waters. I yield to myself as much time as I need and 
will continue with the questions for another few minutes. Yes, 
go ahead.
    Ms. Crowley. Thank you. Our reading is that the Choice 
Neighborhoods money could be spent on housing other than public 
or assisted housing.
    Ms. Waters. That's exactly what my staff just whispered in 
my ear.
    Ms. Crowley. And in fact, it's unclear whether or not--if 
you read the way the statute is written, you could actually, we 
think, go into a neighborhood that didn't have public or 
assisted housing in it and start from scratch. So obviously, we 
just need a lot of work to get to understand this better.
    Ms. Waters. All right. And I'm sorry, I had to cut you off, 
Mr. Cabrera.
    Mr. Cabrera. I just want to say--
    Ms. Waters. As you were explaining--
    Mr. Cabrera. Jordan Downs would probably qualify for this. 
You asked the question earlier, would Jordan Downs qualify for 
Choice Neighborhoods? Yes, I think it would.
    Ms. Waters. What would you do with the dilapidated housing 
around Jordan Downs?
    Mr. Cabrera. I think that HOPE VI is a harder mix for 
something like that than Choice Neighborhoods is. Choice 
Neighborhoods would help more than HOPE VI. You have a broader 
set of tools to deal with that neighborhood than you would with 
HOPE VI.
    Ms. Waters. Jordan Downs is not a HOPE VI project.
    Mr. Cabrera. No. Jordan Downs is a public housing 
development, and so therefore would qualify under either HOPE 
VI or Choice Neighborhoods.
    Ms. Waters. And so if this was a Choice Neighborhoods 
selection, the privately owned housing around it could be the 
beneficiaries of Choice Neighborhoods funding to--
    Mr. Cabrera. Theoretically in a Choice Neighborhoods, yes.
    Ms. Waters. --to buy those houses up, to relocate those 
people, to fix up their housing for what?
    Mr. Cabrera. This is legislation that right now is proviso 
language in a budget. I think that's one of the things that 
people are struggling with. But conceptually, the way that I'm 
reading it, and it's just one person's opinion, sure, you can 
probably utilize these funds, if you were to be the winning 
competitor, to expand the footprint beyond the property 
description of Jordan Downs, yes.
    Ms. Waters. And would a private or a nonprofit be given 
eminent domain authority in this proposal?
    Mr. Cabrera. I don't know that a for-profit or nonprofit 
could ever be given eminent domain authority in any place in 
the country, notwithstanding Revco. I do think that in the case 
of Los Angeles, knowing Los Angeles, I doubt that would ever 
happen. I think that would have to be resident in whatever the 
State said it's residential. It's either HACLA or Los Angeles 
County development or the housing department, whomever it might 
be. But, you know, just thinking about Jordan Downs, you have 
already had two charettes. There are several more slated. I 
think that's the kind of discussion that happens very much at a 
local level. It's hard to solve beyond a local level, because 
those are intensely local concerns with whomever the developer 
might wind up being. It's going to be HACLA and at least one, 
possibly others, and that's where that conversation happens.
    Ms. Waters. Thank you very much, and let me just say that 
it was mentioned that public housing in the coordination of 
additional resources to make this concept work, you could use 
like CDBG, and some of just won't allow that to happen because 
CDBG is the last standing funding into poor communities for 
many of the programs that work for seniors and other kinds of 
efforts. And it's not that much any more. So I guess my bottom 
line concern is still the big question, what is Choice 
Neighborhoods? How does it really work? What's the criteria for 
choosing a Choice Neighborhood? How is that decision made? And 
I'm still trying to get my arms around it.
    With that, Mr. Ramirez, I'm going wrap up with you.
    Mr. Ramirez. I would just say that we have a great 
opportunity to answer all those questions and the demonstration 
money that has already been appropriated in 2010. There is a 
NOFA that will be coming out sometime during the course of this 
year. There will be plenty of opportunity to also bring to 
Congress a clearer understanding of what it means. I feel that 
at this particular moment in time, the biggest decision I know 
you're wrestling with is that there are scarce resources, and 
other programs have suffered. The Ross program has been 
proposed for elimination. No Hope VI, capital funds are down 
for public housing, and there are others. And so as you 
deliberate through this process, we firmly believe that the 
Choice Neighborhoods Initiative does have great potential to 
transform even a bigger part of neighborhood. We just need to 
give it time to mature, and we have given the department the 
resources to bring something back that can be better evaluated 
and acted upon.
    Ms. Waters. So basically, you believe that the $65 million 
that has been agreed upon the Appropriations Committee should 
again forward as such and we learn from that what is the 
potential for a broader effort?
    Mr. Ramirez. We believe that by the Secretary's own 
admission, it's going to take a tremendous amount of investment 
in any neighborhood that goes under this program because of its 
comprehensive nature. It does open up a glide path for the 
Department with the existing $65 million that has been set 
aside for this program to either start with planning grants, to 
bring other agencies to the table with the resources that they 
need to come with at the same time, and produce a NOFA that 
brings the kind of results that would point to a more 
comprehensive and coordinated investment within the 
neighborhood. Absent that, we believe that there are dollars 
that are currently being invested that could be better invested 
in the sense that a more sensitive look at what the impacts are 
to residents be inserted into them, but that already are 
transforming, again by HUD's own admission, three-quarters of 
these neighborhoods that they're talking about in this 
initiative, which are public housing neighborhood.
    Ms. Waters. Thank you very much. With that, we're going to 
wrap this up. The only way that I'll extend it for another 
minute or so is if there's a thought that you simply cannot 
hold, any one of you, that you must share publicly at this 
moment. Yes, ma'am?
    Ms. Eldridge. I just want to say that I hope Choice 
Neighborhoods prevents the displacement of seniors from any 
neighborhood that Choice Neighborhoods is in, and the only way 
to do that is to leverage Medicaid and Medicare dollars in the 
effort to upgrade the neighborhood. That is the only way. Thank 
you.
    Ms. Waters. Thank you all very much. You have been very 
helpful in helping me to focus on some of the issues related to 
this initiative. And I will note that some of the members who 
participated today may have additional questions for this 
panel, which they may wish to submit in writing. So without 
objection, the hearing record will remain open for 30 days for 
members to submit written questions for these witnesses and to 
place their responses in the record. And with that, this panel 
is dismissed--oh, we do have something to submit before we 
adjourn. Without objection, the written statement of Dr. 
Deirdre Oakley, Assistant Professor, Georgia State University, 
will be made a part of the record.
    With that, this hearing is adjourned. Thank you very much.
    [Whereupon, at 1:20 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             March 17, 2010
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