[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE OBAMA ADMINISTRATION'S RENTAL
ASSISTANCE DEMONSTRATION PROPOSAL
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
INSURANCE, HOUSING AND
COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
NOVEMBER 3, 2011
__________
Printed for the use of the Committee on Financial Services
Serial No. 112-83
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72-624 WASHINGTON : 2012
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HOUSE COMMITTEE ON FINANCIAL SERVICES
SPENCER BACHUS, Alabama, Chairman
JEB HENSARLING, Texas, Vice BARNEY FRANK, Massachusetts,
Chairman Ranking Member
PETER T. KING, New York MAXINE WATERS, California
EDWARD R. ROYCE, California CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois BRAD SHERMAN, California
GARY G. MILLER, California GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina CAROLYN McCARTHY, New York
JOHN CAMPBELL, California JOE BACA, California
MICHELE BACHMANN, Minnesota STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan BRAD MILLER, North Carolina
KEVIN McCARTHY, California DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico AL GREEN, Texas
BILL POSEY, Florida EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK, GWEN MOORE, Wisconsin
Pennsylvania KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee
Larry C. Lavender, Chief of Staff
Subcommittee on Insurance, Housing and Community Opportunity
JUDY BIGGERT, Illinois, Chairman
ROBERT HURT, Virginia, Vice LUIS V. GUTIERREZ, Illinois,
Chairman Ranking Member
GARY G. MILLER, California MAXINE WATERS, California
SHELLEY MOORE CAPITO, West Virginia NYDIA M. VELAZQUEZ, New York
SCOTT GARRETT, New Jersey EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina WM. LACY CLAY, Missouri
LYNN A. WESTMORELAND, Georgia MELVIN L. WATT, North Carolina
SEAN P. DUFFY, Wisconsin BRAD SHERMAN, California
ROBERT J. DOLD, Illinois MICHAEL E. CAPUANO, Massachusetts
STEVE STIVERS, Ohio
C O N T E N T S
----------
Page
Hearing held on:
November 3, 2011............................................. 1
Appendix:
November 3, 2011............................................. 25
WITNESSES
Thursday, November 3, 2011
Elsesser, Charles, attorney, Community Justice Project of Florida
Legal Services, on behalf of the National Low Income Housing
Coalition...................................................... 9
Guerrero, Ismael, Executive Director, Housing Authority of the
City and County of Denver, Colorado............................ 6
Henriquez, Hon. Sandra B., Assistant Secretary, Public and Indian
Housing, U.S. Department of Housing and Urban Development...... 4
Hydinger, Steven C., Managing Director, BREC Development, LLC.... 8
APPENDIX
Prepared statements:
Elsesser, Charles............................................ 26
Guerrero, Ismael............................................. 33
Henriquez, Hon. Sandra B..................................... 40
Hydinger, Steven C........................................... 51
Additional Material Submitted for the Record
Biggert, Hon. Judy:
Letter from a coalition of housing industries................ 55
Letter from the Housing Assistance Council................... 57
Letter from Secretary Shaun Donovan, U.S. Department of
Housing and Urban Development.............................. 58
Letter from the National Association of Housing and
Redevelopment Officials.................................... 60
THE OBAMA ADMINISTRATION'S RENTAL
ASSISTANCE DEMONSTRATION PROPOSAL
----------
Thursday, November 3, 2011
U.S. House of Representatives,
Subcommittee on Insurance, Housing
and Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:57 p.m., in
room 2128, Rayburn House Office Building, Hon. Judy Biggert
[chairwoman of the subcommittee] presiding.
Members present: Representatives Biggert, Hurt; Gutierrez,
Cleaver, and Clay.
Also present: Representative Ellison.
Chairwoman Biggert. The Subcommittee on Insurance, Housing
and Community Opportunity will come to order.
We will start with opening statements, and I will recognize
myself for such time as I may consume.
Good afternoon. I want to welcome everyone. I am sorry
about those pesky votes again. That seems to happen around 2
p.m. all the time. So I apologize, and I thank you for your
patience.
This is the third hearing in a series on reforms to the
Section 8 Program. During today's hearing, the subcommittee
will examine the Obama Administration's Rental Assistance
Demonstration proposal, or what is called ``RAD.''
I am supportive of this creative proposal because it would
allow for mixed financing and leveraging of private capital
with existing Federal funds. This is a concept that I actually
have worked on for many years, and was realized through recent
reforms to the Section 811 Program, which provides affordable
housing for people with disabilities, and reforms to the
Section 202 program, which provides affordable housing for
seniors.
Given very scarce Federal resources, it is important that
we maximize the impact of every taxpayer dollar, especially
funds that go toward affordable housing. And given the demand
for affordable rental housing, projected rehabilitation costs
to preserve aging housing stock, and capital needs for housing
development, new initiatives for private sector participation
must be considered. So I thank many of the Members whose staffs
have already offered input into the Section 8 reform package.
And, with that, I recognize the ranking member from
Illinois, Mr. Gutierrez, who is busy talking.
Mr. Gutierrez. Thank you, Madam Chairwoman.
And thank you to all of our witnesses for joining us today
to discuss HUD's proposal for a Rental Assistance
Demonstration.
Let me start by saying that I understand how hard it can be
for our Nation's public housing agencies to meet the demand for
safe, affordable housing that they can see in our communities
right now. This Congress has watched unemployment and
homelessness approach historic highs. And how has it responded?
Unfortunately, by cutting the programs that serve our most
vulnerable constituents. Appropriators are threatening to shut
down housing counseling agencies, strip funding from housing
programs for the elderly, and cut the Public Housing Capital
Fund by hundreds of millions of dollars.
So I understand the logic behind the RAD proposal. It is a
potential solution to the capital infrastructure challenges
that our public housing agencies are constantly facing. These
agencies know they cannot depend on Congress to appropriate the
funding they need, so they have worked with HUD and have come
to us with an alternative that they hope will work. In short,
HUD and public housing groups are willing to try a conversion,
on a limited scale, of traditional public housing units to the
project-based Section 8 Program, making it more likely that
they will be able to leverage financing from private sources to
meet their capital needs.
But a conversion like this doesn't come without risks. That
is why I want to highlight certain provisions in the RAD
proposal that reinforce tenant protections, promote resident
choice, ensure long-term affordability for converted units, and
prioritize continued public ownership of housing units after
conversion.
I would ask that our witnesses address these provisions in
detail today. I want to make sure that they truly will provide
adequate protections and insurance so that our public housing
dollars continue to reach the lowest-income families in a fair
and equitable way. That is the only way a demonstration like
this will work for everyone.
Thank you again, Madam Chairwoman. I look forward to the
testimony of the witnesses and I welcome this opportunity to
learn more about the RAD proposal. I yield back the balance of
my time.
Chairwoman Biggert. Thank you.
Mr. Gutierrez. I ask unanimous consent that our colleague
Mr. Ellison from Minnesota can join us for 5 minutes.
Chairwoman Biggert. Do you have an opening statement?
Mr. Ellison. Yes, ma'am.
Chairwoman Biggert. You are recognized for 5 minutes.
Mr. Ellison. Thank you, ma'am.
Chairwoman Biggert and Ranking Member Gutierrez, thank you
for holding this hearing today. Revitalizing public housing is
an important topic for this committee to address, especially
when the poverty rate continues to rise and families struggle
with unrelenting unemployment.
In 2010, 46 million Americans lived in poverty. That is
over 15 percent of our population. And the availability of
affordable housing for many of these families is scarce. This
is exactly the wrong time to turn away from affordable housing
programs that support low-income families. Instead, it is time
for creative solutions to revitalize the affordable housing we
already have invested in.
As I am sure today's witnesses are going to mention, the
existing public housing buildings across the country have a
combined capital need of about $26 billion. That is a lot of
money. These capital needs come from years of underfunding of
public housing programs. These capital needs mean that many
buildings and individual apartments are in need of serious
repair. Even worse, over the last decade, public housing
authorities have already lost over 100,000 public housing units
because buildings fell into disrepair. Considering this level
of capital needs, creative solutions are necessary to protect
public housing and ensure that these buildings remain
affordable.
Now, at the high-water mark when Congress stepped up to the
plate and really did something for public housing during the
ARRA funding, we gave about $4 billion. So public housing
residents cannot realistically expect Congress to appropriate
adequate money to fund public housing. It simply isn't
realistic to believe that. So something else needs to be done.
I would like to applaud Secretary Donovan, Assistant
Secretary Henriquez, and the Administration on their commitment
to this issue. The Rental Assistance Demonstration language is
a thoughtful and innovative approach for revitalizing public
housing and other affordable housing programs overseen by HUD.
Let me say very quickly, if I have any more time left, last
Congress I introduced the Rental Housing Revitalization Act.
There were a lot of people who were fearful about what this
might mean, but we worked with the community and we listened
and we incorporated ideas. This bill shared the same goal of
helping public housing to access capital and financing in order
to make needed repairs and renovations, given the gap I already
identified.
I welcome the support of the Administration's work on
advancing and refining these ideas. And I would like, again, to
thank Chairwoman Biggert and Ranking Member Gutierrez for
holding this hearing today. I look forward to working with
members of this committee on strategies to preserve public
housing. And I look forward to hearing from today's witnesses
about their thoughts on the Rental Assistance Demonstration
language.
And if I have any more time left, I just want to quickly
say that a few years ago, I was lucky to have then-Chairman
Barney Frank come to Minneapolis, and he spoke very eloquently
about public housing affordability. One gentleman came forward
who needed the assistance of a Spanish language interpreter to
tell his story. And what he told us is that he and his five
children and his spouse were looking for a place to rent but
they couldn't find anywhere. But somebody came to him and told
him that he could buy a house for no money down and that it
would be really great and really easy on him and his family. He
bought that house, but what they didn't tell him was that in 2
years, his mortgage was going to explode. He ended up not being
able to make those payments and losing that house.
What if we had had good, decent, productive public housing
that was in good repair available for that family? It could
have saved a financial tragedy. And so, I hope we can step
forward and do the right thing.
Chairwoman Biggert. I thank the gentleman.
We will now proceed to introduction of the witnesses. We
are very fortunate today to have with us the Honorable Sandra
Henriquez, Assistant Secretary, Public and Indian Housing, U.S.
Department of Housing and Urban Development; Mr. Ismael
Guerrero, executive director, Housing Authority of the City and
County of Denver, Colorado; Mr. Steve Hydinger, managing
director, BREC Development, LLC; and Mr. Charles Elsesser,
attorney for the Community Justice Project of Florida Legal
Services.
Without objection, all your written statements will be made
a part of the record, and you will each be recognized for a 5-
minute summary of your testimony.
We will start with Ms. Henriquez.
STATEMENT OF THE HONORABLE SANDRA B. HENRIQUEZ, ASSISTANT
SECRETARY, PUBLIC AND INDIAN HOUSING, U.S. DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
Ms. Henriquez. Thank you very much. Good afternoon,
Chairwoman Biggert, Ranking Member Gutierrez, and members of
the subcommittee. I want to thank you for holding this hearing
today and for giving me this opportunity.
We meet at an important moment. Today, the need for
affordable housing is greater than ever, with 7 million
households paying more than half of their income for housing,
living in substandard housing, or both. Essential to meeting
the needs of very low-income families, the elderly, and the
disabled is public and assisted housing, which provides 2.5
million quality, affordable homes in communities across this
Nation.
Over the last 75 years, the taxpayers invested
significantly in these homes, but with a capital backlog
estimated between $22 billion and $26 billion in the public
housing portfolio loan, we have reached a breaking point. And
where most forms of affordable housing could leverage funding
from private investors and other nongovernment sources to make
needed repairs, antiquated laws mean public housing and
properties funded through HUD's so-called legacy programs
generally cannot. As a result, we have already lost 150,000
publicly owned homes to demolition and disposition over the
past 15 years. And we see no sign that this trend will abate
anytime soon, particularly in this fiscal environment.
Further, some 48,000 units in our Rent Supplement, Rental
Assistance Program. and our Section 8 Mod Rehab Programs are
also at risk due to contract limitations that inhibit their
ability to leverage capital.
Madam Chairwoman, my own decades of corporate and public-
sector experience managing housing tell me that we can do
better, we must do better, and that we can build a system that
harnesses the resources and the discipline of the private
market without compromising the important mission of publicly
supported housing--a system that does not leave America's
poorest families isolated.
The Rental Assistance Demonstration we have proposed
represents an important step in building that better system. As
this subcommittee knows, last year we proposed a multiyear
initiative called, ``Transforming Rental Assistance,'' which
sparked an important conversation about how the public and the
private sectors can work together to invest in the success of
these properties and the families who live in them. And the
concepts and the feedback that emerged from that conversation
culminated in the demonstration we are here to discuss today.
I would like to take a moment to outline five key goals of
the demonstration, not only to explain how it differs from our
TRA proposal in the past and builds on what we know works, but
also how it will provide more opportunity for families we
serve.
The first goal is long-term stability by helping owners
preserve these homes and plan for the future by better managing
investments the public has already made. For PHAs, this
essentially means replacing operating and capital subsidies
with 20-year, project-based Section 8 rental assistance
contracts. For the Rent Sup and RAP programs, contracts would
convert to Section 8 project-based rental assistance, PBRA,
with 20-year terms, while Mod Rehab properties would be able to
convert to long-term, 20-year Section 8 PBRA or project-based
voucher contracts. These tools have widespread acceptance and
familiarity among owners, those in the lending community, and
those of us at HUD.
Indeed, the second goal is to allow these programs to
access the same safe, proven tools that successfully support
1.4 million units of multifamily assisted housing and access
the Low-Income Housing Tax Credit Program in particular. These
tools have not only brought new capital to affordable housing,
but also a discipline and rigor that extends to how these
properties are managed.
The third goal is long-term affordability, saving
properties for generations to come by better managing the
investment the public has already made. For this demonstration,
that means long-term assistance contracts and use agreements
that would protect affordability in the event of foreclosure or
for bankruptcy, should that happen.
And, indeed, the fourth goal is effective public ownership.
The demonstration will ensure public housing properties remain
under the ownership or control of a public housing authority or
public or nonprofit entity or limited partnerships formed to
access tax credits.
In the unlikely event of foreclosure--and I would note
that, even in this economy, multifamily owners have defaulted
on their loans less than one-half of 1 percent of the time--the
Secretary would be permitted to transfer the contract and the
use agreement to capable public and non-profit entities, and
only when neither of those options is viable, may the Secretary
seek the help of a for-profit entity in preserving the
property. Regardless, the owner would be required to manage the
property, guarantee its affordability, and maintain tenant
rights in accordance with the use agreement.
The last goal of this demonstration is to provide more
resident choice and real resident rights. Families should be
able to choose where they live and take responsibility for
their futures. Accordingly, we expect that at least 90 percent
of the converted public housing and Mod Rehab units would
provide residents with an option to move with voucher
assistance. Residents will have an opportunity to comment on
any conversion action, and they will not be subjected to
rescreening, and they will be afforded strong procedural and
organizing rights.
Underlying all these goals is the need for the private
sector partnership, which is why we have designed this
demonstration to capitalize on the capacity and the expertise
the private sector can provide, particularly in the field of
real estate finance and development. As we have seen in HOPE
VI, many housing authorities have already collaborated with the
private sector in a variety of ways, from securing FHA
insurance, tax-exempt bond financing, private loans and tax
credit investments, to legal and accounting assistance. And
these are the kinds of collaborations that will be essential to
the success of this demonstration.
As you know, the Senate Appropriations Subcommittee
recently included language that authorizes a limited, cost-
neutral demonstration targeted at public housing. While we
support comprehensive authorization, we also believe it is
reasonable to proceed, for now, with the option that has been
included in the Senate Appropriations bill. And we are hopeful
that this subcommittee will join with us in supporting this
strategy while continuing to explore the broader authorization
process.
But, Chairwoman Biggert, we believe the time has come to
allow America's public housing system to take advantage of 30
years of innovations in the affordable housing finance arena,
to connect millions of families to opportunity, to turn homes
too often seen as neighborhood problems into community assets,
and to make proven preservation tools available to all
affordable housing programs. This demonstration represents an
important step toward that goal.
I want to thank you again for this opportunity to testify
today, and I would be happy to answer any questions that you
may have.
[The prepared statement of Assistant Secretary Henriquez
can be found on page 40 of the appendix.]
Chairwoman Biggert. Thank you.
Mr. Guerrero, you are recognized for 5 minutes.
STATEMENT OF ISMAEL GUERRERO, EXECUTIVE DIRECTOR, HOUSING
AUTHORITY OF THE CITY AND COUNTY OF DENVER, COLORADO
Mr. Guerrero. Good afternoon, Chairwoman Biggert, Ranking
Member Gutierrez, and members of the subcommittee.
My name is Ismael Guerrero, and I am the executive director
of the Denver Housing Authority. Prior to joining DHA, I was
with U.S. Bank Community Development Corporation and before
that, with Mercy Housing Corporation. So as a practitioner with
over 15 years of experience in financing and community
development, I want to thank you for this opportunity to
provide some testimony on the Rental Assistance Demonstration
proposal.
I am also a board member of the Council of Large Public
Housing Authorities (CLPHA). CLPHA's members include 70 of the
largest public housing authorities located in most major
metropolitan areas in the United States. CLPHA has been working
with numerous stakeholders on this rental assistance proposal
and is also appreciative of the hearing that is happening
today.
DHA is the largest housing authority in the Rocky Mountain
region, with over 10,000 rent-subsidized housing units and
Section 8 housing choice vouchers. In the last 4 years, DHA was
ranked as one of the top multifamily developers in the Denver
region. We continue to maintain a ``high performer'' status
with HUD and simultaneously, an A-plus rating on our tax-exempt
revenue bonds with Standard & Poor's.
We support the Rental Assistance Demonstration proposal
because as a developer, an owner, and a manager of a diverse
affordable housing portfolio, we understand the challenges and
opportunities that face all housing authorities in managing
their assets.
We believe the voluntary conversion option, which allows
housing authorities the choice to convert from public housing
to Section 8 project-based rental contracts, is urgently needed
as an additional financing tool to address the growing backlog
of capital improvement needs in our aging housing portfolio.
The Denver Housing Authority today has capital needs of over
$90 million, and with the persistent cuts that are happening,
this will only continue to grow.
Because of the need to maintain our housing at standards
that our residents deserve and our communities expect, DHA has
become more creative and more resourceful in using all
available Federal resources and programs. We have been awarded
three HOPE VI Federal grants, we have utilized the Capital Fund
Financing Program, and we have received multiple competitive
capital grants through the American Recovery and Reinvestment
Act, just to name a few. Through these one-time Federal grants
totaling over $94 million, we have preserved over 1,100 public
housing units, and, more importantly, we raised over $300
million in private debt and equity.
However, these efforts have improved less than a third of
our total portfolio. The reality is that we need a more
comprehensive and structural solution to the problem of
maintaining, preserving, and transforming our aging and
obsolete public housing portfolio. We need market-based
solutions to maximize the leverage of Federal resources with
private sector debt and equity.
We believe that the option to convert public housing
operating and capital fund subsidies to Section 8 project-based
contracts or vouchers is an important tool that should be made
available to housing authorities of all sizes and in all
regions.
Converting the ACC operating and capital funding structure
to project-based rental assistance also brings us more in line
with real estate industry practices and asset management. It
should establish fair market rent standards that are
predictable and rental contracts that are more stable than at
the current public housing ACC operating subsidy. Our banking
and equity partners understand fair market contract rents, but
they have a harder time with operating subsidies based on
complicated property expense-level calculations, which have a
history of being arbitrarily prorated as much as 15 percent
below actual expenses.
Our support of this demonstration program is based on real-
time experience. We recently rehabbed a 190-unit public housing
property. It required a $10 million Federal grant, and we were
able to leverage $10.7 million in tax credit equity. Contrast
that with a second example, a 224-unit DHA-owned property with
a Section 8 HAP contract in place which we will rehab with zero
Federal capital funds and a financing plan that includes $8.5
first mortgage and $11.4 million in tax credit equity. Both
properties serve extremely low-income households with incomes
that average approximately $10,000 a year.
We believe that a properly designed and funded
demonstration program will allow more units to be recapitalized
with less restrictive Federal funds and greater leverage of
private debt and equity. In addition, a demonstration program
will allow specific concerns to be studied and resolved, such
as at the end of the day that the demonstration program should
result in a true conversion from public housing to Section 8.
We will have failed if, in the end, the result is a new hybrid
program that multiplies, rather than eliminates, program rules
and regulations.
Secondly, fair market rents are and continue to be the
industry benchmark where an efficient owner-manager is able to
operate. Trading artificial rental subsidy calculations or
prorations will undermine the stated goals of the program.
And, finally, at DHA, we have a strong commitment to
resident empowerment and resident engagement. This
demonstration program should allow maximum flexibility for
local housing authorities to work with their local resident
leaders and stakeholders to create the policies and procedures
around mobility options. At DHA, we believe that tenant rights
should be coupled with tenant responsibilities, including the
expectation of being a good neighbor and working toward self-
sufficiency goals.
So, in closing, I want to reaffirm our support for the
Rental Assistance Demonstration and to thank the committee for
holding this hearing today. Thank you.
[The prepared statement of Mr. Guerrero can be found on
page 33 of the appendix.]
Chairwoman Biggert. Thank you so much.
Mr. Hydinger, you are recognized for 5 minutes.
STATEMENT OF STEVEN C. HYDINGER, MANAGING DIRECTOR, BREC
DEVELOPMENT, LLC
Mr. Hydinger. Thank you very much, Chairwoman Biggert and
members of the subcommittee. First of all, I want to thank you
for allowing me to have the opportunity to speak to you about
the Rental Assistance Demonstration program, known as ``RAD.''
My name is Steven Hydinger. I work with BREC Development
from Birmingham, Alabama. We are a private developer, and we
are proud to be a private developer. We have worked with many
nonprofits in the past over many States, mostly along the east
coast. And we are happy to work with HUD in many different
venues, many different States.
I am very excited to talk about the RAD program, because
when I look at this, it has all the elements of a great
transaction, number one. Unfortunately, there is a tremendous
amount of demand. In a perfect world, there would not be demand
for low-income housing, but this is an economic reality. And
when one looks out over the future, with the aging population,
we are truly going have a crisis, as I mentioned in my
testimony.
Number two, product. It is exciting because I have been in
many conversations with public housing authorities where their
hands have been tied and they have not been able to come up
with the best solution because of what I would call regulatory
handcuffs. The RAD program certainly addresses these--namely,
project-based Section 8, which would be paramount to the
success of this program.
Number three, funding. It is exciting that there is no need
to go ask for increased funding; the funding is in place in
programs. This RAD program seems to be well thought out, and,
from a private developer's standpoint, it seems to be something
that is actionable. There are certainly programs that come out
that we all look at that, when one views the program, there is
skepticism from the get-go. I believe the way the RAD program
is drafted and the direction in which it appears to be headed,
it could be a great success to the many, many thousands of
units that need the assistance.
One word of caution I would say is, much has been mentioned
about the loss of product. Not all of that loss of product can
be viewed as bad. Much of the product is completely outdated,
functionally obsolescent, and needs to go by the wayside and
needs to be redeveloped. My hope in this is that more and more
private developers will be able to work with housing
authorities and be able to come up with absolutely the best,
most dynamic solution to this need that afflicts every State in
the country.
I, again, appreciate your time. Thank you.
[The prepared statement of Mr. Hydinger can be found on
page 51 of the appendix.]
Chairwoman Biggert. Thank you.
Mr. Elsesser, you are recognized for 5 minutes.
STATEMENT OF CHARLES ELSESSER, ATTORNEY, COMMUNITY JUSTICE
PROJECT OF FLORIDA LEGAL SERVICES, ON BEHALF OF THE NATIONAL
LOW INCOME HOUSING COALITION
Mr. Elsesser. Thank you, Madam Chairwoman.
My name is Charles Elsesser. I am an attorney with the
Community Justice Project of Florida Legal Services, and a
member of the Board of Directors of the National Low Income
Housing Coalition, which I am representing here today.
We want to thank the subcommittee chairwoman, Ms. Biggert,
and the ranking member, Mr. Gutierrez, for providing us with
this opportunity to provide input.
The National Low Income Housing Coalition is dedicated
solely to achieving socially just public policy that assures
that people with the lowest incomes have affordable and decent
homes.
Despite the specter of vacant foreclosed homes in many
communities, there is a continuing and increasing need for
affordable housing, particularly for those families with the
lowest incomes. In most communities, there is little if any
decent, safe, unsubsidized housing affordable to extremely low-
income households. Public housing specifically serves this
extremely low-income population. Currently, there are
approximately 2.3 million people living in public housing in
the United States, with an average household income of
approximately $13,350.
Unfortunately, this housing is aging, and for years, the
public housing authorities have received less than necessary in
capital replacement funding. Both the House and the Senate
Fiscal Year 2012 HUD appropriations bills include further deep
cuts to public housing capital funding. These continuing cuts,
without any new funding, leave public housing authorities
without any recourse other than to apply for more demolitions
and dispositions.
Tenant-based vouchers cannot replace public housing. We
have learned from the massive demolitions and relocations that
occurred through the HOPE VI programs and through the
subsequent additional demolitions, resulting in a loss of over
150,000 units of public housing, that there is a significant
percentage of the poorest households that are better served by
public housing than by tenant-based vouchers for a number of
reasons:
Public housing is more affordable. A tenant family pays a
maximum of 30 percent of their income in rent, and there is no
large security deposit. It is more supportive. There are
neighbors and housing managers who are knowledgeable about the
programs and can provide support and assistance. For the
elderly in particular, it provides a location to provide
services and allows people to age in place. Thus, public
housing provides homes for a much higher percentage of elderly
than the voucher program. For people with disabilities, it
provides accessible housing without the often exhausting search
required to utilize a Section 8 tenant-based voucher. And it is
more secure for all families. Once you have a public housing
unit, you can remain without fear of relocation. Tenant-based
voucher recipients can be forced to repeatedly search for new
housing at the end of each year, each time having to locate a
new unit and obtain a new security deposit.
So public housing is vitally important, but how do we
preserve it? The status quo is not the answer. The status quo
means a continuing underfunding of capital repairs, a
continuing deterioration of public housing, and a continuing
loss of units through demolitions. And this is demolition of
housing that can often be preserved but there is simply no
funding source for that preservation. HOPE VI and Choice
Neighborhoods initiatives, even if funded, preserve only a few
neighborhoods in the entire country.
We need additional financial tools if we are to reverse
this trend. We believe that the Department's Rental Assistance
Demonstration proposal could provide that significant
additional tool. The Coalition supports the RAD proposal
because it meets the essential criteria which the Coalition and
its members have developed to both provide additional resources
and to protect the public housing communities and the
residents.
The RAD requires resident participation throughout, both in
development of the RAD program and in the local decision to
utilize the RAD funding for a PHA or a project. It requires
that the resident protections inherent in the public housing
model be continued in the new funding mechanism, including a
right to an informal hearing if denied admission, to grievance
procedures for residents, and to adequate notice and good cause
for eviction. It requires a continuation of public ownership or
control.
Even in a foreclosure, the Secretary must continue public
ownership unless it is simply not possible, and only then can
the Secretary consider nonprofit or other ownership. It
requires long-term use restrictions by mandating that the
Secretary offer and the PHA accept renewals of the project-
based contracts with all of the Federal requirements intact.
And it provides an opportunity for residents to choose a
Section 8 voucher and relocate outside of the project while not
jeopardizing the viability of the project-based financing
itself.
And finally, it is a demonstration from which Congress and
HUD can assess and learn from participating PHAs. This
information will lead to even broader and better preservation
efforts. And, also, the Coalition supports the RAD's attempts
to provide options for Rental Supplement properties, Rental
Assistance Program properties, and Section 8 Mod Rehab, all of
which are significantly threatened without additional
resources.
The Coalition would strongly urge passage of the RAD
proposal and provide this resource for both residents and local
PHAs in their efforts to preserve valuable public housing
resources. Thank you.
[The prepared statement of Mr. Elsesser can be found on
page 26 of the appendix.]
Chairwoman Biggert. Thank you so much.
We will now recognize Members for questions for 5 minutes
each, and I will yield myself 5 minutes.
Ms. Henriquez, what aspects of RAD are absolutely essential
for private lenders to view it as an investment-worthy project?
Ms. Henriquez. Not being a private lender, but my sense is
that they will see--we are not asking them to take on a risk or
do--they will do their own underwriting, as they normally do;
they will approach these properties from a good business sense.
They want the same sort of stability and the ability for this
property to be viable in the longer term, so we don't see that
there is a risk. We think that this is a market that will be--I
wouldn't necessarily say new to them, but it will be an
expanded market, since, as you have heard through the various
testimonies, these are safe, proven methods.
But, more importantly, I think it will be helpful for a
lender because, finally, we are moving the public housing
portfolio to a tried and true real estate platform, as opposed
to something that is just a little bit different, which means
you have to be a bit of a contortionist to be able to
understand and to do a product.
So this will be more straightforward. It will be in the
norm, in the mainstream. And it is not any riskier than
anything else that is underwritten.
Chairwoman Biggert. So, probably, one of the things that
would be most essential for you is that it really is the intent
of RAD to connect private capital with the development and
rehabilitation of PHAs.
Ms. Henriquez. It is absolutely essential. We need to
figure out how to preserve for the longer term the investment
the taxpayer has already made. We need to do it with other
private capital, because, clearly, the need and the level of
renovation that is required for the long-term preservation
cannot simply be met with today's dollars and annual
allocations and appropriations.
Chairwoman Biggert. Thank you.
Mr. Guerrero, you talked about already having private
sources for doing the Section 8. In your experience, is
maintaining and administering public housing more or less
expensive than Section 8 voucher programs that you also
administer?
Mr. Guerrero. Thank you for the question, Madam Chairwoman.
I think that, over time, there is an equalization that
happens in terms of the cost of the two. There is certainly--
the challenge with the public housing portfolio is that the
capital funding tends to come in large, one-time grants. The
annual appropriation is often minimally sufficient to maintain
the properties but not to recapitalize them. Whereas, with a
Section 8 contract, the contract rents, when set at fair market
rents, have been sufficient to cover the operations, the
upkeep, and the debt service that we need, when needed, to
recapitalize a property.
So it is certainly more predictable funding with the
Section 8 contracts than with the public housing.
Chairwoman Biggert. Is there a difference in size? In the
past, in Chicago, we have had the Cabrini-Green and the Robert
Taylor Homes, which were huge. And that has all changed now, to
a lot smaller public housing. Is there a difference in using
voucher 8 or the public housing, is there a difference in just
what they look like?
Mr. Guerrero. No. I think, certainly from the Denver
Housing Authority's experience, our portfolio is very diverse.
We have everything from single-family homes that are public
housing units, fourplexes, duplexes, to 100-unit mid-rises,
and, sort of, everything in between.
And so, I think that is why this demonstration program is
important, because it creates another option. It is not going
to be the solution for every housing authority; it is not going
to be the solution for every property.
Chairwoman Biggert. Great. Thank you.
Mr. Hydinger, as a private developer, and others as well as
your organization, do you have a real desire to engage in the
activities detailed under the RAD proposal?
Mr. Hydinger. Thank you for the question.
Yes, I think when the plan is finalized, I would imagine it
would mirror many of the attributes of the Low-Income Housing
Tax Credit program. As long as project-based Section 8 is in
the plan in the final analysis, I think that is paramount to
its success, and without that, you will not be able to get
these projects underwritten in the private sector. And not only
that, it will have to be a long-term project-based Section 8
contract. These are two things that run together. A 3-year
commitment will not do it. It is going to need to be more in
line with a 20-year committee.
Chairwoman Biggert. 20 years?
Mr. Hydinger. And then just the regular real estate is
going to have to be underwritten in a classic real estate
sense.
So, yes, I am. I think, as was just mentioned with Mr.
Guerrero, that there are certain properties this will work very
well with, and I think those are the properties in some of the
smaller PHAs that a lot of private developers would be able to
assist greatly.
Chairwoman Biggert. Thank you.
And my time has expired. Mr. Gutierrez, you are recognized
for 5 minutes.
Mr. Gutierrez. Thank you very much.
I want to ask you a couple of questions just in
relationship because--I thank the gentlelady for raising
Cabrini-Green and Robert Taylor Homes, because one of the
arguments was that there were too many people concentrated in
too small an area. When Cabrini-Green became a very exclusive
part of the City of Chicago, they had replacement housing. Now,
when I travel through what was once Cabrini-Green, I don't see
the same number of tenants or the same number of housing units
that it replaced. That is to say, there were hundreds, if not
thousands, of units that have not been replaced. People have
been given Section 8 vouchers, or other kinds. And so, if we
end the Section 8 voucher system--which there always seems to
be problems in terms of funding and expanding and where people
are going to get housing.
As I look at that--and you can go by, what is it, the house
that Michael Jordan built on the west side of the City of
Chicago. Nobody really thought of that as land that people
would want and a community where people would want to create a
community, right? But people were creating a community there
and living there, so they tore it down. I just don't see the
replacement housing for the people who once lived there.
Given that, Ms. Henriquez, what do you think? Is this
program going to lead us to less responsibility on the part of
government to provide housing and just a transition from public
housing to no housing?
Ms. Henriquez. First, I would say it is not a transition
from public housing to no housing. The whole point is to
preserve the existing housing, and we think eventually we will
be given the ability to create more housing. The demand has not
lessened, and I don't think our responsibility has lessened
either.
It is important to know that one of the things this--one of
the lessons we hope to learn in this demonstration is what
works. What works in Chicago does not work in Boston where I am
from, and does not work in Denver where Ismael is from. And so,
it is local strategies, it is to figure out what works in the
community, and to reconnect that public housing into the
landscape and the portfolio and the life of that neighborhood
to make it a community asset. It is to stabilize for the longer
term how that property performs, because if we don't have that
property performing, it can't serve its mission to house low-
income people. And these are tools--
Mr. Gutierrez. Then I guess I will look forward to seeing
how the demonstration project--I believe you, and I don't
question your authenticity and that you are coming to tell us
exactly that those are your goals. You can almost take the
words that you have just spoken and add them to programs where
the housing has disappeared. As they said, the goal was to
improve it.
In Chicago, even the consent decree, the Gautreaux consent
decree, took poor black families and moved them into poor
Latino neighborhoods, concentrating poverty once again, and
taking a 25-by-125, 25-foot-wide-by-100, and putting 6 units
into it, with the goal of, ``We are going to build scattered-
site housing.'' So I can take you to scattered-site housing
that replaced it, and I assure you that in many instances,
unfortunately, the quality of life of the people that the goal
was for just didn't happen.
I hope that we can work really hard to figure out--because
I know that is your goal and that is your mission and that is
your passion, to get there. I am just sharing with you, as a
person who shares your goals and passion.
Ms. Henriquez. If I might, again, it is important, that is
why we have proposed this as a demonstration: to see what does
work; how it works; if there are lessons that send us back to
the drawing table, to see exactly what we are doing before we
suggest taking it to scale.
Mr. Gutierrez. So, Mr. Guerrero, what do you think the
long-term impact, positive impact of this, what we are doing as
a test program today, could possibly benefit in Denver?
Mr. Guerrero. Certainly, as Ms. Henriquez said, local
markets are different. I am from Chicago originally, so I am
certainly familiar with what has happened there, and I can tell
you that in Denver, it is certainly a different situation and a
different solution.
Our interest and our support for the program is that we see
this primarily as a preservation initiative, where this would
allow us to convert one unit from one type of subsidy to
another type of subsidy, with the goal of preserving that unit
in perpetuity, as long as we are in the ownership structure, as
an affordable housing unit.
And we have been successful in Denver in our HOPE VI
development to do one-for-one on-site replacement through the
HOPE VI effort. Again, we have a local--a different situation
there, where we started with lower-density housing and were
able to increase the density of what was there before, but
always with the goal of preservation. So we certainly see that
as a benefit here.
We do think there will be needs, and we have seen examples
and have examples in Denver where we might want to reposition
some units. As Mr. Hydinger said, not all units as they exist
today are necessarily the most efficient place to have the
affordable housing. So we certainly would look, in some parts
of our portfolio, still to replace the units but not
necessarily on-site; try to find more efficient ways to create
the housing, both more sustainable, better designs, better able
to serve the needs of the residents.
Mr. Gutierrez. Thank you so much.
Thank you, witnesses.
Chairwoman Biggert. Thank you.
Okay. The vice chair of the subcommittee, Mr. Hurt from
Virginia, is recognized for 5 minutes.
Mr. Hurt. Thank you, Madam Chairwoman, and thank you for
holding this hearing.
Obviously, we are facing--and I want to thank each of you
for being here today and providing information to this
committee about this proposal.
Obviously, here in Washington, we face unprecedented
challenges in balancing our budget. Obviously, the greatest
concern I think that we have is, how do we do more with less?
We are borrowing 40 cents on every dollar that we spend. So,
obviously, things like this, what I would call market-oriented
proposals like this, I think are the order of the day. And so I
appreciate what you all have provided to us in explaining it.
I guess what I would like to know--Ms. Henriquez, maybe I
could start with you? It seems to me that anytime you have a
demonstration, anytime you have something that is sort of a
test, you want to be able to measure its success. And I was
wondering if you could talk a little bit about how you see us
benchmarking this. How do you measure the success of the
program?
Obviously, I understand that we have capital needs that are
significant. You have monetary needs that are significant. And
I guess if we could just write a check for whatever we wanted
to, we could solve all these problems, but that is not what we
can do.
So I was wondering if you could talk about exactly what it
is that will be a measure of success for this program, in as
much as it is a demonstration.
Ms. Henriquez. First and foremost, I think one perspective
is that the success is that the housing is stabilized and
preserved so that it serves the people that we care the most
about and so that residents are not harmed, residents are not
having to leave their homes and their communities because of
difficult conditions in their housing. So that is what
undergirds all of this.
I would say another test of success is the willingness of
the private sector to invest. And we have seen in the past 30
years that they have been quite willing to invest in these
kinds of properties.
And I think the other test is, once that investment is made
and housing authorities really have stepped up and improved the
physical plant, the capital plant, how that property performs.
Because, as I said earlier, the underlining remains the same.
The property has to perform in that financial market arena the
way any other property would have to perform, and yet continue
on, also, to serve the people it is meant to serve.
I think those are tests. I think we see what the appetite
is in the free market as we put more and more of these deals
together. And as housing authorities decide what works for
themselves, we are asking them then also to be very judicious
and to evaluate and monitor what they have done, how they work
with their residents, to make sure this demonstration rolls out
well and smoothly and what are the benchmarks.
So we are asking the financial community to look to make
sure it performs and they are okay. We are asking residents to
look at how they feel this process is going. And everyone who
touches that process will have to help inform how well this
demonstration has performed.
Mr. Hurt. I appreciate that. And I also appreciate,
obviously, your commitment, the commitment, it seems, of each
of you who are in this business, to providing good housing for
people who need assistance.
But I guess what I didn't hear there and wonder if you
could elaborate on is, do you think that we end up saving money
doing this? If you are looking out for the taxpayer, if you are
trying to look at it from that standpoint, it seems to me that
would be a--
Ms. Henriquez. Undoubtedly.
Mr. Hurt. --worthy goal, right?
Ms. Henriquez. It is. As I said earlier in my testimony, we
really want to preserve the taxpayers' 75-year investment
moving forward. It needs to be preserved, but it is a pace and
a need, a level of funding that can't be matched and is not
being matched year after year. And so, yes--
Mr. Hurt. Here in Washington?
Ms. Henriquez. Here in Washington.
Mr. Hurt. Right.
Ms. Henriquez. So, therefore, having investment income,
private equity coming into these properties really does save,
overall, the Federal Government. It helps partner public and
private money together. With the bulk of that, you have heard--
in the HOPE VI program, for example, we are leveraging not just
dollar for dollar, generally $2 of private equity for every
dollar of Federal money. In some instances, in some
communities, that leverage may be three, four, sometimes as
much as eight to one. And as those economics bear out, the
savings are generally there. They are front and foremost.
Mr. Hurt. Thank you very much. That answered my question.
That is my time. Thank you.
Chairwoman Biggert. The gentleman from Missouri, Mr. Clay,
is recognized for 5 minutes.
Mr. Clay. Thank you, Madam Chairwoman, and I thank the
witnesses for being here today.
Let me ask you just a few things about this proposal, and
anyone on the panel can take a stab at it.
How will the PHAs and HUD address this displacement of
tenants when rehabbing of units occurs? Has anyone thought
about a plan for that?
Let's start here. Mr. Elsesser?
Mr. Elsesser. Thank you for the question, Mr. Clay.
I think that the temporary displacement during
rehabilitation is a really important question. I think HUD does
have in place rules and requirements for the counseling and the
displacement of tenants. I think that is a vital part of it.
And I think it is not a question of the necessity of
putting that in this proposal so much as enforcing the rules
that already exist. You want to make sure that the tenants have
a place to go, that they receive counseling before they move,
and that if they want to remain offsite, they can remain
offsite, and that they do have a right to return.
One of the important features of this proposal that has
been missing sometimes in the past is, if the tenants do want
to return, they have a right to return without having to go
through an entire rescreening process.
Mr. Clay. And that will remain in place under this
proposal?
Mr. Elsesser. That would allow them to come back to the
units and not to apply as if they were, sort of, just coming in
off the street.
Mr. Clay. Okay.
Mr. Guerrero, anything to add?
Mr. Guerrero. If I may provide a perspective from the
Housing Authority, we have certainly learned in Denver that for
the sake of the families, it is much better to do phased
development versus wholesale redevelopment, where you displace
the entire community for a longer period of time.
And we have been successful on two different occasions in
doing the redevelopment in phases, where we are moving a
portion of the community out for a shorter period of time and
then rotating through the rehab process, so that over time
families are moving from one unit to another, staying in their
communities, staying close to their support networks and to
their other family members, rather than being relocated for an
extended period of time, where they get disconnected from the
community. And we have had success both in public housing and
in the Section 8 rehab with that.
Mr. Clay. Okay.
Ms. Henriquez--Secretary?
Ms. Henriquez. It is absolutely essential that tenant
rights carry over, that tenants have the ability to participate
meaningfully in the conversion discussions at a housing
authority before they even apply for a conversion, and that
they are consulted in a meaningful way throughout the entire
process, and that includes relocation, relocation rights, their
ability to return.
My expectation is that housing authorities, in so doing,
will actually work with residents, both with a broad relocation
policy and then tailor individual relocation plans, baskets of
services, around each family as they transition offsite, make
their decisions about their right to return.
This is not about gentrification; it is about bringing
people back to their community in a stable way.
Mr. Clay. Okay.
I am going to ask you and Mr. Hydinger a separate question
about tenant environment. Will those who live in and around
these public housing facilities be able to participate in a
meaningful way, especially those who are chronically unemployed
and those who qualify under Section 3, be eligible to work on
these projects? Is there some kind of plan that you have
considered to actually create employment opportunities for the
people?
Ms. Henriquez. Section 3 is a requirement for all public
housing authorities. So as they move forward in the development
of their construction plans, hiring their contractors and so on
to do the work, it is fully our expectation--and we will be
monitoring--that residents both of the public housing
development that is being preserved as well people who are
similarly situated in the community have an opportunity to
participate in employment moving forward as those properties
get redeveloped.
Mr. Clay. Mr. Hydinger, being a developer, do you involve
Section-3-eligible employees in your developments now?
Mr. Hydinger. What we do is we encourage the general
contractors to hire from the property as much as possible. And
when that is possible, there is a certain pride of ownership
that comes with that. And we have been successful, seeing that
occur from time to time.
It is--I will not embellish it. It does not happen as often
as we would like--
Mr. Clay. Sure.
Mr. Hydinger. --but it does happen. And I think it is a
success every time it does occur.
Mr. Clay. It should occur more often, shouldn't it?
Mr. Hydinger. If the person who is applying is able and
willing to work, absolutely.
Mr. Clay. My time is up. Thank you.
Chairwoman Biggert. The gentleman's time has expired.
The gentleman from Missouri is recognized.
Mr. Cleaver. Which one?
Chairwoman Biggert. Mr. Cleaver?
Mr. Cleaver. Thank you, Madam Chairwoman.
Chairwoman Biggert. I am not calling on Mr. Clay again
until we have--
Mr. Cleaver. Thank you, Madam Chairwoman.
The Rental Assistance Program that my colleague, our
colleague introduced a few months ago--and I had a chance to
talk with him for just a few moments before coming in--Mr.
Ellison, is something that I support wholeheartedly. I am one
of the cosponsors.
But I have some questions for you, Ms. Henriquez. If public
housing authorities are actually able to hold debt, does that
not create the opportunity for foreclosure?
Ms. Henriquez. Whenever any entity holds debt, there is an
opportunity for foreclosure. We have 30 years, thus far, of
practice with proven, safe tools on financing that we really on
that will carry forward in this demonstration. And over that
30-year history, we have learned, for example, that on the
multifamily side, the default rate, if you will, is less than
half of 1 percent. Even in the current fiscal environment, it
is very, very, very small.
In addition, the way in which this demonstration is
constructed, that even if there should be, by some slim chance
there should be a foreclosure or a default, all of the use-
agreement restrictions carry forward. Tenant protection rights
are still in place. Long-term affordability is still in place.
And so the purpose of the housing remains, the affordability
remains, and we have the ability then to have that property,
with the use agreements in place, picked up by another not-for-
profit or public sector entity, another housing authority. The
Secretary has the ability to make that change in ownership,
always underlined by the long-term affordability and the tenant
protections going forward.
Mr. Cleaver. I can say of this project what I used to say,
and I will change it, modify it. I would say, McDonald's is the
only entity I have known not to go bankrupt or go into default.
So we can now add public housing authorities.
Ms. Henriquez. I don't see them going into default.
Mr. Cleaver. Okay. I am okay with it.
The other concern is maybe more significant--a more
significant concern is, if you have seen the HUD appropriations
markup, the marked-up House and Senate--you are not getting
what you asked for. So my concern is, if you ask for $200
million and you get--I don't know what--you are not getting
what you asked for. So what does that do to the program?
Ms. Henriquez. We think the program is important. It
provides a direction, a blueprint for us to model, to move
forward. So if we are not getting what we asked for, we need to
then scale the program.
Mr. Cleaver. I know--
Ms. Henriquez. In addition--I am sorry. In addition, what
we have said is we have seen the Senate mark on this, asking us
to look at a no-cost demonstration. We would support this
committee looking at that option as well. And we are prepared
still to go forward with a demonstration at a no-cost proposal
because we think that the direction is absolutely a sound one.
It is what is needed for this portfolio. In the longer term,
there are lessons for us to learn and then to take it to scale
over time.
Mr. Cleaver. I want to talk to you further about that,
because I don't want the failure for the Senate and the House
to give sufficient money for the demonstration and then end up
in this subcommittee hearing again with people complaining that
the demonstration was far too imperfect.
We can talk, because I need to ask one more question, Madam
Chairwoman, and I will do it very quickly. I am concerned with
making sure that the demonstration project doesn't result in a
loss of units, that we still have the one-for-one.
Ms. Henriquez. What we will have is in most circumstances,
we will probably have one for one. I think I would say to you,
though, that in limited circumstances, given market conditions,
that indeed there may be some other ways to come at that
replacement housing in a community. But for the most part, we
are looking not to lose units in this preservation strategy.
Mr. Cleaver. Thank you, Madam Chairwoman.
Chairwoman Biggert. Thank you. The gentleman from Minnesota
is recognized for 5 minutes.
Mr. Ellison. Thank you, Madam Chairwoman. I am going to ask
you a question, a general question about housing, low-income
affordable housing. For people who make, like, 30 percent of
the median income in a given area, would you say the housing
options for them are plentiful or scarce? How would you
characterize that?
Ms. Henriquez. Are you asking me?
Mr. Ellison. Anybody. I am actually asking anybody.
Ms. Henriquez. I think that it is difficult, that the
demand far exceeds the supply, and that there are fewer and
fewer options available unless families--when you start
thinking about transportation costs and housing costs--are
paying in excess of 50 percent of disposable income on those
two commodities alone.
Mr. Ellison. Has the foreclosure crisis, the way it affects
not only homeowners but also tenants--because, of course,
landlords get foreclosed on too--has this exacerbated the
pressure on low-income affordable housing or has it eased it?
Ms. Henriquez. It has exacerbated it in a number of ways.
One, we are finding that the normal turnover time, the people
come in, stay, and then move out through their own choice--the
people are staying longer. We are finding that people are
poorer as they come into the program, and we find that both on
the voucher program and on the public housing program that
people are, I think, eager for more and more economic self-
sufficiency and want to get themselves prepared, but it is
tough fiscal times for the very poor.
Mr. Ellison. Based on the history of Congress appropriating
money for maintenance of assets of public housing, do you think
that we have a realistic chance of ever getting the $26 billion
in maintenance needs that exist right now as an appropriation?
Ms. Henriquez. I want to put my former hat on when I answer
this question. For 13 years, I ran the Boston Housing
Authority. As a former executive director, I would say if there
is the political will to do that in this country, we can do
anything that we put our minds to.
Mr. Ellison. Based on history, do you see it coming up?
Ms. Henriquez. Given the history and the trend, I don't see
that happening. And that is why it is vitally important that we
look to this rental assistance demonstration. We are being
realistic about the current financial times we are in. We are
being realistic about the need for us, both at HUD as an asset
manager and for housing authorities, to be good landlords. And
in part, a large part of that being a good landlord is
providing the kind of safe, affordable, decent housing that
meets code and expectations in local communities--
Mr. Ellison. Thank you.
I would like to open this question up to everybody. When I
introduced the bill that is similar to this one--this is a
demonstration bill; I had a bill that was more broad-based. I
am a hardcore believer in public housing. I think it is a very
important program. But some of my friends say, are you trying
to help folks privatize public housing? And I said, absolutely
not. This is a way to get some lights on and some fixtures, and
this place to be a better place. But how do you respond to that
criticism that this could end up being a provision of public
housing? How do you react to that particular criticism? And I
would invite anyone to respond.
Mr. Elsesser. Mr. Ellison, if I might. I have worked with
many people around your bill on a continuing discussion--the
coalition--the continuing discussion since that time about that
very subject. And I can agree with you that there is a lot of
concern among residents who saw a major loss of housing through
HOPE VI and other events like that. And we are very fearful of
anything.
And I think the Secretary and the Assistant Secretary, to
their credit, reached out, and through your bill in addition,
reached out and worked very hard with people. And I think this
bill is a result of that working to both try to incorporate
protections to the greatest extent possible, from the public
housing side to allay those fears. And at the same time, a
realization amongst the residents that the status quo is not
working; that the status quo does not mean we are not losing
housing; we are losing housing. So we have to do something. And
I think both of those things have come together, and I think
that is why there is such support for this proposal.
Mr. Ellison. I think we have it--if we are not done--
Mr. Guerrero. I would like to add something.
Chairwoman Biggert. One more.
Mr. Ellison. Thank you.
Mr. Guerrero. I think--two points, I guess I would make to
your question. One is that when you only think about serving
families through subsidized housing, we should look at it not
exclusively through whether it is public housing or Section 8
or so forth, but are we serving the most families at the lowest
incomes for the longest period of time in whatever form that
may take. I don't see a shift from public housing to project-
based Section 8 subsidies as a loss of units in any way,
because recently our experience is that we are serving the same
number of families with the same incomes for the same periods
of time, if not more.
The other thought I would put out there for consideration
is that it is not necessarily a cost-savings strategy, but
maybe a better return-on-investment strategy, where today $1 of
capital fund gets you, just for example, $1 of improvement. But
our experience I think is a dollar of Section 8 half rent might
get us $2 of capital improvements because we are able to
leverage that more effectively in the private sector through
loans and through equity.
Mr. Ellison. Thank you, sir. Thank you, Madam Chairwoman.
Chairwoman Biggert. Thank you. And I would have just a
couple of questions with hopefully short answers.
But first of all, Mr. Guerrero, you talk about the local
decision making. And it seems like you have been doing Moving
to Work. Are you part of that?
Mr. Guerrero. We are not a Moving to Work--we would like to
be a Moving to Work agency.
Chairwoman Biggert. Do you think Moving to Work would
provide the flexibility and local decision-making and
innovative financial methods you have described in the public
housing authorities in order to develop the local solutions? Do
you think this is really part of what we are talking about?
Mr. Guerrero. Absolutely. I think the flexibility, the
ability to craft solutions locally with not only our residents
but our local elected officials, local community stakeholders,
is invaluable in that the option should be there for more
housing authorities than currently have the designation. I
think there are a lot of lessons learned already and best
practices for Moving to Work that can be mainstreamed and
regulatory relief that can be implemented now to give us more
flexibility than we have, yes.
Chairwoman Biggert. Okay. And then, Ms. Henriquez, how were
participants in the multifamily and affordable housing
developer community consulted during the development of RAD?
Ms. Henriquez. Much like we did in the public housing side.
My colleagues on the multifamily side, we had stakeholder
convenings, we have had some with housing authorities, we had
some with multifamily owners. There was a lot of outreach
through State housing finance agencies. There was a working
committee that was put together so that the issues that they
would raise that might be particular to a multifamily owner
were addressed and talked about, and how did those line up with
where public housing authorities might be. So we really put
people together in lots of different ways to have this
conversation.
Chairwoman Biggert. How did you find out about this, Mr.
Hydinger?
Mr. Hydinger. I was called and asked some questions, and,
through a series of conversations, asked for my input. Would
private capital, private investors, developers, etc., be
welcomed to the program? And, frankly, I said no, not the way
it was written right now. I hope that it will be. And I would
like to just say that private is not bad. It really isn't. Lots
of people own affordable housing that are private developers
and private owners, and they do quite well and they are
governed by HUD. So Halloween is over, the bogeyman about the
private sector is not all bad. I just want to be sure that we
keep that in mind. But I do appreciate the input.
Chairwoman Biggert. Thank you.
And then, Ms. Henriquez, how does HUD intend to analyze the
outcomes of the demonstration? What are the next steps that HUD
is contemplating once you are able to observe the outcomes of
RAD? And how long will it take for the demonstration to provide
adequate data for an analysis?
Ms. Henriquez. I think we are probably talking as a
demonstration for several years because we really do want both
housing authorities and their residents to be thoughtful about
what they are proposing, which properties they are thinking
about bringing in and how they are going to do that, number
one. They also have to put together physical plans about how
they are going to use the capital dollars, how they are going
to get into the marketplace, whether they are going to use
commercial financing, whether they are going to use tax
credits. All of that is a local decision that housing
authorities, their communities, and their residents need to
talk about.
Once that happens and there is an application and people
voluntarily decide what this program means and what it is going
to look like for them at the local level, by the time we think
that they get the plans in place, they get the funding in place
and their financing straightened out and actually begin the
work--relocation of residents, actually doing the physical
work, moving people back in--that is a multiyear process. We
want to look at along the way what is going on, what those
impacts are both on residents and on the housing authority and
on the financial community.
So I think we are looking at several years before we really
get a body of work to assess and then make some judgments about
growing the program and the lessons learned, and coming back to
have conversations with all of you as well about those lessons
learned before we take the next step.
Chairwoman Biggert. Thank you. Do any of you recommend any
improvements or modifications or further considerations
considering RAD at this time? I guess not. So it sounds like
you are all willing and able to do that.
Ms. Henriquez, were you in charge of bringing all of these
shareholders, stakeholders I should say, together to come up
with RAD?
Ms. Henriquez. In charge of. So, working with--
Chairwoman Biggert. I am just wondering where this idea all
came from.
Ms. Henriquez. We have had several iterations of a bill in
the past 18 months or so. We heard lots of conversations, and
so a lot of times as we talked about this--there is a group at
HUD, it is collaborative. It is in the multifamily side as well
as the public housing side, and we jointly sort of ran this
program and these ideas. And so Carol Galante and I were co-
conveners. We have staff who worked with each other as well.
And we have just been running this to ground. We have people
actually doing lots of--and some of them are here behind me--
actually running numbers, looking at permutations, trying to
figure out strategies, looking at the environment, just
everything. And then listening to residents and housing
authorities, from lenders about this works, this might not, and
really running to ground. And then we really had a group of
people come and say, we think it could work this way; what do
you think, HUD? We have talked about that. And so, what you see
is where we are with this demonstration now.
Chairwoman Biggert. Thank you. And thank you for initiating
such a deliberative process. That is what we are working to do
with--to develop Section 8 as well. I really appreciate all of
your work. Are there any other questions? Mr. Hurt?
Thank you. And I would ask unanimous consent to insert the
following material into the record: an October 11, 2011, letter
from the U.S. Department of Housing and Urban Development; an
October 31, 2011, letter from the Housing Assistance Council; a
September 14, 2011, letter from the Coalition of Housing
Industries; and a November 2, 2011, letter from the National
Association of Housing and Redevelopment Officials.
And without objection, all Members' opening statements will
be made a part of the record. The Chair notes that some Members
may have additional questions for this panel which they may
wish to submit in writing. Without objection, the hearing
record will remain open for 30 days for Members to submit
written questions to these witnesses and to place their
responses in the record.
And I would like to thank you all. I think this has been a
great hearing and it has given us a lot of information. And I
hope that we really can move ahead with this. This is such an
important issue. And thank you all for being here. With that,
this hearing is adjourned.
[Whereupon, at 4:12 p.m., the hearing was adjourned.]
A P P E N D I X
November 3, 2011
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