[Senate Hearing 112-]
[From the U.S. Government Publishing Office]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2013
----------
THURSDAY, MARCH 1, 2012
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:33 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray and Collins.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. SHAUN DONOVAN, SECRETARY
opening statement of senator patty murray
Senator Murray. Mr. Secretary, welcome back to our
subcommittee, as we are here today to talk about fiscal year
2013 budget requests for the Department of Housing and Urban
Development (HUD).
As we begin our work on next year's budget, there are
encouraging signs that our economy is moving now in the right
direction. Although we aren't moving quickly enough for
families that continue to struggle, and we certainly have a
long way to go, the private sector has now been adding jobs for
almost 2 years, businesses are growing, and confidence is up.
We seem to have stepped back, finally, from the precipice,
which, of course, is very good news for the housing market,
which depends on a strong and stable economy to recover and
thrive.
But despite the positive signs, we still face significant
challenges. Over 22 percent of homeowners are underwater.
The recent settlement that was announced among the five
largest banks, the States, and the Federal Government is an
important step. It holds banks accountable and provides relief
to homeowners. But the settlement also paves the way for banks
to proceed with foreclosures that have been stalled in the
pipeline.
While it is important to reduce the excess inventory of
distressed housing, increased sales of these properties at
reduced prices may further depress home values.
Climbing back from the housing crash will not be easy, and
I am interested in hearing your views on how we can increase
the stability of the market.
The depressed housing market has also taken its toll on the
Federal Housing Administration (FHA). This is made clear in the
President's budget. The budget indicates that, for the first
time, FHA may require Federal funding to cover its losses. I
have long been concerned about the solvency of FHA's Mutual
Mortgage Insurance (MMI) Fund, and I applaud the efforts of the
Administration to strengthen FHA's risk controls.
But many of the financial problems facing FHA are related
to older books of business insured at the height of the housing
boom. So while these changes to strengthen the program are
important and long overdue, it will also be important to
recover or prevent expected losses from older loans.
I am pleased that the recent mortgage settlement includes
money for FHA. And other settlements, most notably Bank of
America, will also provide money to cover losses related to
improper mortgage originations.
These settlements should help avoid the need for taxpayer
funding, and I hope you will continue to look for opportunities
to recoup losses from fraudulent or poorly underwritten loans.
Additional changes to FHA premiums contained in the budget,
as well as those announced on Monday, represent your continued
efforts to improve the solvency of the MMI Fund and protect the
taxpayer from having to cover its losses.
Beyond FHA, today we will also examine other aspects of the
Administration's request, which is $44.8 billion in gross
resources to support HUD's programs. While this represents an
increase of over 3 percent, it is largely a current services
budget as a result of the numerous offsets included in the
fiscal year 2012 bill.
As the Secretary's testimony notes, 83 percent of HUD's
budget is dedicated to providing housing to the Nation's most
vulnerable, and these programs require annual adjustments. As
we continue to live under the caps of the Budget Control Act,
this presents us with very difficult choices.
Last year, Senator Collins and I worked very hard to
protect HUD's core rental assistance programs. But doing so
meant difficult cuts to programs like the Community Development
Block Grant (CDBG), HOME, and Housing for the Elderly. The cuts
to CDBG that began in fiscal year 2011 are being widely felt
today. Cities and towns are cutting services to vulnerable
citizens, laying off workers, or delaying critical investments
in their communities.
This year's budget faces many of the same challenges we
struggled with last year. How do you craft a budget that
protects low-income residents who rely on HUD assistance to
keep a roof over their heads, makes the economic development in
affordable investments that strengthen our communities, and
gives HUD the tools it needs to effectively manage its
programs?
While the Administration's fiscal year 2013 budget tries to
address these goals by balancing priorities, I am concerned
about some of the proposals. The proposed budget for Project-
Based Rental Assistance will manage within the requested level
by intentionally not funding contracts for a full 12 months. I
have seen this policy before. And while this may be manageable
in the short run, I'm concerned we won't have the resources
when the bill eventually becomes due.
In the Tenant-Based Rental Assistance account, I'm also
concerned that the funding level requested to renew vouchers is
effectively flat, despite anticipated inflation and the need to
renew vouchers for the first time. The budget also relies on
savings from a number of policy changes which are not without
controversy.
So as we make the difficult choices in this budget, I want
to be sure we are making decisions with an understanding of
their consequences and an eye toward the future.
Despite my concerns, there are some bright spots in this
budget. The request, again, seeks $75 million for new HUD-
Veterans Affairs Supportive Housing (HUD-VASH) vouchers, which
have really helped to reduce homelessness among our veterans by
12 percent between 2010 and 2011.
The Administration has worked hard to develop a plan to
finally end homelessness, and I'm very glad the request for
homeless programs reflects a continued commitment to that plan.
At a time when resources are scarce, oversight of HUD's
programs becomes even more important. I look forward to
continuing to work with the Department and my colleagues to
find additional ways to improve HUD's programs.
I also want to acknowledge today HUD's new inspector
general, Mr. Montoya, who is with us today. I welcome his
vision for HUD's Office of Inspector General, and look forward
to working with him to protect taxpayer dollars and improve the
efficiency of HUD's programs.
The fiscal year 2013 budget, once again, requires difficult
choices to be made. As I work with my colleagues, Senator
Collins and those on this subcommittee, to put together this
bill, I will be mindful of the millions of Americans who rely
on HUD's programs for a place to sleep each night.
prepared statement
Mr. Secretary, I look forward to our discussion today and
working with you as we develop this 2013 budget. And I
appreciate everyone accommodating us in moving this hearing up.
[The statement follows:]
Prepared Statement of Senator Patty Murray
Mr. Secretary, I want to welcome you back to the subcommittee today
as we discuss the fiscal year 2013 budget request for the Department of
Housing and Urban Development (HUD).
As we begin our work on next year's budget, there are encouraging
signs that our economy is moving in the right direction. Although we
aren't moving quickly enough for families that continue to struggle--
and we certainly have a long way to go.
The private sector has been adding jobs for almost 2 years.
Businesses are growing, confidence is up, and we seem to have stepped
back from the precipice. Which, of course, is very good news for the
housing market--which depends on a strong and stable economy to recover
and thrive.
housing market challenges
But despite the positive signs, we still face significant
challenges. Over 22 percent of homeowners are underwater. The recent
settlement announced among the five largest banks, the States, and the
Federal Government is an important step. It holds banks accountable and
provides relief to homeowners.
But the settlement also paves the way for banks to proceed with
foreclosures that have been stalled in the pipeline. While it is
important to reduce the excess inventory of distressed housing,
increased sales of these properties at reduced prices may further
depress home values. Climbing back from the housing crash will not be
easy, and I am interested in hearing your views on how we increase the
stability of the market.
fha solvency
The depressed housing market has also taken its toll on the Federal
Housing Administration (FHA); this is made clear in the President's
budget. The budget indicates that for the first time, FHA may require
Federal funding to cover its losses.
I have long been concerned about the solvency of FHA's Mutual
Mortgage Insurance Fund. I applaud the efforts of this administration
to strengthen FHA's risk controls.
But many of the financial problems facing FHA are related to older
books of business insured at the height of the housing boom.
So while these changes to strengthen the program are important--and
long overdue--it will also be important to recover or prevent expected
losses from older loans.
I am pleased that the recent mortgage settlement includes money for
FHA. And other settlements, most notably with Bank of America will also
provide money to cover losses related to improper mortgage
originations.
These settlements should help avoid the need for taxpayer funding.
And I hope you will continue to look for opportunities to recoup losses
from fraudulent or poorly underwritten loans.
Additional changes to FHA premiums contained in the budget, as well
as those announced on Monday, represent your continued efforts to
improve the solvency of the MMI Fund and protect the taxpayer from
having to cover its losses.
hud's fiscal year 2013 budget
Beyond FHA, today we will also examine other aspects of the
administration's request, which is $44.8 billion in gross resources to
support HUD's programs.
While this represents an increase of over 3 percent, it is largely
a current services budget as a result of the numerous offsets included
in the fiscal year 2012 bill. As the Secretary's testimony notes, 83
percent of HUD's budget is dedicated to providing housing to the
Nation's most vulnerable.
These programs require annual adjustments. As we continue to live
under the caps of the Budget Control Act, this presents us with very
difficult choices. Last year, Senator Collins and I worked very hard to
protect HUD's core rental assistance programs. But doing so meant
difficult cuts to programs like Community Development Block Grant
(CDBG), HOME, and Housing for the Elderly.
The cuts to CDBG that began in fiscal year 2011 are being widely
felt today. Cities and towns are cutting services to vulnerable
citizens, laying off workers, or delaying critical investments in their
communities.
This year's budget faces many of the same challenges that we
struggled with last year. How do you craft a budget that:
--Protects low-income residents who rely on HUD assistance to keep a
roof over their heads;
--Makes the economic development and affordable housing investments
that strengthen our communities; and
--Gives HUD the tools it needs to effectively manage its programs?
budget proposal concerns
While the administration's fiscal year 2013 budget tries to address
these goals by balancing priorities, I am concerned about some of its
proposals.
The proposed budget for Project-Based Rental Assistance will manage
within the requested level by intentionally not funding contracts for a
full 12 months. I have seen this policy before. And while this may be
manageable in the short-run, I am concerned that we won't have the
resources when the bill eventually comes due.
In the Tenant-Based Rental Assistance account, I am also concerned
that the funding level requested to renew vouchers is effectively
flat--despite anticipated inflation and the need to renew vouchers for
the first time.
The budget also relies on savings from a number of policy changes,
which are not without controversy. So as we make the difficult choices
in the budget, I want to be sure that we are making decisions with an
understanding of their consequences and an eye toward the future.
budget highlights
Despite my concerns, there are some bright spots in the budget. The
request again seeks $75 million for new HUD-VASH vouchers, which have
helped to reduce homelessness among veterans by 12 percent between 2010
and 2011.
The administration has worked hard to develop a plan to finally end
homelessness. And I am very glad that the request for homeless programs
reflects a continued commitment to that plan.
hud oversight
At a time when resources are scarce, oversight of HUD's programs
becomes even more important. I look forward to continuing to work with
the Department and my colleagues to find additional ways to improve
HUD's programs.
I would like to acknowledge HUD's new inspector general, Mr.
Montoya, who is with us today. I welcome his vision for HUD's Office of
Inspector General and I look forward to working with him to protect
taxpayer dollars and improve the efficacy of HUD's programs.
closing
The fiscal year 2013 budget once again requires difficult choices
to be made.
As I work together with Senator Collins and my colleagues on the
subcommittee to put together this bill, I will be mindful of the
millions of Americans who rely on HUD's programs for a place to sleep
each night.
Mr. Secretary, I look forward to our discussion today and working
with you as we develop the fiscal year 2013 budget.
With that I will turn it over to my partner in these efforts,
Senator Collins.
Senator Murray. And Senator Collins, thank you for
accommodating us as well.
As all of you know, we have a vote in about an hour and 20
minutes, and I know Senator Collins and I both need to be on
the floor then.
So with that, let me turn it over to my colleague, Senator
Collins. Thank you for being here today.
STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you very much, Chairman Murray.
First, let me say how much I enjoyed working with you last
year as we crafted this important appropriations bill. We did
so in a truly bipartisan fashion. We share a lot of the same
priorities.
And it was also a great pleasure to work with Secretary
Donovan, and I appreciate his being here today as we discuss
how to meet the housing and economic development needs of
families and communities across our Nation.
As we begin to construct the fiscal year 2013 budget, we
are mindful that we are once again operating under very
difficult fiscal constraints. That is even more challenging
when one considers that more than 80 cents out of every $1 of
the budget request is required just to continue serving those
who currently rely on HUD for just housing support.
Addressing the ongoing challenge of homelessness remains a
top priority of mine. Chairman Murray and I continue to share
this commitment, particularly for our Nation's veterans. And we
worked very hard last year to preserve funding for the HUD-VASH
program.
One out of every six men and women in homeless shelters are
veterans, and unfortunately, veterans are 50 percent more
likely to fall into homelessness compared to other Americans.
So I am pleased that the budget request continues funding for
the HUD-VASH program at $75 million. This level of funding
should help us serve an additional 10,000 veterans who would
otherwise likely be homeless.
Veterans' homelessness fell by nearly 12 percent in the
year 2010, demonstrating that these programs work. I've also
always supported funding for the homeless assistance grants
programs to prevent and end homelessness. The budget proposes
$2.2 billion for this program. That's an increase of
approximately $330 million over the previous fiscal year.
It is, however, important that we focus on what works. And
one of the models that I've seen work in the State of Maine is
the Housing First model for aiding those who are homeless.
We need better data to ensure the effectiveness of all
housing programs. This particular model is proving its
effectiveness in my home State of Maine through the Florence
House, a comprehensive center for homeless women in Portland.
In addition to programs that effectively serve the
homeless, HUD, of course, provides support for affordable
rental housing. The budget proposes more than $19 billion for
the Tenant-Based Rental Assistance program, of which $1.6
billion is available for administrative costs. That's an
increase in direct response to the fact that some public
housing agencies (PHAs) are having a difficult time
administering their voucher programs and have actually turned
back vouchers as a result, and that is very troubling.
We don't want to overpay them for their administrative
expenses, but they need to have sufficient expenses to
efficiently and effectively run the program.
Another important issue that I'd like to address is HUD's
oversight of the Maine State Housing Authority Section 8
Voucher Program. A series of recent newspaper stories revealed
troubling cases of code violations and other poor conditions in
Oxford County, Maine. In fact, the local fire chief was so
upset that he wrote a letter to my office, asking for my help.
HUD has an obligation to oversee the use of Federal funds
of public housing agencies nationwide and to ensure that these
funds are not supporting substandard properties.
I just want to share, briefly, with my colleagues and the
people from HUD here, and the inspector general, one of the
particular units, one of the apartments that was cited in this
newspaper series. HUD was actually paying $600 a month in
Federal subsidies for an apartment that had septic backups in
the kitchen sink, a damaged fire escape, and bat and rodent
infestation. Totally unacceptable.
It's bad enough that taxpayers were charged for substandard
units, but it's appalling that residents were forced to live in
such horrible conditions. The welfare and safety of tenants
must be safeguarded, and federally subsidized properties must
represent fair value to both the tenant and the taxpayer alike.
I have requested the inspector general to audit HUD's
oversight of the unit inspections and the Maine State Housing
Authority's administration of the program. It is clearly
critical that federally subsidized properties comply with all
health, safety, and quality standards.
And I want to commend the Secretary for taking my concerns
very seriously and for asking the Maine State Housing Authority
for a corrective action plan.
And I'm also very pleased that the inspector general has
stepped in and is investigating this problem.
I, too, want to echo Senator Murray's concerns about the
Federal Housing Administration, which plays such a critical
role in affordable home ownership. The decline in the housing
market over the past several years has had a tremendous impact
on families and communities throughout the Nation as well as
our economy as a whole.
While I understand that HUD has taken a number of steps to
increase capital reserves, it remains troubling that the
capital reserve ratio remains below the congressionally
mandated level of 2 percent. I'm optimistic that we'll hear
some good news as a result of the settlements, but that still
is of concern.
I also want to discuss in the question period with the
Secretary what can be done to ensure the greater use of wood
pellet heating systems in Maine that have not qualified for
assistance under the FHA program. And those are increasingly
popular. They are an alternative to fossil fuels. Maine is very
heavily dependent on home heating oil, the price of which has
spiked.
Finally, the level funding for the Community Development
Block Grant program, proposed at about $3 billion, is
disappointing. This popular program supports the economic
growth strategies of communities nationwide, and enables key
investments in their long-term economic growth. It is programs
like CDBG that help to build a foundation for future
prosperity.
These are just some of the issues before our subcommittee.
PREPARED STATEMENT
And again, Madam Chairman, I look forward to working very
closely with you again this year.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
Thank you, Chairman Murray. I am delighted to join you once again
as we start the fiscal year 2013 appropriations process and consider
the Department of Housing and Urban Development's (HUD's) budget
request.
Mr. Secretary, it is nice to see you again. I look forward to
working with you to meet the housing and economic development needs of
families and communities throughout the Nation.
As we begin to construct the fiscal year 2013 budget, we will
continue to face difficult decisions given the fiscal constraints we
remain under. This is even more challenging when more than 80 cents out
of every $1 of the fiscal year 2013 request is required just to
continue serving those who currently rely on HUD for housing support.
Addressing the ongoing challenge of homelessness remains a top
priority of mine. Chairman Murray and I continue to share this
commitment, particularly for our Nation's veterans. One out of every
six men and women in homeless shelters are veterans, and unfortunately,
veterans are 50 percent more likely to fall into homelessness compared
to other Americans.
I am pleased the budget continues funding for HUD's Veterans
Affairs Supportive Housing (HUD-VASH) Program at $75 million. This
level of funding will serve an additional 10,000 veterans, who would
otherwise be homeless were it not for HUD-VASH. Veterans' homelessness
fell by nearly 12 percent in 2010, demonstrating that programs like
HUD-VASH work.
I have always supported funding for the Homeless Assistance Grants
program to prevent and end homelessness. The budget proposes $2.2
billion for this program, $330 million more than fiscal year 2012.
We need to focus, however, on what works such as the Housing First
model for aiding those who are homeless. We need better data to ensure
the effectiveness of all housing programs. This model is proving its
effectiveness in my home State of Maine through Florence House, a
comprehensive center for homeless women in Portland.
In addition to programs that effectively serve the homeless, HUD
also provides support for affordable rental housing. The budget
proposes more than $19 billion for the Tenant-Based Rental Assistance
program, of which $1.6 billion is available for administrative costs.
This represents a $225 million increase in administrative funding from
fiscal year 2012. It is my understanding that some public housing
agencies are having a difficult time administering their voucher
programs, including HUD-VASH, this fiscal year.
Another important issue I would like to address is HUD's oversight
of the Maine State Housing Authority's Section 8 voucher program. A
series of recent newspaper articles revealed troubling cases of code
violations and other poor conditions in Oxford County, Maine. HUD has
an obligation to oversee the use of Federal funds at public housing
agencies nationwide and to ensure these funds do not support
substandard properties.
One of the units cited, for which HUD was paying $600 in Federal
subsidies, had septic backups in the kitchen sink, a damaged fire
escape, and bat and rodent infestation. It is bad enough that taxpayers
were charged for substandard units, but it ,is appalling that residents
were forced to live in such horrible conditions. The welfare and safety
of tenants must be safeguarded, and federally subsidized properties
must represent fair value to the tenant and the taxpayer alike.
I requested that the Inspector General audit HUD's oversight of
unit inspections and the MSHA's administration of its program. It is
critical that federally subsidized properties comply with all health,
safety, and quality standards.
In addition to supporting affordable rental housing, HUD plays a
critical role in affordable home ownership through the Federal Housing
Administration. The decline in the housing market over the past several
years has had a tremendous impact on families and communities
throughout the Nation, from the huge number of foreclosures to the
substantial decline in home values.
While I understand HUD has taken a number of steps to increase
capital reserves, it is troubling that the capital reserve ratio remain
s below the congressionally mandated level of 2 percent. In questions I
also want to discuss how HUD regulations can encourage the great use of
wood pellet heat in FHA-assisted homes.
Finally, the level funding for the Community Development Block
Grant (CDBG) program, proposed at $2.95 billion, is disappointing. This
popular program supports the economic growth strategies of communities
nationwide and enables key investments in their long-term economic
growth. It is programs like CDBG that help to build a foundation for
future prosperity.
These are just some of the issues we are confronted with on our
subcommittee this year. Chairman Murray, I look forward to working with
you as we consider HUD's fiscal year 2013 budget request.
Senator Murray. Thank you very much, Senator Collins.
With that, we'll turn it over to you, Secretary Donovan,
for your opening statement.
SUMMARY STATEMENT OF HON. SHAUN DONOVAN
Secretary Donovan. Thank you, Madam Chair, ranking member,
for the opportunity to be here today. Today, I would like to
discuss how HUD's fiscal year 2013 budget proposal is essential
to creating housing and communities built to last and will
directly support 700,000 jobs.
Madam Chair, in developing this proposed budget we followed
four principles. The first is to continue our support for the
housing market, while bringing private capital back. The
critical support FHA provided over the last 3 years has helped
2.8 million families buy a home and more than 1.7 million
homeowners refinance into stable, affordable products with
average monthly savings of more than $125.
At the same time, we have taken the most significant steps
in FHA history to reduce risks to the taxpayer and reform FHA's
mortgage insurance premium structure. With the premium
increases of 10 basis points recently enacted by Congress,
coupled with additional premium increases on jumbo loans
reflected in the budget, FHA projects to add an additional $8.1
billion in receipts to the capital reserve account in 2013.
And just this week, we announced a series of additional
premium changes that will increase receipts to FHA above those
already in the budget by over $1 billion in fiscal years 2012
and 2013.
We have also taken significant steps to increase
accountability for FHA lenders, and continue to seek expanded
authority via legislation that will further enable us to
protect the fund, as will the recent settlement with America's
five largest servicers, through which FHA will receive
approximately $900 million to compensate for losses associated
with loans originated or serviced in violation of FHA
requirements.
With FHA's current market share declining since 2009, these
reforms will further help private capital return, while
ensuring that FHA remains a vital source of financing for
underserved borrowers and communities.
Just as importantly, while HUD's fiscal year 2013 request
is $44.8 billion in gross budget authority, because of FHA and
Ginnie Mae receipts, the cost to the taxpayer for this budget
is only $35.35 billion, fully 7.3 percent below the fiscal year
2012 enacted level, more than meeting our deficit reduction
targets while still allowing us to improve oversight of our
core programs.
The second principle we used to develop our budget was to
protect current residents and improve the programs that serve
them. The 5.4 million families who live in HUD-assisted housing
earn $10,200 per year, as a median, and more than half are
elderly or disabled. That's why 83 percent of our budget, as
you both recognized, keeps these residents in their homes and
provides basic upkeep to public housing, while also continuing
to serve our most vulnerable populations through our homeless
programs.
As you know, inflation and stagnant incomes put real
pressure on the cost of these programs each year. This year, we
redoubled our efforts to minimize and even reverse these
increases, not just for this year, but in the years to come.
For instance, we are working with your colleagues to enact
Section 8 reform legislation that would save $1 billion over
the next 5 years, while also supporting the ability of public
housing authorities in small towns and rural areas to better
serve the working poor.
The budget also achieves savings in the Project-Based
Rental Assistance program by improving oversight of market rent
studies, capping certain annual subsidy increases, and
offsetting excess reserves.
Even still, protecting current families required us to make
choices we would not have made in a different fiscal
environment. Requesting $8.7 billion for the Project-Based
Rental Assistance program allows us to serve the same number of
families, but it required us to provide less than 12 months of
funding for the majority of contracts.
In addition, even though the budget maintains hardship
exemptions, the budget raises minimum rents throughout our core
rental assistance programs to a uniform $75 per month.
These very difficult decisions are the kinds of steps we
were required to take in this difficult budget environment.
That's why our third principle, continuing investments that
leverage private dollars and create jobs, is so important.
Through our Choice Neighborhoods program, we are helping
communities engage a broad range of public and private partners
to transform our poorest neighborhoods and ensure our children
are prepared for the 21st century economy.
As the President said, if we are going to compete with
China and India, we can't leave anyone on the sidelines.
Likewise, our Sustainable Communities grants challenge
communities to creatively use existing resources that help them
insource and bring jobs back to our shores.
In Memphis, which is using HUD's Community Challenge grant
to more effectively use Federal and State resources in
neighborhoods surrounding its international airport, FedEx has
already created over 3,000 jobs, and companies like Electrolux
and Nucor Steel are poised to create another 1,500.
At a time when the fiscal environment has required us to
make tough choices about CDBG and HOME--dollar-for-dollar, the
most effective job creators in our budget--these grants are
essential because they leverage the limited resources of core
programs even more smartly and efficiently.
Indeed, reducing regulatory burdens and increasing
efficiency is the fourth and final principle we used to
formulate this budget. For example, the budget provides
flexibilities to public housing agencies to better manage in
this fiscal environment. And to hold our partners accountable
for the funding they receive, it also continues our
Transformation Initiative (TI).
With your help, we are both continuing the next generation
management system that will improve monitoring and oversight of
our largest rental assistance programs, and launching a
crosscutting technical assistance initiative targeted to PHAs
so they have the capacity to manage their budgets.
TI research also allows us to propose increased investments
in programs we know work, like permanent support of housing and
rapid re-housing that end homelessness and save money. That's
why, even in this difficult environment, as both of you have
championed, we proposed additional funding for homeless
assistance grants and the HUD-VASH program for homeless
veterans, ensuring we can end chronic and veteran homelessness
by 2015.
All told, despite tough choices, this proposed budget
allows us to serve 27,000 more vulnerable families. It
recognizes that the recovery of our housing market is essential
to our broader economic recovery, and it expresses our belief
that every American should get a fair shot, do their fair
share, and play by the same rules.
PREPARED STATEMENT
Thank you for having me here today.
[The statement follows:]
Prepared Statement of Hon. Shaun Donovan
Chairman Murray, Ranking Member Collins, and members of the
subcommittee, thank you for the opportunity to testify today regarding
the fiscal year 2013 budget for the Department of Housing and Urban
Development (HUD), Housing and Communities Built to Last.
I appear before you to discuss this budget in an economic
environment that is significantly improved from when the President took
office. An economy that was shrinking is growing again--and instead of
rapid job loss, more than 3.2 million new private sector jobs have been
created in the last 22 months, and national unemployment has fallen to
a near 3-year low. But we know there's still more work to be done to
ensure that America can create an economy built to last--with good jobs
that pay well and security for the middle class.
HUD's fiscal year 2013 budget tackles these challenges head on: By
helping responsible families at risk of losing their homes; by
providing quality affordable rental housing to some of our Nation's
most vulnerable families; by transforming neighborhoods of poverty to
ensure we are not leaving a whole generation of our children behind in
our poorest communities; by rebuilding the national resource that is
our federally assisted public housing stock and ensuring that its
tenants are part of the mobile, skilled workforce our new global
economy requires; and by leveraging private sector investments in
communities to create jobs and generate the economic growth our country
needs. Indeed, this budget will support hundreds of thousands of jobs
both directly and indirectly, serving as a powerful engine for job
creation in the places that need them most.
Our budget provides $44.8 billion for HUD programs, an increase of
$1.4 billion, or 3.2 percent, above fiscal year 2012. This program
funding level (i.e., gross budget authority) is offset by $9.4 billion
in projected Federal Housing Administration (FHA) and Ginnie Mae
receipts, leaving net budget authority of $35.4 billion, or 7.3 percent
below the fiscal year 2012 enacted level of $38.2 billion. The budget
reflects the reality that we cannot create an economy built to last
without taking responsibility for our deficit. The caps set by the
Budget Control Act of 2011 promise over $907 billion in total
discretionary cuts over the next 10 years, and every department shares
a responsibility to make tough cuts so there's room for investments to
speed economic growth. To maintain our commitment to fiscal discipline,
this budget invests in improving the infrastructure and technological
systems critical to reforming the Government to be leaner, more
transparent, and ready for the 21st century. Moreover, by providing a
menu of key reforms--including to some of our largest rental assistance
programs--this budget simplifies and aligns policies to be more
efficient and effective, while saving the taxpayer hundreds of millions
of dollars. To be clear, not all of the reforms we're proposing are
easy. Indeed, this budget makes tough choices in order to contribute to
deficit reduction in a substantial way.
responding to the crisis
Much has happened in the 3 years since HUD submitted its fiscal
year 2010 budget. Only weeks before the Bush administration and
Congress had taken dramatic steps to prevent the financial meltdown,
the Nation was losing 753,000 jobs a month, our economy had shed jobs
for 22 straight months, house prices had declined for 30 straight
months, and consumer confidence had fallen to a 40-year low.
In the face of an economic crisis that experts across the political
spectrum predicted could turn into the next Great Depression, the Obama
administration had no choice but to take aggressive steps. The Federal
Reserve and Treasury helped keep mortgage interest rates at record
lows. Because low interest rates only matter if there are mortgages
available at those rates, the administration also provided support for
Fannie Mae and Freddie Mac, while HUD's Federal Housing Administration
stepped in to play its critical countercyclical role in helping to
stabilize the housing market. The administration proposed, and Congress
enacted, a homebuyer tax credit to spur demand in the devastated
housing sector. And we took steps to help families keep their homes--
through mortgage modifications and FHA's loss mitigation efforts.
The results of these extraordinary but necessary actions are clear.
Since April 2009, more than 5.6 million borrowers have received
mortgage modifications with affordable monthly payments, nearly 14
million families have been able to refinance their homes, and
foreclosures are down by nearly 50 percent.
creating an economy built to last
Now, having prevented our economy from falling into a second Great
Depression, the administration is focused on ensuring that we create an
economy built to last, which makes strategic investments in our
communities but also takes responsibility for our deficit. For HUD,
that meant using four core principles to develop our budget:
--Continuing to provide critical support for the housing market while
bringing private capital back into the market;
--Protecting current residents--and improving the programs that serve
them;
--Continuing progress on signature initiatives to provide communities
with the tools they need to speed economic growth; and
--Reducing regulatory burdens and increasing efficiency--including
streamlining, simplifying, and reforming current programs.
As such, the Department's budget for fiscal year 2013 follows the
roadmap the President has laid out for jumpstarting our economy through
educating, innovating, and building--by targeting our investments to
the families and geographies that need them the most, and putting
American back to work. Specifically, this budget helps:
--Give Hard-Working, Responsible Americans a Fair Shot.--Not only is
there more work to do to ensure that the economic security of
middle class Americans does not continue to erode, we have a
responsibility to directly address the challenges facing the
most vulnerable Americans. This budget does so by serving over
5.4 million families--the majority of whom are extremely low
income--in our rental assistance programs; and by supporting
the Choice Neighborhoods initiative ($150 million), which
provides communities with the innovative tools they need to
revitalize neighborhoods of concentrated poverty--efforts that
helped communities leverage over $1.6 billion of private
funding last year alone.
--Ensure Every American Plays by the Same Rules.--Put simply, we
cannot settle for a country where a shrinking number of people
do really well, while more Americans barely get by. There are
still millions of Americans who have worked hard, acted
responsibly, and made their mortgage payments on time--who,
because their homes are worth less than they owe on their
mortgage, can't take advantage of today's historically low
interest rates and are facing real economic insecurity. In
addition to steps taken by the administration to combat
predatory lending practices (discussed in depth below), this
budget provides critical funding for the Housing Counseling
program ($55 million), which will directly help over 185,000 of
low- to moderate-income families in improving access to quality
affordable housing, expanding homeownership opportunities, and
preserving homeownership through foreclosure mitigation; as
well as providing training to over 4,800 counselors nationwide.
This budget also recognizes that we can no longer tolerate a
federally supported rental housing system that is ``separate and
unequal''--one which expects public housing authorities (PHAs) to house
over 3 million families, subjecting them to overly burdensome
regulation while denying them access to private capital available to
virtually every other form of rental housing. To bring our rental
housing system into the 21st century and begin addressing the $26
billion in public housing capital needs, this budget includes proposals
that would increase PHA flexibility to fund critical supportive
services for assisted families while also moving them toward mainstream
real estate financing and management practices through the
consolidation of outmoded funding streams. At the same time, by
implementing the second year of our Rental Assistance Demonstration,
the budget will use existing resources to ensure that up to 60,000
units funded through our public housing and the so-called ``orphan
programs'' can leverage debt to access private capital and preserve
affordable housing.
Create New Jobs in America To Discourage Outsourcing.--In addition
to the hundreds of thousands of jobs that this budget creates both
directly and indirectly, it makes an essential contribution to the
administration's broader effort to discourage outsourcing and encourage
insourcing. Specifically, attracting new businesses to our shores
depends on urban, suburban, and rural areas that feature more housing
and transportation choices, homes that are near jobs, and
transportation networks that move goods and people efficiently--which
is why this budget restores funding for Sustainable Housing and
Communities ($100 million), which embodies the President's commitment
to being a new kind of Federal partner to regions, States, and
localities as they tackle planning and economic development challenges
for the 21st century.
Of course, smart planning requires sustained follow-through. That
is why HUD is committed to ensuring that its core community and housing
development work contributes to more and better transportation choices;
promotes equitable, affordable housing; and aligns Federal policies and
funding to remove barriers to local collaboration. Accordingly, we will
continue to make critical investments programs such as the Community
Development Block Grant (CDBG) ($2.95 billion in formula grants) and
Native American Housing Block Grant ($650 million). In particular, CDBG
is an important catalyst for economic growth--helping leaders around
the country bring retail businesses to their communities, forge
innovative partnerships and rebuild their economies.
Reform Government So That It's Leaner, Smarter, More Transparent,
and Ready for the 21st Century.--It is clear that an economy built to
last requires a Federal Government that is efficient, streamlined, and
transparent. As such, the budget proposes reforms to HUD rental
assistance programs that would save over $500 million in fiscal year
2013 without reducing the number of families served--by streamlining
programs and reforming policies. Moreover, this budget once again calls
for the flexible use of resources (estimated $120 million) \1\ through
the Transformation Initiative, which the Department needs to invest in
technical assistance to build local capacity to safeguard and
effectively invest taxpayer dollars; conduct innovative research,
evaluations of program initiatives and demonstration programs so we can
fund what works and stop funding what doesn't; and upgrade the IT
infrastructure that tracks and monitors our programs.
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\1\ The total TI transfer authority in fiscal year 2013 is
approximately $215 million; however, HUD anticipates transferring
approximately $120 million.
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moving the needle, making substantial progress
In short, this budget will achieve substantial results not only for
vulnerable, low-income Americans but also for hard-hit local and State
economies across the country. Its carefully targeted investments will
enable HUD programs to serve millions of families in thousands of
communities nationwide; to help create an economy built on American
manufacturing, American energy, skills for American workers, and a
renewal of American values.
Consistent with the previous 2 years, HUD's fiscal year 2013 budget
is structured around the five overarching goals the Department adopted
in its Strategic Plan 2010-2015. These goals reflect the Department's--
and my--commitment to ``moving the needle'' on some of the most
fundamental challenges facing America as we create an economy built to
last. Indeed, every month, I hold HUDStat meetings on one or more of
these goals, to assess progress and troubleshoot problems in order to:
(1) Ensure that HUD is as streamlined and effective as possible in the
way that we administer our own programs and partner with other Federal
agencies; and (2) hold our grantees accountable for their expenditure
of taxpayers' hard-earned dollars.
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holding ourselves accountable: moving the needle on veterans
homelessness
In a year when we have troops returning from two wars, we cannot
afford to waste any time in the fight to end veterans homelessness.
That is why the partnership between HUD and the Department of Veterans
Affairs (VA) is more important than ever. Over the last 2 years alone,
HUD and the VA have collaborated through the HUD-VASH program to end
homelessness for more than 40,000 veterans, far surpassing HUD's High
Priority Performance Goal of 31,000. Overall, HUD and the VA have
jointly committed to eliminating veterans homelessness by 2015, a goal
which can only be achieved through effective collaboration, along with
a joint focus on data-driven accountability as demonstrated in
processes like HUDStat. VA Deputy Secretary Scott Gould and key VA
program staff have become regular participants in HUDStat meetings,
where together we analyze performance data to understand trends,
identify best practices, and prioritize the actions needed to
accelerate progress. Through this collaboration, which extends to staff
throughout the country, I am proud of the work we have done to keep us
on track to end veteran's homelessness by 2015. However, as President
Obama has said, until we reach a day when not a single veteran sleeps
in our Nation's streets, our work remains unfinished.
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hud goal 1: strengthen the nation's housing market to bolster the
economy and protect consumers
This administration entered office confronting the worst economic
crisis since the Great Depression--as mortgages were sold to people who
couldn't afford or understand them, while banks packaged them into
complex securities that they made huge bets on--and bonuses with--other
people's money. And while the largest factors contributing to this
crisis were market driven, the American people have turned to Congress
and the administration for leadership and action in righting our
Nation's housing market. HUD remains firmly committed to working
together with communities and individuals to cope with these
unprecedented challenges.
Responding to the Market Disruption
The Federal Housing Administration (FHA) and Government National
Mortgage Association (GNMA) continue to have a significant impact on
the Nation's economic recovery. The activities of the Federal
Government are critical to both supporting the housing market in the
short term and providing access to homeownership opportunities over the
long term, while minimizing the risk to taxpayers. Over the past 2
years, HUD has worked with the Department of the Treasury and other
administration partners to construct a housing finance system that
relies on an actuarially sound pricing structure, effective lending
oversight, and adequate organizational capacity to ensure consistent
access to, and liquidity and stability in, the capital markets.
In fiscal year 2013, HUD is requesting $400 billion in loan
guarantee authority for the Mutual Mortgage Insurance Fund, which will
provide an estimated 0.8 million single-family mortgages (a projected
$149 billion in loan volume) and $25 billion in loan guarantee
authority for the General and Special Risk Insurance Fund, which will
provide an estimated 156,000 units in multifamily housing properties
and an estimated 80,600 beds in healthcare facilities. The need for
this investment is clear as FHA has played a critical role in
stabilizing the Nation's mortgage market. At a time when liquidity and
access were needed most in the housing market to facilitate the
recovery of the broader economy, FHA stepped in to ensure that mortgage
capital continued to flow. However, FHA's expanded role is and should
be temporary. FHA's loan volume has declined 34 percent from its peak
in 2009, and its market share is decreasing for the first time since
2006, thereby laying the ground work for private capital to return to
the market. FHA is particularly important to borrowers that the
conventional market does not adequately serve , including qualified
borrowers who would otherwise be shut out of the mortgage market. Fully
60 percent of all African American and Hispanic homebuyers using
mortgages rely upon FHA financing and over 30 percent of all FHA-
insured homebuyers are minorities. Over half of all African Americans
who purchased a home last year and 45 percent of Hispanics did so with
FHA financing.
Redoubling Efforts To Keep Homeowners in Their Homes
While there is work still to be done, HUD is proud of the progress
this administration has made in tackling ongoing foreclosure
challenges. Between April 2009 and December 2011, more than 5.6 million
mortgage modifications were started--including more than 1.7 million
HAMP trial modification starts and nearly 1.2 million FHA loss
mitigation and early delinquency interventions. In addition, to date,
more than 930,000 HAMP trial modifications have resulted in permanent
modifications--saving these households an estimated $10.5 billion in
monthly mortgage payments.
As part of the administration's commitment to help responsible
homeowners stay in their homes, we have actively sought to use our
current programs and authorities to make homeownership sustainable for
millions of American families. Examples of our efforts include:
--Streamline Refinance.--An option that allows borrowers with FHA-
insured loans who are current on their mortgage to refinance
into a new FHA-insured loan at today's low interest rates
without requiring additional underwriting, permitting these
borrowers to reduce their mortgage payments. This program
benefits current FHA borrowers--particularly those whose loan
value may exceed the current value of their home--and by
lowering a borrower's payment, also reduces risk to FHA. And,
because we see potential for more widespread use of this
product, FHA will make changes to the way in which streamline
refinance loans are displayed in the Neighborhood Watch Early
Warning System (Neighborhood Watch) to reduce lender concern
about the potential impact associated with taking
responsibility for loans they have not underwritten, making
them more willing to offer these loans to borrowers who are
current on mortgages already insured by FHA.
--National First Look Program.--A partnership between HUD, the
National Community Stabilization Trust and large financial
institutions that offers Neighborhood Stabilization Program
grantees an exclusive 12- to 14-day window to evaluate and bid
on foreclosed properties.
--Short Refinance Option.--In 2010, FHA made available an option that
offers underwater non-FHA borrowers, who are current on their
existing mortgage and whose lenders agree to write off at least
10 percent of the unpaid principal balance of the first
mortgage, the opportunity to refinance into a new FHA-insured
mortgage.
Finally, as another critical component to the recovery of the
housing market, the President has also put forward a Homeowner Bill of
Rights--a single, straightforward set of commonsense rules that
families can count on when they're shopping for a mortgage, including
the right to a new, simple, clear form for new buyers that gives people
confidence when they're making the most important financial decision of
their lives. And those rights shouldn't end when homeowners get the
keys to their new home. When Americans lose their job or have a medical
emergency, they should know that when they call their lender, that call
will be answered and that their home won't be sold in foreclosure at
the same time they are filling out paperwork to get help.
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funding what works: housing counseling assistance
In fiscal year 2013, HUD is requesting $55 million in Housing
Counseling Assistance to improve access to quality affordable housing,
expand homeownership opportunities, and preserve homeownership, all of
which are especially critical in today's economic climate. With this
funding, HUD expects to serve nearly 185,000 low- to moderate-income
families, as well as provide training to 4,800 counselors nationwide.
HUD-approved counselors help clients learn about purchasing or
refinancing a home; rental housing options; reverse mortgages for
seniors; foreclosure prevention; loss mitigation; preventing evictions
and homelessness; and moving from homelessness to a more stable housing
situation. In 2011, HUD-Approved Housing Counseling agencies, with
grant funds from HUD and other funding sources, assisted over 1.9
million families, including more than 1 million potential and current
homeowners with mortgage-related issues.
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Strengthening FHA and Paving the Way for Private Capital To Return
The books of business in the few years before 2009 have largely
driven the high number of claims to the Mutual Mortgage Insurance Fund
(MMI Fund). This was driven by overall economic and unemployment trends
as well as by the combined effects of poor underwriting, unscrupulous,
and non-compliant practices on the part of lenders, and a seller-funded
downpayment assistance program that allowed many borrowers to obtain
mortgages without a meaningful down payment. As a result, the books of
business FHA insured prior to the start of this administration have
severely impacted the health of FHA's MMI Fund. But thanks to our
efforts, I can say confidently that FHA is moving in another direction,
and that the long-term outlook for FHA and the MMI Fund are now much
better than they were in 2009.
The change in trajectory in the performance of FHA-insured loans is
no accident. Immediately upon taking office, this administration acted
quickly and aggressively to protect FHA's MMI Fund and to ensure its
long-term viability. We have taken more steps since January 2009 to
eliminate unnecessary credit risk and assure strong premium revenue
flows in the future than any administration in FHA history. Indeed, the
gains FHA has experiences since 2009 are the result of a three-part
strategy: Systematic tightening of risk controls, increased premiums to
stabilize near-term finances and expanded usage of loss mitigation
workout assistance to avoid unnecessary claims.
And, we continue to take steps to further strengthen the Fund. In
the 2013 budget we announced a 10 bps annual premium increase on all
FHA insured loans to comply with the requirement passed by Congress
late last year, as well as an additional 25 bps annual premium increase
on ``jumbo'' loans making the total increase for these larger loans 35
bps. And just this week, we announced a series of premium changes that
will further increase receipts to FHA by over $1 billion in fiscal
years 2012 and 2013, beyond the receipts already included in the
President's budget submission. In addition, we have also taken
significant additional steps to increase accountability for FHA
lenders. Via a final rule published a few weeks ago, we clarified the
bases upon which FHA will require indemnification from lenders
participating in our Lender Insurance program, making clear the rules
of the road for lenders and giving FHA a solid basis upon which to
require indemnification by lenders for violations of FHA guidelines.
And we continue to seek expanded authority via legislation that will
further enable us to protect the MMI Fund from unnecessary and
inappropriate losses associated with lenders who violate our
requirements.
The next in a series of steps we have pursued to hold lenders
accountable for their actions are the recently announced settlements
with some of America's largest lenders. Through these settlements, FHA
will receive over $900 million compensation for losses associated with
loans originated outside of FHA requirements, or for which FHA's
servicing requirements were violated.
Despite the unprecedented efforts of this administration to alter
the trajectory of FHA, considerable risks remain. The FHA MMI Fund has
two components: The Financing Account, which holds enough money to
accommodate all expected losses on FHA's insured MMI portfolio as of
the end of the current fiscal year; and the Capital Reserve Account,
which is required to hold an additional amount equal to 2 percent of
the insurance in force. Since 2009, the Fund's capital reserve ratio
has been below that 2-percent level.
The President's budget always includes estimates regarding the
status of the Capital Reserve at the end of the current fiscal year.
This prediction is based on estimates and projections of future
economic conditions, including house prices and other economic factors
which may or may not come to pass. In addition, the 2013 budget
estimate for the FHA Capital Reserve account does not include added
revenue from the additional premium increases announced this week or
the proceeds from FHA-approved lenders under the terms of the mortgage
settlements. With these additional revenues accounted for, the Capital
Reserve is estimated to have sufficient balances to cover all future
projected losses without triggering a mandatory appropriation under the
Federal Credit Reform Act. Moreover, the budget estimates that FHA will
add an additional $8 billion to the MMI Capital Reserve Account in
2013, and return to the congressionally mandated capital reserve ratio
of 2 percent by 2015.
The 2013 budget also includes premium increases for FHA's General
Insurance and Special Risk Insurance programs that serve market rate
multifamily properties and healthcare facilities. These changes are
intended to ensure that FHA products are priced appropriately to
compensate for FHA's risk and encourage the return of private capital
to our mortgage markets. The proposed increases include: 20 basis
points for all new construction or substantial rehabilitation loans
including but not limited to section 220, 221(d), section 231, section
242, and section 232; 15 basis points for permanent loans in section
223(f); and 5 basis points for section 223(a)(7). Premiums for
affordable housing projects (such as those with HUD rental subsidies
and low-income housing tax credits, as well as those insured under FHA
risk-sharing programs) will not be increased.
With the proposed premium increases, FHA Multifamily and Healthcare
loans will be priced more appropriately to crowd back in private
capital, while at the same time continuing to ensure sufficient levels
of available capital in these sectors. The increase in premiums also
reflect new realities--the Multifamily book of business is five times
greater than it was just 3 years ago, and the risk profile has changed
dramatically. FHA's portfolio is now more than 50 percent market rate,
which adds a new component of risk, and a need to take steps to ensure
the future viability of the portfolio. With interest rates at a record
low the existing portfolio loans could remain in FHA's portfolio longer
than the average timeframes and will need to be managed prudently. FHA
will publish the proposed increased in the Federal Register in the next
30-60 days and welcomes feedback during the comment period.
hud goal 2: meet the need for quality, affordable rental homes
In an era when more than one-third of all American families rent
their homes and nearly 7 million unassisted families with very low
incomes spend more than 50 percent of their income on rent, it remains
more important than ever to provide a sufficient supply of affordable
rental homes for low-income families--particularly since, in many
communities, affordable rental housing does not exist without public
support. HUD's fiscal year 2013 budget maintains HUD's core commitments
to providing rental assistance to some our country's most vulnerable
households as well as distributing housing, infrastructure, and
economic development funding to States and communities to address their
unique needs. Overall, 83 percent of HUD's total fiscal year 2013
budget authority requested will provide rental assistance to over 5.4
million residents of HUD-subsidized housing, including public housing
and HUD grants to homeless assistance programs.
And, I am proud to say that, despite an era of challenging budgets,
we have increased the number of families served through our rental
assistance programs every year.
Detailed data shows how vulnerable these families are to the
economic downturn. In HUD's core rental assistance programs, including
Tenant-Based Rental Assistance (TBRA), Public Housing, and Project-
Based Rental Assistance (PBRA): 72 percent of families are extremely
low income (below 30 percent of area median income) and an additional
20 percent are very low income (below 50 percent of area median
income). The devastating effect of the tough economic environment on
the housing circumstances of poor Americans was underscored last year,
when HUD released its Worst Case Housing Needs study results. HUD
defines worst case needs as: Renters with very low incomes who do not
receive Government housing assistance and who either pay more than half
their income for rent, live in severely inadequate conditions, or both.
The report showed an increase of 20 percent in worst case needs renters
between 2007 and 2009. This is the largest increase in worst case
housing needs over a 2-year period in the quarter-century history of
the survey, and caps an increase of 42 percent since 2001. The need for
HUD investments in this area is clear.
Preserving Affordable Housing Opportunities in HUD's Largest Programs
This budget provides $19.07 billion for HUD's Section 8 TBRA
program, which is the Nation's largest and preeminent rental assistance
program for low-income families. For over 35 years it has served as a
cost-effective means for delivering safe and affordable housing in the
private market. This 2013 funding level is expected to assist
approximately 2.2 million families by renewing existing vouchers and
issuing new incremental vouchers to homeless veterans.
The budget also provides a total of $6.6 billion to operate public
housing and modernize its aging physical assets through the Public
Housing Operating ($4.5 billion) and Capital ($2.07 billion) funds, a
critical investment that will help 1.1 million extremely low- to low-
income households obtain or retain housing. Similarly, through a $8.7
billion request in funding for the PBRA program, the Department will
provide rental assistance funding to privately owned multifamily rental
housing projects to serve over 1.2 million families nationwide.
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tough choices: project-based rental assistance
In fiscal year 2013, HUD's Project-Based Rental Assistance request
of $8.7 billion represents a $640 million decrease from the fiscal year
2012 enacted level. This reduction, generated by providing less than 12
months of funding upfront on some PBRA contracts that straddle fiscal
years, will not reduce or delay payments to landlords or impact the
number of families served by the program. Nonetheless, it is a
difficult choice, and not one that the administration would choose to
implement in a less austere fiscal environment.
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Reducing Administrative Burdens and Increasing Efficiency
This budget recognizes the need to simplify, align, and reform
programs to reduce administration burdens and increase efficiency
across programs by:
--Streamlining the Public Housing Operating and Capital Funds.--To
both simplify the program and reduce the administrative burden
on State and local public housing authorities, the budget
proposes to combine the separate Operating and Capital funds
into a single Public Housing subsidy stream. As a first step
toward consolidation, the budget provides all PHAs with full
flexibility to use their operating and capital funds for any
eligible capital or operating expense.
--Providing Flexibility for PHAs To Improve Supportive Services for
Assisted Households.--The budget proposes streamlining and
flexibility measures to help PHAs improve supportive services
for assisted families. The Family Self-Sufficiency (FSS)
program will be consolidated and aligned to enable PHAs to more
uniformly serve both TBRA and Public Housing residents. This
program, which the budget also expands to residents of PBRA
housing, aims to connect residents to resources and services to
find and retain jobs that lead to economic independence and
self-sufficiency. In addition, the budget authorizes PHAs to
use a portion of their Public Housing and Housing Voucher
funding to augment case management and supportive services
provided through FSS or provide other supportive services to
increase opportunities for residents.
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tough choices: cost-savings in rental assistance programs
The budget includes a menu of reforms to HUD rental assistance
programs that save over $500 million in 2013 without reducing the
number of families served.
--In the Project-Based Rental Assistance program, savings are
achieved by improving oversight of market rent studies used to
set subsidy payment levels, capping annual subsidy increases
for certain properties, and using excess reserves to offset HUD
payments to landlords.
--The budget also aligns policy across rental assistance programs and
reduces costs by increasing the minimum rent to $75 per month
for all HUD-assisted households, which is comparable to the
minimum rent enacted in 1998, adjusted for inflation.
Recognizing the potential burden that this higher minimum rent
may impose, the budget maintains the current exemption for
families facing financial hardship.
--Finally, this budget request reduces costs by simplifying
administration of the medical expense deduction, better
targeting rental assistance to the working poor in rural areas,
and setting Public Housing flat rents closer to market levels.
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Rebuilding Our Nation's Affordable Housing Stock
Over the last 75 years, the Federal Government has invested
billions of dollars in the development and maintenance of public and
multifamily housing, which serve as crucial resources for some of our
country's most vulnerable families. Despite this sizable Federal
investment and the great demand for deeply affordable rental housing,
we continue to see a decline in the number of available affordable
housing units. Over the last decade, the public housing stock has
shrunk at a rate of 10,000 units per year, largely due to a growing
backlog of unmet capital needs, estimated at $26 billion. To address
these challenges, HUD's 2012 Appropriations Act authorized the Rental
Assistance Demonstration (RAD) to test new preservation tools for its
assisted housing stock allowing for Public Housing and Moderate
Rehabilitation (Mod Rehab) properties to convert to long-term Section 8
rental assistance contracts (capped at 60,000 units of converted
assistance); and Rent Supplement (Rent Supp), Rental Assistance Payment
(RAP), and Mod Rehab properties, upon contract expiration or
termination, to convert tenant protection vouchers to project-based
vouchers. Unlike their current forms of assistance, these contracts
offer a rental subsidy platform that allows PHAs and owners to leverage
current Federal appropriations with other private and public capital to
finance much needed rehabilitation and preserve the assets as
affordable housing.
RAD is a limited demonstration, which will be evaluated to assess
the success of these approaches in preserving affordable housing. Since
HUD will use funding appropriated for existing programs for
implementation and anticipates strong interest in RAD, the 2013 budget
includes a request to exempt Mod Rehab from the 60,000 unit cap on
projects that could convert assistance, at no cost, to long-term
Section 8 rental assistance contracts. If enacted, the 60,000 unit cap
would apply to public housing conversions alone, while the number of
Mod Rehab conversions would not be constrained.
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funding what works: taking jobs-plus to scale
The budget provides that up to $50 million of Public Housing
capital funds may be targeted to Jobs-Plus competitive grants to fund
scaled-up implementation of the Jobs-Plus model--a successful,
evidence-based strategy to increase the employment opportunities and
earnings of public housing residents through a three-tiered program of
employment services, rent-based work incentives, and community support
for work. This investment will increase employment opportunities for
over 30,000 Public Housing residents, by helping them secure and retain
employment, keep more of the income they earn, and receive the full
benefit of work incentives such as the Earned Income Tax Credit (EITC).
A randomized experiment evaluation of the Jobs-Plus model in three
demographically diverse sites found that, on average, participants had
an additional $1,300 in earnings every year from 2000 to 2006--and
these earning increases were durable beyond the period of the
intervention. Jobs-Plus competitive grants will scale up this proven
model by targeting resources to high-capacity PHAs and housing
developments with enough work-eligible residents to achieve economies
of scale. The grants will prioritize broad and diverse local
partnerships that cut across sectors, agencies, and funding streams.
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Increasing the Production of Affordable Housing Capital Projects
In addition to developing tools to address the growing capital
needs of America's Public Housing stock, HUD is committed to expanding
the supply of affordable rental homes in safe, mixed-income communities
that provide access to jobs, good schools, transportation, and, most
importantly, economic self-sufficiency. Accordingly, in fiscal year
2013 HUD is working together with its partners to identify ways to make
the Low Income Housing Tax Credit (LIHTC) program a more flexible and
nimble tool for the creation and preservation of affordable housing. As
the primary tool of the Federal Government for developing and
rehabilitating affordable rental housing, the LIHTC program is
administered by State agencies with the assistance of guidance from the
Treasury Department and the Internal Revenue Service, and attract
capital to low-income rental housing by satisfying some of the Federal
income tax obligations of investors in certain low-income rental
properties.
Since its addition to the tax laws in 1986, the LIHTC program has
been used to create 1.8 million in affordable rental-housing units
across the country. Annually, the program supports 95,000 jobs and
generated $2.7 billion in State, local, and Federal revenues. In fiscal
year 2013, as part of a broader effort to align Federal rental
programs, HUD, the Departments of Treasury and Agriculture, the
Domestic Policy Council (DPC), the Office of Management and Budget
(OMB), and the National Economic Council (NEC) will continue partnering
to allow greater flexibility to State and local agencies that
administer LIHTC programs, as well as to developers and investors, to
continue to enable the creation of affordable housing in markets where
it is needed the most. Specifically, the revenue provisions of the 2013
budget enhance two revenue proposals that were included in the 2012
budget and introduce two new proposals:
--An Income Averaging proposal would encourage a greater range of
incomes in LIHTC-supported affordable housing by allowing
developers to choose an income-limitation requirement that
would be satisfied if households in the low-income units have
an average income no greater than 60 percent of AMI, with no
household above 80 percent AMI. An additional provision would
allow certain existing tenants to remain in residence without
impairing the developer's entitlement to LIHTCs.
--In the context of preserving, recapitalizing, and rehabilitating
existing federally assisted affordable housing, a Basis Boost
proposal would provide a second mechanism for earning ``4
percent'' LIHTCs and would give an extra, up-to-30-percent
increase in qualified basis for certain projects that receive
``4 percent'' LIHTCs, either because they are at least half
financed with tax exempt-bonds or because they employed the new
mechanism.
--A proposal concerning LIHTCs earned by Real Estate Investment
Trusts (REITs) is designed to diversify the pool of investors
for LIHTCs and to increase the overall demand for LIHTCs. The
proposal would allow a REIT that earns LIHTCs to provide a tax
benefit to its investors by paying them tax-exempt dividends in
an amount almost triple the amount of the REIT's LIHTCs.
--A Victims of Domestic Violence proposal would bar LIHTC buildings
from discriminating against victims of actual or threatened
domestic violence and would clarify that occupancy restrictions
or preferences for such victims are an allowable exception to
the general-public-use requirement.
Finally, the recent Worst Case Housing Needs report underscores
what has been the case since well before the recent recession, namely,
that extremely low-income renters face the most severe housing shortage
and cost burden of any Americans. In addition to the Worst Case Housing
Needs report, the most recent data available from the American Housing
Survey shows that, for renters below 50 percent of area mean income,
the shortage of affordable and available units increased from 5.2 to 6
million from 2007 to 2009, with just 39 affordable and available units
for every 100 renters in 2009, compared to 44 [units] 2 years prior.
The 2013 budget once again provides $1 billion in mandatory
appropriations for the Housing Trust Fund (HTF) to address this
critical shortage of housing where it is most desperately needed.
Enacted in 2008, the HTF was designed to provide capital resources to
build and rehabilitate housing to fill this precise--and growing--gap
in the Nation's rental housing market. The time has come for Congress
to provide this crucial funding.
hud goal 3: utilize housing as a platform for improving quality of life
Stable housing provides an ideal platform for delivering a wide
variety of health and social services to improve economic, health, and
broad-based societal outcomes. For some, housing alone is sufficient to
ensure healthy outcomes, while others require housing with supportive
services to assist with activities of daily living or long-term self-
sufficiency, as well as proximity to crucial services. HUD's fiscal
year 2013 budget acknowledges this reality by making critical
investments in housing and supportive services, and partnering with
other Federal agencies to maximize resources and best practices.
Moreover, these investments will save money in the long term, by
avoiding overuse of expensive emergency and institutional
interventions.
Preventing and Ending Homelessness, Serving Our Nation's Most
Vulnerable
Nowhere is the relationship between housing and supportive services
clearer than in the successful efforts in communities around the
country to address homelessness. These efforts have yielded a
substantial body of research, which demonstrates that providing
permanent supportive housing to chronically ill, chronically homeless
individuals and families not only ends their homelessness, but also
yields substantial cost-saving in public health, criminal justice, and
other systems. This year's budget once again invests in this critical
effort, by providing $2.23 billion in Homeless Assistance Grants,
including competitive programs that annually serve over 800,000
homeless families and individuals. This includes funding for the
Emergency Solutions Grants program, which will continue the work of the
Homelessness Prevention and Rapid Re-Housing Program--funded by the
Recovery Act--that in the last 3 years alone has helped prevent or end
homelessness for over 1.2 million people nationwide.
Moreover, HUD continues to focus on the unique needs of veterans
through both its targeted homeless programs and its mainstream housing
programs using successful methods and interventions. Currently, an
estimated one out of every six men and women in our Nation's homeless
shelters are veterans, and veterans are 50 percent more likely to fall
into homelessness compared to other Americans. HUD is committed to
providing affordable housing units to this unique homeless population,
and has partnered with the Departments of Health and Human Services
(HHS) and Veterans Affairs (VA) to develop targeted approaches to serve
the homeless veteran populations. Accordingly, this budget includes $75
million for the HUD-VASH program, which combines tenant-based voucher
assistance with case management and clinical services tailored to
veterans and their families. This funding will provide 10,000 new
vouchers to help veterans move from our streets into permanent
supportive housing, in addition to the nearly 38,000 already allocated
HUD-VASH vouchers provided in previous appropriations, which have been
critical to a 12-percent reduction in veterans homelessness, and the
10,000 vouchers that will be awarded through the fiscal year 2012
appropriation.
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increasing efficiencies: modernizing the housing opportunities for
persons with aids (hopwa) program
The budget proposes to update the HOPWA program to better reflect
the current understanding of HIV/AIDS and ensure that funds are
directed in a more equitable and effective manner. This modernization
includes a new formula that will distribute HOPWA funds based on the
current population of HIV-positive individuals, fair market rents, and
poverty rates in order to target funds to areas with the most need. It
also makes the program more flexible, giving local communities more
options to provide timely, and cost-effective interventions. The
budget's $330 million investment in HOPWA, in combination with the
proposed modernization, will assist local communities in keeping
individuals with HIV/AIDS housed, making it easier for them to stay in
therapy, and therefore improving health outcomes for this vulnerable
population.
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Investing in Leveraging and Serving Our Most Vulnerable
This budget provides a total of $625 million for the Housing for
the Elderly and Housing for Persons with Disabilities programs, which
includes $154 million to support 5,300 additional supportive housing
units. Doing more with less, the budget proposes reforms to the Housing
for the Elderly program to target resources to help those most in need,
reduce the up-front cost of new awards, and better connect residents
with the supportive services they need to age in place and live
independently.
Historically, HUD has provided both capital advances and operating
subsidies to nonprofit sponsors to construct and manage multifamily
housing for low-income people with disabilities. In an effort to
maximize the creation of new affordable units in a time of funding
restraints, in fiscal year 2012, HUD began providing operating
assistance to State housing agencies that formed partnerships with
State healthcare agencies for service provision to low-income persons
with disabilities. These funds are used to set aside supportive units
for this target population in affordable housing complexes whose
capital costs are funded through Low Income Housing Tax Credits, HOME
funds, or other sources. Investing Section 811 funds under this
authority allows HUD to rely on the expertise of the State housing
agencies to administer the award and on the State healthcare agency to
identify the most critical population to be served and guarantee the
delivery of appropriate services. In fiscal year 2013, HUD is
requesting similar authority for the Section 202 program. Drawing on
lessons learned from implementation in the Section 811 program, HUD
will take advantage of efficiencies inherent in these same agencies'
oversight responsibilities for tax credits, HOME funds or similar
housing funding. Assuming requested statutory language is enacted, up
to 3,450 units could be made available with support from this project
rental assistance.
hud goal 4: build inclusive sustainable communities free from
discrimination
No longer can the American economy tolerate the marginalization
from the labor force of significant numbers of people because of
individualized or systemic discrimination, or because they live in
isolated neighborhoods of concentrated poverty. An American economy
built to last requires an increased supply of affordable rental homes
in safe, mixed-income communities that provide access to jobs, good
schools, transportation, high-quality services, and most importantly,
economic self-sufficiency. As such, HUD's fiscal year 2013 budget puts
communities in a position to plan for the future and draw fully upon
their resources, most importantly, their people.
Each year HUD dedicates approximately 15-20 percent of its funds to
the capital costs of housing and economic development projects
throughout the country. Through this investment, HUD and its partners
are able to provide better opportunities for people living in
neighborhoods of concentrated poverty and segregation, and offer
choices that help families live closer to jobs and schools. Programs
such as the Community Development Block Grant (CDBG), and Choice
Neighborhoods are targeted to areas of need, to provide locally driven
solutions to overarching economic development challenges. As with HUD's
rental assistance programs, HUD's capital grants--including the Public
Housing Capital Fund, Choice Neighborhoods, CDBG, and HOME--tend to
assist areas of great need, including communities with high
unemployment.
Preserving HUD's Major Block Grant Programs for Community Development
and Housing
The budget demonstrates the administration's continued commitment
in a constrained fiscal climate to support municipalities and States as
they navigate through a challenging fiscal climate. By maintaining the
fiscal year 2012 CDBG formula funding level of $2.95 billion, CDBG will
allow over 1,100 State and local governments to improve living
conditions in low- and moderate-income neighborhoods across the
country. As the Federal Government's primary community development
program, CDBG serves as the backbone of State and local community and
economic development efforts. In fiscal year 2011 alone, local
governments used CDBG funding to directly create and retain 21,482
jobs, not including any indirect effect on additional jobs. Moreover,
in fiscal year 2011 CDBG assisted 96,615 households to maintain or gain
access to safe, decent, and affordable housing; provide public service
activities to 10.1 million people; and benefit approximately 4.1
million persons through public improvement investments. CDBG funding is
increasingly one of the few resources available at the local level to
support housing rehabilitation, public improvements, and economic
development assistance--despite growing needs, local governments have
often had no choice but eliminate some of these activities from their
own budgets.
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tough choices: home investment partnerships
The HOME Investment Partnerships program is the principal tool for
the production of affordable housing for low- and extremely low-income
families by State and local governments. It is also the critical gap
financing for LIHTC projects--it has created over 1 million units and
an additional 250,000 households have been assisted with temporary
rental assistance since the program's inception. The program leverages
$4 in other public and private funds for every HOME dollar invested,
totaling more than $88 billion over the life of the program.
The fiscal year 2013 HOME request reflects the difficult choices
HUD was faced with, in order to make real progress in reducing the
national deficit and contribute to creating an economy built to last.
American families are tightening their belts--and we need to do the
same. In addition, the fiscal year 2013 budget includes two proposed
HOME authorizing requests: To Permit recaptured Community Housing
Development Organizations set-aside funds to be reallocated by formula
as HOME funds; and to facilitate the removal of dangerous tenants from
HOME properties. We look forward to working together on these
proposals.
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Transforming Neighborhoods of Poverty
The President has made it clear that we cannot create an economy
built to last if: A fifth of America's children live in poverty, at a
cost of $500 billion per year--fully 4 percent of GDP--due to reduced
skills development and economic productivity, increased later life
crime, and poor health; a growing population lives with the problems of
concentrated neighborhood poverty--high unemployment rates, rampant
crime, health disparities, inadequate early care and education,
struggling schools, and disinvestment--all of which isolate them from
the global economy.
That's why HUD's fiscal year 2013 budget provides $150 million for
the Choice Neighborhoods Initiative to continue transformative
investments in high-poverty neighborhoods where distressed HUD-assisted
public and privately owned housing is located. This will reach four to
six neighborhoods with implementation grants that primarily fund the
preservation, rehabilitation and transformation of HUD-assisted public
and privately owned multifamily housing, and will also engage local
governments, nonprofits, and for-profit developers in partnerships to
improve the economic conditions in their surrounding communities.
Moreover, the leveraging power that these grants have is real--to date,
the five Choice Neighborhoods implementation grantees have leveraged a
combined $1.6 billion in private funds--over 13 times their total grant
award amount.
The Choice Neighborhoods initiative is a central element of the
administration's inter-agency, place-based strategy to support local
communities in developing the tools they need to revitalize
neighborhoods of concentrated poverty into neighborhoods of
opportunity. The Department's administration of the first rounds of
funding for Choice Neighborhoods grants exemplify how our practices
generate effective partnerships with local housing and community
development efforts. In the past, many Federal grant programs followed
a rigid, top-down, ``one-size fits all'' approach that dictated what
local policymakers could and could not do rather than listening to them
and providing the tools they needed to meet local needs. Having served
in local government myself, I am committed to a collaborative approach
responsive to local needs--and believe the results thus far demonstrate
that we are making good on that commitment.
Supporting Sustainable Communities and Innovative Infrastructure
Planning
Creating an economy built to last requires creating jobs here in
America to discourage outsourcing and encourage insourcing. But
attracting new businesses to our shores depends on urban, suburban, and
rural areas that feature more housing and transportation choices, homes
that are near jobs, transportation networks that move goods and people
efficiently, all while lowering the cost and health burdens on
families, businesses, and the taxpayer. Unfortunately, today,
congestion on our roads is costing us five times as much wasted fuel
and time as it did 25 years ago, and Americans spend 52 cents of every
$1 they earn on housing and transportation combined.
With these realities in mind, the fiscal year 2013 budget supports
the multi-agency Partnership for Sustainable Communities, an
administration initiative that integrates resources and expertise from
HUD, the Department of Transportation, and the Environmental Protection
Agency. In particular, the budget restores $100 million for the
Sustainable Communities Initiative, which creates incentives for
communities to develop comprehensive housing and transportation plans
to achieve sustainable development, reduce energy consumption and
greenhouse gas emissions, and increase affordable housing near public
transit. This includes $46 million to fund about 20 additional regional
planning grants to help enable communities to align public and private
investments in housing, transportation, and infrastructure to
strategically integrate goals for mobility, regional housing choices
and economic development. In addition, $46 million will be invested in
neighborhoods and communities to update building codes, zoning, and
local planning efforts as complementary strategies to the regional
grants.
We know how important these planning tools are to regional
economies--particularly those which rely on integrated supply chains
that cross national borders and are essential to meeting the
President's charge to double U.S. exports over the next 5 years. These
investments will also leverage and increase the ripple effects of other
administration proposals to overhaul America's deteriorating
infrastructure, including the Infrastructure Bank, as well as Project
Rebuild and other elements of the American Jobs Act, as we leverage
increased residential and commercial construction around transit and
other infrastructure investments.
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funding what works: the leveraging power of sustainable communities
funding
In fiscal year 2010, Austin, Texas, was provided a $3.7 million
Regional Planning grant through the Sustainable Communities program.
With this funding, the city is helping link its long-term regional
transportation plan to 37 mixed-income communities near transit and job
centers. This grant will help 3,000 small, family-run businesses expand
or open a second location, provided that each of these businesses hires
at least one new worker who has been unemployed for a year or more.
This work is expected to create more than 7,000 permanent jobs and save
the taxpayer $1.25 billion through better connected housing and
businesses, more people employed and fewer people dependent on
Government services.
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Ensuring Inclusivity in Housing Nationwide
An inclusive community is one in which all people--regardless of
race, ethnicity, religion, sex, disability, or familial status--have
equal access to housing and economic opportunities. Throughout its
portfolio of programs, HUD is committed to maintaining that inclusivity
and providing accountability in housing and lending practices
nationwide. Through inclusive development, education, enforcement of
fair housing laws, expanded training and language assistance, HUD will
affirmatively further fair housing and the ideals of an open society.
The Fair Housing Initiatives Program (FHIP) is critical to building
and sustaining inclusive communities. FHIP is the only grant program
within the Federal Government whose primary purpose supports private
efforts to educate the public about fair housing rights and conducts
private enforcement of the Fair Housing Act. In fiscal year 2013, HUD
is requesting approximately $41 million in FHIP funds, representing the
Department's commitment to fair housing, including $28 million to
support the efforts of private fair housing organizations that conduct
private enforcement of the Fair Housing Act. The Private Enforcement
Initiative (PEI) grantees investigate and test housing providers
alleged to have engaged in discrimination. The requested amount will
continue funding to support fair housing enforcement by all statutorily
eligible private fair housing organizations. In addition, it will fund
fair housing education at the local, regional, and national levels.
The Fair Housing Assistance Program (FHAP) is a critical component
of HUD's effort to ensure the public's right to housing free from
discrimination. FHAP multiplies HUD's enforcement capabilities,
allowing the Department to protect fair housing rights in an efficient
and effective manner. In fact, FHAP agencies investigate the majority
of housing discrimination complaints filed in the United States. FHAP
provides funding for 98 Government agencies, including 37 States, 60
localities, and the District of Columbia, to enforce laws that prohibit
housing discrimination that have been reviewed and deemed substantially
equivalent to Federal law. In fiscal year 2013, HUD is requesting
approximately $25 million in FHAP funds.
Ensuring That an Economy Built To Last Includes Opportunities for Rural
Americans
The administration has placed a significant emphasis on ensuring
that America's rural communities are competitive in the global
economy--particularly given the reality that rural communities
generally have less access to public transportation, along with higher
poverty rates and inadequate housing. Each year, HUD invests billions
of dollars in rural communities through its core rental assistance
programs and block grants. The Community Development Block Grant (CDBG)
program allocates funds to States, which provides approximately $692
million to rural areas, supporting over 25,000 jobs both directly and
indirectly, providing needed infrastructure, economic development, and
affordable housing. Because small towns and rural areas often lack the
basic modern infrastructure that citizens in larger communities can
take for granted, States annually spend over 55 percent of their CDBG
funds on basic public improvements such as water and sewer lines, paved
streets, and fire stations. HUD also funds over $300 million in rural
areas for affordable housing and homeownership programs through its
HOME Investment Partnerships program, directly and indirectly
supporting over 5,360 jobs.
In addition, HUD and the Department of Agriculture meet regularly
through an interagency rental housing policy group to better align and
coordinate the affordable rental housing programs each operates.
Altogether, over 800,000 families in rural communities are directly
assisted through the Housing Choice Voucher, Public Housing, and
Multifamily programs, with another 450,000 assisted through USDA. For
homeowners, HUD's Federal Housing Administration (FHA) helps first-time
homebuyers and other qualified families all over the country purchase
their own home. More than 1.5 million of the homes currently insured by
the FHA are in rural areas, and approximately $545 million in current
FHA loans are to rural healthcare facilities designated as ``critical
access hospitals.'' In addition to these critical investments, targeted
rural investments in HUD's 2013 budget include:
--$5 million in Rural Housing Stability Assistance Program (RHSP), as
authorized in the Homeless Emergency Assistance and Rapid
Transition to Housing Act (HEARTH Act), designed to assist
individuals and families who are homeless, in imminent danger
of losing housing, or in the worst housing situations in rural
communities. In addition to this focused RHSP initiative, rural
communities will continue to have access to HUD's targeted
homeless assistance, through the Continuum of Care competition
grant, the Emergency Solutions Grant (ESG) program, and the
Homelessness Prevention and Rapid Re-Housing Program (HPRP).
Rural areas have increasingly gained access to HUD's
competitive homeless assistance grants, primarily through the
creation of Balance of State and Statewide Continuums of Care,
with funds allocated directly to the State. In 2010, the
Continuum of Care competition included a selection priority for
new projects proposing to serve 100 percent rural areas.
Organizations in 69 rural communities submitted applications
for 108 new projects, requesting $19 million. HUD will apply
the rural selection priority to new projects in the 2011
Continuum of Care competition as well.
--$731 million to fund programs that will support housing and
development initiatives in American Indian, Alaska Native, and
Native Hawaiian communities. As the single largest sources of
funding for housing Indian tribal lands today, programs like
Indian Housing Block Grants, Indian Home Loan Guarantees, and
Indian Community Development Block Grants support development
in remote areas where safe, decent, affordable housing is
desperately needed by providing funds to over 550 tribes across
the country. HUD also directly supports housing and economic
development initiatives in remote areas of Hawaii, through the
Native Hawaiian Housing Block Grant Program and Native Hawaiian
Loan Guarantee Program.
hud goal 5: transform the way hud does business
An economy built requires a Government that's leaner, smarter, more
transparent, and ready for the 21st century. The current economic and
housing crisis; the structural affordability challenges facing low-
income homeowners and renters; and the new, multidimensional challenges
facing our urban, suburban, and rural communities all require an agency
in which the fundamentals matter and the basics function. As such, HUD
remains committed to transforming the way it does business. This
transformation is more crucial now than perhaps ever before--HUD
remains at the forefront of the Federal response to the national
mortgage crisis, the economic recovery, and the structural gap between
household incomes and national housing prices--roles that require an
agency that is nimble and market-savvy, with the capacity and expertise
necessary to galvanize HUD's vast network of partners. HUD's 2013
budget reflects these critical roles, by investing in transformation,
research, and development that will be implemented persistently over
time. The Transformation Initiative
Thanks to congressional support for the Transformation Initiative
(TI), past fiscal year appropriations are today funding a wide range of
groundbreaking projects, including:
--Innovative, ``silo-breaking'' OneCPD technical assistance in
communities across the country that replaces a fragmented
broken system with one that addresses the holistic and cross-
cutting needs of our grantees, recognizing that these extend
beyond the rules and regulations of any single funding stream;
--Major evaluations and demonstration programs to examine the
outcomes of key administration initiatives like the Rental
Assistance Demonstration and Choice Neighborhoods, the cost to
local public housing authorities of administering the Housing
Choice Voucher program, different approaches to rent reform in
our largest programs, the housing needs of Native American and
Hawaiian communities, and the impact of housing and services
interventions on homeless families;
--Replacement of 30-year-old technology and information management
practices to reduce risks, and implement higher performing, and
cost-effective business solutions to more effectively
administer the Department's rental housing assistance programs.
The 2013 budget request once again includes transfer authority (up
to 0.5 percent at the Secretary's discretion, totaling up to $215
million) to support ongoing improvements of program effectiveness and
efficiency and to help the Department respond and adapt more
effectively to its rapidly changing operating environment.\2\ TI is a
multiyear effort that can only be achieved through the relentless focus
of agency leadership, full transparency and accountability for real
results, and sustained and flexible budget resources. Since TI was
first enacted in 2010, it has bolstered the long-neglected areas of IT
modernization, research and evaluation, and program demonstrations
crucial for increasing the efficiency and effectiveness of the
Department's programs, and remains the primary source of funding for
this transformation. Further, TI has provided a mechanism for
innovative, crosscutting technical assistance that goes beyond program
compliance to improve grantee capacity, performance, and outcomes.
Finally, recent crises with natural disasters, the housing market, and
deep fiscal distress among State and local partners have highlighted
the need for HUD to be more nimble, creative, and collaborative.
Setting aside a portion of HUD's program accounts through TI to better
understand and enhance program results reflects recognition that
planning for continuous improvement and innovation, investing in tools
and capacity, and assessing results are equally integral for the
operation of programs with accountability to the public interest.
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\2\ HUD estimates that it will transfer approximately $120 million
into TI in fiscal year 2013.
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Research and Evaluations
As an integral component of strengthening HUD's capabilities for
evaluating and improving program effectiveness and efficiency, TI
provides a predictable stream of funding for high-quality research and
evaluation of HUD's programs on an on-going, rotating basis to inform
sound policymaking. HUD anticipates allocating 10-20 percent of TI
transfers to Research and Evaluations in 2013. Expected projects
include: A process evaluation of the evidence-based Jobs-Plus pilot,
seeking to understand the effects of larger scale implementation;
energy efficiency and utility costs analysis for PHAs and residents of
public housing; biennial research NOFAs for Sustainable Communities
Research Grants to inform local governments in preparing and planning
for disasters; and a long-overdue follow-up to a 1995 HOME
Affordability Study to assess affordability over time based on
differing levels of subsidy.
Program Demonstrations
Program Demonstrations test new options for HUD programs that can
make them more efficient and effective and establish sound evidence of
whether and how these options could better achieve HUD's mission. Since
the 1990s, HUD has done relatively few research demonstrations, largely
due to budget constraints. Those few demonstrations, however, have been
HUD's most important and informative research on real program impacts.
In 2013, HUD expects Project Demonstrations to include research on the
Rental Assistance Demonstration (RAD), which allows a trial conversion
of public housing and certain multifamily properties to long-term
project-based contracts.
Technical Assistance
Technical assistance (TA) can be seen as a ``force multiplier''--
making program dollars go further and helping communities do more with
limited Federal and local resources. TA under the Transformation
Initiative (TI-TA) allows HUD to combine assistance for different
programs as appropriate, and provide customized help on the issues any
particular grantee confronts.
In 2013, HUD will utilize TI-TA for activities such as: Assessments
and targeted interventions for PHAs; helping local government
comprehensively assess market trends and implement housing and
community and economic development programs through OneCPD; and
targeting underlying, long-term problems like deficits and poor bond
ratings through the National Resource Network. Flexible, cross-program
technical assistance could also help grantees and clients adapt to new
HUD policies, programs, and management approaches, and develop core
skills and critical competencies required to effectively deliver HUD's
programs.
Information Technology
The budget proposes to again use TI funds for Information
Technology in 2013, to reduce risks, implement higher performing
standards, and cost-effective business solutions.
IT transformation efforts to date have helped HUD evolve its
understanding of opportunities to leverage the foundational toolsets
being implemented under the FHA Transformation, the Next Generation
Management project or NGMS (formerly known as NGVMS), and related
infrastructure modernization projects. These opportunities include ways
to further reduce the Government's risk in the marketplace, improve
services to meet the needs of our citizens and employees and reduce
annual operations costs. For example, recent efforts to define
opportunities to reduce cost by consolidating back office business and
administrative services are expected to lead to the need for capital
investment to transition more of HUD's services from legacy platforms
to shared enterprise services. HUD plans to use TI transfer authority
in 2013 to make capital investments in IT to drive these service
delivery improvements and further cost reduction efforts.
conclusion
Madam Chairman, this budget reflects the administration's
recognition of the critical role the housing sector must play to ensure
every American gets a fair shot, everyone does their fair share, and
everyone plays by the same rules. Equally important, it expresses the
confidence of the President in the capacity of HUD to meet a high
standard of performance.
Given the economic moment we are in, HUD's 2013 budget proposal
isn't about spending more in America's communities--it's about
investing smarter and more effectively.
It's about making hard choices to reduce the deficit--and putting
in place much-needed reforms to hold ourselves to a high standard of
performance. But most of all, it's about the results we deliver for the
vulnerable people and places who depend on us most.
I believe that this budget will contribute substantially to
economic recovery, to creating pathways to opportunity, and to an
America built to last. Thank you.
Senator Murray. Thank you very much, Mr. Secretary. Let me
begin by asking you about the status of the FHA's Mutual
Mortgage Insurance Fund. Given the seriousness of this housing
crisis, it's not surprising that FHA has sustained significant
losses, and the capital reserve account has served its purpose
by covering those unexpected losses.
But I was concerned when the President's budget stated that
$688 million would be needed to cover FHA losses in fiscal year
2012. Both the recent settlements and announced premium
increases are expected to improve the MMI Fund financial
position, but I wanted you to update us this morning on the
financial condition of the MMI Fund, of the FHA's MMI Fund.
MUTUAL MORTGAGE INSURANCE FUND
Secretary Donovan. As you correctly stated, the information
that was in the budget was outdated on the day it was
published. And in fact, we were waiting to make final decisions
about premium increases until we knew the outcome of the
settlement. I wish that had been resolved before the budget was
finalized, but it wasn't. And that's the reason for what was
shown in the budget.
Having said that, with the $900 million that I described
that is the result of our work to recover for bad loans in the
FHA program that are in the settlements, and in addition, the
premium increases that we have announced this week, we do
expect that the fund will remain positive this year.
In addition, because of those steps that we have taken, the
fund will be in a stronger position when the next actuarial
study is done in the fall. That's the most comprehensive look,
looking forward. And we do expect that these changes that we
have made will put us in a significantly better position come
fall.
But again, we have to be vigilant. And we will take
additional steps, if necessary. The single-most important
determinant of the health of the fund is where house prices go
this year and beyond. And so we will continue to be vigilant
and watch carefully to make sure, if we have additional steps
that we need to take, that we can work with the subcommittee to
take those.
Senator Murray. So what are the risks and opportunities
that we need to look at? The housing prices this year. What
other things?
Secretary Donovan. Specifically for the re-estimate this
year, the only things that will affect that number are the
premium increases, and so implementing those very quickly is
critical, and the levels of loan volume that we have this year.
Our estimates are that it would take loan volumes that are more
than 20 percent below our expectations to threaten the fund
through the re-estimate this year.
More importantly, for next year, as we go to do the new
actuarial study, the single-most important factor is house
prices. Our estimates last year showed that it would take
greater than a 4-percent reduction in house prices this year.
Our base case predicted a 1-percent increase. It would take
more than a 4-percent reduction in house prices this year to
push the fund negative.
That was before the premium increases that we have
implemented. So in fact, our estimate now is that it would take
a much larger decline in house prices, much larger than that 4
percent, to put the fund in a negative position for the re-
estimate next year.
Senator Murray. Okay, and you decided to increase the
upfront and the annual premium. Can you tell me how that will
affect worthy borrowers who are trying to access credit?
Secretary Donovan. As you know, Congress made the decision
to include a 10-basis-point increase in our single-family
programs as part of the bill that extended the payroll tax
deduction. In addition, we included a 75-basis-point increase
in the upfront premium. The 10 basis points equates, for the
average loan, to about $9 a month for a borrower, and the
upfront premium increase is about $5 a month for the typical
borrower.
The only places where those increases are significantly
larger is for jumbo loans, those over $625,000, where we
thought it was prudent to include a larger increase. And so for
those borrowers, because the average size of the loan is much
larger and because the increase is more, the increases would be
significantly larger.
SETTLEMENTS WITH LENDERS
Senator Murray. Okay, thank you. The joint Federal-State
servicing settlement and the settlement with Bank of America
represent not only a significant monetary award, but they also
really send a message to FHA program participants that there
are serious consequences to not following the rules.
Just last week, settlements with two additional lenders
were announced. And since most of the losses to the MMI Fund
stem from loans insured prior to the reforms you implemented in
2009, it's really important to pursue opportunities to prevent
or recover losses from those books of business.
Are there additional measures that FHA can take to improve
the outlook for riskier loans that it already has on its books?
FEDERAL HOUSING ADMINISTRATION INDEMNIFICATION
Secretary Donovan. There are.
First of all, let me just compliment David Montoya, our
inspector general, and his team for their remarkable work to
lead to both the servicing settlement and these additional
settlements. They partnered very, very closely with us and the
Department of Justice to allow us to make those recoveries, not
just in the servicing settlement, but from Bank of America,
Citibank, and Flagstar. So those are very important steps, and
I just want to compliment him and his team.
The additional steps that we could take--there are a number
of them that require legislative change. I'm happy to say we're
working closely with your colleagues on the authorizing side as
well as Members of the House on the authorizing committee.
There is a bill in the House that includes a number of the
steps that would allow us to step up our enforcement. And those
build on the recent regulation on indemnification that we put
out, which will allow us to further hold lenders accountable
for those prior loans that didn't meet FHA standards.
Senator Murray. Okay. We all think the FHA's current
outsized role in the market is unsustainable. There's no one
who doesn't think differently. But it still remains difficult
for qualified Americans to get a mortgage today. And the
market's recovery, as we all know, is still very fragile.
If FHA steps too quickly, it could have some serious
consequences, not only for our overall economy, as we all know,
but for the solvency of the MMI Fund. And I wanted to ask you
how you balance the continued need for FHA to help provide
access to credit with making room for private capital to return
to the market.
Secretary Donovan. Senator, you've asked the $64 trillion
question. This is what keeps me up at night, and this is
exactly the key question that we have to balance.
And frankly, it is not just helping the broader market
recover, but if we were to take steps to increase our premiums
too quickly, to take steps that would hurt the market recovery,
we actually hurt the FHA fund and taxpayers, because our old
investments, that trillion-dollar portfolio, will perform much
worse.
And so in the steps that we have taken--and you asked
exactly the right question, ``What's the effect for the average
homeowner?''--we felt that $14 a month, on average, was
acceptable, particularly given that we have record low interest
rates today.
We honestly feel that the biggest barrier holding back
lending--and I agree with you, too many qualified borrowers
aren't able to get lending today----
Senator Murray. Yes.
Secretary Donovan. It isn't the pricing that's the biggest
barrier. It would be if we went too quickly on raising our
premiums. The biggest challenge is the uncertainty that's out
there in terms of how we will enforce our rules. So we have to
make clearer what the rules will be.
That's why our indemnification rule clarifying it is
important. It is why we think the Federal Housing Finance
Agency needs to put out a clear policy on buybacks that will
allow Fannie and Freddie lenders to know what to expect. And it
is why the servicing settlement was important as well. It
created a single, clear, strong set of servicing standards and
clarified foreclosure processes around the country so that that
market can move forward with greater certainty.
And again, it is always hard to get that balance perfectly.
I wouldn't say we are ever done. I sleep on this every night.
But it is a critically important balance, and I just thank you
and the ranking member for your understanding of that balance.
Senator Murray. Okay, very good. I appreciate that. Thank
you.
PROJECT-BASED RENTAL ASSISTANCE SHORT FUNDING
Senator Collins.
Senator Collins. Thank you, Madam Chairman.
I want to go back to an issue that Senator Murray touched
on in her opening statement.
I am concerned by the Administration's proposal to fund
thousands of Project-Based Rental Assistance contracts for less
than 12 months. The reason I'm concerned is that short-funding
these contracts may create a perverse incentive for landlords
not to invest in maintenance, to cut expenses, to the detriment
of some of our most vulnerable households, because of the risk
of whether or not the full appropriations for the remainder of
the year is ever going to come through.
I'm also troubled that some owners may decide to leave the
program altogether rather than take that risk. I know this had
to be a difficult decision, and it clearly was budget-driven.
But how is HUD going to mitigate these risks to the program and
to the residents?
Secretary Donovan. Senator, first of all, let me say thank
you for recognizing this issue. This was one of the most
difficult decisions we made in our budget. Personally, for me,
having run the multifamily programs my first time at HUD, it
was particularly difficult, because I know the impacts.
What I would say is, there are two real risks here. One is
an operational risk that we will not be able to mechanically
get the contracts funded with the short-funding. That happened
in the past when these contracts were short-funded. And I can
assure you that I and my team have worked very hard to make
sure that the operational processes are improved. And in fact,
over the last 4 years, we haven't had those same kind of issues
that might spring up with the short-funding.
We also, operationally, have taken a lot of steps to make
sure we have processes in place to monitor the physical
condition of the units. So I appreciate your concern about
whether this will lead to decreased maintenance. We have new
risk ranking and reporting that we do on these units. We have
quality control around our Real Estate Assessment Center (REAC)
process that we have stepped up. Those are all things that are
critical to make sure that the kind of effects that you talk
about don't happen.
The other risk is an uncertainty around funding, and you
mentioned that as well. And that's one where, frankly, because
there is private capital that supports these units, it is
critical that we not create too much uncertainty around these
programs. And I do think that is one of the risks here.
I think what is very important is that we work together to
make very clear, as Congress has always done, that the funding
is available for these units. We signed 20-year contracts
knowing that they're dependent on appropriations each year. And
the market has been confident that that funding will be there.
And we want to make clear despite this short-funding that we
will do everything on our side, and I know that you will as
well to continue this funding and make sure that it is
available in subsequent years.
SUBSTANDARD UNITS IN MAINE
Senator Collins. Let me now turn to the issue that I
mentioned in my opening statement about the poor living
conditions in some of the HUD-subsidized units in Maine. I'm
troubled by this not only because taxpayers shouldn't be paying
for poorly maintained units, but because the health and the
safety of the people living there is clearly at risk. So
something went dramatically wrong with the oversight and
inspection process.
I was also troubled when we learned of the outright fraud
in some of the public housing agencies last year. I believe the
one in Philadelphia, in particular, was found to have fraud.
So what investments is HUD making in this budget to ensure
that you have quality controls, internal controls, effective
audits, a very close relationship with the IG to ensure that we
are not wasting taxpayer dollars on substandard units that are
unsafe for the tenants, or on outright fraud where people are
stealing money that belongs to the taxpayers and is not
benefiting those who need it most?
Secretary Donovan. First, Senator, let me just thank you
for your directness and your focus on these problems--both you
and Senator Murray.
Where there are issues, where we have made mistakes, and
this was clearly--there were mistakes made on these units.
You've been direct and held us accountable to correct those.
And I hope you'll agree that when we discovered these
problems, we worked very closely with you, with David Montoya,
and I want to really recognize him and his team. We are taking
steps specifically in Maine that I think will lead to better
management going forward.
The contracts with the inspectors, the companies that were
doing the inspections, have been rescinded. Those are being
brought back in-house to improve the inspections there. And we
have a very specific plan that we are monitoring for correction
of other quality control and things within the main housing
authority to make sure those are better.
But I think there are lessons, and you rightly point to
this. What lessons can we learn more broadly for the work that
we are doing across the country? And there are really three
things there.
One is, we have to make better use of our existing
resources, staff, and our partnerships with the IG to improve
oversight. We have, in our budget, proposed shifting public
housing staff into field offices to increase direct oversight.
We have also made sure that we are utilizing our
enforcement center, which previously didn't work as closely
with public housing authorities. Just in 2011, and so far in
2012, we have used the enforcement center to review 140 public
housing agencies across the country. And so that is a better
use of existing resources.
The second, we have to do better in coordinating our
inspection systems. To date, we have one inspection system
using REAC for our project-based units in public housing. We
have a separate system for voucher units. What we have started
now is a pilot to use our REAC inspections for quality control
and oversight, where they will go behind local inspectors and
make sure that the results that they're getting are, in fact,
accurate.
And that's something that we plan to expand and
potentially, in the future, to merge those two systems, so we
have a single set of strong standards for inspections across
all our programs.
The third thing is, with your help, the investments we are
making in information technology. Our Next Generation
Management System for our voucher program will allow us to do
things--just to give you one example, right now, we don't have
the ability to look at the photographs that are taken on those
inspections. There's nothing that replaces actually seeing,
with your own eyes, what happens. And this system will allow us
to download and view anywhere in the country the digital
photographs that are taken on the inspections that local
inspectors are doing.
And that's just one example, but there's a whole series of
things in that Next Generation Management System. That's been
one of the two biggest priorities you've had, and you've held
us accountable to invest in those through our information
technology. We couldn't agree more that that's a critical step
we have to take in investing.
Senator Collins. Thank you. I do want to salute you and the
inspector general for your responsiveness to the problems in
Maine and across the country. It is amazing that you don't
download the photographs. I could lend you my BlackBerry.
If even I can do that, it's clearly a feasible step that
should be taken.
Just one very quick point: Another thing I think the
Department really needs to look at is, if you have bad actors
out there, you do have available to you suspension and
debarment tools, where you can prohibit an individual or even
an agency from being involved in your programs for a period of
time. I would encourage you to make more use of those tools in
egregious cases. Thank you.
Secretary Donovan. Thank you.
Senator Murray. Thank you. What's the timeline on being
able to download those pictures? Do you have a----
Secretary Donovan. So we have--and we'll follow up with
detailed information on all the different steps. Those first
pieces of the Next Generation Management System are going into
place this year. I think it is within a few months that we'll
have the photographic capability that I talked about.
SECTION 8 VOUCHER FUNDING
Senator Murray. Sometimes when people know they are going
to be accountable in bigger ways, it makes a huge difference,
so I appreciate that.
And I echo Senator Collins' concerns about short-funding on
the project-based contracts, so we'll be following that very
closely from our end.
You mentioned in your opening remarks that the programs
that directly support the mission of providing housing to low-
income Americans, most of them who are elderly or disabled, is
about 83 percent of HUD's budget. When we have continued
difficult, challenging, constrained resources I know that those
programs place a lot of pressure on HUD's budget.
The largest of those is the Tenant-Based Rental Assistance
program, which, of course, funds the Section 8 vouchers that
are used by residents to find housing in the private market.
In this year's budget, the level of funding that is
requested to renew those existing vouchers is essentially flat.
While the budget does assume savings associated with
programmatic changes, it doesn't appear to be sufficient to
cover the costs of inflation and renewing incremental vouchers
for the first time. I wanted to ask you how you expect PHAs to
maintain their existing voucher portfolios without those
adjustments.
Secretary Donovan. So two things I would say about this,
Madam Chair. First of all, and I think you all have been very
focused on this for a number of years, is how do we balance
making sure we protect every family with sort of bending the
cost curve, if you will, of the renewals on these programs. And
we, through the budget this year, are proposing a whole series
of steps that would allow us to serve the same number of people
and keep the costs relatively flat. Some of those are choices I
think that we could all agree are ones that are common sense
and easy. Some of those are tougher decisions, and we'll
obviously need to discuss with the subcommittee and get your
views and input on whether some of those make sense.
Specifically in the tenant-based program, there are over
$200 million of savings that we are proposing to achieve. The
single-biggest is to change our income targeting in rural
communities to make sure that more of the working poor can be
eligible for vouchers. It is part of the old Section 8 Voucher
Reform Act that we are hopeful will pass in the House in the
coming weeks and that we would be able to implement. I think
there's broad support for those.
But we also have made proposed changes in the medical
expense deductions as well as the minimum rents that would
allow us to serve the same number of people.
So to be very clear, we are maintaining our commitment to
serving all families there. But it did require taking a number
of steps to try to lower costs next year to keep those flat and
to allow us to have lower renewal costs in the out-years.
The other thing I would just say, briefly, is that an
important piece here, as you both recognize, is what it takes
to manage these programs. And we have been very concerned that
we had two housing authorities, Milwaukee and Akron, that
actually turned back HUD-VASH vouchers. I have never seen that
before. Can you imagine the idea of housing authorities saying
we can't serve any more homeless veterans?
And just in January alone, we had 13 different housing
authorities that made the decision to turn back their broader
voucher programs.
ADMINISTRATIVE FEES
Senator Murray. Because of the costs associated with doing
them?
Secretary Donovan. Because they were concerned about the
inability to fund those.
Last year's budget made the very difficult decision to fund
the administrative fees at just over 70 percent in terms of the
overall need. We are proposing a significant increase there to
get above 80 percent. But we still think, even with the
difficult choices that we are making, that there's still some
risk that housing authorities wouldn't have enough.
So particularly that line item of admin fees is a critical
piece that I think we'll need to discuss and work on this year
in the budget.
Senator Murray. Okay. Let me ask you about that because
your request does prioritize funding for Section 8
administrative fees, which have been cut significantly in
recent years. Administrative fees aren't exactly an exciting
part of the budget, but they do fund the basic operations.
I know you struggled with a lot of difficult choices as you
put this together, but can you explain why you prioritized
funding for administrative fees over other needs?
Secretary Donovan. Clearly, the concerns we had that I just
mentioned about the number of housing authorities that have
made the decision not to serve additional veterans, the number
of housing authorities--that just in January alone have
determined that they did not want to continue with their
voucher programs--were critical in terms of that decision.
And let me give you the precise numbers of what has been
happening to administrative fees and what we are proposing.
First of all, in 2012, it was a 74-percent proration that
we estimated for the budget. For 2013, what we are proposing is
an 81-percent proration. Just to give you an example of where
those fees were previously, it was a 90-percent proration in
2010. So even our 81 percent represents a reduction if you go
back a few years.
And that leads to some of the concerns I mentioned, that
even at 81 percent, we were balancing difficult decisions. I do
have some concerns that it won't be enough for some housing
authorities.
But I would also point out that it represents a significant
increase in absolute dollars from where we were last year. And
I'm just looking here for the exact number of what that is to
make sure. Let me get that to you in a moment.
But there's an exact number in terms of the increase that
we are proposing this year in the budget.
Senator Murray. Okay. I have a couple more questions, but
let me turn it over to Senator Collins.
WOOD PELLET BOILER SYSTEMS
Senator Collins. Thank you, Madam Chairman.
I am just going to ask one more question, because I have
been called to the Senate floor, and submit the rest for the
record.
But this one, too, is one that I referred to in my opening
statement and is extremely important to the State of Maine.
Maine is the most heavily dependent of any State in the Nation
on home heating oil. And when you see the spikes in oil prices
that we've seen this year, and the cutbacks in the Low Income
Heating Assistance Program, it is causing tremendous hardship
for so many of our families in Maine.
It is also very difficult because Maine has the oldest
housing stock in the Nation, and thus, there are a lot of homes
that are poorly insulated that would benefit from
weatherization projects. That's something we ought to invest
more in as well.
The large swings in oil have caused many of our residents
to look to alternatives. The wood pellet boiler industry is
growing rapidly in Maine. It has the potential to help out
these families, to allow them to convert from oil, but also to
create thousands of new jobs in our State.
Wood pellet manufacturing, boiler technology, and pellet
delivery systems have progressed dramatically since the days
when you had to scoop pellets from small bags into a small
stove every couple of hours. Now the industry has developed
boilers that don't even require any human intervention during
the day. There are automatic feeds of pellets.
HUD has been slow to consider wood pellet boiler systems as
an acceptable conventional primary heating source. The reason
this is important is that for the purposes of qualifying for
FHA programs, you have to have a conventional primary heating
source.
I wondered if you could tell me if HUD is looking to
include these new wood pellet boilers as a conventional heating
source, which would help more families in Maine have the
confidence that they could convert to wood without losing their
eligibility for FHA and other Federal housing programs.
Secretary Donovan. Senator, first of all, let me thank you
for raising this issue and putting it on our radar screen, so
to speak, at HUD. Just as we talked about with your BlackBerry
a moment ago, I think we could all recognize there are moments
where the Federal Government and government, in general, can be
a little bit behind the cutting edge in terms of new
technologies.
And I'm happy to report not just that we are looking at
this, but just yesterday we updated our frequently asked
questions on our Web site to tell all of our lenders that wood
pellet stoves are an acceptable heating system for homes under
our insurance programs. As long as they meet the qualifications
that any heating system has to meet, it's an acceptable
technology. We are in the process of updating our handbooks to
reflect exactly that.
So not only are we considering it, but we have actually
considered it and made the decision that you were absolutely
right and that we should include these in our program. So thank
you for bringing it to our attention.
Senator Collins. That's absolutely great news. Again, I
thank you so much for your willingness to look at that.
The technology has changed so dramatically, and that's
going to be great news to a lot of homeowners in Maine. Thank
you very much.
Secretary Donovan. Thank you. I'll be coming to borrow your
BlackBerry later.
Senator Collins. Any time.
Senator Murray. Thank you very much, Senator Collins.
Mr. Secretary, your budget assumes savings associated with
programmatic changes to the HUD rental assistance accounts,
including tenant-based and project-based Section 8. You talked
about this a minute ago, but many of those cost-saving
measurements require legislative changes, which would involve
rulemakings.
What will happen to your savings estimates if all of the
proposed reforms are not enacted, or they are enacted late in
this fiscal year and you still need to go through the
rulemaking process?
Secretary Donovan. First of all, Senator, just to get back
on the specific number I was looking for before, the increase
that we are proposing on admin fees is $225 million this year.
So it is a substantial increase, and one we thought, even in a
tough environment, was absolutely critical. And as I said, we
think it is the minimum necessary to try to get more confidence
that housing authorities will actually be able to administer
the programs.
Specifically, on your question about legislative authority,
I'm happy to say that, with your urging, we are working very
closely with your colleagues in the House on the authorizing
committee and in the Senate here, and I am optimistic about
getting that legislation passed.
The large majority of those changes would not require
extensive rulemaking. There are very few that would require
rulemaking. They're really around the old Rent Sup and
Relocation and Acquisition Policies programs, but the large
majority of them we could implement through notice. So if we do
get the legislation passed, we could implement them quickly,
and be prepared for 2013 to be able to implement them and get
the savings that we're projecting.
Obviously, if the legislation doesn't pass, that would stop
us from being able to achieve some, but not all, of the
savings. We do have a share that we could achieve without
legislation. And I'd be happy to follow up with a specific
analysis that shows you precisely which we could do on a
regulatory basis. Of the $920 million that we are proposing
over the major programs, a significant share of it we could do
without any legislative change.
Senator Murray. Okay. If we can see that, that would be
extremely helpful.
Secretary Donovan. Yes.
MINIMUM RENT INCREASE
Senator Murray. But even if HUD was able to achieve these
changes at the beginning of this fiscal year, we have heard
concerns that some of these proposals may harm owners and
tenants alike. Specifically, some are worried about your
proposal for owners to spend down their property reserves that
would jeopardize maintenance and rehabilitation projects.
And I am also really concerned that raising minimum rents
and increasing medical deduction for tenants could put a real
burden on some of these tenants in these still tough economic
times. Can you please talk a little bit about the impact you
might see there?
Secretary Donovan. I'd be happy to. And again, let me
recognize at the outset, these are not decisions we would make
in anything but very difficult fiscal times, making very
difficult choices. And along with the Project-Based Rental
Assistance decision--the short-funding we talked about
earlier--this minimum rent increase was, I think, the single
most difficult decision in the budget.
And I think what's critical is that we need to clarify and
make sure there's a very strong exception policy for anyone
where hardship of that increased rent would result. We are
expecting to do that. We are already working on clarifying and
strengthening that policy. But there's no question that the
impact of this will have some real consequences for families
that are struggling.
We have analyzed fully in which programs what percentage of
families would be affected by this, the average rent increases
that would come out of this. The impact of the minimum rent is
about $150 million itself, across all the programs. And we'd be
happy to share with you the specific impact that it has for the
various tenant-based, project-based, 202/811, all the various
programs, impacts those would have.
RAPID RE-HOUSING PROGRAM
Senator Murray. Okay, I would really appreciate that.
Finally, let me just talk about homelessness funding. I
want to acknowledge your leadership in really developing a
homelessness plan and fostering coordination across
departments. It's so important, and I think we are making
progress there.
I did want to ask you about the Homelessness Prevention and
Rapid Re-Housing Program (HPRP), which was funded in the
Recovery Act and designed to really help homeless families. But
funding for that program ends this year. The Emergency
Solutions Grant program allows communities to continue these
efforts, but on a much smaller scale.
Can you talk a little bit about what the outcomes have been
for HPRP?
Secretary Donovan. Absolutely. I am so glad you asked about
it.
And let me just say, first of all, while you asked about
the HPRP program, without your leadership, we would never have
made the progress that we made on reducing veterans
homelessness. In just 1 year, to have 12 percent fewer homeless
veterans----
Senator Murray. Amazing.
Secretary Donovan [continuing]. Eighteen percent fewer
sleeping on the streets; that is a huge accomplishment. And
your personal leadership around HUD-VASH has made a huge
difference.
Senator Murray. I think the cross-agency coordination on
that has been really----
Secretary Donovan. A huge difference.
So we are concerned about the ending of HPRP, and we're
concerned because it has been so effective. We thought,
originally, it would reach about 500,000 people. It's already
reached more than 1.2 million and still counting.
And one of the best things about it, 75 percent of the
folks it has reached are homeless families, who have often been
the hardest to reach.
And why have we been able to reach more families? Because
what we have realized through doing this, what the data has
shown us, is that for far less money than we expected, we've
been able to stabilize or rapidly re-house families. It might
be 1 month's rent, it might be a security deposit, it might be
just a couple months of utility bills, but that's allowed us to
serve far more people.
And really, I think the most exciting thing about it is,
it's started to reorient many local responses to homelessness,
where for the first time they see that rapid re-housing in
particular is a very beneficial step. It can be particularly
effective with a small amount of money.
EMERGENCY SOLUTIONS GRANT
Our hope is that by continuing to invest in it through the
Emergency Solutions Grant (ESG), and I think one of the reasons
that we proposed a $330 million increase this year for our
homeless assistance grant account is that we have to continue
to invest in ESG. We have to grow the investment there. But it
is never going to be as much as we had in HPRP.
The hope is--and we are starting to see this in some areas,
and Washington has been a leader in this, of shifting
resources, taking them out of, for example, shelters. Shifting
them from Medicaid funding that's going to emergency rooms and
putting them into rapid re-housing is lowering costs overall.
So what we are hoping we see is, with our continued
increased investment in ESG, along with local investments that
complement it, that we will continue to see a focused
investment. We are nervous about that. We are pushing on it. I
know you've been supporting it.
But it is something that I saw locally in New York, our
prevention efforts, our rapid re-housing efforts. It was
something we were willing to shift our funding into, and that's
something we want to encourage at the local level.
Senator Murray. Okay. And I'll be following that very
closely. So anything you can show us on that, that helps paint
that picture, I'd really, really appreciate it.
But again, I appreciate the tremendous work of you and your
entire staff on an issue that has been at the forefront of our
Nation. Although sometimes nobody really pays attention to the
programs, they really are essential in getting us back on
track. And you've done a great job, and I truly appreciate it.
Secretary Donovan. Thank you. Thank you for your leadership
and partnership.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. Thank you so much for your accommodation
today. And we are going to leave the hearing record open for
anyone who would like to ask additional questions.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Patty Murray
information technology modernization-fha modernization project
Question. Reliable Data is critical to effective oversight. Time
and again the lack of good data has hindered HUD and the committee's
work. You recognize the challenges with HUD's systems and the
limitations they place on effective program management. To your credit,
you have requested significant funding to update HUD's IT systems. The
two biggest IT projects underway are FHA Modernization and the Next
Generation Voucher Management System, which have been priorities for
this committee.
While new technology has the potential to transform departmental
operations, modernization is a big undertaking for HUD. In response,
HUD is also changing the way it manages its IT systems. This involves a
change in culture, which is never easy. What is the current status of
your IT modernization efforts and these specific projects? Given the
significant changes needed in process, skills, and personnel, how will
you ensure that these projects stay on track and on budget?
Answer. The goal of the FHA Modernization project is to provide
business process improvements and technological tools that will address
longstanding constraints that have been impediments to effective risk
management in our underwriting policies and practices; more robust
fraud monitoring and detection; counterparty management, and portfolio
analysis. The scope of the project includes incorporating a
decommission plan for each legacy system targeted for replacement.
Benefits of the FHA Modernization capital investment are being realized
today.
The cornerstone of the FHA Modernization effort is the acquisition
of what is branded as ``the Federal Financial Services Platform.'' This
investment is a configuration of commercial-off-the-shelf products
which aligns FHA with products and services used by our industry
partners. Moreover, the investment aligns and establishes the baseline
for HUD's new and future enterprise architecture. This platform can
ultimately be extended and provides the capability and capacity to
replace the Unisys and IBM mainframe systems at some logical point in
the future. Eighty percent of the initial planned environments are
built out on the Oracle Exalogic platform; 100 percent by August 31,
2012. A requisition for additional Oracle Exalogic hardware/software is
in the procurement pipeline. This additional capacity positions us to
accept requirements from other offices in the Department (e.g., Public
and Indian Housing (PIH), Next Generation Management System (NGMS)
projects); accordingly, this achieves true enterprise capability and
demonstrates scalability.
Another element of FHA Modernization is the Lender Electronic
Assessment Portal (LEAP) application which consists of four modules
(i.e., Approval, Recertification, Monitoring and Enforcement) that are
in various stages of development and production. Today LEAP automates
what largely has been a manual and paper intensive process. The LEAP
application wholly aimed at improved counterparty (i.e., lender)
management, addresses vestiges of risk and fraud at the front end (or
origination) of the loan rather than relying on antiquated process
during the post-endorsement process. The Approval module went live in
April 2012 and is successfully processing a steady volume of requests.
The Recertification generation I module is slated for operational
capability in the second quarter of fiscal year 2013 with design and
development of the other modules in ensuing months; LEAP is projected
to achieve full operational capability in the first quarter of fiscal
year 2014. Consistent with addressing significant constraints on risk
and fraud detection, the Loan Review System (LRS), Portfolio Evaluation
Tool (PET), and Automated Underwriting System capabilities are slated
to achieve operational capability in early fiscal year 2014. This
complementary set of tools and capabilities effectively provide
decision support (and analytics) at every step in the process of the
loan lifecycle, from origination through post-endorsement technical
review.
Over the past 2 years, FHA has improved its project management
capacity. The FHA Modernization project is staffed with a cadre of
experienced and certified IT project managers, who are working
exclusively on FHA initiatives. HUD continues to invest in project
management training and makes this training available annually as part
of its HUD Virtual University Curriculum. Over the past 2 years, FHA
has actively incorporated HUD's Project Planning and Management (PPM)
framework to increase the occurrences of successful project
implementation. Information on the number (and types) of certified
project managers is readily available. The PPM approach provides a
process-centric methodological framework that is central to eliminating
waste, reducing variation and ensuring projects maintain time, scope,
cost, and quality congruence. The FHA Modernization effort has
tremendous reach to effect sustained productive outcomes and eliminate
constraints in the areas previously mentioned (e.g., counterparty
management, portfolio analysis, etc.), the current culture and business
practices will be modified to take full advantage of improved workflow
processes, customer relationship management and improved data outputs.
As new systems are brought online, staff will be trained. Training
modules and on-demand refresher courses will be developed for ongoing
capacity building. Hiring managers will seek to hire technology savvy
candidates to maximize the capacity of FHA staff at headquarters and in
the field.
NGMS is being engineered to serve as HUD's enterprise solutions for
the Rental Housing Assistance (RHA) line of business (LOB). Currently,
HUD provides rental housing assistance to more than 4.4 million
households through at least 13 different programs, each with different
rules administered by the Offices of Public and Indian Housing,
Housing, Multifamily Housing and Community Planning and Development.
Currently, RHA operations relies on manual manipulation of data
using Microsoft Excel and Microsoft Access, which are time-consuming,
costly, inefficient, and prone to human errors. Despite these
limitations, HUD continues to rely on these tools to execute critical
functions that support HUD's mission. With the investment in NGMS, as
an enterprise solution for the RHA LOB, HUD strives to improve
operating and administrative efficiencies in providing needed services
to its constituents.
During the past years, with the help of contractors, HUD conducted
searches for an automated enterprise solution to satisfy requirements
of RHA LOB. This was very challenging because of inherent business and
organizational complexities.
The NGMS program previously focused efforts on the development of
the Next Generation Voucher Management System (NGVMS). Since then, the
program has been re-focused to include needed functionality to support
HUD's RHA LOB. NGMS now focuses on:
--The activities necessary to develop, test, and implement Oracle
Enterprise solutions as the standard technology and platform
for NGMS; and
--Planning a new path forward for NGMS.
HUD has taken several positive steps to ensure the success of the
NGMS program, including:
--Establishing a cross-organization Executive Steering Committee that
provides program oversight and ensuring appropriate
representation from the IT and business communities;
--Establishing a technology training program for HUD personnel;
--Working with the Chief Procurement Officer to enforce contract
administration;
--Hiring a new overall program manager who reports directly to the
General Deputy Assistant Secretary;
--Establishing a Program Management Office (PMO);
--Supporting the PMO's efforts to improve program performance;
--Implementing active oversight of the program;
--Establishing a NGMS system change control process; and
--Establishing an Executive Steering Committee (ESC).
Going forward the overall program manager (PM) will be held
accountable for the following:
--Earned value management;
--Performance reporting;
--Status reports;
--Risk tracking and mitigation;
--Issue tracking;
--Stakeholder reporting;
--Working with HUD's Chief Information Officer and IT vendors to make
sure business and functional requirements are properly
developed, tested, and implemented; and
--Working with HUD's Chief Information Officer and oversee
Independent Verification and Validation (IV&V) of developed
NGMS modules.
The NGMS program has clearly learned important lessons from the
previous challenging efforts. With the formal establishment of the PMO,
the NGMS program, with direct oversight from the Deputy Secretary,
structured development and execution efforts will allow the program to
produce expected results and to avoid repeating past missteps.
Leveraging the Chief Technology Officer's knowledge and past
experiences and the Federal Housing Administration's experiences, HUD
chose Oracle Corporation technologies as the technology platform of
choice for NGMS.
In conjunction with the Chief Procurement Officer and the Chief
Information Officer, the NGMS PMO is in the process of executing the
following tasks:
--Issuing task order for Requirement Definition for RHA LOB--August
2012;
--Defining business priority for the RHA LOB--August 2012;
--Developing NGMS program project plan--August 2012;
--Exploring the use of other agency's Governmentwide Acquisition
Contract for architect, design, engineering and
implementation--Ongoing;
--Issuing task order for PMO support--August 2012;
--Issuing task order for Independent Verification and Validation--
September 2012;
--Developing training strategies for HUD technical employees--August
2012; and
--Updating business plan and Alternative of Analysis--August 2012.
Once completely implemented, NGMS will have included modules that
will satisfy business requirements from offices across HUD. While all
required NGMS modules are being finalized, the following modules are
being considered as NGMS priorities and will be included in Phase I
development:
--Budget forecasting and formulation;
--Cash management;
--Customer relationship management;
--Portfolio management; and
--New robust RHA data architecture.
information technology modernization
Question. When do you think that we will begin to see the results
of these efforts?
Answer. Benefits of the FHA Modernization capital investment are
being realized today. Acquisition of the Federal Financial Services
Platform (using Oracle Exalogic hardware, featuring the integrated
Fusion Middleware software stack) is the cornerstone IT investment.
This platform ultimately has enterprise extensibility and provides the
capability and capacity to replace the less agile Unisys and IBM
mainframe systems at some logical point in the future. Eighty percent
of the initial planned environments have been on the Oracle Exalogic
platform; 100 percent will be built by August 31, 2012. A requisition
for additional Oracle Exalogic hardware/software is in the procurement
pipeline. This additional capacity positions us to accept requirements
from other Offices in the Department (e.g., Public and Indian Housing
(PIH), Next Generation Management System (NGMS) projects), and Policy
Development and Research. Accordingly, this achieves true enterprise
capability and demonstrates scalability. The Lender Electronic
Assessment Portal (LEAP) application consists of four modules (i.e.,
Approval, Recertification, Monitoring, and Enforcement) that are in
various stages of development and production. Today, LEAP automates
what largely has been a manual and paper- intensive process. The LEAP
application wholly aimed at improved counterparty (i.e., lender)
management, addresses vestiges of risk and fraud at the front end (or
origination) of the loan rather than relying on the current antiquated
reviews at the post-endorsement process. The Approval module went live
in April 2012 and is successfully processing a continuous volume of
lender requests. The Recertification Generation I module is slated for
operational capability in the second quarter of fiscal year 2013, with
design and development of the other modules in ensuing months, LEAP is
projected to achieve full operational capability in the first quarter
of fiscal year 2014. In April 2012, FHA staff was given real-time
online access to access to borrower and collateral risk analytical
tools that have improved the capacity of FHA to capture data that is
currently not collected in existing systems. These data profiles help
to identify emerging fraudulent trends and practices. Consistent with
addressing significant constraints risk and fraud detection, the Loan
Review System (LRS), Portfolio Evaluation Tool (PET), and Automated
Underwriting System capabilities are slated to achieve operational
capability in the first quarter of fiscal year 2014. This complimentary
set of tools and capabilities effectively provide decision support (and
analytics) and every step in the process from loan origination through
post-endorsement technical review.
meeting the housing needs of women veterans
Question. In recent years, homelessness among women veterans has
increased significantly, posing challenges for the VA. For example,
many of the programs that traditionally serve homeless veterans aren't
open to families, posing a barrier to homeless women veterans who have
children. HUD-VASH has been one tool that has been successful in
housing veterans with families, but we need to do more to make sure the
needs of women veterans are met.
GAO recently released a report that I requested on meeting the
housing needs of women veterans. It recommends that both HUD and VA
improve data collection. What steps is HUD taking to obtain better data
on homeless women veterans and how are you coordinating these efforts
with the VA?
Answer. Beginning in 2013, HUD will begin to identify women
veterans as an individual element in its annual sheltered Point-in-Time
(PIT) count and biennial unsheltered PIT count of persons experiencing
homelessness. These PIT counts are administered by HUD's homeless
providers and reported to HUD through our annual Continuum of Care
grant competition.
HUD's coordination efforts with the VA include frequent meetings
with senior leadership and staff of both agencies under our ``Solving
Homelessness as One'' initiative and conducting ``Housing First Boot
Camps'' with HUD-VASH communities to increase the coordination and
performance of participating Public Housing Agencies and VA Medical
Centers. The Department is also planning another HUD-VASH Webinar in
September 2012, part of HUD's ``Ready, Set, Go'' training and education
series. This joint Webinar will focus on increasing the participation
of local Continuum of Care systems in the planning and implementation
of the HUD-VASH program.
Female veterans and veterans with families are a particular focus
of the Veterans Homeless Prevention Demonstration Program. HUD is
currently administering this $10 million demonstration program at five
sites, in collaboration with the Department of Veterans Affairs and the
Department of Labor. This program is designed to explore ways HUD can
offer early intervention homelessness prevention for veterans. Through
this program, HUD is gathering data on veterans, including female
veterans, who are assisted. There will also be an evaluation of the
demonstration which will examine the effectiveness of efforts to assist
female veterans in preventing homelessness.
______
Questions Submitted by Senator Herb Kohl
changes in medical deduction for section 8
Question. One of the proposed section 8 savings measures included
in the 2013 budget is a provision which will increase the threshold for
the unreimbursed medical deduction from 3 percent of a senior's income
to 10 percent of a senior's income. As chairman of the Aging Committee,
I am concerned that this policy will have a disproportionate impact on
seniors with low incomes and high unreimbursed medical expenses,
causing untenable rent increases. Not only do these seniors face paying
for medical expenses that are currently reimbursed, but they will also
be faced with a substantial monthly rent increase. I am concerned that
vulnerable seniors will be forced to choose between paying their rent
and buying food, or taking their medications or obtaining needed
medical procedures if the co-payment is too high. What do you estimate
the savings to be from this new requirement?
Answer. The figure of $165 million is the amount of the medical
deduction savings.
Question. Will HUD provide a hardship exemption for poor seniors
where this change in the medical deduction creates a rent increase that
is too onerous?
Answer. The President's budget does not contemplate a hardship
exemption. Such an exemption would result in substantial administrative
burden for PHAs and owners, and the reduction of administrative burden
was an important goal of the proposal. The current deduction does not
assist the lowest income seniors, who are eligible for Medicaid and
therefore receive no additional subsidy under this provision. The
proposal would align HUD assistance policy with the Internal Revenue
Code, which allows for deductions for healthcare costs above 10 percent
of income but not below that level.
rental assistance
Question. While I appreciate HUD's intent to stretch section 202
dollars further and the request funding for new development under the
section 202 program, I have a number of concerns and questions about
the proposals as described in the budget.
While I support the idea of mixed-income developments, I am
concerned that the administration's proposal for rental assistance may
be a mix that is infeasible. Rents will simply have to be too high in
the non-202 units to cover the cost of debt service. Has HUD done any
analysis of the amount of operating costs and/or debt service the
requested PRAC amounts will support?
Answer. Section 202 currently only provides on-going subsidy
sufficient to cover a project's operating costs absent debt service.
However, the Low Income Housing Tax Credit program produces
approximately 100,000 affordable units each year. Of these, HUD
estimates approximately 40 percent are set aside for elderly only
affordable housing. The large majority of these elderly affordable tax
credit projects are financed with permanent debt from the properties'
net operating income (tax credit restricted rents less operating
expenses). Non-section 202 tax credit rents are almost always in excess
of operating expenses and therefore sufficient to leverage debt
financing. HUD is currently assessing allowing section 202 rents to
include debt service as an eligible expense (as it currently does under
the section 8 program), such contracts would be capped at fair market
rents which in almost all jurisdictions are greater than tax credit-
restricted rents.
Question. Do you have any intention of requesting a change in
authority so that the Project Rental Assistance or operating assistance
that you are requesting (without capital advances) can cover debt
service?
Answer. Under existing statutory authority, HUD determines eligible
costs allowed under section 202 Project Rental Assistance contracts.
However, debt service is not currently an allowable expense under
existing administrative rule making, as codified under 24 CFR part 891.
HUD is assessing the possibility of providing some limited regulatory
relief along those lines.
section 202 prac units
Question. A necessary part of successful models of ``aging in
place'' is the role of service coordinator. I am concerned that
projects with a limited number of 202 PRAC units are unable to pay for
the cost of the required service coordinator. To date, few tax credit
or privately financed senior housing developments have been able to
afford a service coordinator. The service coordinator should available
to help the entire senior resident population, not only for the PRAC-
assisted units. Can you comment on how you intend service coordinators
to be supported?
Answer. Tax credit or privately financed senior housing typically
serves a more affluent, younger, and healthier elderly population than
the section 202 program. These households typically have less service
needs and/or have additional resources to directly access services on
their own. However, having a service coordinator in place to serve this
population is important, particular as those households age in place.
For the last 10 years, the section 202 program has accommodated mixed-
finance projects that include some units financed with tax credits and
other sources and some units that were financed with section 202 PRAC
assistance. Going forward, similar to what HUD has historically allowed
under the mixed-finance program, the section 202 units could cover the
costs of a part-time service coordinator. Compensation for a full-time
service coordinator could be provided either by including a service
coordinator line-item as an operating expense on the non-202 units or
by relying on funding from local area Agencies on Aging or other local/
philanthropic sources.
______
Questions Submitted by Senator Patrick J. Leahy
impact of cuts to the community development block grant program and
home investment partnerships program on rural areas
Question. Mr. Secretary, on that topic, two of the most effective
programs Vermont and rural States around the country have come to rely
upon have been the Community Development Block Grant (CDBG) Program and
the HOME Investment Partnerships Program. The CDBG Program is one of
the most effective Federal programs to revitalize communities with
proven results. CDBG helps to fund homeownership assistance, housing
rehabilitation, economic development projects and improvements to
public services while creating jobs, efforts I know the Department
supports. However, the communities that rely on this funding to serve
their most vulnerable residents, principally low- and moderate-income
persons, have been negatively impacted by recent cuts to the program
totaling 28 percent in the last 2 years alone. The CDBG formula
allocation has been cut by over $1 billion since 2000 and the level
funding request would keep this allocation at its lowest funding level
since 1992. These cuts have left State CDBG programs oversubscribed.
During Vermont's most recent grant round, nearly three out of four
projects submitted were denied funding. This directly translated to
Vermont creating one quarter the number of requested affordable housing
units; this translated to the inability of Vermont to create three out
of four proposed new jobs; and it left millions of dollars in State,
local, and private dollars usually leveraged by the CDBG program on the
table.
The HOME program serves as the largest Federal block grant program
to State and local governments designed exclusively to produce
affordable housing for low-income families. Since Congress created the
program it has been the cornerstone in the United States' affordable
housing finance system. HOME provides a flexible resource to meet the
communities' highest priority affordable housing needs. At a time when
States continue to face significant affordable housing shortages, the
program has helped produce more than 1 million affordable homes
nationally and helps approximately 143,000 families secure affordable
housing each year. Funding for the HOME program has also successfully
leveraged more than $88 billion of public and private funds for
affordable housing.
Despite recent criticisms of the program, the vast majority of HOME
projects are completed successfully, on time and with surprising
success given the impact of the current housing and economic crisis.
The HOME program has continued to provide much needed funds to local
communities for tenant-based rental assistance, rehabilitation of
affordable rental and ownership housing, and construction of affordable
housing. Additionally, the HOME program provides down-payment
assistance to help creditworthy families become homeowners, and housing
vouchers to low-income families and those on the brink of homelessness.
HOME funds often assist seniors, persons with disabilities, and the
homeless in ways which directly respond to local priorities and needs.
As the need for affordable housing continues to grow, for many States
and local governments HOME is the only reliable funding for affordable
and special needs housing development available. Despite the growing
need for HOME funds this program faced a 38-percent cut in last year's
funding bill.
Mr. Secretary, in your testimony you pointed to the Department's
support of the Community Development Block Grant Program and HOME
Investments Partnership Program as the primary assistance the
administration provides to rural communities. When I look at the
overall budget request, one that sustains significant cuts, I see a
shift of priorities that heavily favors urban communities over rural
ones. I am concerned about what this level of funding would mean for
these programs, and particularly concerned about what they mean to
rural America. Do you feel the funding request for CDBG and HOME
adequately addresses the housing needs of rural communities given the
current oversubscription of the programs?
Answer. HUD recognizes that the economic downturn has dramatically
impacted rural communities across the country, and the Department
remains committed to continuing its investment in rural America. The
administration was required to make very difficult decisions during the
fiscal year 2013 budget development process, and HUD supports the
requested level of funding for CDBG and HOME given the current fiscal
situation. The requested levels should not disproportionately impact
rural communities. Both the CDBG and HOME programs are formula
programs. Consequently, the proportion in distribution of funding
between urban and rural areas will remain the same.
The CDBG request will provide more than $880 million for the State
CDBG program in fiscal year 2013. While HUD acknowledges the requested
funding level is the same as the request for fiscal year 2012 and
results in a $116 million decrease for States below the fiscal year
2011 appropriated level, it is important to remember that grantees have
a great deal of discretion regarding the development of programs that
best meet the needs of their communities. Grantees may have to rethink
how they prioritize CDBG funding to have the greatest positive impact,
and HUD will continue providing the resources and technical assistance
necessary to assist grantees in achieving the highest level of
performance and positive outcomes from CDBG allocations.
The HOME request will provide more than $400 million for State HOME
participating jurisdictions in fiscal year 2013. While HUD acknowledges
the requested funding level is the same as the fiscal year 2012
appropriation and results in level funding for States and is also 38
percent below the fiscal year 2011 appropriated level, it is important
to remember that, like CDBG, State-participating jurisdictions have a
great deal of discretion regarding the location of HOME projects that
best meet the needs of their rural communities. Just as in CDBG,
participating jurisdictions may have to rethink how they prioritize
HOME project funding and HUD will continue to provide the resources and
technical assistance necessary to assist them.
impact of cuts on rural areas
Question. What steps is the Department taking to ensure budget cuts
do not disproportionately impact rural communities?
Answer. The administration was required to make difficult decisions
during the fiscal year 2013 budget process. Despite the subsequent
reductions in funding requests for some of HUD's programs, these
reductions should not disproportionately impact rural communities. Both
the Community Development Block Grant and the HOME Investment
Partnerships programs are formula programs. Consequently, the
proportion in distribution of funding between urban and rural areas
will remain the same, though the actual dollars allocated will be
reduced as a result of smaller appropriations.
The Department recognizes the importance of the CDBG program for
rural areas and works with grantees to help them carry out successful
programs while adhering to the requirements of the Housing and
Community Development Act of 1974, as amended. From CDBG program
inception to 1981, HUD administered a small cities CDBG program,
awarding 20 percent of formula funds on a competitive basis. In 1981,
Congress formally established the State CDBG program. This statutory
change required 70 percent of CDBG funds allocated by formula go to
entitlement jurisdictions, and the other 30 percent go to non-entitled
communities (small cities, small towns, and rural areas). This
provision, referred to as the 70/30 split, remains in place to date.
By statute, 40 percent of the annual appropriation for HOME is
allocated directly to States. In 24 CFR 92.201, the HOME program
regulation requires that ``Each State participating jurisdiction is
responsible for distributing HOME funds throughout the State according
to the State's assessment of the geographical distribution of the
housing needs within the State, as identified in the State's approved
consolidated plan. The State must distribute HOME funds to rural areas
in amounts that take into account the non-metropolitan share of the
State's total population and objective measures of rural housing need,
such as poverty and substandard housing, as set forth in the State's
approved consolidated plan. To the extent the need is within the
boundaries of a participating unit of general local government, the
State and the unit of general local government shall coordinate
activities to address that need.''
Both of these block grant programs leave the distribution of the
grant funds for small cities and rural areas to the individual States.
Statutorily, each State has a broad discretion on how to prioritize the
use of these funds. HUD continues to offer support to States, small
cities, and rural areas that will help them discover areas with the
highest level of need.
proposed rule for home
Question. Mr. Secretary, I commended the Department's efforts to
improve the monitoring of the HOME program following last year's
criticism highlighting some unfortunate delays and mismanagement in an
otherwise successful and cost-effective program. I am, however,
concerned about the Department's proposed regulation to address these
criticisms. The proposed HOME Program rules appear to have a
disproportionate impact on rural HOME programs despite the fact that
rural communities have dependably ranked as some of the most efficient
and effective recipients of HOME program funding. I know my home State
of Vermont has been awarded two HOME Program Doorknocker Awards and has
consistently been ranked first among State-participating jurisdictions
over the past 6 years based on their administration of the HOME
program. And yet, the proposed regulation would make it difficult, and
in some cases impossible, for rural communities to continue to use HOME
funding.
Of particular concern is the change in how Community Housing
Development Organizations (CHDOs) are required to demonstrate capacity.
The proposed rule would require CHDOs to have paid staff with
development experience and will not allow them to rely on consultants
to demonstrate capacity. This requirement will undoubtedly negatively
impact small rural CHDOs who rely on small staffs and often
partnerships with groups in the community with housing development
experience.
Additionally, the proposed changes to the set aside requirement
changes the definition of ``sponsor'' in a way that would require the
CHDO to be the sole general partner in a limited housing partnership.
In Vermont this would be a significant problem as our CHDOs often are
partners with Housing Vermont, a Statewide nonprofit syndication and
development company.
While I understand the intent of the proposed rule, I worry that
the rule contains changes could have unintended consequences which
could prove to be costly, duplicative or time-consuming especially for
participating jurisdictions and States in rural areas with limited
staff and resources.
In preparing the proposed regulation how did the Department take
into consideration the often unique circumstances facing rural
communities using HOME funds and what steps were taken to ensure that
this regulation would not negatively impact small rural communities?
Answer. In preparation for the publication of the Proposed HOME
Rule, the Office of Affordable Housing conducted ``Listening Sessions''
with both Statewide and local stakeholders. At the stakeholder meeting
held with State agencies on January 14, 2010, HUD asked ``Do rural
Participating Jurisdictions (PJs) have any particular comments or
concerns about the administration of the HOME program?'' Several States
provided input on the challenges experienced by CHDOs and expressed
concern about the lack of capable CHDOs in rural areas. Many States
expressed the opinion that most CHDOs could not be expected to
undertake complex housing development due to their lack of capacity.
Several suggestions addressed ways to provide CHDOs with more funding
for operating costs (e.g., salaries for experienced staff), including
monitoring fees, and different structures for developer fees. To
mitigate some of those concerns, the Department has also made clear in
the proposed rule that project-related soft costs can be paid for with
HOME funds (e.g., underwriting, market analysis).
In summary, with respect to the performance of CHDOs, and in
particular, the performance of CHDOs in rural areas, the Department
received input prior to rulemaking and public comments on the proposed
rule regarding proposed changes to definitions and requirements related
to CHDOs. HUD acknowledges the concerns raised by commenters,
particularly regarding the effects of some of the provisions on rural
areas. HUD has carefully considered these comments in drafting the
final rule. The Department will provide technical assistance to PJs and
CHDOs to help them meet the new requirements.
Question. Will you commit to working with me and my staff to ensure
that when a final rule is published by HUD later this year that
accommodations for small, rural States and CHDOs are made?
Answer. The Department has given careful consideration to the
comments it received on the proposed rule, including comments regarding
the effect of proposed changes on rural areas. The Department is
confident that many CHDOs in rural areas will be able to increase their
capacity in order to be in compliance with the Final Rule. The
Department will offer several different types of technical assistance
and examples of best practices that will assist States with rural areas
and CHDOs in rural areas to modify their programs and build capacity in
order to meet the new requirements of the HOME Final Rule. The new
OneCPD Resource Exchange, https://www.onecpd.info/, will also provide a
forum for CHDOs and States to engage in peer-to-peer assistance.
______
Question Submitted by Senator Susan M. Collins
duplicative economic programs
Question. The Government Accountability Office notes in its 2011
follow up report on duplicative economic development programs that HUD,
Commerce, SBA, and USDA have made minimal progress collecting data and
assessing the effectiveness of their overlapping economic development
programs. Further, HUD is the only agency of the four identified to not
yet have taken steps to define common outcomes with other Federal
agencies. I know that building collaborative relationships is an
important goal of yours. What limits your ability to reach common goals
and results with other agencies?
Answer. HUD strongly agrees with the concept of collaboration, and
it continues to work with other agencies to ensure that its grants are
effective and useful to the communities they are meant to serve.
HUD's core community and economic development program, the
Community Development Block Grant program (CDBG), is distinct from
programs administered by other agencies in both its objectives and
design. It has a statutory requirement that grantees expend in excess
of 70 percent of grant funds on activities that benefit low- and
moderate-income persons. In addition, the CDBG authorizing language is
clear that funding priorities and other decisions are to be made at the
State and local levels; the program provides grantees with a high
degree of flexibility to respond to local economic conditions with
priorities tailored to meet those needs. As a result, many of the
program's intended outcomes are unique from those of other Federal
economic development programs. This has made it difficult to coordinate
goals and results with other agencies. However, CDBG has been a major
factor in allowing these other programs to be effective: Grantees
regularly leverage CDBG funds with these other Federal grant programs
and private resources to achieve common goals.
Despite these differences, HUD, through the Office of Economic
Development, has initiated collaborative discussions with several
agencies administering economic development programs. These
conversations are intended to provide information to HUD grantees to
assist them in making strategic investments of block grant and
competitive resources. HUD plans to disseminate information gained
through these collaborative efforts using the OneCPD Resource Exchange
Web site, the Department's new online portal designed to share news,
events, resources, and information on all HUD Community Planning and
Development programs.
While, due to differences in program objectives and design, HUD may
not be able to fully align CDBG with other Federal economic development
programs, it does strongly believe that collaboration with other
programs can help make sure that it is effective in building strong
communities across America.
______
Questions Submitted by Senator Roy Blunt
fha's solvency
Question. As one of the only games in town, the Federal Housing
Administration (FHA) continues to have a ballooning portfolio, well
above the intended size. As the Administration's white paper proposes
various reform options for the Government-sponsored enterprises (GSEs)
Fannie Mae and Freddie Mac, how can the Department of Housing and Urban
Development (HUD) ensure that FHA won't become the lender of last
resort for home loans should the private market move slowly to fill the
space where the GSE once operated?
Answer. FHA plays a counter-cyclical role in the housing market,
experiencing higher volume during times of market constriction and
lower volumes when there is sufficient access to mortgage capital in
the conventional market. Regardless of the market environment, FHA
loans are typically 30-year, fixed-rate products and lenders
originating these loans must follow FHA guidance in originating and
servicing these loans. Since 2009, FHA has made significant changes to
credit policy to ensure that future books of business continue to yield
positive economic value to the fund. In addition, FHA has adopted a
number of measures that hold lenders accountable for their actions,
including, among others, rules that require lenders to indemnify FHA on
loans found to be materially deficient. FHA is still seeking
legislative authority to pursue indemnification and other heightened
enforcement authority with respect to all FHA approved lenders. FHA has
also enhanced its underwriting guidance and modified its automated
mortgage scoring system to require more underwriter oversight of
riskier loan applications. Finally, FHA's loss mitigation strategies,
already considered among the strongest in the mortgage industry, have
been further improved to protect both homeowners as well as FHA. Taken
together, these actions are designed to ensure that creditworthy
borrowers have a safe and affordable means of obtaining homeownership
while at the same time encouraging only responsible lending on the part
of FHA's approved mortgage lenders. As the economy continues to recover
and FHA's counter-cyclical role becomes less critical, FHA and HUD will
work with the broader administration and Congress on efforts to ensure
that FHA's role in the market does recede and a stable, sustainable
housing market evolves.
Question. The administration's budget once again requests increases
in MMI premiums to help strengthen the fund. While I'm encouraged by
the increase in liquidity to protect against risk to the solvency of
the fund, I question whether the already bloated portfolio will grow in
2013 rather than shrink as your budget assumes. What steps are being
taken to encourage private lenders to originate quality, non-FHA
insured loans? How can HUD encourage the private market to provide home
loans for minorities who disproportionately rely on FHA's Government
guarantee?
Answer. In February 2012, HUD announced an increase in both FHA
annual and upfront mortgage insurance premiums, effective in April
2012. The decision to adjust FHA premiums for the fourth time since
2009 was made by balancing several factors--FHA's mission of providing
access to credit for low wealth, creditworthy borrowers, the health of
the Mutual Mortgage Insurance Fund and FHA's long-term role in the
Nation's housing finance system. As a result of these premium
adjustments, FHA has been able to continue to serve its countercyclical
role in the mortgage market--providing access to credit to creditworthy
borrowers during this time of market constriction--but has seen overall
volume decline. According to Amherst Securities' June 14, 2012, Amherst
Mortgage Insight Report, the composition of FHA loans in Ginnie Mae
securities has actual declined. This is in large part because these
pricing changes have made conventional loans more competitive; high
FICO borrowers who may have chosen to take out an FHA-insured loan
rather than a loan with private mortgage insurance are now finding the
costs of private versus federally backed mortgage insurance more
comparable. However, adjusting premiums is only one lever. Currently,
FHA is the only federally backed institution able to originate high-
priced loans (loans above $625,500). As a result, borrowers seeking
these ``jumbo'' loans only have one outlet--FHA. In its housing finance
reform white paper, the Administration urged Congress to allow the
higher loan limits to expire. Unfortunately, in November 2011, Congress
elected to extend these limits for FHA while allowing the GSE loan
limits to go back to pre-crisis levels. This does create a disincentive
to originate non-FHA loans in some markets and so we would once again
urge Congress to allow FHA loan limits to step back to the HERA levels.
government-sponsored enterprises
Question. The future of Fannie Mae and Freddie Mac remain uncertain
at this point but I am interested in hearing your views. What are your
views about the future of Fannie and Freddie? If Fannie and/or Freddie
continue to exist in some form, what are your views on reconciling the
conflicting goals of private profits and public good? How important are
the mortgage GSEs to carry out Federal housing policy?
Answer. The administration is currently working diligently on a
number of interagency projects set forth in the white paper that was
published in February 2011, including a detailed exploration of the
three options for the future of housing finance. Of those three
options, the third one does provide considerations around maintaining
some Government presence through a model that would serve as a back-
stop in the form of reinsurance behind significant layers of private
capital at a guarantor level. Below is greater detail on the strengths
and weaknesses of this third option. However, to be clear, the
administration is still working with a number of stakeholders,
including Members of Congress, to fully explore all three.
At the same time, the administration is equally engaged on topics
that directly involve the GSEs, such as the development of national
servicing standards, a transition plan for the wind down of Fannie Mae
and Freddie Mac from their current status and reducing the footprint of
the Federal Housing Administration (FHA). It is important to remember
that the FHA and GSEs continue to provide an important source of credit
availability as Government and industry work collectively to reduce the
barriers of uncertainty that block a robust return of private capital.
Thus, while the administration supports decreasing the role of FHA,
Fannie Mae, and Freddie Mac and re-invigorating the private market, we
also believe that any approach must be measured and comprehensive to
address the tensions your questions above elicit.
homelessness
Question. In your testimony, you say that HUD and the VA have
partnered for the past 2 years to make strides in ending veteran
homelessness by 2015. While I appreciate the ambitious goal and the
collaboration between these two agencies, how will your fiscal year
2013 budget address the significant increase in homelessness for
veterans in Missouri?
Answer. HUD is aware that the number of homeless veterans in
Missouri has increased from 529 veterans in 2009 to 853 veterans in
2011 and is working hard to end veteran homelessness. Despite the
significant current economic challenges, in the fiscal year 2011
Continuum of Care competition, Missouri was awarded $27,371,596, an
increase upon the $27,357,782 awarded in 2010. In 2012, HUD allotted
100 HUD-VASH vouchers to the State of Missouri, doubling the number of
HUD-VASH vouchers allotted to Missouri and bringing the total number of
vouchers to 495 Statewide. HUD will continue to request funding in
order to address the significant increase in veteran homelessness in
Missouri and elsewhere.
HUD is currently administering the $10 million Veterans Homeless
Prevention Demonstration Program at five sites in collaboration with
the Departments of Veterans Affairs and Labor. This is a 3-year
demonstration designed to explore ways HUD can offer early intervention
homelessness prevention for veterans--primarily veterans returning from
the wars in Iraq and Afghanistan. While none of the sites for the
demonstration is in Missouri, the lessons learned will be important in
addressing the unique needs of these veterans and will support efforts
to identify, reach, and assist them to regain and maintain housing
stability. An evaluation of the program will also provide HUD with
additional information to inform programs addressing means of
preventing homelessness among veterans in the future. HUD expects to be
able to provide preliminary results which will guide us in policy
formation.
Question. How does your budget ensure that those who have received
assistance for adequate housing won't become homeless again?
Answer. Performance metrics codified in the Homeless Emergency
Assistance and Rapid Transition to Housing Act (HEARTH Act) of 2009
require communities to be able to track length of homelessness,
recidivism rates, and the number of persons experiencing homelessness
for the first time. Under the HEARTH Act, additional funding is
provided to communities to conduct planning and evaluation, including
this performance measurement. HUD's fiscal year 2013 budget includes a
request for the funds needed to continue the transition to the
McKinney-Vento Homeless Assistance Act, as amended by the HEARTH Act.
As communities receive the funds necessary to conduct these critical
evaluations they will be able to better ensure that persons who enter
the homeless system will be served with the most appropriate
interventions to stabilize their housing and foster independent living.
Question. Do you believe that there is enough emphasis placed on
prevention and homebuyer education to prevent another crisis?
Answer. In response to the recent economic crisis, the American
Recovery and Reinvestment Act (ARRA) was enacted, which included the
funding of the Homelessness Prevention and Rapid Re-housing Program
(HPRP). Over 75 percent of the assistance provided with the $1.5
billion allocation was used for homelessness prevention. HUD has used
the lessons learned from HPRP in its drafting of the interim
regulations for the Emergency Solutions Grant (ESG) program, a
McKinney-Vento Homeless Assistance Act program amended by the HEARTH
Act of 2009. As of fiscal year 2013, HUD will no longer have HPRP funds
available to continue that program--to offset this loss, HUD is
emphasizing the funding for the ESG program.
rural housing and development
Question. Investing in rural communities is very important to me
and my constituents. I realize there are common goals within HUD and
USDA in this area and am interested in your views on how the two
overlap in this space. The most recent GAO report acknowledges this
overlap; however, it remains unclear whether the two agencies will
continue to maintain similar but separate housing goals. How can HUD
further protect rural America's needs as funding reaches the States and
large urban areas?
Answer. In fiscal year 2013, HUD will continue to fund programs
that will directly support housing and economic development in rural
communities. Small towns and rural communities across America are
facing an acute need for more affordable housing, while also searching
for sustainable economic development strategies that link rural housing
to job centers. Recognizing the unique challenges in these
decentralized areas, HUD continues to tailor its programs to provide
rural communities with the resources they need to craft innovative
solutions. While specific appropriations for programs in rural
communities ended in 2011, HUD has continued to partner with rural
communities with programs like Community Development Block Grants, HOME
Investment Partnerships, and the Housing Choice Voucher Program (HCVP).
It also directly supports homeownership in rural areas through FHA
insurance for homeowners. HUD's field offices in rural communities
continue to provide technical assistance resources and to link to other
HUD programs and other Federal agencies. Moreover, HUD is committed to
the development of the poorest areas in America, specifically Indian
Country. Through programs like the Indian Housing Block Grant, HUD
partners with rural American Indian and Alaska Native tribal
governments to support efforts to create locally driven solutions to
economic development challenges. Below, HUD outlines some of the
current programs rural communities are using to address their housing
and community development needs.
collaborations with other agencies
HUD meets regularly with other agencies involved in housing through
an interagency rental housing policy group to better align and
coordinate the affordable rental housing programs each operates. The
Rental Policy Working Group, created by the Domestic Policy Council and
consisting of the Departments of Housing and Urban Development,
Agriculture, and Treasury, has released proposals that will more
efficiently align rental programs across Government agencies, including
inspections, financial reporting, appraisals, energy efficiency
standards, and fair housing compliance enforcement, among others. This
working group has increased collaboration between the rural housing
policies of HUD and USDA.
One specific way HUD is working with other agencies is an effort to
improve access to capital from private sources in isolated rural areas.
The first step in this effort is the Border Community Capital
Initiative (``Border Initiative'') is the first step in a collaborative
effort among HUD, the Department of the Treasury's Community
Development Financial Institutions Fund (CDFI Fund) and the Department
of Agriculture--Rural Development (USDA-RD). The Initiative's goal is
to increase access to capital for affordable housing, business lending
and community facilities in the chronically underserved and
undercapitalized United States/Mexico border region. Specifically, it
will provide direct investment and technical assistance to community
development lending and investing institutions that focus on affordable
housing, small business and community facilities to benefit the
residents of colonias. The United States Code defines a colonia as a
community that (1) is in the State of Arizona, California, New Mexico,
or Texas; (2) is within 150 miles of the United States-Mexico border,
except for any metropolitan area exceeding 1 million people; (3) on the
basis of objective criteria, lacks adequate sewage systems and lacks
decent, safe, and sanitary housing;
HUD, USDA-RD and the CDFI Fund have all identified lack of capacity
among organizations serving the colonias and similar persistent poverty
communities as a limiting factor in the effectiveness of Federal
programs. Organizations specializing in affordable housing, small
business support, and community facilities cannot sustain themselves
and grow. The Border Initiative focuses on using each agency's
resources to effectively improve these organizations, empowering them
to improve colonias communities. Depending upon the programmatic
lessons of the Border Initiative and availability of resources, the
agencies hopes to adapt this collaborative approach to improving
capital access in other rural regions.
on-going rural assistance
Beyond targeted efforts to alleviate housing and development issues
in rural America, HUD serves families in small towns and rural
communities through almost every major program it funds. While many
think of HUD programs as mainly for urban communities, HUD supports
communities across the country.
--In 2012, the State Community Development Block Grant (CDBG) program
provided approximately $882 million to rural areas, supporting
over 25,000 jobs both directly and indirectly, providing needed
infrastructure, economic development, and affordable housing.
The State of Missouri received over $20 million of CDBG funding
for rural areas.
--HUD also provided almost $400 million in rural areas in 2012 for
affordable housing and homeownership programs through its HOME
Investment Partnership program, directly and indirectly
supporting over 5,360 jobs. The State of Missouri received over
$9 million of HOME funding for areas outside of large
metropolitan areas.
--Altogether, over 800,000 families in rural communities are directly
assisted through the Housing Choice Voucher Program, Public
Housing, and Multifamily programs.
--For homeowners, HUD's Federal Housing Administration (FHA) helps
first-time homebuyers and other qualified families all over the
country purchase their own home. More than 1.5 million of the
homes currently insured by the FHA are in rural areas, and
approximately $545 million in current FHA loans are to rural
healthcare facilities designated as ``critical access
hospitals.'' HUD recognizes the unique challenges in these
rural areas, and continues to develop innovative, community-
based programming to meet those needs.
homeless assistance grants
According to HUD's most recent Annual Homeless Assessment Report,
the number of people using homeless shelter in suburban and rural areas
has increased 57 percent since 2007. Suburban and rural homelessness
makes up 36.2 percent of the total homeless population in America. The
reason for this increase is unclear. However, with the Federal
Government's commitment to the Federal Strategic Plan to End
Homelessness, it is crucial that the Department confront this growing
problem.
On May 20, 2009, President Obama signed the Homeless Emergency
Assistance and Rapid Transition to Housing (HEARTH) Act, which includes
the establishment of the Rural Housing Stability Assistance Program
(RHSP) within HUD's Homeless Assistance Grants program. RHSP is
designed to assist individuals and families who are homeless, in
imminent danger of losing housing, or in the worst housing situations
in rural communities. In 2013, HUD is requesting $5 million for the
Rural Housing Stability Assistance program. These grant funds will be
awarded outside of the existing Continuum of Care competition and will
introduce activities that have not historically been available through
HUD's homeless assistance programs. For example, if someone's house is
uninhabitable, RHSP funds can be used to make repairs, preventing that
individual from becoming homeless.
In addition to this focused RHSP initiative, rural communities will
continue to have access to HUD's targeted homeless assistance, through
the Continuum of Care competition grant and the Emergency Shelter Grant
(ESG) program. Rural areas have increasingly gained access to HUD's
competitive homeless assistance grants, primarily through the creation
of Balance of State and Statewide Continuums of Care, with funds
allocated directly to the State to assist areas not currently in
Continuums of Care. In 2012, the State of Missouri received over $2.5
million to fight homelessness in non-urban areas. In 2011, the
Continuum of Care competition included a selection priority for new
projects proposing to serve 100 percent rural areas and an additional
41 projects in rural areas received funding, resulting in nearly $16
million for new projects in rural areas.
american indian, alaska native, and native hawaiian programs
As the single largest sources of funding for housing on Indian
tribal lands, HUD initiatives in Indian country continue to provide
crucial resources to America's poorest communities. Programs like
Indian Housing Block Grants, Indian Home Loan Guarantees, and Indian
Community Development Block Grants support development in remote areas
where safe, affordable housing is desperately needed. HUD also directly
supports housing and economic development initiatives in remote areas
of Hawaii, through the Native Hawaiian Housing Block Grant Program and
Native Hawaiian Loan Guarantee Program. HUD recognizes the right of
Indian self-determination and tribal self governance by allowing the
recipients the flexibility to design and implement appropriate, place-
based housing programs according to local needs and customs. All
together, in fiscal year 2013, HUD is requesting $731 million to fund
programs that will support housing and development in American Indian,
Alaska Native, and Native Hawaiian communities, which will directly and
indirectly support over 14,000 jobs.
sustainable housing and communities
Recognizing the strong demand among communities for help in
connecting economic development with future infrastructure and housing
investments, HUD established the Office of Sustainable Housing and
Communities (OSHC) in 2010. Its mission is to both directly assist
those communities looking for assistance in planning for sustainable
growth and to infuse sustainability into HUD policies and programs. HUD
has found that the demand for planning assistance is strong in rural
areas as they attempt to plan for a sustainable future. Through
partnerships with other Federal agencies to align resources and reduce
barriers, HUD has developed the Sustainable Communities Initiative
(SCI) to provide incentives to encourage communities of all shapes and
sizes to use sustainable planning and development strategies. SCI
funding includes special funding categories for smaller communities. In
2011, over 40 percent of the OSHC Community Challenge Grants went to
communities with populations below 50,000. In fiscal year 2013, HUD is
requesting $100 million in SCI funding within the Community Development
Fund, of which a portion will once again be designated for small- and
mid-sized communities.
SUBCOMMITTEE RECESS
Senator Murray. This hearing is recessed until Thursday,
March 8, at 10 a.m., at which time we will hear testimony from
the acting FHA Commissioner, Carol Galante, on the Federal
Housing Administration.
[Whereupon, at 10:33 a.m., Thursday, March 1, the
subcommittee was recessed, to reconvene at 10 a.m., Thursday,
March 8.]