[Senate Hearing 112-747]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-747

 
STREAMLINING AND STRENGTHENING HUD'S RENTAL HOUSING ASSISTANCE PROGRAMS

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

                                HEARING

                               before the

                            SUBCOMMITTEE ON
           HOUSING, TRANSPORTATION, AND COMMUNITY DEVELOPMENT

                                and the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                                   ON

           EXAMINING HUD'S RENTAL HOUSING ASSISTANCE PROGRAMS

                               __________

                     AUGUST 1 and DECEMBER 11, 2012

                               __________

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




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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              RICHARD C. SHELBY, Alabama
CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
HERB KOHL, Wisconsin                 PATRICK J. TOOMEY, Pennsylvania
MARK R. WARNER, Virginia             MARK KIRK, Illinois
JEFF MERKLEY, Oregon                 JERRY MORAN, Kansas
MICHAEL F. BENNET, Colorado          ROGER F. WICKER, Mississippi
KAY HAGAN, North Carolina

                     Dwight Fettig, Staff Director

              William D. Duhnke, Republican Staff Director

                       Charles Yi, Chief Counsel

                 Beth Cooper, Professional Staff Member

              Erin Barry Fuhrer, Professional Staff Member

                  Brett Hewitt, Legislative Assistant

                       Dawn Ratliff, Chief Clerk

                     Riker Vermilye, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                 ______

   Subcommittee on Housing, Transportation, and Community Development

                 ROBERT MENENDEZ, New Jersey, Chairman

         JIM DeMINT, South Carolina, Ranking Republican Member

JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              PATRICK J. TOOMEY, Pennsylvania
SHERROD BROWN, Ohio                  MARK KIRK, Illinois
JON TESTER, Montana                  JERRY MORAN, Kansas
HERB KOHL, Wisconsin                 ROGER F. WICKER, Mississippi
JEFF MERKLEY, Oregon
MICHAEL F. BENNET, Colorado

             Michael Passante, Subcommittee Staff Director

         Jeff R. Murray, Republican Subcommittee Staff Director

                                  (ii)













                            C O N T E N T S

                              ----------                              

                       WEDNESDAY, AUGUST 1, 2012

                                                                   Page

Opening statement of Chairman Menendez...........................     1
    Prepared Statement...........................................    21

Opening statements, comments, or prepared statement of:
    Senator Reed.................................................     2

                               WITNESSES

Keith Kinard, Executive Director, Newark Housing Authority, on 
  behalf of the Council of Large Public Housing Authorities......     4
    Prepared statement...........................................    22
    Response to written questions of:
        Senator Schumer..........................................    87
Dianne Hovdestad, Deputy Director, Sioux Falls Housing and 
  Redevelopment Commission, on behalf of the National Association 
  of Housing and Redevelopment Officials.........................     6
    Prepared statement...........................................    52
    Response to written questions of:
        Senator Schumer..........................................    89
Howard Husock, Vice President for Policy Research, Manhattan 
  Institute......................................................     7
    Prepared statement...........................................    60
Will Fischer, Senior Policy Analyst, Center on Budget and Policy 
  Priorities.....................................................     9
    Prepared statement...........................................    62
    Response to written questions of:
        Senator Schumer..........................................   101
Linda Couch, Senior Vice President for Policy and Research, 
  National Low Income Housing Coalition..........................    11
    Prepared statement...........................................    76
    Response to written questions of:
        Senator Schumer..........................................   105

              Additional Material Supplied for the Record

Letters submitted by Dianne Hovdestad............................   107
NAHRO Voucher Administrative Fee Survey Results..................   116
Statement submitted by Deborah De Santis, President and Chief 
  Executive Officer, Corporation for Supportive Housing..........   120
Statement submitted by Kristina Cook, CAE, on behalf of the 
  National Affordable Housing Management Association.............   127
Memorandum: Proposed Regulatory and Administrative Reforms and 
  Statutory Language.............................................   132
Letter from the Preservation Working Group.......................   158
Letter to the Senate Banking Committee regarding Section 8 
  voucher reform.................................................   160
                              ----------                              

                       TUESDAY, DECEMBER 11, 2012

Opening statement of Chairman Johnson............................   163

                                WITNESS

Sandra B. Henriquez, Assistant Secretary for Public and Indian 
  Housing, Department of Housing and Urban Development...........   164
    Prepared statement...........................................   174





    STREAMLINING AND STRENGTHENING HUD'S RENTAL HOUSING ASSISTANCE 
                            PROGRAMS--PART I

                              ----------                              


                       WEDNESDAY, AUGUST 1, 2012

                                       U.S. Senate,
               Subcommittee on Housing, Transportation, and
                                     Community Development,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Subcommittee met at 10:02 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Robert Menendez, Chairman of the 
Subcommittee, presiding.

         OPENING STATEMENT OF CHAIRMAN ROBERT MENENDEZ

    Chairman Menendez. Good morning. This hearing of the Senate 
Banking Committee's Subcommittee on Housing, Transportation, 
and Community Development will examine opportunities to improve 
the Department of Housing and Urban Development's rental 
housing assistance programs, particularly the Section 8 and 
public housing programs.
    Section 8 and public housing programs put a roof over the 
heads of a combined 3.5 million American families, from 
formerly homeless veterans of our Nation's armed forces to 
hard-working single parents with children to elderly and 
disabled families. Over the past several years, these programs 
have performed to high standards while operating under dire 
funding constraints, but we can clearly see the strain.
    In March, HUD Secretary Shaun Donovan testified that 18 
housing authorities had given up their voucher programs since 
January and two housing authorities had turned down the HUD-
VASH vouchers to assist homeless veterans because they could 
not afford to administer these programs.
    Meanwhile, for the better part of a decade now, Congress 
has been debating proposals to enact a package of changes to 
these rental assistance programs, changes which have the 
potential to improve outcomes for low-income families while 
saving the Federal Government money and easing the 
administrative and regulatory burden on housing authorities.
    The names of the bills have changed from the Section 8 
Voucher Reform Act to the Section 8 Savings Act and now the 
Affordable Housing and Self-Sufficiency Improvement Act, but 
many of the provisions have remained remarkably consistent and 
enjoy substantial bipartisan support.
    Many of these provisions just make good sense. For example, 
it makes sense to recheck the incomes of participant families 
on fixed incomes less frequently since the incomes of these 
families are more stable. It makes sense to make families with 
high net assets ineligible for housing assistance through these 
programs. It makes sense to streamline housing inspections and 
to relieve housing authorities of the burden of inspecting 
housing units that have already passed inspection under another 
State or Federal program. And it makes sense to allow housing 
authorities to pay higher rental subsidies for families with 
disabilities if the higher rent is needed to enable the family 
to live in an accessible home. I believe my colleagues and I 
can agree on many of these commonsense provisions, and I look 
forward to highlighting these areas of consensus.
    Changes to HUD's rental assistance programs have also been 
linked to proposals related to other HUD programs, including 
the Family Self-Sufficient Program, the Rental Assistance 
Demonstration, Moving to Work Demonstration, among others. Our 
discussion today will shed greater light on these important 
proposals and, in particular, contribute to the dialog around a 
balanced expansion of the Moving to Work Program that builds on 
the success of the current demonstration while implementing a 
rigorous evaluation system and protecting assisted families 
from policies imposing severe burdens.
    HUD's rental assistance programs enable millions of low-
income Americans to live in safe and affordable homes. It is 
critical that we make these programs more efficient and place 
them on a stable footing for the future so that they can remain 
available to the most vulnerable members of our society.
    I look forward to hearing the witnesses' testimony on 
changes that would move us toward this goal by improving 
outcomes for residents, reducing program costs, and 
streamlining requirements for housing authorities.
    Senator Reed, would you like to make an opening statement?

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Well, thank you very much, Mr. Chairman. I 
want to welcome the witnesses and particularly thank you for 
holding this very important hearing.
    As today's hearing will explore, we are looking for ways to 
streamline and strengthen HUD's rental housing assistance 
programs, and I would like to focus my brief comments on a key 
approach to accomplish this goal, and that is the enhancement 
of the Family Self-Sufficiency Program.
    Family Self-Sufficiency is an employment and saving 
incentive program for families that have Section 8 vouchers or 
live in public housing. This program provides at least two key 
tools for its participants: first, it provides access to the 
resources and training that helps participants pursue 
employment opportunities and other goals; and, second, it 
encourages FSS families to save money by establishing an escrow 
account for them. And upon graduation from the FSS program, the 
family can use these savings to pay for job-related expenses 
such as the purchase and maintenance of a car or for additional 
workforce training.
    I will soon be introducing legislation to enhance the FSS 
Program as it exists today which will broaden the supportive 
services that can be provided to participants, including GED 
prep and financial literacy training, and extend the FSS 
Program to participants who live in privately owned properties 
with project-based assistance. And I would urge all my 
colleagues to look very closely at the bill, and hopefully they 
will be supportive.
    Finally, I will continue to work to fund the National 
Housing Trust Fund, and I reiterate my willingness to work with 
all my colleagues to realize this goal.
    One point I think I want to just emphasize is that there is 
something more that we have to do than simply provide shelter. 
You have to provide people the ability to move up and move 
forward, and the FSS Program does it. So without supportive 
services, I think we end up in the long run spending a lot more 
money and not giving people the chance to use their talents to 
move up and move out and move on. And that should be our goal 
just as much as providing basic shelter.
    Thank you, Mr. Chairman.
    Chairman Menendez. Thank you, Senator.
    Let us welcome all of our witnesses. As I introduce you, 
let me just say that your full testimony will be included in 
the record. We ask you to summarize your testimony in around 5 
minutes or so, and then that will be followed by a question-
and-answer period.
    Let me introduce our panel. Keith Kinard is the executive 
director of the Newark Housing Authority in New Jersey since 
June 2006. That is the largest public housing authority in the 
State of New Jersey, managing over 11,000 public housing units 
and housing choice vouchers. It also serves as the 
redevelopment authority for the city, working in support of the 
revitalization of the city of Newark. Prior to that, Mr. Kinard 
was the executive director of the Pittsburgh Housing Authority, 
which participates in the Moving to Work Demonstration, so we 
look forward to hearing his insights on that. He is testifying 
today on behalf of the Council of Large Public Housing 
Authorities, of which he is a board member. Welcome, Keith. We 
look forward to your testimony.
    Dianne Hovdestad is the deputy director of the Sioux Falls 
Housing and Redevelopment Commission in Sioux Falls, South 
Dakota. She is responsible for the day-to-day administration of 
programs that provide affordable housing to approximately 2,000 
households, including 1,800 housing choice vouchers. She has 
over 35 years of experience--they must have taken you from the 
crib to do this work--working with HUD rental assistance 
programs and has served in various leadership positions with 
the National Association of Housing and Redevelopment 
Officials, including the vice president of the housing 
committee, and she testifies on their behalf today.
    Howard Husock is vice president for policy research at the 
Manhattan Institute where he is also director of its Social 
Entrepreneurship Initiative, a contributing editor to City 
Journal, has written widely on housing and urban policy, has 
served as director of case studies in public policy and 
management at Harvard University's Kennedy School of 
Government, where he is also a fellow at the Hauser Center for 
Nonprofit Organizations. We welcome you as well.
    Will Fischer is a senior policy analyst at the Center on 
Budget and Policy Priorities. His work focuses on Federal low-
income housing programs, including the Section 8 Voucher 
Program, public housing programs, the Low-Income Housing Tax 
Credit Program has been cited in numerous media publications, 
and we welcome him.
    Linda Couch is the senior vice president for policy and 
research at the National Low Income Housing Coalition. In this 
role, Linda focuses on issues including public and assisted 
housing, appropriations, capitalization of the National Housing 
Trust Fund. She has previously worked at Leading Edge on 
affordable housing for low-income seniors. She also has a 
background in State Government affairs.
    So we have a very talented set of panelists. With that, we 
are going to start with you, Mr. Kinard, and, again, about 5 
minutes, and then we will move on to the rest of the panelists 
and have a good question-and-answer session.

 STATEMENT OF KEITH KINARD, EXECUTIVE DIRECTOR, NEWARK HOUSING 
  AUTHORITY, ON BEHALF OF THE COUNCIL OF LARGE PUBLIC HOUSING 
                          AUTHORITIES

    Mr. Kinard. Good morning, Chairman Menendez, Senator Reed, 
and other Members of the Subcommittee. My name is Keith Kinard. 
I am the executive director of the Newark Housing Authority and 
a board member of the Council of Large Public Housing 
Authorities. CLPHA's 70 members serve over 1 million 
households, manage almost half the Nation's public housing 
stock, and administer nearly one-quarter of the Section 8 
program.
    With the proposed AHSSIA legislation, Congress has 
recognized the need for revision of the Housing Choice Voucher 
Program to allow agencies to operate more efficiently. There 
are several aspects of AHSSIA that would undoubtedly improve 
the Housing Choice Voucher Program. The first is allowing 
families with fixed incomes to recertify at least 3 years in 
lieu of the annual recertification requirement. Current HUD 
regulations require all assisted families to recertify 
annually. This creates a significant incessant administrative 
task. Of those 4,500 families on the program in Newark, nearly 
40 percent, or 1,800, rely on fixed income to support their 
families. The provisions of AHSSIA that allow the reexamination 
to take place every 3 years would greatly reduce the costs 
associated with the current process.
    The second improvement is curbing the volume of unplanned 
interim reexaminations performed at the participant's request. 
Our agency received approximately 180 requests for interim 
reexaminations last month alone, or 2,500 annually. New 
provisions in AHSSIA setting a 10-percent decline threshold and 
giving housing authorities discretion on whether to complete an 
interim recertification if the change in income occurs within 3 
months preceding the annual recertification are a welcome 
option to housing authorities' avoiding duplicative work.
    An additional positive recommendation is the allowance of 
biennial housing quality standard inspections. The Newark 
Housing Authority must conduct a minimum of 4,500 annual HQS 
inspections per year. That equates to 87 per week and spending 
roughly $160,000 annually. It is the Newark Housing Authority's 
position that through this reform effort, landlords should bear 
the cost for required second and third inspections that occur 
due to the failing condition of units.
    The Rental Assistance Demonstration Program is a step in 
the right direction toward converting public housing rental 
portfolio. Public housing nationwide carries a $26 billion 
capital backlog due to funding issues and an aging inventory. 
Newark Housing Authority alone has $500 million in capital 
needs and receives just over $16 million annually. This is a 
recipe for failure. RAD begins to offer a path to allow 
conversion and preservation through private investment in our 
public housing stock. The current House version of AHSSIA is 
strongly supported by CLPHA because it not clears up many 
aspects of the process, but it also authorizes appropriations 
of $30 million annually over the next 5 years in order to 
supplement costs, evaluate the program, and provide much needed 
technical assistance to authorities and residents.
    We do, however, believe that HUD should use to the maximum 
extent possible their waiver authority to address current 
limitations on contract rent setting, the cap on the number of 
PBV units, and also the 12-month choice mobility constraint.
    Finally, we support the permanent expansion of the Moving 
to Work Program for any interested housing authorities. 
Currently 35 MTW agencies are managing a program that falls 
outside the bounds of the traditional models and are raising 
overall standards of housing services. Innovative programs 
dealing with rent simplification, preservation of expiring use 
properties, and funding of housing for the chronically homeless 
are just a few initiatives that were born out of the MTW 
Program. Having run both an MTW agency and a nontraditional 
non-MTW housing authority, I can attest to the major benefits 
that residents, the community, and the housing authorities 
alike realize in an MTW environment. In Newark, a non-MTW 
agency, we are consistently drawn to focus on HUD test 
protocols such as PHAS, SEMAP, PIC, and VMS submissions. This 
diverts attention away from families we serve and the outcomes 
we strive to achieve.
    In my previous role as the executive director of the 
Pittsburgh Housing Authority, we utilized a broad range of MTW 
flexibility to address the more critical needs in our 
community. We began our days thinking about creating affordable 
housing within intensive supports, eliminating high-cost/low-
benefit activities required by regulation, and focusing cash, 
regardless of its origin, on creating new affordable housing 
and preserving the existing stock.
    In sum, CLPHA strongly supports the expansion of MTW and 
this assisted housing reform effort, and we thank you all for 
the opportunity to provide testimony on these critical issues.
    Chairman Menendez. Thank you very much.
    Ms. Hovdestad.

  STATEMENT OF DIANNE HOVDESTAD, DEPUTY DIRECTOR, SIOUX FALLS 
HOUSING AND REDEVELOPMENT COMMISSION, ON BEHALF OF THE NATIONAL 
       ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS

    Ms. Hovdestad. Good morning, Chairman Menendez, Senator 
Reed, Senator Crapo. My name is Dianne Hovdestad, and I serve 
as the deputy director of the Sioux Falls Housing and 
Redevelopment Commission in South Dakota. I am also 
representing the 22,000 individual members and 3,200 agency 
members of the National Association of Housing and 
Redevelopment Officials, the oldest and largest group 
representing housing and community development professionals. I 
am here representing many, many housing authorities across the 
Nation.
    The voucher program is a difficult program to administer 
and difficult for households and landlords to participate in as 
the regulations are very complex. My written testimony has many 
recommendations of what I hope you will consider enacting, but 
there are three things I implore you to consider based on my 35 
years of experience in administering rental assistance 
programs:
    One, adequate funding for administration of the program, on 
the budget appropriations side, that Congress provides adequate 
funding for the administration of the voucher program. In many 
ways, Sioux Falls Housing is indicative of a great number of 
housing authorities serving rural, geographically large areas. 
I mention this because the impact of the current situation with 
the administrative fees affects both large urban housing 
authorities as well as smaller rural housing authorities, but 
in substantially different ways.
    Given this need, the time for relief is now. I will use 
Sioux Falls Housing administrative fees to demonstrate how 
difficult it has become.
    In fiscal year 2003, Sioux Falls Housing earned 
approximately $970,000 to administer $7.3 million in voucher 
rental assistance for 1,500 households. In calendar year 2012, 
Sioux Falls Housing anticipates that it will receive 
approximately $950,000 to administer $10 million in rental 
assistance for approximately 1,800 households. Sioux Falls 
Housing is receiving less money to administer $3 million more 
in rental assistance to an additional 316 households.
    I am pleased that Chairman Johnson recognized that housing 
authorities could not perform all the required program tasks 
based on the pro-ration in 2012. In order to assist housing 
authorities, Senator Johnson introduced an amendment to address 
this issue. I hope you will address the administrative fee in 
any legislation that you develop.
    Two, rent simplification. The determination of a 
household's income which is used to calculate the amount of 
rental assistance and the household's share of rent is an 
extremely complicated process. Every source and amount of a 
household's income must be verified by a third party and 
reported to HUD. This includes amounts that are specifically 
excluded by statute and/or regulation. Each household 
participating in the voucher program must provide information 
annually to determine if an adjustment should be made in the 
amount of their rental assistance and tenant share of the rent. 
Each interview takes approximately 30 to 45 minutes to 
complete. I am asking that the complexities of the rent 
calculation requirements be alleviated through quick rulemaking 
changes so long as statutory requirements are met. A rapid 
response to this request would mean immediate relief to staff 
time currently dedicated to meeting the current complex 
requirements. Changes would alleviate the administrative costs 
associated with the current calculations regime and result in a 
twofold effect of reducing administrative costs currently 
associated with the current rent calculation regime while also 
providing immediate relief to address my request.
    Three, regulatory relief. Housing authorities across the 
country, whether small rural agencies like the one I serve or 
the larger urban communities, desperately need responsible 
regulatory reform. I am respectfully requesting that you bring 
your significant influence to bear at this time to stress to 
the Department the urgent need for quick action. For nearly 10 
years, the National Association of Housing and Redevelopment 
Officials has urged the Department to take quick action. With 
your permission, I would like to submit the Mountain Plains 
NAHRO's request for regulatory relief and the Department's 
response for the record.
    Chairman Menendez. Without objection.
    Ms. Hovdestad. Positive action on requested regulatory 
relief by the Department would provide not only the regulatory 
relief I mentioned but, more importantly, increase staff time 
to address the important matters of providing excellent 
customer service to our community, greater transparency to our 
landlords participating in the voucher program, and place low-
income families in safe, quality housing.
    Thank you.
    Chairman Menendez. Thank you.
    Ms. Husock.

STATEMENT OF HOWARD HUSOCK, VICE PRESIDENT FOR POLICY RESEARCH, 
                      MANHATTAN INSTITUTE

    Mr. Husock. Thank you, Mr. Chairman, and thanks to this 
Committee for devoting its time and attention to the important 
issues of low-income housing.
    The legislation recently considered by the House focused 
both on how best to finance and maintain affordable housing and 
how to structure tenant-based low-income housing programs so as 
to encourage self-sufficiency and upward mobility. I will focus 
mainly on the Housing Choice Voucher Program and, particularly, 
the Moving to Work Program, which, like Mr. Kinard, I will 
strongly support.
    Over the past two decades, housing vouchers have emerged as 
a major program for many of our lowest-income households, 
roughly doubling in size. In fiscal year 1998, the Congress 
appropriated $9 billion for local public housing authorities to 
distribute vouchers. More recently, HUD has allocated $17 
billion for that same purpose. Spending on vouchers has even 
surpassed the cash benefits of Temporary Assistance for Needy 
Families.
    One can well understand why the challenge for the lowest-
income families earning 30 percent or less of median to find 
housing is substantial. It is important, however, to understand 
the housing choice voucher not just as a housing program but, 
in addition, as a key aspect of U.S. social policy, that is, 
our policy aimed at aiding the long-term upward mobility of the 
most disadvantaged households. That traditional goal of social 
policy--what President Johnson called a ``hand up''--is 
relevant to this program in which many of the most vulnerable 
households are enrolled.
    Like traditional public housing, nonelderly voucher 
recipients with children are largely single-parent families, 94 
percent headed by single women; and they are of extremely low 
income, 47 percent at 20 percent or less of national median. So 
the importance of structuring the program to provide incentives 
such that households move toward economic self-sufficiency is 
crucial. But this also has a practical dimension. The long 
waiting list and the likelihood that appropriations will not be 
significantly increased means it behooves us to find ways to 
help the participants move up and out if only to serve others 
in need. But HUD data shows that currently 50 percent of 
voucher tenants and 48 percent of public housing tenants have 
been in the program for 5 years or longer.
    It is in this context that it is crucial to set goals for 
the program that go beyond administrative efficiency, as 
important as that is, and that public housing authorities which 
administer the program seek to improve such metrics as 
employment, household income, and the graduation, if you will, 
from the program. To find the best ways to manage and structure 
it so as to achieve these goals, it makes sense to give the 
Nation's network of 3,200 public housing authorities 
flexibility based on the model of efforts authorized under the 
modestly scaled, too modestly, Moving to Work initiative, which 
should be made permanent and expanded to include as many 
authorities as possible.
    We are already seeing very significant social improvement 
through Moving to Work to date. Notably, the Atlanta Housing 
Authority has used its MTW waiver to link a work requirement 
with extensive counseling to the voucher, and they have 
increased work participation among voucher holders--among its 
housing population, rather, from 14 percent in 1994 to 71 
percent today. Other authorities--including Cambridge, 
Massachusetts; Charlotte, North Carolina; Portland, Oregon; 
Ravenna, Ohio; the State of Delaware--are using MTW in ways to 
change their rent structure so as to stop discouraging work and 
to encourage savings. An expansion of Moving to Work would 
allow other authorities to try similar experiments, even to 
consider, as Philadelphia did, an outright time limit.
    Flexibility for local housing authorities must be guided by 
clear goals shaped by the Congress and overseen by HUD, but 
there is just no reason to limit the flexibility that comes 
with Moving to Work, an initiative begun by the Clinton 
administration, to just 35 of the Nation's 3,200 housing 
authorities.
    Finally, I would like to address briefly the proposal also 
discussed in the House bill's language to convert public 
housing capital and operating subsidies into project-specific 
vouchers, both as a means to preserve affordable housing 
developments in their current use and to facilitate increased 
investment of private capital to reduce an estimated $30 
billion in maintenance backlog. The rationale for doing this in 
a time of serious maintenance needs and budget shortfalls is 
obvious, and the approach may provide a useful additional tool 
for public housing officials facing serious deferred 
maintenance.
    I would urge, however, that Members of the Committee be 
cautious in a too broad embrace of this plan which could be 
fiscally consequential. Anytime public incentives divert 
private capital, we cannot be sure what opportunities we are 
forgoing, and the same is true for preserving specific housing 
developments when there may be a higher and better use for 
their sites in ways which could benefit those of all income.
    Innovative maintenance financing may be worth trying in a 
limited number of circumstances but should not be seen, in my 
view, as a way to preserve unit by unit all public and 
subsidized housing. Better for the Congress through HUD to 
encourage additional approaches which could include, for 
instance, the sale of high-value parcels currently owned by 
local housing authorities so as to create locally based 
maintenance endowments for remaining units.
    Let us be guided both in how much public housing we 
preserve and how we set the rules for housing choice vouchers 
not by a narrow goal of preservation or program expansion, but 
by a broad determination to help improve the economies of our 
cities in ways that uplift the poorest households.
    Thank you very much.
    Chairman Menendez. Thank you.
    Mr. Fischer.

  STATEMENT OF WILL FISCHER, SENIOR POLICY ANALYST, CENTER ON 
                  BUDGET AND POLICY PRIORITIES

    Mr. Fischer. Thank you, Chairman Menendez, Senator Reed, 
and Members of the Subcommittee. It is a privilege to testify 
before you today, and I want to thank you also for holding this 
hearing on the important topic of strengthening and 
streamlining Federal rental assistance.
    The Nation's rental assistance programs assist more than 4 
million low-income families, most of them elderly people, 
people with disabilities, and working-poor families with 
children. Research has shown these programs to be highly 
effective in addressing problems like homelessness and housing 
instability, but it has been a long time--14 years--since 
Congress has enacted authorizing legislation covering the 
voucher and public housing programs, and there are 
opportunities to improve the programs based on lessons learned 
and changed circumstances.
    Both AHSSIA, the bill that the House considered this year, 
and the Section 8 Voucher Reform Act that Congress has 
considered in previous years contain a set of largely similar 
core reforms that would strengthen and update these programs 
through reducing administrative burdens for agencies and 
owners, allocating voucher funds more efficiently, and 
strengthening support for work.
    Even more pressing, these bills contain large Federal 
savings. According to CBO, the December 2010 version of SEVRA, 
which is the most recent, would reduce the amount of funding 
needed to maintain the current level of rental assistance by 
more than $700 million over 5 years. According to the Financial 
Services Committee, the most recent version of AHSSIA, which 
contains some additional cost savings measures, increases that 
to $1.5 billion. Those numbers do not include savings from 
administrative streamlining which would reduce costs by an 
additional several hundred million dollars.
    My testimony contains details on the core reforms in these 
bills. Just as one example, I think the provisions streamlining 
determination of tenant rents and incomes are one of the key 
reforms that would really reduce administrative burdens as well 
as generating other cost savings. The change to doing 
recertifications for people in fixed incomes every 3 years, as 
has been mentioned, is a good example of that. That would 
reduce burdens on mostly elderly people and people with 
disabilities who would be affected and also generate large 
administrative savings for agencies. It is just one of a large 
number of similar commonsense, good Government reforms that are 
in these bills. These are largely proposals that HUD supports 
but cannot move forward with without congressional 
authorization. They have been vetted for a number of years in 
Congress and have had strong bipartisan support, and they are 
supported by a broad range of housing groups, as evidenced by 
the letter from 810 organizations around the country that was 
sent to the Banking Committee urging prompt action.
    I would urge the Committee to be cautious with more 
controversial provisions. For example, a sharp expansion of the 
Moving to Work Program raises a number of risks, such as large 
shifts of funds from the voucher program to other purposes that 
would result in many fewer families receiving assistance. And 
any Moving to Work expansion that goes beyond the compromise 
provision that is in the most recent House bill would also 
undermine the broad support that the bill has received so far.
    I want to close by just emphasizing how important it is 
that the country's rental assistance programs work as 
efficiently and as effectively as possible so that they can 
assist as many families as they can. In concrete terms, the 
savings in these bills would mean that housing agencies can 
serve more needy families or, if necessary, avoid painful cuts 
in assistance. These are critically important changes, 
especially now when budgets are expected to be tight for years 
to come, but the need for rental assistance remains very high 
with fewer than one in four families eligible for assistance 
getting help.
    The voucher reform bills, the rental assistance reform 
bills would take a big step toward achieving those goals of 
improving these programs, and I would urge the Congress to 
enact them as soon as possible so that the savings and other 
benefits from the programs can begin to be realized as soon as 
possible.
    Thanks again for the privilege of testifying before you, 
and I will be happy to take any questions that you have.
    Chairman Menendez. You are so efficient. You had another 
minute.
    [Laughter.]
    Chairman Menendez. Ms. Couch.

STATEMENT OF LINDA COUCH, SENIOR VICE PRESIDENT FOR POLICY AND 
        RESEARCH, NATIONAL LOW INCOME HOUSING COALITION

    Ms. Couch. On behalf of the National Low Income Housing 
Coalition, I would like to thank Chairman Menendez for holding 
this important hearing today at a time when the need for rental 
assurance is growing across the United States.
    The shortage of affordable and available units for 
extremely low income households in 2010 was 6.8 million units, 
400,000 more than it was in 2009. For extremely low income 
households, there is a shortage of more than 189,000 affordable 
and available units in New Jersey alone.
    Ideally housing reform legislation would result in both 
more affordable housing and more efficient use of Government 
resources. Recent versions of housing reform legislation would 
result in 5-year savings ranging from around $700 million to 
more than $1 billion. These are tremendous savings, the vast 
majority of which come from uncontroversial policy changes.
    In any reform bill, we urge the Subcommittee to balance new 
program flexibilities with the need for program accountability. 
In the long run, we fear that if Congress' understanding of the 
program's use and impact fade due to fewer reporting 
requirements, the result would be decreased resources. The 
reforms that we support bring efficiencies while continuing to 
hold all parties accountable for the use of Federal resources.
    We support several changes that would encourage increased 
earned income and simplify rent setting while maintaining 
Brooke, the program's underlying tenet that each household pays 
a rent that is affordable, even as its income fluctuates.
    The Nation would also benefit from enactment of 
improvements to the project basing of vouchers, which would 
allow otherwise unaffordable units to meet the Nation's most 
significant affordable housing needs.
    The need for clear direction to HUD on the allocation of 
voucher renewal funding was a primary reason for the 
development of reform legislation several years ago. We support 
language directing HUD to base renewals on actual costs and 
leasing data as well as policies that would allow agencies to 
over-lease vouchers and reserve offset and reallocation 
policies.
    We would like any Senate housing reform bill to include 
provisions to improve the portability of vouchers from one 
housing agency's jurisdiction to another, to require HUD to 
establish certain standards and procedures for assessing the 
performance of agencies' voucher programs, and to guard voucher 
households from paying excessive rent burdens. Each of these 
provisions improve the voucher program for tenants, and each 
has thus far been left out of the House versions of the bill 
this session.
    On another note, the Low Income Housing Coalition was 
shocked and disappointed that the Administration requested 
increased minimum rents in its fiscal year 2013 budget request. 
We referred to HUD's proposal as one that ``picks the pockets 
of the poorest of the poor.'' It follows then that we do not 
believe increasing minimum rents is needed to create a robust 
housing reform bill. The House's latest proposal increases 
minimum rents for households with incomes of less than $2,800 a 
year. While it may be hard to imagine that there are households 
with incomes so low, the reality is that these households 
exist, and the programs keeping them off the street, out of the 
back seats of cars at night, and out of shelters are HUD's 
voucher, public housing, and project-based Section 8 programs.
    We also support other major reforms to the voucher program 
which we know are outside of the scope of any bill this year. 
Three policies that would significantly increase households' 
choice and ability to use their vouchers are the 
regionalization of voucher assistance and administration, the 
enactment of Federal source of income laws, and instituting 
nationwide small-area fair market rents, an effort for which 
HUD is currently doing a demonstration.
    Of course, a real breakthrough would be to make assistance 
by the Housing Choice Voucher Program an entitlement to those 
households eligible for it, at least for certain populations. 
Today the only housing entitlement programs are for homeowners, 
the vast majority of those resources going to assist high-
income households.
    While the coalition has agreed to a carefully crafted 
version of Moving to Work expansion, referred to by others here 
as the ``stakeholder agreement,'' and I believe attached to 
CLPHA's testimony, history shows that Moving to Work expansion 
has stalled housing legislation for years. We support moving 
forward with voucher reform legislation without an MTW title. 
Moving to Work legislation could be considered separately while 
the significant savings and efficiencies of a broader housing 
reform bill could be taken advantage of now.
    We also encourage Members of this Subcommittee to support 
capitalization of a National Housing Trust Fund, which Congress 
authorized in 2008 thanks to the leadership of Senator Reed. 
The National Housing Trust Fund, coupled with the stabilization 
of HUD's rental assistant programs by housing reform 
legislation, could end homelessness in the United States.
    Thank you for your work to improve HUD's programs.
    Chairman Menendez. Thank you. Thank you all.
    There is a lot of ground to cover here, so let me start 
with you, Mr. Kinard and Ms. Hovdestad. Both of you are on the 
ground. You are working every day to implement these programs 
on behalf of low-income families. We have been talking about 
this for some time. I think there is a tendency to forget how 
incredibly pressing the need for action really is. I have heard 
from affordable housing advocates and housing professionals 
telling me that these reforms really cannot wait and are 
urgently needed now.
    Can you discuss the impact over time if Congress fails to 
act soon to implement some of the specific reform proposals we 
have talked about? What are the consequences on the ground?
    Mr. Kinard. I certainly can do some of that. The 
consequences really are devastating. There are financial 
consequences associated with cumbersome, burdensome processes 
that simply we cannot afford and each year are escalating. 
There is the potential for loss of units. We have many units in 
Newark alone right now that are boarded up, that we simply do 
not have the funding to put back online. And a lot of our 
funding is being used today to ultimately fill out score sheets 
and fill out reports and send information in. And it is really 
sad riding to work every day past units that have the windows 
boarded up and the doors boarded up, knowing that we have 
waiting lists that have thousands and thousands of families on 
them for many, many years, and realizing that I have got to 
divert that funding to ultimately respond to needs that have 
been on regulatory books for many, many years, and 
unfortunately really do not get to the heart of the mission 
that we are in business to do.
    So essentially for the availability of future housing, for, 
I think, the future existence of our program, and especially in 
light of the outlook of budgets moving forward in forward 
years, I think the impact is devastating if we do not move 
soon.
    Ms. Hovdestad. I would like to echo what was just said and 
that we do spend a lot of time working on reports that we have 
not had to do in the past. HUD is putting a lot of emphasis on 
lease-up, and so every month we respond to questions from HUD 
about why we are not leasing up to our baseline units. And part 
of our problem of underutilization of our vouchers is that we 
are unable to hire staff that has left the agency's employ for 
other jobs, and so the rest of the workload is distributed to 
the other staff, and they cannot take on any more than they 
currently have. It is taking longer to get the inspections done 
because of the lack of staff. And then the interim changes that 
we are required to do, they are taking a lot of time also.
    Another big impact is on the Family Self-Sufficiency 
Program that we have, and I would like to thank Senator Reed 
for his work on the FSS Program. We have a very successful 
Family Self-Sufficiency Program, and we were able to use some 
of our administrative fees to help meet some of the unmet needs 
like personal counseling. We have a lot of participants who 
have a lot of personal issues that are barriers for them 
becoming self-sufficient. We have used it to put on workshops 
on financial wellness and what it takes to buy a house and 
things like that.
    On the regulatory side, we just spend a lot of time kind of 
doing things that seem kind of redundant and unnecessary, like 
the reporting of excluded income.
    Chairman Menendez. Since you are both representing a 
different universe of housing authorities here, what is the 
reality of housing authorities' refusing to run their voucher 
programs, turning down VASH vouchers to assist homeless 
veterans, loss of hard units as a result of the lack of 
reforms? With your colleagues, do you experience that?
    Mr. Kinard. Well, I feel that. We have not done that. We 
have not been forced to do that. But we have had to make 
similar decisions, and I will give you a concrete example that 
we face on a monthly basis.
    Due to reduced admin fees and due to our strain in terms of 
resources, we are making decisions in terms of how many staff 
we have associated with interim reexamination processes and 
annual reexamination processes versus our ability to actually 
issue vouchers and get families on the program. It is a 
budgetary issue. It is a commonsense issue. If you only have 
ten staff and that is all you can afford, but you must get 
these forms in, somewhere in there you have got to make a 
decision between the two. And I believe those housing 
authorities have made probably the most difficult choice in 
many of those directors' and staffs' career that they do not 
want to provide insufficient service or they do not want to 
jump into something that ultimately will provide less than 
decent, safe, and sanitary housing. Instead, they will turn 
those vouchers in, and hopefully someone else can utilize those 
correctly because they simply do not have the funding to run 
the program.
    Chairman Menendez. All right. I have several other 
questions, but I want to turn to Senator Reed first.
    Senator Reed. Well, thank you, Mr. Chairman, and I want to 
thank the witnesses for excellent testimony and giving great 
perspectives on some very critical issues. I think Mr. Husock 
pointed out that it is not just about keeping people in 
housing; it is giving them a chance to move up, move forward, 
move ahead. And I think that is a theme that we want to 
support.
    That takes me back to the point I raised in my opening 
statement about the Family Self-Sufficiency Act. Thank you, 
Dianne, for using it so well and effectively. But I wondered, 
Mr. Fischer, with your colleagues at the Center on Budget and 
Policy Priorities, have you looked at this issue and can you 
give some comments about how valuable the program is and what 
we can do to continue it? In terms of changes, HUD is making 
similar proposals as I am.
    Mr. Fischer. Sure. I think this is an important issue to 
look at, ways to help people who receive rental assistance move 
toward self-sufficiency. As context, there are a lot of people 
on rental assistance for whom this is not an issue. Half of the 
caseload is elderly people or people with disabilities. Another 
30 percent is working families. But there is a segment of the 
population that could use support to help move toward self-
sufficiency and increase their earnings, and I think the Family 
Self-Sufficiency Program is a really strong approach to doing 
that. It combines both supportive services and counseling and 
also earnings incentives through the creation of escrow 
accounts, and that is a combination that based on the available 
information does work in terms of helping people increase their 
earnings.
    Like you said, HUD is considering some--has supported some 
similar proposals to strengthen the Family Self-Sufficiency 
Program. The AHSSIA bill that is in the House has a number of 
provisions that move in the same direction, and I really thank 
you for looking at this issue and looking at ways to move this 
legislation forward.
    I think one example of an important change that needs to be 
made and that all these entities are looking at is extending 
the program to the project-based Section 8 program, which is, 
along with public housing and vouchers, the third large rental 
assistance program. Currently the Family Self-Sufficiency 
Program is not available. There is no reason for that. It is 
equally applicable in project-based Section 8. And so proposals 
like yours that would extend it there would really do a lot of 
good for the people who are in that program.
    Senator Reed. Thank you very much.
    Just a final question, because I know the Chairman has 
additional questions. Ms. Couch, you mentioned the National 
Housing Trust Fund. From your evaluation, capitalizing this 
program, getting it up and running, how could it help the 
current crisis?
    Ms. Couch. Well, the Nation's housing needs, as you know, 
are overwhelmingly clustered within households with extremely 
low incomes, households below 30 percent of area median income. 
And the National Housing Trust Fund, as Congress designed it in 
2008, would dedicate the majority of its assistance to 
households at that really deep income level.
    Today we have these great shortages, like almost a 190,000-
unit shortage in New Jersey, because we are not producing 
housing that is affordable to incomes at this low of a level. 
We used to with public housing and project-based Section 8, but 
the numbers of those units are shrinking. The trust fund could 
step in and really produce units affordable to households at 
that low income level and also preserve other units that might 
be unsubsidized today and really set this Nation on a path 
toward ending worst-case housing needs, as HUD defines them, 
all of the--more than 73 percent of ELI households pay more 
than half of their very low incomes on rent, and ending 
homelessness in the United States. So we see the trust fund as 
really critical to setting the Nation on a path to end 
homelessness in the country.
    Senator Reed. Let me just add one final point. There might 
be, particularly at this moment, an additional benefit, that 
is, putting people to work building rental properties, 
renovating rental properties. We have a very weak housing 
market. I know Senator Menendez has been leading the way on 
several different initiatives. Your legislation, which I am 
proud to cosponsor, is designed to try to get people back not 
only into housing but people banging nails, et cetera, to build 
housing.
    Ms. Couch. It is certainly a jobs program as well. We 
appreciate that. And I think that, you know, the home builders 
have all sorts of great data on the numbers of jobs, both 
immediate jobs and long-term jobs, that can be sustained 
through the development of housing.
    Senator Reed. You look like you have a comment, Mr. Husock, 
and I want to give you the chance. Are you all set?
    Mr. Husock. If I might very briefly, with the Chairman's 
permission, I wanted to add to Mr. Fischer's comments about 
Family Self-Sufficiency in response to Senator Reed's question 
and to echo what Ms. Couch said about the importance of not 
having a rent structure that penalizes people for improving 
moving up and forward, as the Senator puts it, because when you 
have a Brooke amendment-based rent structure that has a set 
percentage, the more you earn the more you pay, so, in effect, 
the marginal tax rate on our poorest households is higher than 
for our highest-income households. That is ridiculous.
    And so setting fixed rents and allowing people to earn more 
but to keep what they earn perhaps in the context of other 
requirements--with which we may not agree, but nonetheless we 
agree on that, I think--I think would be very important to 
promote self-sufficiency also in the context of counseling and 
other programs.
    Senator Reed. My time is up, but the possibility exists, 
too, of sort of a shared appreciation where, you save more. But 
you contribute a little bit more, too. So I do not think it 
would necessarily have to be either/or, either fixed or not. 
But I think there is a way in principle we can work out a 
formula that encourages moving up. Let me just thank you for 
that insight. It is valuable.
    Do you have a quick response, Ms. Couch?
    Ms. Couch. I just wanted to clarify that we believe 
strongly that each household's income should--each household's 
rent should reflect its income at the time, and all of the 
voucher reform bills have included provisions which we think 
really encourage and allow for increased earned income without, 
you know, immediately coming and raising people's rent. And so, 
you know, we support those proposals, but one of the key 
benefits of these programs is stability, and if your rent keeps 
going up but for some reason your income goes down, these 
programs are not providing the assistance we need them to. And 
so the rents absolutely have to maintain this Brooke standard 
of fluctuating as a household's income fluctuates.
    Senator Reed. Well, thank you very much for your insights.
    Thank you, Mr. Chairman.
    Chairman Menendez. Thank you, Senator Reed, for your 
leadership in this field.
    Let me ask a few other questions here. There are various 
legislative proposals that would enact a stable voucher renewal 
funding policy. Currently congressional appropriators set a 
voucher renewal funding policy each year, which I am told makes 
it very difficult for housing authorities to plan for the year 
ahead. In addition, there are various legislative proposals 
that would clarify how much money housing authorities can hold 
in reserves for a rainy day without those funds being taken 
back or offset, so to speak.
    Mr. Fischer, you write in your testimony that these voucher 
funding rules will allow housing authorities to serve many more 
families with the same amount of funding. Can you explain how 
the predictability and clarity provided by those simple changes 
would translate into more families served?
    Mr. Fischer. Sure. When agencies are able to predict how 
much money they will have and also how much funding they will 
have in reserves, it can let them manage their funds more 
predictably. There is history behind this where there was--
starting in 2003, there has been a series of changes in the 
funding formula. It has gotten somewhat more stable in recent 
years, but during that period we saw the percentage of 
agencies' vouchers in use drop from around 97 percent down to 
92 percent, which translates to about 100,000 fewer families 
being assisted. And part of this was just that it was much 
harder to predict both what funding level agencies would get 
and whether their funding reserves, whether they could keep 
funding reserves or those would be recaptured. And those played 
a role in those large numbers of families not receiving 
assistance. I think stabilizing the funding formula, like SEVRA 
and AHSSIA would do, would give agencies more certainty and 
would help them assist more families.
    Another sort of specific thing in both bills that would 
contribute to this is a provision that would allow agencies to 
assist more families than their authorized number if they had 
funds available to do this. Right now, agencies, even if they 
are sitting on unused money and have reserves, they are not 
allowed to go above their authorized voucher cap. They are 
penalized for that, and they do not get, it affects their 
funding for the following year. Under SEVRA and AHSSIA, 
agencies could use those extra funds to assist more families, 
and this would mean not only more families getting help but 
also the agencies would have a strong incentive to reduce the 
cost per voucher because they would know that they are able to 
do that and stretch their funds further and they can help more 
families.
    Chairman Menendez. Let me go back to you, Mr. Kinard, on a 
different issue. I am concerned nationwide but certainly that 
New Jersey's stock of federally assisted affordable housing is 
aging rapidly. We have long been a population center. 
Affordable housing was built many decades ago and is now in 
danger of becoming obsolete as a result of a lack of funding 
for modernization. And I am hopeful that HUD's Rental 
Assistance Demonstration will serve as an effective tool to 
preserve affordable housing in New Jersey and nationally. But I 
share the concerns that have been raised by affordable housing 
advocates that the lack of funding for RAD will prevent the 
housing developments with the greatest capital needs from 
participating in the program.
    Could you discuss whether you believe the new RAD 
authorizing language and the authorization for appropriations 
contained in the most recent, I think it is an April draft of 
the House's Affordable Housing and Self-Sufficiency Improvement 
Act would help open the program to developments most in need?
    Mr. Kinard. Certainly. It is our belief firmly that it 
would, that RAD is an important initiative that ultimately 
would allow the conversion of much needed deteriorated and 
distressed public housing into a more stable environment on the 
project-based voucher side. In fact, in Newark right now we are 
in the midst of converting a 220-unit public housing building 
into project-based voucher. We have been able to partner with a 
private bank and generate nearly $30 million to go into a 
building that--we talk about the future--maybe in 5 or 8 years 
this building would have become obsolete, and those seniors 
would likely had to have been moved out of the building.
    So we know that putting money in RAD will supplement in 
some regards, in some jurisdictions, the funds that are 
ultimately needed to make their projects work. Is it enough? 
Clearly not in certain jurisdictions. But putting money into it 
in the demonstration program will make some jurisdictions who 
are one side of the fence able to get on the other side of the 
fence and actually participate. And hopefully it will 
demonstrate a program that will generate more funds, will 
demonstrate the need for more funds, and allow us to get even 
more housing authorities involved.
    But I think there is a lot of training and technical 
assistance and evaluation that those funds will also support 
that need to occur with the RAD conversions.
    Chairman Menendez. All right. So let me move to Moving to 
Work. You had a time in the Pittsburgh Housing Authority, which 
had a Moving to Work Demonstration project, and you are now at 
the Newark Housing Authority, which does not have a Moving to 
Work Demonstration project. So I think you are in a unique 
position to talk to us from both perspectives. Can you speak to 
the good and the bad as you see it?
    Mr. Kinard. Well, the good was Pittsburgh with Moving to 
Work. The bad is Newark without Moving to Work. It is a very 
different environment, and it actually gets even down to the 
depths of the work culture. When you have Moving to Work, you 
tend to think about problems as any corporation would think 
about a problem that they are facing. You tend to think about 
your funding as a source to solve problems and create new 
housing for the homeless, create self-sufficiency programs, 
preserve expiring use housing 236. 236's do a number of 
innovative initiatives that the community that you operate in 
is actually desperately needing.
    When you do not have Moving to Work, you are really focused 
on trying to score your best on some PHAS or SEMAP score sheet 
or getting all your forms in because, really, that is the bar. 
You are operating in a very limited box, and unfortunately, 
many times you can see the light at the end of the tunnel and 
the trouble heading your way. But you can only move so far left 
and right in a non-Moving to Work environment, and you have to 
let the car run over you.
    So, you know, that is--in essence, I think the importance 
of Moving to Work is it will allow us to move more fluidly and 
flexibly in an environment of limited funding, and it will 
allow us to find greater administrative cost savings and 
hopefully serve even more families in quality housing. And it 
has been proven. I mean, Moving to Work has been out there. We 
were in it in Pittsburgh in 1998, and we were able to do some 
really innovative things on the self-sufficiency side, on the 
housing production side, really, really creative things. So it 
has been proven to work, and I think it is a program that 
really merits strong consideration, deep expansion, and 
obviously taking into consideration some of the concerns of 
others.
    Chairman Menendez. Let me broaden the question. I wanted to 
get your perspective because you have been in both 
environments. So I will open it to anyone on the panel who 
wants to have an opinion.
    We have long debated whether or not HUD's Moving to Work 
Demonstration should be expanded and made permanent, and I can 
see the attraction from a director's position. The question is 
whether that is the way in which we take you out of the 
straitjacket that you are in or whether the actual program is 
positive in terms of results at the end of the day that would 
want to expand it. I am talking about beyond the straitjacket 
of how you have resources to deal with your challenge.
    This issue has actually been a sticking point preventing us 
from moving ahead on the substantial set of changes that HUD's 
rental assistance programs that we can agree on. So I am 
encouraged to hear that the stakeholders--many groups have come 
together around a compromise solution which would pair an 
expansion of some elements of the Moving to Work Demonstration 
Program with tenant protections and a strong evaluation 
component. Can you discuss the compromise, which I understand 
is incorporated into the latest version of the Affordable 
Housing and Self-Sufficiency Improvement Act, and whether it is 
acceptable to you and the organizations that you represent? And 
if so, why? And if not, why? Anyone who wants to comment.
    Ms. Couch. I will start. We have opposed, strongly opposed 
Moving to Work expansion for many, many years and got back to 
the table on Moving to Work last winter and sat down with most 
of the groups at this witness table and several others and HUD 
to work out what we call the ``stakeholder agreement.'' The 
agreement would expand Moving to Work's footprint 
substantially. Right now there are about 35 agencies that are 
considered MTW agencies.
    The agreement would expand a basic version of Moving to 
Work to 500,000 units of public housing and vouchers, and under 
basic, the Moving to Work agencies would have what I see as 
really broad flexibility administratively to funge money 
between the public housing and voucher accounts, to reporting 
requirements to HUD, simplification of rent setting, not rent 
reforms, and have a lot of really administrative 
simplifications, many of which, you know, we have talked about 
over the years as part of the voucher bills.
    But the stakeholder agreement and what was included in the 
April 13th version of AHSSIA would also include an enhanced MTW 
whereby up to 25 housing authorities could access this enhanced 
authority where they could enter into programs that maybe would 
institute work requirements or time limits, or huge rent policy 
shifts that would divorce people's rents from what their 
incomes are. And all of those, you can see the problems for 
tenants in each of those, but the bill language would also 
require really strict reporting and evaluation requirements and 
a stakeholder advisory committee that would try and watch and 
make sure that no harm was being done but that successful 
programs could be replicated in the future. And there are a lot 
of tenant protections and assuredness that households--that 
significantly the same number of households would continue to 
be served.
    And so all of those things are dangers in the current MTW 
landscape that I think would be addressed by the stakeholder 
agreement.
    Chairman Menendez. Anyone else?
    Mr. Husock. I think that Ms. Couch's remarks demonstrate 
why it is a compromise, and some of the potentials that concern 
her are exactly what I think makes the bill attractive to those 
who are concerned about the open-endedness of housing 
assistance and not conforming to the goals that Senator Reed 
enunciated of moving up and moving forward.
    So in the context of a rigorous evaluation, could work 
requirements or time limits be draconian and drive people into 
homelessness if they do? Well, that would be a bad thing, and 
we would have to know about that. Could it encourage, as we 
have seen in some housing authorities, improvement in the 
situation and making room in a limited number of unit universe, 
because entitlement is not a likely prospect anytime soon, 
assistance for others who are on the waiting list? That seems 
to be worth trying in a relatively confined context in an 
atmosphere of evaluation.
    So that is what makes it an attractive compromise, and I 
think if those aspects of it were not included, you would not 
see the same buy-in.
    Chairman Menendez. Mr. Fischer.
    Mr. Fischer. Like Linda, we have had strong concerns about 
expansion of Moving to Work under the current rules. One issue 
is the elimination of a lot of key tenant protections that 
would, for example, get rid of the guarantee that tenants would 
pay affordable rents that Linda and Senator Reed were talking 
about earlier. Because it allows shifts of funds from the 
voucher program to other purposes, when we have looked at data 
on the program today, one of the things that has resulted in is 
many fewer families receiving assistance per dollar of Federal 
funding, and that is a concern when the resources are already 
very limited for housing assistance.
    Another really strong concern is that Moving to Work is 
funded as a block grant under the existing--it goes from the 
existing housing voucher system where funding is based on the 
actual cost of funding a particular number of units. Instead, 
it is a fixed block grant amount.
    When we look at other housing assistance or HUD programs 
that are funded as block grants, what we see is that they tend 
to erode or see cuts over time in a way that the Housing 
Voucher Program has not experienced, and I think a big part of 
the difference is these funding programs, for example, the four 
largest HUD block grants have seen their funding erode by 38 
percent in inflation-adjusted terms over the last 10 years, 
where funding for the Housing Voucher Program has seen some 
shortfalls but it has basically kept up with the need. And so 
that is another big concern about MTW.
    The agreement that is in the House bill contains a lot of 
protections that reduce these risks. I do not want to overstate 
it. I think we still see some significant risks in that bill on 
all of those areas that I mentioned. But in our view, the core 
reforms that are in SEVRA and AHSSIA are so important and so 
beneficial and the restrictions in the House agreement are 
strong enough that our view is that the package together is 
worth enacting if that is what it takes to get those core 
reforms.
    Chairman Menendez. Ms. Hovdestad.
    Ms. Hovdestad. Yes, NAHRO has been working with the 
Department to expand the Moving to Work Program. The concern 
that we have is that there is no harm done to the current 
Moving to Work agencies and their agreements with the 
Department. Moving to Work as a separate bill would be OK, but 
our preference would be to expand the MTW program as soon as 
possible.
    Chairman Menendez. Well, very good. I think that that gives 
us a good sense of where we are at. Hopefully we can move here 
because I get the sense that our continuous delay here is 
creating consequences at the end of the day, and moving would 
have a powerful, beneficial benefit. So I am hoping that this 
hearing and the foundation that we have laid here assists us in 
the fall to see if there is a possibility.
    With that, I appreciate the testimony of all of you. The 
record will remain open for 1 week so that everybody can submit 
their comments, Members can submit their questions. If we do 
have questions and we send them to you, we ask for your speedy 
response so we can close the record as soon as possible.
    With that, this hearing is adjourned.
    [Whereupon, at 11:05 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
             PREPARED STATEMENT OF CHAIRMAN ROBERT MENENDEZ
    Local public housing agencies across the Nation face an existential 
threat. The current Federal budget crisis looms over a public housing 
inventory that is already stressed by inadequate appropriations and the 
famously burdensome HUD regulatory regime. The high-water funding mark 
for FY2013 appropriations is now known. House and Senate appropriations 
bills are strikingly similar and both significantly underfund the 
Public Housing Operating Fund and the Capital Fund. Only deeply 
committed authorizers can significantly improve conditions in current 
public housing funding by passing legislation that improves local 
flexibility, spurs revenue growth and lets agencies take advantage of 
cost-efficiencies that are within easy reach.
    Public housing is, in the words of the HUD Secretary ``an 
irreplaceable public asset that must be preserved.'' That asset serves 
among the poorest households in more than 3,000 communities, both large 
and small, all across the country. Public housing is community owned, 
place based, and locally accountable. It provides stable homes to more 
than 2 million people every day of the year--and has served untold 
millions more over the last 75 years. Public housing has survived rapid 
neighborhood change and every sort of policy direction prescribed by 
Washington. It endures because hundreds of thousands of elderly and 
disabled households will always have need for safe, secure, and decent 
homes in their neighborhoods. Public housing will also endure for the 
more than 800,000 children whose parents need the time and services of 
a secure platform to prepare for better, stronger lives. As you know, 
public housing is easily maligned by occasional glaring headlines and 
is too often targeted by outdated stereotypes. The truest story of 
public housing, however, is one of safe and well-run housing that 
provides a real sense of community and that has quietly helped produce 
generation after generation of productive citizens including members of 
Congress and the Supreme Court, business leaders, schoolteachers, elite 
athletes, soldiers, artists, and public servants.
    Authorizers in the 112th session of Congress have real 
opportunities to pass legislation that will limit the loss of units as 
a result of chronically low funding and enormous amounts of deferred 
capital improvements. If the public housing inventory is to be salvaged 
for the next generation, it will need a broad menu of funding 
opportunities that can begin to address the enormous $26.5 billion 
capital needs backlog that threatens it. This authorizing Committee and 
its counterpart in the other chamber have the ability to set public 
housing on a new, more streamlined and sustainable course by passing 
key pieces of legislation. They include:
    Affordable Housing and Self Sufficiency Improvement Act (AHSSIA) is 
proposed legislation that promises to deliver long-awaited and much 
needed reforms to the Section 8 voucher program. Voucher agencies are 
particularly stressed as Congress has failed to provide adequate 
administrative fees for the program that is uniquely rule-bound and 
labor intensive. With no ability to adjust to these real-time 
marketplace conditions; HUD continues to apply SEMAP, the program's 
report card, as if agencies were fully funded and fully staffed. AHSSIA 
offers agencies administrative flexibility that will help provide some 
cost-cutting opportunities. Agencies will have fungibility for their 
Operating and Capital funds and the flexibility to do risk-based 
scheduling for physical inspections. Agencies will also be able to 
perform fewer recertifications for fixed-income households and to use a 
more streamlined rent and income determination process. Overall the 
bill allows agencies to economize on costs. The bill was gingerly 
crafted with tenant advocate groups so it has some added complications. 
For example, the bill allows agencies, for the first time in 14 years, 
to charge a higher minimum rent of approximately $70. The opportunity 
for added revenue comes with new reporting and procedural requirements.
    Of special importance is the section of AHSSIA entitled 
``Flexibility for High-Capacity HAs'' that makes permanent the highly 
useful and successful Moving to Work (MTW) program. The bill also 
allows for a significant expansion of the program but limits 
participation primarily to PHAS and SEMAP high performers. A Moving to 
Work (MTW) expansion was recommended in HUD's own 2010 interim MTW 
report to Congress. The report stated ``MTW provides unprecedented 
insight into alternative methods of providing housing assistance. By 
prolonging and doubling the number of participating agencies, the 
housing industry stands to learn even more from this unique resource.'' 
This successful program has survived for 16 years in spite of unfounded 
criticism of the MTW demonstration. This section of the AHSSIA consumed 
much of the bill's negotiations and added more narrow definitions of 
households served by MTW. The enormous transformative efforts in cities 
like Atlanta, Chicago and Philadelphia might not have happened if 
baseless fears had been allowed to rule implementation of the MTW 
demonstration. MTW is the most hopeful preservation solution for the 
greatest number of agencies at HUD's disposal. The program can help 
counter the deep and chronic funding shortfalls in public housing 
programs. To date, MTW agencies have used the program's flexibility to 
significantly expand affordable housing opportunities in their 
communities.
    Also included in AHSSIA is $30 million in funding for the 
Administration's RAD (Rental Assistance Demonstration). RAD is the 
Administration's signature program to help housing agencies convert 
their public housing properties to a more reliable Section 8 funding 
platform using either project-based vouchers or project based rental 
assistance. Appropriators launched RAD in the FY2012 THUD 
Appropriations bill but provided no new funding for the program. The 
bill allowed agencies to convert with only the money currently 
available to public housing properties. Unfortunately, the current low 
funding cannot sustain properties in the public housing program--much 
less support them in the Section 8 program where higher rents are 
needed to maintain properties and to also support debt service on 
financed capital needs. The $30 million will make it more likely that 
properties with deferred capital needs will be able to participate in 
the RAD program.
    Today public housing finds itself at a critical juncture where poor 
funding might well determine the fate of the program. The Subcommittee 
has an opportunity to intercede on behalf of public housing and its 
residents by working with the House to pass AHSSIA this year. Public 
housing has been rocked by a series of recent funding and policy 
choices that call into question the Federal Government's resolve to 
continue its decades-long relationship with local communities to house 
the poorest among us. It is well within the authority of this 
Subcommittee to pursue proposals like AHSSIA, with its important MTW 
and RAD components, that will help preserve assisted and public housing 
for future generations of needy elderly, disabled, and family 
households. PHADA looks forward to working with the Subcommittee to 
find new ways for agencies to use flexibility, streamlining and 
innovation to bring additional funding resources to support and 
maintain public housing.
                                 ______
                                 
                   PREPARED STATEMENT OF KEITH KINARD
Executive Director, Newark Housing Authority, on behalf of the Council 
                  of Large Public Housing Authorities
                             August 1, 2012
    Chairman Menendez, Ranking Member DeMint, and Members of the 
Subcommittee, my name is Keith Kinard and I am Executive Director of 
the Newark Housing Authority and Board Member of the Council of Large 
Public Housing Authorities (CLPHA). CLPHA is a national, nonprofit 
membership organization that works to strengthen neighborhoods and 
improve lives through advocacy, research, policy analysis, and public 
education. CLPHA's members comprise nearly 70 of the largest Public 
Housing Authorities (PHAs), located in most major metropolitan areas in 
the United States. These agencies act as both housing providers and 
community developers while effectively serving over one million 
households, managing almost half of the Nation's multibillion dollar 
public housing stock, and administering nearly one quarter of the 
Section 8 Housing Choice Voucher program.
    The Newark Housing Authority (NHA) has over 11,000 public housing 
and housing choice vouchers. NHA is the largest public housing 
authority in New Jersey and one of the largest in the Nation. We have a 
portfolio of 44 public housing communities with a total of over 7,000 
rental units scattered throughout the City of Newark. NHA also 
administers up to 4,000 Housing Choice Vouchers (Section 8) within the 
city limits. A unique aspect of the Newark Housing Authority is that 
the agency also serves as a redevelopment authority and uses that power 
to enhance the renaissance of Newark. As a redevelopment authority, the 
NHA has a stake in the creation and maintenance of safe, livable 
neighborhoods and the expansion of economic opportunities in their 
communities.
    We thank the Subcommittee for holding this hearing on 
``Streamlining and Strengthening HUD's Rental Housing Assistance 
Programs'' and appreciate the opportunity to comment on those matters 
that we believe are critical to include in any legislation to improve 
and reform HUD's rental assistance programs. As you know, for many 
years, CLPHA has been active in these legislative efforts.
    We have most recently been engaged in efforts to improve the draft 
legislation entitled, ``Affordable Housing and Self-Sufficiency 
Improvement Act of 2012'' (AHSSIA) in the U.S. House of 
Representatives. AHSSIA is the latest iteration of recent endeavors to 
reform and advance the Section 8 Housing Choice Voucher program which 
began in the 109th Congress and continued with the ``Section Eight 
Voucher Reform Act'' (SEVRA) and the ``Section Eight Savings Act'' 
(SESA) through the 110th and 111th Congresses. While we have seen 
different variations on a theme with the various legislative 
proposals--with refinements and degree of emphasis--there have been 
certain core components in most versions of the reform proposals. 
Included among those core features which CLPHA strongly supports are 
simplification of rental assistance administration; preservation of the 
housing stock; protection of tenants; and expansion of funding 
flexibilities and local decision making for housing authorities.
    As CLPHA testified last year on SESA, we believe that simplifying 
and streamlining the administration and funding of the Housing Choice 
Voucher (HCV) program is a key component to a broader rethinking of the 
landscape of public and assisted housing in this country. Equally, we 
believe that expansion and permanency of the Moving to Work (MTW) 
program is an essential element in strengthening the flexibility and 
local decision making that housing authorities need to be successful in 
their communities. And, we believe that the Rental Assistance 
Demonstration (RAD) program will be critical in helping housing 
authorities reposition and strengthen an effective housing rental 
assistance delivery system for residents in a time of shrinking Federal 
budgets.
Streamlining and Simplification
Voucher Renewal Funding
    One activity to streamline and simplify would be a permanently 
authorized renewal funding formula which would provide predictability 
and stability to the Housing Choice Voucher program. As you are aware, 
the shift to the ``snapshot'' voucher funding formula in 2004 caused a 
serious mismatch between funding eligibility and vouchers requiring 
renewal funding. Further, continued uncertainty about determining 
eligibility each subsequent year undermines agencies' ability to manage 
their programs efficiently, as they are unable to predict the level of 
voucher utilization that they could support. We have seen, since 2007, 
how funding based on actual leasing and costs provides agencies the 
resources needed to increase leasing and help additional families. We 
are slowly recovering vouchers lost to the previous policies. With a 
renewal formula reflecting actual PHA needs placed in permanent 
statute, rather than in annual appropriations acts as is currently the 
case, PHAs will have renewed confidence in the predictability of their 
funding. A stable and reliable funding formula will provide 
predictability for housing authorities and landlords alike. They will 
be able to plan for the future, taking steps to increase utilization, 
reduce costs, eliminate inefficiencies, and improve service delivery.
Reserves and Use of Funds
    Another proposal that we support is to allow housing authorities to 
retain a portion of their housing assistance payment funds as reserves. 
An adequate and stable reserve is the bedrock of any well-run 
enterprise. Housing authorities serving large metropolitan areas must 
often deal with fluctuations in the number of landlords, the cost of 
rent, and other market factors beyond their control. We recommend that 
agencies always be able to retain their full accumulated reserves in 
order to support leasing in their communities, to allow them the 
flexibility to respond to changing markets, and to prepare for planned 
and unplanned extraordinary expenses, particularly in light of Federal 
budget allocations oftentimes subject to pro-ration. Given their level 
of unspent funds, some PHAs have taken steps to increase their voucher 
utilization levels. They have made commitments in their communities to 
increase leasing by a certain percentage or house a certain number of 
additional families. Large funding offsets and pro-rations could derail 
such plans, even if a housing authority is making progress toward their 
goals. Housing authorities that have defined plans should be allowed 
additional reserves protection to increase leasing.
    The Newark Housing Authority has been struggling with voucher 
utilization issues for more than a decade. Newark's Section 8 program 
consistently spends in excess of 100 percent of the allocated Housing 
Assistance Payments (HAP) funds; however, we report less than 80 
percent utilization on a monthly basis. This discrepancy is due in part 
to the high cost of rent in the region and an offset of 10 million 
dollars of reserves. The reserve offset occurred in the midst of a plan 
to place 2,000 families on the program and created community animosity 
and trust issues for the Agency.
    Additionally, agencies participating in the Moving to Work (MTW) 
program should be funded according to their agreements, subject to any 
pro rata adjustment. MTWs rely on their reserve balances as set out in 
their plans and agreements to leverage funds for redevelopment and 
revitalization projects. Allowing their funding to be offset by their 
reserves would severely undermine the goals of the MTW program. HUD has 
recognized this fact by exempting MTW voucher funding from offset 
provisions to meet Congressionally mandated rescissions (see, PIH 2009-
13, PIH 2008-15). CLPHA supports language in previous versions of SEVRA 
that clarifies that MTW agencies shall spend their reserves in 
accordance with their program agreements.
    Finally, CLPHA has long advocated eliminating the authorized-
voucher cap on leasing, and we strongly support provisions that allow 
leasing in excess of authorized levels.
Project-Based Vouchers
    CLPHA also supports previous legislative provisions that allows 
housing authorities to project-based vouchers in their own buildings, 
as part of a public housing redevelopment, without going through a 
competitive process. This would eliminate a significant administrative 
burden that has, in the past, kept PHAs from being able to commit 
project-based vouchers in a timely fashion. Time is often of the 
essence in redevelopment deals, and having this provision would 
facilitate and expedite project-basing of vouchers. Thus, this 
provision would not only help increase the affordable housing supply 
using tenant-based resources, but also add to the supply of deeply 
subsidized hard units for communities that need them.
    Newark's experience with this policy is two-fold. We currently own 
a 100 percent project-based voucher, elderly/disabled hi-rise building 
that has been thriving for many years. This facility has benefited 
tremendously from this initiative in many ways. The most prominent 
benefit is what it provides for the residents. Through Project-Based 
Vouchering the agency has been able to take on extensive capital needs 
of the building and upgrade the general amenities for the residents. 
Our second experience involves our current work to convert a public 
housing, 220-unit, elderly/disabled hi-rise building into a Section 
Eight Project Based facility. We started this process 4 years ago and 
quite frankly we are about 70 percent through the conversion. A 
significant amount of administrative time and financial resources have 
been used to competitively procure and ultimately award project based 
vouchers to ourselves. In Newark, Section 8 vouchers are scarce and we 
were not able to provide any vouchers to the more than twelve (12) 
applications who submitted proposals. Everyone's scarce resources could 
be better utilized.
    We also strongly urge the Subcommittee to expand the flexibility of 
PHAs to use project-based vouchers to leverage private investment for 
the preservation of affordable housing. Specifically, we support 
increases in the percentage of its Section 8 vouchers that a PHA may 
use for project-basing, above the 20 percent cap, and in the number of 
vouchers that may be project-based in individual projects, for the 
purpose of preservation. There is precedent for these changes under the 
recent notice implementing the Rental Assistance Demonstration, which 
exempts converted units from the 20 percent cap and increases the 
percentage of vouchers that may be project-based in a single project, 
though we do not believe that the Department has gone far enough on 
this second point. Again, project-based vouchers have become an 
essential tool for PHAs' efforts to meet their local community needs, 
particularly with populations that require the availability of ongoing 
supportive services. Increasing the resources that can be used for this 
purpose can play an important role in preserving affordable housing and 
efforts to end homelessness and serve other vulnerable populations. In 
addition, we support the language in the bill that would extend the 
maximum term of the Section 8 contract from 15 years to 20 years, which 
will also encourage private investment.
Administrative Streamlining
    Some changes that could streamline administrative processes 
include: options for triennial recertifications for fixed-income 
households and moving to less frequent inspections and interim 
recertifications. The Newark Housing Authority spends a large 
percentage of administrative fees on work associated with mandatory 
annual recertification, annual unit inspections and rent, allowances 
and asset calculations. Local flexibility that maintains the integrity 
of the program while eliminating the need for high cost, low benefit 
work could save our agency vital resources. It is worth noting that 
many similar innovations have already been tested for years at MTW 
agencies throughout the country. Many MTW agencies have adopted less-
frequent recertifications for their fixed-income households and have 
found that it not only produces less stress for their residents, but 
also significantly reduces their administrative burden.
    Some MTW agencies have been able to streamline their inspection 
process, grouping inspections geographically to save travel time and 
costs. Allowing housing authorities to use a risk-management approach 
to conducting inspections, rather than tying them to arbitrary annual 
deadlines, will help relieve housing authorities of a sometimes 
redundant administrative burden, while still ensuring that families are 
housed in safe and decent housing. Also, allowing housing authorities 
to rely on inspections from governmental agencies further simplifies a 
complicated inspection process and allows localities to rely on one 
standard for guaranteeing the suitability and safety of area housing. 
CLPHA previously testified in support of these changes in SEVRA and 
SESA.
    Additional ways of streamlining administrative processes and 
reducing administrative burden and costs include additional 
simplification of the rent calculation process (even beyond what is 
included in SESA), allowing flexibility with regard to re-inspections, 
and allowing the development of local wait-list policies. These are all 
areas in which Moving to Work agencies have been developing local 
policies, to meet their statutory objective of ``reducing cost and 
achieving greater cost effectiveness in Federal expenditures.'' 
Congress would do well to look to MTW agencies for further ideas about 
administrative streamlining.
Rental Assistance Demonstration (RAD)
    CLPHA's objective for a rental assistance demonstration was 
straightforward. As MTW helps housing authorities in their public and 
affordable housing preservation strategies, we were seeking to preserve 
the existing housing stock through the funding flexibility and funding 
leverage that MTW offers. For this reason, we proposed and supported 
the Rental Assistance Demonstration (RAD)--a conversion option for 
public housing rental assistance to project-based vouchers (PBV) or 
project-based rental assistance contracts (PBRA) that will enable 
greater funding flexibility and leveraging. CLPHA worked alongside 
other stakeholders to help Congress enact RAD last year as a 
demonstration program to preserve this important affordable housing 
stock.
    We see this initial version of RAD as the first step in converting 
public housing subsidies to leverage additional capital investment and 
address the nearly $26 billion capital backlog of our public housing 
stock. The current no-cost model that authorizes conversions to PBV and 
PBRA is an important step forward, but will only go so far in 
addressing a segment of the portfolio. Furthermore, a recent industry-
funded research report by Recap Real Estate Advisors makes clear the 
critical need for adequate RAD funding in order to provide conversion 
and recapitalizing opportunities to a larger pool of public housing 
properties.
    With no funding to support this first iteration of the 
demonstration, CLPHA appreciates the broad waiver authority from 
Congress to create the best program possible within the constraint of 
current public housing operating and capital subsidies. We believe this 
waiver authority is a critically important tool in order to ensure a 
successful demonstration program, and HUD should exercise its waiver 
authority to a greater extent than it proposes in the recently 
published Final Notice. In order to operate successfully under the no-
cost RAD program and for housing authorities to be creative in their 
approaches, this flexibility is necessary. For example, the limitations 
on PBV conversions, including contract rent setting, the cap on the 
number of PBV units in a project, and the 12-month choice mobility 
constraint, all create a disincentive for housing authorities to pursue 
PBV conversions and undermines a critically important option in the 
demonstration program.
    The current House AHSSIA draft proposal includes the original 
legislative draft language from the stakeholders' coalition on RAD. It 
authorizes a demonstration program for the voluntary conversion of 
units currently assisted under the public housing or Section 8 moderate 
rehabilitation programs to a contract under either the Section 8 
project-based voucher or project-based rental assistance programs, 
including the authorization of appropriations of $30 million per year 
for 5 years of a demonstration. The additional funding is for 
supplemental costs of the first year of assistance, evaluation, 
technical assistance to housing authorities and tenant organizations, 
and other appropriate purposes.
    It also authorizes properties assisted under the rent supplement 
program or the Section 236 rental assistance program to convert to 
project-based Section 8 renewal contracts, subject to the terms of 
Section 534 of MAHRAA, with authorization of appropriations of $10 
million per year for 5 years.
    CLPHA strongly supports the RAD program and considers it an 
important tool for public housing preservation strategies. The 
additional funding authorization will help PHAs stabilize properties in 
markets where the current level of assistance and rents are not 
sufficient to address capital backlog needs and provide for long-term 
viability of the properties. We support the version of RAD in the 
AHSSIA bill, and strongly urge the Senate to include the RAD program in 
any legislative proposal.
Moving to Work Expansion
    CLPHA has long been a strong supporter for a permanent expansion of 
a Moving to Work (MTW)-like program for any interested housing 
authority. The premise of MTW is simple, to allow PHAs to develop 
locally driven housing plans that respond to local housing needs, in 
concert with their residents and community stakeholders. The current 35 
MTW agencies administer over 131,000 public housing units and 307,500 
Housing Choice Vouchers, or more than 12.5 percent of the current 
traditionally PHA-operated housing stock, in addition to operating 
local housing programs that fall outside the bounds of traditional 
models. A review of the current MTW agencies show that they have raised 
the standard of housing services, used program flexibility to create 
jobs, added affordable housing stock, served more households, and 
helped families build savings. They have also shown how to operate and 
manage affordable housing in ways that is accountable to their 
residents and local communities without needless and time-consuming 
bureaucratic measures that add costs but no value. Many administrative 
activities now universally accepted as good practice, providing cost-
savings, are beneficial to residents, and are noncontroversial were 
first tested in the laboratory of Moving to Work (MTW).
    Instead of asking themselves ``what do we need to do to make sure 
we score high on our next Section 8 Management Assessment Plan 
(SEMAP)?'', MTW agencies ask themselves, ``where are the most profound 
needs in our community and what are we going to do to address them?'' 
This fundamental shift in thinking has allowed MTW agencies from 
Cambridge, MA, to Atlanta, GA, to Seattle, WA, to solve problems in 
their communities more efficiently, more rapidly and with greater 
community participation than most non-MTW agencies could even imagine.
    The strength of MTW is that it allows PHAs to customize their 
services to meet the unique challenges their communities face. For 
example, in the northwest and northeast, MTW PHAs are engaging with 
homeless service providers in ways unimaginable outside of MTW. The new 
sponsor-based housing is allowing the most difficult-to-house 
populations to find stable homes, with supportive services. 
Comprehensive, long-term services are being paired with PHA 
redevelopment efforts to create dynamic, place-based service centers 
where the most vulnerable households receive not just housing, but the 
intensive supports they need to keep from slipping back into 
homelessness. These are just a few examples of the amazing work going 
on at MTW agencies.
    NHA is not designated as an MTW agency, however, in my previous 
role as Executive Director of the Pittsburgh Housing Authority, we were 
among the original group of agencies granted this broad range of 
flexibility. Having worked for 14 years under both circumstances, it is 
evident that the greatest advantage of MTW is the localized focus true 
regulatory flexibility affords. For example, in Pittsburgh we were able 
to utilize MTW to dramatically improve our housing stock, promote 
significant private investment, streamline our applicant waiting list 
process, promote programs for the homeless and create a social service 
endowment to consistently fund strong self-sufficiency programs.
    On the other hand, without MTW in Newark, our focus has been 
predominately driven by regulatory scoresheets such as the Public 
Housing Assessment System (PHAS) and SEMAP. With both limited 
flexibility and funding, we spend more of our time focused on the 
timeliness of our PIC submissions, Asset Management Projects (AMP) and 
Central Office Cost Center (COCC) performance (financial performance of 
the central office and grouped sites), Voucher Management System (VMS) 
submissions, coordinating REAC inspection activities, along with dozens 
of other monthly, quarterly, and annual submissions.
    In sum, if the Newark Housing Authority were designated a Moving to 
Work site, we would seek to create housing programs for the homeless, 
focus on prisoner re-entry and transitional housing. In addition, we 
would tackle extensive applicant wait-list issues and examine rent 
simplification, recertification and inspection processes for overall 
program efficiencies. Finally, we would utilize funding fungibility to 
create greater housing opportunities for our city's most vulnerable 
populations.
    However, we are aware that the MTW program is controversial among 
many housing advocates and engenders strong, negative, and emotional 
reactions due to misperceptions and misinterpretations of the program's 
objectives, accounting, and results. Given the disparate views of 
proponents and critics of the program, we realized the best approach to 
try to resolve differences was to declare a period of detente, sit down 
with the differing parties, and attempt to work out a practical 
agreement on extending and expanding the program. The result was 
intensive, passionate, and focused deliberations between the 
stakeholders.
    The stakeholder group representatives included tenant advocates, 
civil rights advocates, housing authorities, assisted housing owners, 
and HUD. In a remarkable undertaking with no issue too minor or nuanced 
for consideration, the stakeholder group produced a set of guidelines 
culminating in the ``MTW Expansion Principles and Proposals'', along 
with a legislative draft incorporating those guidelines, that was 
agreed upon by all the parties involved. The stakeholder agreement 
provides for a permanent basic and enhanced MTW program; a robust 
evaluation; new development tools; and resident protections.
    Included with my written comments for the record is a copy of those 
principles (Attachment 1) and legislative draft (Attachment 2).
Closing
    In closing, even as we work to improve the housing choice voucher 
program, we must not forget the continuing challenges faced by the 
shortage of public and other affordable housing. There is still an 
urgent need to preserve and increase the supply of housing units 
specifically dedicated to those most in need. Once again, CLPHA urges 
this Committee to work to provide additional resources and tools to 
enable PHAs to preserve our public housing stock and increase the 
supply of housing affordable to very low-income households.
    We appreciate the Subcommittee's perseverance and willingness to 
continue to tackle the reforms needed in HUD's rental housing 
assistance programs. We look forward to working with you and HUD on 
making additional improvements to the programs and developing reform 
legislation.
    Thank you again for this opportunity to testify.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                 PREPARED STATEMENT OF DIANNE HOVDESTAD
 Deputy Director, Sioux Falls Housing and Redevelopment Commission, on 
    behalf of the National Association of Housing and Redevelopment 
                               Officials
                             August 1, 2012
    Chairman Menendez, Ranking Member DeMint, Members of the 
Subcommittee on Housing, Transportation, and Community Development, 
thank you for giving me the opportunity to provide information and 
perspective on ``Streamlining and Strengthening HUD's Rental Assistance 
Programs''. My name is Dianne Hovdestad; I currently serve as the 
Deputy Director of the Sioux Falls Housing and Redevelopment Commission 
(SFHRC) in Sioux Falls, South Dakota. SFHRC provides rental assistance 
to approximately 2,000 households by utilizing various HUD-funded 
programs. These include: the Section 8 Housing Choice Voucher (HCV) 
program; the Section 8 Moderate Rehabilitation Program, public housing, 
programs funded through the McKinney-Vento Act, including Shelter Plus 
Care and Housing Opportunities for Persons with AIDS; HOME Tenant-Based 
Rental Assistance; and the Section 8 Multi-Family program. In addition, 
the SFHRC provides affordable housing using Neighborhood Stabilization 
Program funding and is currently working toward the construction of 
additional affordable housing using the Low-Income Housing Tax Credit 
program and the HOME program.
    I am also proudly representing the National Association of Housing 
and Redevelopment Officials (NAHRO), one of the Nation's oldest and 
largest housing advocacy organizations. NAHRO currently represents over 
22,000 individual members and over 3,200 housing and redevelopment 
authorities across the country. NAHRO has led the fight for cost-
effective legislative reform of the Section 8 voucher program over the 
past 10 years. Speaking for myself as someone who has been involved in 
the housing industry as a professional for 35 years, I am particularly 
pleased to have the opportunity to address the Subcommittee today on 
the critically important matter of streamlining and strengthening HUD's 
Rental Assistance Programs, particularly the Section 8 voucher program.
Responsible Program Administration During a Period of Fiscal Restraint
    I think it is safe to say that this hearing is being held at a time 
when economic and political considerations affecting the Nation's 
fiscal health are in more dramatic focus than they were when we began 
the conversation about administrative and programmatic reform of the 
Section 8 voucher program--nearly 10 years ago. Speaking not only for 
housing authorities in South Dakota but on behalf of my colleagues 
across the country, I think the need to support responsible reform of 
the Section 8 voucher program is more pressing and more important today 
than it was in 2002. In my own case, the work of my authority and our 
own efforts to support those in need of decent, safe, sanitary and 
affordable housing in Sioux Falls have been greatly impacted by 
spending reductions, which have drastically reduced available funding 
to operationalize the voucher program. In particular, Section 8 
administrative fees have been reduced to such an extent that in 
testimony before the Senate's own THUD Appropriations Subcommittee, HUD 
Secretary Donovan testified that housing authorities in growing numbers 
were telling HUD that they would no longer be able to afford to run the 
voucher program--including the highly praised Veterans Affairs 
Supportive Housing (VASH) program that serves America's veterans. Since 
that admission earlier this year, the numbers of housing authorities in 
the same position has only grown. This alone should compel this 
Subcommittee to act now to reform this critically important program by 
reducing administrative burdens that not only cost the Federal 
Government money in a time of fiscal restraint but also impair housing 
authorities' abilities to serve families, seniors and the disabled who 
rely on this program to ensure a decent, safe and affordable place to 
call home.
    The Section 8 HCV program is a regulation-rich program. The myriad 
of complex regulations make the program difficult to administer and 
difficult for recipients and landlords alike to participate in. Program 
operations are subject to administrative directives, rules and 
regulations of Federal and State agencies including, but not limited 
to, HUD. Administrative directives, rules and regulations are always 
subject to change. Most often such changes may occur with little 
notice, and/or inadequate funding to pay for related costs. These same 
changes usually increase administrative burdens that simply add cost, 
often with a limited net gain in efficiency. I want to thank you for 
holding this hearing and for your commitment to addressing the pressing 
need for reform properly through the authorization process. Hopefully 
your work and your leadership will result in thoughtful and purposeful 
improvements in HUD's rental assistance programs--most particularly the 
voucher program.
Necessary Funding to Properly Administer the Voucher Program
    The work of SFHRC, as well as that of other housing authorities 
across South Dakota and the Nation, has been greatly impacted by 
significant cuts in administrative fees over the past 10 years. By way 
of example, in 2003, SFHRC received $970,000 to cover the costs of 
administering $7,300,000 in housing assistance payments under the 
voucher program. In addition, SFHRC was paid by HUD for audit 
reimbursement costs, hard-to-house fees, assessment and preliminary 
fees for tenant-protection vouchers. Each year since, SFHRC has 
received less administrative fee dollars than it has earned, due to 
shortfalls in appropriations which led to significant administrative 
fee pro-rations. SFHRC was able to meet the program's regulatory 
requirements through the utilization of its Section 8 administrative 
fee reserves, currently referred to as Unrestricted Net Assets (UNA). 
Unfortunately, SFHRC has now spent down most of its UNA, so it no 
longer has that resource to cover future program expenses. Sound 
business practice is to have the equivalent of six months of 
operational expenses in reserves. SFHRC's current UNA would cover 
approximately 12 days of operational expenses.
    SFHRC anticipates it will receive administrative fees of $950,000 
for calendar year 2012 to administer approximately $10,000,000 in 
rental assistance dollars. Due to the pro-ration I referred to earlier, 
SFHRC will receive a mere $0.80 for every $1.00 it earns. The 
consequences of the decrease in administrative fees have been a 
decrease in customer service to both the recipients and the landlords. 
Sadly, as I understand from discussions with my NAHRO colleagues, this 
is now the norm. SFHRC has not been able to replace staff who have left 
its employ; remaining staff have to labor under an increased daily 
workload. As a consequence, SFHRC does not have the funds to pay for 
overtime, as required by Federal labor laws, so households are waiting 
longer for inspections. Recipients, landlords, applicants and the 
community wait longer for answers to questions. Landlords in particular 
are becoming so upset with this delayed response that they are 
threatening to leave the program.
    Decreases in administrative fees have also led to a problem with 
utilization of SFHRC's annual budget authority for the voucher program. 
In calendar years 2008-2011 for example, SFHRC utilized 100 percent of 
its vouchers. In calendar year 2012, SFHRC utilization rates are 
approximately 95.67 percent, even though SFHRC has over 3,500 
households who are on its waiting list. Our wait time is approximately 
4 years. The 4.33 percent that is available but not utilized represents 
92 very low-income households who are also in desperate need but who 
are not receiving assistance with their rent each month. Simply put, 
fewer staff means fewer people can be served.
    The bottom line? NAHRO projects that 87,352 fewer households will 
receive much-needed rental assistance due to staff reductions from lack 
of administrative fees. This figure excludes all incremental and 
special voucher programs. NAHRO is happy to make available to the 
Subcommittee their most recent administrative fee survey, as well as a 
chart showing the historic relationship between administrative fee pro-
rations at pre-Quality Housing Work Responsibility Act (QHWRA) rate and 
housing authorities' ability to lease and serve low-income households.
Reform Provisions Central to Any Bill To Be Adopted
    I believe that today's hearing is a very positive step forward in 
the effort to bring about desperately needed changes that will make the 
voucher program more inviting to landlords, better able to ease current 
administrative burdens on staff and better able to assist the very low- 
and extremely low-income households in need of affordable housing. At 
NAHRO we believe that local discretion is the key to providing 
flexibility for program administrators that serve these households in 
varied geographic and economic conditions.
    For several years now there has been much talk in Washington about 
proposed reforms that would make the administration of the voucher 
program and the delivery of other rental assistance programs more 
effective and efficient--including, for example, statutory changes to 
improve the Family Self-Sufficiency (FSS) program. Here again, an 
adequate, consistent subsidy structure is key to a successful program. 
A program like FSS needs stable funding, as it is difficult to manage 
due to the uncertainty of annual appropriations for housing assistance 
payments and administrative fees. Again, it takes people to serve 
people, but it also takes adequate and properly deployed funding to 
help move families out of poverty and on to a life based upon 
individual achievement, accomplishment, and fulfillment.
    Mr. Chairman we believe that there are several factors or 
components that are essential to any reform bill you ultimately adopt. 
At this time, I would like to highlight those factors, recognizing that 
several of these components have been part of previous reform bills 
that have been under consideration here in Washington.
Housing Quality Standards and Property Inspection Protocols
    Under current regulations, a housing authority cannot provide 
rental assistance until it has determined that a dwelling unit that a 
voucher holder wishes to rent meets HUD's Housing Quality Standards 
(HQS). This regulation applies whether the unit is brand new or 100 
years old. NAHRO and my colleagues in South Dakota support the 
enactment of legislative changes that would give agencies discretionary 
authority to start paying rental assistance from the date of the 
initial property or unit inspection if there are only minor HQS 
violations, i.e., conditional approval, where in addition the rent is 
reasonable. We believe that adequate safeguards are in place to ensure 
that housing assistance payments will be withheld and assistance abated 
in 30 days, from the date of the initial inspection, if the violations 
are not corrected. This simple, straightforward change would benefit 
both recipients and landlords. Recipients would receive quicker rental 
assistance in a safe and healthy environment and landlords would have 
an incentive to participate in the program since they would not lose 
income while correcting minor violations. A majority of landlords 
participating in the voucher programs administered across South Dakota 
are in fact small business owners. Any assistance that can be provided 
to them in the operation of their rental property with limited loss of 
income is a win for everyone. On this point, I would like to note that 
HUD program regulations allowed ``conditional approval'' of units from 
the inception of the Section 8 Certificate program until 1980. SFHRC 
has exercised this option and it has worked very well for the reasons I 
noted above.
    In an effort to ease unnecessary regulatory burdens, NAHRO also 
continues to support the discretionary authority to inspect voucher 
program units every 2 years, while acknowledging that this may not be 
the right solution for all housing authorities. This would allow 
housing authorities to perform inspections on a geographic basis 
instead of tying inspections to each household's lease anniversary 
date. It is important to note that in South Dakota, as well as other 
rural areas across the country, there are housing authorities that 
administer the voucher program across significantly large geographical 
areas. For most of those housing authorities, it would not be uncommon 
for staff to drive 100 miles or more to conduct an inspection. The 
annual inspection process is a major program expense when considering 
staff salaries (including driving time to the inspection and the 
necessary time to conduct the on-site property inspections), gas costs, 
vehicle maintenance, and reimbursement for meals while traveling to and 
from the property We believe that local discretion to inspect units on 
a biennial basis is a critically important cost-savings measure that 
should be included in any reform bill you consider.
    Finally on this point, in areas of the country where Low-income 
Housing Tax Credit, HOME or other multifamily properties are inspected 
by other governmental agencies such as a State housing finance 
authority, we believe that housing authorities should have the 
discretion to use inspections conducted by those entities, as long as 
the inspection criteria meets or exceeds HQS, in lieu of conducting our 
own HQS inspection.
Income and Rent Determinations
    A second component central to any reform effort deals with the 
evaluation of resident income and the determination of tenant rents. 
The complexity of the rent and income calculations existing under 
current regulation is daunting, and no doubt underlies many of the 
problems experienced under current rules with respect to payment error. 
NAHRO recognizes that efforts to address rent simplicity, and more 
particularly ``rent reform,'' are inherently controversial. 
Nevertheless, any effort to simplify the rent and income calculation 
process should be pursued with all deliberate speed.
    All of the various bills which have been in circulation and under 
review for years, including the Section Eight Voucher Reform Act 
(SEVRA), the Section Eight Savings Act (SESA) and now the Affordable 
Housing Self-Sufficiency and Improvement Act (AHSSIA) which is 
currently under consideration by the House Financial Services 
Committee, include titles intended to provide ``income and rent 
simplicity.'' However, with all the changes over the years in each of 
the bills, housing authorities that have examined this issue indicate 
that none of them accomplish the intended goal of determining household 
income and calculating households' rent shares simply, as in the 
definition above. I would like to highlight some of our concerns and 
recommendations regarding income and rent provisions.
    First and foremost, an operational definition of ``income and rent 
simplicity'' is an income definition and household rent calculation 
method that is relatively simple for housing authorities to calculate 
and administer, leaves the Brooke Amendment in place for existing 
assisted households by household type (not each individual household) 
within each housing authority, but does not automatically create a set 
of intended incentives or disincentives for low-income households, and 
provides a greater degree of transparency to participating households 
property owners and managers. By contrast, an operational definition of 
``income and rent reform'' is an income definition and household rent 
calculation method that is relatively simple for housing authorities to 
administer, does not necessarily leave the Brooke Amendment in place 
for existing or future assisted households by household type (not each 
individual household) within each individual housing authority, likely 
creates a set of intended incentives or disincentives for low-income 
households, and likely provides a greater degree of transparency to 
participating households property owners and managers.
    With this in mind, NAHRO is particularly concerned about two areas 
of potential hardship related to elderly and disabled families and 
families with dependent children. In any legislation you adopt, we urge 
you to include a provision that authorizes the Secretary, by regulation 
and for a period not exceeding 3 years following the date of enactment, 
to limit increases in rent for elderly or disabled families and for 
families with dependent children whose rent has increased due to 
changes in the allowable exclusions for medical expenses or child care 
expenses.
    It is also important to point out that the rent and income 
provisions you consider and possibly adopt may have an unintended and 
negative impact on housing authorities' rent revenue in the public 
housing program. For example, the New York City Housing Authority has 
estimated that its public housing rent revenue from residents would 
decrease substantially as a result of legislative changes affecting 
rent and income. Thus, we urge you to include in any bill you adopt a 
provision that would authorize compensation to housing authorities 
through increased Operating Funds.
    Housing authorities are required to verify and report to HUD all 
sources and amounts of included and excluded household income. While 
securing third-party verification of income that is to be included in 
determining annual income and rent does make sense, the noteworthy 
expense of verifying excluded income to be reported to HUD does not. 
Additionally, verification of allowable deductions is another time-
consuming and costly administrative process.
    If income and rent determinations are done in a way that meets the 
principal and intended goals and objectives of the voucher program, and 
if income and rent determinations could be conducted in a way that 
would otherwise benefit low-income households, then I believe that 
property owners and the remaining 99 percent of public housing 
authorities that are not MTW agencies would benefit in terms of reduced 
administrative burdens. The Federal Government would also directly 
benefit from administrative cost savings. I am certain Mr. Kinard of 
the Newark Housing Authority can provide you with comments from the 
vantage point of an MTW agency.
    As the representative of a non-MTW agency in South Dakota, I think 
that any changes in income and rent simplicity provisions in the 
voucher, public housing and project-based rental assistance program 
should reduce burdensome reporting requirements placed on recipients 
and should relieve housing authority staff of many verification and 
processing tasks that only add cost. As a professional and as a 
taxpayer I also believe that a proper income and rent methodology 
should reduce the amount of improper payments.
    I encourage you to add language to any reform legislation you adopt 
that would authorize recertifications for fixed-income households every 
3 years, with the application of an annual adjustment factor to their 
income. This would provide relief to recipients who struggle to attend 
appointments due to physical limitations or lack of reliable 
transportation. I also encourage and support other simplification 
provisions, such as eliminating the requirement to verify and maintain 
records of excluded income, as well as the requirement to use a 
household's prior year's income. I also support the ability to use 
income determinations made by other Government agencies.
    In addition to reducing the reporting and processing responsibility 
on low-income households and housing authority staff, income and rent 
reform changes have the potential of promoting employment among 
assisted households without the immediate burden of paying a higher 
rent. Modest reduction of the interim reporting requirement for 
decreases and increases in households' earned income, for example, 
along with exclusion of the first 10 percent of earned income up to 
$9,000, should provide greater incentive for some working households to 
remain gainfully employed.
    Households with children in particular should also get the benefit 
of an increase in the dependent allowance and any program reform bill 
you adopt should permit an adjustment in the threshold for unreimbursed 
child care expenses from 10 percent to 5 percent of gross income. 
Current regulations allow a dollar-for-dollar deduction in gross income 
for unreimbursed child care. This new adjustment to child care 
deduction would increase the household's rent.
    Finally, NAHRO supports language that would enable a housing 
authority to implement alternative tenant rent structures in rental 
assistance that preserves the Brooke Amendment. Alternative rent 
methods include the continuation of flat rents based on the rental 
value of the unit, income-tiered rents, rents based on a percentage of 
the household's income and the use of existing rent structures. NAHRO 
believes that alternative approaches to income and rent determinations, 
when carefully reviewed and analyzed for their likely effects, offer 
important lessons for possible further improvements for all assisted 
agencies and owners and provide opportunities for outcome-based 
research for a menu of locally based options in the future.
Funding Policy
    As I mentioned earlier, the uncertainty of the renewal funding 
process in recent years has made the management and operation of the 
voucher program a difficult challenge. The goal of any housing 
authority is to maximize its leasing up to its baseline total of 
authorized vouchers in order to assist as many families as possible. 
Unfortunately, with constant formula changes over the years and delays 
in the annual budget process, many agencies have been hesitant to issue 
vouchers--either to keep from over-committing their dollars, or to keep 
from leasing beyond their baseline until they know their annual 
appropriation.
    A provision found in the December 1, 2010, version of SEVRA that 
bases funding on the actual leasing and voucher costs for the prior 
calendar year and the 5-year authorization for renewing leased vouchers 
for example provides much-needed stability to properly manage the 
program. Authorization to retain 6 percent of annual budget authority 
in Net Restricted Assets (NRA) is also an important provision in any 
final legislation you adopt.
    As I stated earlier, reductions in administrative fee funds have 
already had an impact on the number of families that housing 
authorities can serve on a national basis. NAHRO is very concerned that 
additional funding reductions in FY2013 could lead to more perilous 
consequences across the country if a remedy cannot be agreed to and 
implemented in a timely fashion. NAHRO has two proposals, either one of 
which can responsibly mitigate decreased administrative fee funding. 
The first would allow the current HAP and administrative fee accounts 
to be combined into one account, providing local authorities with the 
discretion to utilize those dollars with proper safeguards built in. A 
second approach would allow housing authorities to utilize unused NRA 
to supplement dwindling administrative fee dollars--again, with proper 
safeguards built in. NAHRO would welcome the opportunity to discuss 
these recommendations with you in greater detail as you continue to 
deliberate the content of voucher reform legislation.
    NAHRO has also prepared a detailed analysis that addresses voucher 
funding practices over the years, and has recommendations that will 
address problems related to an uneven and unstable funding policy.
Utility Allowances
    Currently, each housing authority must devise a utility schedule 
for their jurisdiction. The data is often imprecise and continually 
changing. For an agency with a large geographic area, or with multiple 
providers of a certain utility, the task is arduous, time-consuming, 
and costly. Consider, too, all the small public service districts. 
NAHRO recommends that HUD be required to share utility costs with 
housing authorities and allow them, if they so desire, to utilize these 
estimated utility costs as standard allowances. I sincerely hope that 
this language is included in any bill that you ultimately adopt.
    If HUD were required to publish utility information each year by 
State and region from other governmental sources, housing authorities 
would know whether or not utility rates in their respective areas 
increased by 10 percent or more in order to determine whether or not 
conducting extensive calculations of utility rates and consumption were 
warranted. We certainly hope the Subcommittee will address this 
apparent inconsistency. Housing authorities should be able to use the 
utility allowance of a household's authorized voucher size if the 
bedroom size of their leased unit is greater than their authorized 
voucher size. During the drafting of AHSSIA, your colleagues in the 
House responsibly included language proposed by NAHRO that does exactly 
that.
    Finally, housing authorities should be allowed to use the lower of 
their utility companies' ``lifeline'' rates or the standard commercial 
rate averages where applicable and be able to average annual utility 
allowances by bedroom size in lieu of utility allowances by structure 
type. Alternatively, housing authorities should be able to survey their 
area utility charges and consumption rates, document them, and propose 
average utility allowances by bedroom size, subject to HUD approval. 
This would significantly reduce the complexity and calculation errors 
by housing authorities for utility allowances, and greatly simplify the 
leasing process for voucher holders and property owners to help create 
less programmatic barriers to low-income assisted households accessing 
the housing market relative to unassisted households.
Current Legislative Reform Proposals Before the Congress
    With one notable exception, much of the December 1, 2010, version 
of SEVRA (Section 8 Voucher Reform Act) provides a thoughtful and 
pragmatic platform to begin your current review and analysis and 
hopefully represents a workable place to begin your work on voucher 
reform. In 2010, this version of SEVRA was actively discussed for 
possible inclusion in the 2011 appropriation bill under consideration 
at that time. As such, it was a vehicle that a number of our industry 
colleagues, if pressed, likely could have supported. NAHRO played an 
active role in moving this particular version of events forward and 
formally endorsed this particular legislative draft.
    As I mentioned earlier in my statement, the time for action is now. 
The 111th Congress had an opportunity to advance a bill that NAHRO felt 
made good sense, practically and politically. The December 1, 2010, 
version of SEVRA was a rather scaled-down version of earlier iterations 
of SEVRA legislation from years past but it was, never the less, a 
meaningful and practical bill. That bill did not contain everything we 
had hoped for, but it did contain much that we could support, including 
the following:
    Income Targeting: The December 1, 2010, version of SEVRA improved 
income targeting for all extremely low-income applicant households, 
with particular benefits for families in rural communities and large-
size families in metropolitan communities, by using the higher of the 
Federal poverty level or extremely low-income thresholds. It provided 
better access to the Section 8 HCV program, public housing program, and 
project-based Section 8 multifamily housing assistance programs.
    Housing Quality Standards and Inspection Process: The December 1, 
2010, version of SEVRA also included a number of inspection-related 
provisions, including ones that would: allow housing authorities the 
discretionary authority to conduct HQS inspections of all of their 
voucher-assisted units every 2-years rather than annually; permit 
housing authorities to perform inspections on a geographical basis; 
allow inspections conducted by other entities to be used in place of a 
housing authority-conducted HQS inspection; and permit a housing 
authority at its discretion to allow a voucher-assisted household to 
move into a dwelling unit after signing a lease with a property owner 
for a unit that has a reasonable rent and no health or safety 
violations, such that an agency may commence a lease, execute a HAP 
contract and verify within 30 days that the unit passes HQS.
    Administrative Simplicity for Income and Rent Reviews: 
Administrative simplification provisions in the December 1, 2010, 
version of SEVRA also track with the reforms noted in my testimony 
today. That version of SEVRA would have relieved housing authorities of 
the responsibility to maintain records of miscellaneous HUD-required 
income exclusions, and would have allowed housing authorities to use 
applicable inflation adjustments for fixed-income families. 
Additionally, language in that bill permitted housing authorities safe 
harbor reliance on other governmental income determinations (e.g., 
Medicaid, TANF), and allowed housing authorities to make other 
appropriate adjustments when using prior year's calculations of other 
types of income. These would be welcome additions to the HCV program. 
NAHRO also supported provisions regarding housing authorities' use of 
households' prior-year earned income and alternative rent structures 
that would be allowed under the voucher, public housing and project-
based Section 8 programs.
    Expansion of Family Self-Sufficiency Program (FSS): The December 1, 
2010, version of SEVRA converted the Family Self-Sufficiency (FSS) 
program from an annual competitive grant to an administrative fee to 
pay for the cost of an FSS coordinator as part of the standard 
administrative fee provided to housing authorities. Additionally, 
language in the bill would have established standards for the number of 
FSS coordinators that an agency may fund and restored coordinator 
funding for agencies with effective FSS programs that lost funding in 
prior years for reasons unrelated to performance.
    Payment Standards, Fair Market Rents, and Utility Allowances: The 
December 1, 2010, version of SEVRA required HUD to approve housing 
authority requests to raise the payment standard to up to 120 percent 
of the Fair Market Rent (FMR) for housing authorities with high rent 
burdens or high concentrations of poverty. To provide reasonable 
accommodations for persons with disabilities, the proposed bill also 
permitted housing authorities to, without HUD approval, increase 
payment standards up to 120 percent of the FMR. Also, HUD was 
authorized to approve payment standard requests in excess of 120 
percent of FMR. The 2010 bill also improved the timing of HUD-published 
FMR values. This version of SEVRA also required HUD to publish data 
regarding utility consumption and costs in local areas as is useful for 
the establishment of allowances for tenant-based utilities for voucher 
families.
    Access to HUD Programs for Persons With Limited English 
Proficiency: The 2010 bill language also included a requirement that 
HUD develop and make available translations of vital documents 
developed by a HUD-convened task force, establish a toll-free number 
and document clearing house, and complete a study of best practices for 
improving language services for individuals with Limited English 
Proficiency (LEP).
    Project-Based Voucher Assistance Program: Finally, the December 1, 
2010, version of SEVRA would have amended the percentage of units that 
can have project-based assistance in an agency's voucher portfolio; 
provided protections against displacement for families who reside in a 
dwelling unit proposed to be assisted under the PBV program; and 
permitted the use of site-based waiting lists under the PBV program--
all of which NAHRO supported.
AHSSIA
    In the period of time between December of 2010 and today, your 
House colleagues on the Financial Services Committee have advanced two 
separate reform proposals: the Section 8 Savings Act (SESA) and the 
current Affordable Housing Self Sufficiency Improvement Act of 2012 
(AHSSIA). At present, an AHSSIA draft proposal has already been 
approved by the Insurance, Housing and Community Opportunity 
Subcommittee. We understand that the draft is currently being readied 
for a full Committee mark-up, which will hopefully take place following 
the August recess. We at NAHRO believe that there is much that we can 
support in the most recent AHSSIA draft. I would add the fact that 
NAHRO's many discussions with House staff about improving that proposal 
even further have been fruitful and productive. Our views on the most 
recent draft of AHSSIA are as follows:
    Funding Voucher Renewals: With respect to Housing Assistance 
Payments and Net Restricted HAP Assets, NAHRO believes that regulatory 
and administrative reforms are desperately needed. The backbone upon 
which the voucher program relies to achieve its historic success--a 
sound funding policy--has been thrown off kilter over the years and is 
in need of improvement. Housing authorities around the country have 
witnessed a widening gap between budget utilization rates and their 
voucher lease-up rates (percentage of authorized vouchers leased). As a 
result, many housing authorities are now serving fewer families than 
their authorized number of vouchers. We would submit that prudent, 
strategic and purposeful application of a sound funding policies based 
on lessons learned, and the restoration of the renewal HAP funding 
policy that was in place in FY2003 represent the centerpiece of any 
voucher reform legislation and accordingly should be included in the 
final bill you adopt. Please know that funding policies recommended by 
NAHRO over many years do not increase the amount of required funding, 
but rather distribute this limited Federal resource on a sound and 
rational basis subject to pro-rations. This approach we believe would 
provide a greater measure of transparency and accountability to voucher 
programs. We are pleased to see that the most recent draft of AHSSIA 
does contain a voucher renewal policy that for the most part includes 
these important components. But we are concerned however that offsets 
of MTW agency dollars are anticipated in the most recent House draft 
with respect to voucher renewals. We oppose offsets of this nature and 
we are working with House staff to find a mutually acceptable solution. 
To avoid problems such as this, we suggest that this Subcommittee 
formally adopt language on this subject that has been a part of THUD 
bills for the past 7 years. This language would avoid overfunding/
underfunding of housing authority dollars and the formula for renewals 
in these same bills is based upon actual cost data from housing 
authorities. Both components are necessary and entirely appropriate and 
we urge that you include language in your bill that anticipates and 
includes language to support these important points.
    Financial Self Sufficiency (FSS): NAHRO has supported the inclusion 
of language concerning the FSS program in AHSSIA and has been pleased 
to support the provision championed by Chairwoman Biggert over several 
years. We would, however, note that HUD has also advanced FSS reform 
legislation that also appears to achieve many of the objectives NAHRO 
could support. Senator Reed, a distinguished Member of the Banking 
Committee, is also very involved in the FSS discussion. Our hope is 
that a consensus product will be hammered out and will part of any 
final reform bill that Congress approves going forward. We feel 
confident we could support a responsive FSS provision in any final 
reform product you adopt based upon our most recent review of proposals 
currently on the table.
    In all circumstances however, current experience over the last 
several years have shown us that unless Congressional appropriators 
increase funding for the expanded FSS program contemplated by HUD, 
Senator Reed and Representative Biggert, existing agencies with 
successful FSS programs will lose much-needed funding. NAHRO recommends 
coordination between this Subcommittee and the THUD Appropriations 
Subcommittee as this legislation moves forward to ensure that there are 
not unintended consequences of existing agencies inadvertently losing 
their existing FSS funding.
    Restoration of ``Maximized Leasing'' and an Explicit Policy on Net 
Restricted Assets: Earlier AHSSIA discussion drafts have included 
language that states ``[r]eserves may be used for overleasing in any 
year, regardless of whether such use is eligible for renewal funding in 
a subsequent calendar year.'' Although the language contained in 
earlier AHSSIA discussion drafts does not state whether the use of 
reserves would be eligible for HAP renewal funding, NAHRO is at a 
minimum pleased these provisions would reinstate ``maximized 
leasing''--a wise and prudent practice that worked effectively prior to 
FY2003. Maximized leasing was an option formerly available to housing 
authorities for many years under the voucher program. It has enabled 
them to serve the maximum number of households possible with the annual 
amounts provided to them, so long as their annual spending over the 
subsequent year did not exceed 100 percent of their contracted units 
over the 2-year period.
    Ongoing Administrative Fees: NAHRO believes that studying 
administrative fees in the voucher program is necessary. We believe 
that a study, if well-designed and well-executed, can illustrate the 
voucher program's current condition relative to these goals, and would 
illustrate examples where a balance is being struck between the methods 
housing authorities are using to achieve balanced outcomes within their 
budgets. However, we feel strongly that final determinations regarding 
administrative fee rates should not be left open to change by the 
Executive Branch. If allowed by Congress, one Administration could, for 
example, use the authority to significantly incentivize use of vouchers 
in metropolitan and suburban areas at the expense of rural communities 
unmet affordable housing needs; another Administration could use its 
authority to significantly incentivize widespread use of deep rental 
housing subsidies at the highest end of agencies' payment standard 
authority even if it meant serving fewer families overall. Still 
another Administration could use its authority to significantly 
incentivize home ownership at the expense of rental housing 
opportunity.
    Administrative fee rates have been established in statute over the 
history of the HCV program with operational success, without undue 
influence by any Administration. The Office of Management and Budget 
(OMB) has consistently given the HCV program the highest rating awarded 
to any of HUD's programs. Just as we have emphasized how important a 
sound HAP and NRA funding policy is to the success of voucher programs, 
we also believe that the funding structure to support the 
administrative functions necessary to help families succeed and to 
enforce housing quality standards under the program be established by 
the Congress. Accordingly, for reasons specified above, NAHRO believes 
that any legislation you adopt should require HUD to submit ongoing 
administrative fee study findings to Congress and to interested 
stakeholders. NAHRO also supports deferring to the existing authorized 
statute regarding pre-QHWRA fee rates and design under Section 8(q).
    Moving to Work: NAHRO has long advocated for greater program 
flexibility and an expanded Moving to Work (MTW) program in its current 
form. We fully support expanded participation in a well-designed MTW 
program, as has been done in an incremental fashion over the last 
several years through the appropriations process and in similar fashion 
in legislation sponsored by Representative Gary Miller. NAHRO's first 
order of business with regard to MTW over the years has been and 
remains to ensure that existing MTW agencies do not have to unravel 
their valuable programs, which they have crafted over several years. We 
do however strongly support an expansion of MTW to enable program 
flexibility for many more housing authorities, large and small. If 
moving and passing long-awaited legislative reforms for non-MTW 
agencies means doing so without a separate MTW title, NAHRO would 
support introduction and passage of a stand-alone and well-crafted MTW 
bill.
    With respect to MTW language found in AHSSIA, NAHRO and many other 
groups working with HUD collaborated on principles to underpin an 
expanded MTW program. Much of what we agreed to as a group is we 
understand to be included in any final version of AHSSIA. We urge this 
Subcommittee to carefully consider this consensus approach to MTW 
expansion as one possible approach towards greater program flexibility 
for many more housing authorities nationwide. However we also stand 
ready to work with you to find additional avenues to encourage program 
innovation and flexibility using the current MTW framework.
Meaningful Regulatory and Administrative Reforms From HUD Are Long 
        Overdue
    I would also like to briefly raise the matter of administrative and 
regulatory reform which, in our opinion, has been long-overdue at HUD 
with regard not only to the voucher program but other programs 
administered by housing authorities.
    On May 3, 2011, NAHRO provided an extensive set of recommendations 
(Document ID: HUD-2011-0037-0024-1 and HUD-2011-0037-0024-2) regarding 
regulatory and administrative reforms in the voucher, public housing 
and community development programs, in response to President Obama's 
Executive Order 13563 titled, ``Reducing Regulatory Burden; 
Retrospective Review.'' On, May 23, 2011, NAHRO also sent a letter to 
HUD to thank HUD for including us in a ``Delivering Together'' briefing 
focusing on the Department's intent to identify and implement short-, 
medium-, and long-term regulatory and statutory reforms to decrease the 
regulatory and administrative burden faced by public housing agencies. 
At that time, NAHRO submitted a smaller list of 27 regulatory and 
administrative reforms in voucher programs, and also at that time 
expressed our belief that significant reforms are needed immediately 
for programs administered by housing authorities.
    We believe that, in addition to the efforts you are making to 
advance voucher reform legislation, HUD should be prompted by Congress 
to act with deliberate speed to put in place long-overdue regulatory 
and administrative reforms that would further enhance and expedite a 
more cost effective and administratively less burdensome voucher 
program. We ask the Subcommittee to work with us to ensure the rapid 
execution of these reforms that HUD can do now.
Conclusion
    Mr. Chairman, as this Subcommittee seeks to advance a bill that not 
only makes sense substantively but politically, we urge you to consider 
and ultimately adopt a bill that hews closely to the December 1, 2010, 
version of SEVRA and reflects some of the more thoughtful and 
constructive provisions in AHSSIA that we have identified today. We see 
no reason, given the measure of support that the December 1, 2010, 
version of SEVRA had and the AHSSIA bill for the most part now has, to 
either radically depart from language contained in these constructive 
approaches to reform--or worse to start from scratch. The time for 
discussion has passed; the time to act is now! With specific respect to 
AHSSIA, we are very pleased to see that your House colleagues made 
significant progress on a number of issues important to NAHRO, 
including improvements to the HQS section, and also retained important 
language regarding the establishment of administrative fee rates by 
Congress. Certainly there is more that this Subcommittee can do to 
improve upon both bills as I have noted but, after almost 10 long years 
of fits and starts, there is no reason to undermine largely viable 
products that have many if not most program stakeholders on board.
    On behalf of my colleagues at NAHRO, thank you again for the 
opportunity to come before you and express our opinions regarding this 
vitally important legislation. We look forward to working with you to 
achieve voucher reform now!
                                 ______
                                 
                  PREPARED STATEMENT OF HOWARD HUSOCK
        Vice President for Policy Research, Manhattan Institute
                             August 1, 2012
    Thank you Mr. Chairman and thanks to this Committee for devoting 
its time and attention to the important issues of low-income housing 
policy, which matters so much both to the Nation's most disadvantaged 
households and to the economies and development of our cities.
    The question of how to finance and maintain affordable housing and 
how to structure and manage our tenant-based low-income housing 
programs so as to encourage self-sufficiency and upwardly mobility, 
both discussed in the bill recently considered by the House, are 
crucial elements of both U.S. housing policy--and social policy. In 
these remarks, I will focus mainly, on tenant-based programs, 
particularly the Housing Choice Voucher program.
    As the members know, housing vouchers, over the past two decades, 
have emerged as a major program for many of our lowest-income 
households, roughly doubling in size. In FY1998, the Congress 
appropriated some $9 billion for local public housing authorities to 
distribute in voucher form; most recently, the HUD budget includes more 
than $17 billion for the purpose. Vouchers now serve more households 
than traditional public housing--1.8 million vouchers were issued from 
March 2011 through June 2012, compared with just 1.1 million 
traditional public housing households. Spending on vouchers has even 
surpassed direct cash benefits provided through the Temporary 
Assistance for Needy Families program of time-limited support.
    One can well understand and sympathize with the reasons for 
supporting the program's growth. The challenge for the lowest-income 
families, those earning 30 percent or less of the median income, to 
find housing they can afford is substantial, although the unfortunate 
rise in home foreclosures may plausibly make some difference in that 
regard. It is important, however, to understand the housing choice 
voucher program, in addition, as a key aspect of U.S. social policy--
our policy aimed at aiding the long-term upward mobility of the most 
disadvantaged households. That traditional goal of social policy--what 
President Johnson called a ``hand up''--is relevant to the program, in 
which many of the most vulnerable households are enrolled. Like 
traditional public housing, nonelderly voucher recipients with children 
are largely single-parent families--a full 94 percent of whom are 
headed by single women. By design, the program serves disadvantaged 
households of extremely low income--47 percent of voucher recipients 
are at or below 20 percent of the national median income.
    The importance of structuring the program so as to provide aid and 
incentives such that households move toward economic self-sufficiency 
has, in addition to being in keeping with the traditional goal of 
social programs--as expressed, for instance in the 1996 welfare reform 
act signed by President Clinton, Work--also has a practical dimension. 
The combination of long waiting lists and the likelihood that 
appropriations will not be significantly increased and the program 
expanded, means that it behooves policy makers to find ways for the 
program to help participating families move up and out, if only so as 
to be able to serve others in need.
    It's in this context that it's crucial to set goals for the program 
that go beyond administrative efficiency, as important as that is--and 
include, in addition, such metrics as employment, increased household 
income, and what could be called graduation from the program, or 
reduced tenure length. To find the best ways to manage and structure 
the program so as to achieve these goals, it makes good sense to give 
the Nation's extensive network of 3,200 public housing authorities 
flexibility, based on the model of efforts authorized under HUD's 
extremely important but modestly scaled Moving to Work initiative, 
which should be made permanent and expanded to include as many 
interested authorities as possible.
    There is precedent for this approach. In the early 1990s, the 
Nation saw State Governments, in their traditional role that Justice 
Brandeis characterized as that of laboratories of democracy, experiment 
with a variety of approaches to welfare reform. The results guided what 
then proved to be a successful Federal level reform, which has since 
reduced dependency and increased workforce participation. We have seen 
similar significant local successes among those public housing 
authorities permitted to date to make use of the flexibility of the 
Moving to Work program. Notably the Atlanta Housing Authority, about 
which I've written extensively in City Journal, used its MTW waiver to 
link a work requirement with the housing choice voucher, coupled with 
an extensive counseling and workforce preparation program. As a result, 
it has seen an increase in workforce participation among its nonelderly 
population from 14 percent in 1994 to 71 percent today. Atlanta 
officials believe they have created what they term ``a culture of 
work''--an historic return to the original conception of who public 
housing authorities should serve. Other authorities, including 
Cambridge, Mass, and Portland, Oregon, are using Moving to Work ways to 
change their rent structure so as to stop discouraging work--and to 
encourage tenants to move up and out over time. HUD data shows that, 
currently, 50 percent of voucher tenants, and 48 percent of tenants in 
traditional public housing, have been in the program for 5 years or 
longer, a tenure beyond the time limit included in the TANF legislation 
and with which housing programs might logically be aligned. An 
expansion of Moving to Work could allow other authorities to try such 
experiments--or even to consider, as Philadelphia has, an outright time 
limit, or to tie housing assistance to education, as in Tacoma, 
Washington.
    Flexibility for local housing authorities must be guided, however, 
by clear goals to be shaped by the Congress and overseen by HUD. These 
could include increases in employment, measurable increases in voucher 
household income, and reduced length of stay in the voucher program 
itself. As with public education, the requirement to meet standards, 
coupled with local flexibility in how best to do so, can be an 
effective approach. Local officials know their own labor and real 
estate markets best. It's unwise to limit the flexibility that comes 
with Moving to Work, an initiative begun by the Clinton Administration, 
to just 30 of the Nation's 3,200 housing authorities. It's a result 
which could be achieved, as well, through a bloc grant approach to the 
voucher program generally.
    It is important to acknowledge and keep in mind, as well, as you 
consider such changes, that the voucher program has experienced 
problems that Moving to Work might help to fix. In a 2009 paper for the 
University of Cincinnati School of Planning entitled ``The Geographic 
Concentration of Housing Vouchers'', a team of researchers led by David 
Varady concluded that a concerted effort by the local housing authority 
to reduce the reconcentration of poverty households through the voucher 
program--a goal widely discussed--had not succeeded. The authors found 
``vouchers clustering in areas that are poor and/or getting poorer, 
including ``emerging hot spots''--and reported, too ``neighborhood 
alarm.'' The study cites and confirms journalistic accounts, including 
my own in City Journal and that of Hannah Rosin in The Atlantic, which 
have raised similar concerns. In discussing what the authors call the 
``implications for national policy'', they conclude that ``studies 
combining the qualitative and quantitative perspectives are urgently 
needed''. Policy innovation, permitted at the local level, can serve as 
the foundation for such research, as policy makers, over the long-term, 
consider whether housing-specific assistance, and on what terms, is the 
best way to assist low-income households.
    Finally, I'd like to address briefly the proposal, also discussed 
in the House bill's language, to convert public housing capital and 
operating subsidies into project-specific vouchers, as a both a means 
to preserve affordable housing developments in their current use and to 
facilitate increased investment of private capital to reduce an 
estimated $30 billion in maintenance backlogs. The rationale for doing 
so, in a time of serious maintenance needs and budget shortfalls, is 
obvious--and may provide a useful additional tool for public housing 
officials facing serious deferred maintenance. I would urge, however, 
that Members of this Committee be cautious in a too-broad embrace of 
such plans. First, public policies which use public funds, tax credits, 
or regulatory mandates to influence the allocation of private capital 
risk reducing the availability of capital for other uses which may 
contribute more to economic growth and wealth creation--in ways which 
ultimately benefit lower-income families more than might affordable 
housing preservation. Similarly, the designation of specific real 
estate parcels for affordable housing purposes for the long-term risks 
inducing municipalities to forestall the use of such parcels for the 
highest and best economic uses--again in ways that may uplift the 
economic prospects of all citizens. The proposed voucher-based 
maintenance financing approach for public housing is impressively 
imaginative--but should not been seen, in my view, as a way to 
preserve, unit-by-unit--all public and subsidized housing. Better, in 
my own view, for the Congress, through HUD, also to encourage 
additional approaches which could include, for instance, the sale of 
high-value parcels currently owned by local housing authorities so as 
to create locally based maintenance endowments for remaining units. 
Let's be guided, both in how much public housing we preserve, and how 
we set the regulations for housing vouchers, not by a narrow goal of 
preservation or expansion but by a broad determination to help uplift 
low-income households and improve the economies of our cities.
                                 ______
                                 
                   PREPARED STATEMENT OF WILL FISCHER
     Senior Policy Analyst, Center on Budget and Policy Priorities
                             August 1, 2012
    Thank you for the opportunity to testify. I am Will Fischer, Senior 
Policy Analyst at the Center on Budget and Policy Priorities. The 
Center is an independent, nonprofit policy institute that conducts 
research and analysis on a range of Federal and State policy issues 
affecting low- and moderate-income families. The Center's housing work 
focuses on improving the effectiveness of Federal low-income housing 
programs, and particularly the Section 8 housing voucher program.
    It is commendable that the Subcommittee is holding a hearing on 
streamlining and strengthening rental assistance. The proposed 
Affordable Housing and Self-Sufficiency Improvement Act (AHSSIA), 
Section 8 Savings Act (SESA), and Section 8 Voucher Reform Act (SEVRA) 
all contain important, timely measures to strengthen the voucher 
program and other major rental assistance programs. The reforms in 
these bills would sharply reduce administrative burdens for State and 
local housing agencies and private owners, establish voucher funding 
rules that would enable housing agencies to manage funds more 
efficiently, strengthen work supports, and generate large Federal 
savings.
    This testimony focuses on seven core reforms that should receive 
top priority for enactment. Each of these measures appears in some form 
in the version of AHSSIA circulated by the Financial Services Committee 
on April 13, 2012, and the version of SEVRA circulated by the Banking 
and Financial Services Committees on December 1, 2010. \1\ These high-
priority reforms would:
---------------------------------------------------------------------------
     \1\ My testimony focuses on these versions--the most recent public 
version of each bill--except where otherwise noted. Since SESA was 
circulated by the current leadership of the House Financial Services 
Committee earlier in this Congress, I generally focus on the 
Committee's later AHSSIA bill instead. A detailed side-by-side 
comparing AHSSIA, SEVRA, and current law is available at http://
www.cbpp.org/files/5-10-12-SEVRA-AHSSIA-CurrentLaw-Comparison.pdf.

    Simplify rules for setting tenant rent payments, while 
---------------------------------------------------------------------------
        continuing to cap rents at 30 percent of a tenant's income;

    Streamline voucher housing quality inspections to encourage 
        private owners to participate in the program;

    Establish a stable, fair voucher funding system to enable 
        agencies to use funds more efficiently and better cope with 
        shortfalls;

    Allow more working poor families to qualify for vouchers by 
        modestly raising income targeting limits;

    Strengthen the Family Self-Sufficiency program, which 
        offers housing assistance recipients job counseling and 
        incentives to work and save;

    Provide added flexibility to ``project-base'' vouchers to 
        support affordable housing development and preservation;

    Make the rental assistance admissions process fairer by 
        limiting screening to criteria related to suitability as a 
        tenant.

    My testimony also discusses several other provisions that have been 
included in one or more of the reform bills.
Reform Would Build On Strengths of the Rental Assistance Programs
    The Nation's rental assistance programs help more than four million 
low-income households afford decent housing. The great majority of 
these households are senior citizens, people with disabilities, and 
working poor families with children. As shown in the table attached to 
this testimony, rental assistance units are spread among the 50 States 
and across rural and urban areas.
    Rigorous research has shown that rental assistance can sharply 
reduce the incidence of homelessness and housing instability--problems 
that have been shown to have serious harmful effects on children's 
health and development. \2\ Families that receive assistance to ease 
rent burdens also have more funds available for other basic needs, such 
as food, medication, child care, and transportation, and may be able to 
save or invest in education to help lift themselves out of poverty. \3\
---------------------------------------------------------------------------
     \2\ Diana Becker Cutts, MD, ``U.S. Housing Insecurity and the 
Health of Very Young Children'', American Journal of Public Health, 
August 2011, Vol. 101, No. 8, p. 1508; Michelle Wood, Jennifer Turnham, 
and Gregory Mills, ``Housing Affordability and Well-Being: Results From 
the Housing Voucher Evaluation'', Housing Policy Debate 19:367-412 
(2008).
     \3\ Joint Center for Housing Studies of Harvard University, 
``America's Rental Housing: Meeting Challenges, Building on 
Opportunities'', April, 2011, p. 5 and table A-9, http://
www.jchs.harvard.edu/sites/jchs.harvard.edu/files/
americasrentalhousing-2011.pdf.
---------------------------------------------------------------------------
    Housing assistance produces positive indirect effects, as well. 
Studies suggest that work-promoting initiatives are more effective for 
families with affordable housing, \4\ and a growing body of research 
suggests that stable, affordable housing may provide children with 
better opportunities for educational success. \5\ Affordable housing 
combined with supportive services can help the elderly and people with 
disabilities retain their independence and avoid or delay entering more 
costly institutional care facilities. \6\ The evidence of health care 
and other savings from providing affordable housing and services to 
homeless individuals with chronic health problems is particularly 
compelling. \7\
---------------------------------------------------------------------------
     \4\ James A. Riccio, ``Subsidized Housing and Employment: Building 
Evidence of What Works'', in Nicolas P. Retsinas and Eric S. Belsky, 
eds., Revisiting Rental Housing, Joint Center for Housing Studies and 
Brookings Institution Press, 2008.
     \5\ Maya Brennan, ``The Impacts of Affordable Housing on 
Education: A Research Summary'', Center for Housing Policy, May 2011, 
http://www.nhc.org/media/files/Insights_HousingAndEducationBrief.pdf.
     \6\ Gretchen Locke, Ken Lam, Meghan Henry, Scott Brown, ``End of 
Participation in Assisted Housing: What Can We Learn About Aging in 
Place?'' Abt Associates Inc., February 2011, available at: http://
www.huduser.org/publications/pdf/
Locke_AgingInPlace_AssistedHousingRCR03.pdf.
     \7\ For summaries of findings and references, see U.S. Interagency 
Council on Homelessness, ``Opening Doors: Federal Strategic Plan To 
Prevent and End Homelessness, 2010'', pp. 18-19, http://www.usich.gov/
PDF/OpeningDoors_2010_FSPPreventEndHomeless.pdf; and Michael Nardone, 
Richard Cho, and Kathy Moses, ``Medicaid-Financed Services in 
Supportive Housing for High-Need Homeless Beneficiaries: The Business 
Case'', Center for Health Care Strategies, Inc., June 2012, available 
at http://www.rwjf.org/files/research/74485.business.case.pdf.
---------------------------------------------------------------------------
    Research has found additional benefits when housing assistance 
enables low-income families to live in neighborhoods with lower poverty 
rates, including sharply fewer deaths from disease or accidents among 
girls and lower rates of obesity and diabetes. \8\ Where housing 
policies have allowed low-income children to attend high-performing, 
economically integrated schools over the long term, their math and 
reading test scores are significantly better than comparable children 
who attended higher-poverty schools. \9\
---------------------------------------------------------------------------
     \8\ Jens Ludwig, et al., ``Neighborhoods, Obesity, and Diabetes--A 
Randomized Social Experiment'', New England Journal of Medicine, 
365:16, October 2011, http://www.nejm.org/doi/full/10.1056/
NEJMsa1103216; Brian A. Jacob, Jens Ludwig, Douglas L. Miller, ``The 
Effects of Housing and Neighborhood Conditions on Child Mortality'', 
NBER Work Paper No. 17369, National Bureau of Economic Research, August 
2011, http://www.nber.org/papers/w17369.
     \9\ Heather Schwartz, ``Housing Policy is School Policy'', The 
Century Foundation, 2010, http://tcf.org/publications/pdfs/housing-
policy-is-school-policy-pdf/Schwartz.pdf.
---------------------------------------------------------------------------
    The core reforms in SEVRA and AHSSIA would build on this record of 
success. Fourteen years have passed since the enactment of the Quality 
Housing and Work Responsibility Act (QHWRA) in 1998, the last major 
authorizing legislation affecting the voucher and public housing 
programs. As with any program, adjustments are needed over time to 
reflect changed circumstances and lessons learned.
    Reforms that stretch limited dollars to assist more families or 
avoid painful cuts are especially urgent today, when budgets are tight 
but unemployment, poverty, and homelessness are high. The Congressional 
Budget Office (CBO) estimated that the December 2010 version of SEVRA 
would reduce the budget authority needed to fund the current level of 
housing assistance by more than $700 million over 5 years. Financial 
Services Committee staff have indicated that the April 2012 version of 
AHSSIA (which included additional cost saving measures) would save at 
least $1.5 billion. These estimates do not attempt to include 
administrative savings, which could lower funding needs by an added 
several hundred million dollars over 5 years.
Simplifying Rules for Determining Tenants' Rent Payments
    Tenants in HUD's housing assistance programs generally must pay 30 
percent of their income for rent, after certain deductions are applied. 
The rent streamlining provisions in AHSSIA and SEVRA maintain this 
rule, but would streamline determination of tenants' incomes and 
deductions. As a result, the bills would reduce burdens on housing 
agencies, property owners, and tenants. The changes would also reduce 
the likelihood of errors in rent determinations and strengthen work 
incentives for tenants.
    Most significantly, the bills would:

    Reduce the frequency of required income reviews. Currently, 
        agencies and owners must review income annually for all 
        tenants. AHSSIA and SEVRA would allow agencies and owners to 
        limit reviews to once every 3 years for households that receive 
        most or all of their income from fixed sources such as Social 
        Security or SSI and consequently are unlikely to experience 
        much income variation. \10\
---------------------------------------------------------------------------
     \10\ Many fixed-income benefits, such as Social Security and SSI, 
typically increase annually due to cost-of-living adjustments. To avoid 
a loss of revenue from this streamlined option, agencies would be 
required to assume that in the intervening 2 years these tenants' 
incomes rose by a rate of inflation specified by HUD.

    Today agencies and owners also must adjust rents between annual 
reviews at the request of any tenant whose income drops. AHSSIA and 
SEVRA would require adjustments only when a family's annual income 
drops by 10 percent or more, making such ``interim'' reviews less 
common but still providing adjustments when tenants would otherwise 
face serious hardship. The bills also would require interim adjustments 
for income increases exceeding 10 percent, except that adjustments for 
earnings increases would be delayed until the next annual review to 
strengthen work incentives.
    Together, these changes would sharply reduce the number of income 
reviews that agencies and owners must conduct. This would substantially 
lower administrative costs, since income reviews are among the most 
labor-intensive aspects of housing assistance administration.

    Simplify deductions for the elderly and people with 
        disabilities. Currently, if the household head (or his or her 
        spouse) is elderly or has a disability, housing agencies and 
        owners must deduct medical expenses and certain disability 
        assistance expenses above 3 percent of the household's income 
        from income for purposes of determining the household's rent. 
        Agencies and owners report that this deduction is difficult to 
        administer, since they must collect and verify receipts for all 
        medical expenses. It also imposes significant burdens on 
        elderly people and people with disabilities, who must compile 
        and submit receipts that may contain highly personal 
        information. Largely for these reasons, many households 
        eligible for the deduction do not receive it. By contrast, a 
        second deduction targeted to the same groups--a $400 annual 
        standard deduction for each household where the head or spouse 
        is elderly or has a disability--is quite simple to administer.

    AHSSIA and SEVRA would increase the threshold for the medical and 
disability assistance deduction from 3 percent of annual income to 10 
percent. This would reduce the number of people eligible for the 
deduction--and therefore the number of itemized deductions that would 
need to be determined and verified--while still providing some relief 
for tenants with extremely high medical or disability assistance 
expenses. At the same time, the bills would increase the easy-to-
administer standard deduction for the elderly and people with 
disabilities, to $675 annually in SEVRA and $525 annually in AHSSIA, 
and index it for inflation.
    In addition to reducing processing burdens for agencies, owners, 
elderly people, and people with disabilities, this change is likely to 
reduce payment errors substantially. HUD studies have found that the 
medical and disability expense deduction is one of the most error-prone 
components of the rent determination process, while errors in the 
standard deduction are rare.
    The higher $625 standard deduction in SEVRA would be preferable, 
since it would come closer to fully offsetting rent increases (on 
average across all families) from the scaled back medical expense 
deduction (although it would also result in somewhat lower savings). 
Some individual households would see higher or lower monthly rents, but 
the changes would generally be modest. Congress could provide added 
protection for tenants who are adversely affected by allowing HUD to 
establish a hardship exemption policy (as AHSSIA would do) and delaying 
the effective date of the change to allow tenants to find other ways to 
cover out-of-pocket medical expenses.

    Simplify deductions for families with children. AHSSIA and 
        SEVRA would scale back an existing deduction for child care 
        expenses--which evidence suggests is implemented 
        inconsistently--by allowing deductions only of expenses above 5 
        percent of income (rather than all reasonable expenses). At the 
        same time, it would increase from $480 to $525 a simple annual 
        deduction that families receive for each child or other 
        dependent, and index it for inflation. The dependent deduction 
        recognizes the larger share of family income required to cover 
        nonshelter expenses when a family has more children.

    Base rents on a tenant's actual income in the previous 
        year. Currently, rents are based on a tenant's anticipated 
        income in the period that the rent will cover, usually the 
        coming 12 months. Except when a family first begins receiving 
        housing assistance, AHSSIA and SEVRA would require agencies 
        generally to base rents on actual income in the previous year. 
        This would give tenants an incentive to increase their 
        earnings, since such an increase would not affect their rent 
        for as long as a year. It also would simplify administration, 
        both by making it easier for agencies and owners to use tax 
        forms and other year-end documentation to verify income and by 
        reducing the need for midyear rent adjustments for tenants 
        whose earnings change during the year.

    Limit utility allowances based on family size and 
        composition. AHSSIA contains a provision to limit utility 
        allowances in the voucher program based on the number of 
        bedrooms a family is eligible for given its composition, rather 
        than the actual size of the unit. Today families are permitted 
        to rent units larger than they are eligible for, but the cap on 
        the total housing costs the voucher covers (that is, the 
        payment standard) does not rise as a result. Adopting the 
        AHSSIA limit on utility allowances would generate savings and 
        avoid providing families incentives to rent larger units than 
        they need.

    Allow housing agencies to use income data gathered by other 
        programs. AHSSIA and SEVRA contain a provision that would allow 
        State and local housing agencies and owners to rely on income 
        determinations carried out under SNAP (formerly food stamps) 
        and other Federal means-tested programs, without separate 
        verification. Currently, housing agencies and owners must 
        determine and verify income independently, even though this 
        duplicates work already being carried out by other agencies. 
        Allowing housing agencies to rely on income determinations made 
        by SNAP agencies would ease their administrative burdens 
        considerably, since a large portion of housing assistance 
        recipients also receive SNAP benefits.

    AHSSIA, however, does not include a provision from the December 
2010 version of SEVRA requiring State SNAP agencies to make available 
to housing agencies income data for families participating in both 
programs. It is important that Congress include this requirement, since 
without it many SNAP agencies may not provide the needed data.
Flat Rent Changes Offer Promising Way To Raise Revenues
    To encourage a mixture of incomes among public housing residents, 
current law permits residents to elect to pay a ``flat rent.'' This 
policy benefits residents with the highest incomes (who pay less than 
30 percent of their income for housing under the policy) but has been 
considered reasonable because HUD rules require that flat rents be set 
at the ``estimated rent for which the [agency] could promptly lease the 
public housing unit''--that is, at the approximate market rent. Data 
suggest, however, that existing flat rents are well below market rents 
in some areas, which raises Federal costs and can increase funding 
shortfalls for local agencies.
    AHSSIA includes a statutory change proposed in the Administration's 
2012 budget to require agencies to set flat rents no lower than 80 
percent of the HUD fair market rent for the area. \11\ HUD estimates 
that the provision would reduce public housing operating subsidy needs 
by $150 million in the first year and by more than $400 million per 
year once the proposal is fully phased in.
---------------------------------------------------------------------------
     \11\ The flat rent option was authorized by the Quality Housing 
and Work Responsibility Act of 1998 (QHWRA). The AHSSIA provision would 
also apply to ``ceiling'' rents, which were established prior to the 
enactment of QHWRA and are subject to somewhat different rules.
---------------------------------------------------------------------------
    As proposed by HUD, AHSSIA would require local agencies to 
implement the new policy no later than September 30, 2013, which would 
allow agencies some time to phase the policy in. In addition, the bill 
limits any increases in rental payments by affected households to 35 
percent per year.
Minimum Rent Increase Would Harm the Poorest Tenants
    The April version of AHSSIA contains a provision not included in 
SEVRA increasing to $69.45 a month the ``minimum rents'' that the 
lowest income housing assistance recipients can be required to pay, and 
indexing this amount for inflation. Under current law, housing agencies 
have the option of setting minimum rents for voucher holders and public 
housing residents up to $50. HUD also has authority to set minimum 
rents up to $50 in project-based Section 8 units, and currently has set 
that level at $25.
    The April AHSSIA provision makes two significant improvements over 
the minimum rent proposal in the earlier version of AHSSIA that a House 
Financial Services subcommittee passed on February 7, 2012:

    The subcommittee-passed bill would have required all 
        housing agencies and owners to charge minimum rents of $69.45, 
        eliminating the discretion that exists under current law. By 
        contrast the April AHSSIA provision would permit housing 
        agencies and owners to set minimum rents below $69.45 for 
        ``good cause,'' unless HUD disapproves the lower rent.

    The subcommittee-passed bill made no significant changes to 
        existing protections for families that would face hardship if 
        they were required to pay minimum rents. A 2010 HUD-sponsored 
        study found that these protections help few families: 82 
        percent of agencies reported providing exemptions to less than 
        1 percent of families subject to minimum rents, and only 5 
        percent of agencies said they had exempted more than a tenth of 
        affected families. \12\ The April AHSSIA bill improves the 
        hardship requirements to increase the chances that poor 
        families facing hardship will be exempted.
---------------------------------------------------------------------------
     \12\ Abt Associates et al, Study of Rents and Rent Flexibility, 
prepared for HUD Office of Public and Indian Housing, May 26, 2010, 
http://www.huduser.org/publications/pdf/Rent%20Study_Final%20Report_05-
26-10.pdf.

    Despite these improvements, the April AHSSIA provision is still 
likely to harm many of the Nation's most vulnerable families and 
individuals. As many as 500,000 households could be required to pay 
higher rents, including families with 725,000 children. While the 
improvements described above would protect some families, many are 
still likely to fall through the cracks, placing them at risk of severe 
hardship and even homelessness. Moreover, is not clear what the 
rationale for the increase is. Congress should omit it in final rental 
assistance reform legislation.
Rent Demonstration Could Be Useful, but Restrictions Should Be 
        Tightened
    AHSSIA and SEVRA would authorize HUD to conduct a limited 
demonstration of alternative rent policies. Such a demonstration is 
potentially beneficial. Today's rent rules generally work well, 
providing sufficient help to enable the neediest families to afford 
housing while not giving higher-income families more subsidy than they 
need. In addition, the current system maintains largely identical rules 
across programs and localities, making it easier for voucher holders to 
move from one community to another (for example to pursue a job 
opportunity), for private-sector owners and investors to participate in 
multiple programs and operate in multiple jurisdictions, and for HUD to 
provide effective oversight.
    Most major changes--and particularly those that would result in 
sharply higher or lower subsidies for certain families--would carry 
substantial risks and tradeoffs. It is possible, however, that some 
substantial changes would have significant benefits that would justify 
enacting them on the Federal level. For example, a policy of 
disregarding some percentage of earned income would carry added costs, 
but might encourage sufficient increases in earnings to offset a 
sizable share of the cost and justify the change. A demonstration could 
offer an opportunity to rigorously test policy alternatives to 
determine their costs and benefits relative to the current rules. HUD 
is already conducting a rent demonstration at a subset of MTW agencies, 
but would need additional statutory authority to extend it to other 
agencies.
    However, the rent demonstration in AHSSIA and SEVRA should be 
strengthened in important ways. It should provide HUD broader 
flexibility to identify promising policies, limit the length of the 
demonstration to avoid allowing wasteful or harmful policies to remain 
in place indefinitely, explicitly require an experimental evaluation, 
and clarify that the ``limited'' number of families that can be subject 
to alternative policies should be no more than the number needed to 
yield statistically valid results.
Streamlining Inspections To Encourage Participation by Private Owners
    The voucher program requires that vouchers be used only in houses 
or apartments that meet Federal quality standards. AHSSIA and SEVRA 
would allow agencies to modestly change the inspection process used to 
ensure that units meet those standards. The changes would ease burdens 
on agencies and encourage landlords to rent apartments to voucher 
holders.
    Most significantly, AHSSIA and SEVRA would allow agencies to 
inspect apartments every 2 years instead of annually. In addition, the 
bills would allow agencies to (1) rely on recent inspections performed 
for other Federal housing programs, and (2) make initial subsidy 
payments to owners even if the unit does not pass the initial 
inspection, as long as the failure resulted from non- life-threatening 
conditions. Defects would have to be corrected within 30 days of 
initial occupancy for the payments to continue. These provisions would 
encourage owners to participate in the voucher program by minimizing 
any financial loss due to inspection delays. They also would enable 
voucher holders, who in some cases are homeless or experience other 
severe hardship, to move into the unit more quickly than under current 
rules.
    Today, when an inspection of a unit occupied by a voucher holder 
finds a violation, the housing agency is permitted to temporarily halt 
subsidy payments if the owner fails to address the violation in a 
timely manner, and ultimately terminate the subsidy if the defects are 
not adequately repaired. AHSSIA and SEVRA would retain this authority 
and establish a series of requirements regarding the rights of tenants 
and other aspects of subsidy abatement and termination.
    SEVRA also includes a beneficial requirement, which Congress should 
enact, for housing agencies to provide assistance to help tenants find 
a new unit and relocate if the subsidy to their unit is terminated 
because of an inspection violation. AHSSIA would make this assistance 
optional.
Stabilizing Voucher Funding Rules
    One of the most important goals of authorizing legislation 
concerning the voucher program should be to establish a stable, fair, 
efficient policy for distributing funds to renew voucher subsidies to 
the approximately 2,400 State and local agencies that administer the 
program. This would enable those agencies to assist more families 
within the level of resources provided in annual appropriations bills 
than would otherwise be possible.
    For the last 9 years, appropriations acts have changed renewal 
funding policies every several years. Such instability creates 
uncertainty and makes many agencies reluctant to use the funds they 
have to serve the number of families Congress has authorized, out of 
fear that they will not receive sufficient renewal funding to maintain 
payments to landlords. As a result, only about 92 percent of authorized 
vouchers are in use, compared to about 97 percent before the changes in 
renewal funding policy began--a loss of assistance to about 100,000 
families. The reform bills include a package of changes that would 
stabilize and strengthen renewal funding policy.

    Stable funding formula. AHSSIA and SEVRA would establish as 
        a permanent part of authorizing law the policy in recent 
        appropriations bills of basing each agency's funding on the 
        cost of the vouchers it used in the previous year, adjusted for 
        inflation and certain other factors. This approach forces 
        agencies to manage within a limited budget, while also ensuring 
        that each agency's funding level matches its actual needs.

    Stable reserve and offset policy. AHSSIA and SEVRA would 
        assure State and local housing agencies that they can maintain 
        a funding reserve of at least 6 percent of the renewal funding 
        for which they are eligible, but permit HUD to ``offset'' (that 
        is, deduct from the agency's funding) reserves above that 
        level. AHSSIA improves on the SEVRA offset policy by extending 
        it to cover MTW agencies in addition to non-MTW agencies; this 
        avoids unfairly disadvantaging non-MTW agencies.

    In the current funding environment, when agencies may fear that 
Congress will not provide sufficient new funding to support all 
vouchers in use, a predictable reserve level provides the cushion 
agencies need to reissue vouchers to needy applicants on the waiting 
list when families leave the program and be confident that they will 
have sufficient funds to sustain the vouchers. At the same time, making 
clear that HUD will have authority to offset reserves beyond the 
permitted amount provides a strong incentive for agencies to put excess 
funds to use assisting families.

    Permitting agencies to assist as many families as possible 
        with available funds. AHSSIA and SEVRA would encourage agencies 
        to reduce the cost of voucher subsidies and stretch their 
        voucher funds to serve as many families as possible by 
        restoring flexibility that existed prior to 2003 to assist 
        families beyond the agency's ``authorized voucher cap.'' Under 
        a policy adopted in annual appropriations acts since 2003, 
        agencies are penalized if they use more than their authorized 
        number of vouchers in a year, even if they can do so with 
        available funds by reducing per-voucher costs. This policy has 
        pushed many agencies to use substantially fewer than their 
        authorized number of vouchers, out of fear of exceeding the 
        cap.

    AHSSIA and SEVRA would remove this chilling effect and assure 
agencies that if they took steps to limit costs, they could use any 
savings to provide vouchers to more families even if this pushes them 
above their authorized voucher level. Vouchers above the authorized 
level that are supported by unused prior-year funds would not be 
counted for determining the agency's future funding level, so this 
incentive would not increase program costs.

    Efficient use of funds above renewal formula amounts. When 
        Congress passes appropriations bills in a timely manner, it 
        sets the voucher funding level before all the data needed to 
        know the precise amount agencies will be eligible for under the 
        renewal formula are available. In recent years, when funding 
        has exceeded the amount needed HUD has been required to 
        distribute the extra funds pro rata to all agencies. HUD could 
        use these funds more efficiently if it had authority to 
        allocate them to meet unforeseen needs, reward high 
        performance, or for other purposes. SEVRA provides HUD broad 
        authority to make such allocations, while AHSSIA provides more 
        limited discretion. The SEVRA provision would be preferable, 
        but Congress should enact at least the AHSSIA provision.
Per-Voucher Costs Have Risen More Slowly Than Housing Costs in the 
        Private Market
    While AHSSIA and SEVRA would create important incentives to keep 
per-voucher costs low, it is important to note that this would build on 
the voucher program's already successful record of restraining costs. 
Per-voucher costs have generally risen at a slower rate than housing 
costs in the private market. HUD-determined Fair Market Rents (FMRs), 
which are based in market rents for standard-quality unassisted units, 
increased by 19 percent from 2005 to 2010. As shown in Figure 1, during 
that same period per-voucher costs increased by less than 16 percent.
    A central reason for this is that housing agencies controlled 
voucher costs through their ability to set payment standards, which cap 
voucher subsidies and can be set anywhere from 90 to 110 percent of the 
FMR (and outside that range under some circumstances). This explanation 
receives support from HUD data showing that, on average, voucher 
payment standards declined in relation to FMRs from 2005 to 2010.
    By incorporating an improved voucher renewal funding policy in 
permanent law, AHSSIA and SEVRA would provide agencies--as well as 
families with vouchers and private owners--with more confidence that 
renewal funding needs will be met in future years, which is 
particularly important to maintain program effectiveness in the current 
fiscal environment. This approach would not weaken Congress control 
over the cost of the program. Congress would still determine the amount 
of annual program funding, and if the funds appropriated in a given 
year were insufficient to fully fund the renewal formula, HUD would 
reduce each agency's funding by the same percentage so funds would 
still be allocated based on agencies' relative needs. The provisions in 
the bills would simply ensure that, for any given level of funding, 
more families would receive the important benefits that vouchers have 
been shown to provide.


Easing Income Targeting Rules To Help More Working-Poor Families
    Currently, 75 percent of vouchers and 40 percent of project-based 
Section 8 and public housing units must be allocated to households with 
incomes at or below 30 percent of the median income in the local area 
at the time they enter the program. AHSSIA and SEVRA would adjust these 
criteria to require that those vouchers and units be allocated to 
households with incomes at or below 30 percent of local median income 
or the Federal poverty line, whichever is higher. Neither this revised 
requirement nor current law restricts a family's income after it is 
admitted. \13\
---------------------------------------------------------------------------
     \13\ A separate provision of SEVRA (but not AHSSIA) would prohibit 
families from continuing to receive assistance if their income rises to 
a much higher level (generally above 80 percent of local median 
income). Currently, there is no income limitation after admission. 
Under SEVRA, owners and agencies could opt not to enforce this new 
policy in project-based Section 8 and public housing. And families with 
incomes above 80 percent of median in most areas no longer qualify for 
assistance under the voucher program because 30 percent of their 
adjusted income--their required contribution--exceeds the maximum rent 
a voucher can cover. Nonetheless, because the SEVRA policy would 
terminate assistance for some higher-income families (who would then 
typically be replaced by lower-income families who require larger 
subsidies), CBO estimated that it would cost $209 million over 5 years.
---------------------------------------------------------------------------
    This change would give housing agencies greater flexibility to 
target working-poor families. Some agencies in low-income areas have 
expressed concern that the current targeting criteria prevent them from 
assisting these families. At the same time, the change would maintain 
the emphasis on assistance for the poor. CBO has estimated that the 
reduction in subsidy needs that would result from easing targeting 
rules would reduce funding needs by $1.14 billion over 5 years, making 
it the largest source of savings in the bills.
    The only difference between the bills' targeting provisions is that 
AHSSIA fixes language in SEVRA that could allow targeting in project-
based Section 8 developments in Puerto Rico and other U.S. territories 
to be raised excessively. The Federal poverty line is not designed to 
apply in U.S. territories, and using it to target housing assistance 
there would raise the targeting threshold far above 30 percent of the 
local median income and shift assistance away from the neediest 
families. For this reason, both AHSSIA and SEVRA seek to exempt the 
territories from the targeting change, but the SEVRA exemption applies 
only to ``in the case of public housing agencies'' located in a U.S. 
territory. This would allow sharp targeting increases in project-based 
Section 8 developments, which generally are not administered by public 
housing agencies. Congress should adopt the more complete AHSSIA 
exemption.
Strengthening the Family Self-Sufficiency Program
    The Family Self-Sufficiency (FSS) program encourages work and 
saving among voucher holders and public housing residents through 
employment counseling and financial incentives. Both AHSSIA and SEVRA 
establish a stable formula to allocate funds to cover administrative 
costs of FSS programs. This formula would replace a competitive process 
that has made funding unpredictable and disrupted administration of 
local FSS programs.
    Unfortunately, residents of units assisted through the project-
based Section 8 program are ineligible for FSS today. AHSSIA (but not 
SEVRA) corrects this omission, enabling families receiving any type of 
Section 8 assistance as well as public housing residents to benefit 
from FSS. Offering participation in the FSS program to project-based 
Section 8 tenants would be optional for property owners. Generally, 
such tenants would participate in an FSS program operated by a public 
housing agency, if one is available that will admit the families. 
Owners of properties with project-based Section 8 contracts could also 
use funds in their HUD-required ``residual receipts accounts'' to 
operate an FSS program independently if it serves at least 25 
participants.
    AHSSIA also contains other beneficial FSS provisions, including a 
requirement that housing agencies with 500 or more voucher and public 
housing units offer or expand FSS programs if sufficient funds are 
available.
Facilitating Use of Project-Based Vouchers
    Both AHSSIA and SEVRA would make it easier for a housing agency to 
enter into agreements with owners for a share of its vouchers to be 
used at a particular housing development. Through such ``project-
basing,'' agencies can, for example, partner with social service 
agencies to provide supportive housing to formerly homeless people or 
support development of mixed-income housing in low-poverty 
neighborhoods with strong educational or employment opportunities.
    Residents of units with project-based voucher assistance have the 
right to move with a voucher after 1 year, using the next voucher that 
becomes available when another family leaves the program. (When this 
occurs, a voucher remains attached to the housing development; the 
family moving out of the development receives a separate voucher.) This 
``resident choice'' feature and other policies make the project-based 
voucher option significantly different from earlier programs that 
provided project-based assistance.
    AHSSIA and SEVRA increase the percentage of an agency's voucher 
assistance that can be project-based from 20 percent to 25 percent, if 
the added 5 percent is used in areas where vouchers are difficult to 
use, to house homeless families or individuals, or to provide 
supportive housing to people with disabilities. AHSSIA adds units that 
house veterans or the elderly to the categories that qualify for this 
added authority. In SEVRA, agencies would be permitted to project-base 
the higher of 25 percent of their authorized vouchers or 25 percent of 
their voucher funding, giving greater flexibility to housing agencies 
that are able to keep project-based voucher costs low. AHSSIA would 
base the limit strictly on the percentage of the agency's authorized 
vouchers.
    In addition, the bills would permit housing agencies to commit to 
project-based voucher contracts with a term of 20 years (the term HUD 
permits for contracts under the separate project-based Section 8 
program), rather than the 15-year maximum permitted today. The bills 
would also permit owners to establish and maintain site-based waiting 
lists subject to civil rights and other requirements, allow agencies to 
provide project-based vouchers in the greater of 25 percent of units or 
25 units in a project, and permit 40 percent of the units in a project 
to have project-based vouchers in areas where vouchers are difficult to 
use or the poverty rate is 20 percent or less. \14\ These policy 
changes would help agencies increase the effectiveness of the voucher 
program in rural and suburban areas, where rentals are frequently 
scarce and properties tend to be small, and in low-poverty areas in all 
types of locations.
---------------------------------------------------------------------------
     \14\ Both today and under AHSSIA and SEVRA, agencies can place 
project-based vouchers in 100 percent of units in developments that 
assist the elderly or people with disabilities or provide supportive 
services to residents.
---------------------------------------------------------------------------
Protection Against Arbitrary Screening of Housing Assistance Recipients
    Housing agencies and owners must screen housing assistance 
applicants based on several federally required criteria, and can opt to 
establish additional screening criteria. AHSSIA and SEVRA would make 
several changes to the screening process for the housing voucher 
program, including limiting optional screening criteria to those 
directly related to the family's ability to meet the obligations of the 
lease and requiring housing agencies to consider mitigating factors 
before denying assistance. These important improvements would prevent, 
for example, denial of assistance to a family with a good record of 
paying rent on time but (like many poor families) a weak credit history 
for other reasons, and would make it easier to provide housing vouchers 
to homeless people and others with an urgent need for assistance who 
today might be denied help for arbitrary reasons.
    Unfortunately, the current AHSSIA draft drops a provision of some 
versions of SEVRA that would have made similar (and equally important) 
changes in the public housing and project-based Section 8 programs. 
Congress could extend the changes to those programs by restoring the 
omitted provisions or simply by giving HUD authority to establish 
common requirements for all rental assistance programs.
    Both AHSSIA and SEVRA also would add an important protection for 
families being shifted from assistance under the public housing or HUD 
multifamily programs to housing vouchers due to the elimination of the 
existing assistance for the properties in which they reside. The bills 
recognize that such families are not new to HUD assistance and should 
be considered continuing participants rather than new applicants 
subject to initial screening. In addition to protecting families, these 
changes also would reduce administrative burdens for housing agencies.
Other Provisions
    In addition to these seven core reforms, a series of other 
provisions appear in SEVRA, AHSSIA, or both. Several of these 
provisions are discussed below:

    Local flexibility to adjust voucher payments to accommodate 
        the special needs of people with disabilities. Housing agencies 
        today can allow people with disabilities to use vouchers to 
        rent more expensive units than is permitted for other families, 
        if this is necessary to accommodate their disability. If this 
        requires a payment standard above 110 percent of the FMR, 
        however, the agency must obtain special approval from HUD. This 
        can create delays that make it much more difficult for people 
        with disabilities to use vouchers. Accessible units are often 
        more costly than a typical unit in an area, either because few 
        such units exist or because they require added investments by 
        owners.

    SEVRA and AHSSIA would allow agencies to provide exceptions up to 
120 percent of the FMR for this purpose without approval from HUD. 
Because these exceptions would be needed for only a small share of 
vouchers, this important provision's cost would be minimal.

    Use of vouchers in manufactured housing. AHSSIA drops a 
        beneficial SEVRA provision that would allow vouchers to be used 
        to cover loan payments, insurance payments, and other periodic 
        costs of buying a manufactured home, in addition to the cost of 
        renting a space on which to place the home. The combined 
        payments would, however, be subject to the same subsidy limits 
        that apply to other vouchers.

    Currently, vouchers can be used to cover the full range of periodic 
home ownership costs for the purchase of a traditional home or a 
manufactured home set on land also purchased by the family. But if a 
family rents the space for a manufactured home, which is common in some 
States, the voucher subsidy is limited to about 40 percent of the 
assistance it could otherwise provide, and can only cover the space 
rental costs and not the costs of purchasing the home. The SEVRA 
provision would allow vouchers to be used effectively in a segment of 
the housing market that in some areas is the most readily available 
source of affordable housing--and that for many families offers the 
most realistic avenue to home ownership.

    Fair Market Rents. AHSSIA and SEVRA contain identical 
        provisions that would make modest improvements to the process 
        for setting FMRs by streamlining HUD's FMR determination 
        process and giving housing agencies added authority to protect 
        families from rent increases stemming from FMR reductions.

    Rental Assistance Demonstration. AHSSIA would authorize 
        $150 million for a 5-year Rental Assistance Demonstration (RAD) 
        testing the conversion of public housing and Section 8 moderate 
        rehabilitation units to project-based vouchers or Section 8 
        project-based rental assistance, and $50 million for similar 
        conversions of units from the Rent Supplement program or Rental 
        Assistance Program to Section 8 project-based rental 
        assistance.

    RAD offers a promising approach to preservation of needed 
subsidized housing. HUD has just issued a final notice to implement a 
version of RAD approved by the 2012 HUD appropriations act. The AHSSIA 
RAD provision's most important improvement over the existing version of 
RAD is that it would permit public housing units to receive subsidy 
levels capped under regular Section 8 rules rather than limiting 
subsidies to the amount the units received through public housing prior 
to conversion. This would make RAD a more effective and flexible tool, 
but only if appropriators provided the needed funds--a step they were 
unwilling to take in the 2012 act.

    Economic Security Demonstration. AHSSIA contains a 
        provision not included in SEVRA directing HUD to carry out a 
        demonstration to rigorously evaluate options for helping to 
        increase the economic security of housing assistance 
        recipients, including financial incentives, work requirements, 
        and other interventions, and authorizes $25 million for this 
        purpose. Such a demonstration could generate important 
        information about the effectiveness of policies to promote 
        economic security. If Congress enacts it, however, it should 
        specify that new policies may remain in place only during the 
        demonstration or until otherwise allowed by Congress, to avoid 
        leaving harmful policies in place indefinitely.

    Moving-to-Work. The version of AHSSIA passed by a House 
        Financial Services Subcommittee in February 2012 contained a 
        harmful provision permitting an unlimited expansion of the 
        Moving to Work (MTW) demonstration, which currently exempts 35 
        housing agencies from nearly all Federal housing laws and 
        regulations. This would risk deep cuts to housing assistance 
        over time (due to the block grant funding formula used in MTW) 
        and harmful policy changes, such as sharp rent increases on 
        vulnerable families or time limits on assistance even for 
        working poor families who cannot afford to stay in their homes 
        without help. Moreover, the sweeping scale of the expansion 
        would make it impossible to address a key shortcoming of the 
        existing MTW demonstration--that it has permitted risky policy 
        changes without carefully evaluating them to determine their 
        true impact. \15\
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     \15\ For further discussion of the risks of posed by MTW 
expansion, see Douglas Rice and Will Fischer, Proposal to Greatly 
Expand ``Moving to Work'' Initiative Risks Deep Cuts in Housing 
Assistance Over Time, available at http://www.cbpp.org/files/1-10-
12hous.pdf, and Will Fischer, Expansion of HUD's Moving to Work 
Demonstration Is Not Justified, available at http://www.cbpp.org/cms/
index.cfm?fa=view&id=3590.

    The April version of AHSSIA also contains a large-scale MTW 
expansion, but the expanded program would be subject to significant 
limitations. These include prohibitions on waivers of some key tenant 
protections and requirements for rigorous evaluation of the riskiest 
policies. If Congress enacts an MTW expansion as part of reform 
legislation, it is essential that it be subject to the limitations in 
the April AHSSIA bill.
    It should be noted however, that even with these limitations MTW 
expansion would still pose serious risks. Most importantly, the April 
AHSSIA bill would allow large (though capped) shifts of funds from the 
voucher program to other purposes, raising the risk that the expansion 
would result in many fewer needy families receiving housing assistance 
than would be assisted under regular program rules. Moreover, the goals 
of MTW, such as testing alternative policies and streamlining program 
administration, can be pursued effectively through other, less risky 
approaches. Consequently, even the more limited MTW expansion in the 
April AHSSIA bill can be justified only if it is critical to the 
enactment of comprehensive legislation containing most or all of the 
important reforms discussed earlier in this testimony.
Conclusion
    The core provisions of AHSSIA and SEVRA would build on the voucher 
program's many strengths through a series of measured, targeted 
improvements that, taken together, would deliver important benefits to 
housing agencies, private owners, and low-income families. Moreover, 
because several of the bills' provisions extend beyond the voucher 
program, they also would improve the public housing and project-based 
Section 8 programs.
    It is important that Congress expeditiously enact rental assistance 
reform legislation with these key provisions. The need for housing 
assistance is unusually high today, with elevated levels of 
homelessness and poverty and widespread foreclosures. Yet Congress 
appears unlikely to expand resources for housing assistance 
substantially, and is likely to consider substantial cuts--on top of 
the sharp reductions enacted in recent years to voucher administrative 
fees, public housing capital grants, and other housing programs.
    At this time, the Nation needs its housing assistance programs to 
be as efficient and effective as possible, and the measures in AHSSIA 
and SEVRA would take major steps toward that goal. The bills' core 
provisions have been fully vetted through deliberations in the past 
four congressional sessions, and it is urgent that Congress enact them 
this year so that the large Federal savings they would generate--as 
well as their many other benefits--can begin to be realized.




                   PREPARED STATEMENT OF LINDA COUCH
  Senior Vice President for Policy and Research, National Low Income 
                           Housing Coalition
                             August 1, 2012
    On behalf of the National Low Income Housing Coalition (NLIHC), I 
would like to thank Chair Menendez and Ranking Member DeMint for 
holding this important hearing. The Nation's need for the programs 
under discussion today is growing. We greatly appreciate your 
leadership on HUD's rental assistance programs and your commitment to 
the people they are intended to assist.
    The National Low Income Housing Coalition (NLIHC) is dedicated 
solely to achieving socially just public policy that assures people 
with the lowest incomes in the United States have affordable and decent 
homes.
    Our members include nonprofit housing providers, homeless service 
providers, fair housing organizations, State and local housing 
coalitions, public housing agencies, private developers and property 
owners, housing researchers, local and State Government agencies, 
faith-based organizations, residents of public and assisted housing and 
their organizations, and concerned citizens. NLIHC does not represent 
any sector of the housing industry. Rather, NLIHC works only on behalf 
of and with low income people who need safe, decent, and affordable 
housing, especially those with the most serious housing problems. NLIHC 
is funded entirely with private donations.
Need for Affordable Housing Is Growing
    NLIHC analysis of American Community Survey data shows there were 
9.8 million extremely low income (ELI) (households with incomes less 
than 30 percent of area median) renter households in 2010 and only 5.5 
million units renting at prices they could afford, resulting in an 
absolute gap of 4.3 million units affordable to ELI households. In 
2009, this gap was 3.9 million units. Because higher income households 
rent some of the units that ELI households could afford, the gap of 
affordable and available units for ELI households in 2010 was 6.8 
million; \1\ in 2009, it was 6.4 million.
---------------------------------------------------------------------------
     \1\ NLIHC. Housing Spotlight: The Shrinking Supply of Affordable 
Housing. February 2012. http://nlihc.org/library/housingspotlight/2-1
---------------------------------------------------------------------------
    These numbers are equally stark at the State level. In New Jersey, 
there is a shortage of more than 189,000 units affordable and available 
to ELI households. In South Carolina, the shortage of affordable and 
available units for ELI households is more than 79,000.
    HUD's Office of Multi-Family Housing Programs/Federal Housing 
Administration Deputy Assistant Secretary Marie Head testified in the 
House in June that increased market demand for new rental housing is 
directly attributable to the fact that ``as many as 3.9 million former 
homeowners have been displaced by mortgage distress and are now in the 
rental market,'' and the entrance of ``as many as 4.3 million new 
renter households'' into the rental housing market. \2\
---------------------------------------------------------------------------
     \2\ June 7, 2012. House Financial Services Subcommittee on 
Insurance, Housing, and Community Opportunity hearing, ``Oversight of 
Federal Housing Administration's Multifamily Insurance Programs''. 
http://financialservices.house.gov/Calendar/
EventSingle.aspx?EventID=297671
---------------------------------------------------------------------------
    One result of this influx is that the percentage of renter 
households paying more than half of their income on rent and utilities 
increased across all income groups between 2009 and 2010, with 
extremely low income and very low income (VLI) (households with incomes 
less than 50 percent of area median) renters most affected. Seventy-six 
percent of ELI renters and 36 percent of VLI renters had a severe 
housing cost burden in 2010, compared with 74 percent and 34 percent, 
respectively, in 2009. \3\ In New Jersey, households with annual 
incomes below $26,607 are considered ELI; in South Carolina, households 
with incomes below $17,175 are.
---------------------------------------------------------------------------
     \3\ NLIHC. Housing Spotlight: The Shrinking Supply of Affordable 
Housing. February 2012. http://nlihc.org/library/housingspotlight/2-1
---------------------------------------------------------------------------
    In New Jersey, the public housing program serves more than 40,000 
families with an average annual income of $15,746, and the voucher 
program assists almost 63,000 households, with an average annual income 
of $15,790. In South Carolina, the State's more than 23,000 rental 
assistance vouchers serve households with an average annual income of 
$11,000; the average annual income of the State's 15,000 public housing 
households is about $10,400. Without HUD assistance, we can be assured 
that many of these extremely low income families would be severely cost 
burdened or, indeed, would join the ranks of the Nation's homeless 
population, which totals more than 630,000 on any given night. \4\
---------------------------------------------------------------------------
     \4\ ``State of Homelessness in America 2012''. National Alliance 
To End Homelessness. Washington, DC. http://www.endhomelessness.org/
content/article/detail/4361/
---------------------------------------------------------------------------
    As the National Alliance to End Homelessness' annual ``State of 
Homelessness in America 2012'' pointed out in January of this year, 
``Homelessness is a lagging indicator, and the effects of the poor 
economy on the problem are escalating and are expected to continue to 
do so over the next few years.'' \5\ It is NLIHC's hope that 
improvements made to HUD's housing programs by broad authorizing 
legislation will result not only in efficiencies that increase the 
number of households served, but also in greater Congressional support 
so that homelessness can be prevented and ended in the United States.
---------------------------------------------------------------------------
     \5\ Ibid.
---------------------------------------------------------------------------
    NLIHC held a summit of voucher stakeholders in 2005, in response to 
upheaval in the housing choice voucher program instigated in the spring 
of 2004 by a flawed allocation by HUD of otherwise adequate voucher 
renewal funding. This left many agencies with insufficient funds and 
ultimately caused the loss of more than 100,000 vouchers nationwide. 
Sixty-six people attended, including voucher holders and 
representatives from advocacy groups, public housing agencies and their 
trade groups, affordable housing developers, housing finance agencies, 
HUD, the Office of Management and Budget, financial institutions and 
congressional policy and appropriations staff from the House and Senate 
and both sides of the aisle.
    Many of the recommendations made by those at the voucher summit 
have been included in various iterations of the Section 8 Voucher 
Reform Act, the Section 8 Savings Act, and the Affordable Housing and 
Self-Sufficiency Improvement Act. These include recommendations 
regarding income targeting, rent simplification, portability, 
inspections, project-based vouchers and enhanced vouchers.
    As we did in 2005, we continue to believe there are many reasons 
for Congress to enact broad housing reforms. Since 2005, Congress has 
worked on various versions of the Section 8 Voucher Reform Act, the 
Section 8 Savings Act, and the Affordable Housing and Self-Sufficiency 
Improvement Act. The HUD programs we come together to talk about today 
are critical to meeting the needs presented by these data. The housing 
choice voucher, project-based Section 8 and public housing programs are 
all deeply income targeted and all provide housing stability even if 
individual household incomes fluctuate with changing circumstances.
    In the fall of 2011, NLIHC worked with other national organizations 
to coordinate a letter, signed by more than 810 local and national 
organizations, urging the Senate Committee on Banking, Housing, and 
Urban Affairs to act expeditiously on housing reform legislation. ``The 
savings and efficiencies created by this good Government bill are 
needed as soon as possible,'' the letter said. \6\
---------------------------------------------------------------------------
     \6\ See, letter and NLIHC press release, ``Advocates Urge U.S. 
Senate To Act Now on Voucher Reform Legislation''. September 21, 2011. 
http://nlihc.org/press/releases/9-21-11
---------------------------------------------------------------------------
    We are encouraged by this hearing and hope legislation can be 
enacted this year that:

    Improves the programs from the perspective of assisted 
        households

    Results in savings and efficiencies

    Stabilizes voucher renewal funding

Legislation That Improves the Programs From Perspective of Assisted 
        Households
    NLIHC supports several policy changes that would improve the 
programs:

    Encourage increased earned income while maintaining Brooke

    Upon increases in earned income, NLIHC supports reforms so that 
most families would not have to recertify their incomes in between 
annual income certifications. This would allow families to hold on to 
100 percent of their increased earned income until their next annual 
income certification. PHAs and owners, under various versions of the 
legislation, would base rents on prior year income. Again, this could 
encourage increased earned income by residents.
    Early versions of housing reform legislation would expand the now-
narrow Earned Income Disregard to all tenants, allowing the first 10 
percent of earned income to be disregarded for purposes of establishing 
household rents. Unfortunately, and for cost reasons, that provision 
has not been in recent versions of the housing reform bill and the 
existing, limited Earned Income Disregard for some residents is 
eliminated. NLIHC supports expanding the Earned Income Disregard.
    Any housing reform legislation should also revise the frequency of 
income recertifications for families on fixed incomes. NLIHC supports 
provisions that would require families on fixed incomes to recertify 
their incomes once every 3 years, instead of annually as is now the 
case. This could lead to less paperwork for fixed income households, 
and administrative savings for PHAs and owners.
    Critically, these simplifications to the rent-setting process can 
be enacted without jeopardizing the Brooke Amendment, named after 
former United States Senator Edward Brooke (R-MA). The Brooke Amendment 
caps tenant rents at a percentage of adjusted income, today 30 percent, 
while continuously connecting each household's rent to its own income. 
This ensures affordability and housing stability for each household. If 
we cannot rely on every household's rent being affordable, then there 
is little value in any housing assistance program.

    Payment standard for people with disabilities

    To reduce administrative tasks as well as improve the effectiveness 
of the voucher program for people with disabilities, NLIHC supports 
provisions giving PHAs the authority to increase the payment standard 
to 120 percent without having to seek HUD approval as a reasonable 
accommodation to persons with disabilities.

    Expanding affordable rental stock by improving project-
        basing of vouchers

    NLIHC supports provisions that have been in most versions of 
housing reform legislation that would improve how vouchers could be 
project-based into properties, allowing otherwise unaffordable units to 
meet the affordable housing needs of the lowest income households.
    There are several provisions to improve the project-basing of 
vouchers, all of which NLIHC supports including in any housing reform 
bill:

  1.  Changing the limitation on vouchers that can be project-based 
        from 20 percent of an agency's voucher funding to 20 percent of 
        an agency's authorized vouchers.

  2.  Allowing a PHA to use an additional 5 percent of authorized 
        vouchers to serve persons with disabilities, elderly households 
        or homeless populations or be used in areas where vouchers are 
        hard to use.

  3.  Increasing the number of units a PHA can provide with project-
        based voucher assistance in smaller properties.

  4.  Increasing the maximum contract term for project-based vouchers 
        from 15 to 20 years.

    Improvement to the project-basing of vouchers can help programs 
like the Low Income Housing Tax Credit (LIHTC) serve more extremely low 
income households in an affordable way. Without additional subsidies, 
often in the form of a Housing Choice Voucher, Low Income Housing Tax 
Credit units are simply not affordable to extremely poor households. 
Vouchers, and project-based vouchers, ensure stable housing as a 
family's income fluctuates. Doubling up Federal subsidies in LIHTC 
units by adding a voucher makes these units affordable for the 
households with the greatest housing needs in the United States. 
Without additional subsidy, the Nation's largest subsidized affordable 
housing program is simply not affordable or viable for ELI households.
    Recent research \7\ from data collected per the Housing and 
Economic Recovery Act of 2008 reveals that there are indeed ELI 
households served by the LIHTC program, about 43 percent of units 
assisting such households.
---------------------------------------------------------------------------
     \7\ O'Regan, Katherine O. (NYU Wagner Graduate School and Furman 
Center) and Keren Horn (University of Massachusetts, Boston). What Can 
We Learn About the Low Income Housing Tax Credit Program by Looking at 
the Tenants? July 1, 2012. http://nlihc.org/sites/default/files/
LIHTC_Tenant_Report_2012.pdf
---------------------------------------------------------------------------
    It appears, however, based on data provided by the same report, 
that without rental assistance these extremely poor households are 
paying more than half their incomes for their housing costs, thus 
meeting HUD's definition of households with ``severe housing cost 
burden.'' The data presented by the report show that 31 percent of ELI 
renters in LIHTC units receive no rental assistance, Housing Choice 
Vouchers or otherwise. The report also presents data that fully 30.6 
percent of ELI households in LIHTC units are severely cost burdened, 
paying more than half of their income for rent in these units. Voucher 
assistance attached to these units through the project-basing of 
vouchers, or provided to these tenants directly with housing choice 
vouchers, brings housing affordability and stability to these 
households.

    Other provisions to improve the programs from the 
        perspective of assisted households

    NLIHC also supports including provisions from past housing reform 
bills that would direct HUD to develop new portability regulations that 
minimize billing and administrative barriers to portability, provide 
public housing agencies and HUD with tools to address excessive rent 
burdens as well as concentrations of vouchers in higher-poverty areas 
by adjusting payment standards, and allow vouchers to pay for home 
payment (since the Quality Housing and Work Responsibility Act, 
vouchers only pay for rental of land). All of these provisions will 
improve people's access to their communities of choice.
Legislation That Results in Savings and Efficiencies
    Overall savings

    Any version of housing reform legislation saves Federal resources, 
ranging from around $700 million to $1 billion over 5 years. These are 
tremendous savings, the vast majority of which are uncontroversial.

    Definition for deep income targeting

    A major source savings from any housing reform bill would be a 
change to how targeting of assistance to extremely low income 
households could be carried out. Today, these large HUD programs must 
target a certain percent of new housing assistance each year to 
extremely low income households. NLIHC supports reforms that would 
expand this deep income targeting category to be the greater of 
households with incomes below 30 percent of area median income 
(extremely low income) or the Federal poverty line. This will help 
target assistance to very poor households in rural areas, where incomes 
overall are low.

    Rent simplifications

    In addition to the rent simplification provision discussed above, 
requiring fixed income households to recertify incomes every 3 years 
instead of annually, housing reform legislation can do much to simplify 
the rent setting process. NLIHC also supports the ability of PHAs and 
owners to rely on other Federal means-tested assistance programs, 
including the Supplemental Nutrition Assistance Program, to verify 
tenant income.
    Simplifying the deduction of medical and related expenses has long 
been a goal of housing reform legislation. Raising the percent of 
income that must be exceeded before unreimbursed medical or related 
expenses are deducted from income is one way that versions of housing 
reform legislation have simplified the complicated rent-setting 
process. As the House and Senate have always supported, any such 
increase in the threshold for deducting expenses must be coupled with 
an increase in the standard deduction for elderly families and families 
with disabilities. Hardship provisions to protect households with 
outlier medical expenses are also good policy.

    Create efficiencies; do not weaken accountability

    NLIHC is interested in balancing efforts to create efficiencies 
with retaining the programs' accountability, both to local communities 
and to Congress and HUD. While efficiencies can bring savings through 
reduced program costs, we urge caution when considering exempting 
agencies from standards HUD and Congress use today to measure public 
housing agency performance. Even exempting the smallest agencies, as 
some housing authority groups support, from many Section 8 Management 
Assessment Program indicators would remove accountability on key 
indicators like accuracy of payment standard calculations, use of all 
available vouchers and expansion of housing choice from agencies that 
administer a tenth of the Nation's vouchers. Congress's understanding 
of how the voucher program, under such circumstances, was actually 
meeting the Nation's housing needs would be incomplete if such reforms 
were enacted. NLIHC believes that such changes would put rental 
assistance programs at risk of reduced funding in the future as 
Congress's understanding of their use and impact fade.
Legislation That Stabilizes Voucher Renewal Funding
    Voucher Renewal Funding

    The need for clear direction to HUD on the allocation of voucher 
renewal funding was a primary reason for the development of this 
legislation several years ago. The viability and credibility of the 
voucher program is rooted in a stable, sufficient and reliable voucher 
renewal funding policy. NLIHC supports authorizing language whereby the 
annual appropriation of each agency administering vouchers is based on 
actual leasing and cost data from the last calendar year, with various 
adjustments, including for tenant-protection, project-based and ported 
vouchers. NLIHC also supports policies that would support agencies' 
over-leasing of vouchers.
    NLIHC supports offset and reallocation policies that will bring 
additional stability to the program. Offset policies in previous 
versions of housing reform legislation, supported by NLIHC, would allow 
HUD to offset a PHA's voucher allocation by the amount its reserves 
exceeded 6 percent. The HUD Secretary would then be authorized to use 
these offsets for a variety of purposes, including for increased costs 
due to portability, significant increases in voucher renewal costs 
resulting from unforeseen circumstances and reallocating to PHAs to 
avoid or reduce any pro-rations of renewal funding.
    NLIHC also supports an advance mechanism to PHAs that could act as 
a safeguard for agencies that experience a temporary shortfall in 
funds. NLIHC supports provisions that allow a PHA to request, during 
the last quarter of the calendar year, up to 2 percent of its 
allocation to pay for additional voucher costs, including costs related 
to temporary over leasing. NLIHC believes that this will give some PHAs 
the assurance they need to increase their voucher utilization rates. 
These advances would have to be repaid and could not occur in 2 
consecutive years.
Minimum Rents
    NLIHC does not believe that increasing minimum rents is needed to 
create a robust housing reform bill. The latest House draft bill is an 
improvement over earlier versions, especially because it would greatly 
improve hardship exemptions from minimum rents for households and 
because it offers housing agencies and owners the ability to have 
minimum rents lower than the bill's $69.45 a month for good cause.
    The House's latest proposal impacts households with incomes of less 
than $2,800 a year. While it may seem hard to imagine that there are 
households with incomes so low, the reality is that these households 
exist and the programs keeping them off the street, out of the back 
seats of cars at night and out of shelters, are HUD's voucher, public 
housing and project-based Section 8 programs. NLIHC supports the House 
draft bill's improvements to hardship exemptions. We continue to oppose 
any increase in minimum rents, which by definition only impact the 
lowest income households.
    NLIHC was shocked and disappointed that the Administration 
requested increased minimum rents in its FY13 budget request, which it 
said could generate $150 million in revenue. ``The Budget Control Act 
created spending limits that are so unworkable that the Federal 
Government is reduced to picking the pockets of the poorest of the 
poor. It is Scrooge-like,'' NLIHC's President and CEO Sheila Crowley 
said in a press release on February 13. \8\
---------------------------------------------------------------------------
     \8\ NLIHC. Press release: ``President's Budget Request Creates 
Grim Outlook for Low Income Housing'', February 13, 2012. http://
nlihc.org/press/releases/2-13-12
---------------------------------------------------------------------------
Bigger Reforms in the Future
    NLIHC also supports additional policy proposals to improve the 
voucher program. We are very pleased that HUD is moving forward with 
its Small Area Fair Market Rent (SAFMR) demonstration. The SAFMR 
demonstration project will determine FMRs at the ZIP code level, so 
payment standards will more closely reflect local market conditions and 
rents by neighborhood. As noted in a 2012 NLIHC paper, Affordable 
Housing Dilemma: the Preservation vs. Mobility Debate, ``Going to small 
area FMRs would cause `such a redistribution of poor people over time 
in metro areas, because there's so many rental units that would be 
accessible all of a sudden that aren't accessible now.' '' \9\ HUD will 
conduct an evaluation of the demonstration program to determine if 
using SAFMRs will increase neighborhood choice for program participants 
and increase program efficiency overall. NLIHC is eager to see HUD's 
evaluation of the SAFMR demonstration. We are confident that the 
results will show that the use of SAFMRs should be adopted nationwide.
---------------------------------------------------------------------------
     \9\ NLIHC. Affordable Housing Dilemma: the Preservation vs. 
Mobility Debate. May 2012. http://nlihc.org/library/other/periodic/
dilemma
---------------------------------------------------------------------------
    Another potential bright spot in the Nation's ability to simplify 
the administration of vouchers is to encourage PHAs to join forces and 
regionalize voucher administration. Regionalizing voucher 
administration, as has been done in several communities across the 
country, will result in greater housing choice for tenants and greater 
program efficiencies for administrators. Voucher holders in the 
metropolitan Washington, DC, area, for example, are restricted from 
moving freely within our housing market because of PHA geographic 
boundaries. What makes the most sense is for the jurisdiction of the 
voucher administrator to match the jurisdiction of the overall housing 
market. The voucher program does not naturally do that today, but it 
should in the future.
    NLIHC also supports creating Federal source of income laws, which 
would basically prohibit a landlord or property manager from denying 
housing to a prospective tenant because of precisely how they would pay 
their rents, or the source of their income. According to the Poverty & 
Race Research Action Council (PRRAC), 13 States and dozens of cities 
have some version of source of income protections. \10\ Federal source 
of income protections could expand the properties and communities where 
voucher holders can chose to live. According to an analysis of research 
on discrimination in the voucher program in this same report, PRRAC 
notes that discrimination against voucher holders contributes to 
peoples' inability to use rental assistance vouchers in their 
neighborhoods of choice.
---------------------------------------------------------------------------
     \10\ Poverty & Race Research Action Council. Keeping the Promise: 
Preserving and Enhancing Housing Mobility in the Section 8 Housing 
Choice Voucher Program. March 2011. http://prrac.org/pdf/AppendixB-
Feb2010.pdf
---------------------------------------------------------------------------
    A real breakthrough would be to make assistance from the housing 
choice voucher program an entitlement to those households eligible for 
it, or at least for certain populations. Today, the only housing 
entitlement programs are for homeowners, and the vast majority of those 
resources assist high income households. Moving the voucher program 
into the world of entitlements, at least for certain populations, would 
demonstrate real commitment by Congress that everyone has a right to 
safe, decent, and affordable housing.
Moving to Work
    No discussion of housing reform legislation would be complete 
without consideration of the Moving to Work (MTW) demonstration 
program. The demonstration, authorized in 1996, has been an exercise in 
broad regulatory and statutory flexibility for a few dozen housing 
agencies and in growing frustration for groups like NLIHC, which seek 
to advance housing solutions for the lowest income people. The 
frustration comes from the inability of NLIHC, or any other entity, to 
know what the impacts of these broad statutory and regulatory 
flexibilities have been on the current and future low income residents 
of these housing authorities, and on the physical and financial health 
of these housing authorities. Yet, housing agencies continue to seek 
participation in the MTW program, hopeful that participation will bring 
salvation from years of chronic underfunding in the public housing 
operating and capital funds and voucher administrative fees.
    NLIHC joined several national organizations and HUD early this year 
to see whether a compromise could be reached on MTW, a compromise 
acceptable enough to all that broader housing reform legislation could 
move forward. This ``stakeholder'' group did eventually turn months of 
hard decisions and compromises into an agreement on MTW expansion, 
which was included in the April 13 version of the House's draft 
Affordable Housing and Self Sufficiency Improvement Act.
    The stakeholder agreement on MTW would allow up to 500,000 units 
administered by high-capacity PHAs to be included in a ``basic'' MTW 
program. Units in basic MTW would have the flexibility to streamline 
administrative procedures. Up to 25 agencies could also participate in 
an ``enhanced'' MTW program, which would have the ability to implement 
harmful policies, like rent reform, work requirements and time limits 
only if doing so is part of rigorous evaluation protocols. For all, 
income targeting, resident rights and housing affordability would be 
protected to a significantly greater extent than in the current 
demonstration sites.
    While NLIHC has agreed to this carefully crafted version of MTW 
expansion, history shows that MTW expansion has resulted in the 
stalling of housing reform legislation for years. NLIHC would strongly 
support moving forward with voucher reform legislation without an MTW 
title. MTW legislation could be considered separately, while the 
significant savings and efficiencies of a broader housing reform bill 
could be taken advantage of now.
    Some versions of housing reform legislation, including the most 
recent House draft, have included other demonstrations as well (i.e., a 
rent policy demonstration and an economic security demonstration). HUD 
is already conducting a rent policy demonstration and should not need 
additional authority to complete this work. The goals of the economic 
security demonstration, and its cost of $25 million, could be brought 
into whatever form the MTW demonstration eventually takes, taking on 
all the protections for current and future residents, evaluation 
components, and size and duration limitations of MTW that would be 
necessary to test hypotheses while protecting people and assets. NLIHC 
opposes these additional, standalone demonstrations.
National Housing Trust Fund
    While enactment of housing reform legislation would generate 
hundreds of millions in savings in the near future, NLIHC also 
encourages Members of this Subcommittee to support capitalization of a 
National Housing Trust Fund, which Congress authorized in 2008. The 
National Housing Trust Fund, coupled with the stabilization of HUD's 
rental assistance programs by housing reform legislation, could end 
homelessness in the United States. Each State has a shortage of 
affordable and available units for ELI households. Housing reform 
legislation could stabilize existing programs and give Congress the 
assurance that these highly efficient programs deserve more Federal 
resources. But, we also need to dramatically increase the actual number 
of units affordable to ELI households. The National Housing Trust Fund 
is the mechanism to accomplish this. NLIHC looks forward to working 
with the Senate on ways to capitalize the NHTF.
    Thank you for considering our testimony.
    
    
    
    
    
    
    
    
       RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER
                       FROM KEITH KINARD

Q.1. Improvements to the Project-Base Voucher Program:
    The Project-Based Voucher program is a unique tool that a 
PHA can use to help create or redevelop affordable housing. A 
PHA that operates a PBV program can use it to facilitate the 
redevelopment of existing assisted housing or use to create 
mixed-income housing in areas that are being targeted for 
community redevelopment. The Affordable Housing and Self 
Sufficiency Improvement Act, currently pending in the House 
Financial Services Committee makes changes to the program that 
would enable a PHA to use the PBV program to target vulnerable 
populations, provide 100 percent assistance to small properties 
and provide additional assistance to properties located in 
high-cost markets.
    Do you support the changes the Affordable Housing and Self 
Sufficiency Act makes the project-based voucher program? How 
will these changes help you better serve low-income families in 
your community?

A.1. Yes, CLPHA supports the changes that the Affordable 
Housing and Self Sufficiency Act (AHSSIA) would make to the 
project-based voucher program. The project-based voucher 
program is an important tool in the redevelopment and the 
rehabilitation of our Nation's public housing stock and the 
changes that AHHSIA makes to the program will allow more 
housing authorities to utilize this tool. Changing the 
percentage limitation so that it is based on authorized units, 
rather than funding levels, makes that limitation less of a 
moving target because it will be based on a more predictable 
measure and will facilitate housing authorities' maximizing 
project-basing authority. Raising the percentage limitation by 
5 percent for projects that house families with veterans or 
that provide supportive housing to persons with disabilities or 
elderly persons will better enable and encourage housing 
authorities to target those vulnerable populations in their 
plans for project-basing. Increasing limits on both the 
percentage limitation and income mixing requirements in areas 
where vouchers are difficult to use will enable housing 
authorities to respond to their local market conditions more 
easily. Allowing site-based waiting lists will streamline 
administrative procedures considerably. AHHSIA's changes to the 
project-based voucher program will increase the supply of 
deeply subsidized hard units in communities that truly need 
them and make more affordable housing units available to 
vulnerable populations.
    Another change to the project-based voucher program that 
CLPHA believes should be included in AHSSIA would be to allow 
housing authorities to attach project-based vouchers to housing 
authority-owned structures without following a competitive 
process. This would remove a step from the project-basing 
process that consumes a great deal of time without adding 
value. Additionally, CLPHA notes that in a previous iteration 
of the Section 8 reform bill, the project-based voucher 
percentage limitation was raised to 25 percent across the 
board, with an additional 5 percent targeted to vulnerable 
households on top of that raised threshold. CLPHA would prefer 
that any subsequent Section 8 reform bill return to that 
arrangement.
    Newark has already benefited from the project-based voucher 
program, and any changes enacted that make the project-based 
voucher program more accessible to housing authorities will 
benefit low-income communities. Newark currently supports a 
200-unit building for the elderly and individuals with 
disabilities through the project-based voucher program; the 
development receives 100 percent of its assistance through 
project-based vouchers. Without the funding flexibility that 
the project-based voucher program provides, Newark would not 
have been able to address the extensive capital needs of the 
building or to upgrade the general amenities available to 
residents. The development is now thriving and is a place that 
makes residents and Newark proud. Despite this success, Newark 
still hits administrative roadblocks in the current project-
based voucher program when trying to structure redevelopment 
deals. For the past 4 years, Newark has been in the process of 
converting a 220-unit building for the elderly and individuals 
with disabilities to a Section Eight Project Based facility. We 
are still only 70 percent of the way through the conversion due 
to the administrative procedures of the program, in which 
Newark was required to competitively procure and ultimately 
award the project-based vouchers to ourselves. The provisions 
in AHHSIA relating to the project-based voucher program will 
not only bring welcome administrative relief, but the 
revitalization of public housing for the benefit of low-income 
communities.

Q.2. Exempting public housing redevelopment from counting 
against a PHA's project-base voucher funding limitation:
    The PBV program limits a PHA from project-basing more than 
20 percent of its voucher funding. Many PHAs around the country 
have been using the PBV program as a tool to redevelop and 
rehabilitate its public housing stock. Recently, HUD has 
embraced this principle by allowing a PHA to convert its public 
housing assistance to a 15 year PBV contract through the Rental 
Assistance Demonstration program. Unfortunately, for many PHA's 
unable to utilize the RAD program, the 20 percent limitation 
may still be a barrier for them to redevelop their own public 
housing stock. A simple solution would be to exempt public 
housing revitalization that a PHA undertakes from the 20 
percent voucher-funding cap. This would then allow a PHA to 
continue to reposition its public housing stock and also 
continue to use the program in a manner that best serves the 
low-income households in the surrounding community.
    Would you support a change to the project-base voucher 
program that would provide an exception to the 20 percent 
voucher funds limitation for PHAs that use the PBVs to 
redevelop its own public housing stock? Are there are other 
limitations or changes you would make to the RAD program that 
would make it easier for a PHA to redevelop public housing in a 
manner that protects the Federal investment and provides safe, 
decent housing for low-income households?

A.2. Yes, CLPHA supports a change to the project-base voucher 
program that would provide an exception to the 20 percent 
voucher limitation for all housing authorities that use the 
project-based vouchers to redevelop its own public housing 
stock. Project-based vouchers have become an essential tool for 
housing authorities' efforts to meet their local community 
needs, especially for vulnerable populations that require 
supportive services. The lifting of the 20 percent cap will 
allow housing authorities--particularly those unable to 
participate in the Rental Demonstration Program (RAD)--the 
ability to preserve hard units for extremely vulnerable 
populations who might not be able to find a place to live in 
the private rental market.
    Housing authorities that are able to participate in the RAD 
program will be better able to serve their communities because 
RAD incorporates a 20 percent cap exception and increases the 
percentage of vouchers that may be project-based in a single 
project. However, it would be easier for housing authorities to 
redevelop public housing under RAD if a greater percentage of 
vouchers could be project-based in a single project. This 
change would allow housing authorities to leverage their 
project-based vouchers more effectively in redevelopment deals, 
which would preserve and redevelop more units of public 
housing, and thus ultimately benefit low-income households that 
may not otherwise have access to affordable housing that is 
both safe and decent.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER
                     FROM DIANNE HOVDESTAD

Q.1. Improvements to the Project-Base Voucher Program:
    The Project-Based Voucher program is a unique tool that a 
PHA can use to help create or redevelop affordable housing. A 
PHA that operates a PBV program can use it to facilitate the 
redevelopment of existing assisted housing or use to create 
mixed-income housing in areas that are being targeted for 
community redevelopment. The Affordable Housing and Self 
Sufficiency Improvement Act, currently pending in the House 
Financial Services, makes changes to the program that would 
enable a PHA to use the PBV populations, provide 100 percent 
assistance to small properties and provide additional 
assistance to properties located in high-cost markets.
    Do you support the changes the Affordable Housing and Self-
Sufficiency Act makes to the project-based voucher program? How 
will these changes help you better serve low-income families in 
your community?

A.1. Yes, we support the changes the ``Affordable Housing and 
Self-Sufficiency Improvement Act'' (AHSSIA) makes to the 
project-based voucher program. Listed below is a summary of our 
position on the PBV provisions in the current draft of AHSSIA, 
as well as additional PBV legislative reforms we support in the 
December 1, 2010, version of the ``Section Eight Voucher Reform 
Act'' (SEVRA) as well as regulatory reforms stemming from 
enactment of the ``Housing and Economic Recovery Act of 2008'' 
(HERA).
    The Sioux Falls Housing & Redevelopment Commission (SFHRC) 
has not, yet, exercised the option of project-basing a portion 
of its Section 8 Housing Choice Vouchers. The decision not to 
project-base Section 8 Vouchers is based several factors: 
First, SFHRC's waiting list is long--approximately 3.5 years 
from the time an application is received in SFHRC's office 
until funding is available under the Voucher program with 
currently over 3,700 households on its waiting list. Most 
applicants want the option of locating a dwelling unit that 
meets their unique circumstances. The majority of voucher 
holders in Sioux Falls have been successful in locating units 
that meet their needs and HUD's criteria for approving a 
dwelling unit to be placed under a Section 8 Housing Assistance 
Payments Contract. It hasn't been necessary for SFHRC to 
project-base its vouchers in order to for a voucher holder to 
utilize their voucher.
    Also, since SFHRC's waiting list is so long and most 
vouchers are utilized in a timely manner SFHRC cannot justify 
taking the vouchers ``off-line'' and holding them through 
turnover/attrition until a project was ready to be occupied. 
This would be denying rental assistance to a family that 
desperately needs it. While HUD's voucher HAP renewal formula 
does account for vouchers committed to a PBV development under 
an ``Agreement to Enter Into a Housing Assistance Payments 
Contract'', the Department's existing Section Eight Management 
Assessment Program (SEMAP) currently does not take this into 
account. As a result, Public Housing Authorities (PHA) that 
engage in the PBV program that have to take tenant-based 
vouchers ``off-line'' are penalized in their SEMAP scores.
    Second, the unpredictability of annul housing assistance 
dollars makes it difficult to determine the number of vouchers 
that can be project-based. Currently, PHAs are allowed to 
project-base up to 20 percent of its tenant-based funding. It 
is difficult to strategically plan for project-basing vouchers 
when the pro-ration and the formula for determining renewal 
housing assistance payments dollars changes each year, 
depending on the language in the appropriations bill. In 
addition, the timeliness of HUD's notices of annual budget 
authority makes planning extremely challenging. For example, 
for calendar year 2008 SFHRC was not notified of its annual 
budget authority until March 14, 2008. The pro-ration was 
101.453 percent; however, the formula included an offset for 
both Useable and Unusable Net Restricted Assets (NRA) which 
decreased available funding.
    In 2009 SFHRC received notice of its annual budget 
authority for that calendar year on May 5, 2009. The pro-ration 
was .991 percent, again the formula included offsets of Usable 
and Unusable NRA.
    On February 12, 2010, SFHRC was notified of its annual 
budget authority for calendar year 2010. The pro-ration was 
.995 percent, with no offset.
    For calendar year 2011 SFHRC received notice of its annual 
budget authority on June 14, 2011. The pro-ration was 98.81 
percent, with no offset. For the first time HUD included an 
allowance for Family Self-Sufficiency escrow deposits in the 
formula used for calculating housing assistance payments 
renewal dollars, which increased the dollars for housing 
assistance payments. Regrettably, this is no longer HUD's 
practice.
    On March 1, 2012, SFHRC was notified of its annual budget 
authority for calendar year 2012. The pro-ration was .996 and 
an offset was included in the formula.
    Although the 2.64 percent difference in pro-ration during 
these 5 years doesn't, on its face, appear to be much, it does 
impact the number of households that can be served and, 
consequently if there would be monies available for the 
project-based vouchers. It is difficult for SFHRC to estimate 
the amount of annual renewal dollars it will receive as some 
years there are offsets, some years not.

AHSSIA: Percentage of PAH's ACC Units for Project-Basing Vouchers

    Modifying existing laws, as proposed in AHSSIA, so that the 
project-based voucher program limitation is based on authorized 
units, instead of tenant-based funding levels, will be much 
simpler for PHAs and HUD to determine and track.

AHSSIA: Percent of Units That Can Have Project-Based Assistance in a 
        PHA's Voucher Portfolio

    AHSSIA modifies the current limitation on project-basing up 
to 25 percent of the units in a project to the greater of 25 
percent of the units in a project or 25 units. In areas where 
vouchers are difficult to use; in census tracts where the 
poverty rate is 20 percent or less; to serve individuals and 
families that fall under the McKinney homeless definition; that 
house families with veterans or provide supportive housing to 
persons with disabilities AHSSIA would allow the PHA to 
project-base 25 units or 40 percent of the units in the 
project. Current regulations require a cumbersome process to 
determine which project should receive project-based vouchers. 
Multifamily projects in Sioux Falls tend be 50 units or less. 
Under existing law, in projects with 50 units, the maximum 
number of vouchers that could be project-based is 12. The 
amount of work it would take to project-base the 12 vouchers is 
not cost effective. If the limitation is increased to greater 
of 25 percent or 25 units, or 40 percent of baseline units in 
areas described above it may become cost effective to go 
through the process for project-basing vouchers in certain 
instances.
    Previous versions of this bill defined areas where tenant-
based vouchers are difficult to use under HUD's existing 
definition of ``success rate payment standard'', as PHAs that: 
(1) established its payment standards at 110 percent of the 
40th percentile FMR for a period of at least 6 months; and (2) 
established a policy of granting automatic extensions of 
voucher terms to at least 90 days; but (3) notwithstanding 
these actions, the PHA still has less than 75 percent voucher 
holder success rate in finding and leasing units. This 
definition of a tight housing market, where tenant-based 
vouchers are difficult to use, already has existing regulations 
and implementation for PBV program stakeholders. Creating an 
open-ended definition subject to formulation by HUD is 
unnecessary and given the Department's slow track record for 
implementing regulations would be imprudent. We recommend 
restoration of the above definition of units located in areas 
where tenant-based vouchers are difficult to use.
    We also recommend exempting Public Housing assisted 
households in a development that is converted to Section 8 
Project-based Voucher assistance from the percentage of their 
voucher portfolio that they can project-base. In addition, we 
recommend that PHAs with existing PBV contracts from 
conversions of Public Housing are ``grandfathered.''
    Increasing the number of project-based vouchers would 
benefit the pro forma used to determine if a project is 
financially feasible. It may mean the difference between a 
project going forward or not.

AHSSIA: Income-Mixing Requirement

    The simplification of PBV program income mixing 
requirements in AHSSIA for project-based developments by 
allowing PHAs to attach 100 percent of the dwelling units that 
serve elderly populations, persons that require supportive 
services and for projects that have 25 units or less would make 
the program easier to administer.

Downward HAP Pro-rations

    Under AHSSIA, an initial Housing Assistance Payments 
Contract between a PHA and the owner of a project may be up to 
20 years (compared with 15 years under current law), subject to 
availability of sufficient appropriated funds for the purpose 
of renewing expiring PBV contracts for assistance payments, as 
provided in appropriation Acts and in the PHAs' Annual 
Contributions Contract (ACC) with HUD. In the event of 
insufficient appropriated HAP funds, payments due under PBV 
contracts must take priority if other cost-saving measures that 
do not require the termination of an existing contract are 
available to the PHA. Currently, if PHAs' receive downward pro-
rations in HAP funds for their tenant-based voucher programs, 
one of the measures available to PHAs to help prevent them from 
having to terminate HAP Contracts and Lease Agreements on 
behalf of existing voucher-assisted households, is to lower 
their voucher payment standards for newly admitted households 
upon turnover and for households relocating from one unit to 
another with the benefit of voucher assistance. In those 
instances, participants in the tenant-based voucher program pay 
between 30-40 percent of their income towards rent and 
utilities. Even though the PVB program is a subset of the 
tenant-based voucher program, all PBV-assisted households must 
pay no more than 30 percent of their income towards rent and 
utilities. In other words, when there is a downward pro-ration 
in HAP, tenant-based voucher households described above, bear 
the full brunt of downward pro-rations.
    We understand and appreciate how important it is that PBV 
Contracts receive 100 percent HAP pro-rations, even if the 
level of HAP appropriated funds results in a downward pro-
ration below 100 percent. However, PHAs that utilize a greater 
percentage of their portfolios to PBV assistance will be 
disproportionately harmed in their tenant-based voucher 
programs as a result of this provision in AHSSIA. In addition 
to the language in the bill, NAHRO recommends that PHAs also be 
provided the authority to help make up for downward pro-rations 
in HAP funds overall, to also opt to raise PBV-assisted 
households Total Tenant Payment (TIP) from 30 percent of their 
monthly adjusted income to between 30-40 percent of their 
monthly adjusted income like the tenant-based voucher program. 
Clearly this is a measure that would only be implemented under 
downward pro-rated HAP funds, as a way for all PHAs' program 
participants to share the burden of such action. Absent this 
change, PHAs that may have considered utilizing and/or 
increasing the percentage of their units under the PBV program 
would face significant financial disincentives in doing so.

Additional PBV Program Legislative Reforms

    Listed below is a summary of our position on additional PBV 
legislative reforms we supported in the December 1, 2010, 
version of the Section Eight Voucher Reform Act (SEVRA).

Site-Based Waiting Lists

    A provision to permit owner-managed, site-based waiting 
lists, subject to PHA oversight and responsibility, and further 
subject to the protection of tenants displaced by 
rehabilitation.

Absolute Preference To Prevent Displacement of Existing Eligible 
        Residents

    Any family who resides in a dwelling unit proposed to be 
assisted under the PBV program or in a unit to be replaced by a 
proposed unit to be assisted under the program, is required to 
be given an absolute preference for selection for placement in 
the proposed unit, if the family is otherwise eligible for 
assistance.

Vouchers Project-Based in PHA Owned Public Housing Properties

    A provision to permit PHAs to attach project-based vouchers 
to a PHA-owned Public Housing project or site without 
undergoing a competitive process. However, PHAs would have to 
reflect the project-based initiative in their ``PHA Plan'' and 
the units could not receive Public Housing funding. This 
process would not change eligibility rules under which PHA can 
project base their own units. PHAs would be responsible for any 
expenses such as Housing Quality Standards (HQS) inspections 
and rent reasonableness determinations.

HAP Contract Term

    A provision that would allow the housing assistance 
payments contract between the owner of the project and the PHA 
to be 20 years.

Lease and Tenancy Provisions

    A provision clarifying that lease and tenancy provision 
pertaining to Section 8 vouchers shall apply to project-basing 
of vouchers, except for requirements concerning the minimum 
lease term.

Enhanced Vouchers

    A provision allowing enhanced vouchers at mortgage maturity 
for properties for enhanced vouchers on prepayment.

Transfer of Vouchers and Budget Authority

    A provision to allow PHAs to transfer a portion of its 
vouchers and corresponding budget authority to other PHAs to be 
used to provide project-based assistance. The bill states that 
``HUD shall encourage such agreements and promptly execute the 
necessary and contract modifications.

Rents in Units Assisted by Housing Trust Fund

    A provision to allow lower rents for vouchers in units 
assisted by a Housing Trust Fund, but only with the mutual 
agreement of the PHA and owner.

Additional PBV Program Regulatory Reforms

    Attached for your review and consideration please find 
NAHRO's comments, on behalf of its members, regarding HUD's 
proposed rule titled: ``The Housing and Economic Recovery Act 
of 2008 (HERA): Changes to the Section 8 Project-Based Voucher 
Programs'' (Docket No. FR-5242P-01).

Conclusion

    Mr. Chairman, as this Subcommittee seeks to advance a bill 
that not only makes sense substantively but politically, we 
urge you to consider and ultimately adopt a bill that hews 
closely to the December 1, 2010, version of SEVRA and reflects 
some of the more thoughtful and constructive provisions in 
AHSSI that we identified today. We see no reason, given the 
measure of support that the December 1, 2010, version of SEVRA 
had and the AHSSIA bill for the most part now has, to either 
radically depart from language contained in these constructive 
approaches to reform--or worse to start from scratch. The time 
for discussion has passed; the time to act is now! With 
specific respect to AHSSIA, we are very pleased to see that 
your House colleagues made significant progress on a number of 
issues important to NAHRO, including to the HQS section, and 
also retained important language regarding the establishment of 
administrative fee rates by Congress. Certainly there is more 
that this Subcommittee can do to improve both bills as we have 
noted but, after almost 10 long years of fits and starts, there 
is no reason to undermine largely viable products that have 
many if not most program stakeholders on board.
    On behalf of my colleagues at NAHRO, thank you again for 
the opportunity to come before you and express our opinions 
regarding this vitally important legislation. We look forward 
to working with you.












       RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER
                       FROM WILL FISCHER

Q.1. Allowing tenant protection vouchers to be project-based in 
order to preserve affordable housing.
    Currently, HUD allows some tenant protection vouchers that 
are issued to be project-based in order to help preserve 
affordable housing and reduce tenant displacement. More 
specifically, HUD allows tenant protection vouchers (TPVs) to 
be project-based in the ``orphan properties,'' that have no 
option for rental assistance contract renewals and no option 
for long-term affordability. By allowing owners to project-base 
these vouchers, they can then leverage the rental assistance 
contracts to recapitalize the property. Further, it helps 
protect households that are currently residing in the property 
from being displaced and forced to relocate.
    With the appropriate safeguards in place, including tenant 
consultation and notification, do you believe that making all 
tenant protection vouchers eligible for project-basing is an 
important tool that will help preserve affordable housing? What 
are some other options to preserve affordable housing for low-
income households that are facing possible displacement and 
rent increases due to affordability restrictions expiring or 
owners opting out of HUD's programs?

A.1. We agree that project-based vouchers are an important 
preservation tool to retain affordable units in a property for 
the long term. However, project-basing usually is not necessary 
to prevent displacement of current tenants. The large majority 
of tenant protection vouchers issued when privately owned 
properties opt out of Federal assistance are ``enhanced 
vouchers'' provided under the authority of section 8(t) of the 
U.S. Housing Act, which leaves the choice of whether to remain 
in the property to the tenant. Tenants with enhanced vouchers 
could be protected from displacement through enforcement of 
requirements in existing law for owners to accept the vouchers.
    Because of the language of section 8(t), HUD has determined 
it does not have the authority to allow enhanced vouchers to be 
project based, prospectively or retroactively. Congress would 
have to enact new authority to make such project-basing 
possible. Section 202(b) of the April 13, 2012, House draft of 
the Affordable Housing and Self-Sufficiency Improvement Act 
(AHSSIA) would provide this authority.
    Congress should enact this provision, but it should 
modestly alter the language to cover all situations eligible 
for enhanced vouchers (including prepayments in addition to 
cessation of rental assistance), require tenant notification 
and consultation, and require that HUD provide advance notice 
of the standards it will apply for waivers of the requirement 
in 8(o)(13)(C) that project-basing be consistent with the PHA 
plan and the goal of deconcentrating poverty.
    Congress also should drop the language in Section 202(b) 
authorizing HUD to waive the limits in 8(o)(13)(B) and (D) on 
the percentage of units in a project that can have PBV 
assistance and the share of an agency's voucher funds that can 
be project based. As is discussed further in the answer to the 
next question, HUD should instead exempt all PBVs used to 
preserve federally assisted housing from these limits but 
establish a new cap of 50 percent on the share of an agency's 
voucher program that can be project based for any reason.
    In addition, enactment of the improvements to the PBV 
program included in Section 106 of AHSSIA would make project-
based vouchers more attractive to owners and effective as a 
preservation tool. For example, these changes would increase 
the maximum length of project-based voucher contracts from 15 
years to 20 years, require public housing agencies to 
prioritize making payments due under PBV contracts in the event 
of insufficient appropriations, facilitate the maintenance of 
site-based waiting lists that comply with fair housing 
requirements, set the limit on the share of a PHA's voucher 
program that can be project based at 20 percent of the PHA's 
authorized vouchers rather than 20 percent of its funding 
(making the limit more predictable and expanding project-basing 
capacity at most agencies), and allow PHAs to project base an 
additional 5 percent of vouchers for specified purposes.
    Regarding other options, we have two suggestions:

  1.  Congress could authorize HUD to provide tenant protection 
        vouchers for tenants residing in HUD-assisted 
        properties with maturing mortgages or expiring use 
        restrictions if sufficient appropriated funds are 
        available for this purpose after addressing the needs 
        of tenants in other properties, public or private, 
        already eligible for tenant protection vouchers. 
        (Prioritizing already authorized uses of tenant 
        protection vouchers is important, because if funds are 
        insufficient families that have been receiving rental 
        assistance under other programs may be displaced and 
        unable to afford other housing.)

  2.  Congress could direct HUD to create a preservation 
        exchange program that will identify properties that are 
        at-risk of opt-out and facilitate purchase of these 
        properties by preservation-oriented entities that will 
        maintain affordability.

Q.2. Exempting public housing redevelopment from counting 
against a PHA's project-based voucher funding limitation.
    The PBV program limits a PHA from project-basing more than 
20 percent of its voucher funding. Many PHAs around the country 
have been using the PBV program as a tool to redevelop and 
rehabilitate its public housing stock. Recently, HUD has 
embraced this principle by allowing a PHA to convert its public 
housing assistance to a 15 year PBV contract through the Rental 
Assistance Demonstration program. Unfortunately, for many PHA's 
unable to utilize the RAD program, the 20 percent limitation 
may still be a barrier for them to redevelop their own public 
housing stock. A simple solution would be to exempt public 
housing revitalization that a PHA undertakes from the 20 
percent voucher-funding cap. This would then allow a PHA to 
continue to reposition its public housing stock and also 
continue to use the program in a manner that best serves the 
low-income households in the surrounding community.
    Would you support a change to the project-based voucher 
program that would provide an exception to the 20 percent 
voucher funds limitation for PHAs that use the PBVs to 
redevelop its own public housing stock? Are there are other 
limitations or changes you would make to the RAD program that 
would make it easier for a PHA to redevelop public housing in a 
manner that protects the Federal investment and provides safe, 
decent housing for low-income households?

A.2. PBVs are a promising tool for preserving public housing, 
and it would be beneficial to ease--but not eliminate--the 
limitation on the share of voucher funds that can be project 
based if the added project-based vouchers (PBVs) go toward 
preservation of public and other federally assisted housing. 
Congress could achieve this by exempting PBVs used to preserve 
federally assisted housing from the 20 percent cap in 
8(o)(13)(B), but providing that PHAs may not under any 
circumstances project base more than 50 percent of their 
voucher funds (or authorized vouchers, if the change in Section 
106 of AHSSIA is enacted).
    This 50 percent limit is very important, for two reasons:

    First, allowing the majority of vouchers or voucher 
        funds at an agency to be project based would undermine 
        the PBV program's resident choice policy. PBV residents 
        have the right after 1 year to move with the next 
        available tenant-based voucher. This is a vital feature 
        of the PBV program, since it enables the owner to 
        leverage assistance for underwriting purposes and 
        residents to benefit from the stability of project-
        based housing, but also permits residents to move if 
        needed (for example, to pursue a job opportunity) 
        without giving up rental assistance.
    For the resident choice policy to work well, however, the 
        pool of tenant-based vouchers must be large compared to 
        the number of PBVs. If too many of an agency's vouchers 
        are project based, PBV tenants who wish to move will 
        experience long waits and few vouchers will be 
        available to unassisted families on tenant-based 
        assistance waiting lists.

    Second, if agencies project base a high percentage 
        of their vouchers, lenders may be less willing to 
        finance rehabilitation with loans that rely on PBVs for 
        repayment. It is more challenging to foster lender 
        confidence in project-based vouchers than in Section 8 
        project-based rental assistance, which has a longer 
        track record and is backed by direct multiyear 
        contracts between the Federal Government and owners. 
        Moreover, Congress has underfunded the voucher program 
        a number of times in recent years, with the result that 
        HUD has been compelled to fund agencies at levels 
        somewhat below the amounts for which they were 
        eligible. The deepest shortfall to date, in 2006, 
        reduced agencies' funding by 5.4 percent. Funding 
        uncertainty and the potential for shortfalls may well 
        increase in the next decade, given the constraints 
        already enacted by the Budget Control Act and deficit-
        reduction pressures.
    Project-based vouchers have been largely insulated from 
        voucher funding shortfalls because they make up a small 
        portion of agencies' voucher programs. PHAs can cover 
        shortfalls through temporary and usually modest 
        cutbacks to their tenant-based vouchers (for example, 
        by shelving vouchers rather than reissuing them when 
        families leave the program) without affecting project-
        based owners or their lenders. If an agency were faced 
        with a shortfall and most of its vouchers were project 
        based, however, the agency could avoid PBV cuts only by 
        making such drastic cuts to their smaller tenant-based 
        program that current voucher holders could be forced to 
        leave their homes. And if the shortfall were deep 
        enough and the share of PBVs high enough, it could 
        become impossible for agencies to avoid PBV cuts. Even 
        the prospect of this occurring could make lenders less 
        willing to make loans that are backed by PBV subsidies.

    The Moving-to-Work stakeholder agreement incorporated in 
Section 401 of the April 2012 AHSSIA draft recognized the 
importance of maintaining some limits on project-basing. That 
provision would permit MTW agencies to project base more than 
20 percent of their voucher programs, but only up to 50 
percent.
    Another provision of the PBV statute also impedes use of 
PBVs for public housing: the cap in section 8(o)(13)(D) of 25 
percent on the share of units in a development that can have 
project-based vouchers (excluding units made available 
specifically for the elderly, people with disabilities, or 
families receiving supportive services). This cap is beneficial 
and important when PBVs are used in newly assisted 
developments, since it encourages mixed-income housing (which 
can place greater market discipline on the development's 
management). But it makes little sense in developments where 
more than 25 percent of the units already receive Federal 
housing assistance. It would be helpful if Congress specified 
that the cap does not apply when project-based vouchers are 
used to preserve federally assisted housing.
    While these changes would be worth making, on their own 
they likely would expand the use of project-based vouchers to 
preserve public housing only moderately. HUD has increasingly 
implemented restrictions on public housing demolition and 
disposition to further preservation goals. These restrictions 
are important, but one of their effects is to impede voucher 
conversions solely to finance redevelopment. Moreover, when 
conversions are permitted the funding for new vouchers would 
need to come from the limited appropriation for tenant 
protection vouchers, which has been cut sharply in recent years 
and is close to or below the level needed to meet the existing 
annual need for new tenant protection vouchers.
    RAD, which Congress authorized in 2012 appropriations 
legislation, permits conversion of up to 60,000 public housing 
units to project-based vouchers or project-based rental 
assistance, but prohibits HUD from setting these units' Section 
8 subsidies above the amount they would have received through 
the public housing operating and capital funds. This funding 
restriction, as well as the unit cap, will limit the share of 
the public housing stock where RAD is feasible. Large-scale use 
of project-based vouchers or project-based rental assistance to 
preserve public housing will likely require a decision by 
Congress to approve additional conversions and appropriate the 
modest increase in voucher or other section 8 funds needed to 
set subsidies at adequate levels.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHUMER
                        FROM LINDA COUCH

Q.1. Allowing tenant protection vouchers to be project-based in 
order to preserve affordable housing.
    Currently, HUD allows some tenant protection vouchers that 
are issued to be project-based in order to help preserve 
affordable housing and reduce tenant displacement. More 
specifically, HUD allows tenant protection vouchers (TPVs) to 
be project-based in the ``orphan properties,'' that have no 
option for rental assistance contract renewals and no option 
for long-term affordability. By allowing owners to project-base 
these vouchers, they can then leverage the rental assistance 
contracts to recapitalize the property. Further, it helps 
protect households that are currently residing in the property 
from being displaced and forced to relocate.
    With the appropriate safeguards in place, including tenant 
consultation and notification, do you believe that making all 
tenant protection vouchers eligible for project-basing is an 
important tool that will help preserve affordable housing? What 
are some other options to preserve affordable housing for low-
income households that are facing possible displacement and 
rent increases due to affordability restrictions expiring or 
owners opting out of HUD's programs?

A.1. The National Low Income Housing Coalition (NLIHC) thinks 
that project basing vouchers, as either tenant protection or 
enhanced vouchers, can be an important preservation tool that 
safeguards tenants from increased housing costs and helps 
retain affordable rental housing.
    In most cases when an owner opts out of a Federal housing 
assistance program, residents are issued tenant protection 
vouchers that enable them to stay in their homes, or use the 
vouchers to move if they choose to. However, there is a small 
subset of HUD-assisted properties with maturing mortgages or 
expiring use restrictions that are not eligible for tenant 
protection assistance once the affordability restriction ends. 
The FY12 Appropriations Act provided up to $10 million to 
provide tenant protection or enhanced vouchers for residents of 
these properties located in low-vacancy areas (the ``Durbin-
Brown'' provisions). The FY12 Appropriations Act also allowed 
HUD to project base that assistance, which would preserve a 
property's affordability while enabling tenant mobility. Beyond 
FY12, Congress should continue and augment appropriations for 
tenant protection vouchers for all tenants Durbin-Brown 
intended to assist (HUD is making only $6 million available); 
plus, the provision should be modified to remove the limitation 
to low-vacancy areas.
    The ``Merkley-Brown'' provisions of the FY12 Appropriations 
Act should also be expanded beyond FY13 in order to allow 
ongoing project basing of vouchers, in lieu of tenant-based 
vouchers, when Rent Supplement (Rent Supp), Section 236 Rental 
Assistance Payment (RAP), or Section 8 Moderate Rehab contracts 
expire.
    In addition, Congress should amend Section 8(o)(13) of the 
Housing Act, explicitly stating that all tenant protection 
assistance may be in the form of project based vouchers, 
eliminating the 25 percent cap on the number of units that may 
be project based at federally assisted housing. The Merkley-
Brown provisions authorized HUD to waive most features of 
Section 8(o)(13), but in the Rental Assistance Demonstration 
HUD merely raised the cap to 50 percent. Eliminating the cap 
and increasing the maximum contract length of a project-based 
voucher contract from 15 to 20 years would make project basing 
a more attractive and effective tool for preservation.
    Finally, Congress should establish a national preservation 
inventory that is publicly available and regularly maintained, 
requiring HUD to provide each federally assisted property with 
a unique numerical identifier. This will help residents, 
advocates, and preservation-oriented developers identify 
properties that are at risk of leaving the affordable housing 
stock so that preservation-oriented developers can take the 
necessary steps to preserve properties as affordable housing 
for low income people.
              Additional Material Supplied for the Record
                 LETTERS SUBMITTED BY DIANNE HOVDESTAD


















            NAHRO VOUCHER ADMINISTRATIVE FEE SURVEY RESULTS








STATEMENT SUBMITTED BY DEBORAH DE SANTIS, PRESIDENT AND CHIEF EXECUTIVE 
              OFFICER, CORPORATION FOR SUPPORTIVE HOUSING














 STATEMENT SUBMITTED BY KRISTINA COOK, CAE, ON BEHALF OF THE NATIONAL 
               AFFORDABLE HOUSING MANAGEMENT ASSOCIATION










    MEMORANDUM: PROPOSED REGULATORY AND ADMINISTRATIVE REFORMS AND 
                           STATUTORY LANGUAGE




















































               LETTER FROM THE PRESERVATION WORKING GROUP




  LETTER TO THE SENATE BANKING COMMITTEE REGARDING SECTION 8 VOUCHER 
                                 REFORM






    STREAMLINING AND STRENGTHENING HUD'S RENTAL HOUSING ASSISTANCE 
                           PROGRAMS--PART II

                              ----------                              


                       TUESDAY, DECEMBER 11, 2012

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:31 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Tim Johnson, Chairman of the 
Committee, presiding.

           OPENING STATEMENT OF CHAIRMAN TIM JOHNSON

    Chairman Johnson. I call this hearing to order.
    I would like to welcome the Honorable Sandra Henriquez once 
again to the Committee for a hearing entitled ``Proposals to 
Streamline and Strengthen HUD's Rental Housing Assistance 
Programs, Part II.''
    Millions of American families struggle every day to afford 
a roof over their heads. Currently, a person with a full-time 
job needs to earn about $18.50 an hour in order to afford a 
modest, two-bedroom rental at the national average. This is an 
amount far above the minimum wage or the income provided by 
Supplemental Security Income.
    Affordability is not just a problem in the largest cities 
in the country. The Sioux Falls Housing and Redevelopment 
Commission, for example, has 3,800 families--nearly twice the 
number the agency currently serves--on the waiting list for 
housing assistance.
    HUD's Section 8 Voucher and Public Housing rental 
assistance programs help over 3 million households, including 
low-income seniors, people with disabilities, and families with 
children, find safe, affordable housing. This assistance is 
funded by the Federal Government through HUD and delivered 
locally through a network of local and State public housing 
authorities, or PHAs.
    Despite the vital role these programs play in our national 
safety net, they face a number of challenges. These include 
complex administrative procedures, aging buildings in need of 
revitalization, and Federal funding constraints that have local 
agencies struggling to do more with less. The strains on local 
agencies have become so difficult some PHAs have turned down 
HUD-VASH vouchers for homeless veterans--or even shut down 
completely--due to a lack of funding to administer the program.
    Given these challenges and the Nation's fiscal position, it 
is essential that our Federal programs operate effectively and 
efficiently.
    Earlier this year, Senator Menendez's Subcommittee held a 
hearing to gather stakeholders' recommendations for improving 
these programs. Many of these focused on commonsense ideas that 
have been considered in both House and Senate Section 8 voucher 
reform bills in recent years, such as streamlining housing 
inspection schedules, simplifying rent calculations, and 
improving PHAs' ability to provide new housing opportunities 
through the use of project-based vouchers. Some of these 
suggestions would also streamline processes in HUD's Section 8 
project-based rental assistance programs.
    We have invited Assistant Secretary Henriquez here to share 
the Administration's recommendations on this important topic. I 
look forward to learning where there may be consensus around 
commonsense reforms that will strengthen the Section 8 and 
public housing assistance programs for our families, local 
partners, and taxpayers.
    Are there any other Members----
    Senator Reed. That is a good question.
    [Laughter.]
    Chairman Johnson. Jack, do you wish to make a brief opening 
statement?
    Senator Reed. Mr. Chairman, thank you again for holding 
this hearing. It is very important. Welcome, Madam Secretary, 
and I look forward to your testimony. Thank you.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you all. And I want to remind my 
colleagues that the record will be open for the next 7 days for 
opening statements and any other materials they would like to 
submit.
    Now I will briefly introduce our witness, the Honorable 
Sandra B. Henriquez, Assistant Secretary for Public and Indian 
Housing at the U.S. Department of Housing and Urban 
Development. In this capacity, she has day-to-day oversight of 
HUD's public housing and Section 8 voucher programs as well as 
HUD's Office of Native American Programs.
    Assistant Secretary Henriquez, you may proceed with your 
testimony.

   STATEMENT OF SANDRA B. HENRIQUEZ, ASSISTANT SECRETARY FOR 
  PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN 
                          DEVELOPMENT

    Ms. Henriquez. Thank you and good morning. Chairman 
Johnson, Ranking Member Shelby, Mr. Reed, and Members of the 
Committee, I thank you for inviting me here today to testify 
this morning on opportunities for reform of the Housing Choice 
Voucher and public housing programs.
    The voucher and public housing programs provide critically 
important housing assistance in communities across the Nation. 
These programs serve extremely poor families, many of whom are 
elderly or disabled. Not surprisingly, with the recent 
recession, the demand for rental assistance has increased.
    HUD recognizes the urgent need to streamline and simplify 
its rental assistance programs in order to reduce the 
administrative burdens on public housing authorities and to 
increase overall efficiency, while also generating Federal cost 
savings where possible.
    In light of the persistent demand for deeply affordable 
rental housing, we are also working hard to preserve public 
housing. My testimony today will cover three important 
approaches: streamlining and simplifying our programs, further 
reforming the public housing oversight structure to strengthen 
the portfolio, and increasing flexibility to respond to local 
housing needs.
    There is broad, external consensus among policy experts and 
practitioners for a number of key reforms that will streamline 
and simplify HUD's rental assistance programs. In its fiscal 
year 2013 budget request, HUD put forward a number of reforms 
around which there is consensus, and these include 
consolidating the Voucher and Public Housing Family Self-
Sufficiency programs and opening eligibility to multifamily 
residents; enacting a rental policy demonstration to test the 
effectiveness of different policies and encouraging family 
economic dependents and self-sufficiency, and authorizing 
biennial inspections for Housing Choice Voucher units to reduce 
administrative and financial burden. We are exploring further 
streamlining measures that require statutory authority and may 
be worth pursuing in fiscal year 2014.
    Our commitment to streamlining and simplification extends 
to the future of public housing as well. We recognize the 
importance of aligning our oversight structure with basic 
property management principles. Small public housing 
authorities view our existing oversight structure--known as the 
``Public Housing Assessment System,'' or PHAS--as increasingly 
unworkable. They assert that the program is heavy-handed, that 
small housing authorities pose little risk to HUD, and that HUD 
should, therefore, scale back its oversight of small agencies.
    In response to these concerns, we have taken steps to 
adjust how public housing are scored under the system, and we 
are willing to change and consider other changes as well.
    Broader reform that embraces traditional real estate 
management practices will bring substantial administrative 
relief to PHAs of all sizes, helping to put the public housing 
portfolio on a more solid foundation. Reform of HUD's oversight 
structure is the next step on the path established nearly a 
decade ago with the implementation of ``asset management''--a 
system where accounting, budgeting, funding, and management are 
performed at the property level rather than the public housing 
level.
    The Rental Assistance Demonstration, a top priority of this 
Administration, also known as RAD, addresses the contractual 
relationship between public housing authorities and HUD. It 
offers participating housing authorities the option to convert 
to long-term project-based Section 8 contracts which will 
enable them to leverage private investment on terms similar to 
those available to private property owners participating in 
HUD's multifamily programs. We expect that RAD will help to 
reverse the loss of public housing units and to preserve the 
portfolio going forward.
    The Moving to Work Program was authorized in 1996 as a 
demonstration as well to provide a limited number of housing 
authorities with the statutory and regulatory flexibility to 
test practices that increase cost-effectiveness, reward 
employment and economic independence, and increase housing 
choices for low-income families. MTW has enabled housing 
authorities to pioneer innovative approaches to serving 
homeless families, building resident earnings and assets, 
achieving operating cost efficiencies, and leveraging private 
capital.
    For example, Home Forward, formerly known as the Portland 
Housing Authority, in Portland, Oregon, used project-based 
vouchers to provide housing to formerly homeless veterans, and 
the building is served by a full-time resident services 
coordinator, and services are provided by the VA program. 
Flexibility allows Home Forward to provide security deposits to 
veterans using VA supportive housing vouchers as well.
    The Department is pleased that some of our most important 
stakeholders from public housing authorities and low-income 
housing advocacy communities were able to negotiate through 
their differences over MTW in order to advance broader Section 
8 reform. As the Committee crafts its legislation, we hope you 
will consider the stakeholder approach.
    Mr. Chairman, there is an irrefutable need for rental 
assistance in communities across this Nation. At the same time, 
there is longstanding consensus on a set of reforms that will 
streamline and simplify administration of the Housing Choice 
Voucher and the public housing programs. HUD is committed to 
improving not only the administration of its programs, but its 
oversight of the public housing programs as well, and we look 
forward to working with the Committee and our industry partners 
to develop a property-based oversight structure.
    We also recognize that any expansion of the MTW program 
must be coupled with measures to protect tenants, assure 
adequate HUD oversight, and evaluate results.
    I look forward to your questions. Thank you.
    Chairman Johnson. Thank you for your testimony.
    As we begin the questions, I will ask the clerk to put 5 
minutes on the clock for each Member.
    As I mentioned earlier, PHAs in my State and around the 
country are struggling to provide services to families given 
inadequate voucher administrative funding. How will the 
proposals we have been discussing here reduce the burdens on 
PHAs, particularly small agencies serving large areas, like 
those in South Dakota?
    Ms. Henriquez. That is a good question, and thank you very 
much. Our proposals to streamline and administer also look at 
the options of forming consortia, having smaller agencies band 
together in order to have economies of scale in administering 
their programs. In addition, we think that there are 
streamlined opportunities around inspections, around rent 
certifications that could happen particularly for those 
families on fixed incomes, and that could happen on a less 
frequent basis because that income change is small and is known 
year after year.
    We also believe that the inspection protocols could move 
from annual to biennial, particularly in housing authorities 
where there is a known tenant population with less wear and 
tear on those units, which indeed may free up housing authority 
staff, create efficiencies, economies, and allow housing 
authorities to spread their precious resources further to serve 
the populations that are housed in those properties.
    Chairman Johnson. PHAs in my State have also described 
their difficulties in keeping up with regulatory burdens and 
paperwork. For example, South Dakotans have mentioned that they 
are often asked to submit the same information multiple times. 
We must obviously find a balance between the need to provide 
appropriate oversight of taxpayer dollars with the needs of 
agencies, particularly small agencies who have limited staff 
and funding.
    Are you examining administrative actions that HUD can take 
to reduce burdens on small PHAs?
    Ms. Henriquez. Yes, we are examining particularly the 
reporting and regulatory burden on small PHAs, and indeed, we 
are trying a couple of things in a couple of different areas.
    One, as I said earlier, we want to look at what we can do 
to streamline across the board.
    Two, we are looking at our own data collection systems to 
make sure that we ask for it once, we do not ask for it in 
duplicative ways, and that when we ask for it, it is 
information that we are going to use, not information that we 
are not. So we want to make sure that our data collection is as 
tight as possible.
    In addition, providing regulatory relief to small agencies 
in particular, there are some things that we think make totally 
good sense from a property management and a monitoring 
perspective. We want to take those not just for small agencies, 
but we want to take them to scale, because if they are good for 
small agencies doing real estate property management, then they 
are good for other, larger agencies to do that same work as 
well.
    And there are other issues around regulatory streamlining 
that we would like to talk more with both the Committee and 
with small agencies about what they need to really run their 
business and balance that with what HUD needs for its own 
monitoring. We realize that we need to look at risk and assess 
risk, and generally small housing authorities, if you follow 
the money, small agencies are less riskier propositions than 
larger housing authorities to get the bulk of the HUD dollars. 
But we want to strike that balance and make sure that we are 
being as effective and efficient with all of our stakeholders.
    Chairman Johnson. You have recommended increasing the 
medical deduction used in income and rent calculations from 3 
to 10 percent of income. Previous versions of the Senate's 
SEVRA legislation and the AHSSIA bill under discussion in the 
House Financial Services Committee take a broader approach to 
simplifying income and rent calculations. These measures would 
streamline several deductions in HUD's complicated income 
calculations and replace them with higher standard deductions.
    Do you support this broader approach to simplifying 
deductions?
    Ms. Henriquez. Yes, we do support a broader approach to 
simplifying. We think that there will be less errors; it will 
be easier for residents to understand the changes; it will be 
easier for housing authorities' staff to actually compute and 
make less mistakes in those computations. We also think that 
there needs to be a balance between standard deductions and--
both on standard deductions and pairing that with any changes 
in the medical deductions so there is a balanced program. This 
is truly not to harm or cause greater cost to be borne by the 
most economically vulnerable citizens that we house in our 
programs.
    Chairman Johnson. Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman, and 
thank you, Madam Secretary. And as you know, one of the 
consistent themes here both from your Department and from the 
Chairman's questioning is lowering the dead weight costs, for 
want of a better term, on small public housing authorities. You 
are trying to do that.
    One issue that has come recently to our attention is that 
the agency always has recognized that in the awarding of FSS 
grants this year, there were some errors.
    Ms. Henriquez. Correct.
    Senator Reed. You are trying to correct those errors. We 
have a housing authority in North Providence that is in that 
process. And this is another sort of example of particularly 
smaller public housing authorities where, when they have to go 
back and redo the work, et cetera, it just adds to their 
administrative costs.
    But could you give us sort of some insight as to what 
happened and what are you doing?
    Ms. Henriquez. Yes, thank you for that question. I 
sometimes refer to it as ``cosmic convergence.'' There were 
several things that went wrong, and they all went wrong at the 
same time, and, hence, we find ourselves having made a mistake 
in the award and the calculations for those awards for the 
Family Self-Sufficiency grants on the voucher side.
    As it relates to small housing authorities, or any housing 
authority that applied under the NOFA earlier this year, we are 
not asking for a resubmission. We are going to reprocess 
starting at the point where HUD made its first mistake, and 
that was our data pull.
    I want to be very clear. The NOFA, as written, made a 
point. It said: We will do a data pull from our data base that 
looks at the year-long number of families registered under the 
Family Self-Sufficiency program at any particular housing 
authority. We will post that data on a Web site, and the link 
is in the NOFA. So if you clicked on the NOFA electronically, 
it automatically took you to that posting.
    In addition, we said please check the posting to see the 
numbers we have for your particular housing authority, and the 
NOFA said if you disagreed with that number, could you please 
then submit a supplemental or an ad hoc report to accompany 
your submission. And we used then that submission as the way to 
calculate the funding for those housing authorities that 
submitted the ad hoc report.
    Even with that, our data pull was a point in time as 
opposed to an entire year, and so it didn't take into account--
you might have had a thousand people at the beginning of the 
year, people graduated during the year, and you are replacing 
them, and so your number is lower at the point of time pull. 
That was mistake number one.
    So what we are doing is we are asking--in fact, a letter 
went out Friday to all housing authorities that submitted about 
750 of them that said we will be reprocessing, here is the 
information, this is the reposting, this is where you will find 
it, please, again, check the reposting, pull your own numbers, 
resubmit, and from that point forward we are going to then 
actually reprocess all of those applications and make the 
adjustments where people--some people got awards that should 
not have, some people got lower awards, some people got higher 
amounts than they were due.
    When all is said and done, because it is a mistake of the 
Department, we do not want housing authorities and cascading 
down to residents who use the services of a self-sufficiency 
coordinators, we do not want folks to be harmed. And so for 
people who should not have been awarded money, we are going to 
make available extraordinary admin fees for them so they can 
continue, if they have already hired people and made employment 
commitments, that they will not be harmed and will be able to 
move forward and not have to take a loss and lay people off.
    Senator Reed. Thank you, Madam Secretary. Just let me make 
two points, because my time is winding down.
    One, you in your proposal for essentially merging or 
consolidating both the FSS voucher program and the FSS program 
for public housing authorities, I think that is part of your 
design. That is reflective of legislation that I have 
submitted.
    Ms. Henriquez. Yes.
    Senator Reed. And I think it makes sense.
    The second point--and you alluded to it, too--is this 
notion of banding together, spreading overhead costs, it is 
something I think we should all explore. You know, I am sure 
there are communities in South Dakota and New Jersey and Rhode 
Island where there is one housing official trying to cope with 
all of this in a really difficult climate, and so to the extent 
that we can incentivize this sort of coming together, maybe not 
formally but through sort of joint services or joint overhead, 
that would be very, very good. So any advice you have for us 
going forward, we would appreciate that. But thank you, Mr. 
Chairman, and thank you, Madam Secretary.
    Ms. Henriquez. Thank you, sir.
    Chairman Johnson. Senator Crapo.
    Senator Crapo. Thank you very much, Mr. Chairman. First of 
all, I apologize. I am only going to be able to be here for 
just a couple of moments, but I did want to stop by and 
indicate to you, the Chair, as well as to our witness and to 
the other Members of the Committee that in these difficult 
budget times that we see and the understanding that I think we 
all have that funding issues are critical, I think it is 
important for us to focus on the kind of regulatory activity 
that the Department can bring and the focus it can bring to 
these housing issues. I think that the deregulation of Section 
8 is very critical and important and strengthening, and I would 
hope in that process that the Moving to Work Program could get 
a strengthening and a renewed strong focus as we move forward.
    But I just wanted to stop in and indicate my support for 
the process that is moving forward and encourage that we work 
closely together on it.
    And, again, I apologize. I have been in four places this 
hour, and I have got another one to get to. So I apologize, and 
I am going to have to step right out.
    Chairman Johnson. Madam Secretary, do you have any comments 
about these issues?
    Ms. Henriquez. We just look forward to working with the 
Committee both in strengthening our regulatory oversight that 
is appropriate and balancing that with the needs of housing 
authorities to get their work done to serve the people who are 
housed in those programs. So thank you very much, sir.
    Chairman Johnson. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman, and thanks for 
calling this hearing. We had a hearing in the Subcommittee that 
laid a foundation, and I am pleased to see the Secretary here 
to build upon it.
    Madam Secretary, we have been discussing reforms to Section 
8 for some time now, and I think there is a tendency to forget 
how incredibly pressing the need for action really is. 
Affordable housing advocates and housing authorities back in 
New Jersey are telling me that these reforms cannot wait and 
that they are urgently needed now. So can you give the 
Committee a sense of the impact over time if Congress fails to 
act relatively soon, after such a long time of having this 
discussion, to implement specific reform provisions? What flows 
from that?
    Ms. Henriquez. That is a really good question. Thank you, 
Senator.
    I am taking a moment because I want to sort of get 
centered, because I think that there are lots of potential 
issues that will flow from this.
    As you know already, administrative fees, which is the 
money that housing authorities get for leasing units under the 
Section 8 side, as those fees decrease, the workload does not. 
So what they have to do, the kinds of questions they have to 
ask, the kinds of documentation that is required on an annual 
basis does not decrease in spite of the fact that the funding 
to do that work has decreased, which has meant that housing 
authorities in some instances have had to lay people off. And 
that has led to longer waiting lists for people. Then people 
are on waiting lists longer, so they have lived in more 
difficult conditions longer.
    It has also meant that as you have laid off people with 
decreasing funding, that housing authority employees themselves 
will find themselves in difficult straits as well.
    The way in which we think about how that program gets 
managed gets more difficult. The less people but more workload 
or similar workload means potential for more error. Potential 
for more error means potential for wasted taxpayer dollars. And 
so we really do need to think about streamlining so that the 
work gets done, the people get house as quickly as possible, 
and the operations and the business processes for housing 
authorities are streamlined and efficient so that errors are 
minimized and maximizes the dollars, the precious resources we 
have.
    Senator Menendez. I appreciate that. How about housing 
authorities refusing to run their voucher programs and turning 
down VASH vouchers to assist homeless veterans and the loss of 
hard units?
    Ms. Henriquez. We have seen that in several instances, and, 
in fact, not just VASH vouchers, but we are seeing about a 
dozen housing authorities have decided that they are not going 
to operate a voucher program anymore, and they have made 
arrangements to convey that operation, to consolidate that 
operation with another larger housing authority.
    It means that the folks who need the subsidy, the 
affordability, are not getting served. It means that the amount 
of work that it takes to do the job well is not able to be 
supported. And it means most of all that we will have homeless 
veterans and other families, homeless families, in emergent 
conditions, and that should not be tolerated.
    Senator Menendez. Let me just quickly--there are some core 
reform provisions that I would like to get your comment on. One 
is having a stable voucher renewal fund policy that would 
create predictability, because I am told it is very hard for 
housing authorities to plan for the year ahead when they do not 
know exactly what that will do; also to clarify how much money 
housing authorities can hold in reserves for a rainy day 
without those funds being taken back or offset; and also the 
flexibility provisions that are being--that have been discussed 
in project-based vouchers, enabling housing authorities to 
better assist families, especially elderly and disabled 
families, families transitioning out of homeless, to live in 
affordable housing communities of opportunity to receive 
services onsite.
    How would that predictability, clarity in the funding side, 
and the flexibility translate into more families served, if it 
does translate into that?
    Ms. Henriquez. Predictability is something that we would 
endorse wholeheartedly. It means that a housing authority can 
plan its business moving forward, it will understand its 
resources, and it can then tabulate its expenses and figure out 
how best to run its program.
    I would say that that does not just benefit the housing 
authority and its employees; it benefits the residents who are 
participating in those programs on the voucher side. We have 
heard in the past issues around shortfalls or money not being--
not having sufficient funds to make sure that everybody who 
needs to be housed or be renewed, have their voucher renewed, 
will be able to do that. And this will make sure that we do not 
have to have those discussions again. So tenants will be 
protected, and participants would be protected in that regard.
    Further, I believe that a fixed formula funding, renewal 
funding, will mean that housing authorities are able to buildup 
small reserves. It right now is at about 3 weeks, and a 3-week 
reserve in a multi-billion-dollar program is really not a lot 
of money, particularly when you are running a voucher program 
which is tied to market real estate forces. And so while there 
are fair market rents and there are limits and so on, the 
natural tendency for a housing authority is to want to house as 
many people on its waiting lists as possible. That is why we 
are all in this business. Having that predictability will allow 
them to do that, particularly when it is coupled with 
understanding what your reserve levels are and that will not be 
swept, and understanding that one of the things we keep asking 
for as well is the reallocation authority for the Secretary. So 
in some markets, it may be easier to lease, and you may have 
more room. And some housing authorities may not be able to 
lease as readily, and they will not use all of the money that 
has come to them. And so the ability to reallocate so we can 
continue to house and maximize housing across this Nation is 
something that we would look forward to as well.
    Senator Menendez. Mr. Chairman, thank you very much, and 
thank you, Madam Secretary, for your answers. I look forward to 
working with the Chair and his leadership hopefully in the next 
Congress to see if this is something that we within the housing 
context could prioritize, because I think there are two shared 
goals here: getting more people to have a place to call home 
and, second, saving taxpayers' money. So thank you very much.
    Ms. Henriquez. Thank you.
    Chairman Johnson. You support the idea of permitting PHAs 
to form consortia for purposes of forming partnerships to 
administer their public housing programs. Congress initially 
authorized the use of consortia in 1998, yet I understand 
barriers remain to PHAs' taking full advantage of this 
authority.
    What is HUD doing to remove barriers to use of consortia 
and facilitate PHAs' participation in consortia if they 
determine it will meet their local needs?
    Ms. Henriquez. There are several actions we are taking 
right now. First of all, consortia are allowed in voucher-
administering agencies, but not on the public housing side, and 
so we are looking to extend the ability to have that happen in 
the public housing programs.
    In addition, right now under a consortia housing 
authorities, let us say three or four housing authorities band 
together to get some economies of scale, to simplify their 
operations, but they still have to fill out three or four 
separate reports to HUD because they are still seen as three or 
four separate public housing entities. And so we are looking at 
ways--again, this is why streamlining and administrative 
flexibility is so important, because we are trying to figure 
out ways in which housing authorities could file one report, 
for example, that would cover their agencies. We would still 
ask each housing authority to file for its own tenants and its 
own participants into what we call our PIC data base, which is 
our personal information and every single household in the 
voucher program on the public housing side. We would ask that 
under Family Self-Sufficiency there is one report that is done 
that covers what the goals are early on in the program and then 
if they have met those goals at a year-end report. And so we 
are looking at all sorts of ways--in fact, we have been working 
with a number of housing authorities, all range of sizes across 
the country, asking them what information do they need to run 
their day-to-day business about which they make their business 
decisions, and then translating that into what about that 
information we could collect and use--since they are doing it 
already, that we could then use to monitor them as well so that 
we are not asking for different information or in a different 
format than they already collect it.
    Chairman Johnson. You mentioned your support for the Rental 
Assistance Demonstration enacted in fiscal year 2012--or RAD--
in your remarks. Can you update us on the status of this 
demonstration? Second, can you also comment on a draft House 
proposal to authorize funds for use in this conversion 
demonstration and how these funds might be used to preserve 
assisted housing?
    Ms. Henriquez. Yes, thank you, sir. So the Rental 
Assistance Demonstration Program was authorized in fiscal year 
2012. It is designed initially as a two-application period for 
public housing properties because we knew that there were 
housing authorities ready to submit and others who really 
wanted to spend some time thinking through their applications 
at a later date.
    The initial application period ended October 24th, just 
several weeks ago. We got a number of applications. That is 
still being tabulated in terms of how many, but they range from 
small housing authorities to medium to large housing 
authorities who have put proposals together, and we can provide 
greater tabulation once those initial awards are made. And on 
an ongoing rolling basis, applications are coming in after the 
October 24th date. We will look at those after this initial cut 
has been reviewed.
    As you know, the previous bill said that we could get up to 
60,000 units in at no cost, and either using project-based 
contracts or project-based vouchers. In addition, in that 
60,000 cap is also authorizing for multifamily programs, rent 
supplement, RAP--rental assistance payments--and Section 8 mod 
rehab.
    So while we strongly support this program as a way to 
preserve public housing to get enough capital infused using 
private sector tools, financing tools, to get private money 
into the public arena to help rehabilitate and maintain these 
properties, we do know that there are a number of properties 
for whom this does not work because they have a larger capital 
need. And so we look forward to what we have seen in previous 
iterations on the House side, additional money going into that 
program which would help housing authorities with greater 
capital needs leverage greater amounts of private sector 
equity.
    But what we are seeing, which is really helpful, is housing 
authorities using a variety of tools for mixed finance deals to 
make this happen. Again, it puts them on the same real estate 
platform as everything else in the real estate marketplace, 
using the equity from properties to leverage capital 
improvement dollars, to make sure that properties are 
maintained at current standards and will continue to improve 
and continue to be available to serve the people who live there 
now and for future generations who need the economic stability.
    Chairman Johnson. I would like to thank you, Assistant 
Secretary Henriquez, for your testimony and for being here with 
us today.
    This hearing is adjourned.
    Ms. Henriquez. Thank you.
    [Whereupon, at 11:09 a.m., the hearing was adjourned.]
    [Prepared statements supplied for the record follow:]
               PREPARED STATEMENT OF SANDRA B. HENRIQUEZ
   Assistant Secretary for Public and Indian Housing, Department of 
                     Housing and Urban Development
                           December 11, 2012
    Chairman Johnson, Ranking Member Shelby, and Members of the 
Committee, thank you for inviting me here today to testify regarding 
opportunities to reform the Housing Choice Voucher and public housing 
programs.
    As you know, the voucher and public housing programs provide 
critically important housing assistance in communities across the 
Nation. These programs serve extremely poor families, many of whom are 
elderly or disabled, or both. While the median income of American 
families today is just above $50,000, voucher and public housing 
families have substantially lower incomes. \1\ Not surprisingly, with 
the recent recession, the demand for rental assistance has increased.
---------------------------------------------------------------------------
     \1\ The average annual income of voucher program participants is 
approximately $12,500; for public housing families, the figure is 
slightly more than $13,500.
---------------------------------------------------------------------------
    At the same time, we have been tightening our belts at the Federal 
level, and HUD recognizes the urgent need to streamline and simplify 
its rental assistance programs in order to reduce the administrative 
burdens on PHAs and increase overall efficiency. In our FY12 and FY13 
budget requests, we included measures that reduce administrative 
burdens and increase efficiency, as well as generate Federal cost 
savings.
    At the same time, and in light of the persistent need for deeply 
affordable rental housing, we are working hard to preserve public 
housing. For example, the Department's Rental Assistance Demonstration 
(RAD) is providing participating PHAs with new options for addressing 
the capital needs of properties, enabling them to leverage private 
investment on terms and conditions similar to those available to 
private property owners participating in HUD's multifamily programs. We 
expect that RAD will help to reverse the loss of public housing units 
and eventually place the inventory on a more sound, sensible regulatory 
footing for the long term. In the meantime, administrative streamlining 
is key to holding on to what we have. We also recognize that both 
preservation and administrative streamlining will be well served by 
continuing--and completing--HUD's transition to a project-based 
framework for public housing. HUD recognizes both the necessity and the 
wisdom of moving in the direction of an oversight model for public 
housing that is more closely aligned with the multifamily project-based 
Section 8 portfolio and with traditional asset and portfolio management 
principles.
    Finally, the Department believes that PHAs should enjoy greater 
flexibility to respond to local housing needs, which in some cases 
means testing innovative strategies and engaging in partnerships 
tailored to local circumstances. The Department recognizes that greater 
flexibility must be coupled with measures to protect tenants, assure 
adequate HUD oversight, and evaluate results.
Streamline and Simplify
    The Department is aware that there is broad external consensus 
among policy experts and practitioners for a number of key reforms that 
will streamline and simplify HUD's rental assistance programs. In its 
FY13 budget request, HUD put forward a number of reforms around which 
there is such a consensus. These reforms include:

1. Revising the threshold for medical deductions. The current threshold 
for the deduction of medical and related care expenses is 3 percent of 
family income. HUD proposes to increase the threshold to 10 percent of 
family income. This change would generate estimated savings of $150 
million in the first year of enactment ($30 million in the voucher 
program, $23 million in public housing, and $98 million in project-
based Section 8).

2. Consolidating the Family Self-Sufficiency program. Currently, there 
is a Family Self-Sufficiency (FSS) program for the voucher program and 
another for the public housing program. The programs are separate and 
administered independently. HUD proposes to consolidate the two 
programs and expand eligibility to project-based Section 8 owners, 
opening the program to multifamily tenants.

3. Modifying the definition of extremely low-income. In areas where 
median incomes are extremely low (e.g., rural areas), working poor 
families may be skipped over for rental assistance, even if their 
incomes put them below the poverty level. This is the case for the 
voucher program, especially, because 75 percent of new admissions each 
year must have incomes at or below 30 percent of the area median. HUD 
proposes to define an extremely low-income (ELI) family as a family 
whose income does not exceed the higher of the Federal poverty level or 
30 percent of the area median income. This provision will generate 
estimated savings of $155 million (in the voucher program only) in the 
first year after enactment.

4. Enacting a rent policy demonstration. Currently, HUD can test and 
evaluate different rent-setting policies only at Moving to Work (MTW) 
agencies, since other agencies are not authorized to alter their rents 
beyond what is permitted in statute. HUD proposes to carry out a rent 
policy demonstration at any agency ``for the purpose of determining the 
effectiveness of different rent policies in encouraging families to 
obtain employment, increase their incomes, and achieve economic self-
sufficiency, while reducing administrative burdens and maintaining 
housing stability.''

5. Establishing a flat rent floor. PHAs are required to establish a 
flat rent ``based on the rental value of the unit'' and to offer public 
housing families the option of paying the flat rent or an income-based 
rent. In order to align public housing flat rents more closely with 
market rents, HUD proposes to establish a flat rent floor set at 80 
percent of the applicable FMR. To assure that no family's rent would 
increase by more than 35 percent in any one year, the increase would be 
phased in where applicable. Once fully implemented, this provision 
would reduce costs by approximately $400 million.

6. Changing the definition of a PHA to include a consortia of PHAs. 
Currently, there is statutory authority for PHAs to form consortia for 
the purposes of administering the voucher program, but not for 
administering public housing. HUD proposes to amend the definition of a 
``public housing PHA'' to include a ``consortium of PHAs'' so that PHAs 
will be able to reduce their administrative costs and achieve operating 
efficiencies by combining their operations, should they choose to do 
so.

7. Authorizing biennial inspections for HCV units. Currently, HCV units 
must be inspected on an annual basis, regardless of whether such units 
have a record of regular compliance with HUD's physical condition 
standards. To reduce the administrative and financial burden on PHAs 
and high-performing landlords, HUD proposes to authorize biennial 
inspections, enabling PHAs to concentrate their inspection resources on 
the more marginal and higher-risk units. Importantly, residents would 
retain their right to request an inspection.

    While each of the above-described provisions requires statutory 
authority, we have established a cross-program working group to 
identify streamlining and simplification measures that HUD can 
implement through regulation or notice and are moving aggressively to 
implement these measures. In addition, we are exploring further 
streamlining measures that require statutory authority and may be worth 
pursuing in FY14.
A Stronger Foundation for Public Housing
    Our commitment to streamlining and simplification extends beyond 
the provisions identified above. As we look a bit further out on the 
horizon and consider the future of public housing, in particular, we 
recognize the importance of aligning our oversight structure with basic 
asset management principles.
    Small PHAs, in particular, view our existing oversight structure--
known as the ``Public Housing Assessment System,'' or PHAS--as 
increasingly unworkable. They assert that PHAS is heavy-handed, that 
small PHAs pose little risk to HUD, and that HUD should therefore scale 
back its oversight of small PHAs. I understand and appreciate these 
concerns. We have taken some steps to adjust how PHAs are scored under 
PHAS, and we are willing to consider others. We are interested, 
however, in pursuing broader reform in this area in the interest of 
protecting tenants and the taxpayer's substantial investment in public 
housing. Reform that embraces traditional asset management principles 
and practices will also bring substantial administrative relief to PHAs 
of all sizes, helping to put the public housing portfolio on a more 
solid foundation.
    Reform of HUD's oversight structure is the next step along a path 
whose initial direction was established during the prior 
Administration, with the implementation of ``asset management.'' Asset 
management entailed movement from a system where accounting, budgeting, 
funding, and management were all performed at the agency level to a 
system where these functions are now performed at the project level.
    Movement along this path picked up a strong head of steam with 
enactment of the Rental Assistance Demonstration (RAD), which is a top 
priority of the Department. RAD addresses the contractual relationship 
between PHAs and HUD. By offering PHAs the option to convert to a long-
term, project-based Section 8 contract, RAD facilitates lending to and 
investment in individual public housing properties. Without a doubt, 
asset management laid the groundwork for RAD by beginning to build an 
operating history at the individual project level. This information is 
critically important to the lenders and investors who will be 
underwriting public housing preservation transactions under RAD.
    Moving HUD's oversight of public housing to a true asset management 
model is the next step on the path toward putting the public housing 
portfolio on a stronger foundation and reversing the portfolio's 
isolation from the affordable housing mainstream. As we move ahead, we 
look forward to working with the Committee and our industry partners as 
we pursue this important change.
Moving to Work
    The Moving to Work (MTW) program was authorized in 1996 as a 
demonstration program. The purpose of the program is to provide a 
limited number of PHAs \2\ with the statutory and regulatory 
flexibility to test approaches to providing housing assistance that 
reduce costs and increase cost-effectiveness, reward work and 
employment, and increase housing choices for low-income families.
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     \2\ There are currently 35 MTW agencies.
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    Since its enactment, MTW has enabled PHAs to pioneer innovative 
practices around approaches to serving homeless families, building 
resident earnings and assets, leveraging private capital through the 
project-basing of vouchers and other strategies, and achieving 
operating cost efficiencies through streamlined approaches to income 
recertifications, inspections, and the calculation of utility 
allowances. For example:

    Home Forward (Portland, Oregon) made an award of project-
        based vouchers to a local not-for-profit organization that 
        provides housing to formerly homeless veterans. The building is 
        served by a full-time resident services coordinator, and 
        supportive services are provided by the Veteran's Health 
        Administration. Home Forward also uses its single-fund 
        flexibility to provide security deposits to veterans using 
        Veterans Affairs Supportive Housing vouchers to lease rental 
        units.

    The King County Housing Authority (KCHA) is able to 
        leverage its MTW flexibilities to build programs involving 
        local partners that bring their own sources of funding to the 
        table. For example, KCHA developed a Resident Opportunity Plan 
        (ROP) in partnership with the local YWCA; Bellevue College, 
        Hopelink; and Washington State's Department of Employment 
        Security. Through the ROP, participating residents receive 
        wrap-around services and financial assistance so they can 
        acquire the skills needed to increase their earned income and 
        ultimately graduate from federally assisted housing. KCHA's 
        flexibility under MTW provides it with the latitude to refine 
        the program iteratively and incrementally, improving resident 
        outcomes as the program progresses, while also supplementing 
        the sources of funding brought by other partners, which are 
        typically constrained to particular activities.

    The Cambridge Housing Authority implemented a tiered rent 
        structure that combines elements of an income-based rent and a 
        flat rent. Rents are established for various income bands and 
        set at 30 percent of adjusted income at the low end of each 
        band. This approach, which is combined with a hardship 
        exemption, produces much-needed rent simplification for both 
        the PHA and residents.

    As you know, the Department supports the principles of MTW, 
including appropriate recordkeeping, reporting requirements, and 
rigorous evaluation. We look forward to working with the Committee as 
it considers potential reforms and improvements to the MTW program.
Conclusion
    Mr. Chairman, there is an unquestioned need for rental assistance 
in communities across the Nation. At the same time, there is 
longstanding consensus around a set of reforms that will streamline and 
simplify administration of the Housing Choice Voucher and public 
housing programs. HUD is committed to improving not only the 
administration of these programs, but its oversight of the public 
housing program, in particular. Finally, the Department recognizes that 
greater flexibility for PHAs must be coupled with measures to protect 
tenants, assure adequate HUD oversight, and evaluate results. Thank you 
for your consideration of these comments, and I look forward to 
addressing your questions.
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