[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE FUTURE OF HOUSING IN
AMERICA: A COMPARISON OF
THE UNITED KINGDOM AND UNITED
STATES MODELS OF AFFORDABLE HOUSING
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
HOUSING AND INSURANCE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MAY 12, 2016
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-86
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
SCOTT GARRETT, New Jersey GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico RUBEN HINOJOSA, Texas
BILL POSEY, Florida WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK, STEPHEN F. LYNCH, Massachusetts
Pennsylvania DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin KEITH ELLISON, Minnesota
ROBERT HURT, Virginia ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina BILL FOSTER, Illinois
RANDY HULTGREN, Illinois DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania DENNY HECK, Washington
LUKE MESSER, Indiana JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Subcommittee on Housing and Insurance
BLAINE LUETKEMEYER, Missouri, Chairman
LYNN A. WESTMORELAND, Georgia, Vice EMANUEL CLEAVER, Missouri, Ranking
Chairman Member
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
SCOTT GARRETT, New Jersey MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico WM. LACY CLAY, Missouri
BILL POSEY, Florida AL GREEN, Texas
ROBERT HURT, Virginia GWEN MOORE, Wisconsin
STEVE STIVERS, Ohio KEITH ELLISON, Minnesota
DENNIS A. ROSS, Florida JOYCE BEATTY, Ohio
ANDY BARR, Kentucky DANIEL T. KILDEE, Michigan
KEITH J. ROTHFUS, Pennsylvania
ROGER WILLIAMS, Texas
C O N T E N T S
----------
Page
Hearing held on:
May 12, 2016................................................. 1
Appendix:
May 12, 2016................................................. 37
WITNESSES
Thursday, May 12, 2016
Beider, Harris, Professor, Community Cohesion, Centre for Trust,
Peace and Social Relations, Coventry University, United Kingdom 6
Bledsoe, Thomas A., President and Chief Executive Officer,
Housing Partnership Network.................................... 4
Gentry, Richard C., President and Chief Executive Officer, San
Diego Housing Commission....................................... 11
Lee, Jaime Alison, Assistant Professor of Law, and Director,
Community Development Clinic, University of Baltimore School of
Law............................................................ 10
Popkin, Susan J., Senior Fellow, and Director, Neighborhoods and
Youth Development Initiative, Metropolitan Housing and
Communities Policy Center, Urban Institute..................... 8
Russ, Gregory P., Executive Director, Cambridge Housing Authority 13
APPENDIX
Prepared statements:
Beider, Harris............................................... 38
Bledsoe, Thomas A............................................ 52
Gentry, Richard C............................................ 61
Lee, Jaime Alison............................................ 82
Popkin, Susan J.............................................. 98
Russ, Gregory P.............................................. 110
THE FUTURE OF HOUSING IN
AMERICA: A COMPARISON OF
THE UNITED KINGDOM AND UNITED
STATES MODELS OF AFFORDABLE HOUSING
----------
Thursday, May 12, 2016
U.S. House of Representatives,
Subcommittee on Housing
and Insurance,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:02 a.m., in
room 2128, Rayburn House Office Building, Hon. Blaine
Luetkemeyer [chairman of the subcommittee] presiding.
Members present: Representatives Luetkemeyer, Royce,
Garrett, Pearce, Posey, Stivers, Barr, Rothfus, Williams;
Cleaver, Velazquez, Clay, Green, Beatty, and Kildee.
Ex officio present: Representative Waters.
Chairman Luetkemeyer. The Subcommittee on Housing and
Insurance will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Today's hearing is entitled, ``The Future of Housing in
America: A Comparison of the United Kingdom and United States
Models of Affordable Housing.''
Before we begin, I would like to thank the witnesses for
appearing before the subcommittee today. We look forward to
your testimony.
I now recognize myself for 5 minutes to give an opening
statement.
We have spent a great deal of time over the last year-and-
a-half looking at the state of housing in America, examining
the current environment and attempting to identify
opportunities to serve more people in need.
From a 30,000 foot level, we need to assess whether or not
our system is equipped to address needed reforms. Can we
enhance the quality of services delivered? And can we improve
the outcomes and livelihoods of residents?
These aren't new conversations. And the affordable housing
crisis isn't unique to the United States. Today we will look
outward beyond our borders to examine innovative methods and
programs that aim to help more people and attract greater
private and nonprofit sector participation.
Under the bold leadership of Prime Minister Margaret
Thatcher, the U.K. was able to pursue transformative housing
policies that altered the course of their nation's welfare
state. Prime Minister Thatcher, and Prime Minister Blair after
her, envisioned a system that would facilitate a greater role
for the private sector and affordable housing, including a
right-to-buy policy which would give housing tenants the
opportunity to purchase their homes over time.
The U.K. housing model also focused on the transfer of
government-owned housing to nonprofit organizations, which in
turn helped to expand the capacity of nonprofits to serve
communities across Great Britain.
There are pros and cons to each aspect of these and other
policies instituted in the United Kingdom. And we will use
today's hearing as an opportunity to examine which aspects, if
any, might work in the United States.
As a participating subcommittee of Speaker Ryan's Task
Force on Poverty, Opportunity and Upward Mobility, we have been
charged with exploring innovative solutions to combat poverty
in America specifically regarding housing.
It is my hope that today's assessment of an alternative
housing model will serve as a means of self-reflection on how
our own Nation can approach affordable housing and, more
importantly, how the United States can do better.
The topic for today's hearing is one of great interest and
great complexity. To ensure that as clear a picture as possible
be painted we have two public housing authority executives from
different markets, two academics with extensive backgrounds of
housing in both nations, and two researchers whose efforts to
produce quality reports helped to inspire today's hearing.
The subcommittee thanks you all for participating today.
While all six witnesses before us represent varying
perspectives, we all believe in the human desire for self-
sufficiency, the pursuit of a better life, and a place to call
home.
This hearing is not intended to provide us with a complete
picture of what the future of public housing could or should
look like in America, but it is our hope that today's
conversation will help to spur additional discussions on
potential solutions to the current state of housing in America.
I look forward to what promises to be a robust
conversation.
And the Chair now recognizes the ranking member of the
subcommittee, the gentleman from Missouri, Mr. Cleaver, for 5
minutes for an opening statement.
Mr. Cleaver. Thank you, Mr. Chairman.
And I would like to thank the witnesses for contributing
your valuable time to us today.
This hearing, I think, provides us with a unique
opportunity to compare the housing system of the U.K. with our
own.
With a rental affordability crisis looming, it seems to me
that we must take a look at everything possible to look at
innovative ways in which we can move housing into the 21st
century for the American public. And I think that it is crucial
that this subcommittee continue to assess ways to ensure that
our constituencies have access to safe and affordable homes.
This hearing focuses on two reports: one entitled,
``Lessons of the International Housing Partnership,'' published
by the Housing Partnership Network (HPN); and the other
entitled, ``Atlantic Exchange: Case Studies of Housing and
Community Redevelopment in the United States and the United
Kingdom,'' published by the Urban Institute.
We have witnesses from both of these organizations as well
as other interested stakeholders.
Now, here in the United States, many of us encourage home
ownership opportunities for Americans of all walks of life. We
also provide public housing and vouchers for our most
economically vulnerable populations.
And I would like to thank the chairman, Chairman
Luetkemeyer. On our recent trip to London we did meet with
officials from the public housing sector of their government.
It was a very good meeting and provided us with some stark
contrasts between the U.S. and the U.K.
The HPN explores two Margaret Thatcher-era policies: the
right to buy, which gave tenants the chance to purchase their
units at a reduced rate; and the large-scale volunteer transfer
program which transferred public housing, or what those in the
United Kingdom call council housing, to nonprofit associations.
Both of these programs had a remarkable impact on the
housing landscape of the United Kingdom as council housing was
sold and transferred to the private sector. Much like the U.K.,
this country is struggling with the best way to preserve and
create affordability with regard to housing units.
As we undertake this process, it is important to remember
that much of our public housing is targeted to the most
vulnerable: the elderly; the disabled; and the extremely low
income.
It is also important to emphasize the significance of
tenant protections, including the long-term preservation of
affordable rent, one-to-one replacement, and strong tenant
engagement.
I look forward to hearing from the witnesses and becoming
dialogical as we proceed with the hearing.
Chairman Luetkemeyer. Thank you, Mr. Cleaver.
And with that, we will begin our testimony. Today, we
welcome the testimony of Mr. Thomas Bledsoe, president and CEO,
Housing Partnership Network; Dr. Harris Beider, professor of
community cohesion at Coventry University in the United
Kingdom; Ms. Susan Popkin, senior fellow, and director of the
Neighborhoods and Youth Development Initiative, Metropolitan
Housing and Communities Policy Center at the Urban Institute;
Ms. Jaime Allison Lee, assistant professor of law and director
of the Community Development Clinic at the University of
Baltimore School of Law; Mr. Richard Gentry, president and CEO,
San Diego Housing Commission; and Mr. Greg Russ, executive
director, Cambridge Housing Authority.
Each of you will be recognized for 5 minutes to give your
oral presentation. And without objection, your written
statements will be made a part of the record.
Mr. Bledsoe, you are recognized for 5 minutes. Welcome.
STATEMENT OF THOMAS A. BLEDSOE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, HOUSING PARTNERSHIP NETWORK
Mr. Bledsoe. Thank you very much. Good morning, Chairman
Luetkemeyer, Ranking Member Cleaver, and other members of the
subcommittee. It is a great pleasure to be here and I
appreciate the opportunity to submit not just the testimony,
but also the report that we provided to Congress.
I am Tom Bledsoe, the president and CEO of the Housing
Partnership Network. We are a membership organization of a
hundred of some of the top nonprofits in the United States.
I am not going to go into the great depth that I went into
in my testimony given the time, but I did want to make five
points that I think would be kind of helpful and important.
First, a little bit of background on myself and the kind of
organization that I run and that I represent. I started in
local and State Government, was the head of the Mayor's Office
on Neighborhood Services in Boston, and then the Deputy
Secretary of the State Office of Communities and Development. I
learned a lot about government, what government can do, the
important role it plays.
I also learned what it had a hard time doing. And I think
the adage goes that government is--it is best to steer and not
to row.
I moved from government to run a public/private
partnership, a nonprofit called the Metropolitan Boston Housing
Partnership. It was created really as a new style of nonprofit.
It used a social mission, kind of the public mission that I
knew very well from government, but it worked very closely with
the private sector. And we used private sector business models
to try to bring flexibility and to be able to bring private
capital to bear to accomplish a public and social mission.
This particular organization I ran was formed in
partnership with the City of Boston and the private sector.
Bill Edgerly, chairman of State Street Bank, was the chairman.
We had very strong private sector, community, and governmental
involvement. It was really a partnership-style organization.
It hadn't existed before. And I think that model was really
embraced in a lot of other cities around the country.
We then played a role in helping form a network of these
organizations. They exist in a lot of your districts: Bridge
Housing out in California; Mercy Housing out in California;
Abode in Los Angeles; National Church Residences in Columbus,
Ohio; Homeport in my own City of Boston; and the Planning
Office of Urban Affairs, Community Builders, and Atlanta
Neighborhood Development Partnership in the South.
These organizations really embraced what I would call a
social enterprise model. Again, a social and sort of public
mission first that was driven by mission, but would very much
use private sector business models, and would operate at scale.
These organizations can partner with government to do
things that the public sector wants to get accomplished, but it
has a hard time leveraging the kind of capital and the
flexibility that we can do in the private sector.
So private sector, nonprofit organizations, but very
different than the small neighborhood CDCs and certainly a
little bit different than sort of public agencies.
The second point I would like to make is, why did we go to
the U.K.? We were having a lot of progress in the United States
growing these organizations, but we saw in the United Kingdom a
scale that we hadn't accomplished here. So we took a very large
group of our CEOs, our board is made up of our CEOs, we brought
them to the U.K. to explore the U.K. system. And we found a
number of important things.
We found a system that was much more scaled, where the
government invested in this delivery system and recognized it
as a counterparty that can get things done that it couldn't do
itself.
It had a model that allowed for portfolio flexibility,
bringing much more management efficiencies to bear and a way of
raising private capital that our project-based system, where
you are really focusing on the project rather than the
portfolio or the sponsor, had a harder time doing.
And the third thing is that they were very resident-
focused. Residents were central to their model. Decisions to
transfer stock, which you have referenced, Congressman Cleaver,
which was a very large way that they grew to scale, those
decisions were made by the residents themselves about whether
or not they wanted the housing transferred, and to whom they
wanted to transfer it.
And we found that our British colleagues, with whom we had
so much in common, focused more on the residents honestly than
we did because we were so caught up in assembling financing.
That said, we found real peers there and we built over 15
years a collaboration that has been very rich and enduring.
The network, in addition to doing these peer changes, is a
business itself. We have a set of companies that we run. We
have created an insurance company to insure 70,000 units of our
members' properties, which leverages capital from the private
sector. We now insure $7 billion worth of property.
We created a REIT using some of the portfolio models that
we saw in the U.K., which has now raised $140 million and is
assembling capital from major financial institutions and
foundations.
We created a procurement company creating a joint venture
with a British firm that had more expertise.
Now, why were the Brits interested in us? Well, they found
that in the United States because we didn't have this more top-
down, government-driven system, that we were much more
entrepreneurial. We worked with the private sector, we knew how
to leverage capital from the private sector. We were forced to
because the only way to assemble, as you know, resources in the
United States is to raise capital from all sorts of sources. So
they liked our entrepreneurship.
We have now taken some of those models and have made some
progress in the United States. I know you have seen some of the
work that the British have done. We have built portfolio models
in the United States that have been successful. We would like
to advance that further.
We think there are lessons that can be adopted from the
British, but there are also things that we do very well. And so
our view is that it is really a combination of the two systems
that makes the most sense. There is a convergence going on.
We look forward to working with you and figuring out what
best lessons to take. We have a set of policy recommendations,
I won't get into them now, but in questions and answers, if you
would like to talk about them, I would be glad to go into more
detail.
Thank you very, very much.
[The prepared statement of Mr. Bledsoe can be found on page
52 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Bledsoe.
Dr. Beider, you are recognized for 5 minutes.
STATEMENT OF HARRIS BEIDER, PROFESSOR, COMMUNITY COHESION,
CENTRE FOR TRUST, PEACE AND SOCIAL RELATIONS, COVENTRY
UNIVERSITY, UNITED KINGDOM
Mr. Beider. Mr. Chairman and members of the subcommittee,
thank you for inviting me to appear here today for this
hearing.
For the past 15 years, I have been conducting research on
housing community engagement and change, lately at Coventry
University, but also at Columbia University in New York City.
Previously, I led two national organizations in the U.K. In
addition, I have conducted two research projects comparing
housing and redevelopment initiatives in the U.S. and the U.K.
Affordable housing in the U.K. springs from the ethos of
the welfare state. Housing organizations have used their anchor
position with a city and neighborhood to organize training
programs to provide tenants with the skills necessary to
compete in the job market, have created social enterprises, and
have attracted private sector investment support and renewal.
These activities that focus on social investment have
sometimes been viewed as added value or housing-plus
initiative.
Private housing tenure and creating a property-owning
democracy have become key and shared political objectives both
in the U.S. and the U.K. Public housing has become stigmatized
in both countries, with the worst housing stock being
demolished and replaced with mixed-income and mixed-tenure
housing, while the national or Federal Governments have
encouraged housing organizations to become more efficient and
deliver a wider range of housing products with fewer resources.
There is prior significant research comparing affordable
housing in the U.K. and the U.S. Most notably, the public and
assisted housing sector in the U.S. is just under 2 percent of
total housing stock, while in the U.K. that figure is 16
percent.
In the U.S., public sector housing is characterized by
segregation in both race and income, while in the U.K. it is
characterized by income rather than race. In the U.K., living
in public housing is not as stigmatized as it is in the U.S.
And while mobility is guaranteed in the U.S. by a housing
voucher, in the U.K. mobility is characterized by credits paid
to individuals to use towards rental payments and programs such
as the right to buy which allow for the purchase of council
housing at deep discounts.
The right-to-buy policy was a concerted attempt to
deregulate and privatize the affordable housing sector. For
those who were successful, increasing levels of home ownership
led to capital accumulation. That was part of the
``Thatcherite'' revolution of the 1980s. However, it
contributed to a housing crisis when housing units were not
replaced and consequentially rents increased exponentially.
A few years before the HOPE VI program began in the U.S.,
the 1988 housing act was passed in the U.K. and was
transformative. In addition to introducing the concept of
borrowing to support the development and management of
affordable housing, local authorities now had an opportunity to
repair and renew their housing stock through a process of
large-scale voluntary transfer.
The process was underpinned by a number of factors,
including securing the support of the majority of tenants in a
secret ballot, transferring stock from the private local
authority to a private albeit not-for-profit housing
association, and attracting investment from capital markets to
repair stock.
By 2008, 1.3 million homes had been transferred from local
authorities to housing associations, 14 billion pounds had been
invested to repairing housing, and more than 2 million
residents had benefited from the process.
This process has reshaped social housing in the U.K. By
2015 there had been 300 stock transfers involving more than 200
local authorities, shifting over 1 million properties from the
public to the private sector. These new organizations now
account for 44 percent of the 2.7 million housing association
homes in the U.K.
Some housing advocates have criticized the policy as being
backdoor privatization of government assets and point out that
the focus of housing associations has shifted to working more
with finances than tenants, with the latter facing the prospect
of eroding housing rights, higher rents and less
accountability.
If you now turn to the housing and planning building
conclusion, the topic of housing in a general election and
affordable housing specifically was given a high profile during
the campaign. This led to debates about who should have access
to social housing and whether reliance on social housing led to
welfare dependency.
Some have suggested that the new government proposal
contained in the bill could lead to the death of affordable
housing. And indeed, the next leader of the housing association
lamented that the housing bill signals the end of the road for
truly affordable housing in England.
In conclusion, affordable housing continues to be an
important part of the housing equation in the United Kingdom.
Looking to the future, there is a risk that affordable housing,
as it has been known in the U.K., will cease to exist.
It should not be overlooked or underestimated how important
affordable housing can be to the stability of a person, a
family or a community, particularly as it relates to sustaining
employment.
Continued investment in affordable housing should be an
important component of a national housing policy alongside
other housing choices favored by many consumers and lenders.
Thank you.
[The prepared statement of Dr. Beider can be found on page
38 of the appendix]
Chairman Luetkemeyer. Thank you, Dr. Beider.
Dr. Popkin, you are now recognized for 5 minutes.
STATEMENT OF SUSAN J. POPKIN, SENIOR FELLOW, AND DIRECTOR,
NEIGHBORHOODS AND YOUTH DEVELOPMENT INITIATIVE, METROPOLITAN
HOUSING AND COMMUNITIES POLICY CENTER, URBAN INSTITUTE
Ms. Popkin. Thank you. Mr. Chairman and members of the
subcommittee, thank you for inviting me here today.
For the past 30 years, I have been researching how Federal
and local programs affect the lives of the most vulnerable
public housing residents. My testimony will focus on the United
States housing system.
The U.S. and the U.K. face similar challenges: rising
rents; and an aging stock of subsidized housing. Both countries
have gradually shifted toward more engagement with the private
sector.
In the United States, the Housing Choice Voucher provides
subsidies for tenants to rent units in the private market.
Private organizations own and manage deeply subsidized
properties through the Project-Based Section 8 program. And
private developers use low-income housing tax credit, LIHTC, to
build new, affordable housing.
However, there are fundamental differences. First, housing
in the U.K. is an entitlement and an essential part of the
safety net, and a far larger proportion of the low-income
households in the U.K. receive housing benefits and live in
social housing.
Second, the U.K. does not have the same legacy of racial
segregation and discrimination as the U.S. Because of this
legacy, much federally subsidized housing stock is located in
predominantly minority, chronically disadvantaged, high-crime
neighborhoods.
Federal housing assistance has evolved over the past 50
years, but substantial challenges remain to effectively serving
low-income families. The Housing Choice Voucher or Section 8
program was explicitly designed to shift housing provision to
the private sector. Those lucky enough to receive this
assistance clearly benefit from lower housing costs.
Living in decent, affordable housing and paying a lower
rent yields other important benefits as well. There is evidence
that poor families who receive vouchers are less likely to
double up or experience homelessness. They are also less likely
to face food insecurity and are able to spend more on their
children's educational enrichment.
But availability of U.S. Federal rental assistance falls
far short of needs. For every 100 low-income households
receiving Federal rental assistance, another 298 are eligible,
but are waiting for help.
The fundamental problem in the U.S. is that nationwide
rents have risen faster than incomes for a growing segment of
the workforce. This is primarily the result of widening income
inequality, with incomes rising much more slowly for low- and
moderate-wage workers than those in high-skill, high-wage jobs.
The gap between the ability to pay and rents in the
marketplace is particularly acute for the poorest households.
The Project-Based Section 8 program has also seen its stock
shrink over time. Almost no units have been added since the
early 1980s and units are being removed from this inventory as
owners opt out of the program.
LIHTC properties are developed by private sector housing
developers akin to the housing associations in the U.K., but
the LIHTC program does not require, nor does it provide
sufficient subsidies to allow rents to be capped at 30 percent
of a resident's income, so these units do not generally serve
the same deeply poor population as depend on public housing or
Federal housing subsidies.
The U.S. and the U.K. have also used similar approaches to
revitalizing their aging housing stock, but they differ
significantly in the level of government investment.
HOPE VI was the largest public housing transformation
effort in the United States. My research shows that it produced
important improvements in housing quality, community
conditions, and resident well-being, and produced fewer new
public housing units than were torn down.
In the U.K., the government provided much more generous
funding for the comprehensive redevelopments that occurred
there.
In the U.S., HOPE VI and now Choice Neighborhoods sites,
served only extremely low-income tenants and didn't have the
diversity of incomes that they had in the U.K. Funding for
resident services was relatively limited. And because of the
legacy of segregation and discrimination, U.S. developments are
located in more disadvantaged neighborhoods, meaning the
challenges to revitalization are higher.
Finally, RAD will bring new money into the system, but it
is too early to say how effective it will be in generating new
housing units or protecting the affordable housing stock.
Another question before us today is whether a home
ownership model, like the U.K.'s right to buy, could succeed in
the U.S. and help subsidized tenants move toward self-
sufficiency or help bridge the affordable housing gap.
The evidence from our research suggests that this approach
will not work well here, does not help build wealth, and in
fact could place low-income households at greater risk for
instability.
Right to buy in the U.K. has taken some of the highest-
quality units out of the supply of housing stock. It seems
likely the same could happen in the United States.
Privatization will not solve the fundamental challenge in
the United States. Rising inequality and rising rents mean the
need for affordable housing far exceeds the demand, leaving too
many households at risk for severe housing cost burdens,
instability, and homelessness.
Many of HUD's programs have proven their potential to help
address these challenges, but their scale and capacity falls
woefully short of what will inevitably be needed. Ongoing
improvements in program implementation and expanded scale would
be welcome.
An even more ambitious idea for eliminating homelessness
and housing hardship and advancing the potential of assisted
housing policy to improve the long-term life chances of poor
and vulnerable populations would take us closer to the U.K.
system, treating housing as an entitlement and an essential
part of the safety net.
I recognize that implementing these ideas would both be
costly and politically challenging, but I offer them as
conversation starters for HUD's next 50 years.
Thank you very much.
[The prepared statement of Dr. Popkin can be found on page
98 of the appendix.]
Chairman Luetkemeyer. Thank you, Dr. Popkin. That was very
close to 5 minutes, so thank you very much.
Ms. Lee, you are now recognized for 5 minutes.
STATEMENT OF JAIME ALISON LEE, ASSISTANT PROFESSOR OF LAW, AND
DIRECTOR, COMMUNITY DEVELOPMENT CLINIC, UNIVERSITY OF BALTIMORE
SCHOOL OF LAW
Ms. Lee. Chairman Luetkemeyer, Ranking Member Cleaver, and
members of the subcommittee, thank you for inviting me here
today.
I am Jaime Lee, assistant professor of law at the
University of Baltimore, and I published an article last year
entitled, ``Rights at Risk in Privatized Public Housing.'' And
before becoming an academic, I practiced in a private law firm
representing public housing authorities across the country who
were engaged in HOPE VI and other redevelopment activities.
So I appreciate your inquiry today about how to creatively
solve our affordable housing crisis. I do have concerns that
public housing rights are at risk in privatization and that
stronger enforcement is needed to carry out Congress' intent to
uphold constitutional values.
I am also concerned that there are certain legal tools that
can be used in privatization that can harm affordability and
also restrict access to public housing.
I will first discuss the rights. Public housing has some
very unique and important rights that are derived from the
Constitution and especially from due process. These include the
right to remain in one's housing as long as you abide by the
rules, the right to challenge harmful acts by your landlord
against you without having to go to court--you can do this
through an internal grievance process--and there is also the
right to participate, so to know about and to give input about
things that affect your housing, like, for example,
privatization.
So these rights I do think are at risk, and not at all
intentionally. To the contrary, Congress has actually mandated
that these rights be preserved in privatized public housing.
But reports from the field are that in instances across the
country these rights are being violated. So for instance, there
are--no one is supposed to lose housing under the RAD program.
But there are instances being reported of tenants being re-
screened under the RAD program.
In addition, information-sharing is also minimal in many
places. So people are finding it necessary to file local FOIA
requests in order just to get information, basic information
about what is happening under RAD, who the new owner is, are
rents going up, who is going to be required to move and when.
So I think one of the main problems is that legal
enforcement and monitoring is extremely weak for rights. And no
one is checking on whether these rights are being preserved.
In addition, legal penalties are very challenging to
exercise in the privatized context and so they have little
teeth.
And there is no market-like system for weeding out poor
performers for rights. Because low-income tenants don't have
any consumer power, don't walk away when there is a poor
performer.
Some ideas for better protecting rights might be an
explicit legislative mandate for HUD to enforce these rights,
more monitoring and transparency about how landlords perform,
and Congress can also give tenants the legal power to sue in
court for rights violations.
A second concern is that certain legal rules may lessen
affordability, especially if operating subsidies are
inadequate. So rents can be raised using certain legal waiver
authority, and affordability restrictions are actually
lightened considerably under RAD when a project performs
poorly. So both of these things could jeopardize affordability,
especially if funding is not enough to sustain a project.
A third concern is about who can access public housing. We
have seen a rise in things like stricter screening for new
tenants and stricter house rules which can be used to exclude
people who may be more challenging to house. But these may be
the people who are most in need of public housing.
So in sum, I respectfully encourage the consideration of
legislative changes to preserve constitutional values, to
preserve affordability, and to protect access to public housing
by those in need.
Thank you.
[The prepared statement of Ms. Lee can be found on page 82
of the appendix]
Chairman Luetkemeyer. Thank you, Ms. Lee.
Mr. Gentry, you are recognized for 5 minutes.
STATEMENT OF RICHARD C. GENTRY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, SAN DIEGO HOUSING COMMISSION
Mr. Gentry. Good morning, Mr. Chairman, and members of the
subcommittee.
My name is Rick Gentry. I am the president and CEO of the
San Diego Housing Commission. And thank you for asking me to
participate in this panel this morning.
I am in my 8th year as the CEO in San Diego, but I am in my
44th year in this industry, having begun as a HUD intern in
1972, and having included stints as the CEO of agencies in
Austin, Texas, and Richmond, Virginia.
My experience also includes 10 years in the private sector
with the Local Initiatives Support Corporation, and a LISC
subsidiary, the National Equity Fund in Chicago, which is the
Nation's largest syndicator of low-income housing tax credits.
My position there was to head up the asset management of our
inventory across the country.
I will also point out that I have done some extensive
travel, visits and work in the U.K. beginning in 1994, and have
spent some time in London, Liverpool, Manchester, Edinburgh,
and most recently delivering a paper on the San Diego model at
a national conference in Brighton, England in March of 2013.
So the mileage is there, and I appreciate being able to
participate with you this morning.
My experience and observation is that there are a number of
similarities, in thought at least, between the U.K. model and
the U.S. model. That similarity has much to do with the values
represented in the long-term tradition, that came down through
the Anglo-Saxon history from the U.K. to the U.S., of the
importance of the freedom of the individual and making sure
that the programs that are governmental reinforce individual
opportunities in both countries. And I think, to a great
extent, over the years that has been the case.
I also have pointed out in the paper that I delivered to
this committee for this meeting that I think there are a number
of differences between the two countries, particularly over the
past 60 years or so, that should be taken into account in
looking at similarities.
I would submit that following World War II, under the
government of Clement Attlee, the U.K. basically diverged from
its historical approach, and beginning in the 1980s began
coming back to more of an individual approach to the way social
housing services were delivered to the population.
And I will point out that in the 1980s, over 40 percent of
the population in the U.K. lived in council housing, their
version of public housing. In this country, never more than 1
percent of the population has ever lived in the formal public
housing program. Now, you add another 3 percent or so who live
in the current Section 8 Housing Choice Voucher program,
another 2 to 3 percent who live under the low-income housing
tax credit program, and another percentage or two under various
other programs, you still get a much smaller percentage of the
population in this country who have lived under formal,
subsidized programs like this.
The United States, following World War II, used FHA
insurance, a secondary mortgage market, namely Fannie Mae, the
VA insurance program, and other methods to create a great home
ownership network. And there were also other incentives that
encouraged and developed a private sector rental industry in
this country that is much, much smaller in the U.K.
And I would submit that the U.K.'s movement back to a more
individualized, local product fits in with the values of both
countries.
I will also point out that, as I noted in my paper, the
nonprofit housing industry in this country does have some
notably strong players. I pointed out in particular what is
going on in San Francisco right now with help for that agency
utilizing the private sector and nonprofit industry in the Bay
Area.
However, I would also point out that in most parts of the
country the public housing agencies are strong, operate good,
effective programs, and are good delivery systems. And my
contention would be that it is not the players of the game
frequently that are as important as the rules of the game are.
And if the rules are the same in the private sector and the
public sector, the public sector can compete and do well. That
is the case in San Diego.
I have pointed out in my paper a number of examples of the
San Diego model. I am not going to try to go into those here
today. It would be another probably 50 minutes rather than 5.
But I will point out that I think that the keys are latitude
and flexibility to make decisions on the local level.
And I will point out in closing a term that is in great use
now, not only in the U.K., but in the European Union, and that
is the principle of subsidiarity. And basically what
subsidiarity means is the decision should be made as close to
the local situation as possible and not remote from just a
centralized governmental point of view.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Gentry can be found on page
61 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Gentry.
And Mr. Russ, you are recognized for 5 minutes.
STATEMENT OF GREGORY P. RUSS, EXECUTIVE DIRECTOR, CAMBRIDGE
HOUSING AUTHORITY
Mr. Russ. Thank you, Mr. Chairman. And thanks to the
subcommittee for inviting me to speak today.
My name is Gregory Russ. I am executive director of the
Cambridge Housing Authority in Cambridge, Massachusetts. And my
spoken comments this morning I am going to divide into two
parts, a little bit of the technical geography of public
housing in the United States and items that do impact on how we
think about the system as a whole. And in the spirit of self-
reflection, looking at some of the things that we might be able
to do to make some fundamental changes there should that
opportunity arise.
One thing I want to point out to begin with, having read
the HPN report that was part of the committee materials, is
there are many ideas in that report that we really feel are
worth exploring. And I would suggest to the committee that our
only concern from the housing authority side is, whatever ideas
are tried be entity-neutral so that funding or other
opportunities are crossing platforms and we are not relying
necessarily on the type of tax entity that the land holder is.
In our case, we are a public agency and we are currently
high-performing and entrepreneurial. We are doing a complete
RAD portfolio conversion made possible, in large part, by
another program, Moving to Work. That is 2,500 public housing
units are being shifted off the public housing into the RAD
demonstration.
We have raised about $240 million in our first phase at
about a 16-to-1 leverage ratio of private equity contribution
to public money. We are using the low-income housing tax credit
program and have adapted that to our needs in Cambridge.
The reason we are doing this, and this is the first part of
the geography, is that the public housing program--and it is no
secret--is starved for capital. There is no strong means of
capital investment in this country now other than the low-
income housing tax credit.
In 2010, the need for capital was adequately documented in
a study that was presented to HUD, which estimated somewhere
between $26 billion to $30 billion in backlog need for public
housing. That is an enormous amount of money. And we have a
limited pool of tax credit equity available. And the
competition for that is heating up, especially in markets where
units are threatened and we need to preserve units. That is our
only source of capital, perhaps aside from some local money.
Two other things are important to remember when we talk
about reform that is fundamental to our system. The first of
those is that public housing authorities are State agencies;
they are created by State Governments. We spend Federal money,
but the enabling legislation belongs to the State of
Massachusetts or the State of Ohio, or pick one. And there are
significant powers invested in housing authorities in those
State-enabling legislations. And if there is to be deeper
reform, that will have to be considered by Congress as you go
forward.
The second item I want to mention is that all public
housing property is protected, in a sense, it is use-protected,
by a document called the declaration of trust. This is attached
to the land. And this protects the use, but also restricts the
financing.
One of our recommendations is, looking at the RAD model it
is possible to craft a strong and reasonably balanced use
agreement and replace the declaration of trust that allows us
to tap the assets' equity, if you will, and liberate the asset
while protecting the families that are there. This is precisely
what we have done in Cambridge.
We are using the RAD model to release the declaration of
trust. But we have embedded in our RAD program the lease, the
grievance procedure, the resident protections, and the rent
structures that are most familiar to public housing. And in
fact, when we filed our RAD application we did not have a
single resident or advocate objection to that and still do not.
And we think with care we could craft a use agreement that
would release the capital potential in any public housing
property.
There are a number of recommendations in the HPN report
that I found really interesting and intriguing: expanding the
capital magnet fund, which we would endorse, provided public
housing authorities could receive access to it as well, and the
creation of large-scale, voluntary transfers. We are doing a
portfolio shift with our RAD. There are ways to also allow that
to happen and still protect the underlying use of the property
for low-income families.
There are a number of other comments in my written
testimony that I have made to the committee, but I wanted to
thank you for this opportunity to speak to you today and I look
forward to a discussion on how we might advance public housing
as a platform in this country as well.
Thank you.
[The prepared statement of Mr. Russ can be found on page
110 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Russ.
With that, we will begin the questioning. And I will
recognize myself for 5 minutes.
Mr. Gentry, you had a statement in your written testimony
that said, ``I believe the United States traditional public
housing program is no longer viable in its current form to
continue serving the needs of low-income Americans. America's
traditional public housing program has been, since its
inception, a top-down, one-size-fits-all, centralized, command
and control program operated out of D.C. that is intended for
implementation uniformly across the country. The program as
structured is flawed and needs to be changed and a more
efficient use of taxpayer dollars to serve the housing needs of
low-income Americans.''
Can you give us some ideas on how you came up with that and
what we can do to fix it?
Mr. Gentry. I would be glad to. And it is a result of 44
years of observation of the program.
The public housing program is a one-size-fits-all program.
And my belief, having worked in this program literally all
across the country from Greensboro, North Carolina, to San
Diego, California, is you cannot make one program work the same
way in every locality, you probably cannot even from, say,
Columbia to Kansas City in Missouri.
And the San Diego model, I think, is one that bears
observation. We received approval from HUD in 2007 to convert
our public housing to a Section 8 Housing Choice Voucher
delivery system, from Section 9 of the Housing Act to Section
8.
We then promised HUD that if HUD were to approve that
action, we would keep the properties, we would dispose of no
properties at all, we would allow families to vote with their
feet and choose to remain in our properties or to move out.
About half of the families over the past 9 years have moved
out. We have replaced those families with other families below
80 percent of median income, elderly below 50 percent, and we
have made sure that the rent was an affordable rent that would
fit the marketplace.
We also utilized the equity in the ground in those
properties to create another $95 million in debt that we have
used to create an additional 810 units of housing.
So I think that what we have done in San Diego, a precursor
to RAD, if you will, has worked very well based on the San
Diego model. Would I implement it exactly the same way if I
were back in Richmond, Virginia? Probably not, I would do
something different, but I would do something that would fit
the locality.
Chairman Luetkemeyer. So basically what you are saying is,
if we give you more flexibility, you can probably design
programs to be able to help whatever locale you are in to be
able to do a better job of addressing housing needs. Is that a
fair statement?
Mr. Gentry. Yes, sir. And I would also add the flexibility
and accountability to make sure that the residents and the
taxpayers' resources are properly utilized.
Chairman Luetkemeyer. Very good.
Mr. Bledsoe, you were listening very intently whenever Ms.
Lee was talking about tenants having some problems. I noticed
in your testimony you were talking about the model that you
were looking at in Britain with the sort of transitioning from
the public sector or the private sector. There were boards that
were created within the housing authorities to be able to put
the tenants in charge of the building, so to speak, and that
would seem to address a lot of her concerns. Is that kind of
roughly what you were thinking?
Mr. Bledsoe. Yes, Congressman. I think in the U.K. they
will engage residents in making the decisions about what kind
of changes are appropriate. And if there is a desire to change
the management and the ownership, I wouldn't call it
privatization because it is not putting it into for-profit
entities that are driven more by profit, it is really focused
on the public mission still. But if you can put it into more of
a mixed entity, like the housing associations, like some of our
members really like San Francisco is doing, that decision is
made by the residents.
In the U.S. in the RAD program, that is not really the
case. So the residents aren't making that call. The U.K. has
done that and they have ensured that every resident who is in
their unit, at the existing model, council housing, gets to
stay in the new one.
Now, I think San Francisco has done some very interesting
things there with its RAD demonstration. It is guaranteeing all
the residents a right to come back and to stay in the homes
that are going to be revitalized. It has done a very engaged
tenant process to involve them in kind of the planning and the
design.
And they have also used a portfolio financing model that I
think reflects a lot of the approaches that we are arguing for.
Now, three of our members are partners in San Francisco doing
that RAD program.
So I think with some of the previous programs there are
concerns about whether residents have been able to come back. I
think the San Francisco model has sort of addressed that. But
we would certainly argue for as strong a resident engagement
and protection as possible in any of these programs.
Chairman Luetkemeyer. Very good, thank you.
My time has expired. With that, we go to the gentlelady
from New York, Ms. Velazquez, for 5 minutes.
Ms. Velazquez. Thank you.
And I want to thank the ranking member for yielding.
Ms. Lee, in your testimony you indicate that privatization
programs raise long-term affordability. How can RAD and other
privatization programs be strengthened to ensure housing will
remain accessible for those individuals and families who need
them the most?
And I would like Mr. Russ to also comment on that question.
Ms. Lee. Thank you, Congresswoman, for the question.
So long-term affordability can certainly be strengthened by
first of all just making sure that there is enough funding in
these programs. I think some of the major pressure to raise
rents and make things less affordable comes from insufficient
funding.
And we see there are legal options, under the RAD program
for example, that if a program is not doing well or out of
compliance that affordability restrictions could actually be
lifted or a significant number of them could be.
And so making sure there is funding and then making sure
that some of those legal rules that would allow rents to rise
and higher-income folks to be admitted into public housing,
some of those rules could be tightened.
Ms. Velazquez. Mr. Russ?
Mr. Russ. Thank you, Congresswoman.
The first observation is that in the current version of RAD
there are some pretty strong protections already baked in. One
observation we would have is that the use restrictions, the use
agreements run co-terminus with the housing assistance payments
contract. This is what you are paying the subsidy for. And
those contracts, in effect, compel the owner to renew.
So there is in effect a longer vision perhaps than the 15-
year tax credit period or 20 years, whatever, that is in the
current program.
In our program, we did two things, I think. We assured the
residents that the system of policies that they are familiar
with and their options through due process in our current lease
were carried into the RAD units. So if you are a resident in a
RAD unit you have a grievance procedure, that did not go away.
And I think the other thing is we spent a lot of time
engaging the community at large and our residents on the
capital deficits that we had at our properties. Once we
explained what those looked like and how we had to raise the
money, how we had to use the tax credits, we got folks used to
the idea that in order to raise this much capital we do have to
form a temporary partnership, not a permanent one with our tax
credit investor.
Ms. Velazquez. So we don't know, we don't have any report
as of yet of any of the demonstration projects that are in
place today, right?
Mr. Russ. I can only tell you about ours.
Ms. Velazquez. Yes.
Mr. Russ. But I know that HUD is doing an evaluation of the
program.
Ms. Velazquez. Okay.
Dr. Beider, while there are similarities, the experiences
with developing public housing in the U.S. and the U.K. are
different in significant ways.
In the U.K., as Mr. Bledsoe said, residents have been more
actively engaged in the redevelopment process and in decisions
about supportive services. What lessons can we in the United
States learn about the U.K.'s resident engagement methods that
might be applied here?
Mr. Beider. Thank you, Congresswoman. I think the U.K.
housing sector and certainly the affordable housing sector and
housing associations have had a long history of community
engagement. And that has been part of the vision and purpose of
social housing in the U.K. because it has been based on the
welfare state.
One of the things that has been really, really successful
in terms of the way that housing providers have engaged with
tenants is not just in terms of community engagement and having
tenants on the boards of housing associations, but the very
active ways that housing associations have engaged with both
local councils and the private sector to support social
enterprises in the U.K., therefore creating jobs and employment
opportunities, increasing people's confidence and esteem in
themselves as part of the staircase into better outcomes.
So I think creating social enterprises, engaging with
trained providers to skill-up housing tenants, who after all 70
percent of housing association tenants until recently have been
in receipt of some form of benefit, so they are low-income
communities. And a housing association, because it has fixed
assets, because it is embedded within a neighborhood, because
it has access to private finance and also because it can reach
out to other local stakeholders, has a big, convening role in
that.
Ms. Velazquez. Thank you.
I yield back. Thank you.
Chairman Luetkemeyer. The gentlelady's time has expired.
The gentleman from New Mexico, Mr. Pearce, is recognized for 5
minutes.
Mr. Pearce. Thank you, Mr. Chairman.
And with all due respect to our friends from the U.K., I
would remind the chairman that the last time the British took
this much interest in American housing in Washington they
burned the place down in the War of 1812. So I would have us
watch carefully.
But I really appreciate you being here, Dr. Beider.
My first question is in fact for you. So when I am looking
at page two--
Chairman Luetkemeyer. I remind him, this is a preemptive
strike, try and make sure it doesn't happen again.
[laughter]
Mr. Pearce. On page two, we have Ms. Lee saying in her
testimony that the government oversight of tenants' rights has
greatly diminished. But then also insufficient funding for
privatized programs is a significant concern for U.K.
providers.
That is sort of in contrast to your testimony in several
places. You mentioned the access to private capital, and
especially on page nine you are talking about being very
successful in raising private finances to support social aims.
Would you address the concerns that were raised by Ms. Lee?
Mr. Beider. Thank you, Congressman. I think Ms. Lee's
testimony is absolutely very interesting and there is a great
deal of truth in it.
I think one of the points I was raising in my testimony is
the way that housing associations as being not-for-profit
organizations have been very, very successful in raising
private investment. And that has to be set in the context of a
reduced government subsidy for housing associations.
To be frank, housing associations have had to have recourse
to private finance markets to do the job of building and
managing housing stock. The most important thing, I think, for
housing associations is that they are not-for-profit social
businesses. So even though they run on very much business
terms, they are not for profit, they are as much social as well
as businesses.
And I think that is one of the protections that housing
associations have in terms of veering too much into the private
sector.
The other thing I would just finally add on the importance
of the private sector is this. One of the big debates that is
happening in the U.K. at the moment is, to what extent should
housing associations continue to veer towards the private
sector?
There have been some concerns raised by tenants as well as
advocacy organizations that the balance is tilting too much to
the private sector as opposed to the not-for-profit sector. The
housing associations have or are regulated by the homes and
communitie's agency to make sure that they do fulfill their
aims.
Mr. Pearce. Okay.
Dr. Popkin, you had raised concerns about the viability of
the privatization. You have done probably as much study as
anyone on the panel, and so I am wondering if you have looked
at the privatization of military housing. That was something
that we did here in this country, some people say very
successfully, and other people don't have such high regard for
it.
Have you conducted research on that project? They replaced
maybe 80 percent of the world's military housing, U.S. military
housing, in a very short period of time. Some of the people who
are living in them are in my district and they are very highly
pleased with it. But have you had a study of the real processes
from a backdoor view?
Ms. Popkin. Thank you, Congressman. No, I have not, but I
am familiar with the research that was done on it. I don't
think I am expert enough to offer an opinion about it. I am not
concerned that we have private sector involvement. I think, as
similar in the U.K., we need more funding for the system, as
everybody is saying on the panel.
I am concerned about making sure that we protect the
housing for the very lowest-income tenants and that the private
sector tools we have don't serve them well.
Mr. Pearce. Okay, all right.
Mr. Russ, you have a lot of experience in kind of the
transition. Can you tell me sort of what rates of return that
investors are looking at in this market?
And the reason I am asking that is because there is a lot
of cash out there, a lot of money sits idle and it desperately
looks for 1 and 2 and 3 percent rate of return. So I am
wondering, as we are talking about this access to capital, what
sorts of rates of return do your privatization projects bring?
Mr. Russ. Congressman, let me frame it a little bit
differently, if I could, because the bargain we have struck in
order to make investments in low-income housing, we are asking
a private investor to put equity into these real estate
transactions. In exchange, they get a tax credit on the back
end of that they can then use to reduce their tax bill.
Mr. Pearce. I understand that, but--
Mr. Russ. So in their equity contribution, their return is
the credit.
Mr. Pearce. And what does that draw them? In other words,
what is--
Mr. Russ. We are getting really good pricing on the credit
because companies that are investing in this that are paying
taxes, our partner in the tax credit side is Wells Fargo. They
are the third-largest taxpayer in the country. So they told us
they would buy as many credits as they could.
Mr. Pearce. Yes, I am just wondering what sort of rate of
return--
Mr. Russ. I don't know their rate of return.
Mr. Pearce. Yes, it is--
Mr. Russ. Yes, but the second part of it is we have lenders
for both construction and permanent debt and they are getting
standard loan rates for that.
Mr. Pearce. Okay.
Thank you, Mr. Chairman. I see my time has expired.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we will go to the gentlelady from California,
Ms. Waters, the ranking member of the Full Financial Services
Committee, for 5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman, for holding
this meeting.
This is a very needed discussion. And I am very grateful
for the panel that is participating here today. And I am very
grateful for those who are helping us, who are here to help us
understand what is happening in the U.K. where access to public
housing is an entitlement.
Many of us have grappled with this issue for many years
now. I have lived through the HOPE VI program that was so
touted. And for those of you who remember Jake Kemp, this was
his number-one issue.
But let me just tell you and tell our panel, even though
you may have said it already, that HOPE VI demolished 98,000
units and brought back only 48,348. I have asked my staff
repeatedly, what happened to those people? Where did they go?
We don't have that information, but we know that homelessness
has steadily increased in this country and in places like
Atlanta where I think we had 6,418 original public housing
units and now I think we have about 2,256 public housing
households. So I think these numbers are correct.
But I guess what I am saying is this: Public housing is
absolutely needed in this country, as it is in the U.K. and
other places.
When we talk about privatization, whether we are talking
about HOPE VI or RAD or other ways by which privatization takes
place, privatization is there for one reason. People invest
money because they want to make money, they want to make a
profit from privatization.
When we talk about public housing, we know that along with
the actual, physical units you must have social services to go
along with it. And that cost is what the private sector does
not want to assume. Because when you provide the social
services, it reduces the amount of profit that the private
entities will be able to achieve.
And so entitlement is extremely important. The need is
extraordinary. In Los Angeles County, for example, last year,
at least 2015, homelessness had increased by 20 percent and in
Los Angeles by 12 percent. I don't know what the recent figures
are. But the complaints throughout our caucus are just
astronomical.
And so I believe that governments have to realize that this
is a real need and they are either going to assume the need and
responsibility for public housing or they are not going to do
it.
And I just want to tell you, the waiting list for Section
8, I believe right here in this area in Washington, D.C., is a
decade long. It is a 10-year waiting list here and all over the
country.
Now, I have heard a lot about privatization, I guess in the
U.K., that the residents have the opportunity to participate
and to influence and make decisions. That is not true here.
That is not true at all.
As a matter of fact, in L.A. County, they want not one
resident to serve on the County Board of Supervisors because
they control public housing. And they come to the Congress of
the United States to deny that one resident to sit with the
County Board of Supervisors, and the alternative is an advisory
board with no power.
This is unbelievable. In many other places, they patronize
the residents a bit, many of them handpicked by the mayor, the
politicians, what have you, and they will give them a trip to
Washington, D.C., and they put them up in a hotel and they
treat them nice and they take them home and they don't give
them a chance to vote on any policy at all.
So this is a serious issue. And we have been dealing with
it for many, many years.
And I am pleased to hear and I am just delighted to have
this hearing today because this is going to shed more light on
what we need to do in this country. And we either have to step
up to the plate or not. And for those people who think you can
get it on the cheap, or that somehow these waiting lists are
going to evaporate, this hearing helps us to understand that is
not going to happen.
The need is there. And until we recognize this and we are
prepared to deal with it, it is going to get worse and
homelessness is going to continue to increase.
I yield back the balance of my time.
Chairman Luetkemeyer. The gentlelady's time has expired.
The gentleman from Pennsylvania, Mr. Rothfus, is recognized
for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman.
Mr. Gentry, I want to touch again on your top-down, one-
size-fits-all, centralized command and control criticism of our
public housing programs.
As you may know, I recently joined Majority Leader McCarthy
and several members of this committee in introducing the Moving
to Work Reform and Expansion Act. This bill would expand Moving
to Work by allowing any public housing agency in good standing
to take part in the program. It also includes crucial reforms
to improve accountability and facilitate better analysis.
Your testimony credits Moving to Work with providing SDHC
with the flexibility necessary to implement transformative
programs that have improved outcomes.
Do you support the idea of expanding Moving to Work?
Mr. Gentry. The short answer is yes, sir. The longer answer
is I will support that bill with some technical changes to it.
Mr. Rothfus. Which outcomes do you consider when evaluating
the effectiveness of Moving to Work initiatives?
Mr. Gentry. Serving the needs of the community. I will give
you a good example that will tie back in with Ms. Waters'
comments a few minutes ago as well.
San Diego has in whole numbers the fourth-worst homeless
problem in the country, behind New York City, Los Angeles and
Seattle. And that is in whole numbers, not proportionate to the
population. And what we have been able to do with our Moving to
Work program is to exercise a great deal of local flexibility
with local discretion to address the needs of the homeless
greater than we would have absent Moving to Work authority.
So my belief is that Moving to Work should be available
eventually to every local housing agency in the country that is
not in troubled status, that it gives the kind of flexibility
where local decisions can be made.
Mr. Rothfus. One of the key themes of Moving to Work is
increased self-sufficiency. How do you measure self-
sufficiency? And how successful have you been in achieving it?
Mr. Gentry. As you note, in my paper I point out that we
established an organization called the Achievement Academy
within the San Diego Housing Commission, and we have utilized
the Achievement Academy to encourage work, work-related habits,
acculturation if you will, to increase greater degree of self-
sufficiency among our residents.
We believe that, as in all real estate operators, you have
amenities and the amenity that we try to offer our population
that is not elderly or disabled, of course, is the ability to
move into the economic mainstream.
We have been targeting not only residents, but the adult
children of residents and also the homeless population that we
serve as well.
Mr. Rothfus. Thank you.
Mr. Bledsoe, my district in western Pennsylvania is home to
a number of historically manufacturing and mining communities,
like Johnstown and Aliquippa, that continue to face significant
economic challenges, not unlike those of the north of England
and Scotland.
One of my major priorities as we look at housing reform is
to work with communities like these and provide them with the
policy tools necessary for self-empowerment and a return to
growth.
Considering lessons gained from the U.K.'s experience,
which policies are especially effective in addressing housing
affordability in communities where the industrial base has
contracted?
Mr. Bledsoe. Thank you, Congressman. We have a very active
organization in your district, Action Housing, based in
Pittsburgh. And actually, the CEO of that is our board chair.
So we are very familiar with that market and the challenges.
And the distressed communities still face a lot of economic
distress.
I think there are tools. A lot of the tools that we have
built in this country are really designed for stronger markets.
Weaker markets honestly need more equity, more patient capital.
One of the priorities of our organization is to develop
strategies that work in more depressed markets. We are doing
work in Cleveland, we are doing work in Detroit, places that
face different challenges.
One of the big issues obviously that has faced our country
has been foreclosure. And you know, one of the recommendations
we have in our report is around home ownership strategies. We
think there should be a greater reliance on organizations that
have more of a public mission, some of the nonprofits in our
network who have done a lot of work to address the foreclosure
crisis, instead of relying as much on Wall Street and firms
that are looking to flip properties, rather than to provide
long-term, stable housing opportunities for families.
The foreclosure crisis devastated a lot of communities. It
is still with us. Unfortunately, I think there is a backlog now
of properties that have been acquired by institutions that are
now going to come back onto the streets with some of the same
challenges.
So I know there has been real concern on this committee
about how to deal with some of those properties and some of the
communities devastated by foreclosure. I think there are some
lessons around the models that we have articulated in relying
on stronger, mission-driven organizations to acquire and to do
kind of long-term support for families living in those homes to
either preserve their homes or to kind of create opportunities
for lease purchase.
The British actually have some very interesting models
around shared ownership and strategies that are really designed
for weaker markets. So I think there are some things actually
we can learn from this experience.
But in particular, I think we have to look at different
delivery systems to address this than we have been relying on
more recently.
Mr. Rothfus. I see my time has expired. I yield back, thank
you.
Chairman Luetkemeyer. The gentleman's time has expired.
The ranking member of the subcommittee, the gentleman from
Missouri, Mr. Cleaver, is recognized for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman.
The HOPE VI project, which the ranking member talked about
it, is very interesting. I was a mayor when we did the HOPE VI
project, the first actual program HOPE VI was in Kansas City.
The first pilot project I think was in Atlanta.
But Mr. Bledsoe, it was based, in many ways, on a public
housing project in Columbia Point. I am assuming that is also
part of the Boston public housing. So, the way HOPE VI was
supposed to work, we would tear down the worst housing and then
replace it with mixed-income housing.
I am not sure that--well, we tore down Wayne Miner, which
was one of the notorious first housing projects in the country.
It is not dissimilar to Pruitt-Igoe in Mr. Clay's district.
And so the same issue that the ranking member raised is one
that still sits in Kansas City as a negative toward the HOPE
VI, which was, where are the people? Because if you tear down
Wayne Miner, you build these very nice--these are, if any of
you have seen the HOPE VI project in Kansas City, absolutely
beautiful. But then many of the residents of Wayne Miner never
moved into this mixed-income area.
I am curious about Columbia Point and where is it today?
Mr. Bledsoe. Columbia Point is now Harbor Point. I drove by
that on my bicycle. There is a beautiful little bike trail that
goes all around the harbor there and I drove by the Harbor
Point probably about a month ago. And it is a beautiful
community. So as a mixed-income development it has worked and
it has worked in a way that I think created a model for how
mixed income can be a better, more sustainable model for
residents and can create opportunities both for the community
as well as the residents.
I do agree with you, however, that in a lot of these
developments not all of the residents who lived there initially
are now enjoying that splendor. And so I think that is a
challenge for us.
The communities that have been built are beautiful, they
work for everybody who lives there, and I think they have
proven that mixed income, a range of incomes can live in the
same community and that kind of economic diversity is a
strength, not a weakness.
But there are folks who used to live in those homes who
haven't benefited. And I think that is a real challenge we
face.
And I agree with you, Congresswoman Waters, that is a
challenge in the HOPE VI programs.
I think that is something that, again, the lessons can be
learned from the British model because they have not done that.
And I think in some of the newer RAD examples, I believe in San
Francisco, there is much more of a commitment to making sure
that everybody who lives there now gets an opportunity to
remain and to be able to take advantage of sort of the new
community that is built.
I think that is fundamentally important. I think it is a
lesson that we have learned the hard way. And we have to take
stock of it.
It doesn't, to me, argue that we should not do mixed-income
housing because I think that is a very powerful model and it is
a strong model.
The one other thing I would say about Harbor Point and
going back to my friends at the end of the podium here who are
from the housing authority world, there are a lot of great
operators. There are for-profit operators that do a wonderful
job and that embody a lot of the same principles that are sort
of nonprofit, sort of social enterprise nonprofits incorporate,
and I believe actually that San Diego and Cambridge really
represent the same ethos that we have.
So there is a bit of a convergence going on in the system
between entrepreneurial housing authorities, like San Diego and
Cambridge, and the organizations in our network. I think we are
going to learn from that.
I don't think these are two different worlds. I think we
are converging and moving towards a model that can work better.
They are using nonprofits in the same way we are. We want to
use some of the models that they have demonstrated.
I do, though, believe that mixed income is a critical
component. It works better. We have to figure out a way to make
that work for a community, but to make sure that the residents
who are living in the communities that are revitalized get an
opportunity to move back or get a choice to live somewhere else
that might be better for them, but it is their choice, it is
not sort of the developer who then has to sort of re-certify in
the way that Ms. Lee sort of has raised concerns about.
Mr. Cleaver. I have another question, but maybe I will get
a chance with Ms. Lee before the hearing is finished.
Thank you, Mr. Chairman.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we go to the gentleman from Texas, Mr. Williams,
for 5 minutes.
Mr. Williams. Thank you, Mr. Chairman.
And thanks to all of you for being here today. And I want
to be on record that I believe in the private sector.
I think it is fair to say that America's affordable housing
system is broken. In reading some of the project reports that
we received before the hearing, the number of Americans who use
or are in need of public housing are staggering.
I think we can all agree that the status quo is no longer
acceptable and we should strive to want to offer a better
product to those Americans who most need it.
So my first question would be to you, Mr. Gentry. You
mentioned Austin, Texas, and Austin is in my district, by the
way.
The United Kingdom has made a conscious effort to fund
programs that transfer ownership and management of public
housing away from the government entities. Here in the U.S.,
for example, we have 3,000 public housing agencies that manage
some 1 million public housing units.
So my first question is, do you believe that the private
sector could fulfill the role of public housing authorities in
serving low- and very-low-income families?
Mr. Gentry. In some circumstances, yes, sir; in some, not.
I think it would depend on the locality, the ability of the
local agency to perform and what other options are available.
Mr. Williams. Okay. And in talking to some of our local
housing authorities in Texas, I know programs exist that
encourage working families or individuals to eventually
graduate or leave public or assisted housing programs. Do you
believe this is a model that works well?
Mr. Gentry. Yes, sir, I do. I will point out, too, that
there is one group of individuals who typically are not
involved in this discussion, and that is the folks on the
waiting list.
I will point out that in San Diego we have right now in our
largest program about 15,500 Housing Choice Vouchers, and we
have 60,000 families on the waiting list for that. And the wait
for that is close to 10 years to get in, as Ms. Waters pointed
out a while ago.
And I think one of the best ways to create a unit of
affordable housing is to help a family graduate and move out of
it, which is the reason we try to promote an individual
family's economic self-sufficiency through our Achievement
Academy. And I think we have had a fair amount of success in
accomplishing that.
Mr. Williams. Good. What tools do we need to give our local
housing authorities that will allow them to run programs that
encourage residents to eventually graduate from public and
assisted housing? Because I believe that giving individual
programs flexibility and allowing them to innovate is probably
a good model.
Mr. Gentry. I think the funding that has been available in
the past for a program called the Family Self-Sufficiency
Program, money that comes from HUD, has been very useful to us
in accomplishing that.
And I also think that in San Diego the flexibility we have
had because of our Moving to Work status has allowed us to use
relatively more of our funding for training, for acculturation,
for job training, for job fairs to help people move up and out.
And I think it is that sort of attitude, if you will, that
we need to promote. And that is that in some cases families may
be in the housing for some time, and others we help the family
move on, up and out as quickly as they are able to.
Mr. Williams. Thank you.
Mr. Russ, you talked about the Moving to Work demonstration
program that gives participating public housing authorities the
flexibility to design and test innovative strategies for
providing and administering housing assistance in their
communities.
How successful have Moving to Work agencies been in
attracting private sector funding to their projects?
Mr. Russ. I think on balance, those of us who are engaged
in preservation or revitalization have been very successful in
attracting private capital.
I think I mentioned earlier that our leverage rate is about
$16 private to $1 public thanks to the tax credit program. And
I believe there are probably a number of MTW agencies that,
internal to the way MTW works, help them negotiate financial
arrangements that are beneficial in the sense that they can
bring more money to their units.
The flexibility that program has across your different
budget programs, if I will, allows a housing authority to
present itself in a different way to a financial institution or
other potential investor if you are seeking to attract private
capital.
Mr. Williams. Real quick, what lessons have been learned
from Moving to Work efforts to attract more private sector
funding in public housing that could be replicated more
broadly?
Mr. Russ. I think being able to demonstrate that you have
an adequate bottom line and that both in terms of the operating
budget that you have, and we often use MTW funds to supplement
some of our weaker sites.
But I think the other thing that the private investors are
looking for is, do you have reserves? And I know that is not a
good word in a lot of circles here. But properties need a
reserve commitment and MTW properties or housing authorities
are better able to do that, I think.
Mr. Williams. Thank you for your testimony.
I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
The gentleman from Missouri, Mr. Clay, is recognized for 5
minutes.
Mr. Clay. Thank you, Mr. Chairman.
And I thank you and the ranking member for holding this
hearing.
Let me ask, maybe Dr. Popkin or someone else on the panel,
what is the average length of stay of public housing tenants or
families, what is the average length?
Ms. Popkin. Nationally, I think it is 2 to 4 years.
Mr. Clay. Two to 4 years. And then they usually transition
to--
Ms. Popkin. People go on and off. It is harder in tighter
markets, and where the housing is more distressed you get
tenants who have been there for 10 or 20 years or more. So it
varies a lot. But nationally, the figure is 2 to 4 years. I
think it is shorter on the voucher program than it is in public
housing.
Mr. Clay. I see.
And Mr. Bledsoe, one of the recommendations of the Housing
Partnership Network report is to expand the Family Self-
Sufficiency Program which helps provide families with the
resources they need to build wealth, find employment, pursue
education, and more.
It seems that despite the program's proven success, it has
remained limited in scope due to a lack of funding. Would you
agree?
Mr. Bledsoe. I would. This responds to Mr. Williams'
question as well, which I think there has been some expansion
of the Family Self-Sufficiency Program and project-based rental
assistance. It has been done on an annual basis by the
Appropriations Committee.
We strongly support making that permanent and would hope
this committee would consider expanding and making permanent
the Family Self-Sufficiency Program before project-based rental
assistance.
There are two components of that. One is the service
support and the service coordinators. The other is the
incentive that it creates for family to save and the wealth
that they can build as they are building skills, building
education.
Our proposal has been that we will figure out as charitable
organizations how to raise the money for the service
coordinators. What we want is the mechanism that creates the
incentive for residents who live in project-based assistance,
which will be a lot of the RAD programs, as properties convert
into project-based rental assistance, that we want those
incentives that would encourage individuals to work, encourage
them to get training and skills.
We think that the incentive there and the cash that can be
saved has really proven a very, very strong incentive. And
families who come out of that program with $6,000 or $7,000 of
wealth building.
So that started in public housing, it has been expanded,
but we think that it is now time to make it permanent on the
project-based side, not have it subject to an annual
appropriation as it has been in the last 2 years.
But we are willing as nonprofits to try to raise the
support that the families need for the service coordinators.
But we just need the mechanism so that as your income goes up,
there is not a discouragement to work and a discouragement to
get the training.
Mr. Clay. Thank you for that.
Mr. Gentry, in San Diego, homelessness is a major issue
that has been receiving a lot of attention. Does flexibility
under MTW allow you to better serve the homeless?
Mr. Gentry. Absolutely, it certainly does. And I will give
you a couple of examples. We have utilized some efficiencies in
our Moving to Work program to create capital that we have
invested in properties, two of them. One is the old Hotel
Churchill, which is a 101-year-old property that we are
completing construction on next month which will house 72
homeless veterans. I would invite you to come to the dedication
ceremony which will be sometime in early August.
Mr. Clay. San Diego is a wonderful city to visit.
[laughter]
Mr. Gentry. And another property--Greg, you can come, too--
we were able to acquire is a 130-unit complex for the elderly
at a price of about $15 million for 130 units. We have set
aside 20 percent of those units for elderly homeless folks.
Ms. Waters. Will the gentleman yield?
Mr. Clay. Yes, I yield.
Ms. Waters. Thank you very much. In San Diego, you have a
population of 1.356 million. You privatized 1,366 public
housing units, and in all of San Diego you have 189 units left.
Mr. Gentry. That is accurate with one correction. We
privatized nothing. Those 1,366 units that were formerly
subsidized under Section 9 of the housing act, the housing
commission continues to own, still have vouchers in them.
The other families have made their choice to live elsewhere
with the vouchers. We have actually created more affordable
housing by changing our subsidy system than we had before.
Nothing got privatized, respectfully.
Mr. Clay. I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we go to the gentleman from Kentucky, Mr. Barr,
for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman.
And thanks to our witnesses for your testimony. I
appreciate hearing about the potential opportunities for
studying the model for affordable housing in the United Kingdom
and seeing whether or not a transfer away from government-owned
public housing to a model that invites more private capital
could actually expand access to affordable housing
opportunities for many low-income and poor Americans.
We know that what we have been doing in the past 50 years
has failed. Because over the last 50 years, HUD has spent over,
gosh, $1.6 trillion plus, Congress has appropriated over $1.6
trillion to support public funding housing programs, and yet we
still hear from both sides of the aisle about the waiting lists
for Section 8 vouchers within our communities.
We know the statistics of 46 million Americans who are
struggling in poverty today without access to the best housing
opportunities. And so we know that throwing money at this
problem, from the taxpayer, has not been a policy that has
resulted in optimal outcomes.
Let me just anybody on the panel who might know the answer
to this question, what is the backlog of unfunded capital
needs, maintenance, repairs, rehabilitation that is needed for
all public housing in the United States today?
Mr. Russ?
Mr. Russ. In 2010, HUD had a private contractor conduct a
study that sampled, I believe, close to a million units. And
their estimate in 2010 was that number was around $26 billion.
Mr. Barr. Right. So $26 billion of unfunded liabilities
within existing public housing stock in the United States. What
is the appetite within the private sector for and what is the
capacity within the private sector to address that existing
shortfall?
Mr. Russ. Let us think about what the vehicle is. The
vehicle is the tax credit program. That is it. You have a
modest amount of capital funding that the Congress appropriates
each year, but that number is just completely inadequate for
the need that we have described.
So that number, the $26 billion or $30 billion it might be
now, that is constrained by the amount of tax credits that any
public housing entity could obtain to preserve its housing.
And we are using tax credits extensively in Cambridge and
we have managed to raise a good bit of money with it. But I
still have half to do. So that pool is really the single-
largest pool of equity investment for these kinds of units that
we have.
Mr. Barr. So to Mr. Bledsoe and Mr. Beider, in addition to
maybe expanding, updating the low-income housing tax credit,
explain a little bit more, amplify your testimony as to how a
more mission-driven, non-profit, social enterprise organization
model really built on the voluntary transfer-type programs that
we saw in the United Kingdom could supplement the invitation of
private capital back into the affordable housing space?
Mr. Bledsoe. It is an enormous challenge. And I think Mr.
Russ is correct that the low-income housing tax credit as the
exclusive vehicle for this is going to come up woefully short.
There is not enough tax credit to do the work that we want to
do without addressing the public housing stock. And this is a
really priority need, so there is a shortage, there is a
shortfall.
One of the examples I would give is I mentioned that we
have created a real estate investment trust, or REIT. It is the
first REIT that is actually owned by nonprofits, a social
purpose REIT.
We have now raised $140 million of equity from the private
sector. There was a question of what kind of returns should be
given. We are providing preferred equity opportunities to
investors and we are giving them a 4\1/2\ percent preferred
return. So that is new capital that has come into the system.
They are investing in it honestly because of the capacity
of our organizations.
Mr. Barr. And my time is expiring, so if I could just
quickly rotate to Mr. Gentry.
What would be the impact on public housing authorities to
have to compete for allocations of Section 8 or public housing
dollars with private, not-for-profit, faith-based or mission-
driven organizations?
Mr. Gentry. I think the key is the economic driver. As Ms.
Waters pointed out a while ago, in the U.K. there is a housing
benefit which is an entitlement. And you take money, you put it
with need, that turns the need into demand and the marketplace
meets it.
I think the issue is that the public sector has been
starved for money and has had rules and regulations that have
added more duties onto it.
I think that with the rules being the same in both sides,
you see an equivalence of ability.
Mr. Barr. My time has expired. But I think the idea of
competition will help both the public housing and authorities
and these social entrepreneurship opportunities as well to
provide affordable housing.
Thanks for your testimony, and I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
The gentleman from Texas, Mr. Green, is recognized for 5
minutes.
Mr. Green. Thank you, Mr. Chairman.
I thank the ranking member as well.
And I would like to thank Mr. Russ for your latest
commentary. I haven't heard all of your message today. I have
been attending to other things. I had a Floor message to give.
But I thank you for what you said about the underfunding of
public housing because this gets to the heart of the issue, the
lack of a commitment from Congress.
I literally am very reluctant to say that the system is in
need of repair, that it is in a broken condition, because my
fear is that the cure may be worse than the condition. My fear
is that what we may do as a result of this hearing will
ultimately cause us to find less public housing available than
what we have today because of the lack of commitment.
I was with the ranking member when we went to Louisiana
after the hurricane. And I remember her hue and cry was a
constant one. It was, will there be a one-for-one replacement
of units as they are demolished and as better units are put on
the market? Will there be a one-for-one replacement? That has
always been the issue.
And then the issue also becomes, why don't we track those
who don't get back into these new facilities? Why don't we
track them? Why don't we know what happened to them?
We can track a person across the globe without that person
knowing it. We were able to find Osama bin Laden without him
knowing it, without the Pakistani government knowing it. We can
track people if we want to, the technology is there, the system
is there, the methodology is available to us. We choose not to
track because then we would find out the truth. And the truth
is something we don't want to face, the lack of commitment to
public housing.
If we had the same commitment to public housing that we
have to carried interest, to protecting carried interest, I
assure you we wouldn't be having this hearing.
If we had the same commitment to public housing that we
have to the yield spread premium, or had to it, we had to
eliminate it in Dodd-Frank, but if we had the same commitment,
we wouldn't be having this hearing.
If we had the same commitment that we have to protecting
those who invest my money when I am a pensioner and allow the
investor to decide that he will invest my money in something
that costs more when a similar product is available for less,
no fiduciary rule, if we had the same commitment to this public
housing as we have to elimination of the fiduciary rule, we
wouldn't be having this hearing.
There is a lack of commitment. And it doesn't matter how
great the plan is. If you are not committed to the plan, the
plan becomes another plan that did not work.
There are countries with greater constitutions than the
United States. Ours is a great Constitution. But on paper there
are other countries that have constitutions that are greater.
But they are not committed to their constitution. This is the
greatness of the American Constitution. The people are
committed to our Constitution.
And until we on this committee become committed, all we
will do is find clever ways to rearrange the chairs on the deck
of the sinking Titanic, find clever ways to demolish,
eliminate, and improve neighborhoods, but in the process put
people into the streets.
The greatness of this country will never be measured by how
we treat people who live in the suites of life. The greatness
of any country is measured by how you treat people who live in
the streets of life. How do you treat people who are homeless,
not how you treat those who live in the penthouses, who want
all the breaks, not how you work hard to make sure they
continue to get all of the advantages in life.
There are people who are suffering and we choose to spend
our time making sure billionaires have better opportunities.
That is the flaw and the fallacy in all of this. And until
we decide we are going to commit ourselves to people who don't
necessarily vote and who don't make big campaign contributions,
all of this will continue to be an exercise in futility.
But I am going to be a part of the exercise and I am going
to fight for those people who are homeless and locked out and
left out and left behind.
I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
The gentleman from California, Mr. Royce, is recognized for
5 minutes.
Mr. Royce. Thank you very much, Mr. Chairman. I appreciate
that.
And I thank the witnesses for being with us today.
The success of the affordable housing program should be
judged, I think, on outcomes and how it is helping Americans
get back on their feet, not necessarily by the amount of
taxpayer dollars spent.
HUD has a program, Moving to Work. It is a pilot program,
and I think it fits the bill of a success in this regard.
And in my district, the housing authority of the County of
San Bernardino oversaw an annual 24.6 percent reduction of
unemployed household heads and a 52.4 percent average income
jump for those participating in the MTW program there.
So Mr. Gentry, the difficulties facing those seeking
affordable housing in southern California--what has the San
Diego housing commission's track record with MTW been? And how
does localized control of funding allocation, as is more
commonplace in the United Kingdom, contribute to efficiency?
Mr. Gentry. I think the Moving to Work program has been
essential to what San Diego's success has been. As I indicated
a few minutes ago, we have been able to utilize savings from
efficiencies in the Moving to Work program to better address
homeless services. We have been able to focus on our families
to increase the level and degree and type of work the families
do.
It is Moving to Work. One of our successes is getting more
families to work. It has been absolutely essential.
It is also the public housing transformation that we have
done has helped, as well. Because I think that part of what we
need to do is to make sure that our residents, as much as
possible, have the same choices in life as those who are not
residents of public housing or in a Section 8 program, and that
is live where they want to live and work where they want to
work and associate with whom they want to associate.
So we think that our program has been very useful in
helping people increase their choices and to increase their
economic station in life as well.
Mr. Royce. Thank you.
And I will go to Mr. Russ, too. Because Mr. Russ, you
testified to both the success of the Moving to Work program,
but also how, and I will quote here, ``The current public
housing system, including HUD itself, rationalizes structure
and process over social outcomes.''
Is the reluctance of HUD to expand the Moving to Work
program an example of this philosophy?
Mr. Russ. I guess I will start by saying I think that this
is a really good program and I have a bias towards MTW since we
are an MTW agency. And I would say there are a couple of
factors at work.
The first is, when you receive an MTW designation, the
relationship you have with the department is fundamentally
altered. You have an agreement and that agreement has value and
meaning in the sense of a contract. And in that relationship,
there is more of a peer relationship with the department than
not. And frankly, that doesn't always sit well in terms of how
the department's rules and regulations and many of those things
are promulgated.
And at times, in my own view, there is a lack of
understanding of the MTW agreement itself. It is a very
powerful document.
Mr. Royce. I think it is a win-win.
Mr. Russ. I would agree with you. But the reluctance is
that you have this fear that somehow by giving a locality this
designation--
Mr. Royce. Yes.
Mr. Russ. --it would turn in the wrong direction.
Mr. Royce. It is decentralized.
Mr. Russ. Yes.
Mr. Royce. And there might be some concern of the
decentralization. It is, of course, flexible. But I think at
the end of the day it is time to advance this from a pilot
program to a more expansive.
We have had 20 years of demonstrations, but we have
communities obviously that could really utilize the program.
I have lent my support to H.R. 5137, which is the Majority
Leader Kevin McCarthy's bill, the Moving to Work Reform and
Expansion Act. And I would hope that the agency itself could
get behind this concept and we would have a bipartisan support
for it for the reasons that I cited earlier. The percentages
that I have seen on this indicate it is very, very effective.
But I thank the witnesses very much.
And Mr. Chairman, thank you for holding the hearing.
Chairman Luetkemeyer. I thank the gentleman from
California.
The gentleman from Michigan, Mr. Kildee, is recognized for
5 minutes.
Mr. Kildee. Thank you, Mr. Chairman. I thank you, I thank
the ranking member for holding this hearing, and I thank the
witnesses for your attendance.
And I wonder if I could perhaps start with Mr. Bledsoe. I
would like to pose a couple of questions that maybe you would
all comment on.
But in your testimony, you refer to some of HPN's
recommendations and particularly around the Family Self-
Sufficiency Program. The reason I ask that, and I would like
you to couch this, perhaps any of you who would like to
comment, in the context of weak markets.
I come from Flint, Michigan, but I am not going to go too
far into describing Flint. I think the story sort of tells
itself.
The concern that I have and what I would like you to
address in that context is that a lot of the discussion when it
comes to housing deals with housing in its form as a commodity
or on a transactional basis, trying to figure out how to make
the transactions work better, where a subsidy should go, what
form it should take, et cetera, et cetera.
The context, I think, is very often lost. The context in
the sense that the individuals accessing housing need more than
housing in order to become successful, the self-sufficiency
efforts, I think, are woefully inadequate in order to deal with
it from a family perspective.
And of course, the larger context of community is often
lost. Something that looks like it can work in a transactional
basis might not work for the family. And when we see especially
in distressed communities, and I am thinking of the north of
England where you have had significant population loss, or
places like my hometown, or Detroit, where frankly, a one-for-
one replacement on demolition doesn't make any sense at all
because we are building in an oversupplied market.
If you could comment on the lack of support for holistic
community development efforts so that the context around
whatever form publicly supported housing takes is more
successful and the need for more specific support for families.
And if we could start with Mr. Bledsoe, but I would open it
up to others, particularly Mr. Beider, who might want to
comment in terms of the distressed communities particularly in
the north of England that have had population loss.
Mr. Bledsoe. Thank you very much, Mr. Kildee. And we have
admired your work prior to Congress, your work in Congress as
well, but in leading the Land Bank. We are very familiar with
the challenges in Flint.
I mentioned earlier that we have now launched a nonprofit
development company in Detroit called Develop Detroit because
that is a market that has a real need for redevelopment, but
organizations that have grown up in other parts of the country
that are like our members never really thrived in Detroit. And
we are taking some of the models that exist in other places and
working with the city to build a nonprofit development company
there that can address some of the unique challenges.
I say unique, but they are not. The scale in Detroit is
unique, but the challenges in weak markets are similar and they
are very different than strong markets.
I think one of the lessons we have certainly learned
working with groups in St. Louis and Cleveland and markets,
parts of Chicago, Detroit, is that housing by itself is not the
answer. Housing in those markets is important, but you need a
comprehensive approach that deals with the schools, that deals
with safety, that deals with health and education, deals with
jobs.
So I think in weaker-market communities, you need a
comprehensive approach. If you are in San Francisco, there is
just an acute affordable housing shortage and you can kind of
focus on that.
Now, they have school challenges, they have other
challenges, I am not saying they don't but you can think of it
a little bit more as a transaction.
Though I think fundamentally, housing is a platform that
helps families succeed and it is a way to connect them into
community and give them access to health and education, jobs.
But that is particularly the case in communities like Flint,
and St. Louis, places that--it is a comprehensive problem.
So I think family self-sufficiency is just one way of
thinking about not just the housing itself, but the people who
live there and how you can connect them into other services and
opportunities kind of in the neighborhood.
You need to be addressing the school challenges, you need
to be addressing the whole comprehensive needs for it. So I
think you are spot on. It is a different problem. It is
something that is apparent everywhere, but it is just striking
in a community like Flint, that you can't just be thinking
about doing a housing transaction and you think that is going
to solve it.
Housing, I think, there still is a foundation there, but
you need to be thinking about ways to connect that family into
other supports in that community. And that is why I think
things like family self-sufficiency can be so important.
Mr. Kildee. Thank you.
Thank you, I see my time may have expired. So thank you,
Mr. Chairman.
Chairman Luetkemeyer. I thank the gentleman from Michigan.
The gentleman from New Jersey, Mr. Garrett, is recognized
for 5 minutes.
Mr. Garrett. Thank you, Mr. Chairman. I may not use the
entire 5 minutes.
Let me begin by thanking the chairman for holding this
hearing, for this discussion that we have had, and I know you
are one of the most knowledgeable guys here on this topic and I
look forward to your legislation proposals coming out of this.
I think, Mr. Bledsoe, your point is where I was just going
to tee off on. What we can do to address the issue of housing
is fundamental to the issue of the strength of a community?
If someone is being compassionate for another individual,
it is by them showing concern for that other individual,
whether they have a roof over their head, that old saying of
someplace to hang your hat. But it is so much more than simply
where you are hanging your hat. It is where you are able to
live, marry, raise your family, and have roots in the
community. It goes to the points of the other gentlemen and you
sort of capsulized it well. Send your kids to school and have a
sense of community.
That all begins, not ends, in saying, well, this is my
home, whether that is a house I buy or that is a house that I
am renting, but realizing I have protections and the
wherewithal to be able to be in that house as well. It all
begins there.
To facilitate that then, you have to look--and to realizing
we have problems in this area, you have to look to say, well,
what are some of the problems that we need to address? I have
heard a couple of them, I agree with some, I disagree with
others.
I have heard we need to address income inequality, funding
the model, which is the appropriate model, some models that we
have in the United States versus models overseas, and the third
point, third or fourth, however you are counting, no one has
addressed and that is the regulatory side. And I will get into
that in a minute.
Dr. Popkin raised the issue that one of the fundamental
problems is income inequality. I have said this before in this
committee, we can end income inequality in this country today
if we just pass a law that says the top 1 percent in this
country has to leave tomorrow. You would see the charts again
show income inequality has been erased.
But that has done absolutely nothing for the middle-income
and the lower-income people. They will still not be able to
afford that house just because you got rid of the top 1 percent
or the top 5 percent income earners or wealthiest people in
this country. They will still have the problem of trying to
afford and the daily costs of the upkeep and what have you. So
it is not income inequality.
If you had said tomorrow that the builders and the
investors who see there is a profit margin in building the
3,000, 5,000, 10,000 square-foot home, because there is a
larger profit, is there not, in those homes that they can't do
that, will that force them all then to build low- and moderate-
income housing? No, not necessarily, they will just look to see
whether there are other, better investment vehicles for their
avenues.
So I think Mr. Russ was addressing some of those needs that
you need to do to help entice and tax changes and what have you
in order to say this is an investment vehicle that you can
actually make a profit, and profit is not a dirty word, and
still provide a benefit to the community, as Mr. Bledsoe and
others have said, which is housing. So it is not income
inequality.
Funding and lack of investment, I think, is where the--and
different models, I think, is where the chairman wants to go on
this.
The third or fourth point which no one really talks about
is, why is housing so expensive in the first place? And when I
talk to builders, they tell me, well, there are a couple of
things there, Congressman. One is the cost of land and that is
tied to trying to actually find a place where you can build
low- and moderate-income housing or any housing and the cost of
land as regulatory size pushes that up.
The other is basically the cost of regulation for building
these houses in the first place. And I know in my State, I
remember a study done years ago, and they said around 30-plus
percentage of the cost of building some of these places is the
regulatory side of the equation.
So I only have a few seconds left. Has anyone looked into
that equation, whether it is on a State or the Federal level,
as to whether the regulatory side is driving up the cost and,
therefore, making the low- and moderate-income?
Mr. Gentry seems to be nodding his head.
Mr. Gentry. Yes, sir. Let me refer you to the housing
commission's website, which is sdhc.org. We have conducted a
study that is posted on that website, that we delivered to a
city council committee in December--
Mr. Garrett. Yes.
Mr. Gentry. --that posted 11 drivers of high costs for
affordable housing.
Mr. Garrett. Okay, good.
Mr. Gentry. Eight were city-focused, two were focused in
Sacramento, and one here nationally. I would refer you to that,
sir. I would be glad to speak with you about it anytime you
want to.
Mr. Garrett. I appreciate that.
And my time up, I guess, Mr. Chairman.
Chairman Luetkemeyer. I thank the gentleman.
With that, our hearing is at an end.
I thank all of the witnesses for being here today, for your
testimony, and for your answers to some difficult questions.
You have given us a lot of food for thought and we appreciate
your expertise and your knowledge and willingness to share it
with us.
We will continue to work with each one of you to hopefully
craft some things, some solutions to look at ideas, to perhaps
add flexibility to existing rules and regulations or put
together a pilot project of some kind. Who knows, wherever we
can find ways to improve the housing situation in this country,
I think that is what we need to be taking a look at.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
And with that, this hearing is adjourned.
[Whereupon, at 11:55 a.m., the hearing was adjourned.]
A P P E N D I X
May 12, 2016
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