[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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