[Senate Hearing 114-659]
[From the U.S. Government Publishing Office]
S. Hrg. 114-659
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2017
=======================================================================
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
ON
H.R. 5394/S. 2844
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2017, AND FOR OTHER PURPOSES
__________
Department of Housing and Urban Development
Department of Transportation
Nondepartmental Witnesses
__________
Printed for the use of the Committee on Appropriations
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__________
U.S. GOVERNMENT PUBLISHING OFFICE
98-771 PDF WASHINGTON : 2017
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COMMITTEE ON APPROPRIATIONS
THAD COCHRAN, Mississippi, Chairman
MITCH McCONNELL, Kentucky BARBARA A. MIKULSKI, Maryland,
RICHARD C. SHELBY, Alabama Vice Chairwoman
LAMAR ALEXANDER, Tennessee PATRICK J. LEAHY, Vermont
SUSAN M. COLLINS, Maine PATTY MURRAY, Washington
LISA MURKOWSKI, Alaska DIANNE FEINSTEIN, California
LINDSEY GRAHAM, South Carolina RICHARD J. DURBIN, Illinois
MARK KIRK, Illinois JACK REED, Rhode Island
ROY BLUNT, Missouri JON TESTER, Montana
JERRY MORAN, Kansas TOM UDALL, New Mexico
JOHN HOEVEN, North Dakota JEANNE SHAHEEN, New Hampshire
JOHN BOOZMAN, Arkansas JEFF MERKLEY, Oregon
SHELLEY MOORE CAPITO, West Virginia CHRISTOPHER A. COONS, Delaware
BILL CASSIDY, Louisiana BRAIN SCHATZ, Hawaii
JAMES LANKFORD, Oklahoma TAMMY BALDWIN, Wisconsin
STEVE DAINES, Montana CHRISTOPHER MURPHY, Connecticut
Bruce Evans, Staff Director
Charles E. Kieffer, Minority Staff Director
------
Subcommittee on Transportation and Housing and Urban Development, and
Related Agencies
SUSAN M. COLLINS, Maine, Chairwoman
RICHARD C. SHELBY, Alabama JACK REED, Rhode Island, Ranking
LAMAR ALEXANDER, Tennessee BARBARA A. MIKULSKI, Maryland
MARK KIRK, Illinois PATTY MURRAY, Washington
ROY BLUNT, Missouri RICHARD J. DURBIN, Illinois
JOHN BOOZMAN, Arkansas DIANNE FEINSTEIN, California
SHELLEY MOORE CAPITO, West Virginia CHRISTOPHER A. COONS, Delaware
BILL CASSIDY, Louisiana BRAIN SCHATZ, Hawaii
STEVE DAINES, Montana CHRISTOPHER MURPHY, Connecticut
THAD COCHRAN, Mississippi, (ex
officio)
Professional Staff
Heideh Shahmoradi
Lydia Collins
Gus Maples
Rajat Mathur
Jason Woolwine
Dabney Hegg (Minority)
Christina Monroe (Minority)
Nathan Robinson (Minority)
Administrative Support
Jordan Stone (Minority)
C O N T E N T S
----------
HEARINGS
Thursday, March 10, 2016
Page
Department of Housing and Urban Development: Office of the
Secretary...................................................... 1
Wednesday, March 16, 2016
Department of Transportation: Office of the Secretary............ 67
Wednesday, September 21, 2016
Department of Housing and Urban Development: Housing Vulnerable
Families and Individuals: Is There a Better Way?............... 127
Wednesday, November 16, 2016
Department of Transportation: The Automated and Self-Driving
Vehicle
Revolution: What is the Role of Government?.................... 199
----------
BACK MATTER
List of Witnesses, Communications, and Prepared Statements....... 259
Subject Index.................................................... 261
Department of Housing and Urban Development.................. 261
Housing Vulnerable Families and Individuals: Is There a
Better Way?............................................ 261
Office of the Secretary.................................. 261
Department of Transportation................................. 262
Office of the Secretary.................................. 262
The Automated and Self-Driving Vehicle Revolution: What
is the Role of Government?............................. 263
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2017
----------
THURSDAY, MARCH 10, 2016
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:30 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Susan M. Collins (chairman)
presiding.
Present: Senators Collins, Boozman, Capito, Daines, Reed,
Murray, Schatz, and Murphy.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. JULIAN CASTRO, SECRETARY
opening statement of senator susan m. collins
Senator Collins. The subcommittee will come to order.
Today we welcome both Secretary Castro, who will testify on
the President's fiscal year 2017 budget request for the
Department of Housing and Urban Development (HUD), as well as
Inspector General Montoya, who will discuss not only his
office's budget request but also the oversight and other work
the Office of Inspector General (OIG) has conducted at HUD. I
look forward to hearing from both of you.
I am pleased to be joined today by our ranking member,
Senator Jack Reed, a fellow New Englander, as we begin our
subcommittee's work on the fiscal year 2017 appropriation. When
offsetting receipts from the Federal Housing Administration
(FHA) and Ginnie Mae are excluded, the President's request is
nearly $49 billion, an increase of nearly $2 billion and 4
percent above the fiscal year 2016 enacted level. It's
important for us to remember that this request does not exist
in a vacuum. It must be considered in the broader context of an
unsustainable $19 trillion debt.
The budget cap for non-defense discretionary spending
government-wide is essentially the same for fiscal year 2017 as
it was for 2016. This subcommittee in particular has to cope
with the central truths about HUD's budget that are present
every year.
The cost of simply renewing existing rental assistance,
which consumes 84 percent of HUD's overall budget, will
increase, and, as FHA returns to its countercyclical role,
offsetting receipts will decline.
In addition to the constraint of needing an additional $1.4
billion just to renew existing rental assistance, the
subcommittee again must deal with the uncertainty of how much
on offsetting receipts will be credited from FHA's mortgage
insurance premiums.
The Office of Management and Budget's (OMB's) score of
receipts is $2.8 billion above fiscal year 2016. Good news to
be sure, however, we must keep in mind that the Congressional
Budget Office's (CBO's) baseline score for fiscal year 2017 is
more than $400 million below current levels and $2.7 billion
below the OMB's assumptions, an enormous discrepancy. Until the
CBO finishes scoring the President's budget, prudence dictates
that we assume the lower level as we review HUD's request.
In an environment where the top line remains flat, the
increase of 4 percent over current levels proposed in the
President's budget would be extremely challenging.
Yet rather than submit a budget request that seeks to bend
the cost curve of rental assistance without doing so on the
backs of low-income families and seniors, the Administration
proposes new spending of $750 million above what is needed to
maintain existing rental assistance, plus an additional $11.3
billion in new mandatory spending that lacks an offset and,
frankly, is simply a gimmick to evade the current budget
agreement.
Yet despite all of the additional spending requested, the
Administration inexplicably once again proposes a $200 million
cut to the Community Development Block Grant (CDBG) program.
Well, just this week, mayors and other community officials
were in town, and I can tell you that one of their top
priorities is the CDBG program, because it remains one of the
most adaptable and welcomed community and economic development
and job creation programs, because it can be tailored to meet
the unique need in each State.
In addition to my concerns regarding the proposed funding
levels, I believe that it is critical that HUD continue to
invest in the effective oversight of the management and
physical condition of its assisted housing stock. It must
provide technical assistance where needed, and it must take
action implementing sanctions where appropriate.
Neither residents nor taxpayers are well served when poor
conditions are allowed to continue. I am troubled to read about
egregious examples of poor housing quality in States such as
Tennessee and Florida, and I'm aware of similar problems in my
home State of Maine.
But I am even more troubled to learn that some of these
properties initially received passing inspection scores from
HUD before public outcry compelled a second look. It is
inexcusable that vulnerable residents are ever placed into
substandard housing with serious violations, but it is doubly
offensive when the taxpayers are subsidizing these unfit units.
This is the final budget request of this Administration,
and is a good opportunity to reflect not only on the
disappointments or shortcomings but also on what we have been
able to accomplish working together. I am particularly proud of
what we have been able to do to reduce the number of people who
are homeless.
Since 2010, investments made by this Committee have led to
a 36-percent reduction in the number of homeless veterans,
chronic homelessness has declined by 22 percent, and homeless
families by 19 percent.
While we cannot yet point to meaningful reductions in youth
homelessness, I believe that the targeted funding we just
approved in December will bear fruit. We can point to improved
communication among Federal agencies and targeted funding to
better assess the number and needs of homeless youth as well as
the effectiveness of current programs targeted to these
vulnerable people.
Improved coordination among agencies and at the local
level, especially in the context of coordination with the child
welfare system, is still needed, and that's why I've joined
several of my Senate colleagues in leading the effort to
reauthorize the Runaway and Homeless Youth and Trafficking
Prevention Act, as well as to introduce the Family Unification,
Preservation, and Modernization Act.
I will continue to work with Senator Reed and others on
this subcommittee to ensure that we respond to the housing
needs of these vulnerable children and teenagers.
Finally, Senator Reed and I will be introducing a bill this
afternoon to reform the Housing Opportunities for Persons with
AIDS Program so that the formula no longer counts deceased
individuals.
And yes, you did hear me correctly. The current formula
actually counts people who are no longer living. Currently, 55
percent of the HIV and AIDS cases used in the formula represent
people who have passed on. A formula change is very much needed
to ensure that the scarce resources available are directed to
communities most in need of assistance today.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
The subcommittee will come to order. Today we welcome both
Secretary Castro, who will testify on the President's fiscal year 2017
budget request for the Department of Housing and Urban Development, as
well as Inspector General Montoya who will discuss not only his
office's budget request but also the oversight and other work the OIG
conducted at HUD. I look forward to hearing from each of you.
I am pleased to be joined today by our Ranking Member, Senator Jack
Reed, as we begin the subcommittee's work on the fiscal year 2017
appropriation for the Department of Housing and Urban Development. When
offsetting receipts from F.H.A. and Ginnie Mae are excluded, the
President's request is $49 billion, an increase of nearly $2 billion
and 4 percent above the fiscal year 2016 enacted level. This request
does not exist in a vacuum and must be considered in the broader
context of an unsustainable $19 trillion debt.
The budget cap for non-defense discretionary spending government-
wide is essentially the same as fiscal year 2016. This subcommittee, in
particular, has to cope with the central truths about HUD's budget that
are present every year: the cost of renewing existing rental
assistance, which consumes 84 percent of HUD's overall budget, will
increase, and as F.H.A. returns to its countercyclical role, offsetting
receipts will decline.
In addition to the constraint of needing an additional $1.4 billion
just to renew existing rental assistance, the subcommittee again must
deal with the uncertainty of how much offsetting receipts will be
credited from F.H.A.'s mortgage insurance premiums. OMB's score of
receipts is $2.8 billion above fiscal year 2016. Good news to be sure,
however, we must keep in mind that CBO's baseline score for fiscal year
2017 is more than $400 million below current levels and $2.7 billion
below the OMB's assumption, an enormous discrepancy. Until CBO finishes
scoring the President's budget, prudence dictates that we assume the
lower level as we review HUD's request.
In an environment when the top line remains flat, the increase of 4
percent over current levels proposed in the President's budget would be
extremely challenging. Yet rather than submit a budget request that
seeks to bend the cost curve of rental assistance without doing so on
the backs of low-income families and seniors, the Administration
proposes new spending of $750 million above what is needed to maintain
existing rental assistance, plus an additional $11.3 billion in new
mandatory spending that lacks an offset and is simply a gimmick
intended to evade the current budget agreement.
Yet, despite all of the additional spending requested, the
Administration once again proposes a $200 million cut to the Community
Development Block Grant program. The CDBG program remains one of the
most adaptable and welcomed community and economic development and job
creation programs that can be tailored to meet unique needs within each
State.
In addition to my concerns regarding the proposed funding levels, I
believe it is critical that HUD continue to invest in the effective
oversight of the management and physical condition of its assisted
housing stock. It must provide technical assistance when needed, and it
must take action implementing sanctions when appropriate.
Neither residents nor taxpayers are well served when poor
conditions are allowed to continue. I am troubled to read about
egregious examples of poor housing quality in places such as Tennessee
and Florida and am aware of similar problems in my home State of Maine.
But I am even more troubled to learn that some of these properties
initially received passing inspection scores from HUD before public
outcry compelled a second look. It is inexcusable that residents are
ever placed into substandard housing with serious violations, but it is
doubly offensive when the taxpayers are subsidizing these unfit units.
This is the final budget request of this Administration and is a
good opportunity to reflect not only on the shortcomings but also on
what we have accomplished together. I am particularly proud of what we
have been able to achieve in reducing the number of people who are
homeless. Since 2010, investments made by this Committee have led to a
36 percent reduction in the number of homeless veterans; chronic
homelessness has declined by 22 percent; and homeless families by 19
percent.
While we cannot yet point to meaningful reductions in youth
homelessness, I believe the targeted funding we just approved in
December will bear fruit. We can point to improved communication among
Federal agencies and targeted funding to better assess the number and
needs of homeless youth as well as the effectiveness of current
programs targeted to these vulnerable young people. Improved
coordination among agencies and at the local level, especially in the
context of coordination with the child welfare system, is still needed.
That is why I joined my Senate colleagues to lead the effort to
reauthorize the Runaway and Homeless Youth and Trafficking Prevention
Act, as well as to introduce The Family Unification, Preservation, and
Modernization Act of 2015. I will continue to work to ensure that this
Subcommittee responds to the housing needs of these children and
teenagers.
Finally, Senator Reed and I will be introducing a bill this
afternoon to reform the Housing Opportunities for Persons with AIDS
program, otherwise known as HOPWA, so that the formula no longer counts
deceased individuals. Currently, 55 percent of the HIV and AIDS cases
used in the formula represents deceased individuals. A formula change
is very much needed to ensure the scarce resources available are
directed to communities most in need of assistance today.
Mr. Secretary, I hope you will commit to working with us on this
important bill, and I look forward to hearing from you and Inspector
General Montoya. I now turn to Senator Reed for his opening statement.
Senator Collins. Mr. Secretary, I look forward to working
with you on this important bill, and to hearing from you and
the inspector general. It now gives me great pleasure to turn
to the ranking member, Senator Reed, for his opening statement.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Madam Chairman. It has
been a pleasure working with you as the ranking member and in
so many other ways.
And we've worked together for many years, even before our
assignment together on this subcommittee, and I'm pleased and
delighted that today we're joining to introduce the Housing for
Persons with AIDS Program. As you pointed out, the formula must
be corrected, and your leadership is going to make that change
effective.
We've also worked for many years together on lead-based
paint in our housing stock, and that's another critical issue
that effects our constituents, not just ours, but across the
Nation. And Mr. Secretary, I know you share many of our
concerns, and we look forward to working with you on these
issues and many others.
Welcome to the subcommittee. Thank you for your years of
service. And you have shown a great deal of leadership
advocating for families in need and the importance of ending
homelessness. Thank you for that.
Let me also welcome David Montoya, who will be joining us
for the second panel. David, you have served as HUD's inspector
general since 2011. You bring a great wealth of knowledge in
HUD's financial management performance, and we look forward to
your testimony.
Today, as the chairman pointed out, we are here to discuss
the fiscal year 2017 budget request for the Department of
Housing and Urban Development. The Administration's
discretionary budget request for HUD is $49 billion, nearly $2
billion more than fiscal year 2016. But this increase in
spending is based on very optimistic Federal Housing
Administration receipts, as the chairman pointed out.
As you are aware, these receipts are fundamental to HUD's
budget request, and changes to these receipt levels in a year
of tight budget constraints can mean the difference between
maintaining current programs and literally cutting services.
I am concerned that the request assumes $2.3 billion more
in FHA receipts than in 2016, however, as again, the chairman
intimated, CBO indicates that we could be looking at $400
million less in receipts than in 2016, leaving your budget
request with a $2.7 billion gap.
As we all know too well, just last year we were faced with
another threat of cuts to every budget through sequestration.
We avoided that through great leadership, and particularly,
Senator Collins and others.
But we have a responsibility to not only maintain our
rental assistance programs, our home programs, but as you
suggested, budget to expand programs that are necessary to the
quality of life for many, many Americans.
Your proposal purports to do both, maintain our equities
with respect to rental housing and other programs that are
existing and also to provide enhanced choices, particularly for
low-income Americans, in their housing. But if we're faced with
cuts to the FHA receipts and do not have an increase in
budgetary resources, it'll be very challenging to meet these
dual objectives.
I support many of the proposals which you're advancing
today. They include more than $40 billion to maintain HUD's
rental assistance program to continue the support for nearly
500 million households, it's absolutely essential; combined
$112 million in new vouchers and rapid re-housing assistance
for families with children, again, a very critical program; $15
million to assist families who want to move to high opportunity
areas, this is an issue that I think is one we have to address;
and $200 million to revitalize HUD-assisted housing through the
Choice Neighborhoods initiative.
This program has been very effective in my home State
you've been kind to visit, both in Woonsocket, Rhode Island,
and Olneyville, a part of Providence. You want to address in
the budget homelessness, and this is one of the areas where
Senator Collins has taken a tremendous leadership role,
increasing the Continuum of Care Program by $414 million, as
you want to do in your budget.
These projects, all of them, are extremely important, and
we want to work with you to find a way to get them done. And
while the request includes new targeted investment in
homelessness on the discretionary side, it also assumes
significant investment on the mandatory side.
Nearly $11 billion in mandatory budget authority is
requested over 10 years to end homelessness with children by,
we hope, 2020. And while this mandatory request to fulfill the
Administration's homeless goals is unlikely to be enacted given
the present climate, I applaud the vision.
But I'm concerned that these broad investments do not
include funding for a program that has proved essential, that's
the HUD-Veterans Affairs Supportive Housing (HUD-VASH)
vouchers.
Mr. Secretary, there are still veterans experiencing
homelessness in this country, and I'd like to understand why
the Administration did not include HUD-VASH in its request for
the second year in a row.
Overall, what we have in front of us today is a budget
request that emphasizes housing choice and opportunity for the
many American families that struggle to meet their day to day
needs. Our elderly, our disabled, working poor, they all
deserve a fair chance at affordable and decent housing.
There are more than 400 parents and children in Rhode
Island who remain homeless and deserve a place to call home.
Our veterans also, as I point out, have fought to protect this
country, they, too, deserve this opportunity. We're obligated
to figure out the best and most cost-effective ways to address
these needs, and Mr. Secretary, that is why you're here today
to explain the budget and to work with us going forward so that
we can achieve these objectives.
And thank you, again, Madam Chairman.
Senator Collins. Thank you very much, Senator Reed.
I want to give, since we don't have a huge number of
members with us today, I want to just check to see if either
Senator Daines or Senator Boozman have any opening comments, or
whether you're content to wait. Thank you.
Secretary Castro, the floor is yours.
SUMMARY STATEMENT OF HON. JULIAN CASTRO
Secretary Castro. Thank you very much, Chairman Collins, to
Ranking Member Reed, and the members of the subcommittee. It
really is an honor to appear before you today to discuss with
you HUD's proposed budget for fiscal year 2017.
The President understands that expanding access to quality
and affordable housing will put more Americans on a path to
prosperity, and our budget honors his commitment to promote
inclusive opportunity for all Americans.
This proposal comes at a time of great momentum for our
Nation's economy. Over the past 6 years, businesses have added
14.3 million new jobs, the longest streak of private sector job
growth on record. And now, our challenge is to provide every
person with the chance to share in this promise. And at HUD,
that starts with helping more folks to secure a safe and
affordable place to call home.
Today, a quarter of American renters spend more than half
of their incomes on housing. And too many families are forced
to cut back on food, on health care, and other basic
necessities just to put a roof over their heads. That's why the
President's budget proposes to increase HUD's funding to $48.9
billion, $1.9 billion over the enacted level for fiscal year
2016.
As you noted, Chairman, between 84 and 85 percent of our
budget would go solely toward renewing rental assistance for
nearly 5.5 million households. But we've also taken strong
steps that maximize our remaining resources to achieve bold
goals, such as ending homelessness in America. We've made great
strides in the 6 years since President Obama introduced his
Opening Doors initiative, and the best example of this, a 36-
percent decline in veteran homelessness between 2010 and 2015.
I want to thank you, Chairman, and Ranking Member, and all
of the members of this committee for your continued support of
HUD-VASH. The success proves that, by working together, we can
fully fulfill the President's vision, and we can help the next
generation to escape the cycle of homelessness.
HUD's Family Options Study shows that rapid rehousing and
housing choice vouchers are the most effective solutions for
families with children experiencing homelessness, so we've
asked for a historic $11 billion investment in mandatory
spending over the next 10 years that will use these tools to
assist approximately 550,000 families.
HUD is also committed to empowering Americans through
housing mobility. We've requested $20.9 billion for our housing
choice voucher program, an increase of $1.2 billion from the
enacted level for fiscal year 2016. This would provide 2.2
million families with the chance to move into neighborhoods
with better schools, safer streets, and more jobs, and to stay
there for the long term.
But HUD's mission extends beyond housing mobility. Too many
communities remain segregated by race and by income, and too
many Americans see their futures limited by the ZIP Code where
they were born. So HUD's proposed budget makes vital
investments in underserved communities.
It contains $200 million for Choice Neighborhoods, which
helps transform areas of concentrated poverty by creating
quality mixed income housing, improving public safety, and
sparking growth for local small businesses. And $50 million is
requested for our rental assistance demonstration program to
help make crucial repairs in 25,000 units of HUD-assisted
housing.
We're also taking decisive action to protect children from
the dangers of lead-based paint. We've requested $110 million
for our Office of Lead Hazard Control and Healthy Homes and
$2.07 billion for public housing administrative fees, which can
be used by PHAs to, among other things, increase inspections
and ensure property owners control lead hazards. And we're
improving our policies to mirror the CDC's lead safety
guidelines.
Finally, the President knows that many Native communities
face significant barriers to opportunity, so this budget asks
for $780 million to improve housing and development on Native
American lands, including $20 million for youth programs like
community centers and Head Start facilities. And we continue
our commitment to providing safe, affordable homes through our
Native Hawaiian Housing Block Grant Program.
The President's budget advances a fundamental belief, that
all Americans deserve a fair shot at achieving their dreams. I
look forward to working with this committee to fulfill this
mission and to use housing as a powerful platform to spark
greater opportunity for the American people. Thank you.
[The statement follows:]
Prepared Statement of Hon. Julian Castro
Thank you, Chairman Collins and Ranking Member Reed, for this
opportunity to discuss how HUD's fiscal year 2017 budget proposal
follows the roadmap the President has laid out for jumpstarting our
economy through educating, innovating, and building. This Budget
targets our investments to the families and geographies that need them
the most, and puts more Americans back to work.
HUD's Budget is an essential component of the President's vision of
investing in the things we need to grow our economy, create jobs,
increase skills training and improve education, while continuing long
term deficit reduction. Our request maintains assistance to low-income
families currently served by HUD programs, expands assistance to
targeted vulnerable populations, including the homeless and Native
Americans, and revitalizes neighborhoods with distressed HUD-assisted
housing and concentrated poverty. HUD's work is critical to the
Administration's efforts to strengthen communities, bolster the
economy, and improve the quality of life of the American people.
Overall, the President's Budget provides $48.9 billion for HUD
programs, an increase of $1.9 billion above the 2016 enacted level.
This spending is offset by projected receipts of $10.9 billion.
Increases are provided to protect vulnerable families, make significant
progress toward the goal of ending homelessness, and support community-
centered investments, including funding to revitalize neighborhoods
with distressed HUD-assisted housing and concentrated poverty. This
budget is built on rigorous research and evidence of what works,
providing flexibility and investing in strategies that have been proven
to pay dividends for families and communities.
the fiscal year 2017 hud budget
Provides Opportunities for America's Most Distressed Neighborhoods
to Revitalize and Increase Economic Growth.--The Budget provides $200
million for Choice Neighborhoods to continue to transform neighborhoods
of concentrated poverty into opportunity-rich, mixed-income
neighborhoods. This funding level will be used to revitalize HUD-
assisted housing and surrounding neighborhoods through partnerships
between local governments, housing authorities, nonprofits, and for-
profit developers. Preference for these funds will be given to
designated Promise Zones--high-poverty communities where the Federal
Government is working with local leadership to invest and engage more
intensely to create jobs, leverage private investment, increase
economic activity, reduce violence and expand educational
opportunities. To further support Promise Zones, the Budget includes
companion investments of $128 million in the Department of Education's
Promise Neighborhoods program and $24 million in the Department of
Justice's Byrne Criminal Justice Innovation Grants program, as well as
tax incentives to promote investment, jobs and economic growth.
The Budget proposes $300 million in mandatory funds for a new Local
Housing Policy Grants program. This program will provide grants to
localities and regional coalitions to support new policies, programs or
regulatory initiatives that create a more elastic and diverse housing
supply, and in turn, increase economic growth, access to jobs and
improve housing affordability. These funds will support a range of
transformative activities in communities across the Nation that reduce
barriers to housing development, increase housing supply elasticity and
affordability, and demonstrate strong connections between housing,
transportation, and workforce planning.
Supports Strategic Infrastructure Planning and Investments To Help
Make America a Magnet for Jobs.--HUD is committed to ensuring that its
core community and housing development work contributes to more and
better transportation choices; promotes equitable, affordable housing;
helps communities address the lingering neighborhood impacts of the
foreclosure crisis; and aligns Federal policies and funding to remove
barriers to local collaboration. The Budget provides $2.8 billion for
the Community Development Block Grant (CDBG) formula program, and
proposes reforms to better target CDBG investments to address local
community development goals. The budget also provides $950 million for
the HOME Investment Partnerships Program to help State and local
governments increase the supply of affordable housing and expand
homeownership opportunities for low-income families.
Protects the Vulnerable Recipients of HUD Rental Assistance and
Makes Progress on the Federal Strategic Plan to End Homelessness.--The
Budget includes $20.9 billion for the Housing Choice Voucher program to
help about 2.2 million low-income families afford decent housing in
neighborhoods of their choice. This funding level supports all existing
vouchers and adds 10,000 new vouchers to the program, targeted to
families with children experiencing homelessness. The Budget also
includes $10.8 billion for the Project-Based Rental Assistance program
to maintain affordable rental housing for 1.2 million families, and
provides $6.4 billion in operating and capital subsidies to preserve
affordable public housing for an additional 1.1 million families.
The Budget provides $2.7 billion for Homeless Assistance Grants,
$414 million above the 2016 enacted level. The increased funding will
enable HUD to maintain existing projects, fund the increased
competitive renewal demand for Continuums of Care in fiscal year 2016,
and create 25,500 beds of permanent supportive housing for chronically
homeless persons to reach the goal of ending chronic homelessness in
2017. In addition, the Budget includes 8,000 rapid rehousing
interventions for households with children, which will support the goal
of ending child, family and youth homelessness by 2020, and $25 million
in new projects targeted to homeless youth.
In addition to the targeted requests for homeless families with
children above, the Budget requests $11 billion in mandatory funds for
vouchers and rapid rehousing to end family homelessness. Approximately
550,000 families will be supported over 10 years to stabilize their
housing and assist them to become more self-sufficient. This proposal
is based on rigorous research and will give families the right support
at the right time to promote better outcomes.
Improves Mobility Through the Housing Choice Voucher Program.--The
Budget provides $2.1 billion in Public Housing Authority (PHAs)
administrative fees using a new evidence-based formula that not only
more accurately reflects the actual cost of running the program, but
ensures that PHAs have sufficient resources to provide low-income
families greater access to opportunity areas. In addition, the Budget
requests $15 million for a new mobility counseling demonstration that
is designed to help HUD-assisted families move and stay in higher-
opportunity neighborhoods. A portion of the funding will also support
an evaluation to measure the impact of the counseling pilot to further
inform the policy process and design.
Puts HUD-Subsidized Public and Assisted Housing on a Financially
Sustainable Path.--Public housing authorities (PHAs) house over three
million families. To bring our rental housing system into the 21st
century and continue to address the $26 billion in public housing
capital needs, the Budget includes proposals that would facilitate the
conversion and preservation of additional Public Housing and other HUD-
assisted properties under the Rental Assistance Demonstration (RAD). At
the same time, the Budget provides $50 million for a targeted expansion
of RAD to Public Housing properties in high-poverty neighborhoods and
requests authority to convert Section 202 Housing for the Elderly
Project Rental Assistance Contract properties to Section 8 platforms.
Improves the Way Federal Dollars are Spent.--The Administration
supports legislation to modernize the Housing for Persons With AIDS
(HOPWA) program to better reflect the current case concentration and
understanding of HIV/AIDS and ensure that funds are directed in a more
equitable and effective manner. The Budget's $335 million investment in
HOPWA, in combination with the proposed modernization, will assist
local communities in keeping individuals with HIV/AIDS housed, making
it easier for them to stay connected to treatment, and therefore
improving health outcomes for this vulnerable population.
The Budget also provides $35 million for the evidence-based Jobs-
Plus program, a proven model for increasing public housing residents'
employment and earnings. Through Jobs-Plus, public housing residents
will receive on-site employment and training services, financial
incentives that encourage work and ``neighbor-to-neighbor''
information-sharing about job openings, training, and other employment-
related opportunities.
Invests in Research and Support to Make HUD and its Grantees More
Effective.--The American economy of the future requires a Federal
Government that is efficient, streamlined, and transparent. This Budget
once again calls for the flexible use of resources through HUD's Office
of Policy Development and Research, which the Department will use to
invest in technical assistance to build local capacity to safeguard and
effectively invest taxpayer dollars; conduct innovative research; and
evaluate program initiatives and demonstration programs so we can fund
what works and stop funding what doesn't.
The Budget also continues to invest in focused upgrades to the IT
infrastructure to improve service delivery and to better track and
monitor our programs.
Consistent with the previous 3 years, HUD's fiscal year 2017 Budget
is structured around the five overarching goals the Department adopted
in its new Strategic Plan 2014-2018. These goals reflect the
Department's--and my--commitment to `moving the needle' on some of the
most fundamental challenges facing America. Indeed, every month, I hold
HUDStat meetings on one or more of these goals, to assess progress and
troubleshoot problems in order to: 1) ensure that HUD is as streamlined
and effective as possible in the way that we administer our own
programs and partner with other Federal agencies; and 2) hold our
grantees accountable for their expenditure of taxpayers' hard-earned
dollars.
goal 1: strengthen the nation's housing market to bolster the economy
and protect consumers
This Administration entered office confronting the worst economic
crisis since the Great Depression. And while the largest factors
contributing to this crisis were market driven, the American people
have turned to Congress and the administration for leadership and
action in righting our Nation's housing market. HUD remains firmly
committed to working together with communities and individuals to cope
with these unprecedented challenges. This Budget drives economic growth
by increasing access to credit and strengthening the FHA.
In fiscal year 2017, HUD is requesting $400 billion in loan
guarantee authority for the Mutual Mortgage Insurance Fund, and $30
billion in loan guarantee authority for the General and Special Risk
Insurance Fund. The need for FHA is clear as it stepped up in recent
years to address the unprecedented challenges wrought by the housing
crisis, playing an important countercyclical role that has offered
stability and liquidity throughout the recession. While a recovery of
the housing market is currently underway, FHA continues to act as a
crucial stabilizing element in the market, and to assure ongoing access
to credit for qualified first-time, low-wealth or otherwise underserved
borrowers.
The Budget also includes a request for the FHA Administrative Fee
that will assist FHA in performing critical Quality Assurance work by
funding important Information Technology investments as well as
administrative investments to maintain FHA as an effective partner with
borrowers and lenders. This modest fee on lenders will be applied only
prospectively, and these funds will make it possible for FHA to
continue to increase access, helping to place homeownership within the
reach of more Americans.
goal 2: meet the need for quality, affordable rental homes
In an era when more than one-third of all American families rent
their homes and over 7.7 million unassisted families with very low
incomes spend more than 50 percent of their income on rent and/or live
in substandard housing, it remains more important than ever to provide
a sufficient supply of affordable rental homes for low-income
families--particularly since, in many communities affordable rental
housing does not exist without public support. HUD's 2017 Budget
maintains HUD's core commitments to providing rental assistance to some
our country's most vulnerable households as well as distributing
housing, infrastructure, and economic development funding to States and
communities to address their unique needs. Overall, 85 percent of HUD's
total 2017 budget authority requested goes toward renewing rental
assistance for current residents of HUD-subsidized housing, including
public housing and HUD grants to homeless assistance programs, and to
some limited, strategic expansion of rental assistance to specific
vulnerable households.
HUD's core rental assistance programs serve some of the most
economically vulnerable families in the country. In these programs,
including Housing Choice Vouchers, Public Housing and Project Based
Rental Assistance (PBRA): almost 75 percent of families are extremely
low-income (below 30 percent of area median income) and an additional
20 percent are very low-income (below 50 percent of area median
income). Although worst case housing needs decreased to 7.7 million in
2013 from the record high of 8.5 million in 2011, these needs are still
a national problem. Housing needs have expanded dramatically during the
past decade and were exacerbated by the economic recession and
associated collapse of the housing market, which reduced homeownership
through foreclosures and increased demand for renting.''
Preserving Affordable Housing Opportunities in HUD's Largest Programs
This Budget provides $20.9 billion for HUD's Housing Choice
Vouchers program, which is the Nation's largest and preeminent rental
assistance program for low-income families. For over 35 years it has
served as a cost-effective means for delivering safe and affordable
housing in the private market. This 2017 funding level is expected to
assist approximately 2.2 million families and support new incremental
vouchers for areas of high need, for targeted populations. This Budget
adds voucher leasing opportunities through funding for approximately
10,000 new units of housing for homeless families with children.
The Budget also provides a total of $6.4 billion to operate public
housing and modernize its aging physical assets through the Public
Housing Operating ($4.6 billion) and Capital ($1.9 billion) funds, a
critical investment that will help over 1.1 million extremely low- to
low-income households obtain or retain housing. Similarly, through a
$10.8 billion request in funding for the PBRA program, the Department
will provide rental assistance funding to privately-owned multifamily
rental housing projects to serve over 1.2 million families nationwide.
Rebuilding our Nation's Affordable Housing Stock
Over the last 75 years, the Federal Government has invested
billions of dollars in the development and maintenance of public and
multifamily housing, which serve as crucial resources for some of our
country's most vulnerable families. Despite this sizable Federal
investment and the great demand for deeply affordable rental housing,
we continue to see a decline in the number of available affordable
housing units. Unlike other forms of assisted housing that serve very
similar populations, the public housing stock is nearly fully reliant
on Federal appropriations from the Capital Fund to make capital
repairs. Funding and regulatory constraints have impaired the ability
for these local and State entities to keep up with needed life-cycle
improvements. The most recent capital needs study of the public housing
stock, completed in 2010, estimated the backlog of unmet need at
approximately $26 billion, or $23,365 per unit. Funding for the Capital
Fund has been insufficient to meaningfully reduce public housing's
backlog of repair and replacement needs or even meet the estimated $3
billion in annual accrual needs. Under the strain of this backlog, and
without financing tools commonly available to other forms of affordable
housing, the public housing inventory has lost an average of 10,000
units annually through demolitions and dispositions.
--Rental Assistance Demonstration. To help address the backlog of
unmet capital needs and to preserve this critical source of
affordable housing, HUD is continuing to implement the Rental
Assistance Demonstration (RAD), a program which enables PHAs to
convert public housing to the Section 8 platform. In addition
to the public housing stock, the RAD program targets certain
``at-risk'' HUD legacy programs. Prior to RAD, units assisted
under Section 8 Moderate Rehabilitation (MR) and Section 8
Moderate Rehabilitation Single-Room Occupancy (MR SRO) were
limited to short-term renewals and constrained rent levels that
inhibit the recapitalization of the properties, and units
assisted under Rent Supplement (RS) and Rental Assistance
Program (RAP) had no ability to retain long-term project-based
assistance beyond the current contract term. As a result, as
their contracts expired, these projects would no longer be
available as affordable housing assets.
Conversion to Section 8 rental assistance, as permitted under RAD,
is essential to preserving these scarce affordable housing
assets and protecting the investment of taxpayer dollars these
programs represent. Long-term Section 8 rental assistance
allows for State and local entities to leverage sources of
private and public capital to rehabilitate their properties.
While the Department expects and continues to process Public
Housing conversions of assistance without additional subsidy,
HUD requests $50 million in 2017 for the incremental subsidy
costs of converting assistance under RAD for properties that
cannot feasibly convert to Section 8 at existing funding
levels. This funding would also support a requested expansion
of the RAD authority to include Section 202 Housing for the
Elderly Project Rental Assistance Contracts (PRACs). Overall,
the requested funding will be targeted to: 1) Public Housing
properties located in high-poverty neighborhoods, including
designated Promise Zones, and in areas where the Administration
is supporting comprehensive revitalization efforts as well as
transfer of assistance to high opportunity locations where
there is a limited supply of affordable housing, and 2) Section
202 PRACs with significant recapitalization needs, including
those properties with service coordinators for frail and
elderly residents. The Department estimates that the $50
million in incremental subsidies will support the conversion
and redevelopment of approximately 25,000 Public Housing and
Section 202 PRACs, while helping to increase private investment
in the targeted projects.
In addition to the funding request, the proposed legislative
changes to RAD are designed to allow for maximum participation
by those PHAs and private owners whose current funding levels
are sufficient for conversion. This includes, for example,
elimination of the 185,000 unit cap, which will allow for a
greater portion of the Public Housing stock that can convert at
no cost to the Federal Government to participate in the
demonstration.
goal 3: use housing as a platform for improving quality of life
Stable housing provides an ideal platform for delivering a wide
variety of health and social services to improve economic, health, and
broad-based societal outcomes. For some, housing alone is sufficient to
ensure healthy outcomes, while others require housing with supportive
services to assist with activities of daily living or longterm self-
sufficiency, as well as proximity to crucial services. HUD's fiscal
year 2017 Budget acknowledges this reality by making critical
investments in housing and supportive services, and partnering with
other Federal agencies to maximize resources and best practices.
Moreover, these investments will save money in the long term, by
avoiding overuse of expensive emergency and institutional
interventions.
Preventing and Ending Homelessness
Nowhere is the relationship between housing and supportive services
clearer than in the successful efforts in communities around the
country to address homelessness, which have led to a 36 percent
reduction in veterans' homelessness and a 22 percent reduction in
chronic homelessness, and a 19 percent in family homelessness since
2010. Additionally, this work has yielded a substantial body of
research, which demonstrates that providing permanent supportive
housing to chronically homeless individuals and families not only ends
their homelessness, but also yields substantial cost saving in public
health, criminal justice, and other systems. This year's Budget once
again invests in this critical effort, by providing $2.7 billion in
Homeless Assistance Grants. This funding level will support competitive
programs that annually serve over 800,000 homeless families and
individuals, and create 25,500 beds of permanent supportive housing for
chronically homeless persons to reach the goal of ending chronic
homelessness in 2017. The Budget also includes 8,000 rapid rehousing
interventions for households with children. In addition, the Budget
includes $88 million for housing vouchers for homeless families with
children and also proposes another $11 billion in new mandatory
spending to reach and maintain the goal of ending family homelessness
by 2020.
Leveraging Capital Resources and Serving our Most Vulnerable
This Budget provides a total of $659 million for the Housing for
the Elderly and Housing for Persons with Disabilities programs. Doing
more with less, the Budget proposes reforms to the Housing for the
Elderly program to target resources to help those most in need, reduce
the up-front cost of new awards, and better connect residents with the
supportive services they need to age in place and live independently.
Historically, HUD has provided both capital advances and operating
subsidies to non-profit sponsors to construct and manage multifamily
housing for low-income people with disabilities. In an effort to
maximize the creation of new affordable units in a time of funding
restraints, in fiscal year 2012 HUD began providing operating
assistance to State housing agencies that formed partnerships with
State healthcare agencies for service provision to low-income persons
with disabilities. These funds are used to set aside supportive units
for this target population in affordable housing complexes whose
capital costs are funded through Low-Income Housing Tax Credits, HOME
funds, or other sources. Investing Section 811 funds under this
authority allows HUD to rely on the expertise of the State housing
agencies to administer the award and on the State healthcare agency to
identify the most critical population to be served and guarantee the
delivery of appropriate services. In fiscal year 2014, HUD requested,
and received, similar authority for the Section 202 program. Drawing on
lessons learned from implementation in the Section 811 program, HUD
will take advantage of efficiencies inherent in these same agencies'
oversight responsibilities for tax credits, HOME funds or similar
housing funding.
goal 4: build strong, resilient and inclusive communities
No longer can the American economy tolerate the marginalization
from the labor force of significant numbers of people because of
individualized or systemic discrimination, or because they live in
isolated neighborhoods of concentrated poverty. An American economy
built to last requires an increased supply of affordable rental homes
in safe, mixed-income communities that provide access to jobs, good
schools, transportation, high-quality services, and, most importantly,
economic self-sufficiency. As such, HUD's fiscal year 2017 Budget puts
communities in a position to plan for the future and draws fully upon
their resources, most importantly their people.
Each year HUD dedicates approximately 16 percent of its funds to
the capital costs of housing and economic development projects
throughout the country. Through this investment, HUD and its partners
are able to provide better opportunities for people living in
neighborhoods of concentrated poverty and segregation, offer choices
that help families live closer to jobs and schools, and support locally
driven solutions to overarching economic development challenges. HUD's
capital grants--including the Public Housing Capital Fund, Choice
Neighborhoods, CDBG, and HOME--are focused on assisting areas of great
need, including communities with high unemployment.
Preserving HUD's Major Block Grant Programs for Community Development
and Housing
Through both formula and competitive grants, HUD has partnered with
local organizations and State and local governments to fund innovative
solutions to community development challenges. Underpinning these
partnerships is the fundamental philosophy that local decision-makers
are best poised to drive a cohesive development strategy. In 2017, HUD
is requesting a total of $2.9 billion in funding for the Community
Development Fund to support economic development initiatives and
projects that demonstrate the ability to connect private sector growth
to some of our country's most distressed citizens and communities, and
$950 million for the HOME program.
The Budget requests $2.8 billion for the Community Development
Block Grant (CDBG), which remains the largest and most adaptable
community and economic development program in the Federal portfolio for
meeting the unique needs of States and local governments. Since its
inception in 1974, CDBG has invested in economic development at the
local level, investing in infrastructure, providing essential public
services and housing rehabilitation, and creating jobs primarily for
low-and moderate-income families. Altogether, CDBG funding annually
reaches an estimated 7,000 local governments across the country, in
communities of all shapes and sizes. However, to ensure that CDBG funds
effectively provide targeted benefits to these communities, especially
to low- and moderate-income populations, HUD proposes a suite of
reforms to strengthen the program; help grantees target funding to
areas of greatest need; enhance program accountability; synchronize
critical program cycles with the consolidated plan; and reduce the
number of small grantees while providing more options for regional
coordination, administration and planning.
Often, CDBG dollars alone are insufficient to complete crucial
economic development projects that communities desperately need. In
those instances, HUD offers another potent public investment tool in
the form of the Section 108 Loan Guarantee program. Section 108 allows
States and local governments to leverage their CDBG grants and other
local funds into federally guaranteed loans in order to pursue large-
scale physical and economic investment projects that can revitalize
entire neighborhoods or provide affordable housing to low- and
moderate-income persons. In 2017, HUD is requesting Section 108 loan
guarantee authority of $300 million, and the continuation of a fee-
based structure will eliminate the need for budget authority to cover
the program's credit subsidy.
In addition, the HOME program is proposed at $950 million and the
Budget proposes legislative changes to better target the assistance
provided with this funding. HOME is the primary Federal tool of State
and local governments for the production of affordable rental and for-
sale housing for low-income families. In the past 21 years, HOME has
completed 1.22 million affordable units. The Budget also proposes
statutory changes that would eliminate the 24-month commitment
requirement, eliminate the 15 percent Community Housing Development
Organization (CHDO) set-aside, establish a single qualification
threshold, revise ``grandfathering'' provisions so that HOME
participating jurisdictions that fall below the threshold three out of
the 5 years would be ineligible for direct grants, and provide for
reallocation of recaptured CHDO technical assistance funds.
Notably in 2017, CDBG and HOME are part of the proposed Upward
Mobility Project, a new initiative to allow States, localities or
consortia of the two to blend their CDBG and HOME allocations with
funding from the Department of Health and Human Services' Social
Services Block Grant and Community Services Block Grant in a flexible
way to achieve local goals. Communities would design Upward Mobility
Projects around achieving a specific outcome--like increasing families'
earnings, improving children's outcomes, expanding employment
opportunities, or increasing housing stability--then employ the most
promising evidence-based methods to achieve that goal. To support the
Upward Mobility Projects, Federal agencies will partner with applicants
to blend the identified funds and provide the appropriate waivers
needed for required flexibilities, including but not limited to
aligning household eligibility criteria, aligning and streamlining
reporting requirements, and coordinating and sustaining service
delivery.
In addition, the new Local Housing Policy Grants program would
complement and leverage communities' CDBG and HOME activities by
providing a total of $300 million in mandatory funding for competitive
grants to increase economic growth, access to jobs and improve housing
affordability by supporting new policies, programs or regulatory
initiatives to create a more elastic and diverse housing supply. To
that end, the funding would allow localities to make investments in
areas like infrastructure expansion or improvement, housing market
evaluations, code writing or design assistance, and stakeholder
outreach and education.
Assisting Native Americans
Through innovative programming, HUD has found new ways to partner
with American Indian and Alaska Native tribal governments to help these
communities craft and implement sustainable, locally-driven solutions
to economic development challenges. HUD recognizes the right of Indian
self-determination and tribal self-governance, and has fostered
partnerships that allow tribal recipients the flexibility to design and
implement appropriate, place-based housing programs according to local
needs and customs. In most of these communities, housing and
infrastructure needs are severe and widespread, disconnected from
transportation networks and isolated from key community assets
including jobs, schools and healthcare facilities. In fiscal year 2017,
HUD is requesting a total of $786 million to fund programs that will
directly support housing and economic development in American Indian,
Alaskan Native, and Native Hawaiian communities nationwide, including:
--$700 million for the Indian Housing Block Grant (IHBG) program,
which is the single largest source of Federal funding for
housing on Indian tribal lands today.
--$80 million for Indian Community Development Block Grants, a
flexible source of grant funds for federally-recognized tribes
or eligible Indian entities, requested within the Community
Development Fund. Of this funding, $20 million is set aside for
projects to improve outcomes for Native Youth, such as the
development, rehabilitation or acquisition of community centers
and health clinics.
--$5.5 million for the Indian Housing Loan Guarantee Fund, which
provides loan guarantees to increase the availability of
mortgage lending on Indian reservations and other Indian areas.
--Increases the set-aside for colonias investment in communities
along the U.S.-Mexico border from 10 percent to 15 percent, to
address problems with lack of infrastructure, including
adequate water, sewer facilities and decent housing.
In addition, up to $5 million in funding requested for Jobs-Plus
would be used to implement a demonstration of the successful Jobs-Plus
model in Indian Country.
Transforming Neighborhoods of Poverty
The President has made it clear that we cannot create an economy
built from the middle class out if: a fifth of America's children live
in poverty, at a cost of $500 billion per year--fully 4 percent of
GDP--due to reduced skills development and economic productivity,
increased later life crime, and poor health; a growing population lives
with the problems of concentrated neighborhood poverty--high
unemployment rates, rampant crime, health disparities, inadequate early
care and education, struggling schools, and disinvestment--all of which
isolate them from the global economy.
That's why HUD's fiscal year 2017 Budget provides $200 million for
Choice Neighborhoods to continue transformative investments in high-
poverty neighborhoods where distressed HUD-assisted public and
privately owned housing is located. Choice Neighborhoods--along with
RAD--is an essential element of the President's Promise Zones
initiative, which is designed to support revitalization in some of
America's highest-poverty communities by creating jobs, attracting
private investment, increasing economic activity, expanding educational
opportunity, and reducing violent crime.
The President announced the first five Promise Zones in January
2014 and will designate an additional 15 Zones by the end of calendar
year 2016. Communities compete to earn a Promise Zone designation by
identifying a set of positive outcomes, developing a strategy,
encouraging private investment and realigning Federal, State, and local
resources to support achievement of those outcomes. The Promise Zone
designation process ensures rural and Native American representation.
Promise Zones will receive tax incentives, if approved by Congress, to
stimulate hiring and business investment along with intensive Federal
support and technical assistance aimed at breaking down regulatory
barriers and using Federal funds available to them at the local level
more effectively. Applicants from Promise Zones will also receive
points for competitive Federal grants that will increase the odds of
qualifying for support and assistance to help them achieve their goals.
Promise Zones are aligning the work of multiple Federal programs in
communities that have both substantial needs and a strong plan to
address them. The Promise Zones initiative builds on the lessons
learned from existing place-based programs like the Department of
Education's Promise Neighborhoods and the Department of Justice's Byrne
Criminal Justice Innovation program, both of which receive substantial
increases in the Budget. Other Federal agencies that will be aligning
their work with that of local Promise Zone partners include the
Departments of Commerce, Health and Human Services, and Agriculture.
The Choice Neighborhoods initiative is a central element of the
Administration's inter-agency, place-based strategy to support local
communities in developing the tools they need to revitalize
neighborhoods of concentrated poverty into neighborhoods of
opportunity. The Department's administration of the first rounds of
funding for Choice Neighborhoods grants exemplify how our practices
generate effective partnerships with local housing and community
development efforts. In the past, many Federal grant programs followed
a rigid, top-down, `one-size fits all' approach that dictated what
local policymakers could and could not do rather than listening to them
and providing the tools they needed to meet local needs. Having served
in local government myself, I am committed to a collaborative approach
responsive to local needs--and believe the results thus far demonstrate
that we are making good on that commitment.
Ensuring Inclusive Housing Nationwide
An inclusive community is one in which all people--regardless of
race, ethnicity, religion, sex, disability, or familial status--have
equal access to housing and economic opportunities. Throughout its
portfolio of programs, HUD is committed to maintaining that inclusivity
and providing accountability in housing and lending practices
nationwide. Through inclusive development, education, enforcement of
fair housing laws, expanded training and language assistance, HUD will
affirmatively further fair housing and the ideals of an open society.
The Fair Housing Initiatives Program (FHIP) is critical to building
and sustaining inclusive communities. FHIP is the only grant program
within the Federal Government whose primary purpose is to support
private efforts to educate the public about fair housing rights and
conduct private enforcement of the Fair Housing Act. In fiscal year
2017, HUD is requesting $46 million in FHIP funds, representing the
Department's strong commitment to fair housing. The requested amount
will continue funding to support fair housing enforcement by all
statutorily eligible private fair housing organizations. In addition,
it will fund fair housing education at the local, regional and national
levels.
The Fair Housing Assistance Program (FHAP) is a critical component
of HUD's effort to ensure the public's right to housing free from
discrimination. FHAP multiplies HUD's enforcement capabilities,
allowing the Department to protect fair housing rights in an efficient
and effective manner. In fact, FHAP agencies investigate the majority
of housing discrimination complaints filed in the United States. In
fiscal year 2017, the Budget provides $21.9 million in FHAP grants to
nearly 90 government agencies to enforce laws that prohibit housing
discrimination that have been reviewed and deemed substantially
equivalent to Federal law.
Ensuring that an Economy Built from the Middle Class Out Includes
Opportunities for Rural Americans
The Administration has placed a significant emphasis on ensuring
that America's rural communities are competitive in the global
economy--particularly given the reality that rural communities
generally have less access to public transportation, along with higher
poverty rates and inadequate housing. HUD serves families in small
towns and rural communities through almost every major program it
funds.
As the single largest sources of funding for housing on Indian
tribal lands today, HUD initiatives in Indian country continue to have
some of the Department's most successful track records. Programs like
Indian Housing Block Grants, Indian Housing Loan Guarantees, and Indian
Community Development Block Grants support development in remote areas
where safe, affordable housing is desperately needed. HUD recognizes
the right of Indian self-determination and tribal self-governance by
allowing the recipients the flexibility to design and implement
appropriate, place-based housing programs according to local needs and
customs. Taken together, in fiscal year 2017 HUD is requesting $786
million to fund programs that will support housing and development in
American Indian, Alaska Native, and Native Hawaiian communities.
In addition, HUD and the Departments of Treasury and Agriculture
meet regularly through the interagency Rental Housing Policy Working
Group to better align and coordinate affordable rental housing
programs. For homeowners, the FHA helps first-time homebuyers and other
qualified families all over the country purchase their own homes. HUD
has also entered into a Memorandum of Understanding with the Department
of Treasury's Community Development Financial Institutions Fund and the
Department Agriculture--Rural Development, to expand the capacity of
organizations providing loans and investment capital in underserved
rural regions. The initiative, which is being piloted in colonias along
the U.S.-Mexico border, will improve the delivery of funding from
Federal agencies and private sources supporting small business,
affordable housing and community facilities.
goal 5: achieving operational excellence
A 21st century American economy that is a magnet for jobs and
equips its residents with the skills they need for those jobs demands a
government that's leaner, smarter, and more transparent. The current
economic and housing crisis; the structural affordability challenges
facing low-income homeowners and renters; and the new, multidimensional
challenges facing our urban, suburban, and rural communities all
require an agency in which the fundamentals matter and the basics
function. As such, HUD remains committed to transforming the way it
does business. This transformation is more crucial now than perhaps
ever before--HUD remains at the forefront of the Federal response to
the national mortgage crisis, economic recovery, Hurricane Sandy
recovery, and the structural gap between household incomes and national
housing prices--roles that require an agency that is nimble and market-
savvy, with the capacity and expertise necessary to galvanize HUD's
vast network of partners. HUD's 2016 Budget reflects these critical
roles, by investing in transformation, research, and development that
will be implemented strategically.
Investing In Our Staff
HUD's greatest resource is its dedicated staff. When employees
attain skills and are motivated to use those skills to help their
organization reach goals, the capacity of the organization grows and
employees in the organization grow as well; which is why HUD is
creating training and leadership development opportunities for
employees at all levels. Over time, the rules and regulations that
develop within an organization become hurdles instead of the helpful
pathways they were intended to be. HUD is in the process of simplifying
and combining programs, streamlining regulations, and eliminating rules
and constraints. In addition, the Department is in the middle of a
major reform of its information technology, human resources,
procurement, and other internal support functions to give more
authority to managers and provide better service to HUD customers.
In 2016, HUD is requesting $1.365 billion in salaries and expenses,
in addition to $23 million for Ginnie Mae and $129 million for HUD's
Office of Inspector General (OIG). The HUD request includes several
initiatives to streamline the HUD organization, consolidate functions
for increased efficiency, and increase training for our staff. HUD is
making specific investments of more staff to manage major rental
assistance programs, increasing our ability to enforce new fair housing
rules and provide more oversight to our community grant programs. The
Department will continue to improve operations and create a dynamic
organization capable of addressing some of our Nation's most difficult
challenges.
Carrying Out Critical Program Demonstrations and Research
HUD's ongoing transformation is a multiyear effort that can only be
achieved through the relentless focus of agency leadership, full
transparency and accountability for real results, and sustained and
flexible budget resources. The Department has taken an enterprise-wide
approach to both technical assistance and research that has bolstered
these efforts and increased the efficiency and effectiveness of the
Department's programs. Further, this shared approach has provided a
mechanism for innovative, cross-cutting technical assistance that goes
beyond program compliance to improve grantee capacity, performance and
outcomes.
While the Department's transformation is a crucial long-term
commitment, HUD continues to prioritize these efforts in a responsible
manner that ensures HUD's constituent services don't suffer at the
hands of internal transformation. This year's Budget proposes to again
fund research and demonstrations by transfers from program accounts. In
fiscal year 2017, HUD's request includes transfer authority of up to
$120 million into the Office of Policy Development and Research, up to
$35 million of which will be for research, evaluations and program
demonstrations, and at least $85 million of which will be for cross-
cutting technical assistance, including place-based technical
assistance. This includes training, education, support and advice to
help community development corporations and community housing
redevelopment organizations carry out community development and provide
affordable housing activities for low- and moderate-income persons, as
previously funded through the Self-Help and Assisted Homeownership
Opportunity Program (SHOP) account. This modified approach will enable
HUD to better integrate technical assistance and capacity building.
Upgrading the Department's Information Technology Infrastructure
In 2017, HUD is requesting $286 million for the Information
Technology Fund. HUD will continue development efforts and will focus
on delivery of discrete capabilities in our FHA and voucher management
systems, as well as exploring consolidation of several grant management
applications. In fiscal years 2015 and 2016, HUD deployed three
successful releases of the New Core project, which transitioned key
administrative and financial management functions to the Treasury
Department in the largest financial management shared service
arrangement established to date. HUD also implemented an enterprise-
wide financial system that allows the Department to resolve material
weakness and audit findings though a consolidated shared services
infrastructure platform. These changes are allowing HUD to deliver
services and manage these multi-billion dollar programs faster, more
accurately and using better information for analysis.
conclusion
Chairman Collins, this Budget reflects the Administration's
recognition of the critical role the housing sector must play to ensure
that America becomes a magnet for jobs that strengthen the Nation's
middle class, including providing economic opportunity for all
Americans, whatever their circumstances. Equally important, it
expresses the confidence of the President in the capacity of HUD to
meet a high standard of performance.
It's about making hard choices to reduce the deficit--and putting
in place much-needed reforms to hold ourselves to a high standard of
performance. But most of all, it's about the results we deliver for the
vulnerable people and places who depend on us most.
FUNDING FOR VASH VOUCHERS
Senator Collins. Thank you very much, Mr. Secretary. I want
to pick up where the ranking member, Senator Reed, left off,
the issue of the budget containing no new money for VASH
vouchers which go to our homeless veterans. The same was the
case in last year's budget, and we remedied that by putting in
funding for the VASH program.
As I indicated in my statement, we have made some
significant progress, in large measure due to the VASH program
as well as additional programs for homelessness prevention
among our veterans in reducing the number of veterans who are
homeless.
It's down by 36 percent by 2010. But I very much remember
the Administration having a goal of ending homelessness among
our veterans by the end of last year, and clearly, that didn't
happen. We're not even close to that, even though we're
continuing to make progress, and there are some cities around
the country that have achieved that goal.
So my first question is, why is the Administration
proposing to zero out the VASH account in terms of new
vouchers? And related to that, has the Administration changed
its mind about reaching the goal of no homeless veterans?
Secretary Castro. I definitely appreciate the opportunity
to answer that question. Let me answer your second question
first. The Administration is firmly committed to effectively
ending veteran homelessness, and so that goal remains.
I want to commend you and the committee again, Chairman
Collins, for the investment that you all have made over the
years in HUD-VASH. It has been, I think, absolutely key to the
36-percent reduction that we've seen. You're right that we did
not request additional or new HUD-VASH vouchers, because we
believe that the resources are there for HUD-VASH for who it
includes to serve.
We think that the communities are making tremendous
progress with those HUD-VASH vouchers. Last year, the committee
did grant us additional HUD-VASH vouchers, and we are utilizing
those, and we're going to utilize them in effective ways.
But through the combination of agencies that dedicate
resources to homeless veterans and other mainstream resources
at HUD, we believe that we can continue to drive down the
number of homeless veterans.
I would also note, and I know that we had this conversation
last year, that there are some veterans who did not fit into
the HUD-VASH program, were not able to be served by the HUD-
VASH program, that we believe that, through use of mainstream
resources, that we can serve. One good example that I cited
last year was veterans that were other than honorably
discharged because of the don't ask, don't tell policy.
And so we think that we have the HUD-VASH vouchers that we
need, and I commend the committee for the investment that it's
made, and we can combine that with other mainstream resources
and vouchers to get to functional zero on veteran homelessness.
PHYSICAL INSPECTIONS OF HUD ASSISTED PROPERTIES
Senator Collins. Mr. Secretary, as I mentioned in my
opening statement, I'm deeply troubled by reports of deplorable
living conditions in subsidized properties in Memphis,
Tennessee, and Jacksonville, Florida. Last month, a judge in
Cincinnati placed five HUD-assisted properties in judicial
receivership after the city sued the owners regarding more than
1,800 health and safety violations.
The scale and the longevity of these problems highlight
systemic concerns about the effectiveness of HUD's oversight,
and those concerns are underscored by the fact that contractors
hired by HUD to inspect the Florida property gave it a passing
score just weeks before the city inspectors found hundreds of
code violations, and indeed, the press mentions toilets leaking
into bathtubs, roaches, raw sewage backing up into a bathtub,
water leaking into apartments, trash, debris, sick children, a
really appalling circumstance, which I know must trouble you
gravely as well.
So what's wrong with HUD's system for inspection that
properties could receive passing grades from HUD and then be
cited by local inspectors with literally hundreds of serious
code violations?
Secretary Castro. Yes, let me just begin by saying that, of
course, I share your deep concern with the specific instances
that you've cited that were mentioned in Florida and Tennessee
and one in Maine recently.
And number one, I think that the vast majority of
properties out there are being inspected and inspected well.
And when there are issues, they're responded to in a
responsible way by owners.
But there are instances that I don't think anybody can be
proud of and that HUD is committed to improving our processes
to better respond in a shorter timeframe to ensure that
residents are not living in the kind of conditions that we've
seen described in media reports and that we have received
internal reports about.
So you asked what are we doing to improve this process. We
have created an internal working group to look at our
inspections process, to understand how we can strengthen it, to
make sure that we're getting to properties like those troubled
assets that have been noted in a quicker time, that we're
ensuring compliance by the owners more quickly, and ultimately
providing a better quality of life to residents.
Another component of this is making sure that residents get
tenant protection vouchers more quickly so that they have a
choice and, for the long-term, working with Congress to ensure
that we can strengthen our enforcement capabilities.
So for instance, our fiscal year 2017 budget requests
authority for HUD to issue double damages to owners that
violate their Section 8 contract with HUD, a penalty that's
less burdensome on tenants than abatement, and the same
enforcement capabilities for the 202 project rental assistance
contract properties for the elderly and disabled as for other
Section 8 project based rental assistance properties.
So we want to make sure that we have all the tools that we
can to effectively enforce, and that includes improving our own
processes and working with Congress where we need that help.
Senator Collins. Thank you.
Senator Reed.
FEDERAL PROGRAMS FOR HOMELESS VETERANS
Senator Reed. Well, thank you very much, Madam Chairman.
Again, Mr. Secretary, Senator Collins and I share this
concern about the HUD-VASH vouchers, the fact that progress has
been made, but there's no request this year for additional
vouchers, even though roughly 48,000 veterans are still in the
United States looking for homes.
Are there any other Federal partnerships or programs in
place to provide housing and service to these veterans who are
experiencing homelessness that could sort of soften the blow,
if you will, or help you?
Secretary Castro. Well, there absolutely are, Ranking
Member Reed, both within HUD and also in other agencies. And
the U.S. Interagency Council on Homelessness (USICH) has been
fantastic at coordinating the focus on veterans, but just to
give you a good example of that, the VA is continuing to fully
fund the Supportive Services for Veteran Families, or SFVS, at
$300 million. They've committed to fully staffing all of the
homelessness programs under their auspices. The Department of
Labor has its Homeless Veterans Reintegration Program.
And we found that one of the most effective ways of driving
down veteran homelessness, in addition to HUD-VASH, was to use
mainstream resources, the prioritization of mainstream
resources that go into the hands of veterans. And we are
absolutely committed to continuing to do that.
UPDATING STANDARDS FOR LEAD PAINT
Senator Reed. Thank you, Mr. Secretary. There's another
area that the chairman and I share, and that is the lead
exposure. And we've all been galvanized by the incident in
Flint from water pipes, but roughly 70 percent of exposure
comes from lead paint, which is ubiquitous. It's all over the
place, particularly in older neighborhoods like Bangor and
Portland and Providence.
And as you mentioned in your testimony, the CDC recently
has strengthened the lead standard, because they found that
minute quantities of lead are toxic, very toxic to children,
and cause long-term damage. And you suggested that HUD is going
to modify your stand to reflect this. Can you give us an idea
when that will happen?
Secretary Castro. Yes. Well, we just submitted, on March 8,
the proposed new rule to the OMB, and so this will go through
the rulemaking process. One of the components of this is to
bring our standard in conformity with the CDC standard.
I will note that, since 2013, we actually have strongly
recommended that our grantees conform to that standard, but I
also understand that strongly encouraging is not the same thing
as requiring, so it will require that. It will also make more
robust responsibilities that folks who come into knowledge
about elevated blood levels in children have in terms of
notification.
I also applaud--I know Senator Durbin is working on and
other have proposed a lead-based paint legislation. We look
forward to doing what we can with this new rule and also
working with Congress to improve enforcement and inspections
and so forth.
LEAD PAINT INSPECTIONS
Senator Reed. And you've sort of led me to my next
question, which is the issue of inspection. The chairman
pointed out the broad based issues in terms of how do these
properties slip through. When it comes to lead, information we
have is it's sort of a variable standard, and it's not
consistently enforced. And as you increase and strengthen the
regulation, you literally will have more units that fall
outside the standard.
Can you talk about how you're going to ensure that there's
a consistent standard for lead inspections, it's enforced
consistently, particularly in an additional group of units?
And the other issue I would just point out, and you
suggested, too, is many times the only way you find out about
this, not by a proactive inspection, but the child shows up in
an emergency room, they draw blood, and they found they've been
exposed, and then suddenly, they go to the unit and start
inspecting and saying, ``Boy, this is terrible.'' I think we've
both like to see that reversed. Your comments?
Secretary Castro. I believe we're in agreement here, and
we're committed on our end actually to working toward a common
inspection standard, and we're committed basically to improving
this process fully within what is in our authority, including
on the inspection standard.
You're correct that right now, based on whether it's
multifamily housing or Section 8 housing, there are different
categories of requirements and inspection standards, and we
would like to work to bring those into harmony. And some of
that, we can do on our own. Other pieces of that, we're
definitely going to need congressional help.
I met with Senator Durbin just a couple of days ago on this
issue, and so look forward to working on it.
Senator Reed. Thank you.
Senator Collins.
Senator Collins. Thank you very much, Senator Reed.
Senator Schatz.
HOUSING VOUCHERS FOR THE HOMELESS
Senator Schatz. Thank you, Chairwoman Collins and Ranking
Member Reed. And I want to thank Secretary Castro for the help
that HUD has provided to Hawaii. And I had the opportunity
yesterday to meet with Jennifer Ho and talk about our
partnership with the PHAs and service providers in the State,
and I just wanted to say thank you to you and your excellent
staff.
And I also want to request that you stay engaged and make
sure that, as we transition to a new administration, that we
retain the commitment at the career professional level to
maintain continuity. Whatever happens in city, State, and
Federal administrations, this is a partnership that I think has
to continue.
With respect to homelessness, I support the request for
additional housing vouchers, but I want to understand how these
vouchers are going to be allocated if funded.
And specifically, I want to make sure that places like
Hawaii, that have the need certainly to justify more resources
but are smaller than some of the big urban areas with needs
that could frankly swallow up whatever else we're able to
appropriate, how do we make sure these dollars are spent
throughout the country wherever there are needs, including
Hawaii, but also other rural areas?
Secretary Castro. And thank you, Senator, for your
engagement with our staff. I know you and I have had the
opportunity to sit down and speak to these issues, and I know
how engaged you are on this and what a pressing challenge it is
in Hawaii. I also just recently met, visited with the governor,
and have, on a couple of occasions, visited with Mayor Caldwell
of Honolulu.
Your question relates to essentially making sure that
communities like those in Hawaii get their fair share, I
imagine, of resources. And I want to assure you that, as we
allocate these vouchers, that we do so in a way that ensures
that it's not just the biggest of cities or the usual suspects,
so to speak, that get these resources.
They're allocated, in fact, based on relative need, and
that need it not determined just based on population, but
instead, it considers other factors, such as the rate of
homelessness in the area, availability of existing resources,
the geographic concentration, housing market conditions, and
other pertinent factors.
And so it is a multidimensional analysis that goes into the
allocation of these vouchers. I'm very well aware of the
challenge there in Honolulu particularly and on the West Coast
more broadly.
I had a chance to sit down with several mayors in a West
Coast mayor's summit to tackle some of these issues of growing
street homelessness, unsheltered homelessness, and we look
forward to continuing to work with you and the folks in Hawaii
on this challenge.
Senator Schatz. Thank you. And thanks to Senator Reed and
Chairwoman Collins' leadership.
NATIONAL HOUSING TRUST FUND
As you know, 2016 will be the first year that the States
receive an allocation from the National Housing Trust Fund to
focus on creating affordable housing options for people earning
30 percent of area median income (AMI). When do you expect to
be able to push these dollars out?
Secretary Castro. Yes, we expect that the first allocations
of the Housing Trust Fund, the HTF, will be made this summer.
There's a timeline here that will kick off basically in
April, where States will have to submit to us a State
allocation plan, and then we'll have 45 days to respond to
that. So we think that the timeline, we're confident that the
timeline now for the States that most timely submit their plan
is going to be in the summer.
And we look forward to that, because, as you mentioned,
this HTF is important, because it's serving extremely low-
income individuals which suffer from the biggest gap in
affordability for housing that is out there. So it's a unique
tool that we can use to fill that gap.
FAIR MARKET RENT CALCULATIONS
Senator Schatz. Thank you. And in my limited time left, I'd
like to just flag an issue for you, which I'm sure you're aware
of, but especially in the State of Hawaii, this fair market
rent (FMR), the level that is set in terms of FMR, is just
totally unrealistic.
For instance, on Kauai, HUD set FMR for a two bedroom unit
at $1,238. It's actually $1,800 throughout the island of Kauai.
And so that's too big of a delta for people living on fixed
income. It's too big of a delta in a place where we pay three
to four times the national average in terms of electricity.
And so we're going to need your help to kind of remedy
this, first of all in terms of the way you set FMR, but second
of all, then you ask the county to conduct a study at its own
expense, $50,000 or so, and then I think that, you know, at
both of those steps, we're not doing this right. Thank you.
Secretary Castro. Thank you.
Senator Collins. Thank you very much, Senator.
Senator Daines.
Senator Daines. Thank you, Madam Chair. Secretary Castro,
welcome to the committee.
I grew up in the housing business. My dad's a home builder,
so I spent most of my summers working on construction crews
there putting myself through college. And this is such an
important issue for me personally, certainly housing,
difference between a house and a home, right, such an important
part of America, the American dream and so forth.
But this hearing does come in the wake of a long trail of
instances, established a pattern within HUD of waste and abuse
of taxpayer funds. I want to probe that a bit here with you, if
I could, Secretary Castro.
Certainly, the mission of HUD is very laudable. The fact
is, is repeatedly misallocated resources, that are meant to
really help low-income households in the ordinary course of
operations, and I'm concerned about accountability.
HIGH INCOME HOUSEHOLDS IN PUBLIC HOUSING
You've seen the July 21, 2015 inspector general report,
which revealed that HUD provided housing assistance to over
25,000 households that exceeded the income limit, some earning
incomes over $90,000. These misallocated funds total over $100
million.
At the same time, there were 600,000 low-income families
were left waiting in public housing backlog. Let me put that in
perspective. That's more families than in my entire State.
These numbers aren't small.
The first question is, does HUD accept the responsibility
for the over $100 million that OIG estimated was misallocated
away from low-income households?
Secretary Castro. Thank you for bringing this up, Senator.
We share the concern here, of course. And the report from the
inspector general did identify those 25,000 units out of about
1.1 million units.
We share the concern. We agree with the inspector general
that, particularly in these egregious cases, some of which were
pointed out in that report, these egregious cases of over-
income tenants that they ought not to be living in public
housing. So we, in short order, sent out a letter to public
housing authorities strongly encouraging them to address these
cases.
We also have put out an advanced notice of proposed
rulemaking that would actually allow us to change the way that
we handle these cases.
Senator Daines. Yes, Secretary Castro, on that point, and I
appreciate that rulemaking, that was result of what was
required and prompted by the fiscal year 2016 appropriations
bill.
Secretary Castro. Well, I think it's consistent with what
the direction that HUD wants to go in as well. It's also true,
though, that this issue has come up before. It came up a few
years ago and was in the hands of Congress. And I think what it
boils down to is that there needs to be some nuance in how this
is approached.
For instance, if somebody is, you know, literally making
$20 more than the income cutoff, are we going to summarily put
them on the street because they're $20 off? It requires, I
think, a recognition that we do want folks who live in public
housing to work and try and earn more income, so that they can
better themselves and become upwardly mobile.
I think the challenge is, how much of a grace period do we
give folks, recognized that we want them to be able to be more
self-sufficient.
Senator Daines. Yes, and I'd agree that the $20 probably
gives us less heartburn than those who were found making in
excess of $90,000 a year, which I think is a real concern.
Secretary Castro. I agree. Yes, I agree.
OFFICE OF INSPECTOR GENERAL--SEMI-ANNUAL REPORT TO CONGRESS
Senator Daines. I want to pivot over and talk a bit now
about another issue which the HUD inspector general semi-annual
report to Congress published just this last September,
September 30, 2015. The audit results revealed $1.9 billion,
with a B, of funds that could have been put to better use,
according to the report, and $2.1 billion in questioned costs.
And again, I'm quoting the inspector general. I believe
Congress must ensure that HUD is a good steward of taxpayer
funding, and I'm sure you'd agree with that.
My question is, the inspector general just published its
report here end of last fiscal, what can we expect the next
semi-annual report that will be issued March 31, which is
coming up here in a few weeks? What number can we expect to
come out of that report, and what's your goal?
Secretary Castro. Well, our goal is that all funds are used
exactly as they should be and that we improve our performance
on this score. And so let me assure you that--and I know that
the inspector general is going to testify in just a little
while----
Senator Daines. Well, let me say this. I spent 28 years in
business. I understand aspirational targets, and certainly, we
should aspiring to zero. But there's an old saying, at least
coming from business, if you aim at nothing, you'll hit it.
I mean, is there a goal set here? If the inspector general
said there's $1.9 billion of funds that could be put to better
use and $2.1 billion questioned costs, did anybody sit down and
say, okay, we're not going to get that overnight, we better set
a target here, try to hit here in the next report?
Secretary Castro. Yes, the way that we approach that is to
work with the inspector general and say these are the
recommendations that the inspector general made so that we can
cut down on those instances, and our goal is to implement those
recommendations. And so across the board----
Senator Daines. Well, let me say, a goal of implementing is
an activity. I'm looking for the results. What result do you
expect we'll see here? The activity produces--ultimately, it's
a mean to an end. What's the end going to be do you think?
Secretary Castro. So I'd be glad to follow up with you on
the ones that can implemented within this fiscal year, because
you asked about the fiscal year, and so it depends on which
ones can be implemented during the fiscal year and what their
budgetary impact would be.
Senator Daines. That would be helpful, because I think it's
important that we all hold ourselves accountable with something
that's quantitative. And so this will be a mid-fiscal report,
then I'd like to see a glide path March 16--or excuse me, March
31 will be a number followed by a September 30 number here as
we're trying to make that number lower.
It's not going to get to zero, I think we all agree. We'd
like to see it at zero. I think it's important we have some
glide path metrics here, so we can make sure we're making
progress here, reduce the waste and abuse of the program.
Thank you, Secretary Castro.
Secretary Castro. Thank you.
Senator Collins. Thank you, Senator Daines. I want you to
know that one reason I'm inviting the inspector general to
testify both at both HUD and Transportation at our hearings is
precisely because of the issues you've just raised, so that we
can make sure we hear from the inspector generals on the areas
that deserve our further attention as well as the Secretary's.
So thank you for raising that issue.
Senator Murphy.
Senator Murphy. Thank you, Madam Chairman. Good afternoon,
Mr. Secretary. Good to see you again. Thank you very much for
your visit to Connecticut about a month ago. You were very
generous to spend a day with us, and we're busy at work on many
of the initiatives that you helped us launch and accentuate
while you were there.
CHURCH STREET SOUTH PROJECT
I wanted to cover two topics with you this morning, one
related to your visit, talk a little bit about HUD's work with
the city of New Haven to address the Church Street South
project that you remarked on when you were there, and second,
talk a little bit about the 811 Supportive Housing program
moving forward.
But first, I think this is your last appearance before the
Appropriations Committee. I just want to thank you personally
for your work, for your focus on many of our shared priorities,
and we really have noticed how attentive and the Administration
has been to many members of this committee. So I thank you for
that.
So maybe I'll start with our situation in New Haven. You
know the details. This is a HUD-funded project, Church Street
South, that is really in absolutely decrepit condition, to the
point where we've had to move many of the residents out. Black
mold, bedbugs, really bad crumbling lead infrastructure are the
main causes.
And I guess my question to you is two-fold. I just want to
get your continued assurance that HUD is going to continue to
work with us, not just to move the residents out of that
facility but to then rebuild that affordable housing capacity,
but second, what we've learned is that the Real Estate
Assessment Center (REAC) doesn't really look at some of the
conditions that were the root cause of the problem in Church
Street South. So for instance, black mold, bedbugs, and lead
don't seem to be part of that assessment.
And so I know you've got a short amount of time left
between now and the end of the President's term, but are you
thinking about ways to make these REAC assessments maybe mirror
some of the real threats that a lot of families are dealing
with, mold and bedbugs at the top of the list, which are
becoming, you know, real epidemic problems in places like
Connecticut?
So one, do we have your continued commitment to help solve
this particular problem? And then is there a reform of REAC
that you'll be working on?
Secretary Castro. Yes, and let me just briefly say thank
you, and I enjoyed the visit to Connecticut and having the
opportunity to hear some of the concerns of folks throughout
the State. And of course, we have been working on Church
Street. We'll look forward to making sure that those residents
have what they need in terms of tenant protection vouchers.
REAC INSPECTION PROCESS
To answer your question just directly, the answer is that
we do need to improve our REAC inspections process. And I
believe we can make some of those improvements internally, on
others that we may need legislative help.
You brought up mold, for instance. It's my understanding
that one of the challenges that we have is that right now, the
detection of mold does not trigger a negation or subtraction of
points to the degree that it probably should and that we need
to adjust the scoring system there, and that in this case and
in some other cases that we've seen, that that would help us be
able to get to intervention or enforcement quicker.
So we would like to work with you. You absolutely do have
my commitment to continue to work with you, both in ways that
that can be improved, that that process can be improved, and
that we ensure we're taking care of those residents.
SECTION 811 SUPPORTIVE HOUSING
Senator Murphy. I appreciate both of those commitments.
In the time that I have remaining, just wanted to talk to
you about the Section 811 Supportive Housing program, what a
tremendous success that program has been over the course of the
last 3 years. We were building about 500 new units out of 811
with Federal dollars when I came to Congress, in part because
of legislation that I helped write, where now, over the last 3
years, we built 7,500 units with Federal dollars, great credit
to the folks who have administered the changes that the law
included in your Department.
But this year's budget, I think, flat funds 811. After 2
years of requests of about $25 million in increases, there's
not any new money in 811 this year. I just wanted to sort of
ask you about the decision to flat fund 811 and ask you to give
an update on the continued reforms that are really leveraging
massive private sector and State level and local level dollars.
Big success story, but I don't want our successes to abate
and us to maybe think that we don't need to allocate as much
Federal money because of our success in getting other partners
to put money into these projects.
Secretary Castro. And certainly, we're proud of those
partnerships, and as you know, in 2012 and 2014, we completed
two NOFA competitions that resulted in the award of $218
million to 28 States and the District of Columbia.
You're right that we did request last year, I believe,
funds for 700 new units. That request is not in the budget. I
do put this into the category of very tough choices that we
made in this budget, but that's not because we're not committed
to the 811 program. We see the value of it. We see the housing
opportunity that it is creating out there for a needy
population and look forward to continuing to work with you on
it.
Senator Murphy. States like ours are just in tremendous
budget crunches, in part because, when you don't properly house
these individuals, the cost of inappropriate care, where it--be
in emergency rooms or prisons, gets passed largely down to
State governments.
And so, coming from a State that has pretty regular budget
deficits these days, this small investment that we make at the
Federal level saves an awful lot of money to the taxpayer at
the State level.
I know I'm preaching to the converted here, and I thank you
for your commitment to the 811 program. Thank you, Madam Chair.
Senator Collins. Thank you. Senator Murray, welcome back to
your old subcommittee.
Senator Murray. Great to be here. Thank you for the great
job that you're doing, both of you. I really appreciate it.
HOMELESSNESS
Mr. Secretary, good to see you again. Let me start with an
increasingly urgent issue in my State, that's homelessness,
which I know is a struggle for many States, but it's gotten so
bad now that the mayor of Seattle and the King County executive
have both declared states of emergency. And I believe this
issue really demands a coordinated and robust response from
local, State, and, of course, the Federal Government.
The numbers actually really tell the story here. In the
early hours of January 29, hundreds of volunteers walked
through Seattle and King County neighborhoods, as they do
everywhere, to count the number of people sleeping outside in
doorways, cars, beneath overpasses, or just on the ground.
The preliminary results show a 19-percent increase in the
number of unsheltered men, women, and children, and some parts
of our county experienced increases of over 50 percent over
last year, and that's, of course, on top of double digit
increases the year before.
These are really heartbreaking situations for everyone,
especially tragic when more and more children are involved. But
it's not just happening in our most populated areas. It's
happening in our suburbs, it's happening in smaller cities,
Longview and Vancouver in my State, where families are actually
being priced out of their homes.
And I really think it's important that the Federal
Government does all it can to help provide the resources in
coordination with State and local authorities. I was really
encouraged to see the President's commitment to addressing this
crisis reflected in your Department's budget request with
targeted investments in rapid rehousing, permanent supportive
housing, and new vouchers.
Many organizations in my State, from our housing
authorities to groups like Seattle's Downtown Emergency Service
Center, are really providing some excellent examples of how
these investments can change lives for the better.
I wanted you to talk for a few minutes about HUD's strategy
for addressing homelessness. And is there sufficient
coordination between the different levels of government here?
Secretary Castro. Thank you, Senator Murray, for your
leadership. I know that you and I have had a chance to speak on
some of these issues, as well as Moving to Work (MTW), which I
know is important to you.
Senator Murray. Right. Which thank you very much for your
staff for working on that.
Secretary Castro. So we have had a lot of success over the
last several years in reducing not just veteran homelessness
but family homelessness, chronic homelessness. But it's also
true that in the last year to 18 months, we've seen a spike in
unsheltered homelessness in some communities, and particularly
along the West Coast.
A few months ago in Portland, I joined the mayors of
Seattle, Portland, San Francisco, and Los Angeles at this West
Coast mayor's summit to address these very issues.
And so, number one, I want to assure you that our staff is
working hand in hand with the Seattle mayor to see how we can
provide technical assistance. We spoke at that meeting about
waivers that might be offered to ensure that they could be as
effective as possible with their resources. We spoke about the
need for continuing to invest in housing first, because that is
the most effective way to end homelessness, but recognizing
that we need a successful street strategy as well for the
unsheltered population.
And we see a similar thing in Los Angeles, that it's not
just on skid row, it's out there in the suburbs and the other
parts of LA that people don't normally think of as having
homeless people.
So that's why I'm very proud of the proposal that's in this
budget, both on the mandatory side and on the discretionary
side, and particularly with regard to the population that we're
talking about, the rapid rehousing intervention as well as the
25,500 units of permanent supportive housing to deal with
chronic homelessness, these are the, I think, strategic
investments that we can make to deal with the challenge.
Senator Murray. And I want to thank our chair, Senator
Collins, and our ranking member, Senator Reed, for the
commitment they have continually shown to make sure that no
family who relies on a voucher to stay in a safe home loses
that support. Even when this subcommittee had a really tough
allocation last year, you made a commitment to that, and I
really appreciate it.
LOCAL RENT COSTS
I'm going to work to continue to protect those existing
vouchers and, of course, work for more. But a major challenge
for HUD is proper allocation of the resources it has given for
the voucher program. This is a really difficult task, given the
complexity of local housing trends across the country, and I
really do want to applaud you and your Department for working
hard to continue to refine the formula used to accurately
capture local rent inflation.
Seattle and King County in particular have experienced huge
year-over-year rent increases that couldn't have been
predicted. When HUD last fully revised its inflation formula,
it was back in 2012. I was glad to hear that, when this year's
inflation factor was announced recently, HUD was better able to
capture that drastic increase.
But this is an issue that requires continued analysis, and
I just want to ask for your commitment to continue to examine
that renewal funding inflation factor, to make sure it's
working for what we need to today.
Secretary Castro. We absolutely will. And, you know, we
were pleased to work in forecasting as we set those levels, and
I think that's important, particularly for communities like
Seattle, which ranks at the top in terms of the increase in
rent. So we absolutely can make that commitment.
MOVING TO WORK
Senator Murray. Okay. And I did want to thank you, again,
for your staff's hard work on the Moving to Work. It was really
essential. And separately, if you can give us an update on how
that's working, I'd appreciate it.
And I just wanted to mention to you, we have a vacancy in
our regional HUD administrator office, and I've heard from many
that the acting regional administrator, Donna Batch, has been
just providing excellent reliable leadership, and I hope we can
get that filled soon.
Secretary Castro. I'm glad to hear that. Thank you.
Senator Murray. Great. Thank you.
Senator Collins. Thank you, Senator. We will do one more
round of questions for the Secretary before we turn to the
inspector general. I know he's very much looking forward to
another round of questions, and I didn't want to disappoint him
in any way.
COMMUNITY DEVELOPMENT BLOCK GRANTS
Mr. Secretary, I mentioned how disappointed I am that the
budget, once again, proposes a $200 million reduction, that's
nearly 7 percent, in the Community Development Block Grant
program. Last year, the justification was that there were going
to be legislative changes submitted to the Congress that would
somehow justify the funding cut. We never received those
legislative proposals.
Once again, in this year's budget request, the same funding
reduction exists and the same promise of a legislative proposal
that would justify the funding reduction is made. What are
those legislative reforms, and when will we receive them?
Secretary Castro. Yes, thank you very much for the
question. And I will say that I am a big fan of CDBG. As a
former mayor, that was my favorite program.
Senator Collins. You're a mayor, right.
Secretary Castro. And I know how flexible it is. The mayors
were in town last week, and of course, every time I see them,
they mention how much they appreciate CDBG. So I am very much
aware of how important this program, this particular program,
is to America's local communities, and we do want to preserve
it.
We do intend--we would like to submit legislation to create
more flexibility and also to help communities maximize the
resources that they have now. One example of that was for
smaller communities, allowing them to share in terms of
overhead cost or pool their overhead costs, their
administrative costs, so that they can use more of that money
in an impactful way.
Something else that we're proposing here is this upward
mobility initiative, and that's an initiative that would allow
10 communities, in a demonstration way, to pool their Community
Development Block Grant, their home money, their Social Service
Block Grant, and Community Service Block Grant funds between
HUD and the Department of Health and Human Services (HHS), pool
those together and get a bigger bang for their buck on local
projects. We think that that's one way of making that money go
further, by enhancing flexibility.
The other part of it, I would say, just candidly, chairman,
is, you know, that we do see this extreme challenge with the
housing need. And right now, our best estimate is that 25
percent of CDBG is actually used directly on housing.
And so what we have are--it's a great program, and I know
that it's not only meant for housing, that it's meant for other
infrastructure investments in local communities, and I know
when I was mayor, we used it for that as well.
But in these difficult choices that we're making in the
budget, also, we've chosen to focus a little bit more on, okay,
how can we get that direct housing money to communities, and
that's another reason.
Senator Collins. Well, we look forward to getting the
specifics. I'm glad that you talked with your fellow mayors,
and that they reminded you of the value of this program. It's
been absolutely critical as the lynchpin of many economic
development projects in my State, whether it's revitalizing
downtowns or cleaning up waterfront areas. And it has produced
investment, jobs, and better housing as well.
YOUTH EXITING FOSTER CARE
As you know, based on your visit to Maine, and I very much
appreciated that visit where we went to the New Beginnings
Youth Homeless Shelter in Lewiston, the issue of reducing the
homelessness among our youth is one that is a passion of mine.
And last year, Senator Reed and I worked very closely together
to provide some new funding, despite the budget constraints.
But one area where there's clearly a breakdown among the
supporting agencies at all levels of government is in the
context of youth who are aging out of the foster care program.
Youth that are exiting foster care are at a significantly
higher risk of falling into homelessness, yet HUD's budget
materials are silent, not only on coordination with the child
welfare system, but also on how to better leverage these
significant funding resources.
What is HUD doing to better coordinate with State and local
facilities to help those young people who may, in some States,
still be in high school, and yet are aging out of the foster
care program and literally have nowhere to go?
Secretary Castro. Yes, thank you so much for that question.
Number one, we do coordinate with child welfare agencies. And
you're right that this is a particular challenge for young
people who are aging out of that foster care system. And so we
believe that, and we have proposed that, we be able to extend
the time that a person can avail himself or herself of that
voucher from 18 months to 5 years, and that that is just so
important to ensure stability in the person's life.
In the demonstration project that we've undertaken, we've
combined it with family self-sufficiency. So we believe that
the combination of these two, going up to 5 years and
participation in the family self-sufficiency program, will set
that young person on a more stable course to be able to, you
know, get a job, be gainfully employed, provide for themselves,
and become self-sufficient, because you're correct that all of
the data shows that this is a particularly vulnerable
population.
And we would be glad to follow up with you. If there are
other ways that you think we ought to be working with child
welfare agencies, we're glad to do it.
Senator Collins. Thank you very much.
Senator Reed.
UNITED STATES INTERAGENCY COUNCIL ON HOMELESSNESS
Senator Reed. Well, thank you, Madam Chairman, again.
One of the issues that's come up persistently is most of
these programs, if not all of them, require interagency
coordination. And when you responded to my question about VASH,
you mentioned the Interagency Council on Homelessness, and that
was formed in the 80s. It's scheduled to expire in October
2017. Actually, about ten times, it's been scheduled to expire.
But it raises the issue of how you're going to do the
coordination with veterans, for example, with the Department of
Veterans Affairs (VA), with Department of Defense.
When it comes to the youth homelessness program, which
Senator Collins led on, really, that's going to--engagement
with Department of Education, engagement with local education
authorities, Department of Labor. Will the demise or the
projected demise of this Interagency Council impede your
efforts in any way, or how are you going to plan to compensate
for this?
Secretary Castro. Yes, and I'm glad to get to address this,
Senator. USICH has just been tremendously important to
achieving the reductions in homelessness that we have seen
across the board. And the best example of that has been on
veteran homelessness.
USICH coordinates the activities, as you know, of 19
different Federal agencies. Earlier in my remarks I mentioned,
in responding to a question about HUD-VASH, about SSVF, about
the Department of Labor's programs. Of course, there's HHS and
so forth.
USICH has very effectively taken those different pieces and
helped the agencies break through silos to work together
effectively to reduce veteran homelessness. And it's doing the
same thing this year on youth homelessness and other types of
homelessness.
So I just want to note that I strongly support the
President's call for extending the agency's authorization, at
least until 2020. I believe that we would not nearly be where
we are on veteran homelessness had it not been for the
leadership at USICH. We just can't accomplish it in the same
way without that coordination.
YOUTH HOMELESSNESS
Senator Reed. Let me focus more specifically on youth
homelessness. Again, last year, the subcommittee included $33
million for demonstration to test and target intervention for
youth. You're requesting this year $25 million for a continuing
care project that targeted youth. Does this $25 million build
on, complement? How is it related to the existing $33 million
program?
Secretary Castro. Yes, the way we see it--of course, what
we see out there is tremendous need. And so we were very, very
pleased with the $33 million that was dedicated last year.
We're in the process of making that real for communities out
there, and we look forward to a competitive process and then an
implementation where communities across the United States, who
are being innovative and creative, will be able to drive down
their numbers of youth homelessness.
This $25 million request is meant to build on that, to
further drive down those numbers on youth homelessness. And we
think that the experience that we've had working in a cross-
agency way on veteran homelessness will be very helpful as we
address youth homelessness and family homelessness as well.
Senator Reed. And you're confident that you can get the
grants out under the existing $33 million in such a way that
they're ready to accommodate additional grants under your
proposal this year?
Secretary Castro. I am confident.
Senator Reed. Because one thing, frankly, we don't want to
be in a situation where you're still really honestly trying to
work out a grant program, and then you ask for sort of an
additional add-on, but that, I think has----
Secretary Castro. Yes, I know, and I should have been more
precise, perhaps, to say that I am confident in that, that we
have a very dedicated team, and that we would ensure that
that's done so that these two can work together.
FAMILY SELF-SUFFICIENCY PROGRAM
Senator Reed. Let me ask a final question about the family
self-sufficiency program. In 2015, we gave the Department
authority to expand the program to project-based Section 8
households, and since then, you have started to pilot this at
several sites. Can you give us the status of the pilot and when
you think you'll be prepared to issue guidance so that all
project-based property owners can apply or have access to it?
Secretary Castro. Yes, you know, we do believe that it
makes sense for PBRA, or project-based rental assistance, to be
able to participate in family self-sufficiency (FSS). And so
right now, to give you an update, we're finalizing the
implementing notice for FSS in multifamily properties. And
we're looking forward to getting stakeholder feedback, and
we're going to post the draft notice to the HUD Web site by
March 15 to see comments from stakeholders.
Senator Reed. Thank you. Thank you, Madam Chairman.
Senator Collins. Thank you very much, Mr. Secretary. I know
that many of the members as well as Senator Reed and I have
additional questions, but we will submit them to you for the
record, and we will keep that record open until Friday, March
18.
Senator Collins. We will now go to our second witness,
Inspector General Montoya.
Secretary Castro. Thank you all very much.
Senator Collins. Thank you very much, Mr. Secretary. Mr.
Inspector General, please proceed.
STATEMENT OF HON. DAVID A. MONTOYA, INSPECTOR GENERAL,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. Montoya. Chairman Collins, Ranking Member Reed, and
members of the subcommittee, thank you for the opportunity to
discuss the Office of Inspector General fiscal 2017 budget
request, the Department's top management and performance
challenges, and our oversight of HUD's programs and operations.
I'm pleased to highlight the results from fiscal year 2015
semiannual reports to the Congress and how our budget request
supports and advances our efforts.
In 2015, our audits and other reviews resulted in nearly $2
billion in recommendations that funds be put to better use,
over $2 billion in questioned costs, and nearly $500 million in
collections. Our investigative efforts also led to nearly $670
million in restitution, judgments, recoveries, and receivables.
When you add in our civil recoveries and receivables, our total
results are close to $6 billion.
According to an April 2015 report by Brookings, my office
ranked third of all Office of Inspectors General for a high
return on investment, meaning that for every dollar my office
spent, we brought in approximately $30 in savings or recovered
funds between 2010 and 2014. Our overall return on investment
for fiscal year 2015 is over 46-to-1.
Our request of $129 million in fiscal year 2017 includes
additional funds to hire specialized skills and resources to
fund cost of living adjustments, increased benefit costs, and
within grade increases. Our request is a modest one that will
assist us not only to continue but to enhance our efforts and
oversight of two very large financial institutions which are
vital to the U.S. economy.
We will continue to build on the successes of the last
number of years and ensure our work provides the means to keep
the Secretary and the Congress fully and currently informed
about the Department's problems and deficiencies while also
highlighting best practices. I note that we have seen efforts
by the Department to address their challenges.
Our mission is to also promote economy efficiency and
effectiveness in the Department's programs and operations. In
doing so, we have determined that achieving HUD's mission
continues to be an ambitious challenge for its limited staff,
given its diverse programs, the thousands of intermediaries
assisting the Department, and the millions of beneficiaries of
its housing and development programs.
Proposed and new program changes have introduced new risks,
oversight, and enforcement challenges. For example, the
national credit and financial crisis continues to have a
profound impact on departmental operations. HUD is an important
component of the Nation's housing industry, and in that, FHA-
insured mortgages financed approximately one-fourth of all home
purchases in the United States. FHA's portfolio now exceeds $1
trillion.
Over the past 5 years, Ginnie Mae has seen its outstanding
mortgage-backed securities increase by more than 50 percent and
has experienced its fastest growth in the last 6 years. As of
August 2015, Ginnie Mae's mortgage-backed securities portfolio
exceeded $1.6 trillion and is estimated to reach the $2
trillion mark in a little over a year.
We remain concerned that increases in demand on the FHA
program are having collateral implications on the integrity of
Ginnie Mae's mortgage-backed securities program, including the
potential for increases in fraud.
Finally, in October 2016, my office reported on nine
management and performance challenges facing HUD in 2016 and
beyond. Our work has noted that these challenges are so
interrelated and interconnected that one impacts another to
such a degree that, in many cases, the Department will not be
able to remedy one without first correcting another. This
becomes a taxing challenge to determine which needs to come
first or whether several need to be accomplished
simultaneously.
A common thread underlying many of these management and
performance challenges is the lack of a cohesive department-
wide approach to enforcement, risk management, monitoring, and
following through on our findings.
While HUD is starting to make some changes in certain
programs to correct this, we will continue to stress a
department-wide risk monitoring approach that is data driven
and supports taking appropriate actions when warranted.
I want to acknowledge that I have regular meetings with
Secretary Castro and Deputy Secretary Coloretti on HUD's
management and performance challenges, and their continued
interest and focus is paramount to ensuring HUD can address and
correct these longstanding issues.
My office is strongly committed to working with the
Department and the Congress to ensure that these important
programs operate efficiently and effectively as intended for
the benefit of those most in need now and into the future.
Again, thank you for the opportunity. I'm looking forward
to the questions that you may have of me.
[The statement follows:]
Prepared Statement of Hon. David A. Montoya
Chairman Collins, Ranking Member Reed, and Members of the
Subcommittee, I am David Montoya, Inspector General of the U.S.
Department of Housing and Urban Development (HUD). Thank you for the
opportunity to discuss the Office of Inspector General's (OIG) fiscal
year 2017 budget request. The committee also asked that I address the
Department's top management and performance challenges and my Office's
oversight of HUD's programs and operations.
The Department's primary mission is to create strong, sustainable,
inclusive communities and quality, affordable homes for all. HUD seeks
to accomplish this mission through a wide variety of housing and
community development grant, subsidy, and loan programs. Additionally,
HUD assists families in obtaining housing by providing Federal Housing
Administration (FHA) mortgage insurance for single-family and
multifamily properties. It relies upon many partners for the
performance and integrity of a large number of diverse programs. Among
these partners are cities that manage HUD's Community Development Block
Grant funds, public housing agencies that manage assisted housing
funds, HUD-approved lenders that originate and service FHA-insured
loans, Government National Mortgage Association (Ginnie Mae) mortgage-
backed security issuers that provide mortgage capital, and other
Federal agencies with which HUD coordinates to accomplish its goals.
HUD also has responsibility for administering disaster assistance
programs which has evolved substantially over the years. It also has
assumed a prominent role in administering new mortgage assistance and
grant programs in response to the Nation's financial crisis, to
increases in foreclosures, and to declining home values.
I want to acknowledge that I have continuing open dialogues with
Secretary Castro and Deputy Secretary Coloretti on the management and
performance challenges that the Department faces and on the work my
office does to bring these matters to their attention. I meet regularly
with them and their key staff on areas of concern.
I am pleased to highlight the results from our last two Semiannual
Reports to the Congress which showcase key results for fiscal year
2015. The Inspector General Act requires each inspector general to
report on its results every 6 months. My office is charged with
eliminating and preventing fraud, waste, abuse and mismanagement in HUD
programs and operations, and the audits, evaluations and investigations
conducted by my office have had a significant impact on safeguarding
Federal funds. My office takes the approach that early detection and
prevention are key to ensuring taxpayer funds are not lost. During the
last two 6-month cycles, we issued 148 audits and other reviews, which
resulted in nearly $2.0 billion in recommendations that funds be put to
better use, over $2.1 billion in questioned costs, and nearly $500
million in collections from audits. Our investigations led to nearly
$670 million in restitution, judgments, recoveries and receivables. Our
audits, evaluations and investigations assist HUD in identifying
program vulnerabilities and the rest of my testimony will focus on the
management and performance challenges faced by HUD as well as the OIG's
budget request for the upcoming fiscal year 2017.
overview
The mission of the Office of Inspector General is not only to
prevent and detect fraud, waste, and abuse in the programs and
operations of the Department but to promote economy, efficiency and
effectiveness as well. We accomplish this by conducting independent
audits, evaluations, and investigations. The work performed by our
auditors, evaluators, and investigators provides the means to keep the
Secretary and the Congress fully and currently informed about the
Department's problems and deficiencies while also highlighting best
practices. After identifying problems and deficiencies, we make
recommendations to improve operations and follow-up with departmental
officials on corrective actions. We are committed to reducing fraud at
the outset or at least halting it at the earliest opportunity.
Protecting taxpayer dollars is one of the Inspector General's highest
priorities in order to account for money going to the right place,
doing what it was supposed to do, and having the results it was
intended to have. We actively pursue financial and other fraud schemes
in all of HUD's programs that can have a significant economic impact
often at the expense of the American taxpayer.
fiscal year 2017 request
OIG requests $129 million and 655 Full Time Equivalents (FTE) in
fiscal year 2017. This includes additional funds for the cost of new
hires and resources to fund cost-of-living adjustments, promotions,
increased benefit costs, and within grade increases. Despite some
struggles to replace lost staff previously due in part to budget
interruptions, in fiscal year 2015 the OIG was able to make gains in
total FTE as part of the overall goal of building the organization back
to pre-sequestration levels. The OIG is continuing to build on this
success into fiscal year 2016. Utilizing this active workforce
management should allow the OIG to maintain a staffing base that is
moving closer to historical norms and what is needed based on workload
facing the organization. Twelve new FTEs are requested for fiscal year
2017 representing a small increase over fiscal year 2016. Approximately
seven FTE will operate within the Office of Audit, where the skill sets
needed will mostly concentrate on the increased workload as a result of
bringing the HUD consolidated financial statement audits in-house which
requires highly specialized skills in Federal financial auditing,
actuarial modeling, and information technology (IT) skills. The
remaining five new FTEs will bolster the Office of Evaluations
multidisciplinary teams that work on overseeing, testing, and improving
the information security systems and protocols in place within HUD,
which require highly technical skills in IT security and penetration
testing, especially in light of breaches to Federal IT systems.
oig program divisions
Office of Audit
The Office of Audit (OA) is responsible for conducting audits to
identify, evaluate, and report on the Department's activities and
programs so corrective actions can be taken and future problems can be
prevented. Auditors assigned to headquarters and to seven regional
offices initiate audits based on information obtained from program
officials, program research, complaints, congressional requests, and
risk assessments.
OA provides oversight across a wide array of responsibilities. The
funding requested for the mission of OA allows the organization to
expand and concentrate its expert oversight in several areas:
--Financial audits consisting of the HUD Consolidated Financial
Statement including the audit of FHA ($1.2 trillion mortgage
insurance program) and Ginnie Mae ($1.6 trillion in mortgage-
backed securities) which determine whether financial statements
are fairly presented, internal controls are adequate, and
regulations have been followed. Because of the critical impact
these agencies have had to the financial stability of the
national economy particularly during the last downturn, the OIG
began performing FHA's and Ginnie Mae's financial audits in-
house in fiscal year 2014. This was done to ensure the highest
level of accuracy and due diligence.
--Information system audits determine, among other things, the
adequacy of general and application controls, and whether
security over information resources is adequate, and in
compliance with system development requirements. Ensuring
taxpayer and HUD client information is stored with the
guarantee that it will be safe and private is something system
audits seeks to scrutinize and work to correct when
vulnerabilities are found. In addition, OA has been involved
with assessing new information system deployments within HUD,
an especially large task with HUD's transition to a shared
services system with the Department of Treasury.
--The Joint Civil Fraud Division is a multidiscipline team that
audits and reviews, working with investigators, attorneys, and
other support staff, any suspected financial fraud against HUD
and makes referrals for civil actions and administrative
sanctions. This group provides case support to the Department
of Justice, Civil Division; United States Attorney's Offices
nationwide; and HUD's Office of General Counsel to investigate
and bring civil fraud cases. As a result, since this initiative
began, the Government has reached civil settlements regarding
FHA deficient loan underwriting totaling $3.5 billion for
alleged violations of the False Claims Act; the Financial
Institutions Reform, Recovery, and Enforcement Act; and the
Program Fraud Civil Remedies Act. Nearly $2.4 billion of the
$3.5 billion in settlements is of direct benefit to the FHA
insurance fund and I am proud that the HUD OIG staff from
different components played a prominent role in these efforts.
Moreover, the OA has been incredibly successful in rooting out and
exposing waste, fraud, abuse of taxpayer funds. In fiscal year 2015,
the HUD-wide impact of the audit findings and reports totaled $4.1
billion. This amount compared with the OIG's appropriated dollars means
that for every appropriated dollar received, $36 are returned to
taxpayers or reallocated to other valued mission objectives. When
combined with other OIG units (investigations, evaluations, and other
support divisions) the overall return on investment rises to even more
returned per dollar spent.
Office of Evaluation
The Office of Evaluation (OE) provides a flexible and effective
mechanism for oversight and review of HUD's operations, programs and
policies by using a multidisciplinary staff and multiple methods for
gathering and analyzing data. OE is comprised of integrative teams,
concentrating on areas of risk and multiple methods for analyzing data
providing a flexible and effective process to produce impartial and
reliable results. In an effort to concentrate resources where they can
be most effective, and where the greatest institutional risk is
present, several priorities have been identified:
--HUD maintains a tremendous amount of data in many diverse systems
and databases. The ability for OE to leverage the information
from those systems into products that can be used to identify
fraud and wasteful tendencies before they occur, or early on so
that they do not have the chance to grow into a larger problem,
is a central goal and tenet of the OE mission. Using the data
available to recognize patterns from historical events and to
learn how those patterns can be used to prevent future
incidents is a powerful tool that OE is trying to enhance in
strength and deploy in larger scale. In addition to directly
identifying weaknesses in the administration of HUD funds and
programs, the task of improving data analysis and predictive
analytics will provide OIG with the best information when
communicating with constituents, directing enforcement
strategies, and allocating limited resources.
--Cybersecurity and insuring the protection of IT systems has become
a mission of the utmost importance for the Federal Government
as a whole. HUD is at a critical crossroads with the aging of
the Department's IT infrastructure and the need to modernize
these systems. In this environment, the opportunities for
assessing cybersecurity are heightened. In addition many HUD
systems are supported by outside vendors. While this model of
IT acquisition and maintenance is sometimes necessary, it also
creates additional IT security vulnerabilities or risk. OE
contributes to the OIG's IT security mission by conducting
necessary oversight and by monitoring these systems.
--OE is responsible for conducting the Federal Information Security
Modernization Act of 2014 (FISMA) reviews and other IT
operational evaluations. One of the best tools that the OIG has
to measure this security effectiveness is technical testing to
include ``penetration testing.'' Penetration testing can be
conducted in different ways and on multiple levels to
technically test mandated IT security controls. Recently we
conducted testing which greatly assisted in finding
vulnerabilities within the HUD network and provided the OIG
with additional key information and recommendations for FISMA
reporting. Into the future, follow-up technical testing will be
required by the OIG to validate corrective action of previously
found vulnerabilities are being implemented by HUD, to assess
other areas of the HUD network, FISMA assessment topics, or any
future Federal cybersecurity guidance.
The Office of Evaluation is maturing and becoming fully staffed and
operational with the heightened mission; the key to completing this
process is ensuring the timely and consistent availability of budgetary
resources and critical technical skills.
Office of Investigation
The Office of Investigation (OI) is responsible for the development
and implementation of the OIG's investigative activities and is
comprised of criminal investigators, investigative analysts, and
administrative personnel. OI initiates and conducts criminal, civil and
administrative investigations of possible violations of laws and
regulations relating to the administration of HUD programs and HUD-
funded activities as well as employee misconduct.
--The Office of Investigation has recently produced significant
criminal and civil findings relating to HUD program fraud,
including participation in large-scale settlements that have
returned money to the FHA fund. OI has made it a priority to
root out fraud involving the origination of FHA mortgages,
multifamily equity skimming schemes at housing developments
receiving HUD subsidized rental assistance for tenants, and at
nursing homes. These efforts have produced noteworthy results
in the past and this trend is expected to continue into the
future. The OIG is a full-time participant in the Department of
Justice's Financial Fraud Enforcement Task Force where the
Inspector General is the Co-Chair of the Mortgage Fraud Working
Group. This focus on finding and identifying fraudulent
activity will continue to protect taxpayers from those who look
to defraud the government, negatively impact the financial
health of our economy, and undermine the true mission of HUD
programs.
--OI also works to reduce fraud, waste, and abuse in the Public and
Indian Housing arena, with a focus on Public Housing
Authorities (PHAs). Ensuring that public housing dollars are
being administered properly and utilized by the intended
recipients is a challenge the Office of Investigation
emphasizes every day. This work with the PHAs takes on many
different forms: identifying public corruption, management and
administration deficiencies, contract fraud, embezzlement,
bribery, and rental assistance fraud. The fight against
corruption also takes place in the management of Community,
Planning and Development grant programs.
--OI continues to dedicate time and resources to the work in
communities affected by previous disasters, such as the Gulf
Coast area after Hurricane Katrina and, more recently,
Hurricane Sandy. Designated disaster sites are provided large
amounts of grant and emergency funding in the wake of these
disasters. OI conducts investigations of fraud and abuse of
disaster recovery funds efforts, assists to ensure that these
resources are utilized properly, and leads the effort to
prevent disaster fraud schemes. It also provides training to
those entities tasked at the State and local level on how to
detect and deter fraud and abuse.
Over the last 4 years the Office of Investigation has produced over
$4.3 billion in criminal judgments and nearly $2.2 billion in
recoveries. The reach of this office is extended by resources that keep
investigators in the field working with the tools they need to root out
the waste, fraud, and abuse they are tasked with exposing.
hud's performance and management challenges
Achieving HUD's mission continues to be an ambitious challenge for
its limited staff given the agency's diverse programs, the thousands of
intermediaries assisting the Department, and the millions of
beneficiaries of its housing and development programs. The national
credit and financial crisis continues to have a profound impact on
departmental operations. Proposed and new program changes have
introduced new risks, oversight and enforcement challenges. HUD is an
important spoke to the Nation's housing industry in that FHA-insured
mortgages finance approximately one-fourth of all home purchases in the
United States and in that it has stepped in to bolster the marketplace
during economic challenges.
In October 2016, OIG reported on nine key management and
performance challenges facing HUD for fiscal year 2016 and beyond. They
are so interrelated and interconnected that our reviews suggest one
impacts another to such a degree that, in many cases, the Department
will not be able remedy one without first correcting another. This
becomes a taxing challenge to determine which needs to come first or
whether several be accomplished simultaneously. These challenges are in
the following areas:
1. Human capital management,
2. Financial management governance of HUD,
3. Financial management systems,
4. Information security,
5. Single-family programs,
6. Public and assisted housing program administration,
7. Administering programs directed toward victims of natural
disasters,
8. Office of Community Planning and Development programs, and
9. Compliance with the Improper Payments Elimination and Recovery
Act of 2010.
Since our October 2016 report, my office has completed an
additional evaluation relating to HUD's acquisition management and its
efforts to address long-standing concerns in this area. I have added a
discussion to summarize the results of that review.
Human Capital Management and Financial Management Governance
For many years HUD has struggled and been challenged to effectively
manage its limited staff to accomplish its primary mission. HUD
continues to lack a valid basis for assessing its human resource needs
and allocating staff within program offices. Several studies have been
completed in recent years by the Office of Personnel Management and the
Government Accountability Office that point to a lack of human capital
accountability and insufficient strategic management of human capital
as pervasive problems at HUD. To some extent, these human capital
challenges have contributed to HUD's inability to maintain an effective
financial management governance structure which we have been reporting
for the past 3 years as part of our annual audits of HUD's financial
statements.
In our most recent report on HUD's fiscal year 2015 financial
statements, we continued to report that HUD's financial management
governance remained ineffective. While HUD and its components took
steps to address some of the weaknesses in its financial management
governance structure and internal controls over financial reporting,
deficiencies continued to exist. Specifically, HUD needs to recruit and
hire a Chief Financial Officer and Deputy Chief Financial Officer (CFO)
with the requisite accounting and technical financial management skills
to provide stronger direction to program office accounting so as to
improve financial management and governance issues throughout the
Department and specifically at Ginnie Mae. Additionally, HUD needs to
be more consistent in its control and monitoring activities, including
front-end risk assessments, management control reviews and
reconciliation activities.
These conditions stemmed from the lack of a senior management
council which limits the CFO's ability to stress the importance of
financial management and to facilitate internal control over financial
reporting throughout HUD. Additionally, as we have reported in prior
year audits, HUD did not have reliable financial information for
reporting and has been slow in replacing its outdated legacy financial
systems. Weaknesses in program and component internal control that
impacted financial reporting were caused in part by a lack of financial
management governance processes. Entity-level controls could improve
HUD's governance and enable the prevention, detection, and mitigation
of significant program and component-level internal control weaknesses.
As a result, there were multiple deficiencies in HUD's internal
controls over financial reporting, resulting in misstatements on the
financial statements and noncompliance with laws and regulations.
A 2015 report from the National Academy of Public Administration
(NAPA) also recognized the need for an internal management council to
strengthen HUD's financial governance structure and enhance its
monitoring of financial activity and controls. Such a council would:
--Assess and monitor deficiencies in internal control resulting from
HUD's assessment process.
--Advise the HUD Secretary of the status of corrections to existing
material weaknesses.
--Inform the Secretary of any new material weaknesses that may need
to be reported to the President and Congress through the annual
financial report.
We believe that these are critical steps towards establishing
effective internal controls. In addition to its concerns and
recommendations regarding HUD's impending transition to a shared
service provider for financial management functions, NAPA found that
HUD should strengthen its finance workforce. As we have previously
reported, HUD's ability to monitor and perform routine financial
management activities has been hampered by both turnover and reductions
in staff. Between 2009 and 2014, there was a 40 percent turnover in CFO
staff and an 11 percent reduction in full-time permanent CFO employees.
Between 2014 and 2015 there was a 15 percent turnover and a 9 percent
reduction in full-time employees. The turnover and reductions have
placed additional burdens on CFO staff and limited its ability to
perform its duties in a timely and efficient manner.
In addition to issues at the Departmental level, we have identified
significant financial governance issues within Ginnie Mae. In fiscal
year 2015, Ginnie Mae failed to maintain a governance framework to
ensure the reliability and integrity of Ginnie Mae's financial and
accounting information. This failure in governance was the underlying
cause of the problems cited in the Ginnie Mae financial statement audit
report. Specifically, Ginnie Mae failed to adequately:
--Identify, analyze, and respond to changes in the control
environment and risk associated with the acquisition of a
multi-billion-dollar servicing portfolio.
--Establish accounting policies, procedures, and systems to manage
and control the loan accounting and processing of the
activities related to its defaulted issuers' portfolio.
--Oversee the implementation of the budgetary accounting module in
its financial system to ensure accurate reporting of budgetary
activity.
This condition occurred because of finance staff turnover and
insufficient internal controls to manage the risks associated with
business decisions and changes in its business environment.
Additionally, Ginnie Mae's executive leadership failed to backfill a
number of critical financial management positions, including the deputy
chief financial officer, controller, and the economic modeling
director, all of which have significant financial reporting roles.
These positions had been vacant for an extended period, and Ginnie Mae
relied heavily on contractors to compensate for finance staffing
deficiencies. As a result, serious financial reporting deficiencies
occurred at Ginnie Mae, the most recent of which required $1.9 billion
of restatement adjustments to HUD's fiscal year 2014 consolidated
financial statements. Compounding the problem was Ginnie Mae's late
notification, inadequate communication, and lack of transparency,
resulting in difficulties for HUD's CFO to preparing consolidated
financial statements within the required timeframes and ultimately
inhibiting our ability to validate the accuracy of the accounting
adjustments. Time will tell whether a recent leadership change within
Ginnie Mae will ameliorate some of these conditions.
Ginnie Mae's management of risks associated with (1) handling
complex and changing financial management operations without the
appropriate accounting policies and procedures in place and (2)
monitoring the work performed by third-party service providers on
Ginnie Mae's multi-billion-dollar servicing portfolio have challenged
Ginnie Mae's inadequate financial management staff. These governance
weaknesses contributed to Ginnie Mae's inability to produce auditable
financial statements.
Financial Management Systems
Annually since 1991, OIG has reported on the lack of an integrated
financial management system, including the need to enhance FHA's
management controls over its portfolio of integrated insurance and
financial systems. HUD has been working to replace its current core
financial management system since fiscal year 2003. The previous
project, the HUD Integrated Financial Management Improvement Project
(HIFMIP), was based on plans to implement a solution that replaced two
of the applications currently used for core processing. In March 2012,
work on HIFMIP was stopped and the project was later canceled. This
previous attempt to use a commercial shared service provider to start a
new financial management system failed after more than $35 million was
spent. Our review of the project determined that OCFO did not properly
plan and manage its implementation of the project.
In the fall of 2012, the New Core Project was created to move HUD
to a new core financial system that would be maintained by a shared
service provider, the U.S. Department of the Treasury's Bureau of
Fiscal Services (BFS). We have completed two audits of HUD's
implementation of the New Core Project. In the first audit, published
in June 2015, we found that weaknesses in the planned implementation of
release 3 of phase 1 in the New Core Project were not adequately
addressed. We determined that HUD did not follow its own agency
policies and procedures, the policies established for the New Core
Project, or best practices. HUD will become the first cabinet-level
agency to use a Federal shared service provider. The transfer of its
financial management to a shared service provider has been widely
publicized. If HUD is not successful in this implementation, it could
reflect negatively on OMB's mandate to use Federal shared service
providers. The weaknesses identified in this report relate to
requirements and schedule and risk management. These areas are
significant to the project plan, and the effectiveness with which HUD
manages them is critical to the project's success.
Our second review, published in September 2015, found that HUD's
implementation of release 1 of phase 1 was not completely successful.
Due to missed requirements and ineffective controls, interface
processing of travel and relocation transactions resulted in inaccurate
financial data in HUD's general ledger and BFS' financial system. As a
result, processing continued for more than 6 months with unresolved
errors, leaving HUD's general ledger and BFS' financial system with
inaccurate financial data and discrepancies in the balances between
HUD's general ledger and Treasury's Government Wide Accounting System.
We concluded that the implementation of release 1 confirmed the
concerns we cited in our initial review. Although HUD had taken action
to mitigate some of the problems that occurred with release 1 and
address some of the issues we highlighted, we are concerned that HUD
could be moving too fast with its implementation plans and may repeat
these weaknesses.
We are also concerned about the current state of FHA's IT systems
and the lack of systems capabilities and automation to respond to
changes in business processes and the IT operating environment. In
August 2009, FHA completed the Information Technology Strategy and
Improvement Plan to address these challenges, which identified FHA's
priorities for IT transformation. The plan identified 25 initiatives to
address specific FHA lines of business needs. Initiatives were
prioritized with the top five related to FHA's Single-family program.
The FHA transformation initiative was intended to improve the
Department's management of its mortgage insurance programs through the
development and implementation of a modern financial services IT
environment. The modern environment was expected to improve loan
endorsement processes, collateral risk capabilities, and fraud
prevention. However, to date, few initiatives have been completed
because of a lack of funding. The transformation team is in operations
and maintenance mode for the few initiatives that have been
implemented, and has limited capability to advance with the project due
to the continued lack of funding.
Overall, funding constraints diminished HUD's ability to complete
the new application systems and phase out and deactivate the outdated
systems. Some progress has been made by creating new systems with
modernized capabilities that replaced manual processes. However, many
legacy systems remain in use. Another concern is the ability to
maintain the antiquated infrastructure on which some of the HUD and FHA
applications reside. As workloads continue to gain complexity, it
becomes more difficult to maintain these legacy systems, which are 15
to 30 years old, and ensure that they can support the current market
conditions and volume of activity. The use of aging systems has
resulted in poor performance and high maintenance costs. As part of our
annual review of information systems controls in support of the
financial statements audit, we continue to report weaknesses in
internal controls and security regarding HUD's general data processing
operations and specific applications. The effect of these weaknesses is
that the completeness, accuracy, and security of HUD information is at
risk of unauthorized access and modification.
Information Systems Security Controls
HUD information systems have extensive amounts of sensitive data,
with thousands of entities in the private sector and program officials
directly accessing and using HUD applications daily. However, HUD has
not adequately planned for its future IT and IT security needs. The
primary HUD infrastructure services contract is in a period of
transition and the agency has been forced to issue short-term sole-
source contracts with the previous vendors to ensure continuation of
service. Further, a significant number of critical HUD applications are
legacy systems that are increasingly difficult to maintain and present
security risks that HUD will be challenged to mitigate without
modernization. Legacy systems are difficult or unable to migrate to
cloud technology, further complicating the agency's long-term efforts
to modernize and secure its systems and data while creating
efficiencies and cost savings.
HUD has taken some initial steps to address these long-term
challenges. The agency has finally filled and stabilized several key
positions including the Chief Information Officer, Chief Information
Security Officer, Chief Technology Officer, and Enterprise Architect.
Strategic longterm planning documents have been developed, including an
Enterprise Architect Roadmap aimed in part at guiding modernization
efforts, and a Cybersecurity Framework to address IT security program
deficiencies and prioritize initiatives to correct deficiencies.
Notable change and implementation from these initiatives is not
anticipated to be realized until later this year. Further, successful
implementation of these plans will be directly dependent upon the
agency's ability to obtain adequate resources including technical
expertise. In the process of outsourcing infrastructure and application
maintenance and support, HUD has divested itself of much of its
technical expertise and continues to face significant staffing
challenges. For example, an organizational chart provided to OIG during
its fiscal year 2015 FISMA assessment reflected that 17 of the 35 key
managerial/supervisory positions stationed at headquarters were either
vacant (13) or filled by temporary ``acting'' personnel (4) during
fiscal year 2015. This presents significant challenges to HUD's ability
to conduct technical security reviews of its infrastructure (e.g.,
penetration testing, network assessments) or adequately oversee the
technical security provided by vendors.
Meanwhile, our annual evaluation of HUD's IT security program, as
mandated by Federal Information Security Management Act (FISMA), has
revealed continued and extensive noncompliance with Federal IT
guidance. As depicted in OIG's fiscal year 2015 FISMA report, HUD has
extensive deficiencies in five of the ten program areas which OIG
reports to OMB. HUD is showing progress in remediating these
deficiencies; examples include significant upgrades in its security
awareness training program, account access management, and issuance of
proper guidance for managing Plans of Action and Milestones (POA&Ms).
However, the agency has not adequately addressed many long-standing
security weaknesses identified in prior OIG evaluations.
Procurement and Contract Management
In prior years, we have reported on various concerns relating to
HUD's procurement and contract management including HUD's information
technology infrastructure contracts and HUD's transition to the third
generation of its management and marketing contracts that are used to
manage and dispose of its extensive inventory of foreclosed Single-
family properties. HUD continues to be challenged by its over-reliance
on contractors in general and its ability to allocate sufficient
resources to adequately oversee its contractor work force.
HUD has developed several acquisition improvement initiatives to
address the long-standing concerns in this area. We recently completed
an evaluation to assess the status of these efforts and whether
practices used by other agencies would enhance the quality and
effectiveness of HUD acquisitions.\1\ HUD had made progress in several
areas, including revising and updating its procurement handbook and
redesigning its web site. However, some initiatives had not been fully
implemented or completed on schedule. HUD officials said that
additional resources would be needed to effectively implement ongoing
and planned improvement efforts. HUD had not developed a sound,
cohesive strategy to address its improvement initiatives, and program
offices did not all agree on resource requirements and respective
responsibilities for their acquisitions staff.
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\1\ Evaluation Report 2015-OE-0004, Comprehensive Strategy Needed
To Address HUD Acquisition Challenges, February 2, 2016.
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Some of HUD's improvement initiatives did not follow successful
program management practices or meet the U.S. Government Accountability
Office's criteria for achieving an efficient, effective, and
accountable acquisition function. We identified several successful
practices of other Federal agencies that would improve HUD's
acquisition function by using measurable objectives and goals, building
partnerships, engaging stakeholders, managing change, streamlining
functions, and training staff.
HUD procurement officials and the program offices did not always
collaborate or communicate effectively and did not agree on the best
way to address acquisition problems. HUD had also not maintained cost
and performance metrics to determine where inefficiencies existed.
Program offices continued to experience challenges, and some sought
alternatives in shared services arrangements with Federal agencies to
accomplish their acquisition objectives because the Department could
not do it for them. HUD leadership needs to address these issues, or
its acquisition function will remain at risk.
Single-Family Programs
FHA's Single-family mortgage insurance programs enable millions of
first-time borrowers and minority, low-income, elderly, or other
underserved households to benefit from home ownership. HUD manages a
sizable portfolio of Single-family insured mortgages exceeding $1.2
trillion. Effective management of this portfolio represents a
continuing challenge for the Department.
For the 6 years following the financial crisis of 2008, the FHA
fund had failed to meet its legislatively mandated 2 percent capital
ratio. From a low following the financial crisis, the fund has shown
gradual improvement and, at the end of fiscal year 2015, the capital
ratio stood at 2.07 percent. Much of this success is heavily dependent
on a strong Home Equity Conversion Mortgage insurance program (HECM), a
program we have reported on several times. The HECM program is
sensitive to a number of factors that can influence its financial
stability which then, in turn, can have a significant impact on the
achievement of an adequate capital ratio as mandated by statute. While
barely above the mandated level, this improvement is a positive
development and occurred a year earlier than predicted at the end of
2014. Restoring the fund's reserves and finances has been a priority
for HUD, and it has increased premiums, reduced the amount of equity
that may be withdrawn on reverse mortgages, and taken other steps to
restore the financial health of the fund.
It is incumbent upon the Department to make every effort to prevent
or mitigate fraud, waste, and abuse in FHA loan programs. OIG continues
to take steps to help preserve the FHA insurance fund and improve FHA
loan underwriting by partnering with the Department, the U.S.
Department of Justice, and multiple U.S. Attorney's offices nationwide
in a number of FHA lender civil investigations. In some instances,
these investigations involve not only the loan underwriting of FHA
loans but also the underwriting of conventional loans and government-
insured loans related to Federal programs other than FHA. For those
investigations that involved OIG's assistance on the FHA-related part
of the cases, the Government has reached overall civil settlements
yielding nearly $13.2 billion in damages and penalties in the last 4
fiscal years.
For the FHA-insured loans, results in the last 4 fiscal years have
shown that a high percentage of loans reviewed should not have been
insured because of significant deficiencies in the underwriting. As a
result and as pointed out in the beginning of the testimony, the
Government has reached civil settlements regarding FHA loan
underwriting totaling $3.5 billion for alleged violations of the False
Claims Act; the Financial Institutions Reform, Recovery, and
Enforcement Act; and Program Fraud Civil Remedies Act. Nearly $2.4
billion of the $3.5 billion is of direct benefit to the FHA insurance
fund. Ongoing investigations are expected to lead to additional
settlements that will further strengthen the health of the fund.
In spite of these positive steps, we remain concerned about HUD's
resolve to take the necessary actions going forward to protect the
fund. HUD is often hesitant to take strong enforcement actions against
lenders because of its competing mandate to continue FHA's role in
restoring the housing market and ensure the availability of mortgage
credit and continued lender participation in the FHA program. For
example, FHA has been slow to start a rigorous and timely claims review
process. OIG has repeatedly noted in past audits and other types of
lender underwriting reviews HUD's financial exposure when paying claims
on loans that were not qualified for insurance, most recently last
year. Adding to this concern, HUD increased its financial exposure by
not recovering indemnification losses.
The Reverse Mortgage Stabilization Act of 2013 gave FHA the tools
to improve the fiscal safety and soundness of the HECM program in a
timelier manner. Despite the ability to quickly make needed changes as
appropriate to the program, FHA faces challenges in ensuring that
homeowners comply with the principal occupancy requirements (though not
all dual HECM's are considered improper). For example, borrowers are
not required to repay the loan as long as they continue to occupy the
insured property as its principal residence. To date, OIG has completed
four audits on the HECM program and compliance with principal occupancy
requirements. Our initial audit identified borrowers with more than one
HECM loan despite the principal occupancy requirement. Borrowers were
able to obtain more than one HECM loan because of a lack of controls in
place to identify this noncompliance. The Department has been receptive
to our findings and has implemented controls to address this problem.
Departmental clearance is a necessary and important process to
ensure requisite agreement by applicable HUD leadership on the subject
matter and content of a directive or policy change. This action
requires a review by HUD offices that have expertise, policy or legal,
with the subject matter of the change and that there is no conflict
with other HUD or administration policies.
At a time when FHA is working to restore confidence in the housing
market, OIG has concerns that when the Department is making program,
policy or procedural changes, it is (1) not identifying the significant
changes in its notice, (2) not following the formal clearance process
and instead opting for a more informal method, or (3) avoiding the
process altogether and making changes unilaterally. For example, in May
2015, HUD issued a notice in the Federal Register seeking OMB approval
for information collection. However, OIG believes that the notice did
not adequately describe the changes to be made. The Notice proposed to
make changes to the loan-level certifications that lenders must make to
obtain insurance from FHA. As a result, the certification process
became ineffective and allowed loan originators, firms, or principals
that have been convicted of certain violations to do business with FHA.
However, this detail was not provided in the notice. Another example is
FHA's Single-Family Housing Loan Quality Assessment Methodology (Defect
Taxonomy). The goal of this methodology is to give lenders better
clarity on the quality assurance reviews of their FHA loans. Although
HUD stated that the draft Taxonomy documents had been published on
FHA's Drafting Table web site, FHA did not follow the proper protocol
for issuing a new directive. These changes fit the description of a
directive change and should have been announced through the proper
steps and clearance process as outlined in its own Handbook.
FHA also remains vulnerable to criminal activity and single-family
criminal investigations continue to be a priority of my office. We
recently concluded an investigation of Great Country Mortgage Bankers,
a former FHA mortgage lender in Miami, FL. The owner of the company was
sentenced in U.S. District Court to 135 months incarceration and 60
months supervised release and agreed to forfeit $8 million following
his conviction of conspiracy to commit wire fraud affecting a financial
institution. From at least 2006 through September 2008, the owner and
other conspirators specialized in approving FHA loans primarily for
buyers of condominiums at complexes where he had an ownership interest.
As part of the scheme, the conspirators provided false information on
loan documents to qualify borrowers and in some cases, also paid
inducements to borrowers to purchase the condominium units. Many of the
loans defaulted, causing losses to FHA and financial institutions. To
date, 25 individuals have been charged in this investigation, including
the owner, 3 partner developers, and 20 former employees of the
mortgage lender. Of those charged, 14 individuals have pled guilty, and
1 has signed a plea agreement. Losses to FHA exceeded $64 million. This
case, and others, highlight why the HUD OIG believes that FHA needs to
remain diligent in its efforts, including keeping or enhancing
practices that oversee and monitor abusive or wasteful behavior, aimed
at those who seek to harm the viability of the program and ultimately
the public.
Over the past 5 years, Ginnie Mae has seen its outstanding
mortgage-backed securities increase by more than 50 percent and has
experienced its fastest growth in the last 6 years. As of August 2015,
Ginnie Mae's mortgage-backed securities (MBS) portfolio exceeded $1.6
trillion and is estimated to reach the $2 trillion mark in a little
over a year and a half. We remain concerned that increases in demand on
the FHA program are having collateral implications for the integrity of
Ginnie Mae's MBS program, including the potential for increases in
fraud. Ginnie Mae securities are the only mortgage-backed securities to
carry the full faith and credit guaranty of the United States. If an
issuer fails to make the required pass-through payment of principal and
interest to MBS investors, Ginnie Mae is required to assume
responsibility for it. Typically, Ginnie Mae defaults the issuer and
assumes control of the issuer's government or agency MBS pools.
Historically, Ginnie Mae issuer defaults have been infrequent,
involving small to moderate-size issuers. However, major unanticipated
issuer defaults beginning in 2009 have led to a multi-billion-dollar
rise in Ginnie Mae's nationwide mortgage servicing as well as its
repurchase of billions of dollars in defaulted whole loans to meet its
guarantee commitments to MBS investors. In the near term, these changes
have strained both its operating and financial resources.
Another key challenge facing Ginnie Mae is the risk posed by the
growing number of Ginnie Mae issuers that are institutions other than
banks. In June 2011, 7 of the top 10 servicers were banks, but by
September 2015, only 4 of the top 10 servicers were banks. Ginnie Mae's
potential for losses occurs when an issuer fails to fulfill its
responsibilities. With the significant shift of its business going to
nonbanks, Ginnie Mae can no longer rely on the Office of the
Comptroller of the Currency and other bank regulators to ensure that
its servicers can meet their financial obligations. To mitigate the
risks, Ginnie Mae will need to be more involved with nonbanks to
adequately monitor them, which would require Ginnie Mae to increase its
current staffing level and expertise.
With the approval of OMB and Congress, Ginnie Mae has significantly
increased its management capacity. The total number of Ginnie Mae full-
time employees increased from 89 in fiscal year 2012 to 130 at the end
of fiscal year 2015. However, Ginnie Mae continues to rely heavily on
third-party contractors to perform almost all key operating loan
servicing, pool processing, and other functions. It is imperative to
the country's larger financial health that Ginnie Mae be able to
increase staffing with the needed skills, knowledge, and abilities to
manage a $1.6 trillion program.
Ginnie Mae could benefit from an estimated 30 positions with a
higher salary level than what the general schedule allows in order to
attract the needed and specialized skill sets to operate in the U.S.
financial market. HUD's lack of human capital management support and a
weak procurement process have contributed to Ginnie Mae's inability to
promptly recruit and hire needed skills as well as hampered its ability
to operate swiftly and timely in the marketplace.
Public and Assisted Housing Program Administration
HUD provides housing assistance funds under various grant and
subsidy programs to public housing agencies (PHA) and multifamily
project owners. These intermediaries, in turn, provide housing
assistance to benefit primarily low-income households. The Office of
Public and Indian Housing (PIH) and the Office of Multifamily Housing
Programs provide funding for rent subsidies through public housing
operating subsidies and the tenant-based Section 8 Housing Choice
Voucher and Section 8 multifamily project-based programs. More than
4,000 intermediaries provide affordable housing for 1.2 million
households through the low-rent operating subsidy public housing
program and for 2.2 million households through the Housing Choice
Voucher program. Multifamily project owners assist more than 1.5
million households.
Housing Choice Voucher Monitoring
HUD has a challenge in monitoring the Housing Choice Voucher
program. The program is electronically monitored through PHAs' self-
assessments and other self-reported information collected in PIH's
systems. Based on recent audits and HUD's on-site confirmatory reviews,
the self-assessments are not always accurate and the reliability of the
information contained in PIH systems is questionable. PIH targets PHAs
for various types of on-site reviews using its Utilization Tool and
National Risk Assessment Tool. It also states that it will further
address limitations with the Next Generation Management System, which
continues to be delayed due to a shortage in IT funding. HUD will
continue to face challenges in monitoring this program until it has
fully implemented a reliable, real-time, and all-inclusive monitoring
tool.
Central Office Cost Centers
We are concerned that HUD may not be ensuring that deFederalized
administrative fees paid to PHAs for their public housing program are
reasonable. We found that HUD could not adequately support the
reasonableness of operating fund management, book-keeping, and asset
management fees and Public Housing Capital Fund management fee limits.
In addition, HUD lacked adequate justification for allowing PHAs to
charge an asset management fee, resulting in more than $81 million in
operating funds being unnecessarily deFederalized annually. Our concern
continues to be that the fee amounts implemented are not supported and
may not be reasonable. Excess administrative fees, if deFederalized,
are not required to be used for the public housing program. Ensuring
that only the funds that are needed are transferred to the COCC will
allow more funds to be used directly for the public housing program.
After input from OMB, HUD and OIG have reached an agreement to
implement the recommendations as stated in our audit report. HUD has
agreed to reFederalize the fees and will be reevaluating the fee
amounts. HUD will need to go through the rulemaking process to fully
implement the changes, so it may take some time.
Cash Management Requirements
In fiscal year 2012, PIH implemented procedures to reduce the
amount of excess funds accumulating in PHAs' net restricted asset
accounts in accordance with Treasury's cash management requirements as
directed by a congressional conference report. By that point, a
significant amount of reserves had accumulated with the PHAs. As of
2015, most of the funds had been transitioned back to HUD. However, PIH
has not transitioned any of the excess funding from its Moving to Work
(MTW) program PHAs. Through PIH's confirmation process, MTW PHAs
reported holding $556 million and $514 million, as of September 30,
2014, and March 31, 2015, respectively. PIH must now validate these
balances before it transitions the funds back. This process may take
some time because the composition of these balances is complex and HUD
was not tracking the funds for these agencies. Until HUD validates and
collects the funds, MTW PHAs will continue to hold hundreds of millions
of dollars in excess of their immediate disbursement needs, making the
funds susceptible to fraud, waste, and abuse. Further, this is a
continued departure from Treasury's cash management requirements.
Adding to this challenge, HUD continues to lack an automated
process to complete the reconciliations required to monitor all of its
PHAs and to ensure that Federal cash is not maintained in excess of
immediate need. Reconciliations are prepared manually on unprotected
Excel spreadsheets for more than 2,200 PHAs receiving approximately $17
billion annually. This process is time consuming, antiquated and labor
intensive, and does not allow for accurate financial reporting at the
transaction level as required by FFMIA. This process also increases the
risk of error and causes significant delays in the identification and
offset of excess funding. We recommended that HUD automate this process
during our 2013 financial statement audit, and the matter has been
elevated to the Deputy Secretary for a decision.
Monitoring of Moving to Work Agencies
HUD's monitoring and oversight of the 39 PHAs participating in the
MTW demonstration program is particularly challenging. The MTW program
provides PHAs the opportunity to develop and test innovative, locally-
designed strategies that use Federal dollars more efficiently, help
residents become self-sufficient, and increase housing choices for low-
income families. However, in the more than 15 years since the
demonstration program began, HUD has not reported on whether the
program is meeting its objectives which such a long-standing
demonstration should assert. This is particularly important as under
the MTW program participants receive less oversight from the
Department. HUD has requested and Congress is considering expanding the
program to include more participants without knowing whether
participating PHAs are reducing costs to gain increased housing choices
and incentives for families to work. HUD is experiencing challenges in
developing program-wide performance indicators that will not inhibit
the participants' abilities to creatively impact the program. It is
developing renewal contracts to replace contracts expiring in 2018. HUD
management developed new metrics to help measure program performance
and states that the new contracts will allow it to better evaluate each
PHA's performance. We continue to believe that this is essential before
new agencies are allowed into the program. Moreover, HUD could benefit
from a formalized process for terminating participants from the
demonstration program for failure to comply with their agreement.
Overincome Families in Public Housing
HUD's challenge in addressing overincome families living in public
housing units is exacerbated by public housing agencies' lack of desire
to address these issues themselves. HUD's December 2004 final rule gave
public housing authorities discretion to establish and implement
policies that would require families with incomes above the eligibility
income limits to find housing in the unassisted market. HUD regulations
require families to meet eligibility income limits only when they are
admitted to the public housing program. Neither public law nor
regulations limit the length of time that families may reside in public
housing. Our recent audit \2\ showed that as many as 25,226 families,
whose income exceeded HUD's 2014 eligibility income limits, lived in
public housing. The PHAs that we contacted during the audit chose not
to impose limits based on the notice. In response to our audit, PIH
initially disagreed. After some public discourse, HUD issued a letter
to PHA executive directors, strongly encouraging them to use the
discretion available to them to remove extremely overincome families
from public housing. However, HUD does not have the authority to
require PHAs to implement limits. Consequently, to comply with our
recommendation, HUD initiated the rulemaking process through an
advanced notice of proposed rulemaking. Through this process, HUD will
collect public comments from stakeholders and determine how to proceed
with rulemaking. We will be part of this process. Our concern is that a
nationwide policy may limit flexibility to protect tenants. Until a new
final rule is established, PIH will need to find a way to encourage PHA
participation and ensure the effectiveness of its policies.
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\2\ Audit Report 2015-PH-0002, Overincome Families Resided in
Public Housing Units, July 21, 2015.
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Environmental Review Requirements
In recent reports,\3\ we demonstrated that PIH did not adequately
implement environmental requirements or provide adequate oversight to
ensure compliance with these requirements. The Offices of Housing and
Public Housing did not adequately monitor or provide training to their
staff, grantees, or responsible entities on how to comply with
environmental requirements. Also, HUD did not have an adequate
reporting process for the program areas to ensure that the appropriate
headquarters programs were informed of field offices' environmental
concerns. Further, our review of five Office of Public Housing field
offices found that none of them followed environmental compliance
requirements. HUD relied heavily on its Office of Environment and
Energy to ensure compliance with environmental requirements. HUD stated
that cross-office collaboration should be encouraged as a sensible and
efficient way to achieve oversight and compliance objectives. While HUD
shares OIG's concerns regarding responsible entities' compliance with
environmental requirements and agreed with our recommendations, HUD
believes that the program offices do not always have the authority to
impose corrective actions or sanctions. We provided several examples in
which environmental issues, if not detected, can severely impact the
residents and communities as well as consume significant resources.
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\3\ Audit Report 2015-FW-0001, HUD Did Not Adequately Implement or
Provide Oversight To Ensure Compliance With Environmental Requirements,
June 16, 2015; Audit Report 2014-FW-0005, Improvements Are Needed Over
Environmental Reviews of Public Housing and Recovery Act Funds in the
Detroit Office, September 24, 2014; Audit Report 2014-FW-0004,
Improvements Are Needed Over Environmental Reviews of Public Housing
and Recovery Act Funds in the Greensboro Office, July 14, 2014; Audit
Report 2014-FW-0003, Improvements Are Needed Over Environmental Reviews
of Public Housing and Recovery Act Funds in the Columbia Office, June
19, 2014; Audit Report 2014-FW-0002, Improvements Are needed Over
Environmental Reviews of Public Housing and Recovery Act Funds in the
Kansas City Office, May 12, 2014; and Audit Report 2014-FW-0001, The
Boston Office of Public Housing Did Not Provide Adequate Oversight of
Environmental Reviews of Three Housing Agencies, Including Reviews
Involving Recovery Act Funds, February 7, 2014.
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As a result, HUD began providing more training to staff and
grantees and implemented processes to improve its training program and
curriculum to better support all program areas. Also, HUD was piloting
a recently developed electronic data system, HUD's Environmental Review
Online System (HEROS), which is part of HUD's transformation of IT
systems. HEROS will convert HUD's paper-based environmental review
process to a comprehensive online system that shows the user the entire
environmental process, including compliance with related laws and
authorities. It will allow HUD to collect data on environmental reviews
performed by all program areas for compliance. HUD's Office of
Environment and Energy had also implemented an internal process within
HEROS to track findings, which will allow the program areas to focus
training on recurring issues.
While HUD has made improvements, it faces several challenges,
including lack of resources, unclear guidance, and a perceived lack of
authority to impose corrective actions or sanctions on responsible
entities. Until HUD fully addresses these needed improvements, it faces
an increased risk of creating a potential human health and safety
concern as well as possible damage to the environment. For the five
Office of Public Housing field offices we visited, PHAs spent almost
$405 million for activities that either did not have required
environmental reviews or had reviews that were not adequately
supported.
Physical Condition of the Housing Choice Voucher Units
In response to a 2008 audit report,\4\ HUD developed a plan to
monitor the physical condition of its Housing Choice Voucher program
units. HUD is testing a system of inspections similar to the model used
for its public housing units and multifamily projects. However, this
testing with an initial target completion date of September 30, 2014,
is taking considerably longer than expected. HUD has performed initial
inspections of a sample of its voucher units. However, it needs
resources to continue developing the new protocol and related software
for its comprehensive monitoring system. Meanwhile, we continue to
identify PHAs with inspection programs which do not ensure that voucher
program units comply with standards.
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\4\ Audit Report 2008-AT-0003, HUD Lacked Adequate Controls Over
the Physical Condition of Section 8 Voucher Program Housing Stock, May
14, 2008.
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OIG's Fraud Prevention Program
To assist the department in addressing these various issues, my
office has initiated a fraud prevention program. A key component of
this is a series of Integrity Bulletins to aid commissioners and public
housing executives to identify red flags of fraud and mismanagement.
The series includes topics such as Procurement and Contracting,
Embezzlement, Charge Cards, Fraud Policy, Hiring, and a Primer for
Commissioners. These bulletins are available on the OIG public web
site. To further alert public housing boards and directors of these
bulletins, a direct emailing went out July 2015 that was signed jointly
by Principal Deputy Assistant Secretary Lourdes M. Castro Ramirez and
me. The letter emphasized that public trust and integrity is a
collective responsibility, and encourages recipients to read and share
the Integrity Bulletins.
The fiscal year 2014 appropriation language required HUD to work
jointly with the OIG ``...to determine the critical skills that PHA
boards should have to effectively oversee PHA operations, as well as
the actions HUD will take to ensure that PHAs possess them....'' HUD
has since developed a web-based training program for boards of
commissioners. The training, named ``Lead the Way'' includes the basic
skills and knowledge commissioners need to understand their roles and
responsibilities. HUD is now in a second phase working with our office
to update the training to add skills and knowledge for identifying
risks and responding to them. The training will also cover identifying
common fraud and mismanagement issues and how to report cases to OIG.
The target for completion of the training is mid-summer 2016.
One challenge that has not been resolved is how to get
commissioners to complete this training. HUD has no authority to
require completion of the training of the boards (or PHA executive
staff either). HUD reports that about 500 commissioners have completed
the training. Industry group training for commissioners appears to have
the same problem in getting commissioners to attend training with 300
commissioners being certified by the National Association of Housing
and Redevelopment Officials, and a similar number being certified
through the Public Housing Authority Directors Association. All these
together have trained and certified about 7 percent of commissioners.
Professional certification for public housing commissioners and
executive directors exists in a conflicting array of certificates
offered by public housing industry groups. While these certification
programs are available, completion of the training is not a requirement
to serve as a commissioner or executive director.
We believe it would take congressional action to require boards and
key executive staff to be certified. A certification body needs to be
designated, with HUD approval of a curriculum, and timeframes
established for phasing in the requirement. A requirement would also be
useful that would establish a deadline for successfully completing the
training. Certification of executive directors should likewise be
mandated for at least medium and larger size agencies.
administering programs directed toward victims of disasters
The Department faces significant challenges in monitoring disaster
program funds provided to various States, cities, and local governments
under its purview. This challenge is particularly pressing for HUD
because of the limited resources to directly perform oversight, the
broad nature of HUD projects, the length of time needed to complete
some of these projects, the ability of the Department to waive certain
HUD program requirements, and the lack of understanding of disaster
assistance grants by the recipients. HUD must ensure that the grantees
complete their projects in a timely manner and that they use the funds
for intended purposes. Since HUD disaster assistance may fund a variety
of recovery activities, HUD can help communities and neighborhoods that
otherwise might not recover due to limited resources. However,
oversight of these projects is made more difficult due to the diverse
nature of HUD projects and the fact that some construction projects may
take between five and 10 years to complete. HUD must be diligent in its
oversight to ensure that grantees have identified project timelines and
are keeping up with them. HUD also must ensure that grantee goals are
being met and that expectations are achieved.
My office has completed 16 audits and 1 evaluation relating to
CDBG-DR funding for Hurricane Sandy and other eligible events occurring
in calendar years 2011, 2012, and 2013. There are a number of other
audits and evaluations, as well as investigative work, that are
currently underway. Prior to Hurricane Sandy, HUD-OIG had extensive
audit and investigative experience with HUD's CDBG-DR program, most
notably, with grants relating to recovery after Hurricane Katrina and
the terrorist attacks of September 11, 2001. Over the years, HUD has
gained more experience and has made progress with assisting communities
recovering from disasters, but it continues to face the following
challenges in administering these grants:
--Ensuring that expenditures are eligible and supported;
--Approving the program waiver process;
--Certifying that grantees are following Federal procurement
regulations;
--Conducting consistent and sufficient monitoring efforts on disaster
grants;
--Promoting disaster resiliency within communities trying to recover;
and
--Keeping up with communities in the recovery process.
I will elaborate on the first two areas above as they represent the
most serious challenges faced by HUD.
Ensuring That Expenditures Are Eligible and Supported
In overseeing the CDBG-DR program, HUD must ensure that funds
disbursed for disaster recovery programs are used for eligible and
supported items. Our audits relating to Hurricane Sandy funding have
identified $3.5 million in ineligible costs, $458 million in
unsupported costs, and $360 million relating to recommendations that
funds be put to better use. We have highlighted three audit reports
that demonstrate these challenges for HUD in administering grants made
under this program:
--In our review of New York City's Health and Hospitals
Corporation,\5\ we determined that City officials disbursed
$183 million to the City's subrecipient for unsupported salary
and fringe benefits and unreasonable and unnecessary expenses
and did not adequately monitor its subrecipient and
sufficiently document national objectives. As a result, City
officials could not assure HUD that (1) $183 million in CDBG-DR
funds was disbursed for eligible, reasonable, and necessary
program expenses and (2) going forward the City will have
adequate accounting and financial controls in place to ensure
the remaining allocation of $40 million will be properly spent
for the purposes intended.
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\5\ Audit Report 2015-NY-1001, The City of New York, NY, Did Not
Always Disburse Community Development Block Grant Disaster Recovery
Assistance Funds to Its Subrecipient in Accordance With Federal
Regulations, November 24, 2014.
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--In our review of New Jersey's Sandy Integrated Recovery Operations
and Management System, we found that the State did not procure
services and products for its system in accordance with Federal
procurement and cost principle requirements. The State's
procurement process was not equivalent to Federal procurement
standards. As a result, it disbursed $38.5 million for
unsupported costs. It was also planning to disburse another
$21.7 million to extend the initial period of the related
contract for 3 additional options years including $9.1 million
for costs that it had not shown were fair and reasonable.
--In our review of New York State's buyout program,\6\ we determined
that officials did not always administer the program in
accordance with program procedures. As a result, officials
disbursed $6.6 million for properties that did not conform to
published requirements. This amount included $672,000 and
$598,300 for ineligible incentives and purchase prices in
excess of authorized limits, respectively. In addition,
documentation was inadequate to support that $1.7 million was
disbursed for eligible purchases and that $8.7 million spent
for contracts complied with Federal or State requirements.
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\6\ Audit Report 2015-NY-1010, New York State Did Not Always
Administer Its Rising Home Enhanced Buyout Program in Accordance with
Federal and State Regulations, September 17, 2015.
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--In our review of the New York Rising Housing Recovery Program,\7\
we found that officials did not establish adequate controls to
ensure that CDBG-DR funds were awarded and disbursed for
eligible costs. As a result, more than $2.2 million in CDBG-DR
funds was disbursed for ineligible costs and $119,124 for
unsupported costs. Additionally, the use of a statewide cost
figure, by which more than $87.5 million was awarded, was
unsupported. Also, State officials needed to ensure that
receipts were available to support work completed, or request
that more than $241.2 million be repaid.
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\7\ Audit Report 2015-NY-1011, Program Control Weaknesses Lessened
Assurance That New York Rising Housing Recovery Program Funds Were
Always Disbursed for Eligible Costs, September 17, 2015.
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We attributed these conditions to the grantees' weaknesses in
maintaining file documentation, unfamiliarity with HUD rules and
regulations, and failure to follow State and Federal procurement
regulations.
Approving the Program Waiver Process
We performed two reviews of the State of Louisiana's Road Home
Elevation Incentive (RHEI) Program, in 2010 \8\ and a follow-up review
in 2012.\9\ Based on these reviews, it appears that HUD has established
a pattern and practice to either waive the program requirements, or
retroactively approve the State's amended action plan after the fact,
when deficiencies are identified with this program. The initial
review's objective was to determine whether homeowners used funds to
elevate their homes as set out in their grant agreements. The review
found that 79 percent of the homes we inspected had not been elevated,
strongly suggesting that the grant program was at risk and could fail
to achieve its intended goal of reducing homeowner flood risks from
future hurricanes. Our follow-up review found that as of August 31,
2012, the State did not have conclusive evidence that approximately
$698.5 million in CDBG-DR funds provided to 24,000 homeowners had been
used to elevate homes. As an example of HUD's practice to minimize or
eliminate original program requirements, HUD approved the State's
Amendment 60 on July 26, 2013, which retroactively allowed homeowners
who received a grant under Road Home to prove that they used those
funds to either elevate or rehabilitate their home, although the grant
was specifically intended for elevation only. The amendment is contrary
to the elevation incentive agreement which stated that the funds were
intended to assist homeowners to only elevate their homes. If the funds
were not used for this sole purpose, they were to be repaid to the
State.
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\8\ Inspections and Evaluations Report IED-09-002, Inspection of
the State of Louisiana's Road Home Elevation Incentive Program
Homeowner Compliance, March 2010.
\9\ Audit Report 2013-IE-0803, Follow-up of the Inspections and
Evaluations Division on Its Inspection of the State of Louisiana's Road
Home Elevation Incentive Program Homeowner Compliance (IED-09-002 March
2010), March 29, 2013.
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In August 2015, HUD again unilaterally waived the Road Home program
requirements. Specifically, HUD changed its 2013 documentation
requirement for rehabilitation expenses to permit an affidavit by the
homeowner and a ``valuation inspection'' by the State to determine the
value of home repairs that were previously performed. This waiver of
requirements was due to the fact that it was still having difficulty
acquiring documentation from homeowners as proof of repair. This new
approach does not consider whether recipients previously received
grants or insurance funds for rehabilitation and could result in a
duplication of benefits. While Congress provided considerable
flexibility in the use of CDBG-DR funds, it specifically required HUD
to establish procedures that prevent duplication of benefits.
HUD has not properly enforced the intent of the Road Home program,
instead opting to change the rules ex post facto so that violations can
potentially be excused. If HUD wishes to implement proper risk
management in its programs, this most recent action seems to defeat the
purpose as it announces to all recipients of HUD funds that
noncompliance may be pardoned because the Department will allow it in
the end with no consequences for divergent actions.
HUD's actions, and retreat from its position and the original
intent of the approved State action plans, diminishes HUD's ability to
properly administer grant agreements, provide proper oversight and
enforcement when needed, and lessens the affected homeowners' trust and
confidence that HUD maintains the highest standards of efficiency and
fairness in its grant award process.
Government-wide Concerns
In view of the significance of funding to multiple agencies to
address Hurricane Sandy, my office is leading a joint cross-cutting
review with seven other OIGs \10\ to assess participating Federal
entities' funding, expenditures, and monitoring. Our objective is to
identify common concerns and make recommendations to improve oversight,
enhance collaboration, and report on best practices.
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\10\ In addition to HUD-OIG, OIGs from the following agencies are
participating: Department of Homeland Security, Department of Health
and Human Services, Department of Defense, Department of the Interior,
Department of Transportation, Small Business Administration, and
Environmental Protection Agency.
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As noted earlier, Congress imposed time limits with respect to the
funding it provided to HUD in the Disaster Relief Appropriations Act,
2013. Funding for other agencies either included varying time limits
or, in some cases, imposed no time limit and will remain available
until spent. Based upon our audits of funds relating to prior
disasters, we believe that imposing statutory deadlines will help to
ensure that funds are promptly spent. HUD is not alone in facing
challenges with timely expenditure of funding. A representative from
the Department of Homeland Security's OIG told us that FEMA disaster
funds remained unspent for extended periods and FEMA still had unspent
funding relating to the Northridge earthquake (more than 21 years ago)
and Hurricane Katrina (more than 10 years ago).
Funding for oversight activities also varied. Separate funding was
provided to both HUD and HUD-OIG for oversight. The Department of
Health and Human Services, which received more than $500 million in
funding, also received funding for its OIG but not for the agency to
conduct administrative oversight. OIGs from the Department of the
Interior, Environmental Protection Agency and the Department of Defense
did not receive separate funding to provide for oversight of their
respective agencies' funding that ranged from $577 million to more than
$5 billion.
Our collaboration with other OIGs has noted a common concern with
respect to time limits being placed on oversight funding relating to
Hurricane Sandy. As is the case with HUD CDBG-DR funds, HUD-OIG's
funding must be obligated by the end of fiscal year 2017. This presents
a challenge for HUD-OIG because much of the expenditure activity under
the CDBG-DR program will occur well after that date, as late as the end
of fiscal year 2022. In addition, a waiver was obtained that allows the
Department to extend program funds beyond the original deadline. It is
unclear from the current statutory language whether HUD-OIG will be
able to use its Sandy funding beyond the obligation deadline. HUD-OIG
is planning to seek an opinion on the specific appropriation issue from
the GAO.
As of the end of fiscal year 2015, over 70 percent of HUD's
Hurricane Sandy funding remains unspent and until the bulk of that
funding is spent, our ability to conduct effective oversight is
limited. This is a concern with at least two other OIGs who have
expressed similar concerns with the slow rate at which their respective
agencies are using their disaster assistance funding. I urge the
Congress to recognize that oversight activities conducted by the
various agencies and their OIGs need to occur well beyond the
obligation deadline and to consider providing relief to the affected
organizations to extend the date at which these oversight funds will
expire.
community planning and development programs
Due to the use of what the Department calls the FIFO method (first-
in, first-out as an accounting methodology of appropriated funds) \11\
for committing and disbursing obligations, HUD's accounting for its
Community Planning and Development formula grant programs' accounting
does not comply with accounting standards resulting in material
misstatement of HUD's financial statements. Since 2013, we have also
reported that the information system used, the Integrated Disbursement
Information System (IDIS) Online, a grants management system, was not
designed to comply with Federal financial management system
requirements. Further, HUD's plan to eliminate FIFO from IDIS Online
was applied to fiscal year 2015 and future grants and not to fiscal
years 2014 and earlier. Moreover, because of funding problems,
completion of the elimination plan will be delayed until December 2016.
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\11\ The FIFO method is a way in which CPD disburses its
obligations to grantees. Disbursements are not matched to the original
obligation authorizing the disbursement, allowing obligations to be
liquidated from the oldest available budget fiscal year appropriation
source. This method allows disbursements to be recorded under
obligations tied to soon-to-be-canceled appropriations.
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As a result, budget year grant obligation balances continued to be
misstated and disbursements made using an incorrect U.S. Standard
General Ledger (USSGL) attribute resulted in additional misstatements.
Although FIFO has been removed from fiscal year 2015 and forward
grants, modifications to IDIS were necessary for the system to comply
with the Federal Financial Management Improvement Act (FFMIA) and USSGL
transaction records.
The inability of IDIS Online to provide an audit trail of all
financial events affected by the FIFO method made it impossible to
quantify the financial effects of FIFO on HUD's consolidated financial
statements. Further, because of the amount and pervasiveness of the
funds susceptible to the FIFO method and the noncompliant internal
control structure in IDIS Online, the obligated and unobligated balance
brought forward and obligated and unobligated balances reported in
HUD's combined statement of budgetary resources for fiscal year 2015
and in prior years were materially misstated. The effects of not
removing the FIFO method retroactively will continue to have
implications on future years' financial statement audit opinions until
the impact is assessed to be immaterial.
HUD's continued inability to provide data to monitor compliance
with the HOME Investment Partnership Act (HOME statute) requirements
for committing and spending funds continues to remain a concern until
appropriate system changes in IDIS Online are implemented and
regulatory changes are fully implemented. The HOME Investment
Partnerships Program is the largest Federal block grant to State and
local governments designed to create affordable housing for low-income
households. Because HOME is a formula-based grant, funds are awarded to
the participating jurisdictions noncompetitively on an annual basis.
In 2009, OIG challenged HUD's cumulative method \12\ for
determining compliance with section 218(g) of the HOME statute, which
requires that any uncommitted funds be reallocated or recaptured after
the expiration of the 24-month commitment deadline. After a continuous
impasse with HUD, OIG contacted GAO in 2011 and requested a formal
legal opinion on this matter. In July 2013, GAO issued its legal
opinion affirming OIG's position and citing HUD for noncompliance. In
its decision, GAO repeated that the language in the statute was clear
and that HUD's cumulative method did not comply with the statute.
Accordingly, GAO told HUD to stop using the cumulative method and
identify and recapture funds that remain uncommitted after the
statutory commitment deadline.
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\12\ HUD implemented a process, called the cumulative method, to
determine a grantee's compliance with the requirements of section
218(g) of the Statute and determine the amount to be recaptured and
reallocated with section 217(d). HUD measured compliance with the
commitment requirement cumulatively, disregarding the allocation year
used to make the commitments.
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The effects of the GAO legal opinion require extensive
reprogramming and modification to IDIS Online in addition to regulatory
changes. However, these system and regulatory changes, which are
already underway, will apply only to new grants awarded going forward
and will not be changed retrospectively. Therefore, HUD's plan does not
comply with the GAO legal opinion and allows grantees to spend HOME
program funding that would normally be recaptured if the 24-month
commitment timeframe was not met.
Compliance with GAO's opinion would enable HUD to better monitor
grantee performance in a more timely, efficient, and transparent way.
It also would strengthen internal controls, bring HUD into compliance
with HOME statutory requirements, and accurately and reliably report
financial transactions.
On June 16, 2015, we issued a memorandum to HUD regarding potential
Anti-Deficiency Act (ADA) violations due to the noncompliance issues
noted above. In the memorandum, we requested that the Chief Financial
Officer (1) open an investigation and determine the impact of FIFO and
the cumulative method for commitments for the HOME program on HUD's
risk of an ADA violation; (2) as part of the violation, obtain a legal
opinion from GAO and OMB to determine whether maintaining the
cumulative method for determining compliance with the HOME statute
results in noncompliance with the Statute and potential ADA violations;
and (3) if HUD incurred an ADA violation, comply with the reporting
requirements at 31 U.S.C. (United States Code) 1351 and 1517(b) and OMB
Circular No. A-11, Preparation, Submission, and Execution of the
Budget, section 145, (June 21, 2005). We determined that HUD has opened
an ADA investigation in response to our memorandum.
We will continue to report that HUD is not in compliance with laws
and regulations until the cumulative method is no longer used to
determine whether commitment deadlines required by the HOME Investment
Partnership Act are met by the grantees.
Subgrantee Monitoring
In fiscal years 2014 and 2015, at least seven of our audits have
found that in some instances, little or no monitoring occurred,
particularly at the subgrantee level. HUD focuses its monitoring
activities at the grantee level through its field offices. Grantees, in
turn, are responsible for monitoring their subgrantees. HUD should
continue to stress the importance of subgrantee monitoring to its
grantees. OIG has concerns regarding the capacity of subgrantees
receiving funding from HUD programs, including grantees receiving CDBG
Disaster Recovery (CDBG-DR) funds. Therefore, audits of grantees and
their subgrantee activities will continue to be given emphasis this
fiscal year as this continues to be a challenge for HUD and its
grantees.
OIG Prevention Activities
To assist the Department with these and other Community Planning
and Development Program concerns, we are currently working with HUD
staff to issue a series of bulletins similar to the topics we have
issued for public housing but adapting them to Community Planning and
Development program grantees. The first of the series is scheduled for
issuance in May. These will also be announced through a joint
communique, signed by Principal Deputy Assistant Secretary Harriet
Tregoning and me, to encourage public official to read and share the
bulletins.
compliance with the improper payments elimination and recovery act of
2010
For the second year in a row, we determined that HUD did not comply
with the Improper Payments Elimination and Recovery Act of 2010
(IPERA). Specifically, our fiscal year 2015 audit \13\ found that HUD
did not adequately report on its supplemental measures and its risk
assessment did not include a review of all relevant audit reports.
Additionally, we found that HUD's estimate of improper payments due to
billing errors was based on out-of-date information, a finding that was
repeated from the prior-year audit.
---------------------------------------------------------------------------
\13\ Audit Report 2015-FO-0005, Compliance With the Improper
Payments Elimination and Recovery Act of 2010, issued May 15, 2015.
---------------------------------------------------------------------------
After exceeding the targeted improper payment rate of 3.8 percent
in fiscal year 2012, HUD's goal for the targeted improper payment rate
was increased to 4.2 percent for fiscal year 2013. While HUD met its
fiscal year 2013 goal with an improper payment rate of 3.2 percent,
with estimated improper payments of $1.03 billion, it continues to face
significant challenges to comply with the requirements of IPERA and
further reduce its improper payments.
For example, without sufficient funding, it will be difficult for
HUD to perform the studies needed to update its estimates of improper
payments due to billing errors. Additionally, there were several
recommendations from our fiscal year 2014 audit report \14\ without
agreed-upon management decisions that had to be referred to the Deputy
Secretary. During fiscal year 2015, HUD increased its efforts to
address these recommendations, as well as current-year recommendations,
and develop corrective action plans. HUD needs to continue its efforts
to address our recommendations and improve its processes for reporting
on its improper payments to become compliant with IPERA in the future.
---------------------------------------------------------------------------
\14\ Audit Report 2014-FO-0004, Compliance With the Improper
Payments Elimination and Recovery Act of 2010, issued April 15, 2014.
---------------------------------------------------------------------------
departmental enforcement
A common thread underlying several of the issues discussed earlier
is the lack of a cohesive departmental approach on monitoring and
follow-through on findings. In an evaluation we conducted on the
effectiveness of the Departmental Enforcement Center (DEC), we found
that the Department does not have an enterprise risk management
approach to monitoring. Its monitoring is for the most part siloed in
each program office and the approaches and results differ greatly.
While there were some successes, there is a much greater task that lies
ahead. The DEC, working with the Office of Multifamily Housing Programs
and the Real Estate Assessment Center, improved housing physical
conditions and financial management of troubled multifamily properties.
Although some other program offices had taken steps toward risk-based
enforcement, they had not taken full advantage of the benefits
demonstrated when programs allow the DEC to assess compliance and
enforce program requirements. The DEC proved that it can remedy poor
performance and noncompliance when programs are willing to participate
in enforcing program requirements.
The DEC was established in part to overcome a built in conflict of
roles. The HUD management reform plan stated that program offices had a
conflicting role in getting funds to and spent by participants versus
holding them accountable when fraud or mismanagement of the funds
occurs. However, memoranda of understanding between the DEC and the
program offices, for the most part, limit the DEC's ability to monitor,
report, and take action to end noncompliance.
HUD is starting to make some changes. Recent attention has
emphasized the point that improvements are necessary for the DEC, REAC
and Office of Multifamily Housing to effectively oversee its aging
portfolio. PIH is working with the DEC to identify risk-based triggers
to target monitoring, and the Chief Financial Officer is leading a
Departmental task force looking at enterprise risk management. The
Department should strive for a Department-wide risk monitoring approach
that is data driven and supports taking actions that will end
noncompliance or will seek the return of funds or other enforcement
steps when corrective actions are ignored.
conclusion
The Department's role has greatly increased over the last decade as
it has had to deal with unanticipated disasters and intervening
economic crises, in addition to its other missions, that have increased
its visibility and reaffirmed its vital role in providing services that
impact the lives of our citizens. My office is strongly committed to
working with the Department and the Congress to ensure that these
important programs operate efficiently and effectively and as intended
for the benefit of the American taxpayers now and into the future.
HIGH INCOME HOUSEHOLDS IN PUBLIC HOUSING
Senator Collins. Thank you very much. My first question for
you follows up on the issue that Senator Daines mentioned, and
that is, in your July 2015 report, you found that more than
25,000 families with household incomes exceeding HUD's program
eligibility income limits were receiving public housing rental
assistance. This is disturbing for many reasons.
Your estimate was that HUD would pay over $104 million over
the next year for public housing units occupied by families
that were over the income limits. That means that there are
lower income families that aren't receiving assistance, and
that clearly needs to be remedied.
I was also concerned that, of those 25,000-plus families,
that nearly 18,000 of them had exceeded the qualifying amount
for more than 1 year, so this wasn't a case where there was a
temporary blip, if you will.
I'm also not talking about a hard-working individual who
gets a pay raise at work and thus, is over the limit by a few
hundred dollars for the year. What you found was that there
were some individuals who owned assets and properties that were
worth literally hundreds of thousands of dollars.
My question is, what has HUD done in response to your
recommendation for better internal controls, and are you
satisfied with the progress that HUD is making?
Mr. Montoya. Yes, ma'am. Thank you for the question. It is
an important issue, as I said in my opening statement, that we
address those most in need in our communities.
I want to make clear that our audit focused on two
categories of over income. One was those numbers of family
below a $10,000 mark and then those that were above a $10,000
mark for a given years. For those over $10,000, I want to note
that that was 47 percent of that 25,000 number that were over a
$10,000 amount per year income, and again, over a year. It
wasn't just a blip on the radar.
I want to make clear also that these public housing
authorities, since 2004, have had the authority to remove over
income, or at least extremely over income families, as we
noted, and have failed to do so. So while I know HUD took a lot
of heat for its oversight, and certainly, it has some
responsibility, proper oversight, I do want to note that
housing authorities currently have that authority to do this.
I would recognize that HUD has sent a letter to these
public housing authority directors, encouraging to follow that
2004 rule, and I know HUD is working with the Congress to
implement some new legislation that would make this more
mandatory.
The question for me is going to become what is going to be
defined as extremely or significantly over income, and of
course, what timeline will HUD put on that, how long do you
have to be over income. I do want to make clear that we
certainly recognize that people's incomes will ebb and flow,
and we were looking for those extreme circumstances.
Senator Collins. But that's what you found, were some
extreme circumstances.
Mr. Montoya. Yes, ma'am.
Senator Collins. Correct?
Mr. Montoya. Correct.
Senator Collins. Because none of us, I don't believe, would
want to put someone out of public housing because of the ebb
and flow, as you say, and also, we don't want to discourage
people from doing better at work.
Mr. Montoya. Right.
Senator Collins. But clearly, there were egregious
examples, as I read your report, that are very troubling,
because it's taking away from scarce resources. Does HUD have
the sufficient statutory authority that it needs to require the
public housing authorities to implement and enforce limits?
Mr. Montoya. No, ma'am. They currently do not have a
regulation or a statute that will have them require the housing
authorities to do this sort of thing, which is what they're
seeking through Congress now.
Senator Collins. I know that they're also engaged in a
notice of proposed rulemaking to try to address this. What was
HUD's initial reaction to your report?
Mr. Montoya. Well, unfortunately, what we've seen too often
with some of my reports is the knee jerk reaction to say the
inspector general is wrong as opposed to stopping to take a
look at what it is regarding and having a conversation with us.
Very shortly after that position was taken by a lower level
employee, I think the Secretary and the Deputy Secretary very
quickly turned that around and were very much in agreement with
what our position was, I think, once they understood what our
report really was meant, designed to do, and that was identify
those egregious examples, and of course to assist them to put
these limited dollars that we're all talking about here to use
for those that are most in need.
Senator Collins. Thank you.
Senator Reed.
Senator Reed. Well, thank you very much, Madam Chairman.
And I, too, want to second your point, which is, I think,
entirely pertinent.
This is not about a temporary spike in income, up or down.
This is not about essentially some year where you do well, and
the next year, you might do much worse. This is consistent and
substantial.
Mr. Montoya. We would agree with you, certainly, sir.
Senator Reed. And thank you. One aspect of this issue is
you mentioned, you know, that they certainly have the authority
to remove these people from the property. Do they have the
authority to raise the rent, so that they capture this extra
income?
Mr. Montoya. I believe that's what happened in some of
these cases, they just allowed them to do the market rent. The
problem is, when you do that in some of these situations, it
takes that particular unit away from, you know, somebody who's
on the waiting list.
Senator Reed. Indeed. But I just want to be clear that one
remedy, it's maybe not the best remedy, is that they can, in
fact, and do, in fact, raise----
Mr. Montoya. That is my understanding, sir, yes.
Senator Reed. Right. But again, I think your point's well-
taken. These units are very scare.
Mr. Montoya. That's correct.
Senator Reed. And intended for people who otherwise would
be literally homeless.
Mr. Montoya. That's correct.
Senator Reed. There's another aspect of this, too, and I
think I just want to make sure we cover the whole area, and
that is we have been very aggressive in pushing family self-
sufficiency programs, job plus programs.
In your analysis, have you made any correlation between
these people who are making more money and participating in
these programs? Because if we move sort of aggressively, and it
turns out that the message we send is, if you get into a family
self-sufficiency program to raise your wages or a jobs program,
you're going to lose your housing, that's not the right message
either.
Mr. Montoya. I would agree. And I don't think that we made
the specific correlation, although we didn't find any of these
extreme examples of somebody who was in the self-sufficiency
type of program, and that's how they got to where they were.
Certainly, that is a consideration.
But the idea of the self-sufficiency program is, of course,
you'll, at some point, get to a point where you can move out of
housing. So at some point, where is that deadline, and what is
that amount, and I think that's what we're going to be anxious
to see when----
Senator Reed. No. I think you have raised some very serious
issues and very important issues, and the Department must
respond, and that is your function as the inspector general. So
thank you for doing your job.
Mr. Montoya. Yes, sir. Thank you, sir.
HOUSING INSPECTIONS OF SECTION 8 VOUCHERS
Senator Reed. One area that has been woven throughout the
Secretary's testimony, your discussions, has been the
consistency of inspections of the Section 8 voucher units. Your
2008 audit suggests that it was wildly inconsistent, etc. What
progress has HUD made to ensure Section 8 voucher units are in
compliance with current housing quality standards? That's come
up repeatedly in both our questioning.
Mr. Montoya. I tell you, we struggle with that almost in
every audit we do, finding that these units are just not very
livable. I think the Secretary addressed that at some point
these reviews didn't even really include mold or bedbugs. It
was so lowly ranked in the scheme of things that inspectors
could've cared less, even if they saw it, quite frankly.
And I think it boils down to some of these inspections are
only as good as the inspector. Too often, from our
investigative side of the house, we've seen unscrupulous
inspectors who are going to go in, just give it a clean bill of
health as quickly as they can, so they can make the amount of
money they've charged to do this inspection and move onto the
next thing. So we've seen a number of those kinds of issues.
We've also seen that in the lead-based paint sort of issue
that you addressed earlier, where, you know, these communities
and HUD is trying to do the right thing, but you have
unscrupulous inspectors who will come in just give them a good,
clean bill of health and move on, having made their income for
the day.
So I think HUD is on the right track. We're certainly
anxious to see them do a little bit more. I think REAC and the
Department, the real estate section that does these inspections
has done well. I think, like anything, there's always more room
for oversight. I would like to see more oversight, though, at
the local level.
LOCAL BUILDING CODES
Senator Reed. That raises an interesting question, because
as the Secretary was discussing this issue, it struck me there
are local building codes, there are local health and safety
codes, and frankly, those are probably being violated, too,
which municipality has full authority to go in and order--in
fact, probably more authority to order correction, to place
liens on the property, to go in and do the correction itself.
To what extent are you urging or the Department is
contemplating a more significant role for local housing
officials?
Mr. Montoya. Well, myself and the Principal Deputy
Assistant at the Office of Public and Indian Housing (PIH), Ms.
Lourdes Castro, we've joined together to do a number of
different things, primarily driven on awareness.
We called them, as we started, fraud awareness bulletins,
but it's migrated to a joint effort with her office to do more
of an educational thing, sort of a technical educational thing.
And of course, what we, as the inspector general, see as
problems with regards to the inspectors, you know, it's a
collective responsibility, so we all hold some level of that.
And you couldn't be more right with regards to the State
and local ordinances that these inspectors have to live by, and
often, they're only given a license to perform this if they
follow State and local regulations. We've seen incidents where
people are coming in as inspectors, and they're not even
licensed.
So what we would look to see to do, and certainly what we
try to do in our investigations, is when we find that
unscrupulous licensed individual, we'd like to report them to
the State and local. They lose their license. They lose their
livelihood. So just how important is it to you to lie about a
number of these things?
So those are the different kinds of enforcement things that
I think we can all sort of fall in behind.
Senator Reed. And those could be implemented immediately
without legislation?
Mr. Montoya. I certainly think they could. I think
certainly housing authorities, with advice from us, there's
nothing wrong with picking up the phone and reaching to your
local ordinance and saying, I just had Mr. John Doe, an
inspector come in, and here's what happened, and I hear he's
licensed by the city or by the State, and we'd like to report
him.
Senator Reed. Well, thank you very much, Mr. Montoya.
Mr. Montoya. Thank you, sir.
Senator Reed. Thank you.
COMPLIANCE WITH FHA UNDERWRITING STANDARDS
Senator Collins. Mr. Inspector General, in your testimony,
you highlighted the fact that, for the last four fiscal years,
the results of audits and evaluations of the FHA fund revealed
a disturbing percentage of loans that were reviewed that should
not have been insured due to significant deficiencies in
underwriting.
What actions do you believe are necessary on the part of
the Department to ensure that lenders are in compliance with
FHA's underwriting standards?
Mr. Montoya. Yes, ma'am. Thank you for the question. It's
an extremely important question, as we've been struggling with
this certainly since my tenure.
We often find that FHA, it struggles with its role to
enhance and advance the market for home ownership for those low
to moderate income individuals while at the same time playing
the enforcement role, and often, those two don't seem to meet.
So certainly with regards to, I think, stronger enforcement
on the behalf of FHA is an important issue, we have made
recommendations for a number of years about these underwriting
deficiencies and the fact that HUD should actually do more
random sampling of these loans so that they can determine early
on whether these loans are going to be viable in the long run
or not. They're doing a better job at that, certainly not as
fast as we'd like to see it.
We also think that, with regards to the claim process, HUD
doesn't do a very good job often at reviewing these claims to
ensure that they're not paying claims that are far more than
they need to be paying. That's another area that impacts the
fund, certainly with regards to their loss mitigation issues
and whether, again, these claims should be paid. These are all
enforcement issues that we think they should be taking a
serious look at.
We are certainly doing our part. We are continuously
finding lenders, and again, unscrupulous people out there who
are trying to defraud the Department. We just did a large case
in the Florida area. It amounted to about a $65 million loss to
the Department. It was a criminal investigation where we
rounded up probably 25 people, a lot of folks, unfortunately,
going to jail.
But there's so many different avenues of that that we're
certainly trying to do our part to assist the Department in
that role.
Senator Collins. Sounds to me like it's fortunate rather
than unfortunate that they're going to jail, if they're
defrauding the Department.
WASTE, FRAUD AND ABUSE IN HUD PROGRAMS
My final question to you is, as you survey the landscape of
programs at the Department, are there any that particularly
stick out in terms of being particularly vulnerable to waste,
fraud, and abuse that you would like to bring to our attention.
Mr. Montoya. I don't know that I would single out any one
program. I think they are all vulnerable in some way, shape, or
form. I do want to acknowledge that, not only with PIH, but
more recently with the Office of Community Planning and
Development (CPD), we're working at the highest levels to do
joint things, to go out there and train the communities and
these professionals who are running these programs to
understand where the red flags are, to understand where the
hiccups and the roadblocks might be, so they don't get into
that trouble.
Our motto is prevention first, because once we lose those
funds, then we can't get them back. So we're doing as much as
we can to assist them. I think if there was a program, albeit
not a program that it would raise some real concerns, is HUD's
information technology, because these programs, whether it's
PIH or CPD, are so heavily wedded to these IT programs, that if
you have a failure in one particular case, you know, a
catastrophic failure, there is no other way to get the monies
out to these individuals who are going to need it.
And constantly, in our IT security reviews, we are finding
aging systems that are incapable of really patching from a
security standpoint. HUD maintains millions of records of
personally identifiable information that becomes susceptible in
those kind of arenas. And really, what happens if these systems
fail, and how do we get this money out to all these communities
and all these recipients is sort of what's keeping us awake at
night at this point.
Senator Collins. Thank you. I think that's a statement you
could make about every single department in the Federal
Government.
Mr. Montoya. It's unfortunate.
Senator Collins. And it is very worrisome. Thank you very
much for your testimony. Senator Reed, do you have anything
further?
HUD INFORMATION TECHNOLOGY SYSTEMS
Senator Reed. I just want to thank you, Madam Chairman, for
the hearing. And I think the point that the inspector general
just made about the IT systems, as you point out, could be
made, many Federal agencies.
And one of the dilemmas is that I would suspect that their
system are probably already out of date by many years, and
there's nothing in this budget really that would be a total
recapitalization of their IT enterprise so that they'd be ahead
of the curve.
Mr. Montoya. That's correct.
Senator Reed. Yes.
Mr. Montoya. That's correct. They're basically in operation
and maintenance mode. There is no advancement of these
programs.
Senator Reed. Yes, and again, that's something we could
sort of find in probably every Federal agency, and that is a
real, real problem. But I think you focused on something which
is absolutely critical, so thank you, again.
Mr. Montoya. Thank you, sir. Thank you, ma'am.
Senator Collins. Thank you, Senator Reed.
Thank you very much, Mr. Inspector General, for being here
with us. As we proceed with putting together this bill and
getting more input, I'm sure we will have additional questions
for you as well and hope that you won't hesitate to contact us
with your recommendations and suggestions.
We are going to have a real challenge, as we always do, in
writing this bill, given the fact that 84 to 85 percent of the
budget is, if you will, spoken for, given that that's necessary
for the renewal of vital rental assistance, and we need your
help in finding efficiencies where they may exist.
So thank you very much for testifying today and for your
assistance to the committee.
Mr. Montoya. Thank you.
ADDITIONAL COMMITTEE QUESTIONS
Senator Collins. The hearing record, as I mentioned, will
remain open until next Friday, March 18.
[The following questions were not asked at the hearing, but
were submitted to the Department subsequent to the hearing:]
Questions Submitted by Senator Susan M. Collins
rental assistance demonstration
Question. The budget request proposes additional funding and
authority for the Rental Assistance Demonstration in order to preserve
affordable housing. However, the Department's implementation of the
project-based rental assistance option for owners of properties
eligible under the second component of RAD appears contrary to the goal
of preservation. By arbitrarily limiting initial rents to 110 percent
of the Section 8 Fair Market Rent, HUD discourages owners from
participating in RAD and preserving scarce affordable housing options
in high cost areas.
Why hasn't the Department fully utilized the flexibility and
discretion to establish appropriate rent levels to preserve this
housing stock that the RAD statute provides?
Answer. Section 8 (c)(1) of the U.S. Housing Act of 1937 allows the
Secretary to set rents for new Section 8 contracts up to 120 percent of
the Fair Market Rent (FMR). For properties assisted under Moderate
Rehabilitation (Mod Rehab) contracts, HUD permits conversions at
current contract levels, not to exceed this statutory cap. For
properties assisted under the Rent Supplement/Rental Assistance Program
(Rent Supp/RAP) programs, the rationale for limiting rents to 110
percent of the FMR is as follows:
First, the vast majority of Rent Supp/RAP projects--103 of 109
projects that are currently eligible under this conversion option, or
95 percent--have current rent levels below 110 percent of the FMR.
Accordingly, a rental price set at 110 percent of the FMR would be a
significant increase for the majority of our Rent Supp/RAP contracts.
Second, HUD's decision to set a rent limit of 110 percent of the
FMR was also informed by the desire to maintain a financially
consistent conversion option between project-based voucher (PBV) and
project-based rental assistance (PBRA). PBV rents are statutorily
limited to 110 percent of the FMR. Further, RAD conversions rely in
part on transfers from the tenant-based rental assistance (TBRA)
account to the PBRA account.
Finally, HUD has the statutory flexibility to allow owners to
request a waiver of the RAD Implementation Notice (PIH 2012-32 Rev 2)
to seek an alternative rent limit of up to 120 percent of the FMR. HUD
is currently entertaining such waivers on a case-by-case basis.
Question. If an owner of a second component RAD property will get
an enhanced voucher set at comparable market rent why would they
participate in a preservation program that arbitrarily limits rents to
a lower level?
Answer. Owners may receive an enhanced payment standard from an
enhanced voucher being issued to a tenant, at the expiration of their
Rental Supplement or Rental Assistance Payment (RAP) contract or when
prepayment of an underlying Section 236 mortgage takes place. However,
not all vouchers triggered through these events will yield an enhanced
voucher. In order for a voucher to become an enhanced voucher, the
market rents of the property would need to exceed 110 percent of the
FMR. Further, since many of these projects are still encumbered by
236(e)(2) use agreements at the time of their conversion, the rent
increase is not automatic. Rather, the owner would have to request a
budget-based rent increase process with HUD or with their State housing
finance agency. While it is entirely possible that the voucher will
carry with it an enhanced payment standard, it is not a guarantee.
Further, the value of a long-term project-based subsidy contract
cannot be discounted since the tenant-based subsidy is contingent on
the tenant staying at the property. Many owners are only able to access
debt and equity financing in conjunction with the execution of a long-
term project-based subsidy contract. Since an enhanced voucher is
mobile and a tenant can take it with them at any time, the Project-
Based Rental Assistance (PBRA) or project-based voucher (PBV) contract
that an owner receives as a result of a RAD conversion is the only way
an owner can receive a long-term subsidy contract in place of the Rent
Supplement, RAP, or Mod Rehab contract.
Question. Isn't it better to encourage preservation of these
affordable housing resources by providing the owner with at least the
same rent that they would get under another HUD program but which does
not preserve the property as affordable?
Answer. As noted above, the rent paid to the owner using an
enhanced voucher is not guaranteed--neither the rent level itself nor
the ongoing payment of the rent if the voucher holder chooses to leave
the property. In contrast, through RAD, the property owners receive a
multiyear contract with adjustments to contract rents at regular
intervals to ensure the long-term viability and affordability of the
property.
fha
Question. FHAs primary purpose is to act as a countercyclical
balance during economic downturns, not to compete with the private
market. Such a role was critical during the recession of 2008 to
mitigate even further economic uncertainty and the loss of trillions of
dollars in household wealth. But there comes a time when FHA should
return to its traditional role. Through fiscal year 2015, FHA accounted
for 19 percent of the total purchase mortgage market while its
historical market share averages 13 percent. FHAs current market share
is artificially maintained in part due to last year's decision to
reduce single-family mortgage insurance premiums.
As we begin our work writing the fiscal year 2017 appropriations
bills, does the Department plan to make further reductions to single-
family mortgage insurance premiums, placing it in further competition
with the private sector rather than returning to its countercyclical
role?
Answer. FHA's mission is to ensure the availability of credit in
the mortgage market while protecting the health of the Fund. With a
constantly changing housing market and other economic forces, FHA must
continually evaluate that balance, and when necessary make appropriate
changes in pricing.
In regards to market share, FHA has a mission mandate to improve
access to credit, not a market share or revenue mandate such as a
private firm faces. The size and shape of overlap between FHA and
others will continue to vary with changes in economic conditions,
industry practices, and public policy objectives. Consequently, the
Department cannot predict how the market will shift.
gao
Question. According to GAO's review of the U.S. Government's fiscal
year 2015 and 2014 consolidated financial statements, HUD was one of
three agencies to receive a disclaimer on the audit of its financial
statements. GAO also reported that HUD started fiscal year 2015 with
eight material weaknesses, adding three new ones, and resolving two, to
end up at the end of the fiscal year with nine material weaknesses. The
Inspector General separately audited HUD and in addition to these
material weaknesses, also identified eight significant deficiencies in
internal controls, and six instances of noncompliance with applicable
laws and regulations. According to the audit, these weaknesses were due
to an inability to establish a compliant control environment, implement
adequate financial accounting systems, retain key financial management
staff, and identify appropriate accounting principles and policies.
What steps has HUD taken to improve on this situation and at least
end fiscal year 2016 with fewer material weaknesses than it started
with?
Answer. Improving HUD's longstanding financial management
challenges has been a top priority. Between fiscal year 2014 and fiscal
year 2015, by working closely with OIG, GAO and OMB, HUD has been able
to drop its number of material weaknesses from 11 to 9 and anticipates
improving upon those numbers in fiscal year 2016. This effort will not
and has not been easy, but HUD is changing financial management across
the Department to address the OIG's findings by investing in its people
and our systems, re-engineering outdated processes, engaging with
stakeholders, and implementing a financial shared-service provider.
--HUD is making progress in establishing a sound, resilient financial
governance structure that is flexible enough to adapt to the
changing landscape and complex program structure. HUD is
tackling challenges by investing in its people and our systems,
re-engineering outdated processes, engaging with stakeholders,
and leveraging implementation of a financial shared-service
provider to improve our financial reporting.
--Public Housing Authority (PHA) Assets: In 2015, HUD enhanced its
capabilities for making timely reclassification of PHA data to
address the material weakness regarding non-GAAP accounting for
PIH assets and liabilities. We are continuing to make a
concerted effort to obtain data from grantees which will allow
for validation of the grant accruals and obtain data from PHAs
to properly account for advance payments.
--Office of Community Planning and Development (CPD) Grant Accrual:
In 2016, HUD's Office of the Chief Financial Officer and Office
of Community Planning and Development made progress in
addressing the non-GAAP validation of CPD's grant accruals by
initiating a process to obtain data from the grantees, which
will allow validation of the accruals.
--CPD First In-First Out (FIFO) Formula Grant Payment Method and HOME
Cumulative Method for Assessing Grantee 24-Month Commitment
Requirement: CPD formula grant programs used the FIFO
accounting disbursement method for fiscal year 2014 and prior
grants; and a cumulative method was used to determine whether
HOME grantees met their 24-month commitment requirement. After
considerable work with OIG, OMB, and GAO, HUD has changed its
accounting to be grant specific instead of FIFO, and is in the
process of amending the HOME regulation to change its method
for assessing grantee compliance with the HOME commitment
requirement from cumulative to fiscal year specific. The grant
administration and financial systems have been modified to
capture the level of detail to record the financial
transactions and allow such grant-specific and fiscal-year
specific reporting for disbursements and commitments for grants
awarded for fiscal year 2015 and thereafter.
--Ginnie Mae Financial Statements: Ginnie Mae has also made
significant progress on each of the material weaknesses
identified by the OIG. Ginnie Mae has been overhauling legacy
processes, and has filled three key leadership positions--
including hiring a CFO, Controller, and a new Accounting Policy
and Financial Reporting Advisor. Ginnie Mae continues to invest
in accounting for non-pooled loans and properties at the loan
level. As with FIFO, this will take time to resolve, but GNMA
is making progress.
--Finally, HUD is revamping the audit coordination and remediation
process to more quickly identify, engage, and resolve potential
issues and improve timeliness of resolutions, which will help
to overcome our material weaknesses. As part of the process, we
briefed the Office of the Inspector General on annual financial
statement process based on implementation of shared-service
provider (Treasury ARC).
housing trust fund
Question. The Housing and Economic Recovery Act of 2008 authorized
the deposit of receipts from Fannie Mae and Freddie Mac into a new
Housing Trust Fund in order to finance the development, rehabilitation,
and preservation of affordable housing for extremely low-income
residents. Along with the HOME program and the Low-Income Housing Tax
Credit, the Housing Trust Fund is an important tool in the goal of
eliminating homelessness and reducing the rent burden on the most
vulnerable.
How much funding will be available for the Housing Trust Fund and
when will HUD release this funding to the States?
Answer. Collections of assessments from Fannie Mae and Freddie Mac
in the amount of $186,256,610 were made available for the Housing Trust
Fund (HTF) in fiscal year 2016. Of this amount, $12,665,449 is
temporarily unavailable due to the sequestration of 6.8 percent of the
funds. After adjusting for sequestration, HUD will make $173,591,160
available to HTF grantees, which HUD expects to announce individual
allocations to States later this spring and execute this summer/fall.
Question. Last month your office issued a report on HUD's
Departmental Enforcement Center (DEC). That report indicates that the
DEC can improve the physical condition of housing stock and improve the
financial management of troubled multifamily properties. However the
report also indicates that the DEC has very limited authority to
monitor failing participants or require enforcement in any program
offices, and that in cases where program offices chose to disregard
DEC's recommended enforcement actions, it could not appeal these
decisions. The report concludes that HUD should provide the DEC with
the authority, independence, and resources to address HUD-wide
enforcement risks. Do you believe that the DEC should be moved out of
the Office of General Counsel in order to address these concerns?
Answer. HUD's own management reform plan known as ``HUD 2020''
recognized the conflicting role program offices face in getting funds
to and spent by participants while also holding them accountable. We
think the Office of General Counsel may have a similar conflict as it
protects HUD's program clients when the DEC recommends enforcement
against those clients. The DEC could increase its effectiveness with
broader enforcement authority that looks at HUD programs from an
enterprise wide view. Independence for the DEC is also critical, which
would allow it to take enforcement action when necessary to bring about
program compliance. While the DEC would likely be effective regardless
of its organizational placement, placement outside the Office of
General Counsel may present the best resolution to independence
concerns that arise when the enforcement program is part of the legal
team that will defend the Department's position on enforcement.
______
Questions Submitted by Senator Shelley Moore Capito
community development block grant
Question. CDBG provides many benefits, but I'd like to ask about an
area that seems to be a natural fit under the scope of this program.
West Virginians are unfortunately well below the national standard for
broadband adoption.
Do you feel that CDBG grants could be a means for communities to
invest in this vital capability in the 21st century?
Answer. Community Development Block Grant (CDBG) funding can be
used by grantees in a variety of ways to promote broadband access and
adoption.
--Installation of broadband infrastructure in particular
neighborhoods or, in some cases, community-wide, can be carried
out as an eligible public facility activity.
--Likewise, installation of broadband infrastructure to schools,
libraries, hospitals, and similar community facilities can be
eligible as a public facility activity.
--Installation of wiring in housing to support broadband service can
be considered as a housing rehabilitation activity.
--Educational and training programs with respect to broadband usage
could be qualified as eligible public service activities.
In each case, the activity would need to meet a national objective
of the CDBG program and usually the national objective will be benefit
to low- and moderate-income persons. The Department recently posted
several questions and answers on use of CDBG in support of broadband on
its website at: https://www.hudexchange.info/resource/4891/cdbg-
broadband-infrastructure-faqs/. Further, HUD is proposing regulatory
revisions that would require CDBG grantees to consider broadband access
and adoption issues in preparing consolidated plans governing annual
funding for the Office of Community Planning and Development's four
formula funding programs (CDBG, HOME, Emergency Solutions Grants (ESG)
and Housing Opportunities for Persons With AIDS (HOPWA)).
connecthome
Question. Could you share with us what HUD has learned so far from
your ConnectHome pilot initiative to accelerate broadband adoption by
children and families in HUD-assisted housing?
Answer. HUD's ConnectHome was officially launched less than a year
ago, in July 2015. A total of 27 Public Housing Authorities and cities
(a few are city/county consolidated metro governments) and one Tribal
Nation received the ConnectHome pilot community designation. Almost all
of the sites are currently working with Internet Service Providers
(ISP) in their area to connect public housing families with school-age
children to the Internet.
We have learned a lot about connectivity among public housing
residents since this program was launched, including the following:
--Connecting public housing residents to the Internet requires the
involvement of other key stakeholders in addition to the Public
Housing Authority, the City and the ISP. To be successful, the
collaboration should also include local schools and colleges,
digital literacy groups and other organizations that serve
young children, as well as foundations, businesses and other
private partners.
--Local staff working on the ConnectHome initiative typically perform
many other duties, which makes it difficult to dedicate the
time necessary for the initiative to succeed.
--Once connectivity has been established, a second hurdle exists:
securing laptops and computers for the families. While many
public housing residents have smartphones that allow them to
access the Internet, a significant number of residents may not
have access to the Internet through devices such as laptops or
computers. For school-aged children, a lack of appropriate
hardware and software can pose a critical problem, as it is
extremely difficult to complete homework assignments using a
smartphone. At least one ConnectHome community has a
relationship with its local college that donates used computers
to ConnectHome residents. HUD is encouraging PHAs to connect
with city governments and local colleges, non-profits, and
businesses willing to donate used computers.
We are also pursuing research in conjunction with the ConnectHome
initiative that will help to inform both ongoing and future broadband
connectivity efforts in HUD-assisted housing. HUD's Office of Policy
Development and Research is currently surveying residents across
ConnectHome communities to estimate Internet connection rates, as well
as to assess the types of devices commonly used by these residents to
access the Internet. This will be HUD's first-ever nationwide look at
Internet use among residents of public housing. Most research on the
digital divide defines low income families as having incomes of $25,000
per year or less, a range which encompasses incomes much higher than
those of the average family in public housing. The results will be
released in late spring of this year.
In addition, HUD plans to conduct a series of focus group
discussions in several ConnectHome communities with an emphasis on
understanding whether and how new subscribers experience the benefits
of Internet connectivity in their homes, as well as what factors are
keeping families from subscribing and lessons learned from the
implementation of the ConnectHome initiative. HUD also plans to conduct
a telephone survey of ConnectHome subscribers with a focus on
understanding families' digital literacy and training needs.
______
Questions Submitted by Senator Brain Schatz
fair market rent
Question. I have heard from public housing authorities (PHAs) and a
number of voucher holders on each of Hawaii's four counties who are
frustrated that fair market rents are unrealistically low. This
difference makes it hard for a person or a family to use a voucher
especially in a neighborhood that may be near better schools and
employment centers. And the only way for a county to meaningfully
challenge the FMR is to pay for a rent study which can run $50,000.
I have no doubt that intentions are good and HUD wants a successful
program but the methodology appears systemically flawed, so what are we
going to do? We need some combination of a better methodology or more
administrative fees to PHAs if we expect them to pay for rent studies
as the way to right size FMRs. I do understand HUD is pursuing the
Small Area FMR but initial feedback from PHAs in Hawaii is that the
result of that may not result in more accurate FMRs but will add to the
administrative costs to administer vouchers across the State.
Answer. HUD does not believe that the Fair Market Rent (FMR)
estimation methods are ``systemically flawed.'' While there may be
certain cases where HUD's FMR estimates are not in line with the local
rental market, the overwhelming majority are sufficiently accurate to
use in operating voucher programs. Out of the approximately 2,400
jurisdictions for which HUD estimates FMRs each year, generally less
than a dozen areas request, and fewer still conduct, rent surveys
because they feel the FMRs are not accurate. FMRs are, however, most
likely to be out-of-line in markets that have had recent spikes in
demand and where housing supply is slow to respond.
Hawaii's unique natural beauty creates demand for housing there
beyond what purely local economic activity can support. This results in
high, and potentially volatile, rents, and a serious shortage of
housing affordable to low-income residents. That said, of the PHAs
operating in Hawaii, only Kauai County appears to be at the limits of
local flexibility to set payment standards around the fiscal year 2016
FMRs according to HUD's voucher tenant data. The remaining PHAs should
explore further use of their payment standard-setting authority before
conducting a survey. The Kauai County PHA should consult with HUD staff
to see what options are available, aside from a rent survey, to make
the voucher program work better there.
In terms of methodological improvements that might better capture
recent, large changes in rent, HUD is assessing forecasting approaches
that might better capture such local variation going forward.
family unification program-family self sufficiency demonstration
Question. HUD recently released its FUP-FSS demonstration program
to better improve system coordination between housing providers and
child welfare agencies to improve outcomes for at-risk youth. I hope
this demonstration will increase the utilization of FUP vouchers for
transition age youth.
What other recommendations does HUD have to improve utilization of
these vouchers and ensure that they are effective tools to assist
transitioning these young people to adulthood?
Answer. HUD has begun working with the Children's Bureau at the
U.S. Department of Health and Human Services (HHS) this year to provide
joint guidance to PHA and Public Child Welfare Agencies (PCWA) on
strategies for better collaboration in order to help increase referrals
of youth to Family Unification Program (FUP) and improve coordination
of housing and supportive services. There are, however, still several
major barriers to youth accessing and successfully utilizing FUP
vouchers.
One of the main barriers is the 18-month time limit on the FUP
voucher for eligible youth. This time limit is one of the main reasons
HUD pursued the FUP/FSS Demonstration Project, as well as proposed a
statutory change in the fiscal year 2017 Budget. The demonstration
project allows for an extension of voucher assistance for FUP youth
from 18 months to up to 60 months (or 5 years). The 18-month time limit
is often too short of an amount of time for youth to obtain stable
housing and transition to adulthood and self-sufficiency, and the short
timeframe of the voucher presents significant costs to the PCWA and PHA
due to the necessarily frequent turnover. HUD continues to support the
Budget proposal to extend the FUP youth time limit from 18 months to 60
months.
Even with extended timeframes, FUP youth will need critical
supportive services from the PCWA. There is a need for critical new
investments in PCWA in order to provide supportive services to former
foster youth transitioning to adulthood. In a 2014 report on FUP for
youth conducted by HUD, 40 percent of PCWA surveyed reported that
funding for the supportive services for youth is either somewhat a
challenge or a major challenge in some cases.
assisted housing and criminal justice reform
Question. HUD recently published Notice PIH 2015-19, ``Guidance for
Public Housing Agencies (PHAs) and Owners of federally-Assisted Housing
on Excluding the Use of Arrest Records in Housing Decisions'' stating
arrest records cannot be the basis for denying admission, terminating
assistance or evicting tenants of federally assisted housing.
What are the methods HUD will use to determine compliance with this
guidance, and how will requirements of this guidance take into account
the balance between access to housing and the safety of all residents?
Answer. HUD's plans to enforce the guidance are consistent with its
approach to enforcing other requirements related to admission or
eviction. HUD Field Offices are preparing to conduct a compliance
monitoring assessment, during which they will review PHAs' Admissions
and Continued Occupancy Policies. Field Office staff will monitor
whether a PHA's policies treat an individual's arrest as a reason to
deny admission, terminate assistance, or evict that individual. Where
polices are noncompliant, PHAs will be required to change them. On an
ongoing basis, HUD Field Offices will monitor compliance via targeted
reviews, with special emphasis on PHAs who are determined to be at a
higher risk of non-compliance according to HUD's National Risk
Assessment Tool (updated quarterly). Further, residents have the option
of reporting any violation of any guidance and/or regulation in writing
or by telephone. All complaints are investigated by the Field Office
and the person is notified of the outcome. Finally, HUD will remind all
PHAs that they must comply with the published guidance on an annual
basis.
PHAs have an obligation to ensure the safety and security of their
residents. While the guidance makes clear that an individual's arrest
cannot be used to prove disqualifying criminal activity, it also states
that a record of an arrest might properly ``trigger'' an inquiry into
whether a person actually engaged in disqualifying criminal activity.
As part of such an inquiry, the guidance allows a PHA or owner to
continue to obtain and review the police report, record of disposition
of any criminal charges, and other evidence associated with the arrest
to inform its eligibility determination, and thereby make an informed
assessment.
Question. What are the fair housing implications of screening out
applicants with criminal records?
Answer. The Fair Housing Act (Act) prohibits both intentional
housing discrimination and housing practices that have an unjustified
discriminatory effect because of race, national origin, or other
protected characteristics. While the Act does not prohibit housing
providers from appropriately considering criminal history information
when making housing decisions, selective use of criminal history as a
pretext for unequal treatment of individuals based on race, national
origin, or other protected characteristics violates the Act.
Additionally, criminal history-based restrictions on housing
opportunities violate the Act if such restrictions have an unjustified
and disproportionate impact on individuals of one race or national
origin versus another. Under the standard for proving discriminatory
effects claims set out in HUD regulations, a criminal history policy
that causes a disparate impact lacks a legally sufficient
justification, and therefore violates the Act, if either the housing
provider cannot prove that the policy is necessary to serve a
substantial, legitimate, nondiscriminatory interest, or a plaintiff can
prove that the housing provider's interest could be served by another
practice that has a less discriminatory effect.
In the context of criminal history-based housing restrictions,
whether a particular policy that causes a disparate impact violates the
Act will generally depend on whether, or to what extent, the policy
takes into account such factors as the nature of a prior conviction and
the length of time since the conviction. Discriminatory effects
liability is always assessed on a case-by-case basis.
For more information, please consult the Office of General
Counsel's Guidance on Application of Fair Housing Act Standards to the
Use of Criminal Records by Providers of Housing and Real Estate-Related
Transactions, issued on April 4, 2016.
local housing policy grants-affordable housing
Question. The lack of housing inventory is a major cause of the
affordability crisis that cities are currently facing. In Hawaii, one-
third of families pay more than half of their income on rent. While
housing vouchers are an important tool, they cannot solve this
challenge alone. Creating more units of housing will reduce the rent
increases for those in market-rate housing, allow government assistance
to stretch further, and keep our communities more affordable. HUD's
budget includes $300 million in mandatory funding to provide localities
with resources to engage in comprehensive planning to solve this
systemic problem.
How would this program would work and how will HUD partner with
localities to tackle these challenges if these additional funds do not
materialize?
Answer. The initiative would fund competitive grants to be awarded
to localities and regional coalitions of localities that demonstrate an
ability to execute and carry out policy, program and regulatory
streamlining initiatives that serve to create a more elastic and
diverse housing supply. The funding would allow localities to address
any needs that arise from the new policy, program or regulatory
initiatives, e.g., infrastructure expansion and/or improvements, as
well as support market evaluations, code writing assistance, design
options, stakeholder outreach and education, and implementation. Funds
would also establish a learning network that would provide ongoing
capacity building to the organizations and entities, facilitate shared
learning opportunities among similar cohorts, and share or disseminate
the results of learning and resulting effective best practices.
In order to encourage innovation, learn from local experience, and
better align multiple HUD and other Federal programs and reduce Federal
barriers, local governments, with support from HUD and other Federal
agencies would develop plans to realize their own visions for building
more prosperous, affordable and economically vital regions.
Without these funds, HUD will look to use a portion of its
technical assistance (TA) resources to support local efforts to
increase housing supply, but TA funds are in high demand. HUD would
also still try to create knowledge sharing among localities that have
developed innovative, local solutions to housing supply challenges,
which can be shared and possibly replicated. Unfortunately, these
alternatives would not completely mitigate the time and cost that many
localities need in developing and implementing these types of policy
reforms.
______
Questions Submitted by Senator Christopher Murphy
fha
Question. After FHA reduced the Mortgage Insurance Premium, the
agency's total number of loans endorsed increased by 73 percent in the
third quarter of fiscal year 2015 (April-June) as compared to the year
before, including a 34 percent increase in purchase-loan endorsements.
Can you differentiate between FHA's current market share of the
low- to moderate-income single family borrower cohort as compared to
Fannie Mae and Freddie Mac?
Answer. At this time, the Department cannot differentiate between
FHA's current market share of the low- to moderate-income single-family
borrower cohort as compared to those of Fannie Mae and Freddie Mac;
but, FHA can demonstrate that the median FICO score of an FHA borrower,
even post MIP reduction, is in the 680's and in line with FHA's mission
to serve low- and moderate-income households. We would note though that
this median is affected by our countercyclical role in the market--and
in times of market expansion and contraction, that the median FHA FICO
score will ebb and flow accordingly as FHA serves the market for credit
access in underserved households at all income ranges. Generally, as
private capital comes back to the market--FHA median FICO decreases and
rises when it leaves the market and more households need FHA insured
financing.
Question. Following FHA's Mortgage Insurance Premium reduction last
year, can you confirm that FHA loans are currently priced appropriately
for their risk?
Answer. The estimated fiscal year 2016 and 2017 credit subsidy
rates for those budget cohorts of -3.70 and -4.42 percent,
respectively, indicate that FHA single-family forward loans are priced
appropriately. Negative subsidy estimates mean that the cohorts'
activity are estimated to result in savings to the government on a net
present value basis.
Question. Do you believe that the GSEs are overpricing for their
risk?
Answer. The Department is not in a position to evaluate the
Government Sponsored Enterprises (GSE's) pricing since the GSEs use a
different methodology, have different risk exposure, and charge
different fees in their role as guarantors of mortgages on the
secondary market.
SUBCOMMITTEE RECESS
Senator Collins. The hearing is now adjourned.
[Whereupon, at 4:04 p.m., Thursday, March 10, the
subcommittee was recessed, to reconvene at a date and time
subject to the call of the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2017
----------
WEDNESDAY, MARCH 16, 2016
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:30 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Susan Collins (chairman)
presiding.
Present: Senators Collins, Blunt, Boozman, Capito, Reed,
Mikulski, Coons, Schatz, and Murphy.
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
STATEMENT OF HON. ANTHONY FOXX, SECRETARY
OPENING STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. The subcommittee will come to order.
Today, we welcome Secretary Foxx, who will testify on the
President's fiscal year 2017 budget request for the Department
of Transportation (DOT) as well as Inspector General Scovel,
who will discuss his office's budget request and the oversight
and other work the Office of Inspector General (OIG) has been
and will be conducting at the Department.
The budget proposes $98 billion for the Department of
Transportation in mandatory and discretionary spending for
fiscal year 2017. The administration has asserted that this
request abides by the bipartisan budget agreement Congress
passed last year. Regrettably, that is simply not accurate.
Instead of living within fiscal reality, the budget evades
the caps by using the same old gimmicks that we have seen in
past proposals. By shifting programs from discretionary to
mandatory, the President is able to show a 36-percent reduction
in spending under the budget caps. At the same time, he takes
credit for increasing DOT's overall budget by almost 30
percent. This undermines the essence of the budget agreement.
I am also disappointed that just 3 months after Congress
passed the Fixing America's Surface Transportation Act (FAST
Act), the budget proposes an entirely new 10-year, $495
billion, 21st Century Clean Transportation plan on top of the
FAST Act. It is paid for by a new $10.25 per barrel tax on
crude oil and other unspecified business tax reforms.
I am simply perplexed by the administration waiting to put
forth this plan now when Congress debated and passed a
multiyear transportation reauthorization, which the President
signed into law, just 3 months ago. It is particularly
astonishing that after ignoring Congress' repeated requests to
engage in developing the necessary reforms to keep the Highway
Trust Fund solvent, the administration has finally proposed a
source of funding, though unrealistic, as it enters its final
year.
I just do not understand why this plan, which is a
legitimate plan, even if it is not one that I think would pass,
was not proposed last year in the midst of the negotiations on
the FAST Act.
For the Federal Aviation Administration (FAA), the request
includes nearly $16 billion to support investments to keep our
aviation system the safest and most efficient airspace in the
world.
I have serious reservations about the legislative proposal
in the House of Representatives. It seeks to privatize air
traffic control outside of the FAA largely under the control of
the major airlines. The public, in my judgment, would not be
well-served by exempting any part of the FAA from annual
congressional oversight, which is necessary to ensure
accountability, and a sustained focus on aviation safety.
The United States has the busiest, most complex airspace in
the entire world. Our Nation's air traffic controllers handle
more than 50,000 flights a day and more than 700 million
passengers each year. To liken our system to any other in the
world is preposterous.
Congressional oversight ensures that the FAA maintains a
system that works across the aviation industry, including for
general aviation and supporting small and rural communities.
Rural States like Maine and other States represented by members
on this committee benefit greatly from services that connect
rural America with the larger transportation network.
The Next Generation Air Transportation System (NextGen) is
modernizing our air traffic control system, and it is happening
today. Much of the backbone work for NextGen is finally
complete. The FAA has safely reduced wake separation standards
at 11 locations, and data comms departure clearance services
are used at eight tower sites.
As a result, we will see reduced flight delays. That will
be very welcome by us who travel back and forth every week to
our home States. And it will also lower fuel consumption.
One of the most innovative DOT programs, which I have
consistently advocated for, is the Transportation Investment
Generating Economic Recovery (TIGER) program. I am very pleased
to see that the Department and the administration continue to
highlight the importance of this vital program.
TIGER has some flexibility to fund a wide range of
transportation projects that demonstrate national or regional
significance to economic growth and job creation. In my home
State of Maine, TIGER has supported vital bridge, port, and
rail projects that otherwise might not have been built.
I am also interested to hear more about the Department's
implementation plan for the new freight and highway competitive
program known as FASTLANE to address the critical freight
issues facing our Nation's aging infrastructure.
With regard to our rail network, I am deeply concerned by
the number of rail accidents that have occurred over the past
several years, including earlier this week. I know this is of
great concern to Secretary Foxx as well.
The Federal Railroad Administration's (FRA's) budget
request highlights the need to ensure safe transportation of
crude oil and other energy products across North America.
Unfortunately, last year, several members of this committee
experienced firsthand the importance of this issue due to
freight derailments in their States. All of us who live near
Quebec, Canada, will never forget the 2013 inferno caused by a
runaway freight train that killed 47 people and decimated the
downtown of a small Canadian community.
Rail safety is a very important issue that this committee
takes seriously, and I know the Department does as well. In
recent years, we have provided funding for FRA to hire
additional inspectors and safety personnel. Last year, we
included funding to provide 33 additional safety personnel, as
well as $50 million for new railroad safety grants. I look
forward to hearing the Department's progress in hiring
inspectors and its timeline for allocating these railroad
safety grants.
With this being the final year of this administration, I
would also like to emphasize to the Secretary the importance of
prioritizing the Department's regulatory agenda. There are many
regulations working their way through the Department and the
Office of Management and Budget (OMB). Priority should be given
to regulations that are urgently needed and are required,
indeed, mandated, by Congress. This is not the time to be
issuing unnecessary, burdensome regulations in the midnight
hours.
Finally, as we all know, Washington, DC, is experiencing
its own transportation crisis today as the DC Metro is shut
down for emergency inspections of power cable systems.
According to the new general manager, the shutdown is the
result of a fire at McPherson Square station on Monday, which
is similar to a fatal fire that occurred at L'Enfant Plaza just
1 year ago.
The unfortunate timing of the notification for the 29-hour
shutdown as commuters were heading home last evening is having
a severe impact on the Federal work force, on tourists who are
visiting their Nation's capital, and on the DC local school
system.
Safety clearly must be the top priority for all transit
agencies. While this was a very tough decision for Metro to
make, it once again brings into question the reliability of the
system and whether or not adequate oversight is being conducted
in a system that it relied upon by so many daily commuters and
tourists who visit the Washington, DC, area. I am sure that
this issue will be brought up in questioning as well.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
The subcommittee will come to order. Today, we welcome Secretary
Foxx, who will testify on the President's fiscal year 2017 budget
request for the Department of Transportation, as well as Inspector
General Scovel who will discuss his office's budget request and the
oversight and other work the OIG has been and will be conducting at the
Department.
I welcome both of you and look forward to hearing your testimony.
The budget proposes $98 billion for the Department of
Transportation in mandatory and discretionary spending for fiscal year
2017. The Administration has asserted that the request abides by the
bipartisan budget agreement Congress passed last year; however, this is
simply not accurate. Instead of living within fiscal reality, the
budget evades the budget caps by using the same old gimmicks we have
seen in past proposals. By shifting programs from discretionary to
mandatory, the President is able to show a 36 percent reduction in
spending under the budget caps. At the same time, he takes credit for
increasing DOT's overall budget by almost 30 percent. This undermines
the essence of the budget agreement.
I am also disappointed that just 3 months after Congress passed the
FAST Act, the budget proposes an entirely new 10-year, $495 billion
``21st Century Clean Transportation Plan'' on top of the FAST Act. It
is paid for by a new $10.25 per barrel tax on crude oil and other
unnamed business tax reforms. I am perplexed why the Administration
waited to put forth this plan now when Congress debated and passed a
multi-year transportation reauthorization, which the President signed
into law, just 3 months ago.
It is particularly astonishing that after ignoring Congress'
repeated requests to engage with this Administration on developing the
necessary reforms to keep the Highway Trust Fund solvent, the
Department has finally proposed a source of funding, though
unrealistic, as this Administration enters its final year.
For the Federal Aviation Administration, the request includes
nearly $16 billion to support investments to keep our aviation system
the safest and most efficient airspace in the world. I have serious
reservations about the legislative proposal in the House that seeks to
privatize air traffic control outside of the F.A.A., largely under the
control of the major airlines. The public would not be well served by
exempting any part of the F.A.A. from annual Congressional oversight,
which is necessary to ensure accountability for program performance and
a sustained focus on aviation safety.
The United States has the busiest, most complex airspace in the
world. Our Nation's air traffic controllers handle more than 50,000
flights a day and more than 700 million passengers each year. These men
and women from all over the country are responsible for providing us
with the safest and most efficient airspace in the world. To liken our
system with any other in the world is preposterous.
Congressional oversight ensures the F.A.A. maintains a system that
works across the aviation industry, including general aviation and
supporting small and rural communities. Rural States like Maine, and
other States represented by Members on this committee, benefit greatly
from services that connect rural America with the larger transportation
network.
NextGen is modernizing our air traffic control system, and it is
happening today. Much of the backbone work for NextGen is finally
complete. The F.A.A. has safely reduced wake separation standards at 11
locations and Data Comm's departure clearance services are used at
eight tower sites. As a result, we will see reduced flight delays and
less fuel consumption.
One of the most innovative DOT programs, which I have advocated for
consistently, is the TIGER program. I am pleased to see the
Administration continues to highlight the importance of this vital
program. TIGER has the flexibility to fund a wide range of
transportation projects that demonstrate national or regional
significance to economic growth and job growth. In my home State of
Maine, TIGER has supported vital bridge, port, and rail projects that
might not have otherwise been built. I am also interested to hear more
about the Department's implementation plan of the new Freight and
Highway competitive program, known as FAST LANE, to address the
critical freight issues facing our Nation's aging infrastructure.
With regard to our rail network, I am deeply concerned by the
number of train accidents that have occurred over the past several
years, including earlier this week. The Federal Railroad
Administration's budget request highlights the need to ensure the safe
transportation of crude oil and other energy products across North
America. Unfortunately, last year several members of this Committee
experienced firsthand the importance of this issue due to freight
derailments in their States. All of us who live near Quebec, Canada,
will never forget the 2013 inferno caused by a runaway freight train
that killed 47 and wiped out a community's downtown.
Railroad safety is an important issue that this Committee takes
very seriously. In recent years, we have provided funding for F.R.A. to
hire additional inspectors and safety personnel. In fiscal year 2016,
we included funding to provide 33 safety personnel as well as $50
million for new Railroad Safety Grants. I look forward to hearing the
Department's progress in hiring inspectors and the timeline for
allocating the Railroad Safety Grants. I will once again be looking
closely at how we can best target Federal funds to reduce accidents in
both passenger and freight trains.
With this being the final year of this Administration, I would like
to emphasize to the Secretary the importance of prioritizing the
Department's regulatory agenda in the months ahead. There are many
regulations working their way through the Department and OMB. Priority
should be given to regulations that are urgently needed and are
required by Congress. This is not a time to be issuing unnecessary,
burdensome regulations in the midnight hours.
With that, let me call upon my colleague and friend Senator Reed,
the ranking member.
Senator Collins. With that, let me call upon my colleague
and friend from Rhode Island, the subcommittee's distinguished
ranking member, Senator Reed.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you, Madam Chairman, for your kind
introduction and leadership.
And thank you, Secretary Foxx. Welcome. You have led the
Department with great energy and honesty, and we appreciate
very much your efforts over the months you have been leading
the Department.
As you work through the last year of this administration, I
want you to know that we all appreciate your leadership and the
way you have worked with the subcommittee. So thank you again,
Mr. Secretary.
Once again, I hope we can convince you to come up to Rhode
Island for a visit. In your earlier trips to Rhode Island, you
saw how our transportation is essential to our State, just as
it is to Maine and Maryland and Missouri and West Virginia and
every other State in the country. You visited our Port of
Davisville, which, once again, celebrated another record year
handling automobiles, over 269,000 vehicles in 2015, a
remarkable economic engine for the State.
You have also helped us break ground on the T.F. Green
runways for the new airport, so thank you very much. This
project will be done in 2017. Indeed, two international
airlines started service to Rhode Island because of the ongoing
efforts. Thank you again.
And we are also working with you to study intercity rail,
which is a key aspect of our economy, as it is in so many other
metropolitan areas in the United States. We want to maximize
intermodal efficiency. We want our airports, our rail systems,
and our bus systems all to operate together. These intermodal
connections are absolutely critical as we go forward. Thank you
for your interest and your personal involvement.
There are, however, some potential difficulties facing the
air traffic control system and airports in general. The
chairman has pointed them out.
As you know, the House of Representatives is considering a
bill to privatize air traffic control. Giving away billions of
dollars in Federal assets to a nonprofit corporation controlled
by airlines without any congressional oversight is I believe an
ill-conceived idea at best. And I do not think that
privatization will offer a path to safer skies.
I think it will, rather, stop NextGen investments in its
tracks, increase costs to consumers, and cut services to small
and rural commercial airports. I think it is a dangerous
proposal that moves this country in the wrong direction.
What this country does need is investment in our airports,
bridges, roads, transit systems. Again, the chairman pointed
out the Metro service interruption of 29 hours, another
indication underscoring the need for investment in transit,
railroads, ports, a host of facilities that need additional
resource, additional effort.
Deficiencies and underinvestment in our transportation
system impact American lives in ways we feel every day. Once
again, we feel it here in Washington today.
We have not been keeping up with the demand. We have not
made the necessary investment to keep pace with this demand.
The FAST Act we passed last year is to start, but America needs
more investment in infrastructure that produces more jobs and a
safer, more efficient transportation system to move our economy
forward.
Our needs are great, as you well know. Roads and bridges
throughout the country are crumbling and inadequate for the
traffic they carry.
Rhode Island's Route 610 connector, for example, is
crumbling with patches upon patches barely holding it together.
As the director of our Department of Transportation said, his
agency has been in design or on replacement for more than 30
years trying to deal with this problem. So this is not a recent
development.
Under the leadership of our Governor, Governor Raimondo,
the State has a vision, not just about fixing the 610 connector
but also making it safe, adding a bus rapid transit lane so we
can have an increase in transit in the State along with
highways. That is thinking ahead and thinking big, and it is
worthy of Federal support. And I am going to ask you to
consider that.
Amtrak, which serves the Providence rail center, has a $7.3
billion state of good repair backlog for the Northeast alone.
Many of its assets are over a century old and need to be
replaced. I support updating the entire corridor, including the
Providence station, which is an important component to the
overall system.
As I mentioned before, the FAST Act has provided modest
growth in transportation funding. But, unfortunately, the
levels fall short of demand. I do want to applaud you for your
advocacy leading up to reauthorization and for pushing us to do
more. Thank you.
Now it is your job to implement the law, and it is now our
task on this subcommittee to make decisions about
transportation funding for fiscal year 2017. Your request
includes FAST Act, level funding for service programs as well
as the new 21st Century Clean Transportation plan.
It is a bold proposal, and I appreciate the administration
looking forward with big investments. It shows the world of
possibilities on what we could achieve with the right vision.
For example, the administration's request includes $1.25
billion for the TIGER program, which is in extremely high
demand and is a linchpin in making innovative projects happen
all across this country; $15.9 billion for the FAA, which fully
funds air traffic controller work force and provides $1 billion
for NextGen programs; $2.3 billion for Amtrak current service;
and $3.7 billion for improving rail service nationwide. Again,
critical.
And as I mentioned, we are looking very closely in Rhode
Island at integrating all the services at T.F. Green Airport
and also at the Pawtucket and Central Falls locations. These
funds would help expand service not only in Rhode Island but
many other parts of the country.
$1.2 billion for the National Highway Traffic Safety
Administration, which will allow the agency to improve vehicle
safety defect investigations. $3.5 billion for FTA's capital
investment grant program, which has seen a 70-percent growth in
projects since fiscal year 2013.
These programs all rely on discretionary resources provided
in the transportation, housing and urban development bill and
they all save lives, create jobs, and grow the economy.
I know we will be unable to meet many of these goals due to
budget constraints, but I know that you make your request based
on the real needs you see and hear about each day. Congress
needs to hear about these needs.
Again, Secretary Foxx, thank you for your service. I look
forward to your testimony.
And thank you, Madam Chairman.
Senator Collins. Thank you very much, Senator Reed.
Normally, we would now turn to the Secretary's opening
statement, but Senator Mikulski, I know that your constituents
have been most affected by the Metro, so I wanted to give you
an opportunity.
Senator Mikulski. I will do it in the question round.
Senator Collins. That sounds great. Thank you.
Senator Foxx--Secretary Foxx. I do not know whether that
was a promotion or demotion.
[Laughter.]
Senator Collins. These days, it is hard to tell.
SUMMARY STATEMENT OF HON. ANTHONY FOXX
Secretary Foxx. Madam Chairman, thank you so much. And I
want to thank the members of the committee, Ranking Member
Reed, and the ranking member of the full committee, Senator
Mikulski. Thank you all very much. I want to thank you for the
opportunity to meet with you today to discuss the President's
2017 fiscal year proposal for the Department of Transportation.
At the outset, however, I want to begin my statement today
by discussing the suspension of operations by Washington's
Metrorail system. This service suspension has not only been
disruptive to the local Washington, DC, community, but to the
operations of the Federal Government. Ranking Member Mikulski
has been a leader in the effort to get this system in shape,
and she and I have worked together on this issue, despite many
shared frustrations with the Washington Metropolitan Area
Transit Authority (WMATA).
Earlier this year, the Federal Transit Administration (FTA)
determined that the safety oversight entity that DC, Maryland,
and Virginia had created was a failure. We then informed the
three jurisdictions that we will temporarily assume safety
oversight duties while they set up a new, stronger, permanent
safety oversight entity.
Frankly, the three jurisdictions have not yet acted on
their responsibility, and I have made that point abundantly
clear in recent months and will continue to until that work is
done.
However, all of us still need to roll up our sleeves and
help WMATA help itself.
WMATA has hundreds of millions of unspent balances and open
grants. I am directing the FTA to evaluate the status of these
funds and prioritize their direction to safety wherever
possible.
Also, as work proceeds on the jumper cable issue, the FTA
will conduct a safety inspection blitz starting next week on
three other critical areas that we have identified as serious
problems for Metro: red light running, use of emergency brakes,
and track integrity. This builds on inspections that have been
conducted over the last several months.
Every year since I have been Secretary, I have urged
Congress to pass a long-term surface transportation bill.
Today, I have come in part to thank Congress for passing a
bipartisan bill last year, the FAST Act, which has done a lot
to remove the cloud of uncertainty hanging over our surface
system for the better part of a decade.
Today, I ask you to join the Obama administration as we
seek to build on the FAST Act with an even more robust 21st
century-focused plan to win the future.
For fiscal year 2017, the President's plan includes $98
billion in transportation investments, a significant increase
over the FAST Act levels to support advancements in safety,
repairing and replacing infrastructure, and driving forward
innovation and emerging technologies that can help us move
faster, more efficiently, and safer in the future.
The President's budget recognizes that neither our current
patchwork funding approach nor the rigid and antiquated
distribution of transportation dollars through formulas is
going to put our Nation's infrastructure in the best possible
position for our kids and grandkids. As the long and tortured
debate about how to put together a surface transportation bill
has shown, our transportation bills are no longer layups.
If we work hard now, it will save stress when the FAST Act
expires. While the FAST Act helps, we are still playing catch-
up, and the same demographic and economic pressures are coming.
Our future challenges, as our report Beyond Traffic tells
us, will get even worse tomorrow than they are today; 70
million more people by 2045, creating even more demand on our
transportation system; freight volumes increasing by 45
percent; 65 percent more trucks on the road; and more of the
population concentrated in what social scientists and other
observers called mega-regions.
In short, our funding and funding distribution models for
America's transportation are rearview mirrors, and the massive
demographic and economic pressures are our front windshield.
With the FAST Act's passage, Congress should rethink our
strategy, and the President's budget offers a pathway for the
future. Specifically, the President's request proposes a new
clean transportation plan. This plan not only increases
spending on infrastructure, it also looks to spend the money
smarter, pushing it to the local and regional levels where
system integration is most needed and projects can be built
much faster.
That is why the President recommends a series of
innovative, new grant programs that advance a 21st century
approach with an annual average budget of $10 billion over the
life of the plan. Also included is a nearly $20 billion
allocation for transit to address fast-growing needs, $6
billion a year for high-performance rail, and finally a clean
transportation plan that will help us prepare for the future by
providing nearly $4 billion over 10 years to research the
integration of new technologies in transportation, including
autonomous vehicles.
Some have already spoken to the allocation for NextGen and
for FAA. This funding will enable the FAA to continue
operations at current funding levels while maintaining its
focus on aviation safety.
With that, I want to thank you, Madam Chairman, for
allowing me to present the President's budget request to you. I
look forward to your questions, and I again thank the
committee.
[The statement follows:]
Prepared Statement of Hon. Anthony Foxx
introduction
Chairman Collins, Ranking Member Reed, and members of the
Subcommittee, I want to thank you for the opportunity to meet with you
today to discuss the President's fiscal year 2017 budget plan for the
Department of Transportation. The President's request totals $98.1
billion in resources that will support the Department's top priority,
safety. This plan is focused on the future with high impact investments
in the safe integration of emerging technologies, such as autonomous
vehicles and unmanned aircraft systems (UAS). It supports improvements
that have the potential to transform transportation systems, save
lives, and reduce carbon emissions. The President's Budget charts a
path towards fundamental changes in the way the government balances and
integrates transportation options in planning for the future.
enhancing surface transportation
The surface transportation investments in the President's fiscal
year 2017 Budget build on the recently enacted Fixing America's Surface
Transportation (FAST) Act, which President Obama signed into law on
December 4, 2015. The FAST Act is an important down-payment for
building 21st Century surface transportation systems. It includes a
series of important changes, to improve the efficiency of permitting
and project delivery, including a number of provisions fostering
ladders of opportunity, establishes new freight-focused funding
programs, and makes changes to a number of the Department's safety
programs. These changes include creating a new grant program and
enhancing authority with respect to recalls, civil penalties, and the
collection of safety data.
However, the FAST Act largely maintains current programs--including
the traditional funding and program distribution between highway and
transit funding, with limited support for multimodal plans and
projects. While the FAST Act included authorization for rail programs,
rail funding will continue to be determined on an annual basis, without
the certainty provided by the multi-year trust fund structure that
currently supports highway and some transit programs.
Thus, the fiscal year 2017 Budget builds on the FAST Act, taking
the next steps to reform funding streams and encourage better planning
and projects at the State and regional levels through increased
investment in areas such as rail and transit. It also includes a series
of new, multimodal programs that increasingly cut across traditional
siloes, in support of more comprehensive regional strategies that
connect communities and support climate and greenhouse gas reduction
goals.
To address these concerns, the President's request directs
investments over a 10--year period towards a 21st Century Clean
Transportation Plan that reflect America's changing demographics and
economy, while at the same time providing access to opportunity.
--As more Americans move to cities, regions, and megaregions, it is
time for us to reassess how we plan for and use our limited
transportation dollars.
--At the same time, this Clean Transportation Plan recognizes the
impact today's transportation systems have on climate change
and the environment and seeks to build incentives that will
encourage new, cleaner forms of transportation and better land
use planning.
--This plan also acknowledges the important role that innovation and
technology play in keeping transportation safe, reliable, and
efficient by requesting funds for programs such as a new
autonomous vehicle deployment pilot that will yield important
benefits.
Overall, the President's Budget request represents a combination of
these proposed 21st Century Plan investments and funding for the
Department's traditional transportation programs. Key elements of the
request include the following:
investing in clean, 21st century surface transportation options that
reflect america's changing demographics and provide access to
opportunity
Enhances Clean Transportation Options for American Families.--Over
the next decade, the Budget invests an average of nearly $20 billion
per year in new investments to reduce greenhouse gas emissions and
provide new ways for families to get to work, to school, and to the
store. The Budget would expand transit systems in cities, fast-growing
suburbs, and rural areas; make high-speed rail a viable alternative to
flying in major regional corridors; modernize our freight system; and
expand the successful Transportation Investment Generating Economic
Recovery (TIGER) program to support high-impact, innovative local
projects.
Supports Investment Decisions Towards a ``21st Century Regions''
Approach That Reflects a Changing Demographics and Economy.--Currently,
the majority of Federal transportation funding flows, via formula,
through the State. To address the shifting demographics in America,
this Budget balances that funding stream, by directing billions of
dollars through regional governments, such as Metropolitan Planning
Organizations, empowering them to play a stronger role in
decisionmaking. Over a 10-year period, the Budget invests an average of
$10 billion a year towards a series of new, innovative multimodal
programs that improve the balance of funding and decisionmaking and
will accelerate the move towards smarter, cleaner, and more integrated
communities. The funding would flow across transportation modes to
support transit-oriented development; reconnect downtowns divided by
freeways; and, bicycle and pedestrian networks.
The President's Budget fully supports FAST-authorized funding
levels for surface transportation programs, aimed at keeping the system
safe and in a state of good repair. In addition to the proposed
increases for surface programs, the Budget fully funds FAST Act levels
for fiscal year 2017, across transportation modes which include: $44
billion to invest in the Nation's critical highway and bridge systems;
nearly $10 billion to support operations of public transit systems
across the Nation; roughly $730 million for the National Highway
Traffic Safety Administration (NHTSA) to research and develop new,
life-saving technologies and programs; and over $640 million to support
nationwide motor carrier safety through the Federal Motor Carrier
Safety Administration (FMCSA).
advances public and private sector collaboration to accelerate cost-
competitive, low-carbon technologies and intelligent transportation
systems
Continues the Transition to the Next Generation Air Transportation
System (NextGen).--The Budget requests a total of $1 billion to support
NextGen. This includes $877 million for NextGen Capital investments, an
increase of $22 million above fiscal year 2016, which will advance
modernization efforts; enhance automation; implement satellite-based
surveillance capabilities; improve data communication practices and
technology; and maximize traffic flow.
Funds Pilot Deployments of Safe and Climate-Smart Autonomous
Vehicles to Create Better, Faster, Cleaner Urban and Corridor
Transportation Networks.--To accelerate the development and adoption of
autonomous vehicles, the Budget includes $3.9 billion over 10-years for
large-scale deployment pilots to develop a common multistate
interoperability framework for connected and autonomous vehicles.
ensures transportation safety keeps pace with changing technology and
organizational needs
Integrates Surface Transportation Technologies Safely Into the
Transportation System.--High impact investments will support activities
such as NHTSA's New Car Assessment Program (NCAP), to test vehicle
safety through state-of-the-art equipment and more realistic crash
dummies. The Budget invests $35 million in fiscal year 2017 for this
integration.
Strengthens Regulatory Enforcement Agencies Across the Department
Through Resources and Organizational Changes.--Across the Department,
agencies are taking action to strengthen the regulatory and enforcement
capabilities that are key to protecting the safety of travelers and
movement of goods.
--Investments would provide over $47 million for NHTSA's Office of
Defects Investigation to improve its effectiveness in
identifying safety defects quickly, ensuring remedies are
implemented promptly, and notifying the public of critical
defects.
--The Budget's $295 million request for the Pipeline and Hazardous
Materials Safety Administration (PHMSA) also includes proposed
organizational changes to elevate the role of research and
analysis in support of regulatory development and enforcement.
Supports Rail Safety Through Research and Development and
Implementation of Positive Train Control (PTC).--The Budget includes
$213 million to support the Federal Railroad Administration's (FRA's)
rail safety and development programs, including implementation and
enforcement of PTC, as well as related track and bridge safety
activities, and another $53 million for additional safety research.
This includes $12.5 million to analyze and demonstrate the safety and
environmental benefits of Electronically Controlled Pneumatic brakes.
Protects Our Maritime Interests.--The Budget provides over $428
million for the Maritime Administration to implement programs that
promote the economic competitiveness, efficiency, and productivity of
U.S. Maritime transportation.
invests in 21st century government and project delivery
Modernizes Permitting and Project Delivery.--The Budget supports
investments, consistent with new requirements in the FAST Act that
ensure we are making 21st Century investments through 21st Century
delivery mechanisms. The Budget expands the Administration's progress
to expedite permitting and approval processes while protecting safety
and the environment.
Supports Ongoing Establishment of a National Surface Transportation
and Innovative Finance Bureau.--Building on the Administration's
successful Build America Investment Initiative, the FAST Act created a
new office to streamline and improve the application processes for
credit programs, expedite project delivery, and promote innovative
financing best practices. The Budget requests resources for
implementation, as well as $275 million for the Transportation
Infrastructure Finance and Innovation Act (TIFIA) Program, along with
flexibility to also use resources from a range of new multi-modal
programs to cover credit subsidy costs.
Protects Cybersecurity and Data Integrity.--The Budget includes $15
million to continue improvements to the Department's cybersecurity
protections, and another $4 million to assist the Department in meeting
the requirements of the Digital Accountability and Transparency Act of
2014.
When taken together all of these new initiatives support our
expanding freight network, and address the ongoing need for
improvements in the transportation options that support ladders of
opportunity for all Americans.
preparing for reauthorization of the faa
Planning for the Future of the FAA.--The President's fiscal year
2017 Budget request includes a total of $15.9 billion to support the
ongoing work of the Federal Aviation Administration (FAA). This funding
level would provide the FAA with ``steady-state'' funding overall when
compared with fiscal year 2016 levels. The FAA's authorization is set
to expire on March 31, 2016. As new legislative proposals are offered
and considered, the President's budget continues to propose expanded
funding flexibilities that would help FAA manage its resources in a
more efficient and effective way.
Thank you again, for the opportunity to appear before you today and
I will be happy to answer your questions.
Senator Collins. Thank you very much, Mr. Secretary.
We are going to start the questioning with the ranking
member of the full committee, Senator Mikulski, in light of the
fact that her constituents more than any of ours have been
adversely affected by the shutdown of the Metro system.
Senator Mikulski.
Senator Mikulski. Thank you, Madam Chair, for once again
your usual sensitivity and courtesy, something very much needed
in the body politic, and the vice chair of the committee,
Senator Reed.
Secretary Foxx, it is good to see you again. I want to
commend you and your professional staff for the outstanding job
that you do. You are a very hands-on administrator and your
staff takes their job very seriously. We in Maryland are very
happy and proud of our assets, whether it is the Port of
Baltimore, the airport, the MARC commuter rail, or the Purple
Line.
But today, we have heartburn once again over the Washington
Metro. Seven-hundred-thousand people ride the Metro every day,
700,000 people. Some older senior citizens. Many work age going
to work here at the Capitol and in the great District of
Columbia. Some are schoolchildren coming to school here in our
community, and they count on a system that is safe, reliable,
and they can count on.
Well, you know what happened. Paul Wiedefeld shut down the
system today. It was drastic. It was disruptive. And yet I
believe it was necessary.
We are deeply concerned about this. I am no Janie-come-
lately to this. Going back to 2009 when on June 7 nine people
died when two Metro trains collided, we have been working to
change the governance, improve the management, and bring more
resources.
From 2009 to 2016, we have had seven incidents of tragedy.
We have had 15 deaths, nine rider deaths, and six Metro deaths.
Some happened at Metro itself. Right after the terrible June 9
crash in August, we had a Metro employee die in Silver Spring.
He was hit by the maintenance equipment.
I will not go through every incident, but here we are,
2010, Metro employee struck by a maintenance truck. Shady
Grove, the carwash fell on an employee who lost limbs. So it is
at Metro that many of these accidents occur to Metro employees.
Then, of course, not too long ago, we had the terrible fire
at L'Enfant Plaza where one person died, but 80 nearly died of
smoke inhalation. They could not get out. Thank God for the
District of Columbia first responders who literally moved
heaven and Earth to get there to help them out.
So where are we today? We have tried to change the
management structure. We have tried to improve the governance.
You have been a big part of that, where you could appoint the
board. And we have tried to increase money.
This subcommittee has put over $1 billion into Metro every
year. It helps us buy new crash-worthy cars.
So my constituents and those in the District of Columbia
and Virginia say, well, we will tough it out for 1 day, but is
this change going to be reliable? Is it going to be
sustainable? Is it going to stick?
For months and years now, we have called for a culture of
safety. But what we get is a culture of resistance to making
changes for safety.
So my question to you, as someone who is really involved
himself, and you have run into the buzz saw of resistance just
the way I have, and the way Ben Cardin and Mark Warner and Tim
Kaine have, and Senator John Warner when he was here, so my
question to you is, what more can the Federal Government do to
help? What more should we in Congress do? Do we need more
money? Do we need more authority? What kind of change? Because
what we need is a Metro that really works, and in a way that
people have confidence that when they get on, they will get off
and they will be okay.
I also worry about the workers who themselves have often
been hurt or injured.
What could you share with us today where we can make a
change, where what you can do to help Wiedefeld get this
literally on track, and a track that gets people where they
need to go?
Secretary Foxx. Senator, first of all, I want to thank you
for what I would call your ferocious advocacy on behalf of
safety and on behalf of the workers and users of the system.
What I would say is that the coalition of the willing here
has to involve the jurisdictions themselves, and it has to
involve all stakeholders who have decisionmaking authority over
WMATA. For months, for months, I have called on the
jurisdictions to stand up an effective State safety oversight
organization.
We took over State safety oversight temporarily to give
them time to get it stood up correctly, and yet we have no
concrete movement on the part of these jurisdictions.
That would be a good start. All of us, those jurisdictions,
Congress, our Department, the board of directors, and the
leadership of the organization itself, Mr. Wiedefeld and his
team, have to have relentless focus on safety.
I am prepared to do more. I have already said that we are
going to look at open grants that WMATA has available and look
at directing those to safety-enhancing investments.
But I really think this is a place where WMATA is going to
have to run itself in a safe fashion. The culture down there
has got to change. And we cannot enable the continuation of
these safety failures any longer.
Senator Mikulski. Well, first of all, thank you.
Second, I also want to say that we are not going to take
the whole hearing today, and the leadership of the committee
has been very generous to me this morning.
The Senators from Maryland to Virginia intend to hold an
oversight meeting with Mr. Wiedefeld and other people who could
help solve this problem as soon as we get back from our spring
work period.
But are you telling me that Metro has unspent money that
they could be using right now for safety? Why is it unspent?
What do you think it could buy?
Secretary Foxx. Well, we have the authority to direct that
they use those monies to focus on their safety priorities. Some
of these dollars were appropriated or provided to them in past
years for any number of things. I have the FTA team looking at
whether any of these funds are constrained by contracts that
WMATA may have.
But rest assured, we are going to make sure that resources
are not the issue. But I think the point that I am trying to
make is, I do not think it is just resources. I think it is
culture, and I think it is a deliberate decision that is needed
on the part of everyone involved in this to focus relentlessly
on safety and get things right. We are digging ourselves out of
a hole.
Senator Mikulski. I know my time is up, but what you are
saying is there has to be an insistence and persistence, not
only from you, not only for me, but from the leaders of the
jurisdictions whose constituents themselves ride it.
We have to look at not only the money but the consistently
run red lights, and we had to make sure the tracks are rider-
worthy, and then this whole issue. But the running of the red
lights really is a fearsome issue.
Let's follow up in another meeting. I appreciate the fact
that we have a beginning framework here.
Thank you very much, Madam Chair and Senator Reed.
Senator Collins. Thank you, Senator.
AUTONOMOUS VEHICLES
Mr. Secretary, I am very interested in the development of
driverless cars, so-called autonomous vehicles, which could
provide a substantial improvement to our transportation
network, particularly by giving more options to seniors who are
living in rural areas where there is not mass transit of any
kind.
The key benefit, however, is in reducing the number of
crashes and fatalities that occur every year due to human
error. While fully autonomous vehicles may be years away, there
are tools such as collision avoidance, lane deviation,
electronic stability control, that can help reduce crashes in
the near term.
The National Highway Traffic Safety Administration (NHTSA)
has traditionally provided the testing regime and standards-
setting for such new safety technologies.
The budget request includes a new $4 billion request for
over 10 years for large-scale deployment pilots to test
autonomous vehicles in designated corridors. This appears to be
an entirely new role for the Department, and there are no
details in the budget on how this large amount of funding would
be used.
What is the plan? Is the budget potentially duplicative of
private sector efforts already underway to deploy these
vehicles in real-world driving situations?
Secretary Foxx. Thank you for the question. You are correct
that the proposal is $4 billion over 10 years for pilot
programs.
We also agree with you that the automated technologies have
enormous potential for safety benefits. And to accelerate those
benefits, we are proposing to invest these resources in support
of real-world testing. Now there is private-sector testing that
is currently being engaged in, but we believe that the
Government has an interest in understanding further things like
whether national policy should focus on licensing, what sorts
of testing is reliable, information-sharing among States and
the Federal Government, and to what extent we can build on
those systems.
We have actually already speeded up the deployment of these
systems through regulations, including the New Car Assessment
Program (NCAP), which is beginning to require or at least
encourage some of these technologies as you talked about, some
of the automated types of systems to come into the vehicle as
part of the grading system for NCAP.
Having said that, we believe it is beneficial for the
private sector to test, just as the public sector tests. And
many of these tests will be done in conjunction with the
private sector.
SPEED LIMITERS
Senator Collins. Thank you. Last year, Mr. Secretary, I
asked you about the status of the Department's proposed
rulemaking on speed limiters or Governors, as they are also
known. You stated at that hearing that the rule would be out
``no later than the fall.'' Here we are in our hearing a year
later and well-beyond last fall and the Department has yet to
issue its rulemaking.
I am puzzled by this because this is a rule that will help
to reduce highway fatalities. It has the support of the
trucking industry. It has the support of various safety
advocates.
Why has there been a delay in this rulemaking?
Secretary Foxx. So subsequent to our hearing last year, OMB
did accept the heavy truck speed limit, or Notice of Proposed
Rulemaking (NPRM), on May 18, 2015, as a top priority. We have
been working closely with OMB to get that rule pushed out.
Based on our current estimates, we expect the rule to be
completed by April 22, 2016. So within the next month or so.
Senator Collins. Thank you. I will hold you to that.
Senator Reed.
AIR TRAFFIC CONTROLLER STAFFING
Senator Reed. Thank you very much, Madam Chairman.
We spoke about air traffic controllers previously in our
statements regarding this proposed privatization. I think it
should clear where both the chair and I stand on that one. But
there is another issue and that is there is a significant
number of controllers who are eligible to retire at FAA
facilities. In fact, it looks like there are more potential
retirees than there are individuals in the pipeline prepared to
come aboard.
So what are you doing to ensure that there is no gap, that
we have an adequate number of controllers?
Secretary Foxx. I can get you the statistics, Senator, but
in short, we have annual hiring goals for air traffic
controllers, and we are currently at about 54 percent of our
hiring goal for the current year and still going. We feel very
comfortable that we will meet that target this year.
You are correct that we do have an aging work force, and we
are working to onboard new air traffic controllers and move
them through our systems as quickly as possible so that we can
stay ahead of that attrition.
In addition to the hiring goals, we are also looking at two
other aspects of the process. One is getting folks to the FAA
Academy or equivalent training as quickly as possible from the
time they get onboarded. And secondly, we are actually looking
at some of our testing programs to ensure that those are
calibrated to get us the best possible air traffic controllers.
Senator Reed. A follow-on question, the inspector general
has raised concerns that when you are looking at your work
force, you are looking at historical trends and not specific
and critical facilities.
What are you and the FAA doing to better factor in
facility-specific air traffic so that you might have the right
number, but they are just not properly located?
Secretary Foxx. I would like to take that back to the FAA
and give you a more complete answer. But what I would say is
that our airspace remains fairly dynamic. We know where a lot
of their traffic is, but we also have some modeling that helps
us predict where we think it is going to get more intense over
time.
I fully expect that our answer will reflect our projections
going forward, and our response to that. But I would like to
give a sharper answer from FAA.
NEXTGEN MODERNIZATION
Senator Reed. Thank you very much, Mr. Secretary.
On a related issue, an FAA issue, the inspector general
issued a report in January with some criticism regarding the
management of NextGen modernization efforts. It was a rather
long sweep in terms of the beginning of the program until
today.
But can you fill us in on some of the reforms and the pace
of reforms in this administration under your leadership?
Secretary Foxx. Sure. I will be honest, I cannot take full
credit for what I am about to say. There have been a lot of
people who have been working on this in this administration.
But effectively, what the FAA has done in this
administration is rebaseline NextGen. There was a certain
critical path for the project. It was way off scale prior to
the administration. We have since right-sized that critical
path. And we are meeting our targets even notwithstanding some
of the budget shockwaves we have experienced in past years.
Some of the deliverables are the rolling out of metroplexes
across the country; some of the flight enhancements like
optimized profile descents, which are saving millions of
dollars and tons of gasoline as planes land in our airspace;
the development of ERAM; as well as the rollout of data comm,
which will be coming on board over the next year or two.
So we feel good that we're starting to get capabilities out
there. I think one of the big risks for NextGen is getting
equipage in the cockpit of airplanes across the country,
including general aviation, and we look forward to working with
you and others to get that done.
Senator Reed. Thank you very much, Mr. Secretary.
Thank you, Madam Chairman.
Senator Collins. Senator Capito.
AIRPORT RECONSTRUCTION PROJECT
Senator Capito. Thank you, Madam Chair.
I want to thank the Secretary for being here with us today.
I read your interview in the New York Times business section
last Sunday. I really appreciated learning a little bit about
your history. The tributes that you paid to your parents, in
terms of your education, I thought were very inspiring for the
next generation, so thank you for doing that.
I have a localized question here. I am from West Virginia.
As you are aware, a landslide at Yeager Airport in Charleston
forced the evacuation of several people and destroyed the
Keystone Apostolic Church. It was the engineered materials
arrestor system (EMAS) that collapsed, because our airport is
built on top of three different mountains. Thankfully, nobody
was injured.
There have been a lot of entities, including the FAA, that
have been trying to do the repair work. We have also been
working with FEMA and the West Virginia Division of Highways.
The FAA provided the initial investment for the EMAS system,
which prevents planes from going over the side of the airport
down the hill.
I believe that the FAA should help us play a role in
rebuilding a new one. We need a new one. This is a very
important project for basic safety, but also, I have learned,
will play into what types of aircraft will land or be permitted
to land in the Yeager Airport, which obviously has great
circumstances.
I know there is litigation pending on this matter, but I
would like to get a sense from you any thoughts or perspectives
you might have where the FAA could be more helpful to us and to
the local community to try to rebuild the system.
Secretary Foxx. Obviously, first of all, I want to tell you
thank you on behalf of my family, for your comments. That was
very nice of you.
Secondly, to acknowledge that the collapse of the runway
safety area at Yeager Airport is a very complex issue. The FAA
continues to work with the airport. As they do that, I look
forward to giving you updates on how that conversation is
going. But I want the FAA to be helpful to you. I want the FAA
to be helpful to the community in getting that service back up
and running.
Senator Capito. Thank you. Hopefully, we can have
subsequent conversations. The rebuild on that is estimated to
cost between $25 million and $35 million. That is a lot for a
county airport to be able to sustain.
I want to ask you about the Transportation Infrastructure
Finance and Innovation Act (TIFIA) appropriation that you have
in the budget and the development of the National Surface
Transportation and Innovative Finance Bureau. In our State, we
have really used these public-private partnerships to make our
money go farther and complete some highways. I am curious to
know, I noticed you asking for $3 million in new resources for
this implementation, so I am going to assume that this finance
bureau has not been implemented yet. Is that correct?
Secretary Foxx. We are in the process of standing it up. We
have some efforts underway to figure out which programs need to
be consolidated and how to set up the staffing mechanisms. But
I expect that by the time the year ends, we will have this
organization stood up.
I think the goal is to have enough personnel and resources
to make sure that it is delivering what you need in West
Virginia.
PASSENGER FACILITY CHARGES
Senator Capito. Yes, I think every State is trying to
maximize resources. Certainly, what has worked for us is to
have the private company do the forward financing and then have
a steady stream paying back, because if you can get them done
sooner, they are cheaper--or less expensive. Nothing is cheap,
but less expensive.
As I was reading through your report, I noticed an issue
about the ability to increase the pass-through facility charge
limit. I guess that is a fee on every airline ticket from $4.50
to $8. Again, living in a rural area, smaller airports, what
caused my concern was it would eliminate guaranteed Airport
Improvement Program (AIP) entitlement funding for large hub
airports. I do not know what that would do to a small or
medium-sized airport. Who gets the flexibility to raise that?
The local airport?
Secretary Foxx. So it would be local airports, but really
the largest airports in the country, the rural airports, the
smaller and medium-sized airports, would be held harmless. They
would not have any change in their AIP grant access. But the
larger airports would not have access to AIP, but they would
have access to their own passenger facility charge (PFC)
increases.
Senator Capito. What happens in smaller and more rural
airports that have commercial services? It is so expensive. I
mean, for me to fly back to West Virginia an hour, to
Charleston, West Virginia, the capital city, sometimes your
airline ticket can be $700 and $800 for a round-trip ticket.
That is just preposterous.
So even though it is a small change, is just put prices
even further and further out of the market. That is my concern
on that.
But anyway, I thank you again. Thanks for your service, and
we will follow up about Yeager and see what kind of help we can
get from you and from the FAA.
Secretary Foxx. I look forward to working with you.
Senator Capito. Thank you.
Senator Collins. Thank you.
Senator Coons.
AMTRAK INVESTMENTS AND POSITIVE TRAIN CONTROL
Senator Coons. Thank you, Senator Collins.
Thank you, Mr. Secretary, for your service and your
leadership.
As other Senators have commented, today's emergency
shutdown of the DC Metro system was a big surprise, and for
many an inconvenience. But as someone who rides Amtrak rail
every day, I know what a priority safety has to be regardless
of the transportation mode. So I appreciate your engagement and
diligence in ensuring that we put passenger safety first.
Let me start by thanking you for your leadership, your
focus, your staff's terrific work in responding to the I-495
challenge that we had in my home community of Delaware. DOT's
support on the emergency relief funding and your ability and
willingness to work well together, Federal and State agencies,
in a compressed timeframe to fix a critical infrastructure
problem for us was greatly appreciated.
I just attended the groundbreaking of an expanded Route 301
through Delaware with the Federal Highway Administration (FHWA)
administrator, Greg Nadeau. It was only possible because of
TIFIA financing.
I know Senator Collins and others have spoken about the
value of TIFIA financing, but I just want to add my voice. It
makes possible projects like this. Mayor Branner of Middletown
has been working on it for, I think, 30 years, so it is a long
hoped for investment.
Amtrak is of critical importance to my State, not just to
me. Like the Vice President, I think I have spent more time on
Amtrak than with my family during my time in the Senate. I am
pleased the President continues to be a strong advocate and
supporter.
As Senator Reed mentioned, there is a $7.3 billion backlog
in State of Good Repair in the Northeast Corridor alone. While
the FAST Act makes important progress in providing
authorization, I am really concerned about the sufficiency of
funding.
So tell me, if you would, what the positive train control
(PTC) investments in your budget do for Amtrak and what you see
as the prospects for sustaining investment in Amtrak and
improving its State of Good Repair.
Secretary Foxx. So in terms of how far dollars would go
specifically for Amtrak, we do not exactly have a number on
that, in terms of how far our investments would go because that
is sort of an Amtrak question in terms of how they would
invest. But our budget actually contains $1.3 billion for PTC.
That, of course, is part of our desire to ensure that we are
getting that system deployed as quickly as possible.
Senator Coons. I support the increased request for Amtrak,
and I am hopeful that we will be able to sustain that over
time.
Delaware actually happens to be one of the deadliest States
in America for pedestrians, unfortunately. Tragically, it was
number one in the country--this is on a per capita basis,
obviously--in 2012, 2013, and number three in 2014 and 2015.
The Federal Highway Administration (FHWA) has done some great
research and funded some projects on how to deal with this.
But for us, it is really a suburban problem, not an urban
problem. It is a challenge of high-speed, multi-laned suburban
commercial corridors.
Can I help start a dialogue between your office, DelDOT,
and advocacy groups about this issue and future research?
Secretary Foxx. Absolutely.
Senator Coons. I would be grateful for a chance to work
with you on that.
Funding and continuation, as I mentioned, of the TIGER
program is absolutely instrumental in advancing rail projects
in the Northeast Corridor (NEC). And improving the NEC is the
only way we can ensure our ability to add more commuter rail
frequencies to all Delaware stations, including access to MARC
service from Maryland.
I would be interested in your view on whether you think
TIGER programs will continue to be reviewed and approved on a
timely basis.
Secretary Foxx. Yes. We understand how important the TIGER
program is. We quite frankly appreciate this committee's just
incredible support for the program. You can rest assured that
we are going to work hard to review and move those dollars out,
so they can get people to work and do the good things that
TIGER grants do.
Senator Coons. It has made possible that Delaware third
track project, in part. There are some critical chokepoints
south of Wilmington, but there are another two north of
Wilmington, so it is my hope we can continue to work on that.
I am also encouraged by the great progress you are making
with New York and New Jersey on the Gateway Tunnel project.
Congratulations. I suspect you have become a good friend of
Senator Schumer's through all this, and I am hopeful we can
continue to invest in that.
Secretary Foxx. And the Governor's.
SHORT LINE RAIL
Senator Coons. Let me just last mention that short-line
railroads handle a great deal of agricultural commerce in my
community and on the Eastern Shore of Maryland. If you could
tell me briefly anything about how you think we can do a better
job of helping America's short-line rail and the critical role
they play for our ag sector.
Secretary Foxx. You are exactly right. Our short-lines are
critical. I think the changes that the FAST Act made to
hopefully make the Railroad Rehabilitation and Improvement
Financing (RRIF) program more accessible to short-line
railroads will be very helpful because many of them do have
large capital needs that they cannot necessarily meet on their
own. The RRIF program was designed to help them, so we want to
use as much of our existing capacity in the RRIF program to
help them.
We will do anything else we can think of to ensure that
those short-line railroads are strong.
Senator Coons. Thank you very much, Mr. Secretary.
Secretary Foxx. Thank you.
Senator Collins. Thank you.
Senator Blunt.
SMART CITY CHALLENGE
Senator Blunt. Thank you, Chairman.
Mr. Secretary, thank you for your leadership of the
Department. The FAST Act, the 5-year highway bill. After 37
extensions of the highway bill, it is really well-received
throughout the country. It would not have happened without your
leadership, and we are all pleased we had a small part of
working with you on that.
TIGER grants, as you know, the Champ Clark Bridge, which is
I think the oldest bridge still crossing the Mississippi River,
is going to be replaced with partially a TIGER grant, and a big
commitment from both Illinois and Missouri. But I think the
TIGER grant made that whole package come together.
Our hope now is that that bridge can safely be used until
its replacement is put in place, because it is a significant
detour to get to the next bridge on the river, if that bridge
is not working. So thank you for that.
To follow up on Senator Coons' thoughts about the PTC, just
awareness for you and the folks in the line of chairs there
behind you, in the FAST Act, we authorized almost $200 million
of that $1.3 billion to help commuter railroads install PTC,
particularly in areas where the State has a significant
obligation for how those commuter terminals work.
We have a situation in both Kansas City and St. Louis where
access to some of that $200 million--actually, it is $199
million. I assume $200 million would have been too much, so
Congress, in its wisdom put $199 million in that particular
category. It is available for States who are involved in public
transportation and have some unique responsibility for
implementing positive train control. I just wanted to mention
that, so you are aware that it matters significantly to how the
commuter rail system works in our State.
Also, I was pleased, as I am sure the other Smart City
Challenge finalists were, to see Kansas City--I am sure
everybody who had a city in that was pleased to be part of it.
But I clearly think Kansas City is a great potential testing
ground for Smart Cities.
It is the first Google fiber city. It is a nexus of
interstate transportation from west of us, south of us, north
of us. Several interstates come together there. And also
putting in that new trolley system, they have been able to put
some of the first phase equipment in already.
I know the chairman mentioned her interest and an interest
I share with what is happening with smart car technology. How
do you see that Smart City model coming together? And what do
you think we learn by looking at the city you finally select? I
think you are down to six or seven finalists now to be the
Smart City finalist.
Secretary Foxx. It is a great question. I see three
different buckets. One is what the private sector is doing,
which is testing, innovating, coming up with new ideas for
technology.
Currently, in general terms, there are some that are
working on connected cars that talk to each other using kind of
a GPS signal, and there is another group that is working on
autonomous cars, which have a roving eye and kind of see the
environment just like you and I do.
We actually believe those two technologies are going to
merge and you are going to have autonomous connected cars in
the future. But industry is working to innovate.
The second bucket is what we do at the government level. We
have promised to give the industry our best guidance--not the
industry, but even the States--good guidance on how to lay a
foundation for this technology to be integrated into the
marketplace. That is work that we have promised to do as an
agency.
Then the third piece is, if you have the technology and you
have the foundation, how do people actually make use of it? The
Smart City Challenge is really our way of putting the challenge
to American cities to help define how these technologies can be
used. And not just those technologies, but how to use data and
analytics better to shape this transportation decisionmaking,
how does land use integrate with that.
So we are very pleased to see 78 great cities submit
applications. We have seven finalists, and we plan to announce
the winner of the challenge in June. But we also plan to give
every city that has applied our best pathway to use Federal
programs to implement the plans they sent to us so that there
are hopefully no losers. Every city hopefully wins.
Senator Blunt. Thank you, Chairman.
Senator Collins. Thank you.
Senator Schatz.
PEDESTRIAN SAFETY
Senator Schatz. Thank you very much.
Secretary Foxx, thanks for your leadership. I am still
waiting to hear from you regarding your trip to Hawaii. We have
a request. As you know, we have some unique needs and some
unique new projects, the Kauai TIGER grant, the rail transit
program. And we are the most isolated populated place on the
planet. So we have some unique transportation infrastructure
needs.
As you know, I support community planning strategies to
create walkable neighborhoods and to take care of pedestrians.
I think you understand that transportation systems have to be
complete. They have to be viable for cars and rail, for buses,
for bikes, and for people.
Senator Heller and I worked in the FAST Act to include a
provision that would allow the Department of Transportation to
work with metropolitan planning organizations (MPOs) and other
agencies to work on reducing traffic fatalities.
In particular, Hawaii has the unfortunate distinction of
being number one in terms of senior fatalities on the street.
We had nearly 5,000 in 2014, and that number continues to creep
up.
So can you tell me what the Department will do to implement
the policy that Senator Heller and I worked on in the FAST Act,
and more generally, what you are doing this year to reverse the
trend on pedestrian fatalities?
Secretary Foxx. First of all, thank you for the question.
It is an incredibly important issue. When I walked into the
Department, that was the one area, bike and pedestrian
fatalities, where we were actually seeing an uptick. This year,
I think our estimates are a 9 percent increase.
A couple things. Just this week, the Federal Highway
Administration published new safety performance measures that
call for State and regional targets to reduce highway deaths
and injuries. And it includes a separate target for pedestrian
and bicyclist fatalities and serious injuries.
We have also included a bike pedestrian performance measure
to signal our commitment to nonmotorized safety.
We have also launched a Safer People, Safer Streets
initiative with America's mayors. We have more than 200 mayors
across the country who signed on to use best practices in their
cities to build the kinds of sidewalks and pedestrian and bike
facilities that are necessary to ensure safety.
There is still a lot of work to do and building on the
language that you had put in the FAST Act, we are going to
implement that as soon as we possibly can.
Senator Schatz. We are going to need your continued
leadership, because one of the challenges that we have in
Congress is that this has actually become, unfortunately, a
partisan issue for some where it becomes a question of whether
or not you support smart growth, location efficiency,
multimodal transportation, rail, all those things, which
sometimes cut along liberal and conservative lines when, in
fact, if you look at mayors, if you look at the AARP, this is a
question of keeping people safe as they walk around.
It was incredibly disappointing to see that this became a
sort of dividing line about whether or not you think people
ought to use cars.
We have two cars in our family. We use cars. We appreciate
the highway system. We appreciate every aspect of the
transportation system.
But I think it is going to require the continued leadership
of the Federal Department of Transportation to push on MPOs, to
push on not-for-profits, to make sure that everybody
understands it cannot possibly be a partisan issue to keep our
seniors and our kids safe as they walk to school or they walk
to the market.
Secretary Foxx. Thank you. If I may just add one small
additional point?
Senator Schatz. Please.
Secretary Foxx. Which is that on these revised NCAP
standards, the way that we rate cars, the five-star rating
system that NHTSA uses, one of the things we are going to score
in the future is the collision avoidance systems that deal with
things outside the car, including pedestrians.
That is another way that we are working to address this
issue, and it is a way that technology did not make available
just a few years ago but now we think it can. So that is
another way we are trying to get at this.
Senator Schatz. Thank you very much.
Secretary Foxx. Thank you.
Senator Collins. Thank you.
Senator Boozman.
TIGER
Senator Boozman. Thank you, Madam Chair. And I thank you
and the ranking member for holding this important hearing.
We appreciate having you here, Secretary Foxx, and all of
your hard work on the behalf of improving our infrastructure in
so many different ways.
I appreciate the work that Senator Collins and the
committee have done to strengthen the TIGER program and provide
critical infrastructure resources. I do hear concerns from
applicants that the Department can do a little bit more to
increase support and help applicants improve their proposals.
Then also, very importantly, those who were not fortunate
enough to get a grant, as to what the problem was, how they can
come back on the next go-round and really the criteria of what
you are looking for. So we would like to work with you on that.
Can you talk a little bit about that and just tell us how
you are trying to remedy that? I suspect you are hearing that a
little bit also.
Secretary Foxx. Sure. I think it is a great point. I think
Congress has done us a service by lowering the minimum amount
that can be used, for example, for rural areas and even urban
areas, because there are some communities where $1 million or
$2 million could do something really big for that community.
Senator Boozman. Very much. You understand that as an old
mayor.
Secretary Foxx. I do. I do. I also understand that some
communities can hire fancy consultants to package their
proposals, and in some communities, you have two people sitting
across a desk trying to figure out when the deadline is.
So what we have tried to do is to avail ourselves through a
variety of mechanisms, outreach where we actually deploy people
out in the country to do focus groups with people to try to
help them understand the process. We have done webinars.
By the way, we offer technical assistance. So if you or
someone in your State called us and said, ``Hey, I am thinking
about applying to TIGER. Can someone help me work through the
process?'' my instructions to our staff is to help those folks
get their package together and help them do the best they can
in the process.
So those are the tools that we try to use. I am
particularly concerned, quite frankly, for our rural areas that
are a lot of times stretched thin and underresourced to make
sure that we in the review phases are giving folks a very
careful look and asking a lot of questions to try to make sure
that we are making an evaluation that is fair to them.
So that is the work that we do. We have had some successes.
In fact, the last round of TIGER, we had almost 40 percent of
the TIGER grants go to rural America. I am very proud of our
ability to do that.
Senator Boozman. Very good. Thank you.
Secretary Foxx. Yes.
AIRPORT CERTIFICATION
Senator Boozman. Another thing that I would like to
emphasize is the importance of modernizing and improving the
airport certification process. I know you have worked hard to
help the aircraft industry. And again, to make it more
competitive and successful, it would be nice if we could make
it so that was a little bit easier to get done.
I would like you to comment about that, but also, on a
related note, the FAA recently published their notice of
proposed rulemaking on Small Airplane Revitalization Act. The
purpose of the legislation is to improve safety while cutting
in half the cost of new aircraft certification.
I believe the goal is to have the rulemaking done by the
end of the year.
So both of those, that is, certainly, very important, and I
think it really would greatly help our aircraft industry, which
I know that you are very interested in doing. So can you
comment about those things a little bit?
Secretary Foxx. Certainly, on part 23, which is the
certification process you are referring to, I am very
supportive of getting that rule done so that we can avail more
of our industry of the advantages of being able to self-certify
if they make certain requirements, if they meet certain
requirements. So that process is underway.
I am very hopeful that we will have that rule out before
the end of the year, certainly--hopefully.
And on the other one, I need to probably come back to you.
I do not know that I am familiar with it, so I would like to
have a chance to write you back on that.
Senator Boozman. On the other one that you commented on,
certainly, that is very important. It would be part of a
significant part of the legacy, in the sense I know that you
have worked very hard to get some of these things accomplished.
But that is one that really does need to be and it is something
we have grappled with for a while and we appreciate you taking
it on. So hopefully, we can get it done in a timely process.
Thank you all very much.
CONTRACT WEATHER OBSERVERS
Senator Collins. Thank you, Senator.
Mr. Secretary, we are going to do one more round of
questions before we turn to the inspector general.
The budget, as you are well-aware, proposes to eliminate
contract weather observers at 57 airports across the country
and require that air traffic controllers perform those
functions, in addition to their existing responsibilities.
In January, Senator Reed and I wrote to you and the FAA
administrator, urging the FAA to fully assess all of the safety
risks and hazards that could result from the loss of
professional weather observers, particularly in cold-weather
States like ours, prior to going through with the plan to
eliminate the contract weather observer program at airports.
These observers are really important in providing real-
time, critical weather information that helps keep our pilots
and our passengers safe.
For example, in Bangor, Maine, air traffic controllers are
simply unable to leave the tower, which would prohibit them
from observing real-time conditions like freezing rain or ice,
which may not be easily discernible from the tower. And that is
what our current weather observers do at Bangor International
Airport.
I also think it is important that our air traffic
controllers remain focused on safely managing the air traffic,
not on performing tasks that they are not specifically trained
or have the experience to do and that others are now doing.
So my question is, Mr. Secretary, have you considered our
recommendation that the safety risk management panel reevaluate
its proposal to determine if this change is truly wise and what
the impact would be on safety, particularly in cold climate
States?
Secretary Foxx. Yes. Yes, the FAA is actually looking at
this question. The way they are looking at this is they have
deployed several panels to various sites across the country,
including some cold-weather areas, to have these testers, if
you will, test in accordance with FAA safety management
systems.
The panels will come back to the FAA with recommendations.
Those recommendations will not be final until they have gone
through an internal process at the FAA.
So what I would say is that your letter has prompted the
FAA to do a much more extensive review of this question, and
that is prompting this work that is being undertaken. And no
final decisions will be made until we have heard back from
those folks, and we will, certainly, be happy to share what we
hear back with you.
Senator Collins. That is very good to hear. I know that the
air traffic controllers and the airport managers in both of our
States would be happy to talk with FAA further also.
Secretary Foxx. Good.
Senator Collins. Let me switch to one other issue for my
final question, and then I am going to submit the rest for the
record. There are many, so you can be happy about that part.
Secretary Foxx. Thank you.
MARITIME TRAINING VESSELS
Senator Collins. Training ships at our State maritime
academies are rapidly approaching the end of their service
lives. The fleet ranges in age from 27 to 55 years old. Without
training vessels, the maritime academies simply will not be
able to prepare adequately the future generations of maritime
workers. These vessels are an important part of the curriculum
as sea time is required for graduation and for licensure.
Last year, in the 2016 budget, the administration requested
and Congress provided $5 million for the design and planning of
a replacement vessel. I would note that the oldest vessel
reaches the end of its service life in 2019, and the T.S. State
of Maine at Maine Maritime Academy will reach the end of its
service life in 2025.
I am disappointed, therefore, that instead of moving
forward with the design and construction of the new vessel,
which is what we anticipated, the budget request instead
proposes to conduct yet another analysis of alternatives.
Now the Department has already completed a feasibility
study and initial analysis of alternatives, and a preliminary
business case analysis for the national security multimission
vessel.
Mr. Secretary, I guess my question is, given the $5 million
that was provided, why isn't the administration seeking funding
for the construction of a replacement training vessel, given
the age of these vessels that are fast approaching the end of
their useful lives?
Secretary Foxx. That was a very well-put question. The
reality is that we have been debating this internally within
the Department for quite some time. I think it is fair to say
that our Maritime Administration feels very strongly that we
need to tackle this issue and to get the new ships put in
place.
I guess the best answer I can give you is that, in the
course of balancing all of the equities throughout the budget
process, this is one where we felt like additional independent
verification and analysis and consideration of the training
requirements for cadets, we believe that we need to look at
this more in terms of understanding whether the ships are, in
fact, necessary for training.
But I understand the argument on the other side and,
certainly, understand if the committee feels differently about
it.
Senator Collins. Having christened one of those ships, I
can tell you that they are absolutely essential. Most of these
cadets either end up going into the Navy or most of them into
the Merchant Marine. If they do not have actual sea time, they
cannot get the licenses that they need. They can't even
graduate from these academies.
So let me just end by saying that I hope you will work with
us. Surely, in a $98 billion budget, we ought to be able to
find this funding.
Senator Reed.
TRANSPORTING HAZARDOUS MATERIALS
Senator Reed. Thank you very much, Madam Chairman.
Mr. Secretary, the Pipeline and Hazardous Materials Safety
Administration (PHMSA) maintains a database with respect to
special permits and approvals for hazardous materials
transportation. The inspector general has issued a report that
describes it as out-of-date and incomplete, which inhibits the
ability of FRA inspectors to carry out their role of ensuring
the safe transportation of these materials.
So could you comment on what the PHMSA is doing to address
the issue? And, critically, when we will the FRA inspectors be
able to get ready access to that information to do their jobs?
Secretary Foxx. The fiscal year 2017 request includes
investments and requests for funding to do some additional IT
investments to help us in this regard. It is part of a 6-year
IT strategy that includes a well-developed investment plan
supporting improvements and a Web-based system.
PHMSA has made improvements to the hazardous material
shipment data collected, including adding a Dun & Bradstreet
identifying number and shipper profile information to its Web
portal. It is also developing certification for a data
operations quality management system that will improve user
satisfaction with data portals, including the hazmat Web
portal. And PHMSA is also developing an online smart form that
will streamline the incident reporting process to improve the
quality of data.
So there are steps that are being undertaken. We are also
asking for resources in the budget to help us take those steps
further.
SEXUAL ASSAULT AND SEXUAL HARASSMENT
Senator Reed. Thank you, Mr. Secretary. Let me turn to
another topic.
You are the Cabinet Secretary responsible for the United
States Merchant Marine Academy. This is an issue that cuts
across too many campuses across the country and for my service
on the Armed Services Committee, it is also obviously an issue
at the service academies, the Air Force, the Navy, and West
Point. That is the issue of sexual harassment.
Each year there is a survey that must be done. Of the 136
women at the academy, 17 percent reported in this anonymous
survey that they were victims of sexual assault, and 63 present
reported being a victim of sexual harassment.
I know you do not tolerate this. You do not accept it. The
question is what we can all do to change the culture and to
provide more training and more support, so these statistics
improve dramatically and quickly.
Secretary Foxx. First of all, I want to thank you for the
question, and I want to thank this committee, including
Chairman Collins and former Ranking Member Patty Murray so much
for continuing to focus on this.
It is a culture issue in our academies and, in particular,
at the Merchant Marine Academy. When I came into the
Department, we had this issue on the plate. We worked with the
academy to ensure that there were people in place at the
academy who were focused on making sure that complaints had a
ready place to go and that they were being adjudicated
effectively.
Unfortunately, this is an area where our success in that
regard looks like failure because you start to get reports up.
The other thing that we have taken very seriously is to
ensure we are being very intentional about ensuring more gender
diversity in the ranks of recruits to the academy. The
statistics that I have been given tell me that at the 25
percent level, the culture starts to shift and you begin to
have a culture in which these types of behaviors are not
tolerated and there is a critical mass of women there to
enforce against that. So we are working on that as well.
But we will continue at this until we get it right.
Senator Reed. I think just an aside, but the experience--my
closest proxy is West Point--is that as more and more female
cadets came in, that culture began to change, but more
specifically, as more and more of the faculty and instructors
and administrators were females, it accelerated that change.
I say with some pride that we have our first female
Commandant at the military academy, so that is another
direction I would encourage you to go in.
Secretary Foxx. Absolutely.
AMTRAK SERVICE
Senator Reed. Final question, if I may, and that is the
Northeast corridor, the Federal Railway Administration has
launched this. They are looking ahead, which I commend them
for, the vision for the Northeast corridor in the future. I
would hate to see that vision exclude in any way services to
Rhode Island.
Amtrak plays a key role in our economy. In fact, the
Providence station is not only a large Amtrak station, it is
the biggest Massachusetts Bay Transportation Authority (MBTA)
station outside of Boston's South Station. To have a future
which would avoid Rhode Island in any way, shape, or form,
either through routes or through services, would be, I think,
wrongheaded. So I wonder what you might comment.
Secretary Foxx. Yes, look, I know how the alternatives
process works. But I see no future where Rhode Island gets
bypassed. That is where I come down very solidly.
In fact, I have had conversations with Governor Raimondo
about ways to potentially look at enhancing service in Rhode
Island. We look forward to working with you and her on that.
Senator Reed. Thank you very much, Mr. Secretary.
Thank you, Madam Chairman.
Senator Collins. Thank you.
Mr. Secretary, I very much appreciate your testimony today.
I was thinking about the range of questions that you answered
today, which literally spanned the spectrum from trains to
driverless cars to metros to ships to bridges to subways. It
really is an amazing span that your Department covers, and we
did not get even get to two questions I wanted to ask you, one
on buses and the other having to do with drones. So the number
of areas under your responsibility truly is tremendous.
We will be submitting additional questions for the record,
and the hearing record will remain open until next Friday,
March 25, for other members to submit questions to supplement
ours.
Senator Collins. I now thank you for testifying and would
call up our next witness, the inspector general.
Secretary Foxx. Madam Chair, if I might just say one thing,
I was talking to my staff yesterday and they said that this may
be my last appearance before this committee, perhaps my final
testimony, period, knock on wood. I hope that is true.
[Laughter.]
Secretary Foxx. But I wanted to say, on a personal note to
both you and to the ranking member, that a lot of times in
politics, particularly in a rancorous presidential election
year, there is a lot of noise about how things do not work.
What I wanted to say to you is that I appreciated your
friendship, your willingness to work out issues with us, and
the fact that we all recognize that transportation is neither a
Democratic nor Republican issue. It is an American issue.
So I just wanted to say thank you so much for your
friendship. Thank you for the hard work that you do for our
Department and for the American people, and I look forward to
working with you through this budget process. Thank you.
Senator Collins. Thank you very much, Mr. Secretary. I very
much appreciate those thoughtful words. I look forward, as I
know the ranking member does, to working with you as we draft
our bill. It has been a pleasure working with you, and I
commend you for your leadership.
Secretary Foxx. Thank you.
Senator Collins. Thank you.
Our next witness today is the Hon. Calvin Scovel, the
inspector general of the Department of Transportation.
Mr. Inspector General, when you are ready, please proceed
with your statement.
STATEMENT OF HON. CALVIN SCOVEL, INSPECTOR GENERAL,
DEPARTMENT OF TRANSPORTATION
Mr. Scovel. Chairman Collins, Ranking Member Reed, members
of the subcommittee, thank you for inviting me to testify today
on DOT's budget priorities. Each year, DOT spends more than $70
billion across a wide range of transportation programs.
Regardless of specific budget levels, effective oversight and
management are key to meeting the Department's goals and
protecting taxpayers' investments.
My testimony today focuses on three crosscutting management
challenges: safety, stewardship, and IT security.
Improving highway safety continues to be one of the
Department's most important priorities. In 2015, we made 17
recommendations to enhance NHTSA's ability to remove unsafe
vehicles from roads. This includes collecting and analyzing
more comprehensive vehicle safety data.
While NHTSA has taken steps to strengthen its defect
investigations, the agency must now effectively implement its
planned improvements to ensure automakers promptly identify
defects and recall defective vehicles. Unsafe commercial
drivers further threaten the safety of our highways,
particularly those who repeatedly violate medical-, drug-, and
alcohol-testing requirements and other safety regulations.
Of the 272 motor carrier safety cases that OIG's criminal
investigators have initiated since 2008, 14 percent involved
carriers that were banned from the roads for safety violations
but continued to operate under a new business name.
At the same time, DOT must work to maintain our Nation's
strong aviation safety record. The introduction of unmanned
aircraft systems (UAS) creates one of the most significant
safety challenges in decades. This week, FAA will have approved
more than 4,000 commercial UAS to operate in our airspace, and
the number of operators is certain to increase once FAA
publishes a final rule for small UAS this year.
However, FAA has yet to establish standard procedures or
training for air traffic controllers to safely manage UAS in
the same airspace as manned aircraft. In addition, FAA
inspectors lack clear guidance for how to conduct UAS
oversight, and FAA lacks formal systems to track and classify
the severity of UAS incidents.
With regard to stewardship, DOT has opportunities to
improve oversight of its investments and assets. For example,
we recently reported that FAA awarded a new $727 million
contract for controller training without first addressing
longstanding issues that we had identified in its prior
controller-training contract, issues that resulted in millions
of dollars in cost overruns.
Similarly, last year we reported FTA had not fully
implemented the required processes and internal controls to
award and monitor $10 billion in grant funds allocated for
Hurricane Sandy relief. Strong risk-based oversight, financial
controls, and planning are vital to eliminating fraud and
maximizing Federal investments.
Sustaining a skilled workforce, DOT's most important asset,
also remains a key challenge, particularly as workforce
demographics change.
For example, 22 percent of DOT's acquisition workforce, not
counting FAA, was retirement eligible last year. From air
traffic controllers to FAA oversight personnel to vehicle
defect analysts, DOT must identify how many staff it needs in
these positions and ensure its training programs keep pace with
changing technology.
Finally, with regard to IT security, DOT has made major
progress in implementing the required use of personal identity
verification (PIV) cards for all employees and contractors.
This is a key step in securing access to facilities and
systems.
However, DOT has been slow to address longstanding
cybersecurity weaknesses, such as the lack of effective systems
to continuously monitor for threats.
The September 2014 fire at a Chicago air traffic control
facility also demonstrated the importance of effective
contingency planning. Damage from the fire crippled that
facility and its systems for 2 weeks, significantly impacting
passengers and airlines.
Earlier this month, we reported that 5 of the Department's
12 operating administrations were not effectively testing or
meeting all requirements for their disaster recovery plans.
The Department has consistently demonstrated its commitment
to addressing these challenges, but effective management and
follow-through remain imperative. My office will continue to
assist the Department as it works to meet these goals.
Chairman Collins, this concludes my prepared statement. I
am happy to answer any questions you and members of the
subcommittee may have.
[The statement follows:]
Prepared Statement of Hon. Calvin L. Scovel III
Chairman Collins, Ranking Member Reed, and Members of the
Subcommittee:
Thank you for inviting me here today to discuss the Department of
Transportation's (DOT) budget priorities. Each year, the Department
spends over $70 billion on a wide range of programs to meet its top
priority of transportation safety and to maintain and modernize
transportation systems. We remain committed to assisting DOT as it
works to improve how it manages programs and resources. My statement
today will focus on three cross-cutting management challenges: (1)
addressing DOT's new and longstanding safety challenges, (2) continuing
diligent stewardship over DOT's critical investments, and (3) enhancing
DOT's information technology (IT) security and preparedness. Regardless
of specific budget levels requested or approved, effective oversight
and management of safety efforts, major transportation projects, and
DOT assets are critical to ensure the greatest return on the taxpayers'
investment.
summary
Safety is DOT's top priority, and the Department faces a range of
emerging and longstanding safety challenges. These include safely
integrating Unmanned Aircraft Systems (UAS) into the National Airspace
System (NAS), addressing risks posed by the transport of hazardous
materials (hazmat), and removing unsafe vehicles and commercial drivers
from roadways. At the same time, DOT must carry out its safety mission
within a framework of diligent stewardship over its investments and
assets. In particular, continued attention to strengthening the
Department's internal controls and risk-based oversight is critical to
the efficiency of taxpayer-funded projects to build, repair, and
maintain the Nation's surface transportation system. DOT can also do
more to reduce risk in its billion-dollar efforts to modernize the
Nation's aviation system and to develop and sustain a high-performing
workforce. Finally, DOT continues to struggle to secure the 450-plus
information systems it uses to conduct business and operate critical
transportation systems, ensure continuity of operations, and safeguard
systems from insider threats.
addressing new and longstanding safety challenges
Making the Nation's airspace, environment, and roads safer
continues to be DOT's top priority. Addressing a number of new and
longstanding safety issues we have identified will be critical for DOT
to maintain and improve the Nation's transportation safety record. In
addition to the new challenges of safely integrating UAS into the NAS,
DOT must continue to reduce safety risks in transporting hazardous
materials while improving safety on our Nation's roadways.
Integrating Unmanned Aircraft Systems Safely Into the National Airspace
System
DOT, the Federal Aviation Administration (FAA), and industry have
maintained a remarkably safe aviation system, with no fatal passenger
accidents involving domestic commercial carriers in over 7 years.
However, the growing demand for commercial UAS operations--for purposes
ranging from precision agriculture operations to package delivery--
presents one of the most significant safety challenges for FAA in
decades. Analysts predict that as much as $93 billion will be invested
in the technology worldwide over the next 10 years.
The FAA Modernization and Reform Act of 2012 requires FAA to take
multiple steps to safely integrate UAS into the NAS. However, FAA and
industry have not reached consensus on UAS-specific technology
standards that are critical to safe integration. For example, FAA and
industry still lack standards to ensure that UAS can automatically
detect and successfully maneuver around other aircraft operating in
nearby airspace.\1\
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\1\ While FAA 14 CFR 91.113 describes a pilot's ability to ``see
and avoid'' other aircraft, the UAS community is using the term
``detect and avoid'' to describe the desired capability of UAS.
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FAA also lacks a regulatory framework for UAS integration, which
would govern areas such as small UAS (under 55 pounds) operations,
beyond-line-of-sight procedures, larger unmanned aircraft systems, and
pilot qualifications. FAA currently approves commercial UAS operations
only on a case-by-case basis, leveraging an authority granted by
Congress to exempt small UAS from certification requirements.\2\ So
far, FAA has issued over 3,800 exemptions. We are currently reviewing
the UAS exemption and safety oversight processes. FAA intends to issue
its rule on small UAS operations in late spring 2016--more than a year
and a half behind the schedule established in the act. However, several
high-profile aspects of UAS use--such as package delivery--will not be
covered under the rule, which underscores the need for further
regulatory efforts. FAA also has not established standard procedures
for safely managing UAS in the same airspace as manned aircraft or an
adequate UAS training program for controllers.
---------------------------------------------------------------------------
\2\ These requirements include the steps necessary to obtain an
airworthiness certificate, including demonstrating to FAA that the UAS
conforms to an approved aircraft design and is in condition for safe
operation.
---------------------------------------------------------------------------
As the number of UAS operations continues to grow, safety and
oversight will remain a significant concern. According to FAA, reported
UAS sightings by pilots have increased significantly, with more than
1,100 reports in 2015, compared to just 238 reported in all of 2014.
Some reports indicated safety risks, such as pilots altering the course
of their aircraft to avoid UAS. Despite these risks, FAA does not have
a formal system to track and classify the severity of UAS incidents. In
addition, FAA inspectors still lack clear guidance on how to conduct
UAS oversight. FAA reports that, through its recently established
registration process, nearly 370,000 operators have already registered
their unmanned aircraft. The impending rule on small UAS is likely to
further increase the number of UAS in our airspace, making UAS
oversight an increasingly critical responsibility for FAA's safety
inspector workforce.
Strengthening Cross-Modal Efforts To Address Pipeline and Hazmat Safety
Risks
A key DOT mission requiring strong cross-modal efforts is
mitigating the safety risks posed by transportation of hazmat. From
2010 through 2014, there were more than 3,000 pipeline and 78,000
hazmat incidents in the United States, including about 3,500 rail
incidents involving hazmat. These incidents resulted in fatalities and
injuries, as well as environmental and property damage. Transportation
of hazmat by air also presents serious risks, with more than 70
incidents worldwide between 1991 and 2014 involving lithium batteries
in aviation cargo and passenger baggage.\3\
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\3\ These incidents included extreme heat, smoke, fire, or
explosions in aviation cargo and passenger baggage.
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The Pipeline and Hazardous Materials Safety Administration (PHMSA)
works to implement robust and timely safety measures for mitigating
significant hazmat and pipeline accidents. However, PHMSA has made
limited progress towards meeting safety recommendations by the National
Transportation Safety Board (NTSB) and congressional mandates. For
example, PHMSA has not fully implemented a 2007 NTSB recommendation to
require railroads to immediately provide emergency responders with
real-time information regarding the identity and location of all
hazardous materials on a train. PHMSA also has not fully implemented
the safety measures included in the Pipeline Safety, Regulatory
Certainty, and Job Creation Act of 2011.\4\ These measures aim to
improve operators' assessments of gas pipelines, require leak detection
systems on hazardous liquid pipelines, and establish regulations for
transporting carbon dioxide by pipeline.
---------------------------------------------------------------------------
\4\ Public Law No. 112-90 (2012).
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On the aviation front, FAA established the Hazardous Materials
Voluntary Disclosure Reporting Program (HM VDRP) in 2006, which allows
air carriers to voluntarily disclose violations of hazmat regulations
without receiving civil penalties. While this is a good step towards
encouraging air carriers to improve hazmat safety, our 2015 report \5\
found that FAA lacked an adequate framework of internal controls to
effectively carry out HM VDRP. For example, FAA requires air carriers
to complete corrective actions for violations they disclose through the
program. However, for 31 of the 48 (65 percent) closed cases we
reviewed, FAA did not request sufficient evidence to verify that air
carriers completed all corrective actions or conducted self-audits as
required. In response to our findings, FAA recently issued a new policy
to require air carriers to document all corrective actions taken and
FAA regions to coordinate with FAA Headquarters on proposed corrective
actions and significant HM VDRP cases. Effective implementation of this
policy will require follow through with adequate training and guidance
to maximize HM VDRP's potential as a safety program.
---------------------------------------------------------------------------
\5\ Program and Data Limitations Impede the Effectiveness of FAA's
Hazardous Materials Voluntary Disclosure Reporting Program (OIG Report
Number AV-2015-034), March 13, 2015.
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Finally, the Federal Railroad Administration's (FRA) enforcement of
PHMSA regulations plays a large role in the safety of hazmat
transported by rail. In fiscal year 2015, FRA reported that its
inspectors identified 1,670 violations of hazardous materials
regulations, and the Agency fined railroads and other regulated
entities \6\ roughly $3.9 million. Key elements in an effective
enforcement program are considering risk when allocating enforcement
resources and imposing sufficient penalties to deter future violations.
Last month, we issued a report identifying shortcomings in the risk
assessments FRA uses for allocating hazardous materials inspection
resources and raised concerns about FRA's use of civil penalties and
lack of criminal case referrals to OIG. FRA has agreed to implement our
recommended improvements.\7\
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\6\ Entities that received these violations and fines may include
railroads, shippers, or tank car repair facilities.
\7\ FRA's Oversight of Hazardous Materials Shipments Lacks
Comprehensive Risk Evaluation and Focus on Deterrence (OIG Report
Number ST-2016-020), February 24, 2016.
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Increasing Safety on Our Nation's Highways
Recent large-scale recalls from automotive manufacturers and
continued efforts to enforce motor carrier regulations highlight a
number of safety challenges the Department faces. Over the last 2
years, General Motors (GM) has recalled nearly 9 million U.S. vehicles
for a defect involving a faulty ignition switch after it received more
than 100 reports of death claims and more than 200 injury claims.\8\
The GM recall and others have prompted reviews and recommendations on
how NHTSA can improve its safety processes and controls, and NHTSA is
working to address these concerns. For example, in 2011 we made
recommendations to strengthen NHTSA's Office of Defects Investigations'
(ODI) procedures for documenting and retaining evidence on defects
investigations, coordinating with foreign nations to identify safety
defects or recalls, and documenting its justifications for not
investigating identified defects. Last month, we reported on NHTSA's
progress towards those recommendations.\9\ While NHTSA has completed
the agreed-upon actions, we are concerned with how it is implementing
some of them; in particular, NHTSA lacks mechanisms to ensure staff
consistently apply the new policies. For example in response to one of
our recommendations, ODI agreed to document justifications for
exceeding investigation timeliness goals; however, over 70 percent of
delayed investigations we reviewed did not include justifications for
why these goals were not met. We made two new recommendations to
enhance ODI's quality control mechanisms, and NHTSA fully concurred.
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\8\ GM's ignition switch compensation fund had approved 124 death
and 275 injury claims as of August 21, 2015.
\9\ Additional Efforts Are Needed To Ensure NHTSA's Full
Implementation of OIG's 2011 Recommendations (OIG Report Number ST-
2016-021), February 24, 2016.
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NHTSA also agreed to implement the 17 recommendations stemming from
our June 2015 audit, which found weaknesses with how ODI collects
vehicle safety data and uses that data to determine whether to open an
investigation.\10\ For example, ODI's processes were insufficient for
verifying that manufacturers submit complete and accurate early warning
reporting data, which can be essential for identifying potential safety
trends or concerns.
---------------------------------------------------------------------------
\10\ Inadequate Data and Analysis Undermine NHTSA's Efforts To
Identify and Investigate Vehicle Safety Concerns (OIG Report Number ST-
2015-063), June 18, 2015.
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It will also be critical for NHTSA to follow through on NHTSA's
Path Forward, a 2015 self-evaluation report released by the Secretary
of Transportation. Through this effort, the Secretary seeks to improve
NHTSA's ability to hold manufacturers accountable by implementing more
effective methods for overseeing carmakers and their suppliers, as well
as collecting and communicating vital safety information. The Secretary
also announced the formation of an expert panel to help strengthen
NHTSA's defect investigation workforce. It will be important for DOT to
closely monitor how NHTSA addresses the panel's findings and
recommendations.
At the same time, DOT has important opportunities to improve the
safety of its highway infrastructure, particularly the bridges and
tunnels that connect our Nation's roadways. For example, the Federal
Highway Administration (FHWA) must maintain momentum in its initiatives
in response to our recommendations to implement data driven, risk-based
oversight of bridges and implement improvements to bridge safety
mandated under the Moving Ahead for Progress in the 21st Century Act
(MAP-21).\11\ FHWA must also continue its oversight of highway tunnel
safety according to the National Tunnel Inspection Standards that
became effective in August 2015 and maintain a national tunnel
inventory.
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\11\ FHWA Has Not Fully Implemented All MAP-21 Bridge Provisions
and Recommendations (OIG Report Number MH-2014-089) August 21, 2014,
and FHWA Effectively Oversees Bridge Safety, but Opportunities Exist To
Enhance Guidance and Address National Risks (OIG Report Number ST-2015-
027) February 18, 2015.
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Another critical--and longstanding--highway safety concern is
reducing motor carrier fatalities. Our safety investigations continue
to identify challenges for the Department and the Federal Motor Carrier
Safety Administration (FMCSA) as they seek to remove unsafe motor
carriers from highways. Since fiscal year 2008, we have opened 272
criminal investigations involving motor carrier safety. I would like to
highlight two focus areas where the Department and FMCSA can bolster
their safety efforts.
First, FMCSA must take stringent enforcement and out-of-service
actions to remove motor carriers that repeatedly violate and blatantly
seek to circumvent safety regulations, including (1) hours of service
regulations and records of duty status; (2) medical, drug, and alcohol
testing requirements for drivers; and (3) vehicle inspection, repair,
and maintenance records. In some instances, these carriers have been
involved in multi-vehicle crashes and fatalities. While FMCSA has taken
enforcement actions and is collaborating with our office and other law
enforcement partners to remove these carriers from service, carriers
intent on breaking the law continue to pose a significant threat to
highway safety. Key actions to keep unsafe carriers off the road
include effective vetting of carriers' applications, focusing resources
on high-risk carriers, and prosecuting companies that are caught
violating the law.
The second area concerns reincarnated carriers--carriers that
attempt to operate as different entities in order to evade FMCSA's
enforcement actions. Reincarnated carriers have been involved in
approximately 14 percent of the motor carrier safety investigations we
opened since fiscal year 2008. For example, in Texas, we investigated a
company that was issued an unsatisfactory safety rating by FMCSA for
numerous violations, including falsifying hours-of-service requirements
and using drivers who were not medically examined or certified. After
being placed out of service by FMCSA, the company reincarnated under a
different name and was involved in a passenger bus crash that killed 14
people. FMCSA proposed that Congress modify Section 521 of Title 49
U.S.C. to make it a criminal penalty for knowingly and willfully
violating an out-of-service order, which will assist in prosecuting
reincarnated carriers. Criminal penalties under Section 521 currently
contain only a misdemeanor provision, which is difficult to prosecute
and less likely to result in jail time if prosecuted; therefore, its
effect as a deterrent is limited.\12\
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\12\ 49 United States Code Section 521(b)(6)(A) is a misdemeanor
statute for violations of certain FMCSA regulations.
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continuing diligent stewardship over dot's critical investments
Diligent stewardship of DOT's investments of taxpayer funds is
vital for the Department to effectively carry out its mission. While
DOT remains committed to strengthening its oversight for highway, rail,
and transit projects, opportunities remain to improve its risk-based
oversight of projects and strengthen financial controls to protect its
investments. In addition, FAA faces challenges in its efforts to
provide effective contract and acquisition management--a critical
element in reducing risk for the major programs and systems in which it
has invested.
Maximizing Federal Investments Through Improved Risk-Based Oversight
and Better Financial Controls
DOT receives over $50 billion in Federal dollars annually to fund
projects to build, repair, and maintain the Nation's surface
transportation system. Strong risk-based oversight and financial
controls are key to the success of the more than 100,000 transportation
projects funded by the Federal Highway Administration (FHWA) and
Federal Transit Administration (FTA) each year.
FHWA recently revised its overall risk-based strategy to overseeing
Federal-aid highway project funds. This revised effort includes
improving the linkage between FHWA's annual assessments of State and
Federal-aid highway programs and analyzing that information to better
target its oversight reviews of highway and bridge projects. FHWA
recently completed its first full performance cycle with these revised
initiatives; in future performance cycles, management will need to
assess whether the program is robust and working as designed and make
improvements where needed.
However, to address more specific risks, FHWA needs to improve
oversight of financial and program plans covering major highway and
bridge projects--those exceeding $500 million in funding--to implement
its new guidance on project estimating, and address the backlog of
pending Federal-aid highway project closeouts to ensure effective use
of Federal funds. In addition, FHWA has yet to finalize improvements to
its financial information system to improve project data used to
oversee its programs.
FTA has similar opportunities to better target its oversight and
use tools to meet its goals to ensure major projects are on time and
within budget. For example, FTA did not verify the adequacy of the
Metropolitan Washington Airports Authority's (MWAA) support for claimed
costs on grant expenses for FTA's Dulles Rail Project.\13\ As a result,
FTA initially reimbursed MWAA for more than $36 million in unsupported
and unallowable costs.\14\ In addition, FTA faces challenges in
overseeing how local transportation agencies continue to use the
approximately $10 billion in relief funds for Hurricane Sandy. In 2015,
we reported that FTA had not fully implemented the processes and
internal controls (required by the Disaster Relief Appropriations Act)
it established to award and monitor Hurricane Sandy funds.\15\ FTA also
has yet to develop a formal coordination process with the Federal
Emergency Management Agency to reduce the risk of duplicating emergency
and disaster-related assistance.
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\13\ MWAA's Financial Management Controls Are Not Sufficient To
Ensure Eligibility of Expenses on FTA's Dulles Rail Project Grant, (OIG
Report Number ZA-2014-021), January 16, 2014.
\14\ FTA and Federal grant conditions require that grant recipients
maintain support for federally funded project costs. MWAA did not have
sufficient documentation to support some of the expenses charged to the
Dulles Rail Project and these costs are considered unsupported. These
principles also specify the types of costs that are allowable under
Federal grant awards. An example of an unsupported cost that we found
was invoices that said ``labor'' with no further details or
documentation about what these charges included. An example of an
unallowable cost that we found was $54,000 for expenses that were
outside the scope of the Phase 1 Project to which they were charged.
\15\ FTA Has Not Fully Implemented Key Internal Controls for
Hurricane Sandy Oversight and Future Emergency Relief Efforts (OIG
Report Number ST-2015-046), June 12, 2015.
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Fraud remains another ongoing concern. For example, our
investigators determined that an owner of a Massachusetts transit
authority bus operator diverted grant funds that were designated to pay
salaries, benefits, and other expenses for employees of the bus
company.\16\ Similarly, during liaison and coordination efforts with
FTA and other stakeholders, we discovered that a Hurricane Sandy
grantee was not reporting fraud settlements to FTA. We have reported
that the use of integrity monitors can help to prevent and detect fraud
and noted the importance of sharing fraud allegations across
organizations so we can partner to combat wrongdoing.\17\ As we stated
in June 2015,\18\ FTA must focus on promptly addressing identified
oversight issues; strengthening stakeholder agreements; and enhancing
controls to prevent, detect, and report fraud.
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\16\ The former owner was sentenced in July 2015 to 70 months in
prison and ordered to pay $688,772 in restitution in connection with
his diversion of grant funds.
\17\ Initial Assessment of FTA's Oversight of the Emergency Relief
Program and Hurricane Sandy Relief Funds (OIG Report Number MH-2014-
008), December 3, 2013.
\18\ Oversight of Major Transportation Projects: Opportunities To
Apply Lessons Learned (OIG Briefing No. CC-2015-010), June 8, 2015. We
briefed Members of the Committee on Oversight and Government Reform,
Subcommittee on Transportation and Public Assets, United States House
of Representatives.
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Structuring Major Aviation Acquisitions To Successfully Manage Risk
FAA continues to award high-dollar contracts without fully
addressing and mitigating risk in the acquisition planning and contract
award stages, often resulting in large cost overruns and delays in
system implementation.
First, FAA has had ongoing challenges in effectively structuring
several of its major acquisitions.\19\ These issues have been prevalent
with the $1.8 billion Automatic Dependent Surveillance-Broadcast (ADS-
B) system. ADS-B is a new satellite-based surveillance system for
managing air traffic that is critical to the success of FAA's Next
Generation Air Transportation System (NextGen). Since 2010, we have
reported that FAA faces significant risks in implementing ADS-B and
realizing benefits due to weaknesses such as its contract structure and
oversight. For example, the ADS-B contract structure bundles tasks and
costs, making it difficult for decisionmakers to manage the contract
and track costs. In addition, FAA covered the first 18 years of ADS-B's
28-year lifecycle through one contract award, rather than breaking it
into more manageable segments as OMB and the Federal Chief Information
Officer recommend.\20\ While FAA has finished deploying the 634 ADS-B
ground radio stations, based on our ongoing review, it remains unclear
whether FAA has fully mitigated past problems associated with contract
management and oversight to ensure it can achieve ADS-B technical
requirements and do so within budget. We plan to issue our next report
providing an update on how FAA is addressing ADS-B contract weaknesses
later this year.
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\19\ These acquisitions include the Wide Area Augmentation System
(WAAS) Program, the Standard Terminal Automation Replacement System
(STARS), and the En Route Automation Modernization (ERAM) system. FAA
has awarded contracts for these large modernization efforts using a
grand design, rather than through successive incrementally priced
awards--each of which experienced cost increases, delays, and
performance issues.
\20\ FAA's AMS lacks sufficient guidance on practices that could
minimize mistakes associated with acquisition planning, such as using
modular contracting to award information technology contracts in
incremental, workable segments; and using contract line items, with
separate pricing, contract types, and deliverables, to better manage
the acquisition.
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Second, FAA did not take sufficient steps to assess and mitigate
risk factors we identified on a previous significant contract when
selecting a bidder and awarding the new contract, potentially resulting
in increased costs to the Agency. In 2015, FAA decided to award a $727
million new Controller Training Contract (CTC), without first
addressing longstanding issues we reported with its prior controller
training contract, the $859 million Air Traffic Control Optimum
Training Solution (ATCOTS) contract. Specifically, in 2013, we reported
that before awarding ATCOTS, FAA determined there was a 60- to 80-
percent likelihood that the successful bidder would not meet FAA's
training needs with the limited staff hours proposed.\21\ However, FAA
did not require the contractor to address this issue prior to award and
had to spend millions of dollars more than expected to make up for the
shortfall in contracted resources. We made 10 recommendations in 2013
to improve FAA's management and oversight of the ATCOTS contract. We
recently reported that while FAA addressed recommendations related to
contract administration practices and oversight, it has not implemented
those related to better defining training requirements and validating
training costs. \22\ These recommendations were designed to improve
FAA's ability to develop a comprehensive understanding of its training
needs and, in turn, a more reliable estimate of the Agency's training
costs. Because FAA awarded CTC without fully addressing these
recommendations, it may encounter many of the same issues that
compromised the success of the ATCOTS contract.
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\21\ FAA Needs To Improve ATCOTS Contract Management To Achieve Its
Air Traffic Controller Training Goals, (OIG Report Number ZA-2014-018)
December 18, 2013.
\22\ FAA Has Not Sufficiently Addressed Key Weaknesses Related to
Its ATCOTS Contract (OIG Report Number ZA-2016-010), December 10, 2015.
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Developing and Sustaining an Effective and Skilled DOT Workforce
Maintaining an effective and skilled workforce is critical to
ensuring a safe and vibrant transportation system. This means
identifying and hiring the right number of staff with the requisite
skill mix; adapting hiring and training practices to account for
changing missions, requirements, and workforce demographics; and
implementing policies and procedures that promote employees' success
and ability to carry out DOT's mission effectively.
However, DOT agencies have not always taken adequate actions to
ensure a robust workforce. For example, FAA lacks a comprehensive
process for determining staffing levels needed to oversee its
Organization Designation Authorization (ODA) program--a program that
allows FAA to delegate certain functions, such as certifying aircraft
components, to manufacturers and other organizations. Although FAA uses
a staffing model to help identify overall ODA staffing needs, the model
does not include detailed data on important workload drivers, such as a
company's size and location, type of work performed, past performance,
and project complexity and volume. In addition, FAA does not have the
data or an effective model to accurately identify how many air traffic
controllers it needs to maintain efficiency without compromising
safety. Therefore, as we recently reported, many of FAA's busiest and
most complex air traffic control facilities have a shortage of fully
trained controllers.\23\ We have an ongoing audit to examine FAA's new
controller hiring process and the changes that have occurred since its
implementation in 2014.
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\23\ FAA Continues to Face Challenges in Ensuring Enough Fully
Trained Controllers at Critical Facilities, (OIG Report Number AV-2016-
014), January 11, 2016.
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My office has made a number of recommendations to help DOT ensure
its employees keep abreast of changing technology and missions. Now,
agencies must follow through on actions planned in response to these
recommendations. For example, in 2011 we found that NHTSA's ODI did not
have a formal training program to help develop its current and future
workforce to promote continuity of institutional knowledge. In 2015,
NHTSA provided us a workforce assessment that evaluated its staffing
and training needs for ODI. NHTSA must now fully implement the results
of the workforce assessment to help inform future decisions on the
resources required for this critical mission. Similarly, we found in
2014 that FHWA had not conducted a comprehensive assessment of MAP-21's
impact on its workforce--despite the significant structural changes the
act brought about, such as consolidation of several FHWA programs. FHWA
has since completed an assessment that recognizes the Agency's need to
make changes to the way it does business and deploys staff to meet MAP-
21 requirements and carry out its mission effectively.
Changes in workforce demographics also present unique challenges
for DOT. For example, 22 percent of DOT's acquisition workforce was
retirement-eligible in fiscal year 2015, heightening the need for
improved compliance with contracting officer (CO) training and
experience requirements across all DOT agencies.\24\ DOT's acquisition
workforce is composed of hundreds of COs, CO representatives, and other
supporting staff who provide agencies with the goods and services
required to accomplish their mission at the best value to
taxpayers.\25\ While DOT has several training improvement initiatives
under way for its acquisition workforce, our 2015 review found that it
still needs to clarify and enforce its policies governing certification
and warrant authority for COs.\26\ Of the 63 COs we reviewed, 15 (24
percent) did not fully comply with DOT requirements. For example, 10
COs' certifications had expired, yet they continued to approve over
3,000 contract actions and obligate over $731 million. While DOT
recently revised its acquisition workforce policy in response to our
report, full implementation of our recommendations and enforcement of
these policies will be critical to ensure that COs have the appropriate
training, experience, and certification to award and administer DOT's
complex, high-dollar acquisitions.
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\24\ FAA is excluded from these data and the scope of our work
described in this paragraph because Congress exempted FAA from Federal
acquisition laws and regulations in DOT's fiscal year 1996
Appropriations Act. Congress provided FAA with broad authority to
develop its own acquisition process. Under this authority, FAA
developed the Acquisition Management System and a set of policies and
guidance designed to address the unique needs of the Agency.
\25\ COs are Government employees who can bind the Federal
Government to a contract. COs are responsible for ensuring performance
of all necessary actions for effective contracting, ensuring compliance
with the terms of the contract, and safeguarding the interests of the
United States in its contractual relationships. Contracting Officer
Representatives (COR) are Government employees responsible for
monitoring the contractor's progress in fulfilling the technical
requirements specified in the contract. For example, CORs maintain
administration records, approve invoices and perform quarterly
monitoring reports to confirm the contractor is meeting the terms and
conditions under the contract.
\26\ Some Deficiencies Exist in DOT's Enforcement and Oversight of
Certification and Warrant Authority for Its Contracting Officers (OIG
Report Number ZA-2015-041), April 9, 2015.
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enhancing dot's it security and preparedness
Attacks on public and private sector information systems, carried
out by increasingly well-funded and organized hackers, pose a
continuous threat to the more than 450 information systems DOT uses to
conduct business and operate some of the Nation's most critical
transportation systems. While DOT has made progress in protecting its
information systems, many remain vulnerable to compromise, underscoring
the need for more effective contingency planning, and aggressive
deterrence of insider threats.
Protecting DOT's Information Systems From Increasing Threats
DOT continues to face longstanding cybersecurity vulnerabilities
and must take corrective actions to address identified weaknesses that
pose threats to its information systems. To its credit, DOT has made
major progress in implementing the required use of Personal
Identification Verification (PIV) cards \27\ for all DOT employees and
contractors--a key step in securing access to DOT facilities and
systems. DOT reported issuing PIV cards to 100 percent of its
employees, and 98.3 percent have been configured for use in accessing
networks--an increase of 74.5 percent from last year.
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\27\ A PIV card is a smart card that contains the necessary data
for the holder to be granted access to Federal facilities and
information systems and assure appropriate levels of security for all
applicable applications.
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However, DOT has been slow to take corrective actions to address
many other cybersecurity weaknesses. To help reduce cybersecurity
risks, OMB requires agencies to track identified weaknesses using plans
of actions and milestones (POA&M). Yet, in 2015, DOT had a backlog of
more than 3,800 POA&Ms, which included 21 unimplemented recommendations
we have made. DOT also remains behind schedule in implementing
recommendations we have made in our annual Federal Information Security
Management Act (FISMA) reports and other IT-related audits.
Many of our recommendations focus on key Administration priorities.
For example, OMB requires agencies to implement continuous information
system monitoring, which can provide near real-time security
information to senior leaders, by 2017.\28\
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\28\ Continuous monitoring involves establishing processes and
capabilities to provide near real-time security information to senior
leaders.
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However, DOT has not yet defined the practices or technologies that
should be used or established common security controls \29\ to help
protect its information systems, including high-value asset \30\
systems. Specifically, DOT is still conducting planning and research to
determine the resources needed to ensure that common controls are
properly used, implemented, and monitored. Until those are finalized,
DOT remains vulnerable to more aggressive and complex cyber threats due
to insufficient security controls.
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\29\ Necessary to meet requirements of the National Institute of
Standards and Technology (NIST), common system security controls are
controls that exist in one system that can be used to protect other
systems.
\30\ High-value assets are assets, systems, or datasets that may be
considered ``high-value'' by the Department based on the following
attributes--sensitivity of the information, uniqueness of the dataset,
impact of loss or compromise, system dependencies, and systems that are
integral to supporting critical department communications. A system is
considered ``high impact'' if the loss of confidentiality, integrity,
or availability for that system could be expected to have a severe or
catastrophic adverse effect on organizational operations,
organizational assets, or individuals.
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Strengthening Contingency Plans and Security Protocols To Deter Insider
Threats
We continue to find weaknesses in DOT's ability to plan for
contingencies and recover from disruptions, even for critical systems.
For example, our ongoing work has shown that several Operating
Administrations did not conduct annual contingency plan testing for
their selected mission critical or high- and moderate-impact systems to
ensure they will work in the event of a disruption, as required.\31\
Specifically, 5 of the Department's 12 Operating Administrations did
not comply with DOT policy to conduct such testing or meet all DOT
requirements for their disaster recovery plans, potentially limiting
their effectiveness at ensuring continuity of critical systems in the
event of a malicious attack.
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\31\ Departmental Cybersecurity Compendium Supplement to DOT Order
1351.37, ``Departmental Cybersecurity Policy,'' Version 3.0, September
2013.
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The importance of effective contingency plans was demonstrated on
September 26, 2014, when an FAA contract employee deliberately started
a fire that destroyed critical telecommunications equipment at FAA's
Chicago Air Route Traffic Control Center in Aurora, IL. As a result of
the damage, Chicago Center was unable to control air traffic for more
than 2 weeks,\32\ thousands of flights were delayed or cancelled, and
aviation stakeholders and airlines reportedly lost over $350 million.
While FAA completed comprehensive reviews of its contingency plans and
security procedures following the Chicago Center incident, significant
work remains to prevent or mitigate the impact of similar events in the
future.
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\32\ Chicago Center's air traffic and airspace responsibilities
were eventually transferred to other facilities, based on a 2008
contingency plan and airspace map. This required extensive adjustments
to ensure adequate radar and radio communication coverage.
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Notably, the event highlighted the need to enhance security and
increase the flexibility and resiliency of the national air traffic
control system. For example, FAA lacked the controls necessary to block
access to a contract employee no longer assigned to this facility,
thereby leaving the Center's high-value systems vulnerable to
unauthorized access, disruption, and loss of information. Other insider
threats pose significant threats to security, ranging from an employee
who maliciously steals data to an employee who unwittingly opens
infected email attachments. For example, in 2014, a DOT employee opened
an infected email attachment and unleashed a serious computer virus
(known as ``Dyre'') into DOT's network, compromising more than 5,000
computers and resulting in loss of productivity, email interruptions,
and data loss. The virus was designed to steal information (including
passwords), avoid routine detection, and generate new emails with
attachments to further spread the virus. While DOT reported that the
virus has been mostly eradicated, it noted the need to better train
employees to protect DOT's systems to lower the risk of system
compromise.
conclusion
The safe and efficient movement of people and goods is vital to our
Nation's economic growth, global partnerships, and quality of life. The
Department has clearly demonstrated its commitment to advance these
priorities. To continue addressing the management issues we have
identified as well as a changing transportation environment, it will be
important for the Department to follow through with new safety
standards and recommended actions, stronger financial and project
controls over major investments, and vigilant security and preparedness
measures.
We remain committed to assisting DOT as it works to improve how it
manages programs and resources and to our role in ensuring the greatest
return on investment to taxpayers. I appreciate this Committee's
continued support in the coming fiscal year to enable us to enhance our
coverage of the Department's safety programs, high-dollar
administrative and management assets, and information systems security.
This concludes my prepared statement. I will be happy to answer any
questions you or other Members of the Subcommittee may have.
CYBERSECURITY
Senator Collins. Thank you very much.
I was very pleased that you mentioned cybersecurity and the
vulnerabilities there. What is your assessment of the
vulnerabilities and risk to critical infrastructure that is
part of the Department of Transportation?
Mr. Scovel. Thanks for the question.
We are very concerned. It remains a significant
vulnerability for DOT as it does for virtually every other
agency across all of government. It is a threat that seems to
grow by leaps and bounds. And despite the best efforts of the
cybersecurity officials in DOT as well as other units of the
Government, it is almost as if they are being overtaken by the
threat and by technology itself.
As you know, we are required to conduct a Department-wide
survey, if you will, of information security management every
year. We have found that, in the past year, DOT made
significant progress, as I mentioned, in the use of PIV cards,
requiring PIV cards, which, when they are fully implemented
across the board, will be essential not only for facility
access, physical security, if you will, but also for what the
techies call logical access. They can be used to gain access to
particular security or computer programs.
On the other hand, where the Department has struggled is in
implementing its plan of action and milestones (POA&Ms). They
are plans of action and milestones to address critical
vulnerabilities.
In fiscal year 2014, DOT had about 5,600 POA&Ms on the
books. By the end of fiscal year 2015, they had reduced that
number to about 3,200, so they had made some progress.
But those that remain constitute significant tough nuts, in
our opinion, to crack. Many of those POA&Ms do not yet have
start dates assigned to them. The Department has not yet been
able to even estimate the remediation costs in order to
implement those.
I mentioned in my prepared statement continuous monitoring,
which is a top priority across all of government, so that
senior officials can understand on a real-time basis when
threats are appearing and what immediate action they may be
able to take to deal with them.
In order to make progress on that, the Department has to
identify those key nodes across all of DOT's cyberspace, so
that if there are places where a single, common system security
control can be effective, it can be placed at that one place,
and it can have a ripple effect for security across the board.
Just very quickly, and I have talked a long time on this,
because, as you know, it is a significant problem. DOT has
about 200 critical systems out of the 463 on the books; 163 of
those belong to FAA. DOT understands it needs to prioritize its
cybersecurity efforts to protect those most critical systems
through the means that I mentioned, the POA&Ms, the continuous
monitoring, and the common system security controls.
CYBERSECURITY--NEXTGEN
Senator Collins. That was an excellent answer, and I very
much appreciate the thoroughness. This has been a major concern
of mine.
Do you think that the NextGen system, which we are
installing for air traffic control, will help decrease the
vulnerability of our air traffic system to a cyber attack?
Mr. Scovel. Madam Chairman, it will help in some respects,
but in other respects, the NextGen systems themselves may be
vulnerable. We have undertaken some testing of some of the
systems, ADS-B (Automatic Dependence Broadcast System) and
others. We have concerns about those.
I am not at liberty in an open forum to discuss those,
because our reports have been properly deemed, after review by
the Department, to constitute sensitive security information.
We have spoken with your staff on some of those matters in the
past. We would be happy to come over and in a closed setting
discuss them with you in more detail.
SEXUAL ASSAULT AND SEXUAL HARASSMENT
Senator Collins. Thank you very much. This is an issue that
I continue to pursue from my seat on the Intelligence Committee
as well.
I want to follow up on a question that Senator Reed asked
the Secretary, and that has to do with sexual assault at the
U.S. Merchant Marine Academy.
The Department's most recent report on the academy shows
that the level of sexual assault and harassment remains
unacceptably high. There continues to be a large discrepancy in
the number of sexual assaults that are officially reported and
the responses to the anonymous survey. That is very troubling
because it implies that the midshipmen women still do not have
the trust and faith in the academy's leadership to report
incidents when they occur, whether it is on campus or at sea.
What recommendations do you have for how we can change the
underlying cultural attitudes that the Secretary referred to
that appear to either turn a blind eye to or in some ways not
really condone but do not forcefully act on such a disturbing
level of sexual assault and harassment at the academy?
Mr. Scovel. Madam Chairman, this is a most disturbing
problem. You and I and Senator Murray have had discussions on
this in the past, and I greatly appreciate your interest and
concern on behalf of the students at the Merchant Marine
Academy. I think the ranking member is exactly right when he
pointed out earlier, in questions to the Secretary, his
observations concerning his experience at West Point and
elsewhere in the military, Senator.
But when a critical mass is achieved in the student body
and even more particularly, in the administration leadership at
the academy itself, things can change.
Obviously, as inspector general, I am not in a position to
influence that, but where we have brought our forces to bear,
on, that is, with the assistance and at the request of this
committee and others, to take a look at what the school and the
Maritime Administration have done, what they have planned, what
other recommendations for improvement we might be able to make
to them.
We did that in the 2014 report. We furnished them nine
recommendations at the time. After close scrutiny, my staff
concluded that the recommended actions had all been taken by
the academy administration, so we were able to close all nine
of our recommendations from the 2014 report.
At about the same time, the academy, much to its credit,
embarked on its own action plan, 44 steps across six or seven
different phases that they intended to carry out in order to
make concrete progress on building the trust and confidence
that you mentioned is necessary on behalf of students.
They closed their action plan in 2015 without having
completed all 44 items that constituted the plan. They left--
not unaccounted for, but unresolved, at least to our
satisfaction--a handful. I think it was seven, to be specific.
But we are continuing our discussions. At the committee's
request, we have been asked to examine the academy's actions on
that action plan and see if it meets with our approval, at
least. We are continuing those discussions. We are going to
have further meetings over the next month or so on the
remaining seven. We will be in a position at that point to come
and discuss with the staff and you, if you wish, how we feel on
the academy's progress.
You mentioned earlier, and it has come up, but I would like
to mention it too, because it is a concern for me, and I have
emphasized with our staff--that is, a look at the academy's
action plan, however good it may appear to be for
implementation on the grounds at King's Point. There are
anywhere from 8 to 12 months of an academic year when students
go out in very small groups and are at sea for extended periods
of time and put into port in places that are much different
culturally and, frankly, can get wild. We can all use our
imaginations on things like that.
Those are opportunities for young people, male or female,
to be vulnerable and to find themselves in trouble. So the
Academy's action plan needs to really get at that specific
point in order to have a fighting chance of getting trust and
confidence back among the students.
Senator Collins. Thank you.
Senator Reed.
HAZARDOUS MATERIALS
Senator Reed. Thank you very much, Madam Chairman.
And thank you, Mr. Scovel. Obviously, we take your reports
very seriously, since we have used it for significant questions
of the Secretary.
Again, going back to your report on hazardous materials
transportation, one aspect of the report was a finding that
many cases merit referral to your office for actual criminal
investigation. Can you provide some examples of those types of
cases?
Mr. Scovel. I can. I will be happy to.
Just to review it a little bit, and I will try to do it
quickly, a couple years ago, I was on a field visit to one of
our investigative field offices in Florida. And I spoke with
one of our agents there who reported that in her 15-year career
or so with our Office of Inspector General, she had received
criminal referrals from virtually every other operating
administration in the Department except for FRA. She was
disturbed by that.
That got my attention. I came back to headquarters. We had
on our planning schedule a look at FRA hazmat procedures, and I
asked them to put in a specific objective to examine this
question of criminal referrals. So we were able to tackle that.
I can say that in the cases that we looked at, and there
were 75 between fiscal year 2010 and fiscal year 2014, we had
received zero criminal referrals from FRA. We found, however,
that there were instances of those 75--23 percent, as we looked
at it through both auditors' and investigators' eyes, should
have merited some attention from my staff, trained criminal
investigators. So those were 17 out of the 75 cases.
A couple of examples. One company produced valves that had
not been put through a required design approval process. Those
valves later caused leaks on tank cars carrying hazardous
materials. FRA chose to pursue civil penalties against that
company and in March 2015 released a rail worthiness directive
on valve replacement, but never referred the case to our office
for criminal investigation.
Another example. A different company released overweight
tank cars for use several times without rectifying the weight
problems and after they had been certified by that company as
underweight. These circumstances indicate possible false
statements by a repeat violator, but FRA did not refer that
case to our office for criminal investigation either.
A final example. Another company may have made a false
statement when it did not include in a bill of lading the
radioactive containers located on a flat railcar on the train,
but FRA again did not refer the matter to our office.
Senator Reed, we have heard from every single other
operating administration in the Department, including even the
St. Lawrence Seaway Development Corporation, in those years,
2010 through 2014. Even St. Lawrence Seaway referred a criminal
matter to us.
We have had zero from FRA, whether it was safety related or
whether it was potentially grant-fraud related. As you know,
FRA has significant oversight responsibility now for high-speed
rail grants.
So we have embarked on a concerted effort, and I know we
have the support and attention of the Department's highest
leadership as well as FRA itself, in order to turn that around,
without using every tool in the toolbox--which includes not
only civil penalties to FRA's leadership but also criminal
investigations, when properly warranted. It amounts to what I
call partial disarmament on the part of the safety regulator.
That is most disturbing. I would like to see it corrected.
CRIMINAL VIOLATIONS
Senator Reed. Let me just follow up with a question. This
is for my benefit as much is anybody else.
The procedure in the Department is that an agency would
submit a potential criminal violation to your office. You would
investigate it, and then you would submit it to the Federal
Bureau of Investigation (FBI) or the Federal attorney? What is
the stop out of your office?
Mr. Scovel. Thanks. We would take it to the assistant U.S.
attorney, to the U.S. attorney in the district where the
alleged violation occurred.
Quite honestly, they have their own priorities, as I am
sure you understand. Counterterrorism and public corruption
these days are number one on the list for FBI and Department of
Justice attention. So matters like this can sometimes be
difficult for us to attract attention. But with safety cases,
particularly where the potential for grievous effects is
significant, depending on when and where, we can often get
Department of Justice cooperation.
Senator Reed. So it is not like that FRA is going directly
to the Federal level. They have to go through you. They are not
going through you.
Mr. Scovel. Yes. This is in contravention I should say,
too, of Department orders that are very specific--that when
possible criminal activity comes to the attention of any of the
modes, they are to refer it to the Office of Inspector General.
ADDITIONAL RESOURCES
Senator Reed. Thank you. Just a final question on that, the
administration submits a budget for your office and you submit
a budget for your office. And we have to sort of parse it.
You are requesting additional resources from the
administration's budget, including 25 additional full-time
equivalent (FTE) positions, I believe. First of all, again, we
appreciate the work you are doing and the work is increasing, I
am sure. But can you explain how you are going to use this
additional staff, and why you need it?
Mr. Scovel. I would be happy to, and thank you for the
question. I have some notes, and if you will bear with me, I
want to be careful in how I say this because we, of course,
have had communications with the Department and with OMB as
well as others on the Hill here already, and I want to make
sure I am consistent.
Senator Reed. Yes, sir.
Mr. Scovel. We have always appreciated it, at DOT OIG, this
committee's, and your colleagues' committees over on the House
side, concern and interest in and support across all the years.
I have been the inspector general for a little over 9 years,
and it has been magnificent.
Here is where we stand now. OIG's budget request to OMB was
$93.6 million in support of an estimated 422 career level FTEs.
The President's budget request is for $90.2 million in support
of an estimated 397 career level FTEs. That would be sufficient
as well for 13 student and expert FTEs.
We do appreciate that the President's budget is intended to
help us move in the right direction. But I consider myself duty
bound to advise you, and now that you have asked, we have
advised OMB in our original budget request, the 25 additional
FTEs we originally requested is the number of staff that would
enable us to fully execute our mission focusing on safety
across all transportation modes while continuing to identify
cost-saving opportunities and making recommendations to improve
program efficiency and effectiveness. Operating below OIG's
requested level puts at risk our ability to provide full and
effective oversight of expanding DOT programs.
I submit that based on our office's record for many years
now, whatever appropriated dollars are sent our way, we make
tremendous use of. A traditional measure in the accountability
community is called return on investment. In 2015, our return
on investment was 32-to-1; for each single appropriated dollar,
we were able to return financial recoveries to the Government
of $32. For the 5 years prior to that, it was 29-to-1. So that
puts us really among the top tier of Federal Offices of
Inspector General.
The resources we have requested for 2017 we believe are
necessary to enable us to provide critical audit and
investigative support of aviation and surface safety issues. We
plan to sharpen our focus on administrative, management, and
procurement programs with significant budget and information
security impacts.
We need to maintain certain technical capabilities needed
to conduct increasingly complex audits and investigations.
And we are also overdue, since we are talking about
cybersecurity, to take measures to reinforce our own IT
security posture.
We also have significant new oversight responsibilities,
and we welcome them, that have been associated and handed to us
through the FAST Act, the Digital Accountability and
Transparency Act (DATA Act), the Grants Oversight and New
Efficiency Act (GONE Act), and the Surface Transportation Board
(STB) Reauthorization Act.
Full funding would enable us to, most importantly, cover
the increasing personnel costs that are largely outside of our
control and that have left us with insufficient funds to
support our full allotment of career level FTEs.
Sir, 75 percent of OIG's budget goes to payroll, if you
will. Much of the balance of that 25 percent is for expenses
over which we have no control--rent and the Department's own
working capital fund.
I will close by thanking you and the chairman and all
members of the committee for your consistent concern and
support for our mission. I well recognize that every government
agency these days operates in a financially constrained
environment. And I pledge to you that no matter what the final
decision may be for our office's appropriation, we will do all
we can with all we have, and my staff sitting behind me has
heard me utter those exact words in all-hands meetings and
everything else. We will always do all we can with what we have
to support the Secretary and the Congress.
Senator Reed. Thank you.
If I can make just one brief comment, the chairman has been
very thoughtful about including the inspector general in these
hearings, and the HUD inspector general has made the same basic
comments about IT security, which is a multibillion-dollar,
government-wide sort of cost that is recognized but not funded.
We were commenting about that after he left.
So we have to do some thinking I think. Thank you, Madam
Chair.
Mr. Scovel. Thank you, sir.
Senator Collins. I certainly agree with the ranking member
in that regard.
Mr. Inspector General, I want to thank you so much, not
only for your excellent testimony today. I was impressed, since
we gave you know warning that I was going to ask you about
cybersecurity, how extremely on top of that issue that you are,
which I think is appropriate because I do believe it is one of
the greatest vulnerabilities that we have facing our critical
infrastructure and one that we have done the least to truly
deal with in a serious way.
But I am always very impressed when I meet with you, have
discussions with you, or hear you testify. So my thanks to you
and your office and dedicated employees who are working hard to
make sure the Department is as efficient as possible.
ADDITIONAL COMMITTEE QUESTIONS
The hearing record will remain open, as I indicated, until
next Friday, March 25. Undoubtedly, additional questions will
be submitted to you for the record.
[The following questions were not asked at the hearing, but
were submitted to the Department subsequent to the hearing:]
Questions Submitted by Senator Susan M. Collins
Question. The Department recently announced the seven finalists for
the Smart City Challenge, which is intended to provide $40 million over
3 years to a medium-sized city for deployment of intelligent
technologies. These may include technologies such as autonomous
vehicles, urban automation, sensor-based infrastructure, and electric
vehicle fleets to help reduce congestion and provide innovative
solutions for safety and mobility.
Mr. Secretary, given the limited amount of funding available for
research and technology, does it really make sense to spend a
substantial amount of money on only one city?
Answer. On December 2015 USDOT issued a Notice of Funding
Opportunity challenging medium-sized cities to solve tomorrow's
transportation challenges using technology and innovation. The
overwhelming response surprised us. Seventy-eight medium-sized cities
from across the country--from Portland to Providence and from Anchorage
to Albuquerque--submitted thirty-page vision proposals.
We intend to offer one city $40 million because a substantial
amount of money focused on one city has the potential to (1) be more
effective in getting the attention of medium-sized cites, (2) inspire
cities to use 21st century technology and innovation to solve
tomorrow's transportation challenges, (3) produce solutions that are
replicable in other medium-sized cities, (4) make the United States the
leader in the development of smart city transportation solutions, (5)
be enough money to create a demonstration that will make an impact in a
medium-sized city, (6) encourage universities, foundations, NGOs to
help these cities look to the 21st century solutions, and (7) be
sufficient to attract technology companies to form partnerships with
the seven finalists. While only one city will win, the Smart City
Challenge started a conversation in seventy-eight cities that has the
potential of changing how they look at transportation.
Question. As I mentioned in my opening statement, I am frustrated
the Department continues to use the same old gimmicks we have seen in
the past, shifting programs from discretionary to mandatory. The budget
proposal, excluding funding for Amtrak, includes $4.1 billion in
proposed mandatory spending for ``High-Performance Rail'' all the while
we have the Railroad Rehabilitation and Improvement Financing Program
with nearly $33 billion in available loan assistance sitting
unobligated.
The fiscal year 2016 omnibus provided nearly $2 million to the
Federal Railroad Administration to support short line railroads with
costs associated with RRIF loan applications. Additionally, the FAST
Act included reforms to RRIF to make the program more accessible.
Mr. Secretary, how does the Department plan to use the funds
provided in fiscal year 2016 and given the changes made by the FAST Act
what concrete steps are you taking to get RRIF funding out the door?
Answer. As directed by the fiscal year 2016 Consolidated
Appropriations Act, the Department intends to use the $1.96 million
appropriated under Section 152 of Division L of the Act to assist Class
II and Class III railroads in lowering costs related to applying for a
loan under the Railroad Rehabilitation and Improvement Financing (RRIF)
Program. Specifically, these funds will be made available for applicant
expenses in preparing to apply and applying for direct loans and loan
guarantees. The Department is currently developing guidance to define
how these funds will be made available to eligible applicants to defray
costs, ensure efficient application processing, and achieve loan
closing.
Increasing access to and usage of the RRIF Program is a top
priority of the Department. The program can play an important role in
advancing major infrastructure projects and assisting potential
borrowers in completing smaller infrastructure, equipment, and
refinancing projects that play a vital role in the borrowers'
operations and the overall performance of the rail network. Prior to
the enactment of the FAST Act, the Department had implemented process
improvements to increase stakeholder outreach, provide technical
assistance to prospective borrowers, and improve the efficiency of the
loan application process. In 2015, the FRA completed the same number of
loans--two--as the previous 3 years combined.
The FAST Act contains several provisions intended to further
streamline the loan approval process, increase applicant eligibility,
and fund a wider array of projects.
The FAST Act also established the National Surface Transportation
and Innovative Finance Bureau (Bureau) within DOT. The Department is in
the process of establishing the Bureau to help consolidate outreach/
coordination of DOT credit programs, process applications more
efficiently, provide technical assistance, and communicate best
practices regarding DOT financing and funding opportunities.
Question. Last fall, Administrator Huerta testified before this
subcommittee on how to successfully integrate unmanned aircraft systems
into our Nation's airspace. Given the rise in the number of U.A.S.
sightings near our Nation's airports, I remain concerned about the
threat posed by potential interference with airport operations. Mr.
Secretary, what is the F.A.A. doing to address this alarming growth in
``close calls'' of U.A.S. near airports?
Answer. As of December 21, 2015, everyone who flies a UAS that
weighs more than 0.55 pounds and less than 55 pounds outdoors must
register using the FAA's new online registration system. Before
completing registration, registrants must acknowledge safety
guidelines, which include restrictions and requirements for flying near
airports. As of the end of March, over 415,000 operators have
registered.
Registration is a key component of the FAA's education efforts,
which also include the No Drone Zone campaign, the B4UFLY smartphone
app, and providing airports with educational public service
announcements to display in their terminals.
Recognizing that education has its limits, the FAA is also working
with interagency partners to evaluate UAS detection technology in the
vicinity of airports. As part of the FAA's Pathfinder program, testing
of a detection system developed by CACI International was completed at
the Atlantic City International Airport in February 2016. A total of
141 tests were conducted--72 with a UAS on the ground and 69 with
different, small UAS in flight. Engineers from the FAA, CACI, and the
Department of Homeland Security will develop a final report of findings
by August 2016.
The FAA pursues enforcement action against the operator where
unsafe or unauthorized UAS operations occur that have a medium to high
impact to the safety of the National Airspace System (NAS), where the
operator is intentionally non-compliant, or where the case involves
repeat violations. Enforcement action can take the form of a civil
penalty or a certificate action if the operator holds an FAA issued
certificate. If criminal statutes are implicated, the FAA also works
with our law enforcement partners in prosecuting those cases.
Question. I have been outspoken about the need to improve the
safety of our rail network, not just on the larger Class One railroads,
but also on the ``short lines.'' Maine has no Class One railroads.
Therefore, short lines play an integral role in connecting goods to our
citizens. In order to address their unique needs, Congress provided
funding in fiscal years 2015 and 2016 to assist the short lines in
building a stronger, sustainable safety culture through the
establishment of the Short Line Safety Institute. The Short Line Safety
Institute recently hired an Executive Director and last year began
conducting safety culture assessments at several short line railroads
across the country. How is the Department using feedback from these
assessments as it works with the Institute on the development of
training, education, and recommendations to improve the safety
performance of short lines?
Answer. The Short Line Safety Institute's (Institute) primary goals
are to enhance and improve safety practices and to increase the short
line and regional railroad industry's culture of commitment to safety
through assessing their safety culture, recommending how to improve it,
and providing leadership, training, and education about safety culture
and conformance. The Institute will accomplish these goals through Four
Pillars of activities:
(1) Safety Culture Assessment: Conducting voluntary, non-punitive,
confidential safety culture assessments (initially focused on
railroads that transport crude oil);
(2) Education & Training: Serving as a long-term training and
education resource for short line and regional railroads;
providing resources, based on industry ``best practices'', for
strengthening railroad safety culture;
(3) Research & Evaluation: Serving as a research center that
compiles and disseminates information on safety needs and
trends within the short line and regional railroad industry
(e.g., assessing education/training needs, identifying
communications gaps, and analyzing safety metrics over time);
and
(4) Strategic Communications: Disseminating timely information to
industry stakeholders about the Institute's mission and vision
and providing guidance on how to communicate internally and
externally about safety culture improvement efforts
stakeholders may undertake at their properties.
After a safety culture assessment, assessors synthesize information
collected from multiple methods (interview, document review,
observation, survey) from employees across all levels of the short line
railroad. In addition to providing individualized feedback to the
railroads assessed, the assessments are also used to identify industry-
wide gaps in safety culture knowledge. The Institute will address these
gaps with training, webinars, conferences, and other strategic
education and communication efforts. As a result, the Institute will
provide short line and regional railroads with the tools needed to
drive safety culture change.
FRA is partnering with the American Short Line and Regional
Railroad Association (ASLRRA) and the Institute in this effort,
providing continuing support to the Institute as it strives to improve
safety and safety culture in the short line industry. FRA's Office of
Research & Development continues to work closely with ASLRRA, Volpe
National Transportation Systems Center, and the University of
Connecticut to ensure the Institute's processes and procedures are
evaluated for effectiveness and based on scientific rigor.
Question. We continue to hear aviation stakeholders question the
F.A.A.'s ability to implement NextGen. We have spent approximately $6
billion on NextGen to date, but passengers, shippers, and aircraft
operators have realized few benefits. This lack of progress seems to be
one of the main arguments driving the push for significant changes to
F.A.A.'s structure. Surely by now the aviation industry is seeing
benefits from the billions of dollars this committee has provided. Can
you tell us what progress F.A.A. has made on NextGen?
Answer. Passengers and operators benefit from NextGen in multiple
ways, by flying on more direct paths to their destinations with fewer
delays. NextGen benefits include fewer carbon emissions, contributing
to a greener environment.
Nationwide, the FAA has measured $1.6 billion in benefits to
airlines and the traveling public from NextGen capabilities already in
place since 2010 through 2014. Over the next 15 years, NextGen will
produce an additional $11.7 billion in benefits from those
improvements. Once all currently planned programs are in place, the FAA
expects NextGen to deliver $134 billion in direct airline, industry,
and passenger benefits through 2030. The benefits were based on the
fiscal year 2014 Business Case for the Next Generation Air
Transportation System.
Last year, the FAA completed deployment of the En Route Automation
Modernization (ERAM) system, in all FAA Centers in the continental
United States. The system is already processing information from the
634 ground transceivers that comprise Automatic Dependent Surveillance-
Broadcast, ADS-B. In places such as Alaska and the Gulf of Mexico, our
controllers can continuously track equipped aircraft, even though the
nearest radar site might be several hundred miles away.
The FAA is making flying more efficient. The Metroplex initiative
has transformed the airspace around some of our busiest cities,
replacing inefficient ground-based routes. We now have scores of new
satellite-based air traffic procedures in Houston, North Texas,
Charlotte, Washington, DC, and Northern California.
The FAA has collaborated with the aviation industry through the
NextGen Advisory Committee (NAC), a Federal advisory committee, to
develop a plan to implement a number of high-priority NextGen
capabilities in the areas of Multiple Runway Operations, Performance
Based Navigation, Surface Operations, and Data Communications. To date,
the FAA and industry have completed 42 NextGen Priorities commitments,
introducing a wide range of benefits into the NAS.
Question. In the fiscal year 2016 Omnibus bill, this Committee
provided a substantial increase in resources to the National Highway
Traffic Safety Administration for the Office of Defects Investigation.
Given the dramatic increase in recalls and fines issued in recent
years, ranging from fault GM ignition switches to Takata airbags, it
was apparent NHTSA did not have sufficient engineers and resources to
properly vet defect claims. The O.I.G. has issued several reports on
NHTSA's inability to properly identify and address vehicle safety
defects due to inadequate standards and procedures. I find it troubling
that, according to the O.I.G., NHTSA has failed to consistently apply
the recommendations from a 2011 report and lacks the mechanisms to
ensure that staff consistently applies these recommendations. This
finding from the O.I.G. makes me question whether the Department is
truly making permanent changes as called for in I.G. reports for any of
the agencies within DOT. Mr. Secretary, can you tell us how you, in the
last few months of this Administration, will ensure the O.I.G.
recommendations are taken seriously throughout the Department?
Answer. NHTSA has performed a comprehensive review of its defects
program. NHTSA's internal review and the review performed by the O.I.G.
last year form the agency's roadmap for building a more effective and
comprehensive defects program. NHTSA established an aggressive schedule
to implement all of the O.I.G. recommendations, and the agency will
meet its June 30, 2016 deadline. NHTSA has already initiated additional
actions to address O.I.G.'s recent recommendations about establishing
controls and procedures over the new policies.
The Department, through its Office of Audit Relations and Program
Improvement, recently initiated bi-monthly recommendation update
meetings with each Operating Administration to discuss the status of
every open recommendation. As of April 1, 2016, the Department had 547
open recommendations. The OIG has closed 152 open recommendations,
including 5of the 33 that it listed as high priority, based on actions
taken by the Department to implement those recommendations. The
potential savings of the closed recommendations total over $518
million.
My office is carefully monitoring and will continue to monitor
NHTSA's and other DOT agencies' progress in meeting the benchmarks
established by the O.I.G.
Question. A local bus company in Maine has brought to my attention
a troubling rulemaking issued by the Federal Motor Carrier Safety
Administration, regarding ``bus lease-interchange''. This rule hurts
operators who have a safe record but find themselves having to partner
with other bus companies to provide service. For example, if bus
company ``A'' breaks down on the side of the highway, full of
passengers, then company ``A'' would have to find alternative service
to get the passengers quickly and safely to their destination through a
lease agreement with another company ``B''. This rule puts full burden
of compliance and liability for company ``B'' on company ``A'', even
though company ``B'' has DOT operating authority and its own safety
record. This makes no sense if both companies have their own operating
authority and are deemed safe by DOT. While the intent of this rule was
to prevent unsafe carriers that attach themselves to reputable
companies with DOT operating authority, the rule simply fails to do
that. The very class of carriers that the rule was trying to go after
would fall entirely outside of this final rule--in short, it really
only hits the folks following the rules. The rule is detrimental to bus
service providers across the country that regularly, and often without
much notice, have to lease or charter additional service from other
carriers. I am pleased to learn the Department delayed implementation 1
year. Mr. Secretary, do I have your commitment to address these
concerns before the end of this Administration?
Answer. The Department acknowledges motor carriers of passengers'
concerns about the Federal Motor Carrier Safety Administration's
(FMCSA) 2015 final rule about the lease and interchange of buses. FMCSA
received numerous petitions for reconsideration of the final rule and
based upon a review of the petitions, determined that the compliance
date should be extended to January 1, 2018 to provide sufficient time
to address the issues raised by the petitioners. You have my commitment
that FMCSA will issue a decision concerning each of the petitions for
reconsideration by the end of the calendar year, and FMCSA anticipates
publishing amendments to the final rule in the Federal Register for
petitions which are granted, in early 2017.
______
Questions Submitted by Senator Steve Daines
Question. Secretary Foxx, the President's budget request is over
$98 billion. That is more than $22 billion, nearly 30 percent, above
last year's enacted amount. The Office of Inspector General (OIG)
reported to the Commerce Committee in January that there were 569 open
recommendations with nearly $2 billion in potential savings. What is
DOT doing to expedite implementation of these recommendations?
Answer. The Department, through its Office of Audit Relations and
Program Improvement, recently initiated bi-monthly recommendation
update meetings with each Operating Administration to discuss the
status of every open recommendation. As of April 1, 2016, the
Department had 547 open recommendations. The OIG has closed 152
recommendations, including 5of the 33 that it listed as high priority,
based on actions taken by the Department to implement those
recommendations involving questioned costs and funds put to better use,
as identified by the OIG, total over $518. The potential savings of the
closed recommendations total over $518 million.
Question. The single biggest savings is in Federal Aviation
Administration (FAA) air traffic control (ATC) towers, totaling $853
million. DOT's target action date is in July. What is DOT doing to
expedite implementation of these ATC savings?
Answer. The FAA concurred with OIG Report #ST-2015-080: Efficiency
of FAA's Air Traffic Control Towers Ranges Widely. The FAA is in the
process of performing a ``Deep Dive'' into the facilities outlined in
the report in order to determine the root causes of the inefficiencies.
This will allow the FAA to determine if, in the interim, these causes
have been corrected or if there are actions that can be implemented to
improve efficiencies. The FAA is working to deliver a response to the
OIG by the end of May 2016 and to issue a final response and results,
as applicable, by the end of July 2016.
Question. Airports in Montana utilize the Federal Contract Tower
(FCT) program. These towers account for approximately 28 percent of
operations while only utilizing about 14 percent of funds. Would
expanding the FCT program improve DOT's finances?
Answer. The FAA does not believe that expanding the contract tower
program would improve FAA's or DOT's finances at this time. The FAA
currently has no plans to convert any FAA towers into contract towers.
Any expansion of the program would therefore solely involve adding more
non-Federal towers to the program, thus raising FAA's overall costs.
Question. In addition to financial responsibility, maintaining a
safe transportation network is critically important. When it comes to
addressing behavioral safety issues, States agencies, not the Federal
Government, have the best understanding of their individual challenges.
One provision I was proud to champion in the Fixing America's Surface
Transportation (FAST) Act was to qualify 24/7 sobriety programs for
National Highway Traffic Safety Administration (NHTSA) safety grants.
While implementing the FAST Act, how will DOT ensure States have the
flexibility to institute safety programs that address their unique
challenges?
Answer. NHTSA encourages States to develop creative approaches to
improve safety. The general approach is to allow States the maximum
flexibility consistent with statutory language. With regard to the
implementation of 24-7 sobriety program grants, NHTSA plans to use the
statutory language in the FAST Act as the basis to determine those
States eligible for a grant. Although the statute specifies certain
requirements that must be met in order to receive a grant, we believe
it affords room for flexibility for a State to tailor an approach to
suit its needs while satisfying the requirements imposed under the
statute.
Question. The Amtrak's Empire Builder runs across Montana's Hi-
Line, providing much needed connectivity to 12 rural communities.
Amtrak completed a feasibility study that concluded a stop in
Culbertson, MT would have a net positive impact on Amtrak's finances.
How will DOT facilitate coordination between the Federal Railroad
Administration (FRA), Amtrak, and local stakeholders to help bring this
service online?
Answer. Amtrak's Long Distance routes, such as the Empire Builder,
play a critical role in connecting the national rail network and
provide a vital transportation alternative to communities throughout
the country.
As directed by the Senate's fiscal year 2016 Transportation and
Housing and Urban Development Appropriations Bill report (Report 114-
75), FRA and Amtrak are in the process of re-evaluating a previous
Amtrak feasibility study on adding a station stop along the Empire
Builder route in Culbertson, MT. The Amtrak ``Passenger Rail in the
Bakken Region'' study is due to the Appropriations Committee by
December 18, 2016 and FRA and Amtrak are on track to meet this
deadline. In addition to re-evaluating the revenue, ridership, and
other operating cost metrics of the previous Amtrak study, the fiscal
year 2016 Senate report language instructs FRA and Amtrak to also
examine the capital infrastructure improvements that would be necessary
to bring intercity passenger rail service to Culbertson, MT. FRA and
Amtrak must communicate with local stakeholders and the host freight
railroad, BNSF, to gather the resource and operational requirements
needed to carry out the study.
FRA is always available to provide technical assistance to States
and local governments regarding rail issues. Depending on the results
of the study and whether Federal funding will be sought for the capital
improvements required to add a station stop, FRA may also play a more
formal role in the environmental, engineering, and design processes to
construct the local government's preferred station facilities.
Question. Inspector General Scovel, the President's budget request
is over $98 billion, more than $22 billion increase above last year. In
a letter you sent to the Commerce Committee in January, you highlighted
569 open recommendations with nearly $2 billion in potential savings if
implemented. What is the status of these recommendations?
Answer. Of the 569 open recommendations we identified as of
December 31, 2015, 174 have since been closed and 395 remain open.
Additionally, since January 2016, we have issued 40 audit reports
containing 145 new recommendations, of which 135 remain open.
Accordingly, as of April 26, 2016, there are a total of 530 open audit
recommendations.
highway safety
Question. In your testimony, you discussed recommendations for the
National Highway Traffic Safety Administration (NHTSA). We discussed
many of these recommendations, specifically the Office of Defects
Investigation (ODI) recommendations, during a Commerce Committee
hearing last June. What recommendations has NHTSA closed since our last
meeting? Has NHTSA improved its stewardship of taxpayer resources?
Answer. Since my testimony on June 23, 2015, we have closed 6 of
the 17 recommendations we made to improve ODI's pre-investigative
processes. More specifically:
--Recommendation 6, which was closed on September 30, 2015, was aimed
at improving the quality of consumer complaint data and
enhancing ODI access to important data sources such as pictures
and accident reports. In response to our recommendation, ODI
enhanced safercar.gov to:
--Provide definitions for affected parts \1\ to assist consumers in
appropriately categorizing their complaints,
---------------------------------------------------------------------------
\1\ The online complaint submission form requires consumer to
select up to 3 affected parts from a drop-down list of 18 options such
as airbags, brakes, lighting, and powertrain.
---------------------------------------------------------------------------
--Provide guidance to consumers on what sort of information to
include in their narrative descriptions of incidents and
their vehicles that would be most helpful to ODI in
identifying potential safety concerns, and
--Allow consumers to upload up to 5 files while submitting their
complaints, and also encourage them to hold on to important
information such as police reports and photographs for at
least 5 years.
--Recommendation 13, which was closed on October 30, 2015, was aimed
at documenting supervisory review throughout ODI's pre-
investigative process including data screening.\2\ In response
to our recommendation, ODI implemented a process to conduct a
one-on-one meeting twice a month between each Defects
Assessment Division (DAD) screener and the DAD chief to discuss
all ongoing investigation proposals and issues. These meetings
will also include discussion of any limitations confronted by
screening staff, the need for future training, and staff
utilization. These meetings will serve as a platform for the
DAD chief to provide guidance to screeners. Additionally, ODI
developed a process to document these meetings and to store the
documentation within pertinent case files.
---------------------------------------------------------------------------
\2\ ODI has two groups that are primarily involved with its pre-
investigation process: the Defects Assessment Division (DAD) and the
Early Warning Division. OIG and ODI mutually agreed that ODI's process
for supervising the Early Warning Division would be covered under its
proposed action to close out recommendation 10.
---------------------------------------------------------------------------
--Recommendation 15, which was closed on October 30, 2015, was aimed
at developing and implementing guidance on the amount and type
of information needed to determine whether to open an
investigation. In response to our recommendation, ODI developed
risk assessment matrices that take into account the frequency
and hazard levels associated with a potential safety defect.
ODI guidance defines the specific information needed to
populate the matrices, describes how that information is
evaluated, and sets forth specific standards for when an
investigation must be opened. The matrix groups issues into
red, yellow and green--red suggesting that an investigation
should be opened, yellow suggesting that more information is
required to make a call, and green suggesting a low hazard. ODI
also identified a plan to develop matrices in 11 areas that
present the highest risk to safety such as cyber-security,
brakes, and air bags by April 30, 2016.
--Recommendation 17, which was closed on November 30, 2015, was aimed
at documenting and establishing a process for enforcing
timeframes to determine whether to open investigations and to
establish a process for documenting justifications for these
decisions. In response, ODI developed a process to ensure:
--All investigation proposals will be reviewed and dispositioned by
the appropriate investigative division within 6 weeks of
initial transmittal. Additionally, if an investigation
division chief does not make a decision on an investigation
proposal in the prescribed 6-week timeframe, it will
automatically be forwarded to the Defects Assessment Panel
for consideration.
--Compliance with the 6-week standard and the justifications for
opening investigations will be documented in ARTEMIS
through internal e-mails, defect assessment panel meeting
minutes, preliminary evaluation opening resumes, and
evaluations.
--Justification for declining to investigate must reference either
an applicable risk assessment matrix (see recommendation 15
above) or a detailed explanation of why the elements of a
potential safety defect do not exist. The justifications
will be documented in ARTEMIS.
--Timely dispositioning of issues will be factored into division
chief and ODI director's performance.
--Recommendation 3, which was closed on March 31, 2016, was aimed at
requiring manufacturers to develop and adhere to procedures for
complying with early warning reporting requirements, and
require ODI to review these procedures periodically. In
response, ODI sent a notice to auto manufacturers requiring
them to provide an explanation of their current procedures to
comply with early warning reporting (EWR) requirements. Under
this notice, manufacturers will have to describe their
practices for ensuring the accuracy and timeliness of their EWR
submission, as well as their process for ensuring the correct
assignment and interpretation of ODI component codes. ODI
developed a process for conducting ongoing periodic reviews of
manufacturer practices to ensure their continued compliance
with EWR requirements.
--Recommendation 10, which was closed on April 18, 2016, was aimed at
implementing a supervisory review process to ensure that all
EWR data are analyzed according to ODI policy and procedures.
In response ODI implemented a process to conduct a bi-weekly
meeting between Early Warning Division (EWD) screeners--both
Federal employees as well as contractors--and the EWD chief.
These meetings will cover screeners' analysis of all forms of
EWR data and allow the EWD chief to provide feedback to
screeners, assess their familiarity with ODI policies and
procedures, and keep them informed of any updates to those
policies and procedures.
Based our interactions with Agency staff and their actions taken to
date, we believe that NHTSA is focused on implementing and closing our
17 recommendations, and is on the right path to improving the
stewardship of taxpayer resources.
Question. Inspector General Scovel, in your 2015 Financial
Information Security Management Act (FISMA) audit, you reported DOT had
a number of challenges resolving plans of actions and milestones
(POA&Ms) \3\--longstanding security vulnerabilities within DOT systems.
What are DOT's challenges in resolving POA&Ms, and what is the Agency's
status in implementing OIG recommendations?
---------------------------------------------------------------------------
\3\ Per OMB Memorandum M-02-01,--A POA&M is a tool that assist
agencies in identifying, prioritizing, and monitoring progress of
corrective efforts for security weaknesses found in programs and
systems.
---------------------------------------------------------------------------
Answer. In 2014, DOT had a backlog of over 5,600 POA&Ms. In 2015,
DOT had only resolved 1,798 (32 percent), leaving more than 3,820
POA&Ms. Of the 3,820 unresolved POA&Ms:
--2,023 POA&Ms do not have actual start dates. Of these, 188 are high
priority, and 1,569 are medium priority.
--960 POA&Ms had no documented remediation costs. Of these, 53 are
high priority, 316 are moderate priority, 534 are low priority,
and 57 are not categorized.
As part of our fiscal year 2015 FISMA audit, we issued 9 additional
recommendations increasing the total number of OIG outstanding
recommendations to 21. DOT's target action completion dates for all 21
recommendations indicate that actions would be completed by the end of
fiscal year 2016. However, we note that several recommendations have
been open since 2010.
______
Questions Submitted by Senator Jack Reed
Question. What is the timing for the NHTSA rulemaking for the 405
grants?
Answer. The agency plans to issue an interim final rule
implementing the provisions for the Section 405 grants in May 2016..
Question. Does NHTSA consider county-based or pilot 24/7 programs
as qualifying for 405 and 164?
Answer. NHTSA is currently engaged in rulemaking to implement this
and other statutory grant requirements, and plans to publish a rule in
the near future. Under Section 405, a 24-7 sobriety program is defined
as a State law or program that authorizes a State court or an agency
with jurisdiction to require driving under the influence (DUI)
offenders to be subject to testing for alcohol or drug use. Section 164
is similar in that States are responsible for meeting the statutory
requirements and must either have the required law or program in place
to be compliant.
Question. Should NHTSA be doing a rulemaking to certify 24/7
devices?
Answer. Under the grant program in Section 405 and the transfer
program in Section 164, compliance is based on a State having a law or
program that authorizes DUI offenders to be tested for alcohol or
drugs. The statutes direct a State to meet process requirements related
to testing to be determined compliant (e.g., at least twice per day or
by continuous transdermal monitoring). They do not mandate a particular
device or that any device be used. Consequently, we do not believe that
certifying 24/7 devices is necessary under the programs.
Question. FRA and PHMSA have received increases in funding in
recent years for safety with direct calls for more inspectors on routes
that carry flammable liquids and passengers. What is the status for
hiring the inspectors and safety personnel funded by this subcommittee
at FRA and PHMSA?
Answer. Regarding PHMSA:
In fiscal year 2015, PHMSA received 7 additional inspection and
enforcement positions to support the safe transportation of flammable
liquids. The positions were allocated based on risk related to the
transportation of flammable liquids. The position breakdown includes
five new Inspectors located in Trenton, NJ (2), Kansas City, MO (1),
Ontario, CA (1), and Houston, TX (1). In addition, there are two new
Hazardous Materials Safety Assistance Team safety personnel located in
Ontario, CA (1) and Atlanta, GA (1). As of April 2016, all positions
have been successfully filled.
Regarding FRA:
The FRA received funding for 10 new inspectors, in fiscal year
2014, and five more in fiscal year 2015. All 15 of these positions have
been filled
In fiscal year 2016, we received funding for four new inspectors.
One of these positions has already been filled, and the remaining 3 are
underway.
FRA also filled all 15 positions for which we received funding in
fiscal year 2014 in our Office of Railroad Policy and Development.
These critical positions included analysts, engineers, and
environmental and freight policy experts. Additionally, we filled 14
more positions of the 20 for which we were funded for safety
headquarters staff.
In fiscal year 2016, we received funding for an additional 29
regional and headquarters safety staff. FRA has already or will soon
initiate the hiring process for all of these positions, and expects to
fill most of them in this fiscal year.
Question. Tire Pressure Monitoring Systems: Motorcoach safety is a
priority for both NTSB and the Committee. Per Section 32703(c) of MAP-
21, DOT was directed to consider within 3 years whether motorcoaches
should be equipped with direct tire pressure monitoring systems (TPMS).
Such a requirement would be consistent with the 2009 National
Transportation Safety Board (NTSB) Safety Recommendation H-09-022 that
all new motor vehicles weighing over 10,000 pounds to be equipped with
direct TPMS. Further, in February 2014, NTSB echoed the need for
implementation this safety recommendation. The Committee requested a
status update on the implementation of the MAP-21 requirement in Senate
Report 113-182, which was adopted as part of the fiscal year 2015
omnibus appropriations bill.
The Committee is aware that the National Highway Traffic Safety
Administration (NHTSA) recently conducted motorcoach safety equipment
testing that included a testing of direct TPMS. Nonetheless, the MAP-21
deadline has passed and the NTSB's recommendation remains open.
What is the current status of the agency's consideration of direct
TPMS on motorcoaches?
Will the agency promulgate requirements in this area consistent
with Safety Recommendation H-09-022?
Answer. The agency has reviewed and evaluated the available crash
data. The analysis did not reveal a safety need to justify regulatory
action at this time. The agency will continue to monitor the crash data
for tire under-inflation on motorcoaches and will pursue future
regulatory action if warranted.
Question. FMCSA Regulations on Windshield Mounted Vehicle Safety
Technology: The Senate Appropriations Committee is aware of current
FMCSA regulations that limit the ability of commercial motor carriers
to mount vehicle safety technologies on windshields to prevent
obstruction of a driver's field of view. The Committee is also aware
that the agency routinely has recognized the benefits of certain safety
technologies, and under current rules have provided 2 year exemptions
(the maximum time allowable under the current rules) for such
technologies.
To that end, the Committee directed the FMCSA to move forward on
prescribing regulations to modify 49 CFR 393.60(e) to permanently allow
the voluntary mounting on a vehicle's windshield of vehicle safety
technology likely to achieve a level of safety that is equivalent to,
or greater than, the level of safety that would be achieved absent such
an exemption. Further, the Senate also included such a provision in the
FAST Act (Public Law 114-94), specifically Section 5301, which directed
the agency to prescribe a regulation to address this, as well.
Please provide an update on the status of these directives?
When can the Committee expect an NPRM on this issue to be put
forward?
Will the agency meet the deadline included in the FAST Act to
promulgate a rule to meet the requirements of the law?
Answer. The Department's Federal Motor Carrier Safety
Administration (FMCSA) has drafted an Interim Final Rule to amend 49
CFR 393.60(e) to permanently allow the voluntary mounting of vehicle
safety technology in the windshields of commercial motor vehicles.
FMCSA does not anticipate completion of the rulemaking by the June 1,
2016, deadline provided in the FAST Act. However, the Agency is
committed to issuing the Interim Final Rule by July 1 and a final rule
by the end of the calendar year.
Question. Amtrak PTC Deployment: We were all deeply troubled by the
deadly Amtrak accident in Philadelphia last year.
Has Amtrak activated PTC on all Amtrak-owned infrastructure?
Answer. No. Amtrak has activated PTC on all 396 route miles of the
Northeast Corridor (NEC) which it owns, and 97 route miles of line in
Michigan. Its electrified Harrisburg line is currently undergoing final
testing, and is expected to be in service in 2016, along with its
Empire Connection in New York. All other Amtrak owned line segments are
slated to have PTC activated, or in operation, by the end of 2017.
----------------------------------------------------------------------------------------------------------------
Estimated Start
Number of Route Status at End of Date for
Segment Identification Miles in Calendar Year Revenue Service
Segment Demonstration
----------------------------------------------------------------------------------------------------------------
NEC (Boston to Washington)............................. 396 Operational/Complete Completed
Philadelphia to Harrisburg............................. 104 Testing March 2016
Springfield Line (New Haven to Springfield, MA)........ 62 Installing Dec. 2017
Empire Connection...................................... 10 Testing April 2016
Michigan Line (Amtrak Owned)........................... 97 Operational Completed
Michigan Line (State Owned)............................ 135 Installing June 2017
Hudson Line (Poughkeepsie to Hoffmans)................. 94 Installing Dec. 2017
Chicago Union Terminal................................. 1.5 Not Started Dec. 2017
----------------------------------------------------------------------------------------------------------------
Question. The next step that Amtrak will face is full deployment of
PTC on the National Network. As you know, unlike the Northeast
Corridor, most of Amtrak's operations occur over infrastructure owned
by host railroads. I understand negotiations between host railroads and
Amtrak over who will cover the cost for PTC implementation on the
National Network are proceeding slowly, if at all. In order to meet the
deadline for PTC implementation, Amtrak will have to make various
investments in its rail network and equipment over the next two fiscal
years.
What is the FRA doing to budget for the costs of PTC implementation
on Amtrak's National Network?
Answer. The Department of Transportation has long-stated that
public sector funding is necessary to assist resource-constrained
commuter railroads, short line railroads, Amtrak, and States with
implementing PTC. FRA has requested funding for PTC system development
and implementation grants in every budget request dating back to fiscal
year 2011 (which was released by President Obama on February 1, 2010).
In fiscal year 2017, the $1.9 billion FRA requested for Grants to
Amtrak includes funding under both the Northeast Corridor and National
Network for PTC capital, equipment, and maintenance costs. Further, FRA
requested $1.25 billion for PTC implementation under the new
Consolidated Rail Infrastructure and Safety Improvement Program. In
addition to supporting commuter and short line railroads, this program
is targeted to assist States and Amtrak with their proportional share
of PTC costs on Amtrak's State-Supported routes that are required due
to Amtrak operations on those routes.
______
Questions Submitted by Senator Patty Murray
Question. Secretary Foxx, the safe transport of crude-by-rail is of
great importance to me and my constituents. In almost every meeting
that I take back home, people tell me they are concerned about oil
trains running through their towns. While I appreciate the Department's
attention to this critical issue to date and the investments in the
fiscal year 2017 budget request, there is more work to be done. And it
needs to be done at a much quicker pace.
The National Transportation Safety Board issued three
recommendations to the Pipeline and Hazardous Materials Safety
Administration (PHMSA) in January 2014 after finding that current
regulations are outdated and do not account for the reality of trains
frequently transporting more than 100 tank cars. Today, we have robust
requirements for oil spill response plans for pipelines and ships. We
need them for railroads, too.
Despite issuing an Advanced Notice of Proposed Rulemaking on
comprehensive oil spill response plans in July 2014 and clear direction
from Congress to begin a rulemaking within 90 days of enactment of the
fiscal year 2016 Omnibus, PHMSA has failed to do so. In a January 4,
2016 letter you outlined that PHMSA expects to release a proposed rule
no later than June 2016 and complete a final rule in June 2017. This
time line is simply unacceptable.
Secretary Foxx, I am extremely disappointed in the continual delays
on this critical rulemaking. My constituents are counting on this
rulemaking to provide better protection for their communities and the
environment. What is causing the delay? Do you need additional
resources to support PHMSA's work on this rulemaking? I strongly urge
you to begin and complete this rulemaking earlier than the current June
2016 and June 2017 timeline. We must ensure trains carrying oil are
treated no differently than pipelines or maritime vessels.
Answer. The Pipeline and Hazardous Materials Safety Administration
(PHMSA) shares your concerns and is working expeditiously to publish
the Notice of Proposed Rulemaking (NPRM) entitled, ``Hazardous
Materials: Oil Spill Response Plans and Information Sharing for High-
Hazard Flammable Trains.'' The DOT's Rulemaking Requirements \4\
outline the processes and procedures for completing significant
rulemakings. In accordance with the procedures and as mandated by
Executive Order, the Department provided the NPRM to the Office of
Management and Budget (OMB) for interagency review on February 24,
2016. The interagency review process coordinated by OMB may take up to
90 days. Therefore, PHMSA expects the NPRM will be published in June
2016. The DOT rulemaking procedures also require a 60 day public notice
and comment period. Receiving comments from our stakeholders, including
the emergency response community, is essential to protecting people and
the environment from the risks of hazardous materials transportation.
The volume and complexity of comments also impacts the additional
analysis and drafting during the final rule stage. Typically, final
rules require 1 year after the close of the NPRM comment period to
complete.
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\4\ See https://www.transportation.gov/regulations/rulemaking-
requirements-2012.
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Question. Communities in Washington remain very concerned with the
safety of the trains already running through their cities. And for good
reason. Crude oil shipments by rail have skyrocketed in Washington
State. The number went from almost no crude oil in 2011 to 17 million
barrels of oil shipped across the State in 2013. With more than 10
refinery expansions or crude oil facilities under consideration in
Washington, this figure could raise to 241 million barrels a year.
The new tank car standards rulemaking completed by DOT in May 2015
is a step in the right direction to improve the safety of transporting
crude oil.
Secretary Foxx, is the Department on track to meet the first
deadlines for upgrades to the DOT-111 non-jacketed tank cars by January
1, 2018 and the DOT-111 jacketed tank cars shortly thereafter by March
1, 2018? Do you foresee any problems with the manufacturing industry
being capable of delivering these upgraded tank cars on this time line?
The final rule also required any new tank cars constructed after
October 1, 2015 to meet the enhanced DOT-117 design and performance
criteria. How many of these DOT-117 tank cars have been produced and
are in use today to transport crude oil?
Answer. As of the 4th quarter of 2015, there were 1,793 DOT-117 and
DOT-117R cars used in flammable liquid service. Almost 1,600 of those
cars were constructed after October 1, 2015, to meet the enhanced DOT-
117 design and performance criteria. FRA does not expect the industry
to have difficulty in producing additional DOT-117 cars.
Question. I understand that the FAA is proposing to eliminate the
Contract Weather Observer (CWO) program at 57 airports, including
Spokane International Airport in Washington State. Today, the CWO
program provides weather monitoring, augmentation, and back up for
automated weather systems (ASOS) at 136 airports across the Nation.
I believe this proposal would compromise aviation safety. The ASOS
is limited in its ability to detect and accurately report on rapidly
changing weather conditions and weather sensors periodically fail or
malfunction. For example, weather such as freezing rain, freezing
drizzle, smoke, and haze are critical to flight safety at Spokane
International Airport, but these conditions are not reported by ASOS.
In fact, in December 2015, the CWO program at Spokane International
Airport documented over 900 separate augmentations to ASOS
measurements. In addition, adding weather observation duties to air
traffic controllers would degrade the speed and accuracy of the weather
observations given existing workloads managing aircraft and
requirements to for air traffic controllers to remain in the tower and
make weather observing their lowest priority.
Secretary Foxx, the CWO program is vital to the safety of our
Nation's airspace and I am very concerned with this proposal. What
analysis has the FAA conducted to ensure that such a change does not
increase safety risks and hazards at these 57 airports? Furthermore, if
the FAA believed air traffic controllers can and should take on weather
observation duties why is this change not being proposed for all 136
airports that currently have the CWO program? What makes the remaining
79 airports with CWO programs different? I respectfully request that
you reconsider this proposal and ask that you provide a full
explanation of FAA's initial decision to eliminate the CWO program,
including the stakeholder input and public comment that contributed to
this decision.
Answer. In accordance with our Safety Management System, the FAA
conducted two Safety Risk Management Panels (SRMP) at appropriate
facilities in order to make updates to weather data and variables, and
traffic volume and complexity. The SRMPs also reviewed factors to
consider in determining whether to use air traffic controllers or
contract weather observers (CWO) to observe weather. Stakeholders and
industry groups served on the panels, including Southwest Airlines,
National Air Traffic Controllers Association, National Business
Aviation Association, Air Line Pilots Association, National Oceanic
Atmospheric Administration, CWO vendors, and others.
Air traffic controllers currently function as weather observers at
75 percent of the towers in the NAS (391 facilities). CWOs function in
that capacity at the remaining 136 facilities. As a result of the
SRMPs, the updated policy identified 57 of those 136 facilities as
having similar weather and traffic volume/complexity as facilities
where air traffic controllers are used as weather observers, and at
this time the FAA is considering transitioning these facilities to
controller-provided weather services.
The SRMPs assessed the risk in transferring weather observation
responsibilities from CWO to air traffic controllers at the 57 sites.
No decision has been made at this time to transition any of the 57 CWO
sites to controller provided observation services.
Each of these safety panels will result in a recommendation, but
they do not make the final decision. The FAA must take a comprehensive
view of safety when it makes its final decisions. Ensuring the safety
of our aviation system is always the highest priority, and the
importance of accurate, reliable and detailed weather observations will
be a priority concern during this process.
Question. In the 2012 FAA authorization bill, Congress directed the
FAA to develop a plan to realign and consolidate Terminal Radar
Approach Control (TRACON) facilities. The FAA is now considering
whether to close the TRACON facility at Grant County International
Airport in Washington State and relocate the TRACON controllers to
another airport.
Grant County International Airport provides unique civilian and
military aviation services to the aviation industry, both in support of
national security interests and to the local community. On any given
day, there is a blend of fast moving military aircraft, Boeing
production and test aircraft, and slower-moving civilian aircraft all
utilizing the same airspace and the same five active runways. During
the summer months, this airspace is also shared by aircraft fighting
forest fires in the Northwest. Very rarely do these aircraft arrive at
Grant County International Airport and simply taxi off the runway as is
the case at most other airports. Instead, these aircraft perform a
variety of activities, including Rejected Take Off situations,
simulated or actual equipment failures, touch-and-go landings, full
stop and goes, wide area pattern work, and other operations that
require an aircraft to hold on a runway or execute unusual maneuvers
overhead.
Grant County International Airport is a critical training ground
for the Air Force and Navy. C-17s from Joint Base Lewis-McChord (JBLM)
operate on the assault strip, P-3s and P-8s from Naval Air Station
Whidbey Island conduct touch-and-go training, F-15s from the Oregon Air
National Guard and EA-18Gs from Naval Air Station Whidbey Island come
to operate within the airport's pattern, and KC-135s come from
Fairchild Air Force Base (AFB) for training exercises. For JBLM in
particular, the conditions and characteristics of Grant County
International Airport cannot be replicated elsewhere in the Northwest.
In the case of Fairchild AFB, the airport provides easy access for
military aircrew training, allows training to occur at times when it
cannot at Fairchild AFB due to weather or runway closures, and serves
as their ready reserve base in the event of a natural disaster or other
emergency.
Secretary Foxx, I am concerned the FAA is not taking national
security into account when it evaluates whether or not to close the
TRACON at Grant County International Airport. Can you provide me with
assurance that the FAA will in fact be considering national security
when making the final decision?
Answer. The FAA is evaluating TRACON facilities and services for
realignment across the NAS, as required by the FAA Modernization and
Reform Act. For clarification, the FAA is considering realigning TRACON
facilities so that air traffic control services would be provided at
another location, and not closing facilities and ending the provision
of air traffic control services. The air traffic control towers are not
a part of this process.
The agency is fully committed to developing realignment
recommendations and implementing any realignments in the safest manner,
without affecting national security. At Grant County, the FAA
management and Labor Union representatives met with stakeholders,
including military, industry, and local government, to share
information, answer questions regarding TRACON services, and discuss
safety and security considerations. As required by the legislation, the
FAA takes all stakeholder input and considerations into account
throughout its analysis, recommendation development, and during the
final decisionmaking stage of the process.
______
Questions Submitted by Senator Brian Schatz
Question. Safe Streets: Secretary Foxx, as you know I support
community planning strategies to create walkable neighborhoods that
minimize pedestrian fatalities. Hawaii has the highest pedestrian
fatality rate among adults over 65 so this is more than an abstract
philosophy to me, this is about reducing deaths among older people in
Hawaii.
Unfortunately, traffic fatalities among pedestrians went up again
to 4,884 deaths in 2014. The FAST Act included language Senator Heller
and I worked to secure directing USDOT to work with States and MPOs to
help them implement planning that takes into pedestrian safety into
account.
Can you tell me how the department will implement this policy and
generally what are you doing in 2016 to reverse the trend of pedestrian
fatalities?
USDOT has created a number of planning tools, manuals and best
practices for States, MPOs and others to refer to and that's important.
But what is the next step to take all of that information and get
States to integrate it into their regular planning and construction
process and start reducing that 4,884 number?
Answer. First, I share your concern and assure you that safety is
our highest priority and that commitment is the same for all forms of
transportation people choose, including walking and bicycling..
The lead action FHWA is taking in 2016 to ensure pedestrian safety
is the recently issued Safety Performance Management Final Rule (23 CFR
490), which requires all States and MPOs to annually establish and
report on a target for each of five safety performance measures,
including a nonmotorized safety performance measure: the number of
combined nonmotorized fatalities and nonmotorized serious injuries on
all public roads in the State or MPO planning area. This performance
measure encourages all States and MPOs to address pedestrian and
bicycle safety; recognizes that walking and biking are modes of
transportation with unique crash countermeasures distinct from
countermeasures to prevent motor vehicle crashes; and addresses the
increasing trend in the total number of pedestrian and bicyclist
fatalities in the United States. The Safety Performance Management
regulation will improve data; foster transparency and accountability;
and allow safety progress to be tracked at the national level. More
information is available at: http://safety.fhwa.dot.gov/hsip/
rulemaking.
Regarding the FAST Act provision you reference (section 1442), DOT
is committed to continuing to encourage States and MPOs to adopt
standards for the design of Federal surface transportation projects
that provide for the safe and adequate accommodation of all users of
the surface transportation network.
We have significant programmatic work underway to build national
capacity around multimodal planning and design issues, encourage a
flexible approach to design, and reverse the trend of increasing
pedestrian fatalities. This work will be captured in the report called
for in section 1442.
Question. Transit Costs: Secretary Foxx, I've read several articles
recently which discussed how per-mile transit and rail capital
construction in the US costs two to five times more than it does in
other industrialized nations, such as Japan or Spain. There are even
some very wide variations within the United States. Experts agree that
this is a problem that must be fixed, but don't fully know the cause of
these differences. Some speculate the issue may be due to poor
interagency cooperation, project design and routing, procurement
challenges or perhaps regulatory barriers.
Here are some examples of the problem:
--New York City's price for one kilometer of subway or commuter rail
tunnel is about five times more expensive than Tokyo's, eight
times more expensive than Berlin's or Paris's, and twelve times
more expensive than Barcelona's.
--Phase 1 of WMATA's Silver Line which is entirely above-ground and
isn't located in a dense city center, clocked in at over $150
million per kilometer. In many developed European and Asian
countries, this would be enough to build a fully underground
subway line in a dense urban core.
--For Amtrak, the Gateway project is estimated to cost $25 billion,
and its most ambitious plan for high speed rail on the
Northeast Corridor would cost nearly $300 billion. On a per-
kilometer basis, this is about twice as expensive as the
predominantly underground Maglev bullet train that Japan is
building.
With the underlying goal of stretching our transit dollars further
I'm interested in pursuing a study to identify the root causes of these
cost differentials.
Is USDOT currently studying or otherwise working to understand why
the costs of transit are so much more expensive in the U.S. than in
other industrialized nations?
If so, can you describe those efforts including a timeline for the
work to be complete?
Answer. FTA has not conducted an analysis comparing the costs of
construction of transit systems within the United States with those of
Europe or Asia. Additionally, FTA is not aware of research that has
determined that the cost of constructing transit in the U.S. is more
expensive than in other industrialized nations.
FTA cautions that the average costs per kilometer cited in the
question may not accurately reflect the actual costs of construction.
Cost per-mile comparisons may not include major items such as the
number of stations constructed or the number of vehicles purchased.
Additionally, the comparisons may not take into account whether right-
of-way is privately or publicly held, costs of financing, etc.
FTA has undertaken considerable efforts to analyze costs of FTA
funded projects. In 2005 FTA implemented a new capital costing format,
the Standard Cost Categories, to establish a consistent format for the
reporting, estimating, and managing of capital costs for major transit
projects. This information is then housed within FTA's Capital Cost
Database that currently contains the as-built costs for 35, federally-
funded, light rail and heavy rail projects. The database is used for
performing historical cost analysis and developing ``order-of-
magnitude'' cost estimates for conceptual transit projects. However,
the database does not include information for international projects
and it is therefore difficult to make like-to-like comparisons with
those projects.
Question. Port Financing: Secretary Foxx, I hear regularly from
people in my State that they need more resources to improve port and
harbor operations. Specifically the question I typically hear is,
surface transportation has the Highway Trust Fund and airports have the
Airport Trust Fund so why don't we have dedicated resources for land
side improvements to our ports?
The FAST Act created some grant programs for which port
improvements are an eligible use and directed the creation of a
National Multimodal Freight Policy. My question is, are we on track to
systematically partner with States and port authorities in a way that
meets the infrastructure needs described in the Department's Beyond
Traffic framework over the next 30 years?
Answer. The FAST Act includes several provisions to improve the
condition and performance of the national freight network and to
support investment in freight-related surface transportation projects,
including opportunities to enhance land-side improvements to ports.
States and port authorities will have an unprecedented opportunity to
partner in an effort to address our infrastructure deficit.
FASTLANE Grants, under the Nationally Significant Freight and
Highway Projects program, authorizes $4.5 billion for nationally and
regionally significant freight and highway projects over fiscal years
2016 to 2020, with up to $500 million authorized this year for freight
rail, water (including ports), or other freight intermodal projects.
Applications for FASTLANE grants were due April 14,2016, and we have
had significant initial interest in the program, including from States
and port authorities.
The Department has also taken important strides to educate ports
about the existing eligibilities within the Surface Transportation
Block Grant Program, the Transportation Infrastructure Finance and
Innovation Act (TIFIA) program, and the Railroad Rehabilitation and
Improvement Financing (RRIF) program. MARAD's StrongPorts initiative
has published a Port Financing Guide and is partnering with the Build
America Transportation Investment Center to provide technical
assistance to ports looking to access U.S. DOT funding and financing.
Additionally, the TIGER grant program received $500 million in
fiscal year 2016 appropriations and offers another opportunity to fund
port infrastructure projects. Through seven rounds, TIGER has awarded
funding to 45 port projects totaling $541.1 million, including two
planning grants. These projects are located across 24 States and
account for 11.7 percent of total TIGER funding.
These programs will help to meet some of the infrastructure needs
described in our Beyond Traffic framework. The FAST Act provides
certainty to States, local governments, port authorities, and the
private sector; however, it is only a down-payment for building 21st
Century surface transportation systems that our Nation deserves. The
demand for surface transportation infrastructure investment is
overwhelming, yet the FAST Act largely maintains current programs, with
limited support for multimodal plans and projects. That is why the
President's fiscal year 2017 budget request includes additional
multimodal programs and investments, to build off of the FAST Act
provisions and to continue to meet the infrastructure needs of our
surface transportation system over the next 30 years.
Question. Paratransit programs: Secretary Foxx, the FAST Act
includes several provisions to improve the mobility of people with
disabilities including new flexibility for the use of funds for
operating expenses to transit agencies that demonstrate paratransit
improvement activities, new inter-agency coordination efforts among
Federal agencies and new demonstration authority. Can you discuss the
Department's plans to assure these programs get up and running as
quickly as possible?
Answer. The FAST Act includes several provisions to improve the
mobility of individuals with disabilities and the Federal Transit
Administration (FTA) has moved quickly to implement these provisions as
described below.
The FAST Act permits FTA grant recipients to use up to 20 percent
(rather than up to 10 percent) of urban or rural transit formula funds
to operate Americans with Disabilities Act (ADA) paratransit service if
certain conditions are met. On February 16, 2016, FTA published in the
Federal Register a Notice of FTA Transit Program Changes, Authorized
Funding Levels, and Implementation of Federal Public Transportation Law
as Amended by the Fixing America's Surface Transportation (FAST) Act
and FTA fiscal year 2016 Apportionments, Allocations, Program
Information and Interim Guidance that implemented this provision.
The FAST Act also created a new pilot program for innovative
coordinated access and mobility, authorizing grants to eligible
recipients to assist in financing innovative projects for the
transportation disadvantaged that improve the coordination of
transportation services and non-emergency medical transportation
services. On March 29, 2016, a Notice of Funding Opportunity (NOFO) was
published in the Federal Register announcing the availability of $2
million of fiscal year 2016 funding under this program, as well as $3.3
million in additional research funding for the Rides to Wellness
Demonstration and Innovative Coordinated Access and Mobility Grants
(R2W Demonstration Grants). The FTA will be holding a webinar on April
20, 2016 to further explain the grant program to potential grantees.
The application deadline is May 31, 2016. The goal of the competitive
R2W Demonstration Grants is to find and test promising, replicable
public transportation healthcare access solutions that support the
following Rides to Wellness goals: increased access to care, improved
health outcomes and reduced healthcare costs.
Finally, the FAST Act included new statutory requirements regarding
the Federal Coordinating Council on Access and Mobility (CCAM),
including a requirement to publish a strategic plan. FTA is working
with its Federal agency partners on CCAM to develop a work plan that
addresses the required elements of this plan. FTA is already working
together with staff from the Departments of Health and Human Service,
Veterans Affairs, and Agriculture on joint projects to improve the
linkages between transportation and healthcare. These projects include
a series of Rides to Wellness forums to increase partnerships between
healthcare and transportation providers, a research project to identify
the impact of transportation on missed appointments and therefore on
the cost of healthcare and funding to encourage innovative solutions to
healthcare access challenges.
______
Questions Submitted by Senator Lindsey Graham
Question. The recently enacted FAST Act contains three tire-related
provisions for which rulemakings are required: tire performance
standards for rolling resistance and wet traction; mandatory tire
registration by tire sellers at point of sale and; a tire recall lookup
tool on NHTSA's web site. What is the agency's timetable for
implementing each of these rulemakings?
Answer. The FAST Act requires NHTSA to promulgate regulations for
tire rolling resistance and wet traction minimum performance standards
by December 4, 2017. NHTSA has already begun the required testing to
guide the wet traction regulation.
The FAST Act requires NHTSA to initiate a rulemaking for mandatory
tire registration by independent sellers. However, there is no
statutory deadline for completing this rulemaking and the agency has
not yet developed a time table for completing this rulemaking.
The FAST Act also requires NHTSA to establish a publicly available
and searchable electronic tire recall database. The statute does not
require this provision to be implemented through a rulemaking and there
is no statutory deadline. NHTSA has not yet developed a time table for
completing this provision. The agency is gathering information and
meeting with stakeholders to discuss each of these requirements.
Question. NHTSA has not completed a rulemaking required under the
2007 Energy Independence and Security Act (EISA) that mandated consumer
information about tire fuel efficiency, wet traction and tread wear.
The White House announced in December 2014 that NHTSA would finalize
that rule by 2017. According to NHTSA's most recent schedule, a
proposed rule should have been sent to OMB on February 10, 2016 but
that did not happen. What is the agency's revised timetable for
completing this rulemaking within the White House imposed deadline?
Answer. NHTSA published a final rule in 2010 establishing test
methods that would be used for the new consumer information program.
However, the 2010 final rule did not specify the content or
requirements of the consumer information and education portions because
NHTSA needed to conduct additional consumer testing and resolve
important issues raised by public comments on the proposal. The agency
is drafting a supplemental notice of proposed rulemaking and expects to
finalize the rule in 2017.
SUBCOMMITTEE RECESS
Senator Collins. This hearing is now adjourned.
[Whereupon, at 4:24 p.m., Wednesday, March 16, the
subcommittee was recessed, to reconvene at a date and time
subject to the call of the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2017
----------
WEDNESDAY, SEPTEMBER 21, 2016
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:30 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Susan Collins, (chairman)
presiding.
Present: Senators Collins, Boozman, Cassidy, Daines, and
Reed.
Housing Vulnerable Families and Individuals:
Is There a Better Way?
OPENING STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. The hearing will come to order.
Good morning. I am pleased to be joined today by our
ranking member, Senator Jack Reed, as we begin our hearing
examining whether there are more effective ways to meet the
housing needs of vulnerable families and individuals.
The question of how best to house families and individuals
in need of assistance has simply not received the attention it
deserves.
Today, I want to focus on whether the place-based rental
assistance of the current public housing and project-based
Section 8 programs still has a beneficial role to play. Should
limited Federal resources be directed to tenant-based Section 8
vouchers and existing projects converted to vouchers?
We focus on public housing and project-based Section 8
because unlike, for example, housing for the elderly or housing
for the disabled programs, public housing and Section 8,
intended to serve a diverse population, are not limited to a
particular demographic group.
Public housing and project-based Section 8 both provide
rental assistance that is tied to specific properties, limiting
a family to receiving assistance only at that property. The
tenant-based Section 8 program, on the other hand, enables a
family to move at its discretion while continuing to receive
rental assistance.
The biggest difference between public housing and project-
based Section 8 is that public housing was built and is owned
and operated with Federal funds by public housing agencies that
are entities of State and local governments. Project-based
Section 8 properties are privately owned, and HUD has entered
into a long-term contract with the owner to provide rental
assistance.
This conversation is particularly timely, given the overall
fiscal constraints of the current budget caps and our Nation's
$19.5 trillion national debt.
In addition to the overall fiscal constraints, this
subcommittee annually faces the uncertainty of how much
offsetting receipts will be credited from the Federal Housing
Administration's mortgage insurance premiums. These offsetting
receipts significantly affect our ability to fund our programs.
Ensuring that sufficient funds are provided to renew existing
rental assistance has, however, always been a priority.
The challenge is that the cost of renewing rental
assistance continues to grow by hundreds of millions, if not
billions, of dollars each year. Rental assistance consumes an
ever-larger share of HUD's budget. For fiscal year 2017, the
rental assistance takes up 84 percent of HUD's overall budget,
reducing funds available for other critical priorities,
including the popular Community Development Block Grant and
HOME programs. We have a wonderful chart, which I have asked to
be brought over, that demonstrates visually how much of HUD's
budget--right on cue--is consumed by rental assistance. And
that is just keeping us even. Keep in mind that we are not
beginning to serve many people who qualify for rental
assistance and are very low income individuals.
[The chart follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Senator Collins. Directing 84 percent of HUD's budget to
rental assistance might be reasonable if it were to effectively
meet the housing needs of all vulnerable families and
individuals. However, as I pointed out, with notable yet
relatively small exceptions, such as the HUD voucher program,
the VASH program for our homeless veterans, our expenditures on
rental assistance are barely holding on to the existing
inventory of Section 8 and public housing units.
As the directors of homeless shelters will attest, there
are so many families and individuals, including homeless young
people, with tremendous unmet housing needs all across the
country.
The issue goes beyond those who are actually homeless.
Nationally only one out of four families eligible for housing
assistance receives it. According to HUD's most recent
estimate, approximately 7.7 million households experiencing the
worst case housing needs, that is, renters whose incomes are
below 50 percent of the area median, do not receive government-
funded rental assistance and who pay more than half their
monthly incomes for rent or live in severely substandard
conditions, or both. In other words, we have this huge group of
individuals who are very low income, and we are barely
scratching the surface of serving them.
In addition to the funding challenges, emerging research
also raises the question of whether project-based assistance is
the best approach. Research released by a group of Harvard
economists in 2015 makes the case that not only does the
quality of the neighborhood contribute to the health, well-
being, and overall success of all of the residents, but also it
had a significant impact on children moving into better
neighborhoods. For these children, better neighborhoods
contributed to improved long-term outcomes, including future
earnings and college attendance, with each additional year in a
high-poverty neighborhood leading to worse long-term outcomes.
Both OMB Director Shaun Donovan and HUD Secretary Julian
Castro have pointed out that the single biggest predictor of a
child's opportunity and even life expectancy is the ZIP code of
the community in which that child grows up.
Unfortunately, existing public housing and project-based
Section 8 properties are found predominantly in high-poverty
neighborhoods. The Census Bureau defines an extreme poverty
area as one with a poverty rate of 40 percent or higher. For
public housing, 34 percent of properties are located in extreme
poverty areas. For tenant-based vouchers, only 14 percent are
located in extreme poverty areas.
I am concerned that the funding of existing project-based
assistance in high-poverty neighborhoods may be creating more
problems than it solves. With that in mind, if project- or
place-based housing still has an important role to play, would
we be better off divesting the current stock and investing in
project-based housing in high-opportunity areas? That is one of
the many issues I want to explore with our panel today.
As we consider alternative approaches to rental assistance,
we should not forget that changes to the administration of the
voucher program may also lead to better ways to assist
vulnerable families and individuals. The Center on Budget and
Policy Priorities, for example, points out that in 2015, over
70 percent of voucher tenants lived in the 100 largest
metropolitan areas across the country and that in 35 of those
100 areas, voucher administration was divided among 10 or more
agencies. In such situations, the large number of public
housing agencies may well act as an unintentional barrier to
mobility across a metro area. So looking at limited
consolidation of housing agencies is one issue that we should
explore as to whether it would lead to more opportunities for
voucher residents to move to areas of greater opportunities.
That is only one example of the kinds of reforms that have been
suggested.
This morning, I have highlighted concerns that have been
expressed about project-based rental assistance, concerns that
lend themselves to the argument that we should consider
replacing these units with Section 8 vouchers. But I want to be
clear that the purpose of this hearing is to explore all of the
options and that while I find these ideas intriguing, I do not
have a preconceived policy preference. I am trying to figure
out what is a very complicated issue and how we can better
serve our very low-income families and ensure that we are
targeting Federal investment to achieve better results for
those families and to produce brighter futures for our most
vulnerable children.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
I am pleased to be joined today by our Ranking Member, Senator Jack
Reed, as we begin our hearing examining whether there are more
effective ways to meet the housing needs of vulnerable families and
individuals.
The question of how best to house families and individuals in need
of assistance has not received the attention it deserves. Today, I want
to focus on whether the place-based rental assistance of the current
public housing and project-based Section 8 programs still has a
beneficial role to play. Should limited Federal resources be directed
to tenant-based Section 8 vouchers and existing projects converted to
vouchers? We focus on public housing and project-based section 8
because unlike, for example, the Housing for the Elderly and Housing
for the Disabled programs, public housing and Section 8 are intended to
serve a diverse population, and are not limited to a particular
demographic group.
Public housing and project-based Section 8 both provide rental
assistance that is tied to specific properties, limiting a family to
receiving assistance only at that property. The tenant-based Section 8
program, on the other hand, enables a family to move at its discretion
while continuing to receive rental assistance. The biggest difference
between public housing and project-based Section 8 is that public
housing was built and is owned and operated with Federal funds by
public housing agencies that are entities of State and local
government. Project-based Section 8 properties are privately owned, and
HUD has entered into a long-term contract with the owner to provide
rental assistance.
This conversation is particularly timely given the overall fiscal
constraints of the current budget caps and our Nation's $19.5 trillion
national debt. In addition to the overall fiscal contraints, this
subcommittee annually faces the uncertainty of how much offsetting
receipts will be credited from the Federal Housing Administration, or
F.H.A.'s, mortgage insurance premiums. These offsetting receipts
significantly affect the ability of the subcommittee to fund its
programs. Ensuring that sufficient funds are provided to renew existing
rental assistance has always been a priority.
The challenge is that the cost of renewing rental assistance
continues to grow by hundreds of millions, if not billions, each year.
Rental assistance consumes an ever larger share of HUD's budget. For
fiscal year 2017, rental assistance takes up 84 percent of HUD's
overall budget, reducing funds available for other critical priorities
including the popular Community Development Block Grant and HOME
programs.
Directing 84 percent of HUD's budget to rental assistance might be
reasonable if it effectively met the housing needs of all vulnerable
families and individuals. However, with notable, yet relatively small,
exceptions such as HUD-VASH vouchers for homeless veterans, our
expenditures on rental assistance are barely holding on to the existing
inventory of Section 8 and public housing units. As the directors of
homeless shelters will attest, there are still families and
individuals, including homeless young people, with tremendous unmet
housing needs across the country. The issue goes beyond those who are
actually homeless. Nationally, only one out of four families eligible
for housing assistance receives it. According to HUD's most recent
estimate, approximately 7.7 million households experiencing worst case
housing needs--that is, renters whose incomes are below 50 percent of
the area median, do not receive government-funded rental assistance and
who paid more than half their monthly incomes for rent or live in
severely substandard conditions, or both.
In addition to funding challenges, emerging research also raises
the question of whether project-based assistance is the best approach
to meeting housing needs. Research released by a group of Harvard
economists in 2015 makes the case that not only does the quality of a
neighborhood contribute to the health, well-being, and overall success
of its residents, but also it had a significant impact on children
moving to these neighborhoods. For these children, better neighborhoods
contributed to improved long-term outcomes, including future earnings
and college attendance, while each additional year in a high-poverty
neighborhood led to worse longterm outcomes.
Both O.M.B. Director Shaun Donovan and HUD Secretary Julian Castro
have often pointed out that the single biggest predictor of a child's
opportunities, and even life expectancy, is the ZIP Code of the
community where they grow up. Unfortunately, existing public housing
and project-based Section 8 properties are found predominantly in high-
poverty neighborhoods. The Census Bureau defines an ``extreme poverty
area'' as one with a poverty rate of 40 percent or higher. For public
housing, 34 percent of properties are located in extreme poverty areas.
For tenant-based vouchers, only 14 percent are located in extreme
poverty areas.
I am concerned that the funding of existing project-based
assistance in high-poverty neighborhoods may be creating more problems
than it solves. With that in mind, if project or place-based housing
still has a role to play, would we be better off divesting the current
stock and investing in project-based housing in high-opportunity areas?
I look forward to hearing from our panel today on this point.
As we consider alternative approaches to rental assistance, we
should not forget that changes to the administration of the voucher
program may also lead to better ways to assist vulnerable families and
individuals. The Center on Budget and Policy Priorities, for example,
points out that in 2015, over 70 percent of voucher tenants lived in
the 100 largest metropolitan areas across the country and that in 35 of
these 100 areas, voucher administration was divided among ten or more
agencies. In these situations, the large number of public housing
agencies may well act as an unintentional barrier to mobility across a
metro area. Even limited consolidation of housing agencies in these
areas could lead to more opportunities for voucher residents to move to
areas of greater opportunity.
This is only one example of reforms that experts have suggested. I
have no doubt that our panel has other such ideas as well.
This morning I have highlighted concerns that have been expressed
about project-based rental assistance, concerns that lend themselves to
the argument that we should consider replacing these units with Section
8 vouchers. I want, however, to be clear that I approach today's
hearing with no pre-conceived policy preferences. This hearing is an
opportunity to have a broader conversation that challenges us to
explore what is possible and evaluate if we can target the Federal
investment in rental assistance to achieve better results to produce
brighter futures for our most vulnerable children.
Senator Collins. It is now my pleasure to turn to our
ranking member, Senator Jack Reed of Rhode Island.
STATEMENT OF SENATOR JACK REED
Senator Reed. Well, thank you, Madam Chairman.
This is a very important hearing and we are honored to have
a distinguished panel of witnesses. So welcome, all.
Senator Collins and I both share a commitment to finding
innovative ways to provide adequate, decent, affordable housing
for all of our citizens. I must commend her for her leadership
on this issue and so many others.
Again, we have called upon some very distinguished and
insightful witnesses.
Ms. Erika Poethig from the Urban Institute, thank you.
Erika has an extensive background on affordable housing
preservation, which is evidenced by her prior roles at HUD and
the MacArthur Foundation in Chicago. She has led numerous
research efforts that have informed many of the transformative
HUD policies that are under discussion today. Thank you for
your work, for what you have done, and thank you for being here
today.
We are also joined by Mr. Ed Olsen, who is no stranger to
Congress. You have testified about low-income housing policy
many times with insights and with quite insightful comments on
that area. So thank you very much, Mr. Olsen.
And finally, we are joined by Mr. Rick Gentry. Thank you.
San Diego Housing Commission. Mr. Gentry has on-the-ground
experience with implementing HUD programs and can offer some
innovative ways to think about this problem. Thank you again
for joining us, Mr. Gentry.
We are here today because the Nation faces an affordable
housing crisis. Only one out of every four eligible low-income
households in this country receives the rental assistance they
need to avoid homelessness. In Rhode Island, nearly 42,000
households spend more than 50 percent of their income on rent,
and that is a 49 percent increase since 2000. So we are not
doing better. We are falling behind. In fact, we will need to
develop at least 3,460 units in Rhode Island of affordable
housing each year just to keep pace with the growing population
of our elderly and multi-generational residents. I can just
tell you we are not even coming close to generating that kind
of enhanced and new housing properties.
This gap is not unique to Rhode Island. It spans the entire
Nation. As the chairman has pointed out, we dedicate 84 percent
of HUD's budget to preserving rental assistance for nearly 5
million households, and we are just racing to stay in place. We
are not getting ahead. According to HUD, the severely burdened
renters group by 54 percent across this Nation between 2001 and
2013. This is a national crisis. It is getting worse. It is not
getting better.
7.7 million renters are paying more than 50 percent of
their monthly income on rent. That is way beyond what is
reasonable for families. And in addition, it squeezes out other
valuable investments, and it frankly squeezes out investments
in demand in the economy so that when you look at growth rates
that are tepid, some of it is because people do not have the
discretionary income they used to have because of their rental
burden.
So in order to effectively address this gap in quality,
affordable housing, we need more resources, more units, more
resources to support individuals in those units.
Just last year, we were faced with another threat of cuts
due to sequester in the level of defense and non-defense budget
caps, and with Senator Collins' leadership particularly, we
were able to push back on that and able to raise the caps for
both defense and non-defense. We are in that same dilemma, as
we speak, anticipating next year's budget. We know if the caps
do not go up, the problem will get worse. If the caps only go
up for defense, this problem will get worse, in fact, quite a
bit worse because there will be a tendency to offset those
increases with further decreases on the domestic side.
So we have to face this challenge. And again, that is why
this hearing is so important and so timely. Even if we do get
relief, as the chairman has pointed out, essentially we are
just making sure that we cover the rental assistance program.
We are not doing the innovative extra things to create new
units, to move people into those units, also to work with other
agencies because one of the factors of how successful housing
is supportive services for those who are in the housing. So we
have to keep working.
I am pleased that both houses unanimously passed the
Housing Opportunity through Modernization Act. That bill made
important changes to HUD programs, even created savings that
allow us to either house more families or reduce the cost of
housing. So we are making progress there. A step in the right
direction.
Today, we will consider other ways that we can reduce the
cost of rental housing assistance while also expanding the
supply of affordable housing for low-income individuals and
families.
While today's hearing will focus on how HUD can better
serve the vulnerable population, HUD alone cannot solve this
problem. It will require working across Federal departments and
in partnership with States and local governments because this
has to be literally a team effort. So we are obligated to
figure out the most cost-effective way to do that. This hearing
can help us do that.
I thank you and I thank the chairman. Thank you, Madam.
Senator Collins. Thank you very much, Senator Reed.
We will now turn to our panel. I think Senator Reed
essentially did a very nice job of introducing our panel, for
which I thank him.
And so our first will be Dr. Ed Olsen, Professor of
Economics and Public Policy at the University of Virginia.
STATEMENT OF DR. EDGAR OLSEN, PH.D., UNIVERSITY OF
VIRGINIA PROFESSOR OF ECONOMICS AND PUBLIC
POLICY
Dr. Olsen. Thank you, Senator Collins. I am delighted to be
here today to share with you and the members of the committee
what I know about the performance of low-income housing
programs and share some ideas about how to get better outcomes
from the money spent on them.
I speak from the perspective of a taxpayer who wants to
help low-income families, albeit a taxpayer who has spent more
than 40 years studying the performance of these programs. What
I know is based in part on the research of hundreds of other
researchers who like me have no financial interest in
particular ways of delivering housing assistance. So I am
particularly pleased that the hearing will consider major
reforms of the current system because low-income housing
assistance is fertile ground for reforms that would allow us to
serve many more of the poorest households without greater
public spending.
In my view, the current system has two main defects.
First, the majority of current recipients are served by
programs of project-based assistance, whose cost is enormously
excessive for the housing provided. The best study of HUD's
largest program that subsidized the construction of privately
owned projects indicated an excess taxpayer cost of at least 72
percent. The best study of public housing indicated an even
larger excess cost.
The second major defect of the current system is that it
provides large subsidies to some households while offering none
to others in identical circumstances. And it provides subsidies
to many people who are not poor while offering none to many of
the poorest. Less than 35 percent of families with extremely
low incomes on HUD's definition receive housing assistance.
Phasing out programs of project-based assistance in favor of
the system's most cost-effective program, the tenant-based
voucher program, would ultimately free up the resources to
provide housing assistance to millions of additional people.
I will offer several specific proposals to that end.
The low-income housing tax credit is the largest and
fastest growing low-income housing program. Its costs are
excessive for the housing provided, and most of the families
served are not poor. Therefore, I think we should phase out
funding for new tax credit projects and replace these tax
credits with refundable tax credits for the poorest homeowners.
The best evidence also indicates that above-market rents
are paid when the government renews use agreements with owners
of privately owned subsidized projects. Therefore, when
existing housing projects come to the end of their use
agreements, we should not renew them, but instead give their
tenants portable vouchers.
I also have some proposals for public housing reforms that
would better use the funds and assets currently available to
public housing authorities.
First, we should require each public housing authority to
offer a housing voucher to each public housing tenant using its
current budget for public housing.
Second, we should allow public housing authorities to
charge market rents for the units vacated by families that
accept the vouchers and use the increased revenue to improve
their projects.
Third, we should allow public housing authorities to sell
any of their projects to the highest bidder with the
restriction that they must provide occupants with housing
vouchers and use the net proceeds of the sale to improve the
remaining projects.
Finally, the housing voucher program provides very large
subsidies to recipients while offering nothing to other
families in identical circumstances. The national mean subsidy
to a household with one adult and two children and no countable
income is about $12,000 a year. A voucher subsidy of this
magnitude enables its recipient to occupy a rental unit of
about average desirability. From the viewpoint of poverty
alleviation and basic fairness, it is surely much better to
provide somewhat more modest housing to more of the poorest
households rather than housing of this quality to a fortunate
few. Therefore, I think we should provide new voucher
recipients with a less generous subsidy and use the savings to
provide vouchers to more of the poorest households.
I realize that this subcommittee does not have the
authority to implement many of these suggestions, so I will
make one recommendation that is clearly within the committee's
authority and that would, I believe, have an enormous positive
effect on the future course of low-income housing policy.
Specifically, I recommend that the committee appropriate
the money for analyses of the highest quality that compare the
cost-effectiveness of housing vouchers with the cost-
effectiveness of various types of tax credit projects,
including ones that renovate HUD's subsidized projects and ones
involved in public housing's rental assistance demonstration.
The cost of these studies would be trivial compared to the
amount of money spent on these programs each year.
Thank you.
[The statement follows:]
Prepared Statement of Dr. Edgar Olsen, Ph.D.
Low-income housing assistance is fertile ground for reforms that
would provide better outcomes with less public spending. The majority
of current recipients are served by programs whose cost is enormously
excessive for the housing provided. Phasing out these programs in favor
of the system's most cost-effective program would ultimately free up
the resources to provide housing assistance to millions of additional
people and reduce taxes.\1\
---------------------------------------------------------------------------
\1\ Edgar O. Olsen, ``The Effect of Fundamental Housing Policy
Reforms on Program Participation,'' University of Virginia, January 14,
2014, http://eoolsen.weebly.com/uploads/7/7/9/6/7796901/
ehpfinaldraftjanuary2014coverabstracttextreferencetablesonlineappendices
.pdf.
---------------------------------------------------------------------------
Furthermore, the current system of low-income housing assistance
provides enormous subsidies to some households while offering none to
others that are equally poor, and it provides subsidies to many people
who are not poor while offering none to many of the poorest. Avoiding
these excessive subsidies and focusing assistance on the poorest
families will contribute further to poverty alleviation. Well-designed
reforms of the current system of low-income housing assistance would
substantially alleviate poverty with less public spending.
overview of current system
To appreciate the potential for alleviating poverty through housing
policy reforms, it is essential to know the nature of current programs
and the evidence about their performance.\2\ The bulk of low-income
housing assistance in the United States is funded by the Federal
Government through a large number of programs with a combined cost of
more than $50 billion a year. Unlike other major means-tested transfer
programs in the U.S., low-income housing programs do not offer
assistance to many of the poorest families that are eligible for them.
Eligible families that want assistance must get on a waiting list.
---------------------------------------------------------------------------
\2\ For a detailed overview of the current system of low-income
housing assistance and a summary of the evidence, see Edgar O. Olsen,
``Housing Programs for Low-Income Households,'' in Means-Tested
Transfer Programs in the U.S., ed. Robert Moffitt (Chicago: University
of Chicago Press, 2003); and John C. Weicher, Housing Policy at a
Crossroads: The Why, How, and Who of Assistance Programs (Washington,
DC: AEI Press, 2012). For a more detailed account of the evidence, see
Edgar O. Olsen and Jeff Zabel, ``U.S. Housing Policy,'' in Handbook of
Regional and Urban Economics, ed. Giles Duranton, J. Vernon Henderson,
and William Strange, vol. 5 (Amsterdam: North-Holland, 2015).
---------------------------------------------------------------------------
Most low-income housing assistance in the U.S. is for renting a
unit, and the most important distinction among rental housing programs
is whether the subsidy is attached to the dwelling unit (project-based
assistance) or the assisted household (tenant-based assistance). If the
subsidy is attached to a rental dwelling unit, families must accept the
particular unit offered to receive assistance and lose the subsidy if
they move, unless they obtain alternative housing assistance before
moving.
Each family offered tenant-based assistance is free to occupy any
unit that meets the program's minimum housing standards, that rents for
less than the program's ceiling, that is affordable with the help of
the subsidy, and whose owner is willing to participate in the program.
Families retain the subsidy if they move to another unit meeting these
conditions. Figure 1 indicates the percentage of households that
receive rental assistance of various types.
[The chart follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Figure 1. Percentage of Households That Receive Each Type of Rental
Assistance
Source: Author's calculations based on 2013 American Housing Survey.
Note: Includes assistance from U.S. Department of Housing and Urban
Development and other sources.
The Department of Housing and Urban Development (HUD) housing
voucher program is the only significant program that provides tenant-
based assistance. It is the second-largest low-income housing program,
serving about 2 million households and accounting for about 32 percent
of all households that receive low-income rental assistance.
There are two broad types of project-based rental assistance:
public housing and privately owned subsidized projects. Both types have
usually involved constructing new projects. In almost all other cases,
they have required substantial rehabilitation of existing buildings.
Many of these programs no longer subsidize the construction of
projects, but most projects built under them still house low-income
households with the help of subsidies for their operation and
renovation. Overall, project-based assistance accounts for about 68
percent of all households that receive low-income rental assistance.
Public housing projects are developed and operated by local public
housing authorities established by local governments, albeit with
substantial Federal subsidies and regulations that restrict their
choices. For example, regulations limit the circumstances under which
housing projects can be sold and what can be done with the proceeds. In
the public housing program, government employees make most of the
decisions that unsubsidized for-profit firms would make in the private
market--what to build, how to maintain it, and when to tear it down.
Decisions about where to build projects have been heavily influenced by
local political bodies. The public housing stock has declined by about
400,000 units since its peak in 1991. About 1 million households live
in public housing projects.
Government agencies also contract with private parties to provide
housing in subsidized projects. Most are for-profit firms, but not-for-
profits have a significant presence. The largest programs of this type
are the IRS's Low-Income Housing Tax Credit, HUD's Section 8 New
Construction and Substantial Rehabilitation and Section 236 Rental and
Cooperative Housing for Lower-Income Families programs, and the U.S.
Department of Agriculture's Section 515 and 521 programs. Under these
programs, in exchange for certain subsidies, private parties agree to
provide rental housing meeting certain standards at restricted rents to
eligible households for a specified number of years.
None of these programs provide subsidies to all suppliers who would
like to participate. This is highly relevant for their performance. In
general, subsidies to selected sellers of a good have very different
effects than subsidies to all sellers. Subsidies to selected sellers
lead to excessive profits and much greater wasteful rent seeking. About
4 million households live in projects of this type.
Performance of U.S. Low-Income Housing Programs
Many aspects of the performance of low-income housing programs have
been studied, such as their effects on recipients' labor earnings and
the types of neighborhoods occupied by them.\3\ We certainly do not
have evidence on all aspects of performance for all programs, and the
evidence leaves much to be desired in many cases. However, we cannot
avoid making a decision about reforms until we have excellent evidence
on all aspects of performance for all programs. Enough evidence exists
to give policymakers confidence that certain changes would move the
program in the right direction. Making no change in current policies is
a decision.
---------------------------------------------------------------------------
\3\ Olsen and Zabel, ``U.S. Housing Policy.''
---------------------------------------------------------------------------
Of all the differences in the performance of various methods for
delivering housing assistance to low-income families, differences in
cost-effectiveness are by far the most consequential for poverty
alleviation. Evidence on housing programs' performance indicates that
project-based assistance is much more costly than tenant-based
assistance when it provides equally good housing. These studies define
equally good housing to be housing that would rent for the same amount
in the same locality in the unsubsidized market. This measure accounts
for the desirability of the neighborhood and the housing itself. In the
best studies, the estimated magnitude of the excess cost is
enormous.\4\
---------------------------------------------------------------------------
\4\ For a detailed summary of the evidence on the cost-
effectiveness of low-income housing programs, see Edgar O. Olsen,
``Getting More from Low-Income Housing Assistance,'' Brookings
Institution, September 2008, http://www.brookings.edu/papers/2008/
09_low_income_housing_
olsen.aspx.
---------------------------------------------------------------------------
The best study of Section 8 New Construction and Substantial
Rehabilitation, HUD's largest program that subsidized the construction
of privately owned projects, found an excess total cost of at least 44
percent.\5\ That is, the total cost of providing housing under this
program was at least 44 percent greater than the total cost of
providing equally good housing under the housing voucher program. This
translates into excessive taxpayer cost of at least 72 percent for the
same outcome. It implies that housing vouchers could have served all
the people served by this program equally well and served at least 72
percent more people with the same characteristics without any increase
in public spending.
---------------------------------------------------------------------------
\5\ James E. Wallace et al., Participation and Benefits in the
Urban Section 8 Program: New Construction and Existing Housing, vol. 1
and 2 (Cambridge, MA: Abt Associates, 1981).
---------------------------------------------------------------------------
The best study indicates even larger excess costs for public
housing.\6\ More recent evidence has confirmed the large excess cost of
the Section 8 New Construction and Substantial Rehabilitation Program,
and U.S. General Accounting Office (GAO) studies have produced similar
results for the major active construction programs: LIHTC, HOPE VI,
Section 202, Section 515, and Section 811.\7\ In contrast, a succession
of studies over the years have found that the total cost of various
types of tenant-based housing assistance have exceeded the market rent
of the units involved by no more than the modest cost of administering
the program.\8\
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\6\ Stephen K. Mayo et al., Housing Allowances and Other Rental
Assistance Programs--A Comparison Based on the Housing Allowance Demand
Experiment, Part 2: Costs and Efficiency, Abt Associates Inc., 1980.
\7\ Meryl Finkel et al., Status of HUD-Insured (or Held)
Multifamily Rental Housing in 1995: Final Report, Abt Associates Inc.,
May 1999, Exhibit 5-1; Mark Shroder and Arthur Reiger, ``Vouchers
Versus Production Revisited,'' Journal of Housing Research 11, no. 1
(2000): 91-107; U.S. General Accounting Office, Federal Housing
Programs: What They Cost and What They Provide, GAO-01-901R, July 18,
2001, http://www.gao.gov/products/GAO-01-901R; and U.S. General
Accounting Office, Federal Housing Assistance: Comparing the
Characteristics and Costs of Housing Programs, GAO-02-76, January 31,
2002, http://www.gao.gov/products/GAO-02-76.
\8\ Mayo et al., Housing Allowances and Other Rental Assistance
Programs--A Comparison Based on the Housing Allowance Demand
Experiment, Part 2: Costs and Efficiency; Wallace et al., Participation
and Benefits in the Urban Section 8 Program: New Construction and
Existing Housing; Mireille L. Leger and Stephen D. Kennedy, Final
Comprehensive Report of the Freestanding Housing Voucher Demonstration,
vol. 1 and 2 (Cambridge, MA: Abt Associates Inc., 1990); and ORC Macro,
Quality Control for Rental Assistance Subsidies Determination, U.S.
Department of Housing and Urban Development, Office of Policy
Development and Research, 2001, chap. 5.
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The preceding evidence on the cost-effectiveness of project-based
assistance applies to units built or substantially rehabilitated under
a subsidized construction program and still under their initial use
agreement. Evidence from the Mark-to-Market program indicates the
excessive cost of renewing use agreements for privately owned
subsidized projects. In most cases, owners are paid substantially more
than market rents for their units.\9\
---------------------------------------------------------------------------
\9\ For a summary of the evidence, see Olsen, ``Getting More from
Low-Income Housing Assistance.'' 14.
---------------------------------------------------------------------------
The results concerning the cost-effectiveness of different housing
programs illustrate the virtue of substantially relying on market
mechanisms to achieve social goals, especially the virtue of forcing
sellers to compete for business. Under a program of tenant-based
assistance, only suppliers who provide housing at the lowest cost given
its features can remain in the program. If the property owner attempts
to charge a voucher recipient a rent in excess of the market rent, the
tenant will not remain in the unit indefinitely because he or she can
move to a better unit without paying more for it. Under programs of
project-based assistance, suppliers who receive payments in excess of
market rents for their housing can remain in the program indefinitely
because their tenants would lose their subsidies if they moved. These
suppliers have a captive audience.
Recent events in Washington, DC, vividly illustrate the pitfalls of
providing subsidies to selected suppliers.\10\ The mayor has proposed
spending about $4,500 per month per apartment to lease units in
buildings owned mainly by contributors to her campaign. This cost does
not include services to these families, and most units are dormitory
style. It has been estimated that these agreements would increase the
market value of the properties tenfold. At the same time, families with
HUD's Section 8 housing vouchers have been able to find regular two-
bedroom apartments for rents around $1,600 a month. These are better
than average rental units that meet HUD's housing standards. The median
rent of two-bedroom units in DC is about $1,400.
---------------------------------------------------------------------------
\10\ Aaron C. Davis and Jonathan O'Connell, ``Shelter Plan May
Benefit Mayor's Backers,'' Washington Post, March 17, 2016; and Fenit
Nirappil, ``Shelters' Cost Stun Some D.C. Lawmakers,'' Washington Post,
March 18, 2016.
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The evidence on cost-effectiveness argues strongly for phasing out
project-based assistance in favor of tenant-based assistance. This
would contribute greatly to poverty alleviation without spending more
money by increasing the number of poor families that receive housing
assistance.
Phasing out project-based assistance will contribute to poverty
alleviation for another reason. Under the current system, the best
units in new projects in the best locations have very high market
rents. They are much more desirable than the average rental unit. The
worst units in the oldest projects in the worst locations have very low
market rents. Identical families living in the best and worst projects
pay the same rent. Therefore, the current system provides enormous
subsidies to some families and small subsidies to others in the same
economic circumstances.
Equalizing these subsidies would contribute to poverty alleviation.
Under the housing voucher program, identical households within the same
housing market are offered the same assistance on the same conditions.
Therefore, providing incremental housing assistance in the form of
housing vouchers rather than subsidized housing projects would
contribute to poverty alleviation by giving larger subsidies to the
families that would have received the smallest subsidies in the absence
of reform and smaller subsidies to similar families that would have
received the largest subsidies.
These inequities have not been carefully documented but are obvious
to all knowledgeable observers. A recent segment on PBS NewsHour
revealed that $500,000 had been spent per apartment to build a housing
project for the homeless in San Francisco.\11\ This is expensive even
by Bay Area standards. The median value of owner-occupied houses in the
San Francisco metro area was $558,000, and the median household income
of their occupants was $104,000. So this government program provided
apartments to the poorest families that were almost as expensive as the
houses occupied by the average homeowner.
---------------------------------------------------------------------------
\11\ PBS NewsHour, aired October 9, 2013 (New York, MGM
Television).
---------------------------------------------------------------------------
Ensuring that the homeless occupy housing meeting reasonable
minimum standards does not require anything like the amount of money
spent on these units. More than 20 percent of owner-occupied houses in
the San Francisco area sell for less than $300,000. Furthermore, almost
half of the families in the area are renters whose median income is
about $50,000. They live in much less expensive units than homeowners.
We do not need to build new units to house the homeless. They can
be housed in satisfactory existing units at a much lower taxpayer cost.
More than 6 percent of the dwelling units in the area were vacant at
the time.
In Portland, Oregon, where the median value of owner-occupied
houses was $249,000, $360,000 per apartment was spent to build another
housing project for the homeless.\12\ These cases are not anomalies.
The HUD website is filled with photographs of such housing. The desire
of the people involved in the current system to provide the best
possible housing for their clients is understandable. However, this is
not costless. Dollars spent on these high-cost projects are dollars not
spent providing housing to more people.
---------------------------------------------------------------------------
\12\ Peter Korn, ``Police threaten complaint as calls mount at the
commons,'' Portland Tribune, January 9, 2014.
---------------------------------------------------------------------------
Tenant-based assistance has other important advantages in addition
to its greater equity and its much lower cost for providing equally
desirable housing. For example, it allows recipients to choose housing
that better suits their preferences and circumstances, such as living
close to their jobs. This increases their well-being without increasing
taxpayer cost.
In contrast to occupants of subsidized housing projects, voucher
recipients have chosen to live in neighborhoods with lower poverty and
crime rates. Susin found that public housing tenants live in census
tracts with poverty rates 8.8 percentage points higher than in the
absence of assistance, tenants in HUD-subsidized privately owned
projects live in tracts with poverty rates 2.6 percentage points
higher, and voucher recipients live in tracts with poverty rates 2.3
percentage points lower.\13\ Michael C. Lens, Ingrid Gould Ellen, and
Katherine O'Regan found that occupants of tax-credit projects live in
neighborhoods with crime rates about 30 percent higher than voucher
recipients and only slightly lower than the crime rates in public
housing neighborhoods.\14\ Because voucher recipients have much more
choice concerning the location of their housing, this suggests that
subsidized housing projects are poorly located from the viewpoint of
recipient preferences.
---------------------------------------------------------------------------
\13\ Scott Susin, ``Longitudinal Outcomes of Subsidized Housing
Recipients in Matched Survey and Administrative Data,'' Cityscape 8,
no. 2 (2005): 207.
\14\ Michael C. Lens, Ingrid Gould Ellen, and Katherine O'Regan,
``Do Vouchers Help Low-Income Households Live in Safer Neighborhoods?
Evidence on the Housing Choice Voucher Program,'' Cityscape 13, no. 3
(2011): 135-59.
---------------------------------------------------------------------------
Voucher recipients have exercised this choice in a way that
benefits their children. A widely cited, recent paper shows that better
neighborhood environments lead to better adult outcomes for children in
recipient households.\15\ They have higher college attendance rates and
labor earnings and are less likely to be single parents.
---------------------------------------------------------------------------
\15\ Raj Chetty, Nathaniel Hendren, and Lawrence F. Katz, ``The
Effects of Exposure to Better Neighborhoods on Children: New Evidence
from the Moving to Opportunity Experiment,'' American Economic Review
106, no, 4 (2016): 855-907.
---------------------------------------------------------------------------
Before considering reforms of low-income housing policy, it is
important to address a bit of folklore that has been influential in
housing policy debates: that construction programs perform better than
housing vouchers in tight housing markets. Todd Sinai and Joel
Waldfogel show that additional housing vouchers result in a larger
housing stock than the same number of newly built units in subsidized,
privately owned housing projects.\16\
---------------------------------------------------------------------------
\16\ Todd Sinai and Joel Waldfogel, ``Do Low-Income Housing
Subsidies Increase the Occupied Housing Stock?'' Journal of Public
Economics 89, no. 11-12 (2005): 2137-64.
---------------------------------------------------------------------------
In light of other evidence, the most plausible explanations are
that subsidized construction crowds out unsubsidized construction
considerably and that the housing voucher program induces more
recipients to live independently. The voucher program serves poorer
households that are more likely to be doubled up in the absence of
housing assistance. Crowding out is surely greatest in the tightest
housing markets. In the absence of subsidized construction in these
markets, unsubsidized construction would be high, and unemployment
among construction workers would be low. Subsidized construction would
divert workers from unsubsidized construction.
Furthermore, it is reasonable to believe tenant-based vouchers get
families into satisfactory housing much faster than any construction
program, even in the tightest housing markets. For example, the amount
of time from when new vouchers are allocated to housing authorities to
when they are used by voucher recipients is surely less than the amount
of time from when new tax credits are allocated to State housing
agencies to when tax-credit units are occupied.
Even though some households do not use the vouchers offered,
housing authorities can put all, or almost all, their vouchers to use
in less than a year in any market condition. They can fully utilize
available vouchers by over-issuing vouchers early in the year and then
adjusting the recycling of the vouchers that are returned by families
that leave the program late in the year. No production program can hope
to match this speed in providing housing assistance to low-income
households.
Proposed Reforms of Low-Income Housing Policies to Alleviate Poverty
The available evidence on program performance has clear
implications for housing policy reform. To serve the interests of
taxpayers who want to help low-income families with their housing and
the poorest families that have not been offered housing assistance,
Congress should shift the budget for low-income housing assistance from
project-based to tenant-based housing assistance as soon as current
contractual commitments permit and phase out active construction
programs.
This section describes proposals for reform of low-income
assistance that will alleviate poverty without spending more money. The
reforms deal with all parts of the current system--active construction
programs, existing privately owned housing projects, public housing,
and the housing voucher program.
Active Subsidized Construction Programs. The Low-Income Housing Tax
Credit (LIHTC) is the largest active construction program. It
subsidizes the construction of more units each year than all other
programs combined. LIHTC recently became the Nation's largest low-
income housing program, serving 2.4 million households, and it is the
fastest growing. The tax credits themselves involved a tax expenditure
of about $6 billion in 2015. However, these projects received
additional development subsidies from State and local governments,
usually funded through Federal intergovernmental grants, accounting for
one-third of total development subsidies.\17\ Therefore, the total
development subsidies were about $9 billion a year.
---------------------------------------------------------------------------
\17\ Jean L. Cummings and Denise DiPasquale, ``The Low-Income
Housing Tax Credit: An Analysis of the First Ten Years,'' Housing
Policy Debate 10, no. 1 (1999): 299.
---------------------------------------------------------------------------
Furthermore, the GAO found that owners of tax-credit projects
received subsidies in the form of project-based or tenant-based Section
8 assistance on behalf of 40 percent of their tenants.\18\ The
magnitude of these subsidies has never been documented. If their per-
unit cost were equal to the per-unit cost of tenant-based housing
vouchers in 2015, they would have added more than $8 billion a year to
the cost of the tax-credit program. If so, the full cost of housing
people in tax-credit projects would have been about $17 billion in
2015.
---------------------------------------------------------------------------
\18\ U.S. General Accounting Office, Tax Credits: Opportunities to
Improve Oversight of the Low-Income Housing Program, GGD/RCED-97-55,
1997, 40.
---------------------------------------------------------------------------
Unlike HUD's programs, the LIHTC is poorly targeted to the poorest
households. Some tax credits are used to rehabilitate older housing
projects built under HUD and U.S. Department of Agriculture programs
that continue to provide deep subsidies to their occupants. Other tax-
credit units are occupied by families with portable Section 8 housing
vouchers. The families in these units typically have very low earnings.
However, the majority of occupants of tax-credit projects do not
receive these deep subsidies related to their income. Their average
income is more than twice the average for the occupants who receive the
deep subsidies, and they are well above poverty thresholds.\19\
---------------------------------------------------------------------------
\19\ Ibid., 146.
---------------------------------------------------------------------------
The poor targeting of its subsidies and the evidence on its cost-
ineffectiveness argue strongly for the cessation of subsidies for
additional LIHTC projects. Reducing new authorizations under the
program by 10 to 20 percent each year would achieve this outcome in an
orderly fashion. The money spent on this program would be better spent
on expanding HUD's well-targeted and cost-effective Section 8 Housing
Choice Voucher Program.
Because the congressional committees that oversee the two programs
are different, this transfer of funds would be difficult to arrange.
However, the committees that oversee the LIHTC could divert the reduced
tax expenditures on the LIHTC to a refundable tax credit for the
poorest low-income homeowners, thereby offsetting to some extent the
anti-homeownership bias of the current system of low-income housing
assistance. About 25 percent of all unassisted households in the lowest
real-income decile are homeowners.\20\ To avoid excess profits to
sellers, it is extremely important that buyers are able to purchase
from any seller.\21\
---------------------------------------------------------------------------
\20\ In determining a household's real income, this calculation
adds an imputed return on home equity to the income of homeowners and
accounts for differences in family size and composition and price
levels across locations. Edgar O. Olsen, ``Promoting Homeownership
Among Low-Income Households,'' Urban Institute, August 20, 2007, Table
1, http://www.urban.org/UploadedPDF/411523_promoting_homeownership.pdf.
\21\ Edgar O. Olsen and Jens Ludwig, ``The Performance and Legacy
of Housing Policies,'' in The Legacies of the War on Poverty, ed.
Martha Bailey and Sheldon Danziger (New York: Russell Sage Foundation,
2013), 218-21.
---------------------------------------------------------------------------
Existing Privately Owned Subsidized Projects. The second broad
proposal to reform low-income housing policy in the interest of poverty
alleviation is to not renew contracts with the owners of private
subsidized projects. The initial agreements that led to building or
substantially rehabilitating these projects called for their owners to
provide housing that meets certain standards to households with
particular characteristics at certain rents for a specified number of
years. At the end of the use agreement, the government must decide on
the terms of the new agreement, and the private parties must decide
whether to participate on these terms. A substantial number of projects
end their use agreements each year. When use agreements are not
renewed, current occupants are provided with other housing assistance,
almost always tenant-based vouchers.
Up to this point, housing policy has leaned heavily in the
direction of providing owners with a sufficient subsidy to induce them
to continue to serve the low-income households in their projects. We
should not repeat these mistakes. Instead we should give their tenants
portable vouchers and force the owners to compete for their business.
The evidence on the cost-effectiveness of renewing use agreements
versus tenant-based housing vouchers indicates that offering such
vouchers would reduce the taxpayer cost of assisting these families.
The savings could be used to assist additional families.
It is important to realize that for-profit sponsors will not agree
to extend the use agreement unless this provides at least as much
profit as operating in the unsubsidized market. Because these subsidies
are provided to selected private suppliers, the market mechanism does
not ensure that rents paid for the units will be driven down to market
levels. If this is to be achieved at all, administrative mechanisms
must be used. Administrative mechanisms can err in only one direction--
providing excess profits. If the owner is offered a lower profit than
in the unsubsidized market, the owner will leave the program. We should
leave the job of getting value for the money spent to the people who
have the greatest incentive to do so: namely, the recipients of housing
assistance.
It is often argued that giving families that live in privately
owned subsidized housing projects portable housing vouchers at the end
of the use agreement will force them to move. This would not be the
case if tenants are offered the same options as they are offered under
the current system when the project's owner opts to leave the program.
HUD will pay the market rent for the unit as long as the tenant wants
to remain in it but offers the tenant the option of a regular housing
voucher. This would enable the family to continue to live in its
current unit without devoting more income to rent, and it would offer
the family other options that it might prefer.
It is also argued that the failure to renew use agreements on
privately owned subsidized projects reduces the number of affordable
housing units. If the occupants of these projects are offered portable
vouchers, this could not be further from the truth. When use agreements
are extended, the only unit that is made affordable to an assisted
family living in the project is its own unit. If that family is offered
a portable voucher, many units become affordable to the family.
Contrary to the arguments of lobbyists for project-based housing
assistance, failing to renew use agreements on subsidized housing
projects increases rather than decreases the stock of housing that is
affordable to low-income households.
Public Housing. The public housing reform proposals are proposals
to better use the funds and assets currently available to public
housing authorities. They are designed to alleviate poverty by
delivering better housing to tenants who remain in public housing,
providing current public housing tenants with more choice concerning
their housing, assisting additional households, and reducing the
concentration of the poorest families in public housing projects. The
proposals would require congressional action to change the restrictions
on housing authorities, except possibly for those participating in
HUD's Moving to Work Demonstration.
Currently, HUD provides public housing authorities with more than
$6 billion each year in operating and modernization subsidies for their
public housing projects. My proposal would give each housing authority
the same amount of Federal money as it would have gotten with the old
system, so no authority would be able to object on the grounds that it
would have less to spend on its clients. However, the proposal would
alter greatly the restrictions on the use of this money and increase
the total revenue of housing authorities.
The proposal requires every public housing authority to offer
current tenants the option of a portable housing voucher or remaining
in their current unit on the previous terms, unless the housing
authority decides to demolish or sell its project. To ensure that
housing authorities can pay for these vouchers with the money
available, the generosity of the voucher subsidy would be set to use
the housing authority's entire Federal subsidy in the highly unlikely
event that all public housing tenants accepted the vouchers. The
generosity of these vouchers would almost always differ from the
generosity of regular Section 8 vouchers, although the difference would
be small in most cases.
Housing authorities would be allowed to sell any of their projects
to the highest bidder with no restrictions on its future use. This
would provide additional revenue to improve their remaining projects or
provide vouchers to additional households. The requirement that these
projects must be sold to the highest bidder maximizes the money
available to help low-income families with their housing. It also
avoids scandals associated with sweetheart deals.
Many housing authorities would surely choose to sell their worst
projects. With uniform vouchers offered to families living in all of a
housing authority's projects, it is reasonable to expect that the
vouchers will be accepted by more tenants in the worst projects. These
are the projects that would be the most expensive to renovate up to a
specified quality level. They are the types of projects that have been
demolished under the HOPE VI program and that Congress intended to
voucher out under the 1998 Housing Act. By selling the public housing
projects on which they would have spent the most money and providing
their occupants with vouchers that have the same cost as the
authority's average net expenditure on public housing units, the public
housing authority would free up money to better maintain its remaining
units or provide vouchers to additional households.
When a project is sold, the remaining tenants in that project would
be offered the choice between vacant units in other public housing
projects or a housing voucher, the standard procedure when projects are
demolished or substantially rehabilitated. When public housing units
are vacated by families that accept vouchers, the housing authority
would offer the next family on the waiting list the option of occupying
the unit or a portable housing voucher. If the family takes the
voucher, the housing authority would be allowed to charge whatever rent
the market will bear for the vacant unit. This would provide additional
revenue to housing authorities without additional government subsidies.
To reduce poverty concentrations in public housing projects,
Congress might want to eliminate the income-targeting rules for
families that pay market rents for public housing units. Indeed, it
might want to eliminate upper-income limits for these families. Under
current regulations, at least 40 percent of new occupants must have
extremely low incomes. Under the proposal, the new occupants will
receive no public subsidy, and so income targeting would serve no
public purpose.
Each year some former public housing tenants who had used the
proposed vouchers to leave their public housing units would give up
these vouchers for a variety of reasons. The money saved from their
departure should be used to offer similar vouchers to other families
eligible for housing assistance. The recycling of voucher funds would
ensure that the tax money spent on public housing will continue to
support at least the same number of families.
The preceding proposals would benefit many current public housing
tenants without increasing taxpayer cost. The public housing tenants
who accept vouchers would obviously be better off because they could
have stayed in their current units on the old terms. They would move to
housing meeting HUD's housing standards that better suits their
preferences. Tenants who remain in public housing would benefit from
better maintenance of their units.
The only public housing tenants who might be hurt by the proposal
are tenants who want to remain in the projects that housing authorities
decide to sell. Since it is impossible to justify renovating structures
that reach a certain level of obsolescence and dilapidation, the
initial opposition of a small minority of public housing tenants should
not prevent benefits to the majority. Generally, public housing
redevelopment has not required occupants' consent.
Given the difficulty of predicting all of the consequences of such
far-reaching changes, we should start with a controlled experiment
involving innovative public housing authorities willing to implement
these proposals for a randomly selected subset of their public housing
projects. This experiment would produce evidence on the effects of the
proposals, and it would provide useful information for modifying them
to avoid unforeseen negative consequences and achieve better outcomes.
Housing Voucher Program. Even though HUD's Housing Choice Voucher
Program is the country's most cost-effective and equitable low-income
housing program, it too offers opportunities for reform in the interest
of poverty alleviation. The Housing Choice Voucher Program provides
very large subsidies to its recipients while offering nothing to other
families in similar circumstances.
In 2015, the national mean subsidy for a household with one adult,
two children, and no countable income was almost $12,000. The poverty
threshold for this family was about $20,000. A voucher subsidy of this
magnitude enables its recipient to occupy a rental unit of about
average desirability among two-bedroom units, that is, a unit with
about the median market rent.
From the viewpoint of poverty alleviation correctly conceived, it
is surely better to provide somewhat more modest housing to more of the
poorest households rather than housing of this quality to a fortunate
few. The current welfare system provides recipients of housing vouchers
with resources well above the relevant poverty threshold, while leaving
others without housing assistance well below it.
In the interest of ameliorating this inequity and reducing poverty
without harming current recipients, new recipients could be offered
less generous subsidies so that more households could be served with a
given budget, and current voucher recipients could receive the generous
subsidies that are offered by the current program. Because more than 10
percent of voucher recipients exit the program each year, this
initiative will allow more families to be served each year without
spending more money and will improve the program's equity. Eventually,
all participants in the same economic circumstances would receive the
same lower subsidy.
The new subsidy level could be chosen so that the voucher program
could serve all of the poorest households that asked for assistance. At
current subsidy levels, many more people want to participate than can
be served with the existing budget. Reducing the voucher subsidy by the
same amount for households at all income levels would make families
currently eligible for subsidies less than this amount ineligible for
voucher assistance. These are the currently eligible households with
the largest incomes. This would free up money to provide vouchers to
needier households that would not have been served by the current
system.
By reducing the subsidies sufficiently, we would reach a point
where all of the poorest household that ask for assistance would get
it. Olsen analyzes the effect of alternative reforms of this type on
who is served by the voucher program.\22\ This reform would surely
reduce evictions and homelessness, although these effects have not been
studied.
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\22\ Olsen, ``The Effect of Fundamental Housing Policy Reforms on
Program Participation.''
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conclusion
The rapid growth of spending on entitlement programs for the
elderly that will occur until they are substantially reformed will
create pressure to reduce spending on programs such as low-income
housing programs whose budgets are decided each year by Congress. In
this situation, we should be focusing on how to get more from the money
currently allocated to these programs.
Building new units is an extremely expensive way to provide better
housing to low-income households, and subsidizing selected suppliers is
especially expensive. Renting existing units that meet minimum
standards is much cheaper. This also avoids providing recipients of
low-income housing assistance with better housing than the poorest
families ineligible for assistance. The proposed reforms will gradually
move the system of low-income assistance toward more cost-effective
approaches and enable us to provide housing assistance to millions of
additional people without spending more money.
It is often argued that a shortage of affordable housing calls for
subsidizing the construction of new units. This argument is seriously
flawed. Almost all people are currently housed. If we think that their
housing is too expensive (commonly called unaffordable), the cheapest
solution is for the government to pay a part of the rent. The housing
voucher program does that. This program also ensures that its
participants live in units that meet minimum standards. Building new
units is a much more expensive solution to the affordability problem.
Furthermore, it is not necessary or desirable to construct new
units to house the homeless. The number of people who are homeless is
far less than the number of vacant units--indeed, far less than the
number of vacant units renting for less than the median. In the entire
country, there are only about 600,000 homeless people on a single night
and more than 3.6 million vacant units available for rent. Even if all
homeless people were single, they could be easily accommodated in
vacant existing units, and that would be much less expensive than
building new units for them. Furthermore, most of the 600,000 people
who are homeless each night already have roofs over their heads in
homeless shelters, which are also subsidized. The best provide good
housing.
Reducing the substantial differences in subsidies across identical
households that characterize the current system would contribute
further to poverty alleviation. It would help fill the gap between
poverty thresholds and the resources of the poorest households. The
current system provides substantial subsidies to recipients while
failing to offer housing assistance to many others who are equally
poor. Even among the fortunate minority who are offered assistance, the
variation in the subsidy across identical households living in
subsidized housing projects is enormous. The best housing projects
offered by a particular program are much more desirable than the worst,
but tenants with the same characteristics pay the same rent for units
in either. Because the most cost-effective program offers the same
subsidy to identical recipients, the shift away from other programs
toward it will focus more of the system's resources on the poorest
families.
Senator Collins. Thank you very much, Professor. I very
much appreciate the number of years you have spent on this
issue and your very specific recommendation.
We will next hear from Erika Poethig, Institute Fellow and
Director of Urban Policy Initiatives at the Urban Institute.
Thank you for being here.
STATEMENT OF ERIKA POETHIG, FELLOW AND DIRECTOR OF URBAN POLICY
INITIATIVES, THE URBAN INSTITUTE
Ms. Poethig. Thank you, Madam Chairwoman, Ranking Member
Reed, and members of the THUD Subcommittee for the opportunity
to be an expert on this panel.
My name is Erika Poethig. I am Director of Urban Policy
Initiatives at the Urban Institute, which is a nonprofit
research organization dedicated to the power of evidence to
improve lives and strengthen communities.
The views expressed before you today are my own and should
not be attributed to the Urban Institute, its trustees, or its
funders.
There is an overwhelming body of evidence that Federal
rental assistance makes a difference in people's lives and
communities. Increasingly, research demonstrates that housing
serves both as an essential safety net and as a platform from
which individuals, families, and older adults can improve their
health, education, and economic outcomes. When families cannot
afford housing, it undermines their ability to get to the next
rung on the economic ladder and prevents older adults from
aging safely and securely.
Yet, America's housing policy has never fully met the
demand for affordable rental housing. Today, there are nearly
20 million households that qualify for housing assistance, but
only one in four receives it.
I would like to make two points. One, we must expand
Federal rental assistance. And, two, as we work to do so, we
must use the best evidence available to reform existing
policies and programs. Let me elaborate on these two points.
First, this committee has made the smart decision to
prioritize Federal investment in rental assistance. But given
the current and growing need, we must build a new generation of
rental assistance focused on the most vulnerable households. We
leverage housing as a platform for service delivery and access
to opportunity by targeting expanded rental assistance to
families with children earning less than 30 percent of area
median income, people with disabilities, and older adults on
fixed incomes.
Targeting these vulnerable populations pays dividends.
Stable housing generates cost savings to other Federal
programs. For instance, evidence suggests that for homeless
families, rental assistance is more effective than costly
services. At the same time, connecting the housing platform to
services for older adults, such as health care coordination,
has proven reductions in Medicare spending. This is one
opportunity to bring new resources to the table as we work to
expand rental assistance.
Second, evidence tells us that housing policy is one
important lever to promote upward mobility. A low-income child
that gains access to a low-poverty neighborhood will see their
income as an adult grow by 30 percent. Unfortunately, our
current programs are not well designed to enable individuals to
reach their full potential. We need to reform existing policies
and programs.
For instance, greater flexibility is needed to move
project-based subsidy contracts to buildings in lower poverty
neighborhoods. At the same time, we need to prioritize place-
based investment strategies that can catalyze neighborhood
revitalization and improvement, and we need to preserve
existing assets in low-poverty communities.
Finally, the voucher program is a great tool to promote
upward mobility. However, the program could be strengthened by
the use of small area FMRs (Fair Market Rents) and by marrying
vouchers to greater supports for mobility. That is why I am
very excited and thankful to see that this committee included
the mobility demonstration in the fiscal year 2017
appropriations bill that passed the Senate. The demonstration
will generate timely and needed evidence to ensure that
vouchers are indeed a platform for upward mobility.
Thank you very much for this invitation to testify. I look
forward to your questions.
[The statement follows:]
Prepared Statement of Erika C. Poethig
Thank you for asking me to testify at this hearing. My name is
Erika C. Poethig, and I am an Institute fellow and director of urban
policy initiatives at the Urban Institute in Washington, DC. The views
expressed here are my own, not those of the Urban Institute, its
trustees, or its funders.
Congress committed the first national resources to public housing
during the Great Depression. That decision altered the course of
millions of lives for the better, providing the most vulnerable
Americans with a home that was otherwise out of reach and giving
children the promise of a better future. Today, the long bipartisan
legacy of affordable rental housing is in doubt. Millions of Americans
are unable to find safe and secure housing that they can afford.
Housing assistance plays an important role improving lives across
the age continuum. Yet America's housing policy has never fully met the
demand for affordable rental housing. Over the next 15 years, the
demand for rental housing will continue to grow. During this same time
period, the number of senior renters is projected to double, increasing
from 5.8 million to 12.2 million households. More than a quarter will
pay more than 50 percent of their income for rent (Goodman, Pendall,
and Zhu 2015). Absent increased resources for Federal rental
assistance, America's older adult population will face increased
housing instability and homelessness, which can lead to poor health and
diminished quality of life. At the same time, safe and stable housing
also plays an important role in the early stages of life. Rigorous
evidence has demonstrated that housing assistance is an essential
driver of economic mobility for low-income children. In order to meet a
growing unmet need, we must expand Federal rental assistance to serve
the most vulnerable households including older adults, people with
disabilities, and families with children.
Today, over 5.1 million households use Federal rental assistance,
which includes the housing choice voucher program, project-based rental
assistance, public housing, and USDA programs. While we work to expand
the Federal investment in housing assistance, we can also use the best
evidence available to reform existing policies and programs in order to
maximize better health, education, and economic mobility outcomes. Such
reforms will require better alignment between Federal housing programs
and policies, increasing incentives to move and preserve subsidies in
lower poverty neighborhoods, tailoring approaches to address the
continuum of housing and service needs, and capturing and reinvesting
savings housing generates for Medicare and Medicaid.
Rental Assistance Creates Positive Benefits to Individuals and Families
The evidence of the importance of housing assistance for people's
lives is overwhelming. Research demonstrates that housing is both an
essential safety net and a platform from which families can improve
their health, educational, and economic outcomes. Since 2008, more than
40 studies, by a wide array of scholars across many different
institutions, have focused on how housing matters for individuals and
communities. This body of research, which has been largely supported by
the John D. and Catherine T. MacArthur Foundation, has found that
housing location, stability, quality, and affordability affect
kindergarten readiness, children's math and reading scores, child
development, mental and physical health, and income growth.
There are four important ways housing assistance serves as a
platform for better outcomes.
First, housing assistance frees up resources that can be invested
in improving economic mobility and better health outcomes. For
instance, when families cannot find affordable housing, they make
tradeoffs that affect medical care, children's health, child enrichment
activities, food security, and retirement savings (JCHS 2015; Newman
and Holupka 2014). One third of households in the Milwaukee Eviction
Court Study--a sample composed almost exclusively of very low-income
renters who were trying unsuccessfully to afford their rent without a
subsidy--paid at least 80 percent of their household incomes for rent
(Desmond 2012). This leaves very little income to pay for other
expenses. For seniors, rental assistance is an essential protection, as
the potential to increase income is limited. Housing costs account for
the largest proportion of older adults' expenses. Seniors spend more on
housing than healthcare or anything else (Johnson 2015).
Second, housing assistance can reduce frequent moves for children
and seniors. When families are not stably housed, it can lead to
frequent school moves, high rates of absenteeism, and low test scores
among children (Cunningham, Harwood, and Hall 2010). For older adults,
housing stability coupled with age-restricted housing can create a
platform to healthcare coordination and services that slows growth in
Medicare costs. The Support and Services at Home (SASH) model leverages
housing as a platform to connect residents of federally assisted
housing with community-based services and care coordination. A recent
study estimated that the growth in Medicare expenditures for early SASH
participants was $1,756-$2,197 lower than the growth in expenditures
for the comparison groups (Sanders 2014).
Third, housing assistance can be used to revitalize communities. In
1986, New York City Mayor Ed Koch launched a 10-year, $5.1 billion
capital plan for housing, investing local, State, and Federal resources
to revitalize a distressed housing stock and preserving its
affordability. Based on analysis by scholars from the New York
University Furman Center for Real Estate and Urban Policy, this
investment more than paid back the local investment through increased
property tax receipts. The positive spillover effects from the
investment were significant enough to justify government support for
housing production, including the State and Federal resources (Ellen et
al. 2003). In the same study, Ellen and colleagues did not find the
same spillover effects for the tenant-based voucher program largely
because voucher holders are more dispersed and the aim of the program
is not to revitalize neighborhoods but rather enable low-income
households to rent housing from private landlords. At the same time,
some evidence suggests that larger concentrations of voucher holders
can produce negative effects in a neighborhood (Galster, Tatian, and
Smith 1999; Popkin et al. 2012). When Galster and colleagues looked
across neighborhoods they found that positive effects associated with
concentrations of voucher holders were limited to high-value,
predominantly white neighborhoods.
Fourth, housing assistance can help low-income individuals and
families access low-poverty neighborhoods that would otherwise be
unaffordable. In the United States, access to opportunity is intimately
tied to place. Where you live determines school quality, available
transportation options, proximity to jobs, and community assets.
Because place is so closely linked to access to opportunity, housing
policy can provide critical ladders of mobility for people experiencing
poverty (Blumenthal and McGinty 2015). Moving to low-poverty
neighborhoods can also improve mental health and lower incidence of
diabetes and obesity, as demonstrated by the Moving to Opportunity
(MTO) experiment (Ludwig et al 2013).
In 2015, a team of researchers led by Stanford economist Raj Chetty
and Harvard economist Nathaniel Hendren published new empirical
evidence that strongly supports the notion that opportunity and
economic mobility are shaped, in part, by where you grow up (Chetty and
Hendren 2015). Linking data from the MTO experiment to longitudinal
data from the IRS, they conducted a national rigorous study of five
million families to measure how strongly economic mobility and
opportunity are shaped by the neighborhood in which you grow up. Their
findings show that every year a child is exposed to a better
environment improves a child's chances of success. Moving a young child
from a high-poverty neighborhood to a low-poverty neighborhood improves
her chances of going to college, lowers her chances of being a single
mother, and increases her expected earnings by 30 percent. Chetty and
Hendren's research also points to wide regional differences in access
to opportunity.
Although Chetty and Hendren's study is based on a mobility
experiment that used housing choice vouchers, vouchers are not the only
mechanism for enabling low-income children to access low-poverty
neighborhoods. The study's key insight is that place matters and the
longer a low-income child spends in high-opportunity neighborhoods, the
better she is able to climb the rungs on the mobility ladder. It is
possible that these results might also hold true for project-based
rental assistance and public housing located in low-poverty
neighborhoods.
Demand for Affordable Rental Units is Increasing
Housing affordability is a long-term, systemic problem that has
become a crisis. This problem touches nearly every community in the
United States and undermines the ability of low-income individuals and
families to get to the next rung on the economic ladder. This is a
perpetual problem, driven by stagnating low wages and increasing
operating costs. The dynamic is particularly problematic now because
demand for affordable rental housing is surging and is not being met
with sufficient supply.
Since 2000, the number extremely low-income households (ELI) has
grown at a greater rate than the number of affordable housing units.
Simply put, the demand for affordable housing is outpacing the supply.
These two pressures make finding affordable housing even tougher for
individuals and families with low incomes. The number of households who
are housing cost--burdened is at a record high. In 2013, over one in
four renters in the United States, or 11.4 million households, were
facing severe rent burdens, meaning they spend more than half of their
income on housing (JCHS 2016). Affordability challenges are especially
pronounced at the lowest end of income spectrum. Over 70 percent of
severely cost-burdened renter households are ELI, meaning they make
less than 30 percent of the area median income (AMI).
The problem is not isolated to tight rental markets on the coasts.
Forty-eight percent of very low income renters who live in non-metro
areas face severe rent burdens. Housing in rural areas is twice as
likely to lack complete plumbing as typical U.S. housing, and in tribal
areas, substandard housing is even more common (JCHS 2016).
For those who are not living in assisted housing, the conditions
are deplorable. HUD's biennial Worst Case Needs report documents
housing needs for very low income renters (people with incomes no
greater than 50 percent of AMI) who do not receive rental assistance.
HUD considers two forms of worst-case housing needs: severe rent
burden, which means spending 50 percent or more of household income on
rent and utilities; and severely inadequate housing, which refers to
housing with one or more serious heating, plumbing, and electrical or
maintenance problems. In 2013, there were 7.7 million very low income
unassisted renters who had worst-case housing needs, which is 49
percent greater than in 2003. Severe rent burdens accounted for more
than 97 percent of worst-case housing needs (Steffen et al. 2015).
Severe housing burdens are so prevalent partly because low-wage
workers do not earn enough to afford adequate housing. A worker earning
the Federal minimum wage would need to work 104 hours a week to afford
a typical two-bedroom apartment. Renters on average earn $14.64 an
hour, while full-time wage earners on average need to earn $18.92 an
hour to afford a two-bedroom apartment. At the State level, the average
hourly wage a full-time worker needs to earn to afford a two-bedroom
apartment ranges from $12.56 in Arkansas to $31.54 in Hawaii (Leopold
et al. 2015).
Supply of Affordable Housing Units is Not Keeping Pace With Demand
These affordability challenges for the lowest-income families
coincide with a broader surge in rental demand. Between 2010 and 2030,
the growth in rental households will exceed that of homeowners, five
new rental households for every three homeowners (Goodman, Pendall, and
Zhu 2015). According to recent analysis by my colleagues Rolf Pendall
and Laurie Goodman, the United States added more than one million new
households in 2015, but only 620,000 net new units were added to the
stock, creating a shortage of just over 430,000 units. This gap has
pushed up home prices and rents, a trend that is likely to continue
(Pendall and Goodman 2016). Meanwhile, the stock of nonsubsidized
housing that is affordable to extremely low-income renters has steadily
declined. Thirteen percent of nonsubsidized units with rents at or
below $400 in 2001 had been demolished by 2011. Nearly half (46
percent) of the remaining units were built before 1960, putting them at
high risk of demolition (JCHS 2013). These market pressures are felt
first by families at the lowest end of the income spectrum, many of
whom are already severely cost burdened, further exacerbating their
ability to find safe, stable, affordable housing.
The supply of affordable rental housing is not keeping pace with
demand, in part because without scarce government subsidies, it is
nearly impossible to build and operate rental housing in most markets
(Blumenthal and Handelman 2016). Developers cannot make projects
targeted to low-income renters pencil out, meaning that the expected
revenue stream from rents is too low to cover the costs of maintaining
the property and to pay back the debt incurred in development. Lenders
loan money for housing development based on the property's expected
income, and when rents are set to affordable levels, there's a huge gap
between the money needed to build and the money lenders and investors
are willing to provide. Increasing rents to generate additional
expected income puts apartments out of reach for extremely and very low
income households. In order for developments to pencil out, owners need
subsidy contracts that guarantee a long-term commitment to cover the
gap between what extremely low-income tenants can afford and the
established rent.
the private market alone cannot supply affordable housing
These market dynamics are why building affordable rental housing is
truly a public-private partnership. But private contributions alone
cannot close the affordability gap.
Public subsidies are needed to close the gap between the costs of
constructing and operating affordable housing developments and the
revenue such developments are able to bring in. The largest subsidy
source for low-income housing development, the Low-Income Housing Tax
Credit, is designed to make units affordable to households with incomes
at 50-60 percent of AMI, up to twice the ELI limit. The assistance
available through Federal block grant programs (such as the Community
Development Block Grant) and most State and local programs cannot keep
housing affordable to ELI renters over the long term (Cunningham,
Leopold, and Lee 2014).
HUD's rental assistance programs are increasingly the only source
of affordable housing for ELI renters in many areas. Yet, the need for
rental assistance far exceeds the supply. Unlike other safety net
programs--like Social Security, food stamps, Medicaid, or Medicare--
housing assistance is not treated as an entitlement only 24 percent of
the 19 million eligible households receive assistance (JCHS 2013). As a
result, millions of low-income individuals and families face serious
challenges ranging from severe cost burdens to overcrowding to
homelessness.
Federal Rental Assistance Serves One in Four Eligible Households
Through a Variety of Programs
Publicly and privately owned rental housing supported with Federal
rental assistance represents an important supply of affordable rental
housing, especially for extremely low-income households. Over 5.1
million households use Federal rental assistance, which includes the
housing choice voucher program, project-based rental assistance and
public housing. Altogether these three programs cost nearly $35 billion
in fiscal year 2016 and that is to support a level of subsidy that does
not come close to fully meeting the need (NLIHC 2016). Sixty-eight
percent of rental assistance recipients are extremely low income,
meaning they earn 30 percent of area median income or less.
A mix of housing options is essential to serve the varied needs
individuals and families living in public and assisted housing.
Recipients of rental assistance include working families, single
adults, seniors, and people with disabilities. In 2014, over 70 percent
of non-elderly, non-disabled households receiving HUD rental assistance
worked (CBPP 2015). About one third of rental assistance recipients are
families with children. More than half of the recipients of Federal
assistance are seniors or people with disabilities. And, as the older
adult population grows and the number of senior renters doubles over
the next 15 years, they are likely to become a larger share of
households with rental assistance. For this population, rental
assistance is an essential protection, as the potential to increase
income is limited. Policies to support the housing needs of low-income
older adults could substantially improve their financial security
(Johnson 2015). Project-based units are especially important to seniors
and people living with disabilities as it allows for the colocation of
housing and services.
A brief overview of the programs follows:
--The housing choice voucher program is the dominant form of Federal
rental assistance. These tenant-based vouchers provide 2.1
million households with the opportunity to find housing in the
private rental market. Vouchers typically help pay the
difference between what a family can afford and the actual rent
of a unit that meet's HUD's health and safety standards, up to
a regionally determined rent limit (Leopold et al. 2015).
Families are expected to contribute the larger amount of either
30 percent of family income or the minimum rent amount of up to
$50. By law, 75 percent of new households admitted to the
voucher program each year must be ELI. Nearly 40 percent of the
households receiving housing vouchers are families with
children, while another 40 percent are elderly or disabled,
with some overlap (CBPP 2015).
--Project-based rental assistance operates through an agreement
between a private property owner and HUD. The program serves
1.2 million families. Households must contribute the greater of
30 percent of their income or a minimum rent of $25, while the
subsidy compensates the landlord for the difference between the
tenant portion and the contract rent. By law, 40 percent of the
project-based assisted units in a development must be
designated for ELI households (CBPP 2015). The vast majority of
developments were built between the 1960s and mid-1980s using
financial incentives that included low-cost mortgages and
subsidy contracts, but Congress has not authorized new subsidy
contracts since the late 1980s (Treskon and McTarnaghan 2016).
Nearly 50 percent of households assisted through the project-
based rental assistance program are elderly, and 15 percent are
disabled, with some overlap (CBPP 2015).
--Public housing units are owned and operated by local public housing
agencies. The program serves 1.2 million households, 72 percent
of which are extremely low-income. Some public housing
developments have been redeveloped as mixed-income properties,
primarily through HOPE VI and the Choice Neighborhoods
Initiative. New public housing is no longer being developed.
The backlog of capital needed to support existing public
housing has reached such a scale that it stands to jeopardize
the number of desperately needed units available. In 2010, HUD
estimated that 1.2 million public housing units needed an
estimated $25.6 billion for large-scale repairs (Finkel et al.
2010). As demand for affordable housing continues to rise, the
need to preserve the existing stock of affordable units is
vital--and less costly than building new rental housing. When
the full costs of both construction and upkeep are tallied, new
construction costs 25 to 45 percent more than preservation
(Wilkins et al. 2015; Brennan et al. 2013). Of the households
living in public housing, 33 percent are families with
children, 31 percent are elderly, and 21 percent are disabled
single adults or disabled adults with children.
Rental Assistance Strategies Need to Work for Both People and Places
U.S. rental housing policy is made up of many different tools and
levers that operate at the Federal, State, and local level. At the
Federal level, the Low Income Housing Tax Credit is the largest driver
of rental housing production, but it is not designed to meet the needs
of the lowest-income Americans. HUD's programs still fill that gap
through tenant-based and project based-assistance, which primarily
includes housing choice vouchers, public housing, Section 8 project-
based vouchers, Section 202 and Section 811 supportive housing, and the
newly established Housing Trust Fund. At the State level, housing trust
funds often play an important role in filling financing gaps in LIHTC
deals or providing rental assistance with State generated revenues. For
instance, 50 percent of the real estate transfer taxes collected in
Maine are dedicated to the HOME fund, which provides gap financing as
one of the eligible activities. Some States also raise capital through
bonds and tax credits for housing. For instance, there is a referendum
on the ballot in Rhode Island that would raise $50 million in bond
proceeds for affordable housing (Dunn 2016). Some States provide
incentives or require developers and local communities to better
integrate rental housing into low-poverty communities. At the local
level, cities and counties design and implement housing programs using
resources from CDBG and HOME tailored to local need. Cities also create
incentives to leverage private-market development to create greater
affordability and access to opportunity for low-income residents. Some
cities also dedicate significant local resources to affordable rental
housing.
This multiplicity of tools and approaches at different levels of
government is both a strength and weakness. It allows communities to
tailor housing strategies to market conditions, population need, and
goals such as affordability, stability, quality, and access to
opportunity; there are many ways to try to ``move the dial.'' But it
also signals a basic need that is underfunded at every level of
government. Every generation we create a new tool or strategy aimed at
solving a problem that is largely the result of insufficient resources.
We need an evidence-based portfolio of tools that can be tailored
to local context. But we also need sufficient investment to meet the
need of America's most-vulnerable households.
Below I outline five key ingredients to expanding and reforming
rental housing assistance to better meet the needs of people who cannot
afford housing, especially in areas of opportunity.
Expand Resources for Rental Assistance
A full expansion of assistance to all eligible ELI households is a
necessary ingredient to serving vulnerable households. Under current
policy, housing assistance is delivered through programs with more
losers than winners: only one in four eligible households receive
assistance. This imbalance creates fundamental challenges in the
housing system and reduces its general effectiveness.
For these and other reasons, in 2014, the Bipartisan Policy
Center's Housing Commission called for expanding the housing voucher
program to ensure that rental assistance is universally available to
all ELI households (Lubell 2014).The BPC estimated that expansion of
vouchers would extend subsidies to an additional 3.1 million
households, bringing the total assisted to 6.7 million. Through the
proposal, higher-income households would transition off vouchers,
shrinking the gap from 3.1 million to 2.9 million (BPC 2015).
Housing vouchers are extremely effective in helping low-income
families pay rent by filling the gap between what a household can
afford and the fair-market rent. Rigorous evidence from the Welfare to
Work voucher program found that receipt of a voucher reduced
homelessness by 74 percent (Patterson et al. 2004). Researchers at the
Urban Institute estimated that expanding housing vouchers to households
with children would reduce child poverty 20.8 percent from the current
baseline (Giannarelli et al. 2015).
Improve Access to Low-Poverty Areas
However vouchers alone may not be enough to effectively expand
housing choice at scale. Even with a voucher, families face constrained
choices due to factors such as lack of good information about
neighborhood and housing options, lack of affordable units in
opportunity-rich areas, and discrimination (Luna and Leopold 2013).
Therefore, expanding resources for vouchers alone will not necessarily
facilitate greater access to low-poverty neighborhoods.
The Obama administration has made some important strides to
increase housing choice voucher use in low-poverty communities. In
particular, HUD has proposed to expand the use of Small Area Fair
Market Rents (SAFMRs) in order to enable housing vouchers to be used in
neighborhoods with higher rents and presumably more amenities (Kahn and
Newton 2014). HUD's proposal, which concluded its comment period on
August 15, would require State and local housing agencies to use SAFMR
to set voucher subsidies in metro areas where vouchers are
disproportionately concentrated in low-income areas, and allow agencies
elsewhere to voluntarily adopt SAFMRs. Although the HUD approach is
sound, the Center for Budget and Policy Priorities has recommended that
HUD adjust its criteria for deciding where to require SAFMRs to ensure
the policy is doing the most good (Fischer 2016). In hot-market areas,
for instance, the policy may not be sufficient to help families access
opportunity areas and may need to be coupled with other strategies such
as counseling, source-of-income protections, portability between
housing authorities, and move-in assistance.
Additional low-cost or no-cost strategies for encouraging access to
opportunity neighborhoods includes giving greater weight to the
location of voucher holders when assessing public housing authority
performance, reinforcing compliance with the Affirmatively Furthering
Fair Housing rule, and giving housing authorities an administrative fee
bonus for better location outcomes (Sard and Rice 2016).
A complimentary strategy is HUD's policy for transferring budget
authority via Section 8(bb)(1) of the Housing Act. This tool can be
used for properties receiving the budget authority to move the subsidy
contract to a building in a low-poverty neighborhood. PBRA subsidy
contracts are a very important piece of a financing or refinancing
request. They help an affordable housing development pencil out, and
provide housing for extremely low-income households in areas with
greater opportunity.
Preserve Access to Low-Poverty Areas
At the same time, it is important to preserve existing Federal
investments in lower-poverty communities. Losing this resource by
contract expiration of project-based assistance or vouchering out
public housing would be a step backward in efforts to deconcentrate
poverty and expand access to opportunity. Project-based rental
assistance (PBRA) units house over 1.2 million low-income households
(Jordan and Poethig 2015). Thirty-three percent of active PBRA units
are at risk of loss largely because contracts that will expire in the
next 24 months, which will allow property owners to leave rental
affordability programs if they choose, or they are in poor physical
condition. This amounts to over 446,000 units at risk of losing their
affordability status. Sixteen percent of these at-risk PBRA units are
in neighborhoods with poverty rates below 10 percent. Preserving these
units leverages previous and existing investments to help keep low-
income families in higher opportunity communities. Several States and
cities have model approaches to encouraging preservation of at-risk
units, but they rely heavily on support from the philanthropic sector
and HUD regional office engagement, which is not uniform across the
country (Treskon and McTarnaghan 2016).
Another effort to improve and preserve the public housing stock is
the Rental Assistance Demonstration (RAD). This effort, currently still
a pilot program, helps convert public housing projects in need of
repair to project-based vouchers or rental assistance contracts. Doing
this enables public housing agencies more flexibility to access much-
needed private capital or other public funding sources, providing
another stream of resources outside the Federal Government to help
preserve and repair the backlog of capital needs. While this program
holds promise, it is not yet clear how RAD will reach, if at all, some
of the most distressed public housing units or units located in higher-
poverty communities with less market activity. We also need to know
more about how residents are faring through this conversion; an
evaluation underway by scholars at the Urban Institute is looking at
exactly this point. It is essential to better understand both the
impacts to properties and the people who call them home before reaching
a conclusion about the broader implications of the program.
Solve the Wrong Pockets Problem
More than half the recipients of Federal assistance are seniors or
people with disabilities (CBPP 2015). Housing stability and easy access
to services and amenities are paramount factors for these groups. A
growing body of evidence finds cost savings to other systems when
seniors and people with disabilities are stably housed and connected to
services. Yet, we do not have standard mechanisms for capturing those
savings in other systems like health and reinvesting them in the
housing supply.
One approach is to build a case that housing assistance should be a
reimbursable expense for Medicaid, especially when stable housing is
proven to lower healthcare costs. Another approach is to provide HUD
with demonstration authority to test different approaches, such as pay
for success, which would enable cost savings in one system to be
reinvested in affordable housing production or rental assistance. There
are several examples of pay for success transactions paying for
services on the site of affordable housing, but not the housing itself.
Some additional Federal incentives might encourage local demonstrations
that would use a pay for success model to finance rental assistance
(Pay for Success n.d.).
Grow the Evidence Base
As we anticipate future demand for affordable rental housing, it is
critical that we continue to grow our knowledge base about the most
effective strategies for meeting these needs. At all levels of
government, public leaders are increasingly leveraging the rapid growth
of available data to evaluate how well their programs are working--and
at what cost. Evidence-based policymaking is an approach to learning
and doing ``what works'' that involves both real-time performance
management strategies and longer-term evaluation of programs, as well
as innovative data linking and analysis that can reveal new insights
about how programs should be targeted. This data-centric approach can
build ground for bipartisan compromise, as evidenced in the
establishment of the Commission on Evidence-Based Policymaking, which
has been spearheaded by Speaker Ryan and Senator Murray.
While a great deal of research has shown the value of housing
assistance and mobility in increasing access to opportunity and
improving long-term outcomes, much more research and experimentation is
needed to discern the best ways to help families take advantage of
mobility. The Mobility Demonstration proposed in the President's budget
would go a long way toward building an evidence base for strategies
that encourage moves to low-poverty neighborhoods. It is also critical
that Moving to Work (MTW) agencies are investing in high-quality
evaluations of the interventions they are developing under their
authority.
At the same time, we need to invest more in research on how these
place-based investments may contribute to neighborhood revitalization
and improved resident outcomes. HUD has learned through the evolution
from HOPE VI to the Choice Neighborhoods program that a more
comprehensive community development approach to public housing
transformation better integrates the developments into their
surrounding communities and enables the public housing agency and its
partners to address longstanding issues such as crime, education, and
employment as part of overall redevelopment efforts. Through these
efforts, we have also learned that we need better mechanisms to protect
tenants from long-term displacement and support their ability to stay,
should they so choose. In communities that are revitalizing, place-
based investments such as public housing or PBRA can be an important
way to help residents stay and benefit from these changes but we need
better ways to track these results.
Continuing to build the evidence base on rental assistance will
require both increasing the supply of data available to researchers and
pursuing further opportunities to integrate existing datasets. While
much can be learned from surveys and from Federal, State, and local
administrative datasets, private property owners and managers are an
essential group in the evidence-building process; they often have more
nuanced, on-the-ground information about tenure and outcomes than
governments can collect. But because providing such information usually
isn't mandated by housing assistance programs, incentives should be
developed to encourage owners and managers to regularly submit data on
tenant outcomes. The form these incentives take may vary by program,
but getting more consistent information from private owners will give
researchers a clearer picture on best practices for place-based housing
assistance.
Finally, researchers must be able to better take advantage of the
rich datasets already available. Chetty's and Hendren's groundbreaking
research relied in part on connecting previously unlinked datasets from
government offices like the Census, the IRS, the Department of Housing
and Urban Development, and the Integrated Postsecondary Education Data
System. A range of other important data linking efforts are under way,
including the development of integrated data systems hosted by
universities, research organizations, or governments that serve as one-
stop-shops for researchers to connect datasets across scales and policy
areas. Though legal barriers and the important need to protect
individual privacy can make data linking slow, only by expanding access
to public data resources can researchers most effectively glean deeper
insights about families' needs and how these programs are able to meet
them.
Senator Collins. Thank you so much for your testimony.
We will next hear from Richard Gentry, the President and
CEO of the San Diego Housing Commission. I look forward to
hearing your testimony.
STATEMENT OF RICHARD GENTRY, PRESIDENT AND CEO, SAN
DIEGO HOUSING COMMISSION
Mr. Gentry. Thank you, Senator Collins, for having me here
today, and thank you, Senator Reed, for that kind introduction.
I do not know the quality of my track record, but I have been
around for a while. I began my 45th year in this industry
earlier this month, and I have worked in it all the way from my
home State of North Carolina to now southern California. And I
have seen a wide variety of iterations of affordable housing in
the country, and that does come to bear on what my testimony
is.
I will point out that I presented written testimony for the
record. I am not going to try to repeat that. We certainly do
not have the time for that, but I would like to hit three or
four of the highlights from that paper.
Number one is I do not think it is good to start with
defending particular programs. I think what is important are
the principles involved in who we serve and who pays the bill
for who we serve, and those principles are fairly obvious but I
think bear restating. And that is, that we should look to
achieve the greatest benefit of the program for the low-income
families who are served and also to maximize the efficiencies
and expenditures by the taxpayers who are footing the bill for
all of these programs one way or the other.
I think that the methodologies involved in responding to
those two principles are basically twofold. One I think is
providing choice to the families involved. And I think that we
transform low-income families from passive clients into active
consumers when they are able to make choices which, in turn,
empower them, and the choice of where a family lives is one of
the most basic I think that any of us can have. I think that
what can help turn a low-income family into a middle-income
family is the recognition that they have a choice in their
lives and that the choices they make can empower them and their
families.
I think, in turn, the methodology locally that will help to
create those choices are, as much as possible, local
decisionmaking. I think different jurisdictions across the
country have unique housing needs. I have seen that in the
course of my career which has taken me from North Carolina to
Texas back to Virginia, to Chicago, where I worked across the
country as a low-income housing tax credit syndicator, and now
to San Diego.
I think that decisions are best made when they are made on
the local level. There is a term that is in great use in the
European Union that I think would apply to this country as
well, and that term is ``subsidiarity.'' And subsidiarity means
over there that when I make a decision in Brussels, if it can
be made in London, why make it in London if it can be better
made in Liverpool. And I think the analogy here is why make a
decision in Washington, D.C. if that decision can be made in
Sacramento. Why make it in Sacramento if it can be made in San
Diego?
So I think getting the decisionmaking as close to the local
action as is possible with the flexibility inherent in those
decisions is another key to providing choice to the families
and ensuring not only do the families get served well but that
the taxpayers are rewarded with efficient programs as well.
That said, it is my belief in my 44 years of experience
that public housing is itself a failed business model. It does
not work. It is a top-down command-and-control, one-size-fits-
all formula that tries to wedge everybody into the same box.
And that is not to denigrate either the residents of the
programs or the program operators. Indeed, if you can make a
public housing program work, you can make just about anything
in this country work in my opinion.
What I believe, though, is that the public housing program
as it has been traditionally applied is like a metaphor of an
assembly line. High volume of the same thing, which may have
fit this country well in decades past. I think a better
metaphor for our current society is that of a network of smart
phones and personal computers that have the same platform but
provide great variety in use of flexibility for the end user.
That said, the Section 8 housing choice voucher program works
very well in providing that flexibility.
I will point out as well that what we have tried to do in
San Diego--and I would refer you to the San Diego model as
spelled out in the paper and as described in great detail on
the Housing Commission's website--is what I believe the
industry needs to move to. That is a balance between supply-
side and demand-side housing for this business. And please bear
with me. I always get those two mixed up.
The supply side is making sure that there is product to be
housed in and the subsidies needed for that. Demand side is
subsidies to the consumer to help them choose where to live and
live in it successfully. I think getting a proper balance
between those two is utterly crucial as we move forward.
I would be glad to go into that in more detail during
question and answer.
[The statement follows:]
Prepared Statement of Richard C. Gentry
introduction
Good morning, Chair Collins, Ranking Member Reed, and members of
the subcommittee. I am Richard C. Gentry, the President and Chief
Executive Officer of the San Diego Housing Commission, which serves
low-income residents in the city of San Diego--the eighth largest city
in the Nation and second largest city in California. I am honored to be
here today to testify about Federal Section 8 Housing Choice Voucher
rental assistance and public housing.
I began working in San Diego in 2008; however, my experience in
affordable housing spans 44 years--beginning with the U.S. Department
of Housing and Urban Development (HUD) in 1972. I have served as the
CEO of the public housing authorities in Austin, Texas, and Richmond,
Virginia, as well as working in the private sector as the Senior Vice
President of Asset Management for the National Equity Fund in Chicago,
Illinois, the Nation's largest nonprofit Low-Income Housing Tax Credit
syndicator, and as the Vice President for Public Housing Initiatives at
the Local Initiatives Support Corporation (LISC) in Washington, D.C. My
opinions today reflect the diversity of my background and the breadth
of my experience.
Federal housing programs should be guided by two principles:
1. Achieving the greatest benefit of the program for the low-
income families that are served; and
2. Maximizing efficiencies in the expenditure of taxpayer funds.
With this in mind, methodologies need to be evaluated to determine
if they are the best practices to accomplish the mission of assisting
individuals and families in the most effective way.
As methodologies are evaluated, two additional factors are
essential to consider:
1. Housing Choice--Low-income families are transformed from
``clients'' into ``consumers'' when they are able to make
choices, which empowers them. A lack of choices hinders
families from reaching the middle class.
2. Local Decision-making--Different jurisdictions across the
country have unique housing needs. With this in mind, decisions
are most effective when they are localized as often as possible
and are made at the level closest to the jurisdiction.
Public Housing and Section 8 Housing Choice Voucher Rental Assistance--
History
Federally funded public housing in the United States dates back to
the Housing Act of 1937, which provided Federal funds to public housing
for low-income working class families. However, public housing
proliferated after the Housing Act of 1949, which began applying income
limits so that public housing served low-income residents, while
working class families were supported in their access to private sector
housing.
HUD was created by legislation in 1965 to oversee Federal housing
programs for vulnerable low-income households, such as seniors,
individuals with disabilities, and families.
The Housing and Community Development Act of 1974 and subsequent
revisions to it, along with program rules from HUD, created the Section
8 Housing Choice Voucher rental assistance program.
It is important to note that private sector rental housing today
continues to provide the majority of the rental housing opportunities
for both Americans who receive Federal housing assistance and those who
do not.
According to HUD, approximately 1.1 million American households
live in public housing, which is 1 percent of the approximately 116
million households in the United States, based on U.S. Census Bureau
data. In addition, approximately 3.4 million households, or 2.9 percent
of all households in the United States, receive Federal Housing Choice
Voucher rental assistance or Project-Based rental assistance, according
to HUD's proposed budget for fiscal year 2017 (October 1, 2016--
September 30, 2017).
With that said, I believe that 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 in Washington, D.C., that is intended for implementation
uniformly across the country. In a country as large and diverse as the
United States, a public housing program with centralized mandated rules
does not work.
This is not criticism or denigration of the low-income individuals
and families who live in public housing or those who operate the
program. However, the program's structure is flawed and needs to be
changed to more efficiently use taxpayer resources to serve the housing
needs of low- income Americans.
The public housing program reflects an assembly line methodology of
producing a high volume of uniform housing across jurisdictions, which
was better suited to American culture decades ago in the 1930s, 1940s
and 1950s.
However, today's culture reflects the influence of technological
advancement and is analogous to a network of smartphones and personal
computers supported by a standard structure, but with variabilities to
meet individual needs. The Section 8 Housing Choice Voucher rental
assistance program better serves this culture, delivering
individualized assistance tailored to the needs of the individual
customer.
The Section 8 Housing Choice Voucher rental assistance program is
the most useful affordable housing program that I have seen the Federal
Government develop in my 44 years working with affordable housing. It
is the most effective option available in the United States today and
in the future for providing affordable housing for low-income
individuals and families.
In addition, it is important to keep in mind the need for funding
at appropriate levels if public housing is converted to Housing Choice
Voucher rental assistance. In its fiscal year 2017 budget, HUD proposed
funding approximately $9,500 per family for Housing Choice Voucher
rental assistance ($20.9 billion for 2.2 million families), compared
with approximately $5,863 per family for public housing ($6.45 billion
for 1.1 million families). Therefore, to successfully address
affordable housing needs, the conversion of public housing to Housing
Choice Voucher rental assistance requires a corresponding increase in
funding per family.
As this subcommittee considers the question, ``Housing vulnerable
families and individuals--is there a better way?'' I submit that
providing affordable housing opportunities should look much like the
San Diego model, with the innovative approaches we have implemented at
the San Diego Housing Commission (SDHC).
public housing conversion--the san diego model
A landmark agreement on September 10, 2007, between SDHC and HUD
transferred full ownership and operating authority for 1,366 public
housing units to SDHC--the largest public housing conversion at the
time.
``San Diego knows more about what San Diego needs than the Federal
Government does. And when San Diego came to me and said we need to do
this, I was compelled to listen,'' said Orlando Cabrera, the former HUD
Assistant Secretary, who approved the landmark agreement with SDHC.
SDHC paid HUD $1,366--a nominal $1 per unit--to acquire 137
properties with a combined fair market value of $124.2 million. All the
properties were debt-free.
In exchange, SDHC committed to leverage the equity lying fallow in
these former public housing units to create at least 350 additional
affordable housing units--a number SDHC far surpassed.
The SDHC Board of Commissioners and the San Diego City Council
approved SDHC's application to withdraw from HUD's public housing
program, which HUD also approved.
``What the San Diego Housing Commission did was basically say we
can't rely on the Federal taxpayer to continue to maintain units,
because it's not serving our residents well. It's not serving our
community well. They essentially took resources, and then they created
better units with them,'' said former HUD Assistant Secretary Cabrera.
Creating and Preserving Additional Affordable Housing
SDHC presented HUD with a variety of options it was considering to
fulfill the obligation for the creation of additional affordable rental
housing units.
HUD responded on Oct. 17, 2008, by approving seven options, all of
which required SDHC to have a property ownership.
Ultimately, SDHC chose two courses of action that would create and
preserve affordable housing for families in the city of San Diego:
1. Purchase the land and provide a loan and ground lease to the
developers. After the 15-year tax credit compliance period,
SDHC would have the option to buy the public-private
partnership properties.
2. Purchase property directly or in partnership with a government
agency.
Also required were a series of administrative steps to obtain the
appropriate local approvals from the SDHC Board of Commissioners and
the San Diego City Council, sitting as the Housing Authority of the
City of San Diego.
These approvals would bring about internal changes to past
operating practices and set up SDHC for the financing and ongoing
management of the public housing conversion program.
SDHC then implemented an innovative Finance Plan that was developed
in 2009, which leveraged significant private sector financial
investment.
San Diego City Councilmember Todd Gloria, who served on the SDHC
Board of Commissioners at the time the agreement with HUD was being
negotiated, said: ``I think the concern that I had was how do we
maintain the solvency of the agency as we saw the subsidy being
reduced. That obviously produced a lot of financial challenges to the
organization.''
SDHC leveraged the equity from this new real estate portfolio to
create or preserve 810 additional affordable housing in the city of San
Diego through direct acquisitions and public- private partnerships. All
of the units will remain affordable for at least 55 years.
Minimizing Financial Risk
In its loan underwriting, SDHC sought to minimize any financial
risk. Among the key elements of the borrowing:
--Both Fannie Mae and FHA mortgage programs were used as sources of
borrowing, providing more than one option for capital under
circumstances when time was of the essence.
--SDHC limited its use of equity to only 78 converted public housing
properties of five units or more, a total of 1,254 units.
--While lenders would have accepted a loan-to-value ratio (LTV) of 80
to 85 percent, SDHC limited itself to 70 to 75 percent,
providing additional cash flow to support the debt load going
forward.
--Variable interest rates were slightly better at the time, but SDHC
used fixed-rate loans only to better quantify its risk, and
used 30-year instead of 10-year loans.
--Reserve accounts also were established.
When SDHC closed its loans with Fannie Mae on December 30, 2009, it
had raised $37.1 million at a 7.32 percent interest rate.
The FHA loans closed on August 31 and September 30, 2010. SDHC
raised $58.2 million with a 3.76 percent interest rate.
Rehabilitating Former Public Housing Units
Lender requirements prompted SDHC to collect financial statements,
rent rolls, appraisals, title and zoning reports, regulatory agreements
and other documents--as many as 80 reports per property--on the 78
former public housing properties that were leveraged.
After the properties were reviewed, lenders requested that SDHC
perform critical and non- critical repairs. While the original work
list was lengthy, it was limited in scope.
SDHC capitalized on this opportunity to expand the scope of work
and provide a more comprehensive rehabilitation program than what was
required by the lenders. At the conclusion of rehabilitation, nearly
$3.2 million had been invested in the physical assets.
Housing Choice Vouchers for Residents
When the former public housing units converted to SDHC ownership,
residents were provided with Federal Section 8 Housing Choice Vouchers.
They could then use the vouchers at their existing units or take
them with them as rental assistance to another rental home of their
choice.
This expanded the opportunities for affordable housing to hundreds
of additional San Diego families and provided them with more choices.
Approximately 50 percent of the residents chose to stay at their
existing units.
Vacancies in SDHC properties were filled with families who met the
income eligibility established in the agreement with HUD.
Local Action Amid Declining Federal Investment
The public housing conversion emerged from a growing realization by
the SDHC Board of Commissioners and executive leadership that SDHC's
dependence upon the Federal Government's historic investment in
construction and maintenance of public housing could not be sustained
under the current Federal model.
Federal public housing subsidies for operations and maintenance
were based on a formula, were not keeping pace with need, and were
counterproductive to good private sector management techniques. Across
the Nation, fewer new public housing units were being developed despite
a growing demand for workforce and family housing.
``I think one of the most important things is that it created
public-private partnerships, gave the Housing Commission the ability to
sustain even more affordable housing units and to serve more people, to
serve more families. And today if you look at the environment around us
where you see an economic downturn, foreclosures, families who are in
greater need than they were before, you know it was a really smart
thing to do,'' California State Assembly member Toni Atkins, the former
Speaker of the California State Assembly and a former San Diego City
Councilmember, said in 2012.
On October 2, 2012, SDHC published a special multimedia digital
report about the landmark public housing conversion and SDHC's Finance
Plan, which is used today by other public housing authorities as a
manual to emulate. The report, ``Creating Affordable Housing Through
Public Housing Conversion,'' is posted on SDHC's website: http://
www.sdhc.org/uploadedFiles/Media_Center/Digital_Reports/Public
HousingConversionReport.pdf.
In addition to SDHC's own particular type of public housing
conversion, there is another landmark Federal program that provides
additional public housing authorities with similar opportunities to
transform or enhance their public housing:
Rental Assistance Demonstration
Nearly 4 years after SDHC's landmark public housing conversion
agreement with HUD, the Federal Consolidated and Further Continuing
Appropriations Act, 2012, was enacted on November 18, 2011, creating
the Rental Assistance Demonstration (RAD) program.
RAD allows public housing to be converted to long-term, Section 8
Housing Choice Voucher project-based rental assistance contracts. This
conversion under RAD enables properties to obtain private financing to
perform maintenance that had been deferred.
Although SDHC has not yet participated in RAD, we may utilize RAD
in the future for our 189 remaining public housing units, and we
support the public-private principles RAD is based upon.
providing federal rental assistance
Section 8 Housing Choice Vouchers
SDHC's largest program is Section 8 Housing Choice Voucher rental
assistance.
More than 15,000 low-income households in the city of San Diego,
including formerly homeless San Diegans and chronically homeless
Veterans, receive Federal Section 8 Housing Choice Voucher rental
assistance from SDHC.
These households include more than 37,000 men, women and children.
Approximately 56 percent of these households are seniors or
individuals with disabilities.
In addition to assisting low-income households to obtain rental
housing, SDHC's Housing Choice Voucher program invests millions of
dollars in the local economy each year.
In fiscal year 2016 (July 1, 2015--June 30, 2016), SDHC paid
$143,377,584 to approximately 5,600 participating landlords in the city
of San Diego, who are essential to providing affordable housing to low-
income San Diegans.
SDHC engages with private sector landlords to establish more
affordable housing opportunities by providing Federal rental
assistance.
SDHC partners with HUD to provide the most vulnerable San Diegans
with rental assistance to help them locate housing in the competitive,
high-cost San Diego rental housing market.
In addition, this program allows local agencies, such as SDHC, the
flexibility to categorize Housing Choice Vouchers in ways that best
serve their local communities, such as:
--Project-Based Housing Vouchers: Federal Project-Based Housing
Vouchers are awarded to specific affordable housing
developments to provide rental assistance linked to their
units. When a tenant moves, the rental housing voucher remains
with the affordable housing unit so that another low-income or
homeless San Diegan is able to move into the unit and receive
rental assistance.
--Sponsor-Based Housing Vouchers: SDHC awards Federal Sponsor-Based
Housing Vouchers to nonprofit organizations, or ``sponsors,''
that provide supportive services to homeless San Diegans.
Sponsor-Based Housing Vouchers provide rental assistance that
pays up to 100 percent of the tenant's rent, depending on their
income level.
Moving to Work
The U.S. Government's creation of the ``Moving to Work'' program in
1996 established a significant tool to provide affordable housing
opportunities, combining the flexibility to foster innovation with
continuing government oversight from HUD. Public housing authorities
must submit their proposed new MTW programs to HUD for approval.
MTW lessens the impact of the top-down approach of the public
housing program because it provides flexibility and allows local
agencies to determine the most effective programs for their
communities.
MTW has been especially significant in the expensive housing
markets of California, including San Diego.
SDHC is one of only 39 public housing agencies, out of 3,400
nationwide, to receive the MTW designation from HUD, which allows
flexibility to create innovative, cost-effective approaches to provide
housing assistance to low-income families.
I want to thank the members of this subcommittee for your efforts
to extend the contracts of MTW agencies, such as SDHC, for 10 more
years, through 2028, which was approved in the Consolidated
Appropriations Act of fiscal year 2016 on December 18, 2015.
This Congressional action also will expand the MTW program to an
additional 100 public housing agencies across the country. I believe
that the MTW program should eventually apply to all public housing
agencies other than those identified by HUD as ``troubled'' to provide
them with the structure and flexibility to design programs in their
communities.
In San Diego, the MTW program has allowed SDHC to encourage
families and reward them for productive activities, as you will see in
my comments about the SDHC Achievement Academy.
SDHC's MTW initiatives provide: opportunities for Section 8 Housing
Choice Voucher rental assistance participants and public housing
residents to become more financially self-reliant; funding toward the
creation and preservation of affordable housing for homeless San
Diegans; and rental housing vouchers to address homelessness.
SDHC Achievement Academy
A significant component of SDHC's MTW initiatives is that we want
to reward households for taking steps to move to work. The SDHC
Achievement Academy is a critical MTW initiative to help low-income
residents break the cycle of poverty and become more financially self-
reliant.
On October 4, 2010, SDHC opened the SDHC Achievement Academy, a
state-of-the-art learning and resource center and computer lab at
SDHC's headquarters in Downtown San Diego. The SDHC Achievement Academy
provides programs that emphasize career planning, job skills and
personal financial education--at no cost to Section 8 Housing Choice
Voucher rental assistance participants and public housing residents.
In fiscal year 2016 (July 1, 2015--June 30, 2016), 1,930
participants received services at the SDHC Achievement Academy.
The SDHC Achievement Academy's main program is Family Self-
Sufficiency (FSS).
Heidi, age 39, was a homeless, pregnant teen when she began
receiving Federal rental assistance from SDHC in 1997. She began
participating at the SDHC Achievement Academy in 2012 and enrolled in
FSS.
Working as a waitress, she was able to obtain an associate's degree
in 2007. Two years later, she graduated from California State
University, San Marcos with a bachelor's degree in criminology and
justice studies. In spring of 2016, she earned her doctorate degree in
sociology from the University of California, San Diego.
``There is absolutely no way that I would have had the opportunity
to go to school if I didn't have my rent subsidized. I didn't have to
work three jobs to support my family. I was able to take that time and
go to school. I always felt like I had someone in my corner, someone
that supported me, someone that wanted me to be successful, and I'm
speaking specifically of FSS,'' Heidi said.
Heidi is looking for work as a professor and plans to phase out of
Federal rental assistance, making assistance available for another low-
income family.
SDHC utilized MTW flexibility to redesign the SDHC Achievement
Academy's FSS, program, to provide enhanced opportunities for families
to become more financially self-reliant.
Currently, 327 individuals are participating in the SDHC
Achievement Academy's FSS program.
A voluntary, 2-year program, FSS provides a variety of courses,
including: job training, career planning, and financial literacy
education, such as budgeting, saving, establishing good credit, and
income tax preparation.
Participants are required to follow a career plan and obtain a job
working at least 32 hours per week. FSS is available at no charge to
the head of household receiving SDHC HCV rental assistance and public
housing residents.
SDHC Achievement Academy FSS participants are able to earn up to
$10,000 in an interest-bearing escrow account based upon their
educational and employment-related accomplishments. Funding for these
financial incentives is provided by HUD. FSS program participants may
use these funds as they wish when they complete the program.
Path to Success
With the flexibility provided by MTW, SDHC created the Path to
Success initiative to encourage Housing Choice Voucher families to
become more financially self-reliant.
Under Path to Success, SDHC identifies Housing Choice Voucher
rental assistance participants who are able to work (Work-Able).
With approximately 2,800 Work-Able families now paying toward their
rent for the first time, SDHC's goal is to expand the Housing Choice
Voucher program to those families on the waiting list, if it is
financially feasible.
Providing rental assistance to families who are not working
requires more Federal funds than assisting working families who
contribute toward their rent.
Work-Able Families:
--Households with at least one adult who is under 55, not disabled,
and not a full-time student ages 18-23.
--Full-time students ages 18-23 are considered Work-Able if they are
the spouse, head or co-head of the household.
--Income and household circumstances are reviewed every 2 years
instead of annually.
SDHC sees Housing Choice Voucher participants as partners in
utilizing limited Federal funds to help as many families in need as
possible.
Path to Success sets minimum monthly rent payment amounts for Work-
Able families.
New minimum monthly rent payment amounts were implemented for Work-
Able families, effective July 1, 2015:
--Households with one Work-Able person now pay a minimum rent of $300
(up from $200); and
--Households with two or more Work-Able individuals now pay a minimum
rent of $500 (up from $350).
When the Path to Success initiative was implemented on July 1,
2013, the initial minimum monthly rent payment amounts were based on
California's minimum wage standards--$8/hour at the time.
SDHC determined what a Work-Able household could earn working 20
hours a week at minimum wage, and then calculated minimum rent payment
amounts that would be approximately 30 percent of that monthly figure.
SDHC's Housing Choice Voucher program includes 6,587 Work-Able
households. Of these, 2,814 pay minimum rents.
Work-Able families pay either the minimum monthly rent payment
amount or the rent payment amount based on the family's annual income,
whichever is greater.
Adjusted annual income is separated into income ranges. The lower
edge of the range is used to calculate the family's rent payment.
Example:
--The monthly rent payment amount for any family with adjusted annual
income between $20,000 and $24,999 will be calculated using
$20,000 as their income.
--It is possible that a family's monthly rent payment amount may
decrease under Path to Success.
Hardships
Families may apply for a temporary hardship exemption from the
minimum monthly rent payment amounts.
If the exemption is approved, the household is required to
participate in SDHC Achievement Academy work readiness programs for the
duration of the hardship period.
Elderly/Disabled Families:
The Path to Success minimum rent payment amounts do not apply to
Elderly/Disabled households:
--Households where all adult family members are 55 or older,
disabled, or a full-time student ages 18 to 23.
--Income and household circumstances will be reviewed every 2 years
instead of annually.
--The minimum monthly rent payment amount for an Elderly/Disabled
family is $0.
Choice Communities
In San Diego, one of the programs that helps to achieve economic
integration through more economically diverse, balanced communities is
SDHC's Choice Communities program (not the Federal Choice Communities
program), an MTW initiative that began on January 1, 2010.
SDHC's Choice Communities program helps Section 8 Housing Choice
Voucher rental assistance participants move from high- and medium-
poverty areas to low- poverty neighborhoods in the city of San Diego.
Since the launch of the program, 290 low-income families in the
city of San Diego have been able to move to areas with more options for
transportation, schools, and employment opportunities.
Leasing a three-bedroom home from a private landlord was possible
for Maria and her two sons, ages 6 and 12, because of SDHC's Choice
Communities program. A no-interest loan through the program helped
Maria pay the security deposit for the rental home.
``I would not have been able to do that on my own because that's a
lot of money for me as a single mom,'' said Maria, who works in
customer service for a local hospital. Maria has received Federal HCV
rental assistance for the last 6 years.
The Choice Communities program:
--Allows a higher monthly rent subsidy, or ``payment standard''
--Provides no-interest loans of up to $1,450 for security deposits,
to be paid to the property owner, with low monthly repayments
--Provides additional resources, information and guidance to families
interested in moving to one of the specified low-poverty Choice
Communities
Overall, 807 Housing Choice Voucher families live in Choice
Communities, including families who lived in these neighborhoods before
the Choice Communities program began or who are new to SDHC's Housing
Choice Voucher program and chose to live in these communities.
I believe that, as we move forward, many of the programmatic tools
already exist to assist low- income families, as I have shown with the
San Diego model for public housing conversion and SDHC's MTW
initiatives. To help low-income families move out of poverty, it is
essential for local agencies to be provided with the flexibility to
choose the options that show the greatest success in their communities.
As local agencies make these decisions, they are held accountable by
HUD and local governing bodies, such as the SDHC Board of Commissioners
and the Housing Authority of the City of San Diego.
addressing homelessness
The flexibility to meet local needs is utterly essential to
effective affordable housing strategies. Challenges are not the same in
all cities and counties across the country. A specific challenge for
affordable housing in San Diego is homelessness.
The San Diego region ranks fourth in the Nation in homeless
population, behind New York, Los Angeles, and Seattle, according to the
Annual Homeless Assessment Report to Congress, published in November
2015.
Housing First Model
The future of affordable housing includes providing housing
opportunities for homeless seniors, Veterans, families, and
individuals.
SDHC is a driving force of the national Housing First model in the
city of San Diego--to provide homeless individuals with housing as
quickly as possible, with supportive services as needed.
As an MTW agency, SDHC on July 1, 2010, became one of the first
public housing authorities in the Nation to receive approval from HUD
use Federal rental housing voucher funding to provide long-term housing
for chronically homeless individuals.
HUD also approved SDHC's request to utilize its MTW status to
invest its Federal funds to preserve or build affordable housing for
homeless San Diegans.
housing first--san diego
SDHC is applying the power of these Federal resources to address
homelessness through HOUSING FIRST--SAN DIEGO, SDHC's 3-year
Homelessness Action Plan (2014-17), which was launched on November 12,
2014.
Award Development Funds--Up to $30 Million over 3 years (Up to $10
million each year) to create permanent supportive housing that will
remain affordable for 55 years.
To date, SDHC has awarded $12 million in Federal, State, and City of
San Diego funds administered by SDHC to four developments,
which will provide a total 167 affordable housing units for
homeless individuals.
Commit up to 1,500 Federal Rental Housing Vouchers for Permanent
Supportive Housing to provide housing to homeless individuals and
families (Award up to 300 new housing vouchers each year to complement
576 housing vouchers already awarded).
To date, SDHC has awarded a total of 822 Federal rental housing
vouchers.
Renovate Hotel Churchill--72 Units of Permanent Supportive Housing:
56 units for homeless Veterans; 8 units for transitional age youth ages
18-25, such as youth aging out of foster care; and 8 units for adults
exiting the corrections system who also need supportive services.
The grand reopening of the historical Hotel Churchill was celebrated
on Monday, September 19. SDHC worked with our nonprofit
affiliate, Housing Development Partners, to rehabilitate Hotel
Churchill. SDHC invested $9.2 million in MTW funds; $2.9
million in HOME Investment Partnerships Program funds awarded
by HUD to the City of San Diego and administered by SDHC; and
$3.2 million in City of San Diego funds administered by SDHC
toward the $20.6 million rehabilitation cost.
Invest MTW Federal Funds to Acquire Property that sets aside 20
percent of its units for permanent supportive housing for homeless San
Diegans.
SDHC invested $15 million in MTW Federal funds to purchase the 120-
unit Village North Senior Garden Apartments. Twenty percent of
the units--24 units--are set aside for homeless seniors.
Dedicate SDHC-Owned Housing Units--25 for Homeless San Diegans.
SDHC is one of the first public housing agencies in the Nation to
commit affordable rental housing that it owns for this purpose.
This is a rapid re-housing component of HOUSING FIRST--SAN DIEGO.
Since the program began, 13 families have become financially
self-reliant and are now able to pay full rent or have moved to
another apartment. The program served 135 individuals,
including 87 children and 13 Veterans.
SDHC's multimedia digital report about HOUSING FIRST--SAN DIEGO was
published on November 21, 2014, and is posted on SDHC's website:
http://www.sdhc.org/uploadedFiles/Media_Center/Digital_Reports/SDHC%20
Homelessness%20Action%20Plan.pdf.
New initiatives for the second year of HOUSING FIRST--SAN DIEGO
include:
--The 1,000 Homeless Veterans Initiative.--Provide housing
opportunities for 1,000 homeless Veterans in the city of San
Diego within 1 year--March 2017.
Nearly 330 homeless Veterans have secured housing through SDHC's
The 1,000 Homeless Veterans Initiative, which has four program
components:
--Landlord Outreach--``Housing Our Heroes''
--Rapid Re-housing Assistance
--SDHC Federal Veterans Affairs Supportive Housing Vouchers
--SDHC Federal Housing Vouchers with Supportive Services
The Guardian Scholars Program at San Diego State University
(SDSU)--A nationally unprecedented partnership between SDHC and SDSU to
provide rental assistance for up to 100 students who have been homeless
or at risk of homelessness.
The Monarch School Project--Federal housing vouchers for 25
families with students impacted by homelessness.
News releases about these new initiatives are available on SDHC's
website:
--July 20, 2016: The 1,000 Homeless Veterans Initiative http://
www.sdhc.org/uploadedFiles/Media_Center/News_Releases/
NR%20Housing%20Our%20
Heroes%20%20Progresss%20Report7.20.16.pdf.
--December 3, 2015: The Guardian Scholars Program and The Monarch
School Project http://www.sdhc.org/uploadedFiles/Media_Center/
News_Releases/NR.
SDHC-SDSU%20HousingFirstSanDiego.12.3.15.pdf.
conclusion
Creating more affordable housing opportunities for low-income
families requires innovative solutions that foster public-private
partnerships.
As SDHC's experience demonstrates, converting public housing to
Section 8 Housing Choice Voucher rental assistance is the type of
ingenuity needed to maximize the benefit to low-income families, and to
ensure that taxpayer funds are utilized efficiently.
With Section 8 Housing Choice Voucher rental assistance, low-income
families are able to choose the housing that meets their individual
needs, empowering them to be active consumers instead of clients--an
option that public housing does not provide. In addition, the local
economy benefits from the infusion of Federal funds paid to private
landlords, who are essential partners.
The flexibility afforded by the MTW program enhances Section 8
Housing Choice Voucher rental assistance to achieve additional
beneficial results.
As approaches toward affordable housing evolve in the United
States, I encourage all of us to be constantly open to identifying a
continuously changing variety of solutions and to recognize the
importance of both the government and the private sector to meeting the
housing needs of our unique communities.
Senator Collins. Thank you very much for your testimony as
well.
Let me start with you, Mr. Gentry. The conversion of public
housing at the San Diego Housing Commission was a long,
multiyear effort, and I am sure at times that it was an
extremely difficult one. I have a couple of questions for you.
One, as you reflect on the experience, what was the biggest
challenge and the greatest success?
MOVING TO WORK PROGRAM
And second, how important was the Moving to Work program,
which we have expanded, or was the Moving to Work program an
important part of that conversion?
Mr. Gentry. Ma'am, the biggest challenge was simply getting
people to understand that we were not walking away from our
responsibilities. In fact, we had a lot of criticism early on
from people who you would have thought would have some of our
best supporters that we were walking away from our
responsibilities and did not want to serve poor people anymore.
And the analogy I use for that is that people sometimes cannot
differentiate between methodology and mission, and if the
methodology changes, I think you have abandoned your mission.
My belief is that methodologies are in constant flux,
constant change, and we should be continuing trying to do
things better as we move forward and that is, we are
continually breaking the mold and doing things in better and
different ways. It does not mean we are walking away from our
mission.
So I think simply getting folks to understand and support
what we were doing throughout the community and also in this
city frankly was our biggest problem. Beyond that, it was just
a matter of working it out.
In terms of Moving to Work--and San Diego is one of the
original Moving to Work agencies--my predecessor had
unfortunately let the Moving to Work program lapse over the
years so that it was abeyance at the time that the public
housing conversion was approved by HUD, which was in September
of 2007.
DEMOLITION/DISPOSITION ACTIVITY
The authorizing legislation was the demolition disposition
part of the Housing Act of 1998. And in that regard, the
conversion can be done by any agency whether they are moving to
work or not.
I will point out also, because the critics will hear the
demo dispo word and think that we got rid of property or walked
away from our responsibilities, the Housing Commission in San
Diego did not demolish a thing. We have not disposed of a
thing. We still have those 1,366 units in our inventory. It is
just that they are operating on San Diego Housing Commission
principles now rather than public housing principles.
Senator Collins. Ms. Poethig, we know that the research
tells us that the ZIP code in which one is raised is a likely
predictor on how one is going to do in life. So it has a real
impact on our children. You can go by public project housing in
Washington, D.C. It is often dilapidated in high-poverty areas.
The schools in those areas are not good.
Is continued subsidization of public housing in
neighborhoods like the ones I described just perpetuating
problems and an ineffective use of Federal resources?
There is an amazing study that was done by the Robert Wood
Johnson Foundation that you may be familiar with that
determined that the variation between neighborhoods can be so
dramatic that in Richmond, Virginia, babies born within 5 miles
of downtown Richmond face up to a 20-year difference in life
expectancy.
PROJECT-BASED RENTAL ASSISTANCE
Ms. Poethig. Madam Chairwoman, I share your concern about
the public housing units that are in neighborhoods over 40
percent concentrated poverty and that there have to be better
alternatives, if there are better alternatives. And I am happy
to submit more information for the record because I think we
should draw upon the experience of the vouchering out of public
housing in Chicago, the Robert Taylor homes in particular, that
were vouchered out without a particular plan, and what happened
was people actually resegregated into some of the very same
communities. So vouchers did not necessarily promote the
mobility of those families, and there were other concerns
associated with rapid vouchering out that did not have an
attendant plan.
Senator Collins. Thank you.
I have 5 seconds left, so I guess I will have to yield to
my ranking member. And I will come back to you, Dr. Olsen, on
the next round. Senator Reed.
Senator Reed. Well, thank you very much, Madam Chairwoman.
HOUSING CHOICE VOUCHERS
Ms. Poethig, again, without the basis of the kind of
analysis that Dr. Olsen and Mr. Gentry and you have done, the
perception is, particularly after 2007-2008 with the housing
crisis, people would buy houses because you could do it. If you
saw ``The Big Short,'' you could do it with lots of interesting
approaches.
Now there has been a huge shift into the rental market,
driving the price up. And underlying the discussion about
vouchers versus place-based support is the assumption that a
voucher will get you a home. In fact, in some of these studies,
the voucher will get you a home in a really great ZIP code.
What is the reality? Does the voucher get you a home, or you
have a voucher, but you do not have anyplace to live?
Ms. Poethig. Thank you, Senator.
So as you know, the Raj Chetty study, the study by Harvard
economists, has this incredible result. But Dr. Chetty has also
said that it is mathematically impossible to imagine that all
the people living in public housing in highly concentrated
areas of poverty could, in fact, find housing in areas of low
poverty. So that is just at a macro level.
Then within certain markets in certain communities, it is
absolutely appropriate to be concerned about whether there is a
supply of affordable rental housing available, particularly as
we are going to be growing in the number of renters, even
exceeding the number of homeowners in the next 15 years. And as
that demand grows, it will put pressures on the supply that is
not currently keeping up with demand. Currently we have 11.2
severely cost-burdened households, 70 percent of which are
extremely low-income. These are people without assistance. So
we have a ready group of people that fall in and out of
homelessness as a result of not having sufficient supply.
Senator Reed. Dr. Olsen, your comments? Because, again, I
think this is a critical question because there is some
compelling logic but also the reality is will this result in
higher cost to the Federal Government as rental prices go up.
Will it result in homes as people who have a voucher but do not
have a home?
HOUSING ASSISTANCE SUPPLY EXPERIMENT
Dr. Olsen. I do not think we need to be subsidizing
construction to get the number of units that we want. The
private market will do that.
But let me just tell you more specifically what would
happen if you authorize more vouchers. We know this from the
Experimental Housing Allowance Program, which operated an
entitlement voucher program called the Housing Assistance
Supply Experiment in two places. What happened in response to
providing a lot of vouchers was that units that did not meet
the standards were upgraded to meet them. So you had an
increase in the supply of units meeting the standards, largely
without additional units.
The homeless are the only people who do not have housing,
but we don't need additional units to house them, there are
about 600,000 homeless a night. There are over 3 million vacant
apartments every night. The reason homeless people are not in
those vacant apartments is they do not have the ability to pay
for them.
HOUSING CHOICE VOUCHER PROGRAM
Senator Reed. But this discussion is touching upon public
housing. Ms. Poethig suggested that to take the public housing
off, as in a way San Diego did--take it out and give people
vouchers in lieu of that, that is adding to a population
already existing of homeless people. And those 3 million empty
units exist because some of them are too expensive even with
the most elaborate public subsidies. If we go ahead and go to a
tenant-based voucher system, do we build in the law the
guarantee that they must be housed and where they are housed?
Dr. Olsen. I do not think we are anticipating tearing down
all public housing over a very short time horizon. We are
talking about a very gradual process of getting rid of the very
worst units, like we have already done. We have already lost
400,000 units from the peak, very gradually, 20,000 a year,
over many years. The private market can easily accommodate the
number of people who would go onto the market even if you tear
down public housing units.
LOW INCOME HOUSING TAX CREDITS
The other thing to know about the voucher program is that
it leads to more additional units than subsidized construction
programs like the tax credit. That may seem very
counterintuitive, but the explanation for it is that lots of
people who are served by all types of housing assistance are
doubled up prior to getting housing assistance, such as young
mothers with children living with their parents. About 25
percent of the people in the voucher program were previously
doubled up. Any housing program serves a certain number of
people of this type.
HOUSING CHOICE VOUCHER PROGRAM
Because the voucher program serves the poorest people,
there are more people served by that program who are doubled
up. And so it increases the demand for new units more. The
empirical result is that additional voucher units increase the
housing stock more than additional units subsidized under
construction programs. These results are reported in a paper in
the ``Journal of Political Economy.''
Senator Reed. When was that?
Dr. Olsen. ``Journal of Public Economy.'' Sorry.
Senator Reed. When was that?
Dr. Olsen. It was about 5 years ago. There is a reference
to it, I think, in my written testimony, but if there is not, I
will give it to you.
Senator Reed. I would appreciate that. But I think what we
are sensing--and again is that in these 5 years, there has been
a tremendous shift into the rental market by college graduates
who cannot afford homes, by people who choose to live in these.
So I think that the data we are looking at right now and the
trend that Ms. Poethig suggested are the increasing demand by
relatively upscale individuals for housing is going to keep
rental prices high and vouchers higher also.
But thank you. I will have a second round.
Dr. Olsen. Just to follow up on that, the other thing that
is happening, yes, more people are renters, but units that were
formerly owner-occupied have been shifted to the rental market.
There is a shift both in the demand and supply side.
Senator Reed. Thank you.
Senator Collins. Senator Cassidy.
Senator Cassidy. Folks, thank you.
You all know so much more than me. So I am going to pose a
bunch of questions just as an academic, and then ask each of
you to reply as you think is pertinent.
EMERGENCY RELIEF
One is very practical. The State I represent just had a
huge flooding episode. Right now, it is the fourth worst
natural disaster in the history of the United States, moving on
way up to the third.
Now, there have been some reports that this has
particularly impacted, as you might guess--there are 85,000
homes flooded, so assume three to four people per home. We have
350,000 to 400,000 people displaced out of their home.
I gather that those who have had the hardest time have been
in subsidized housing, kind of what you just said, Dr. Olsen,
but at large and acutely, that there is a sudden demand for
rentals and prices go up, and folks with Section 8 have the
least options. I do not have a solution. I am posing that
because that is what we are grappling with. We would like your
thoughts on that. Is it just that is the way life is?
Dr. Olsen. Well, in the short run, the question is where
should these people live. There were some vacancies to start
with, but I am guessing not nearly enough to accommodate all of
these people.
What happened after Katrina was that a lot of people had to
move out of the area. They moved to Houston. They moved to
Dallas. They moved to Atlanta.
Senator Cassidy. They moved to Baton Rouge.
Dr. Olsen. In the first instance, Baton Rouge, the closest
place.
That may be an inevitable part of the solution. There are
not enough units there. They have to have housing now. They
cannot wait for a house to be built. So it may be that a part
of the solution, given the numbers you have said, is some
people are going to have to move elsewhere.
Senator Cassidy. Solutions/results. Folks may not wish to
be disrupted, but it just may be that is the result.
Dr. Olsen. Right.
Senator Cassidy. Does anybody else have a thought?
Ms. Poethig. I would just add, I mean, that given the
natural disaster, we do not have a flexible enough supply to be
able to absorb the demand that happens after a natural
disaster. As Dr. Olsen, Ed, pointed out, I think Houston and
Baton Rouge and other communities ended up receiving many of
the people who were displaced over time. So I acknowledge they
have not necessarily all----
Senator Cassidy. The chairwoman is going to cut me off, so
I am going to cut you off first.
TENANT-BASED RENTAL ASSISTANCE
Ms. Poethig, you had mentioned that sometimes when you shut
down Robert Taylor, you end up with a similar concentration of
poverty but elsewhere. So now is a set of questions that I can
imagine a homeowner who understands that we are going to begin
moving folks into neighborhoods of less poverty. What you just
said implied that if they were moved into a neighborhood of
less poverty, that neighborhood became impoverished with
negative social indicators.
So I am asking, what is the academic literature or the
empiric experience show when you begin moving folks out of
housing projects and/or with Section 8 housing into
neighborhoods with less poverty? What is the impact of social
indicators and property value upon the neighborhood into which
they move? Does that make sense?
Ms. Poethig. So I think one of the most important
principles, if we were to consider this policy, is a policy of
responsible relocation. That includes considerable supports for
people as they make particular housing choices. And so that
responsibility would include better information and ways in
which they can move into neighborhoods fully equipped to be
responsible residents in those particular communities.
PROJECT-BASED RENTAL ASSISTANCE, AND LOW INCOME HOUSING TAX CREDITS
There is research by George Galster that looks at voucher
holders in comparison to place-based investments in low-poverty
communities and finds, generally speaking that those place-
based investments lead to more positive results.
Senator Cassidy. Place-based means what?
Ms. Poethig. It would mean public housing or PBRA, project-
based rental assistance, in some cases tax credit properties,
than dispersed voucher holders.
HOUSING SUBSIDIES
Senator Cassidy. I am not quite sure I follow all of that.
No offense, but there is just some lingo that you know that I
do not.
Mr. Gentry, you got an average neighborhood in San Diego
has homes--you know, middle class neighborhood--the homes are
$450,000.
Yes, sir. So empirically when you all move folks into those
types of neighborhoods, again middle class folks, even though
the home is so expensive, what happened to the property value
and social indicators in those? And again, you all know your
technical language so much. If I can ask you just to kind of
make it a little bit plainer English so I can comprehend.
Mr. Gentry. Well, I will make it very plain. I think the
problem is one of algebra, frankly.
Senator Cassidy. Is what?
Mr. Gentry. Algebra. You have a certain amount of money and
you have a certain number of people you serve. We serve people
in what I call the modest marketplace. We do not have the
amount of subsidy to help people move into higher-income
neighborhoods.
Senator Cassidy. But in San Diego, higher income--again,
your property values are so high, you do not have to be a
wealthy person to have a house which is valued very highly.
Mr. Gentry. However, in San Diego, there are wide varieties
of variations in the value of those properties and the cost of
those properties. So our Section 8 voucher holders tend to wind
up fairly concentrated as well. If you know San Diego well,
they tend to be south of Interstate 8. They tend to be east,
southeast, and south down around the border. And we do not have
a whole lot of voucher holders in La Jolla or Point Loma. We
have got a few.
CHOICE NEIGHBORHOODS INITIATIVE
If you notice in my paper, I do say that we have our own
choice communities program where we have helped, but that has
only served about--less than 300 families who have been able to
move out of the nontraditional neighborhoods. And I will point
out if everybody did, we would serve fewer families.
So the tension--and ``tension'' I think is the applicable
word here--is that if you spend more per family to live in
higher-income neighborhoods, which is what the rent in those
neighborhoods warrant, with the same cost of dollars, you serve
fewer families. So where do you draw the balance?
I think each community in the country is going to be
different. I can tell you in Oakland, California and much of
the Bay area, the Section 8 voucher program has pretty well
stopped working because the value has gotten up so high and
landlords who do not need the program to fill the properties do
not participate that the Oakland Housing Authority has started
project-basing most of its voucher supply or a good bit of it
just in order to make the programs work and to provide
resources for the residents.
San Diego has not gotten to that point yet, although it
could be on the horizon if we do not get more absolute supply
into the marketplace over the next few years.
HOUSING CHOICE VOUCHER PROGRAM
So I think in different parts of the country--you go to
Oklahoma, Mississippi, and my home State of North Carolina, you
still got good applicability and the voucher program works very
well. But it is going to be different in different places. You
are going to have marketplace dynamics you need to take into
account. Somewhere within all this tension, you are going to
find solutions, but they need to be community-based and city-
based and locality-based, sir.
Senator Cassidy. I yield back. I am sorry. Thank you for
being forbearing.
PROJECT-BASED RENTAL ASSISTANCE
Senator Collins. Thank you, Senator.
Dr. Olsen, earlier we heard Mr. Gentry describe the public
housing approach as a failed business model. Do you agree with
that?
Dr. Olsen. Yes, because as I say, the cost-effectiveness
studies show it is very costly for the housing that you get and
other disadvantages too in terms of the location. The housing
authorities in the early years tried to get the projects in
better neighborhoods, but local opposition prevented that. So
most of the projects were built in very low-income
neighborhoods. That is part of how we got to where we are
today.
But in any event, we are where we are today. As you said,
we have a lot of projects in very poor areas, and they are
often in very bad condition as well. And I think we should try
to get away from that and give these people vouchers and let
them try to spread out over the community.
PUBLIC HOUSING CAPITAL FUND
Senator Collins. Ms. Poethig, Congress is now providing
roughly 50 percent of the annual capital needs for the public
housing. And that is clearly, from your perspective, part of
the problem because it means that there are nearly 10,000
public housing units that are at high risk of being lost each
year because they are simply crumbling, and they are not safe,
and they are not suitable for people to live in them.
I know that your first preference is likely more funding,
but putting that issue aside, do you believe that we should be
going more in the direction of project-based rental assistance
and Section 8 tenant vouchers?
TENANT-BASED AND PROJECT-BASED RENTAL ASSISTANCE
Ms. Poethig. So I believe that one of the efforts that we
should build upon is the use of subsidy contracts. So this is
the primary form in project-based rental assistance. And with
project-basing vouchers, this has been a tool that others have
used to enable development to happen because they enable
developers to go the private marketplace and seek funding to
build the units themselves with a hope that they are actually
building in lower-poverty communities.
So I do believe that the subsidy contracts are a very
important tool, coupled with other supply tools that enable
housing to be built for people with extremely low incomes. The
tax credit does not work for people with extremely low incomes.
It needs to be married to rental assistance.
Senator Collins. Mr. Gentry, I really am impressed with
what you were able to accomplish in San Diego. I imagine it was
both difficult and at times controversial. I am wondering what
happened, if you could walk us through more detail, such as is
in your written statement. What happened to the public housing
that you converted? Did it become project-based, tenant
housing? Was it razed? What happened? Did tenants buy some of
it at very low cost? What happened to it?
Mr. Gentry. We still have the physical properties in our
portfolio. And I will point out, if you go on our website, we
have got every one of our properties on Google map. You can do
a windshield survey of every one of them just at your desk.
HOUSING CHOICE VOUCHER PROGRAMS
What we did, we promised HUD three things when HUD approved
this in 2007. Number one is that we would not project-base any
of the subsidies. We would allow these families to take the
subsidy and walk if they wanted to and choose where they wanted
to live. I was not in San Diego when that decision was made in
2007, but I think it was a pretty gutsy decision to make for
those properties.
Now, it was made with the realization that our properties
were better than much of the typical public housing stock, and
I recognize that. And you will see that on that windshield
survey. But still, that was a pretty gutsy decision.
The second thing we promised HUD was that we would
backfill--and this gets to your question. We would backfill.
For every family that moved out, we would backfill with another
family below 80 percent of median income, elderly below 50
percent back into those units at a rent that the families could
afford to pay, which was pegged at just about what a tax credit
rent and just about what a Section 8 rent would be to a
landlord in San Diego.
Then third and the most exciting, we told HUD if they would
give us the deed to those properties, we would convert those
properties. We would convert the equity to debt, and we would
create at least another 350 units of affordable housing. In
2010 to 2014, we issued $95 million in debt on those
properties. Then we purchased, either direct and outright or in
partnership with private sector players, 810 units of
affordable housing with debt paid for by those existing public
housing properties.
Now, the silver lining in the cloud of the economic
downturn in California was that we were able to pick up
properties at the depth of the recession. That helped. But we
would have far exceeded the 350 goal we set with HUD
regardless. And it was an exhilarating process, and it was a
wonderful thing to help accomplish.
But basically what we did was to release the value that was
pent up fallow in the ground on those properties and to reuse
it. And then we were able to glean from the existing
marketplace in a downturn in a countercyclical way to reuse
excess properties in a public sector way that are being well
used now that prime values are way back up. So it was a
wonderful process.
Now, I know people will say that you could not replicate
the San Diego model, say, in other more traditional housing
authority markets. You mentioned Richmond, Virginia a while
ago. I was the CEO down there from 1990 to 1998. A far
different set of circumstances. You would not do in Richmond
what we did in San Diego, but you would go through the same
decision-making process to figure out what Richmond could do,
needed to do if the Richmonders had the same authority to make
their own decisions as we had in San Diego.
Senator Collins. That is why you argue for more flexibility
at the local level in your initial statement.
Mr. Gentry. It is utterly essential.
And I will point out that, too, if you look at the
different programs, no supply-side program is going to get the
cost down below the affordability level for any family below
about 50, maybe 40 percent of median income. You get down into
the extremely low families, let us say, 30 percent or less,
they cannot pay enough rent to cover the cost of operations.
You have got to have a subsidy to make the property operate in
addition to producing it. And that is where a demand-side
subsidy like Section 8, like the vouchers program or operating
subsidy in public housing, is utterly essential. So if you have
got a good balance and marriage of supply-side subsidies to
produce the property and then demand-side to help the extremely
poor afford to stay there, then you can make it work.
And in my experience, there are only three kinds of
subsidies that have ever worked. There is a supply-side subsidy
that buys down the cost of the property. There is a demand-side
subsidy that helps the consumer pay their way. And sometimes
there is an internal subsidy where you get a range of incomes
where the relatively higher-income folks pay more than the
relatively lower-income. I have never seen anything that is not
a variation or a combination of those three. And there is no
magic. You have got to have one or some combination of those
three to make any affordable housing property work.
Senator Collins. Thank you.
Senator Reed.
PROJECT-BASED RENTAL ASSISTANCE
Senator Reed. Thank you very much.
Ms. Poethig, we are talking about basically three
categories of housing: public housing, then project-based
assistance housing, and individual vouchers. Focus for a moment
on the project-based.
In my view--and your comment would be appreciated--there
are some external benefits to that beyond the housing,
particularly with seniors where you have a certain community.
You have access to medical care. You have access to
transportation, which is much more efficient. And so when we
evaluate these place-based vouchers, we have to add in these
factors too I would assume. And also, it tends to make the
project much more valuable. Is that accurate?
Ms. Poethig. Thank you, Senator.
As you know, housing is a very important platform,
especially for older adults, and 50 percent of project-based
rental assistance is actually serving older adults and people
with disabilities. So that is an important part of the
population that is benefiting from that particular platform.
We have a growing body of evidence that not only
demonstrates that it has benefits for the people living in the
housing but also saves money, particularly to Medicare. So the
particular study that I have been most persuaded by is
something called SASH. It is a model in Vermont that has health
coordinators operating on the platform of housing, nurse
practitioners who are connecting them to healthcare services
not only for the people in that housing but also serving people
in rural communities as well. So the housing serves as a
platform for other low-income people with healthcare needs in
rural communities. And it is essentially creating a net savings
to Medicare.
So my concept is how--and this committee has shown such
great leadership in the past in partnership with other
committees--to imagine the partnerships to look at the
convergence or the opportunities between thinking about housing
as a platform, particularly for older adults, and the ways in
which it could save resources and Medicare as a potential
opportunity for investment.
Senator Reed. One of the institutional issues around here
is that we do housing, that somebody else does Medicare. So if
we find savings--you know.
Ms. Poethig. I know, yes.
Senator Reed. That is our problem. Trust me, she will
figure it out.
[Laughter.]
Senator Reed. I was very impressed with your comments, Mr.
Gentry, about the locality issues being so critical. And as you
point out, in San Diego, because of local forces, you are
moving forward with your concepts. But up in Oakland, they have
seen rents rise so high that the vouchers are just--yes, I have
got a piece of paper, but I do not have a place to live. They
are actually going back into the public housing issue. Is that
more widespread than just Oakland?
Mr. Gentry. Well, actually they are not going back into
public housing. What they are doing is project-based----
Senator Reed. Project-based.
Mr. Gentry. But that is where the genius of the voucher is
so useful. It is flexible. You can use it for project-basing.
You can use it for sponsor-basing, meaning a third party tells
you who you can issue the voucher to. Or you can use it as a
classic finders keepers utilizing the marketplace. And you can
vary it based on what the marketplace needs if you have the
good sense and the courage to make your own decisions, then to
be accountable for it.
You can also use the voucher for special purposes. I will
point out, there are a lot of nice things about living in San
Diego, but one of San Diego's particular problems is the
homelessness problem. We have got, not on a per capita basis
but in whole numbers, the fourth worst problem in the country
behind New York City, L.A., Seattle, and then us. You know, you
are not going to freeze to death on the streets in the
wintertime, such as the winter is in San Diego. And we have got
a huge problem there.
MOVING TO WORK PROGRAM
We have targeted much of our Section 8 product to dealing
with the homeless, and we have put on the street--and I
reference this in my testimony--2 years ago November a program
called Housing First San Diego where we have a multi-pronged
approach to dealing with the homelessness problem using the
vouchers as a major part of our approach in two ways. One, the
subsidy itself to help people live in the private marketplace,
and secondly, where we have been able to realize efficiencies
and savings, because we are a Moving to Work agency, we have
invested that back in property on the supply side. We can take
a demand-side subsidy, repurpose it, use it on a supply side
too, as we need to, to accommodate our marketplace and our
needs and problems.
Two days ago, we dedicated the old Hotel Churchill, which
is a 102-year-old hotel that we have rehabilitated in an
historic preservation way. This housing is now housing 72
formerly homeless folks in single-room residency fashion, 56 of
whom are veterans. We would not have been able to do that
without, number one, vouchers and, number two, the Moving to
Work status. So I think it is the flexibility of the program
and then the flexibility within that of our organization
through the MTW program together are just huge in allowing us
to solve San Diego problems in San Diego ways.
Senator Reed. Thank you very much.
Senator Collins. Thank you, Senator.
It is my understanding that Senator Cassidy is going next,
and then we will come to Senator Boozman.
VOUCHER PROGRAMS
Senator Cassidy. Dr. Olsen, again, I am trying to follow
what you all are saying. I thought I gathered what you said
earlier that a voucher is more successful in expanding housing
stock, if you will, the demand-side subsidy, than the supply-
side subsidy.
Dr. Olsen. That is what the study shows, yes.
Senator Cassidy. But it does seem from what we have learned
from San Diego in that comment is that if you are in a really
high-value real estate, that you really do need a supply-side
subsidy if you are going to make something affordable.
Dr. Olsen. Yes. I do not agree with that. And actually the
way the voucher program works is the subsidy is much higher in
the most expensive market.
Senator Cassidy. Well, let me ask because Mr. Gentry
mentioned in Oakland and the Bay area that really the program
is falling apart I gather because rents are so high. And then
he mentioned his own place. There is a tension. Sure, we can
move somebody up to a higher place, but then we serve fewer
families sort of thing.
Dr. Olsen. I do not understand that. The payment standard
in different places is a percentile of the rent distribution.
It is basically median rent. So in places where median rent is
high, the subsidy is very large. The only sense I can make of
it is the subsidy level is the same throughout an entire metro
area. And so there can be parts of a metro area where the rents
are so high that people with vouchers cannot live there. But I
don't know whether that would apply to the entire Oakland area.
The generosity of the voucher subsidy is much greater in San
Diego and in Oakland than it is in Charlottesville, for
example.
Senator Cassidy. Mr. Gentry, any kind of comment?
Mr. Gentry. Just that grand solutions do not always fit
particular issues and problems, and there has to be a
flexibility. In a country as big and large as this one is with
all the variations from a Charlottesville--and I have lived in
Virginia. Charlottesville is a wonderful place--the difference
from a Charlottesville to a Chicago, to a San Diego are
immense. And I think you have got to have some local
flexibility, some local decision-making.
And I think the thing I would disagree on is that it is not
enough just to be able to help people pay their rent. You have
got to also ensure that people in the future will be able to
pay the rent, and that involves making the proper kinds of
investments in properties. Just as it is typically to a
family's benefit to become a homeowner at some time rather than
a renter, at some point in time localities need to also make
sure they own enough properties to guard against the kinds of
problems that Oakland is running into.
I will point out that from my understanding of the Oakland
situation, it is not that the housing authority there is using
the Section 8 subsidy on its own properties. It is using the
subsidy to encourage private sector individuals to get involved
but in a project-based, place-based way because that is what
the local marketplace requires rather than a classic finders
keepers.
Senator Cassidy. Let me ask you one more thing. I once
heard a criticism of Section 8 housing that it establishes a
rather steep marginal tax rate. As someone earns more money,
they get less for their voucher, and in a sense it pays them
not to earn more money. You could add other such benefits, and
somebody told me that in his State, the beginning job would
have to be $55,000 plus medical benefits to account for
everything someone could receive by not working but receiving
all this.
Ms. Poethig, I see you nodding your head. Do you mind
commenting on that?
Ms. Poethig. Certainly, and thank you, Senator.
So HUD has commissioned a study, a rent reform study, that
is looking at these issues related to having a different rent
structure such that you would not create a disincentive for
people to increase their----
Senator Cassidy. Implicitly there currently is and they are
trying to modify it.
JOBS PLUS DEMONSTRATION
Ms. Poethig. They are trying to look at models for
modification for doing that. We know in other important
demonstrations, the Jobs Plus demonstration in particular that
did create a different incentive, it did not essentially
disincentivize someone to earn more. We saw a benefit not only
to increase earnings for that particular person but also longer
job retention. So we hope to see some of the same kinds of
results in increasing self-sufficiency by modifying----
Senator Cassidy. Let me go because I am almost out of time.
Dr. Olsen.
SECTION 8 AND WORK DISINCENTIVES
Dr. Olsen. If I could just comment on that, sir. Actually
this is a feature of each of the major types of housing
assistance. It is true in public housing, other HUD project-
based assistance, and vouchers. The more you earn, the less the
subsidy you get. You lose 30 cents for every additional dollar
you earn.
It is also a feature of other major welfare programs such
as TANF and Food Stamps. The evidence indicates that these
programs have work disincentive effects, just as you mentioned.
Senator Cassidy. Okay. Well, I am out of time. I yield
back. Maybe I am not out of time.
[Laughter.]
Senator Collins. Thank you.
Senator Boozman.
Senator Boozman. Thank you very much.
RETURN ON INVESTMENT
Dr. Olsen, I think we would all agree that finding and
identifying ways to provide flexibility and better return on
investment for Federal dollars is certainly important when it
comes to Federal programs, including those administered by HUD.
What do you believe are the biggest problems to return on
investment of Federal dollars, and where would be a much needed
area to provide flexibility within existing programs?
Dr. Olsen. I think that the biggest opportunities for
getting more bang for the buck is to phase out project-based
assistance, and my views on that are based on evidence on the
cost-effectiveness of the major HUD programs of project-based
assistance, public housing, the Section 8 New Construction
program, and Section 236, compared with housing vouchers. So I
think we need to work our way out of those programs and not
commit money to additional programs of that type.
HOMELESSNESS
Senator Boozman. Thank you.
Mr. Gentry, homelessness is neither a rural or urban issue.
It is a national issue.
What lessons can we learn from your experiences of the
Housing First model when it comes to addressing the issue of
homelessness in America?
Mr. Gentry. The lesson I think is getting the proper
balance among what are basically three types of homeless
housing systems.
One is emergency and shelter housing, which the Housing
Commission does administer on behalf of the City of San Diego,
and those are shelter beds for those in immediate need.
Second is the need for some transitional housing, which
typically also is a congregate setting where individuals and
families can get some of their needs attended to while they are
getting ready for living in the marketplace.
The third, though--and this is what has drawn a lot of
attention lately and I think what we are moving toward--is the
Housing First model, which means you help people get a
permanent structured live-in, a house, an apartment, whatever
you want to call it where it is an individual family occupant,
not congregate housing, and then using that as the basis for
attending to the other problems which have helped to make them
homeless.
I would contend that there are basically three types of
causes for homelessness as well.
One is the intersection of mental health and substance
abuse issues, which has particularly gotten troublesome over
the years with the demise of some of the old large mental
hospitals that used to be in existence in every State and
pretty much are gone now. And I think there is a mental health
crisis in this country.
Second is that particularly with the economic downturn or
the Great Recession, we saw families who had no other issue
other than perhaps the lack of an extended family and short-
term economic problems, and a rapid re-housing approach helped
them, which is short-term assistance.
And then you have a third one that is not always understood
or talked about much, but it typically applies heavily for
women and children. And that is domestic abuse and needing a
place to land and to resettle there.
So I think, again, there are no grand solutions, but I
think if you look at a Housing First model as a basis which you
want to get everybody to and then you go through some of the
other intermediary steps and on occasion you get to recognizing
there are different causes for different families and
individuals, you can work out solutions.
HOW TO IMPROVE HUD
Senator Boozman. Very good.
Really for all of the panel, what I would like to know is
if you had to assign a grade, if you had to critique HUD's
efforts to reduce poverty through its housing policies, what
would you say it would be? Dr. Olsen.
Dr. Olsen. It would not be a high one, but I am mulling
this over. I mean, on the one hand, you have the housing
voucher program, which I think serves a lot of people and is a
highly cost-effective program. So that is a big plus. But on
the other hand, they administer programs that are highly cost-
ineffective.
Those programs are declining within HUD. The number of
public housing units is going down. The number of units in
privately owned HUD projects is going down. The low-income
housing tax credit is the big growth part of the system. So in
some sense, I suppose HUD's performance is improving. Let us
put it that way.
Senator Boozman. Yes, ma'am.
Ms. Poethig. So I think I would agree. HUD's performance
has been improving, but I think where it could really
accelerate efforts are some of the administrative reforms that
would enable the voucher program in particular to live up to
expectations, which it is not currently doing if we imagine it
as a mobility to opportunity strategy. So I think more can be
done to ensure that it is offering true choice and opportunity.
At the same time, I think there is more we can do to be
flexible in terms of this concept that Mr. Gentry and I have
been talking about, the subsidy contracts, being able to move
them, make them more flexible to be matched to some other
capital programs like the low-income housing tax credit to make
sure that we have opportunities for extremely low-income
households.
My one worry is that there is discrimination against
voucher holders in many, many markets, and the ability to
protect them is a local policy and that is not evenly
distributed across the country. And so we have not talked about
that discrimination today, and I think that is a major factor
that really dampens the success of the program if we imagine
vouchering out.
Senator Boozman. Thank you.
Dr. Olsen. Could I just follow up?
Mr. Gentry. I would say that HUD is almost never--I have
got a lot of friends at HUD. So they can take this as they hear
it.
You never get much creativity out of HUD. It is not the
nature of a bureaucracy to be creative or to change its way of
doing business.
But HUD does do what you all tell them to do. And I would
commend you all for extending and expanding the Moving to Work
program last December. That would never have happened waiting
for HUD to make a decision. I will not get into that. But the
fact that you all required them to do it I think was
remarkable, and I think probably the creativity and the
direction will come from here. It will not come from over
there. And I would make every housing agency in the country,
frankly, that was not troubled a Moving to Work agency, give
them the ability make their own decisions and to be accountable
for the results. I think you will see some differences out
there.
Senator Collins. Dr. Olsen, I know you wanted to jump in.
Dr. Olsen. Thank you.
Senator Collins. You are welcome.
Dr. Olsen. So I just wanted to support something Erika just
said. A very important initiative within the voucher program is
the small area fair market rents initiative. Under the current
program, the subsidy is the same no matter where you live in a
metro area, whether it is the most expensive, the least
expensive. So, of course, voucher recipients do not live in the
most expensive.
There is the recent study by Raj Chetty and others that
estimates the advantages to children of growing up in a
neighborhood with a lower poverty rate. I have read that study
carefully, and it is a excellent study.
What the small area fair market rents do is they lower the
subsidy in the areas with the highest poverty rates and
increase the subsidy in areas with the lowest. So they create a
financial incentive for people to live in lower-poverty areas.
This is actually in use in Dallas. It is part of the result of
some litigation. HUD has proposed a regulation to expand it. If
you want to get low-income children into lower-poverty
neighborhoods, I think this is an excellent idea. It
illustrates the flexibility of the voucher program for
achieving the sorts of things you want to achieve.
Senator Collins. Thank you very much.
I want to thank all of our witnesses today. You greatly
enhanced our understanding of the challenges that we face. We
want to make sure that as we look at that 84 percent of HUD's
budget, that we are serving as many vulnerable families as we
possibly can. I think we have to look at new models and new
ways and what is going on at the local level and at the State
level to see if we can stretch those dollars further and get
better results. That is why we wanted to have this oversight
hearing today. We very much appreciate your being with us and
sharing your views.
The hearing record will remain open until next Friday,
September 30th. So you may receive some additional questions
for the record from members of the committee, including those
who were unable to be with us today.
SUBCOMMITTEE RECESS
I want to thank the staff also for their hard work on this
issue. I know I learned a great deal from this hearing.
I want to thank the ranking member also for his usual
thorough and excellent participation. And thank you, Senator
Boozman, for joining us and Senator Cassidy and Senator Daines
who were here earlier.
This hearing is now adjourned.
[Whereupon, at 11:55 a.m., Wednesday, September 21, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
MATERIAL SUBMITTED SUBSEQUENT TO THE HEARING
[Clerk's Note.--The following outside witness testimonies
were received subsequent to the hearing for inclusion in the
record.]
Prepared Statement of the Affordable Rental Housing ACTION
On behalf of the Affordable Rental Housing ACTION (A Call To Invest
in Our Neighborhoods) Campaign--a national, grassroots coalition of
over 1,300 organizations and businesses dedicated to creating and
preserving affordable homes for low-income families using the Low-
Income Housing Tax Credit (Housing Credit)--we appreciate the
opportunity to submit comments to the Senate Appropriations
Subcommittee on Transportation, Housing and Urban Development, and
Related Agencies on the occasion of its hearing on Housing Vulnerable
Families and Individuals. A full list of ACTION Campaign members is
attached.
a proven tool to address a vast and growing need
The Housing Credit is our Nation's most successful tool for
encouraging private investment in the production and preservation of
affordable rental housing. Since 1986, the Housing Credit has financed
nearly 3 million apartments, providing roughly 6.7 million low-income
families, seniors, veterans, people with disabilities, and other
vulnerable populations with access to homes they can afford.
Though the Housing Credit has provided affordable homes for
millions of low-income households, the unmet need for affordable rental
housing continues to far outstrip the available resources. An
unprecedented 11.4 million renter households--more than one in four of
all renters in the U.S.--spend more than half of their monthly income
on rent, leaving too little for other expenses like food, medical bills
and transportation.
Meanwhile, we continue to lose affordable housing from our Nation's
stock. Nearly 13 percent of the Nation's supply of low-income housing
has been permanently lost over the past 15 years. Over the next decade,
the demand for affordable housing will become even greater as 400,000
new households enter the rental housing market each year, many of whom
will be low-income. According to a recent study by Harvard University's
Joint Center for Housing Studies and Enterprise Community Partners, the
number of renter households who pay more than half of their income
towards rent could grow to nearly 15 million by 2025.
a model public-private partnership
For 30 years, the Housing Credit has been a model public-private
partnership program, bringing to bear market forces, State-level
administration and more than $100 billion in private sector resources.
Under the program, private sector investors provide upfront equity
capital into a property in exchange for a credit against their tax
liability in future years. Credits can be claimed only after properties
are built and occupied by income-eligible residents at affordable
rents. This unique structure transfers the real estate risk from the
taxpayer to the private sector investor.
The Housing Credit also benefits from State-level administration,
which reflects local priorities. Each State determines how to allocate
Housing Credits to respond to specific local needs, directing resources
where they are needed most. State allocating agencies also oversee a
rigorous approval process for these developments and monitor properties
for compliance with program rules after their completion.
Each State is required by the tax code to provide only enough
subsidy to ensure financial feasibility, and underwrite Housing Credit
properties at three different stages of the development process to
ensure they provide no more Housing Credit than necessary to each
development.
accountability through the tax code
In the rare event that a property falls out of compliance anytime
during the first 15 years after it is placed in service, the Internal
Revenue Service is able to recapture tax credits from the investor.
Therefore, it is in the interest of the private sector investors to
ensure that properties adhere to all program rules, including income
eligibility, rent limits and high quality standards. This rigorous
private sector oversight is a hallmark of the program, and has
contributed to its unparalleled record of achievement. In fact, only
0.62 percent of all properties during the Housing Credit's 30-year
history have gone into foreclosure, a record far better than any other
real estate class.
incentive to address a market failure
Developing new affordable homes for the growing population of cost-
burdened low-income renters is not feasible without the Housing Credit,
since the rents that low-income households can afford are not high
enough to cover the costs of building and maintaining properties.
According to Harvard University's Joint Center for Housing Studies
(JCHS), to develop new apartments affordable to renter households
working full-time and earning the minimum wage without the Housing
Credit, construction costs would have to be reduced by 72 percent of
the current construction cost average--making the homes either
substandard or financially infeasible.
complement to other housing programs
Congress designed the Housing Credit as a project-based capital
funding source for the production and preservation of affordable
housing. As such, the Credit plays a different role in the effort to
meet the Nation's affordable housing needs than tenant-based rental
assistance programs, such as the Housing Choice Voucher (voucher)
program, play. The Housing Credit increases the supply of affordable
housing, while vouchers make existing housing more affordable to low-
income households.
Vouchers alone cannot address several challenges for affordable
rental housing, including recapitalizing and preserving aging
properties, revitalizing low-income communities, expanding supply in
tight markets, producing housing for households with special needs, and
building housing near areas experiencing job growth. Furthermore,
absent the Housing Credit program, the cost of vouchers would almost
certainly rise significantly, as voucher holders living in Housing
Credit properties would instead need to find market-rate apartments.
Conversely, without rental assistance, it can be very difficult to
provide even Housing Credit housing at rents affordable to the lowest-
income households. In practice, the Housing Credit and vouchers
complement each other, and are often used together to meet the needs of
extremely low-income households.
In addition, the Housing Credit is a central component of HUD's
Rental Assistance Demonstration (RAD), a public housing revitalization
initiative that Congress has recently expanded threefold from its
original authorization. To date, the Housing Credit has provided
approximately 40 percent of the financing being used to recapitalize
over 180,000 units of public housing under RAD, underscoring the
importance of the Housing Credit in preserving federally assisted
properties for the long term in the absence of sufficient Federal
appropriations for public housing.
support the affordable housing credit improvement act
Though the need for Housing Credit-financed housing has long vastly
exceeded its supply, Congress has not increased Housing Credit
authority in 16 years. To make a meaningful dent in the affordable
housing supply gap, we urge Congress to pass the Affordable Housing
Credit Improvement Act, sponsored by Senator Maria Cantwell (D-WA) and
Senate Finance Committee Chairman Orrin Hatch (R-UT), which would
increase Housing Credit authority by 50 percent. While the bill is not
under the jurisdiction of this Subcommittee, we encourage all
Subcommittee members to join Subcommittee Chairwoman Susan Collins (R-
ME), Subcommittee member Senator Bill Cassidy (R-LA), and full
Committee members Senators Patrick Leahy (D-VT), Lisa Murkowski (R-AK),
and Jeff Merkley (D-OR) as cosponsors of the bill.
For the millions of families paying more than half of their income
towards housing--choosing between paying the rent or their medical
bills, making repairs to their cars, or enrolling in job training
classes--protecting and expanding the Housing Credit is critical.
[This statement was submitted by Barbara Thompson, Executive
Director, National Council of State Housing Agencies, ACTION Co-Chair,
and Scott Hoekman, Senior Vice President & Chief Credit Officer,
Enterprise Community Partners, ACTION Co-Chair.]
ACTION Campaign Members
Co-Chairs
National Council of State Housing Agencies
Enterprise Community Partners
Steering Committee Members
Affordable Housing Tax Credit Coalition
Council of Affordable and Rural Housing
Council of Large Public Housing Authorities
Corporation for Supportive Housing (CSH)
Housing Advisory Group
Housing Partnership Network
LeadingAge
Local Initiatives Support Corporation
National Assoc. of Affordable Housing Lenders
National Assoc. of Home Builders
National Assoc. of Housing & Redevelopment Officials
National Assoc. of Realtors
National Assoc. of State & Local Equity Funds
National Equity Fund
National Housing and Rehabilitation Association
National Housing Conference
National Housing Trust
National Low Income Housing Coalition
National Multifamily Housing Council
Stewards of Affordable Housing for the Future
Volunteers of America
National/Regional
Affordable Housing Investors Council
Alliant Capital
Apartment Realty Advisors (ARA)
Balfour Beatty Construction
Ballard Spahr, LLP
Berkadia
Bryan Cave, LLP
Center for American Progress Action Fund
Centerline Capital Group
Certified Commercial Investment Member Association
Cinnaire
City Real Estate Advisors
CohnReznick
The Community Builders, Inc.
Council of Independent State Housing Associations
Council of State Community Development Agencies
Equity Residential
Federation of Appalachian Housing Enterprises, Inc.
Habitat for Humanity International
Holland & Knight
Housing Assistance Council
Liz Bramlet Consulting
Klein Hornig LLP
Housing Trust of America
Hudson Housing Capital
Institute of Real Estate Management
Low Income Investment Fund
McGladrey LLP
Mercy Housing, Inc.
Meridian Investments
Michaels Development Company
Midwest Housing Equity Group, Inc.
Mortgage Bankers Association
National Affordable Housing Management Association
National Alliance of Comm. Econ. Dev. Associations
National Apartment Association
National Assoc. of Local Housing Finance Agencies
National Assoc. for County Community Economic Dev.
National Community Development Association
National Council on Agricultural Life and Labor
National Development Council
National Foundation of Affordable Housing Solutions
National Housing Law Project
National Leased Housing Association
National NeighborWorks Association
National Resources Defense Council
National Trust Community Investment Corporation
NDC Corporate Equity Fund, LP.
The NHP Foundation
Nixon Peabody LLP
Novogradac & Company LLP
Pacific West Communities, Inc.
PIRHL
PNC Real Estate
Preservation Management Inc.
Prudential Affordable Mortgage Company
Rabobank
RBC Capital Markets--Tax Credit Equity Group
Recap Real Estate Advisors
Reno & Cavanaugh, PLLC
Pillsbury Winthrop Shaw Pittman, LLC
Selfhelp Community Services
Smart Growth America
Southeastern Affordable Housing Management Assoc.
Squire Sanders
TAG Associates, Inc.
Tax Credit Group of Marcus & Millichap
TCAM Asset Management
Urban Institute
U.S. Green Building Council
U.S. Vets Initiative
Vitus Group
WNC & Associates, Inc.
The Woda Group, LLC
Alabama
Alabama Council for Affordable Rural Housing
Arbour Valley Development
Arlington Properties, Inc.
The Bennett Group
City of Mobile Community Planning and Development
Development Services Inc.
Drake Law Firm
Highland Commercial Mortgage, LLC
Ledic Realty Company
Lighthouse CDC
Morrow Companies
Opelika Housing Authority
RSM US, LLP
South East Alabama Self-Help Association, Inc.
Tidwell Group, LLC
Alaska
Alaska Coalition on Housing and Homelessness
Catholic Social Services
Cook Inlet Housing Authority
The Easter Group
The Leeshore Center
Love INC of the Kinai Penninsula
NeighborWorks Alaska
Sitka Community Development Corporation
Statewide Independent Living Council of Alaska
United Way of Anchorage
Arizona
A New Leaf, Inc.
Arizona Housing Alliance
Capitol Mall Association
Chicanos Por La Causa
City of Yuma
Comite de Bien Estar
Corporate Social Responsibility
Foundation for Senior Living
Guadalupe Community Development Corp.
Law Offices of William D. Black
Milestone Housing Development Corp.
Morton Consultant Services
Native American Connections
Pima County CDNC
PPEP Microbusiness & Housing Development Corp.
Surrano Law Offices
Tonalea Chapter
UMOM New Day Centers
WESCAP Investments, Inc.
Arkansas
Affordable Housing Association of Arkansas
Arkansas Coalition of Housing and Neighborhood-Growth for Empowerment
(ACHANGE)
Arkansas NAHRO
Boys, Girls, Adults Community Development Center
Des Arc Housing Authority
Housing Authority of Hot Springs
Housing Authority of Star City
Jonesboro Housing Authority
Judsonia Housing Authority
Mississippi County Public Facilities Board
Northwest Regional Housing Authority
PDC Companies
RichSmith Development, LLC
Siloam Springs Housing Authority
Texarkana Arkansas Housing Authority
White River Regional Housing Authority
California
A Community of Friends
Affirmed Housing Group
Affordable Housing Associates
AMCAL Multi-Housing, Inc.
Beacon Communities
Bear River Tribe
Belle Haven Community Foundation
Bocarsly Emden Cowan Esmail & Arndt, LLP
BRIDGE Housing
Burbank Housing Development Corporation
Cabrillo Economic Development Corporation
California Coalition for Rural Housing
California Council of Affordable Housing
California Dept. Housing & Community Development
California Housing Consortium
Candeur Group, LLC
Century Housing Corporation
California Housing Partnership Corporation
Casa de Redwood
Charities Housing
Chelsea Investment Corporation
Chinatown Community Development Center
City of Oxnard Affordable Housing & Rehab Division
Clark Realty Management
Community Build
Community Economics, Inc.
Community Housing Assistance Program, Inc.
Community Housing Improvement Program [CHIP]
Community HousingWorks
Community Revitalization and Development Corp.
County of San Bernardino
Curtom Building & Development
Desert Manna
EAH Housing (also listed in Hawaii)
East Bay Asian Local Development Corporation
East Bay Center for the Performing Arts
East LA Community Corporation
East Oakland Community Development Corporation
Eden Housing, Inc.
Episcopal Community Services of San Francisco
Fresno Economic Opportunities Commission
Gar-Mar Associates
Habitat for Humanity of Greater Los Angeles
Highridge Costa Housing Partners, LLC
Housing Authority of San Luis Obispo [HASLO]
Housing Authority of the County of Monterey
Housing Authority of the County of Santa Barbara
Housing Authority of the County of Tulare
Housing California
Housing On Merit
Housing Resource Connection
Hunt Companies, Inc.
Innovative Housing Opportunities
Jamboree Housing Corporation
The Kennedy Commission
LifeSTEPS
Laurin Associates
LeadingAge California
LINC Housing
Little Tokyo Service Center CDC
M.E. Shay & Co.
Mentis Mental Health Services
Merritt Community Capital Corporation
Meta Housing Corporation
MidPen Housing Corp.
Mutual Housing California
Napa Emergency Women's Services
National Community Renaissance
National CORE
Neighborhood Partnership Housing Services
NeighborWorks Orange County
Non-Profit Housing Association of Northern California
Opportune Companies
Pacific Meadows Senior Housing
Palm Communities
PAH Community
PAHC Management & Services Corporation
PATH Ventures
People Self Help Housing
Peterson & Associates Affordable Housing Connections
Related California
Resources for Community Development
Retirement Housing Foundation
Riverside Charitable
Rural Community Assistance Corporation (RCAC)
Sacramento Housing Alliance
San Diego Housing Federation
San Fernando Valley Homeless Coalition
Self-Help Enterprises
Southern California Association of Non-Profit Housing
SRO Housing Corporation
Sun Country Builders
Thomas Safran & Associates
TJ Bly Company, LLC
TOWNSPEOPLE
Transition House
TWG Architects, Inc.
Urban Housing Communities, LLC
The Vecino Group
Wakeland Housing and Development Corporation
Wasatch Advantage Group, LLC
The Watershed Center
Western Community Housing, Inc.
Women Organizing Resources, Knowledge and Service
Yolo County Housing
Colorado
Adams County Housing Authority
Archway Housing & Services
Aurora Housing Authority
The Burgwyn Co., LLC
CARE Housing Services
Cathedral Development Group, Inc.
Community Resources and Housing Development Corp.
Community Restoration Partners, LLC
Element Properties
Fort Collins Housing Authority
Funding Partners
Grand Junction Housing Authority
Homeward 2020
Housing Colorado
Julesburg Housing Authority
Loveland Housing Authority
Medici Communities, LLC
Metro West Housing Solutions
Monroe Group Ltd.
RCH Jones Consulting
Rocky Mountain Communities
Ross Management Group
S.B. Clark Companies
San Miguel Regional Housing Authority
SERVE 6.8
South Metro Housing Options
Steele Properties, LLC
Urban Land Conservancy
Urban Residential Partners
Vos Consulting
Wolf Family I, Inc.
Zocalo Community Development
Connecticut
The Carabetta Companies
Connecticut Housing Coalition
Housing Authority of New Haven
Mutual Housing Assoc. of Southwestern Connecticut
New Neighborhoods, Inc.
Norwalk Housing Authority
Urban Initiatives
Vesta Corporation
Delaware
Delaware Community Investment Corporation
Delaware Housing Coalition
Delaware Valley Development Company
Leon N. Weiner & Associates, Inc.
NCALL Research, Inc.
Woodlawn Trustees, Inc.
District of Columbia
Affordable Housing Developers Council
Audubon Enterprises
Coalition for Nonprofit Housing & Community Dev.
CSG Urban Partners
Housing Assoc. of Nonprofit Developers
Institute for Responsible Housing Preservation
Jubilee Housing, Inc.
Manna Inc.
Montgomery Housing Partnership
Somerset Development Company
Transitional Housing Corporation
Florida
Ability Housing
Agorazo Development, Inc.
AmeriNational
Arrington Financial Capital, LLC
The Auburn Group
Beneficial Communities
Biscayne Housing Group
Blue Sky Communities, LLC
Broad and Cassel
Carlisle Development Group
Carrfour Supportive Housing
Centennial Management
Coalition of Affordable Housing Providers
Community Realty Agency & Information Group
Delray Beach Housing Authority
Dukes Construction Company
Florida Alliance of CDCs
Florida Council for Affordable and Rural Housing
Florida Supportive Housing Coalition
Fort Lauderdale Community Center
The Gatehouse Group, Inc.
Global Development Initiatives, LLC
Green Mills
Housing Authority of Pompano Beach
Housing Finance Authority of Palm Beach County
Housing Trust Group, LLC
Innerprise
JPM Development, LLC
Kipling Capital, LP
Kiss & Company, Inc.
Landmark Companies, Inc.
Lee County Housing Finance Authority
MCJ Associates, LLC
Norfolk, LLC
Norstar Development USA
The NRP Group
The NuRock Companies
Orange State Construction, Inc.
Palm Beach County Housing Authority
Picerne Development Corp of Florida
Pinellas County Housing Authority
Pinnacle Housing Group, LLC
Raymond James Tax Credit Funds, Inc.
Related Urban
The Richman Group of Florida, Inc.
Roundstone Development, LLC
Royal American
Soho Advisory Partners LLC
South Florida Community Development Corporation
Southport Financial Services, Inc.
SPECTRA
Tacolcy Economic Development Corp.
Tampa Housing Authority
Vestcor Development Corp, Inc.
Victory Fields, LLC
Wendover Housing Partners, Inc.
West Palm Beach Housing Authority
Georgia
Affordable Housing America, Inc.
Alliance Fund Advisors
Alliance Fund Management
Ambling Management Company
American Covenant Senior Housing Foundation, Inc.
Athens Land Trust
Atlanta Neighborhood Development Partnership
The Benoit Group
The Braden Group
Charis Community Housing, Inc.
Coleman Talley LLP
Cordele Housing Authority
Delmar Realty Advisors
Georgia Affordable Housing Coalition
The Integral Group
Invest Atlanta
JBH Financial Brokerage & Associates LLC
Landbridge Development, LLC
Mansermar Inc.
Marietta Housing Authority
Mize & Mize
ORION Real Estate Services, Inc.
Paces Foundation
Partnership Housing Affordable to Society Everywhere
Pittsburgh Community Improvement Association, Inc.
Project Interconnections, Inc.
Purpose Built Communities
Rea Ventures Group, LLC
Resource Housing Group
Sprague and Rosenberger
State Tax Credit Exchange
SUMMECH CDC
Tapestry Development Group
TBG Residential
Triumph Management Group, LLC
Hawaii
EAH Housing (also listed in California)
Hawaii Housing Finance, LLC
Hawaii Workforce Development Council
Housing Hawaii
Management Specialists Co.
Idaho
Community Council of Idaho, Inc.
Community Development Incorporated
HOPE Development, LLC
The Housing Company
New Beginnings Housing, LLC
Northwest Associates
Northwest Real Estate Capital Corp.
The Pacific Companies
Somerset Pacific
Thomas Development Co.
Illinois
Affordable Housing Investment Brokerage
Applegate & Thorne-Thomsen, PC
Bickerdike Redevelopment Corporation
Brinshore Development, LLC
Chicago Community Development Corporation
Chicago Rehab Network
City of Chicago
Consecra Housing Network
Cook County Housing Authority
FLS Group, LLC
Full Circle Communities, Inc.
General Capital Management Inc.
Hooker DeJong Architects, Inc.
Housing Action Illinois
Housing Authority of the County of DeKalb
Illinois Housing Council
JP Morgan
Laborers' Home Development Corp.
Lake County Housing Authority
Lightengale Group
Madison County Housing Authority
MB Financial Bank
Metroplex, Inc.
North Chicago Housing Authority
Peoria Citizens Committee for Economic Opportunity, Inc.
Perry Group, Ltd.
Pike County Housing Authority
The Renaissance Companies
The Resurrection Project
SE Clark & Assoc. Inc.
Springfield Housing Authority
Valerie S. Kretchmer Associates, Inc.
Winnebago County Housing Authority
Indiana
Affordable Housing Association of Indiana
Affordable Housing Corporation
Biggs TC Development, LLC
Bingham Greenebaum Doll LLP
Brown County Career Resource Center
Community Action of Greater Indianapolis, Inc.
Dauby, O'Connor & Zaleski, LLC
The Englewood Group
Fort Wayne Housing Authority
God's Helping Hand
Hamilton County Area Neighborhood Development, Inc.
Herman & Kittle Properties, Inc.
IAB Financial Bank
Indiana Affordable Housing Council
Indiana Association for Community Economic
Development
Indiana Health Centers Inc.
KCG Development
Keller Development, Inc.
Milestone Ventures, Inc.
Neighborhood Development Associates, LLC
New Albany Housing Authority
New Generation Management, Inc.
NSP Consultants, LLC
Paragus, LLC
Pedcor Companies
Pioneer Development Services, Inc.
TWG Development
Valenti Development, LLC
Westside Community Development Corp.
Wooden McLaughlin
Iowa
Affordable Housing Network, Inc.
Anawim Housing
AEGON USA Realty Advisors, LLC
Barnes Realty
Burns & Burns, LC
Community Housing Initiatives, Inc.
Fort Madison Housing Authority
J. Development Company
Hatch Development Group
Home Builders Association of Iowa
Perennial Property Management
Polk County Housing Trust Fund
Simonson & Associates Architects, LLC
Kansas
10up
Cohen-Esrey Real Estate Services, LLC
Homestead Affordable Housing, Inc.
Housing Opportunities, Inc.
JC Builders, Inc.
Kansas City Equity Fund, LLC (also listed in Missouri)
Kansas Housing Resources Corporation
Kim Wilson Holding Inc.
Marsh & Company, P.A.
Mennonite Housing Rehabilitation Services, Inc.
Overland Property Group, LLC
Prairie Fire Development Group (also listed in Missouri)
Topeka Housing Authority
Vintage Construction, LLC
Kentucky
AU Associates, Inc.
FAHE Capital Corporation
Family Scholar House
First World Architects Studio
Homeless and Housing Coalition of Kentucky
HOPE of Kentucky, LLC
Housing Partnership, Inc.
Kentucky Housing Corporation
KY Senior Citizens Apartments
LDG Development, LLC
Lexington Community Land Trust
Marian Development Group, LLC
Louisiana
Bauer Compliance & Consulting
Brownstone Affordable Housing Ltd.
Centerpointe Regional Housing Development, LLC
Fitness & Praise Youth Development, Inc.
Greater New Orleans Housing Alliance
Gulf Coast Housing Partnership
Harmony Neighborhood Development
Houma Terrebonne Housing Authority
Housing Authority of the City of Shreveport
Louisiana Assoc. of Affordable Housing Providers
Louisiana Community Reinvestment Coalition
Louisiana Housing Council
Mt. Pleasant Community Development Corporation, Inc.
Neville Development
Providence Community Housing
Rural Rental Housing Assoc. of Louisiana, Inc.
Standard Enterprises, Inc.
Statewide Louisiana Community Reinvestment Coalition
Maine
Auburn Housing Authority
Avesta Housing
Coastal Enterprises, Inc.
Community Housing of Maine
Developers Collaborative
Freeport Housing Trust
Maine Affordable Housing Coalition
Maine Workforce Housing, LLC
Northern New England Housing Investment Fund
Penquis Housing, Inc.
Portland Housing Development Corporation
South Portland Housing Authority
Westbrook Housing
The Wishcamper Companies, Inc.
Maryland
Bocarsly Emden Cowan Esmail & Arndt, LLP
Chesapeake Community Advisors, Inc.
Comprehensive Hsg. Assistance, Inc. (CHAI) Baltimore
Enterprise Homes
Garrett County Community Action Committee
Green Street Housing
Homes for America
The House of Easterling
Housing Assoc. of Nonprofit Developers
Howard County Housing
HTA Development, LLC
Maryland Affordable Housing Coalition
Maryland Asset Building and Cmty. Development Net.
Maryland Association of Housing and Development Agencies
Montgomery Housing Partnership
NeighborWorks Capital
Riverside Advisors LLC
Roots of Mankind Corp.
The Shelter Group
T.M. Associates, Inc.
Victory Housing, Inc.
WBC Community Development Corporation
Massachusetts
Alliance of Cambridge Tenants
Asian Community Development Corporation
B'nai B'rith Housing
Beacon Hill Capital LLC
Boston Capital
Boston Financial Investment Management
Boston Housing Authority Resident Advisory Board
Candeur Group
Capstone Communities LLC
Carlisle Tax Credit Advisors
Citizens' Housing and Planning Association
Clocktower Tax Credit Investments, LLC
Codman Square Neighborhood Development Corp.
Community Economic Development Assistance Corp.
Connolly and Partners, LLC
David Koven Consulting
Dorchester Bay Economic Development Corporation
Edwards Wildman Palmer LLP
First Financial Management Corporation
Housing Corporation of Arlington
Homeowners Rehab, Inc.
Housing Management Resources
Jamaica Plain Neighborhood Development Corporation
Jewish Alliance for Law and Social Action
Kevin P. Martin & Associates, PC
KPM
Madison Park Development Corporation
Massachusetts Assoc. of Community Dev. Corporations
Massachusetts Housing Investment Corporation
Michel Associates
NeighborWorks Southern Mass
New England Housing Network
North Shore Community Development Coalition
Norwood Housing Authority
Peabody Properties, Inc.
Preservation of Affordable Housing, Inc.
Strategic Tax Credit Investments, LLC
Tenants' Development Corporation
VIET-AID
WinnDevelopment
Women's Inst. for Housing & Economic Development
Michigan
Community Economic Development Assoc. of Michigan
Disability Advocates of Kent County
Ginosko Development Company
Housing Resources, Inc.
Inner City Christian Federation
Kalamazoo Eastside Neighborhood Association
Lapeer Housing Commission
Livonia Housing Commission
Michigan Community Action
Michigan Disability Housing Work Group
Michigan Housing Council
MORC Home Care
Neighborhood Service Organization
Occupancy Solutions, LLC
Ojibway Development, LLC
Plante Moran
Werth Development LLC
Ypsilanti Housing Commission
Minnesota
13th Ave
Aeon
Alliance Housing Inc.
Artspace Projects, Inc.
Augusta Ventures, LLC
Aurora St. Anthony Neighborhood Development Corp.
Avenues for Homeless Youth
Center City Housing Corp.
CommonBond Communities
Diversified Equities Corporation
D.W. Jones, Inc.
Dominium Development and Acquisitions, LLC
Greater Minnesota Housing Fund
Hope Community Inc.
Housing Preservation Project
Mahoney Ulbrich Christensen Russ P.A.
MetroPlains, LLC
The Metropolitan Consortium of Cmty. Developers
Midwest Minnesota CDC
Minnesota Housing Partnership
One Roof Community Housing
Podawiltz Development Corporation
Project for Pride in Living
Real Estate Equities, Inc.
Sand Companies, Inc.
The Schuett Companies
SCI Associates, LLC
Southwest Minnesota Housing Partnership
Three Rivers Community Action
Urban Homeworks
Mississippi
Adams Construction
Greater Greenville Housing
Hope Enterprise Corporation
Hughes Spellings
Lenton Development
Mercy Housing and Human Development
Mid-South Housing Foundation
Mississippi Assoc. of Affordable Housing Providers
The Park Companies
Rosedale Corporation
Ross & Yerger
SECDE Ventures, LLC
South MS Housing & Development Corporation
Tunica County CDC
Winters Construction, LLC
Missouri
Affordable Equity Partners
Affordable Housing Commission
Boonville Housing Authority
Brunswick Housing Authority
Builders Development Corporation
Hamilton Properties Corporation
Hannibal Housing Authority
Housing Authority of Joplin, MO
Housing Authority of the City of Jefferson
Independence Housing Authority
Ivanhoe Neighborhood Council
Kansas City Equity Fund, LLC (also listed in Kansas)
Lee's Summit Housing Authority
Marceline Housing Authority
MarksNelson, LLC
McCormack Baron Salazar
Missouri Workforce Housing Association
Peter & Paul Community Services
Prairie Fire Development Group (also listed in Kansas)
Slezak House
St. Louis Equity Fund, Inc.
RubinBrown LLP
Travois, Inc.
Twain Financial Partners
Wilhoit Properties Inc.
Zimmerman Properties, LLC
Montana
Bullhook Community Health Center GL Development LLC
Great Falls Housing Authority
Housing Authority of Billings
Housing Solutions, LLC
Lee and Co, PC
Missoula Housing Authority
Mountain Plains Equity Corporation
Summit Management Group, Inc.
Rocky Mountain Development Council
Nebraska
Cairo Housing Authority
Cambridge Housing Authority
Cirrus House Inc.
Columbus Housing Authority
Cornerstone Associates, LLC
Excel Development Group
Fremont Housing Authority
Holy Name Housing Corporation
Horizon Bank
Housing Partners of Western Nebraska
Lincoln Housing Authority
McCook Housing Agency
Nebraska City Area Economic Development Corp.
Nebraska Housing Developers Association
North Omaha Foundation
Oakland Housing Authority
Omaha Economic Development Corp.
Omaha Housing Authority
Ord Housing Authority
RMR Group
Schuyler Housing Agency
Seldin Company
Sunrise View Housing Authority
Urban Housing Partners, LLC
Nevada
Clark County Cmty. Resources Management Division
George Gekakis, Inc.
Mueller, Hinds, & Associates, CHTD
Neighborhood Housing Services of Southern Nevada
Nevada Council of Affordable and Rural Housing
Nevada HAND
Nevada Rural Housing Authority
Silver Sage Manor, Inc.
Silver State Housing
New Hampshire
AHEAD, Inc.
CATCH Neighborhood Housing
Concord Coalition to End Homelessness
Families in Transition
Housing Action NH
Laconia Area Community Land Trust
NeighborWorks of Greater Manchester
New Hampshire Public Health Association
Newmarket Housing Authority
NH Coalition to End Homelessness
NH Community Loan Fund
Tri-County CAP
USIS, LLC
New Jersey
Advocates for Peace & Social Justice
Alliance for Betterment of Citizens with Disabilities
Diocesan Housing Services Corporation of the Diocese
of Camden
Hoboken Housing Authority
Housing and Community Development Network of NJ
Housing Authority of Gloucester County
The Ingerman Group
Jewish Community Housing Corp. of Metropolitan NJ
MaGrann Associates
MEND, Inc.
Mercer Alliance to End Homelessness
The Metro Company
Monarch Housing Associates
New Community Corporation
New Jersey Apartment Association
New Jersey Community Development Corporation
New Jersey Housing and Mortgage Finance Agency
North Haledon Affordable Housing
Project Freedom, Inc.
PV Community Development Corporation
Tabor House
The Michaels Organization
Valley National Bank
New Mexico
City of Las Cruces
Housing Trust of Santa Fe
JL Gray Company
New Mexico Coalition to End Homelessness
YES Housing, Inc.
Santa Fe Civic Housing Authority
Sawmill Community Land Trust
Tierra del Sol Housing Corporation
New York
3D Development Group, LLC
42 Equity Partners, LLC
Arbor Housing Development
Asian Americans for Equality
Association for Energy Affordability Inc.
Belmont Housing Resources for WNY, Inc.
Benchmark Title Agency, LLC
Berkley Point
Blueprint Properties
The Bridge
Broadway-Filmore NHS
Central New York Citizens in Action, Inc.
Citizens Against Recidivism, Inc.
Community Access Inc.
Community Action Organization of Erie County, Inc.
Community Development Corp. of Long Island, Inc.
Community Development Trust
Community League of the Heights
Conifer Realty, LLC
Curtis + Ginsberg Architects LLP
East Hampton Housing Authority
Edgemere Development
Evergreen Health Services
Ewing Planning Services
First Sterling
Forsyth Street Advisors LLC
Fecteau PLLC
Fordham Bedford Housing Corporation
Geneva Housing Authority
Greater Rochester Housing Partnership
HANAC, Inc.
Harlem Congregations for Community Improvement Inc.
Hour Children
Housing Visions
The Hudson Companies, Inc.
Humand Development Services of Westchester
Ibero-American Development Corporation
The Institute for Human Services, Inc.
Ithaca Housing Authority
Ithaca Neighborhood Housing Services
Lemle & Wolff, Inc.
Lott Community Development Corporation
Lower East Side Coalition Housing Development, Inc.
Neighborhood Housing Services of New York City
Neighborhood Preservation Coalition of New York State
New Destiny Housing Corporation
New York Housing Conference
New York State Association for Affordable Housing
Northeast Brooklyn Housing Development Corporation
Ocean Bay Community Development Corporation
Oxford Consulting Inc.
PathStone
Property Resources Corporation
Providence Housing Development Corp.
R4 Capital, LLC
Regan Development Corporation
Rochester's Cornerstone Group, Ltd.
Royal Realty Development, Inc.
Rural Ulster Preservation Company
RUPCO
SFDS Development Corp.
Sobro
Southern Tier Environments for Living
Supportive Housing Network of New York
Tenderloin Neighborhood Development Corporation
Transamerica Equities, LLC
Triboro Real Estate Development, Inc.
Urbecon LLC
West Harlem Group Assistance, Inc.
White Plains Housing Authority
North Carolina
The Affordable Housing Group of North Carolina, Inc.
Affordable Housing Management, Inc.
Blue 22 Development
Brock Ventures, Inc.
CAHEC
Carolina Bank
Carolinas Council of Affordable Housing
Charlotte Mecklenburg Housing Partnership
Community Investment Corporation of the Carolinas
Community Management Corporation
DHIC, Inc.
Dixon Hughes Goodman LLP
Eagan Partners, LLC
East Carolina Community Development, Inc.
The Housing Assistance Corporation
KRP Investments, LLC
North Carolina Housing Coalition
Partners Ending Homelessness
Partnership Property Management
Pressly Development Company, Inc.
Reliance Housing Foundation
United Developers, Inc.
Weaver-Kirkland Housing, LLC
Weaver Cooke Construction
William S. Robinson & Associates, Inc.
Wilson Community Improvement Association [WCIA]
Workforce Homestead, Inc.
North Dakota
Beyond Shelter, Inc.
Fargo Housing & Redevelopment Authority
Grand Forks Housing Authority
Lutheran Social Services of North Dakota
North Dakota Coalition for the Homeless
Turtle Mountain Housing Authority
Ohio
The ABCD, Inc.
ABCAP
Affordable Housing Partners, Inc.
Arch City Development
Bethel Development
Burten, Bell, Carr Development, Inc.
CDA Flaherty Consulting
Center for Closing the Health Gap
Clark, Schaefer, Hackett & Co.
Cleveland City Council
Cleveland Housing Network
Cleveland Neighborhood Progress
Cleveland State University
Coalition on Homelessness and Housing in Ohio
Columbus Housing Partnership
Community Action Commission of Fayette County
Community Action Organization of Delaware, Madison,
and Union Counties, Inc.
Cornerstone Corporation for Shared Equity
Detroit Shoreway Community Development Org.
EDEN, Inc.
Episcopal Retirement Homes Affordable Living
Fairfield Homes, Inc.
Famicos Foundation
Friendship New Vision, Inc.
GL Housing Group
Grey Area Consultants, LLC
Housing Services Alliance
James A. Saad, LLC
Jones Walker LLP
Karen A Graham Consulting, LLC
Karen H. Bauernschmidt Co., LPA
LIHTC Working Group
Miller-Valentine Group
Mt. Auburn Good Housing Foundation
MV Residential Development LLC
National Affordable Housing Trust
National Church Residences
Neighborhood Development Services
Neighborhood Housing Services of Greater Cleveland
Ohio Capital Corporation for Housing
Ohio CDC Association
Ohio Housing Council
Ohio Housing Finance Agency
Rental Partnerships
Royal Bank of Canada
Settlement Star Services, LLC
Slavic Village Development
Star Title Agency, LLC
Toledo Fair Housing Center
The Uptown Association, Inc.
United Way of Greater Cincinnati
The Wallick Companies
WSOS Community Action Commission
Oklahoma
Belmont Development Company, LLC
Blackledge Architects
Catholic Charities of the Archdiocese of Oklahoma City
C.H.A.R.M.E.D.
City Care, Inc.
CMA Strategies
Dobson Mortgage Corp.
Elk City Housing Authority
Liberty Realty Capital Group
LIFE Senior Services
LW Development, LLC
Metro First Realty
Mountain View Housing Authority
Oklahoma City Metro Assoc. of REALTORS
Oklahoma Coalition for Affordable Housing
Oklahoma Housing Finance Agency
Oklahoma Investment Realty, Inc.
ORO Development Corporation
Progressive Independence
REI Oklahoma
Resco Enterprises, LLC
Spradling, Kennedy & McPhail, LLP
Sunview Homes
Oregon
Bienestar Oregon
CASA of Oregon
Cascade Management
Grounded Solutions Network
Housing Authority of Jackson County
Housing Authority of Yamhill County
Lincoln Community Land Trust
Mid-Columbia Housing Authority
Network for Oregon Affordable Housing
Northwest Housing Alternatives
Oregon Opportunity Network
REACH Community Development, Inc.
ROSE Community Development Corporation
United Fund Advisors
West Valley Housing Authority
Pennsylvania
Allentown Housing Authority
A.M. Rodriguez Associates, Inc.
BCM Affordable Housing
Community Action Commission
Community Action Committee of the Lehigh Valley, Inc.
Community First Fund
Cornerstone Community Partners
Fayette County Community Action Agency, Inc.
Franklin County Housing Authority
HDC MidAtlantic
The Hickman
Housing Alliance of Pennsylvania
Housing Authority of the City of Erie
Housing Authority of the County of Beaver
Housing Development Corporation MidAtlantic
Kelly & Close Engineers
NCCDC
New Kensington CDC
Pathways to Housing PA
Pennrose Properties
Pennsylvania Association of Housing & Redevelopment Agencies
Pennsylvania Developers Council
Pennsylvania Housing Finance Agency
Philadelphia Association of CDCs
Philadelphia Housing Authority
Presbyterian Senior Living
Quality Community Health Care, Inc.
Ralph A. Falbo, Inc.
The Reinvestment Fund
S&A Homes
SEDA-COG Housing Development Corp.
United Neighborhood Centers
United Neighborhood Community Development Corporation
West Market Management
WRT Design
York Housing Authority
Puerto Rico
Advancer Local Development
ERS Consulting Group, LLC
Fernando L Sumaza & Company
La Fundacion del Perpetuo Socorro
One Stop Career Center of Puerto Rico, Inc.
Rhode Island
Amos House
Barbara Sokoloff Associates
Church Community Housing Corp.
Coventry Housing Authority
Dimeo Properties
EastBay Community Development Corp.
House of Hope CDC
HOUSING ACTION Coalition of Rhode Island
NeighborWorks Blackstone River Valley
Newport Housing Authority
Olneyville Housing Corporation
Omni Development Corporation
Pawtucket Central Falls Development
Property Advisory Group
Rhode Island Housing
Roger Williams University
SWAP Inc.
Valley Affordable Housing Corp.
South Carolina
AMCS Inc.
Connelly Builders, Inc.
CPR Partners
Credit Capital, LLC
Douglas Development
Howell Linkous and Nettles, LLC
Humanities Foundation
Landmark Property Management
SC Community Loan Fund
Southern Development Management Company Inc.
South Dakota
Aberdeen Housing Authority
Dakota Nation Community Development Corporation
Dakota Resources
Development for the Disabled Inc.
GROW South Dakota
Lloyd Companies
Murray Properties, LLC
NeighborWorks Dakota Homes Resources
Oti Kaga, Inc.
Tennessee
Alco Management, Inc.
Bluff City Community Development Corporation
Elmington Property Management
Good Neighbor Foundation
Huber & Lamb Appraisal Group
Jackson Housing Authority
Knoxville's Community Development Corporation
Lexington Housing Authority
LHP Development, LLC
Metropolitan Development & Housing Agency
Pennrose Properties
Volunteer Management and Development Company
Texas
Alden Torch Financial, LLC
Anderson Development & Construction, LLC
Anson Housing Authority
Austin Community Design & Development Center
Banyan Residential
B.E. Boyd Consultant Group
Builders of Hope CDC
Call to Action_Homeless Veterans
Center for Faith & Health Initiatives
Conine Residential Group
Crowell Housing Authority
Delphi Affordable Housing Group, Inc.
Edinburg Housing Authority
Flores Residential, LLC
Fort Worth Housing Authority
Foundation Communities
Georgetown Housing Authority
Granger Housing Authority
Greenville Housing Authority
Gregory Housing Authority
Hidalgo County Housing Authority
Housing Authority of El Paso
Housing Authority of the City of Alamo
Housing Lab by BETCO
Joe Lopez Law Firm
Levelland Housing Authority
Lockhart Housing Authority
Locke Lord LLP
Maupin Development
MWS Real Estate Services
Mount Pleasant Housing Authority
Nortex Housing Finance Commission
Red Stone Equity Partners
Robert T. Pittenger CPA, PC
Rogers Housing Authority
Rural Rental Housing Assoc. of Texas, Inc.
San Antonio Alternative Housing Corporation
San Antonio Housing Authority
Spearman Housing Authority
StoneLeaf Companies
Texas Affiliation of Affordable Housing Providers
Texas NAHRO
UAH Property Management, Inc.
Utah
Adams Construction & Management
Community Development Corp. of Utah
Crossroads Urban Center, LLC
Davis Community Housing Authority
Horizon Development and Management
Housing Authority of Salt Lake City
Housing Authority of the County of Salt Lake
Housing Authority of Utah County
Housing Management and Development Corporation
Mountainlands Community Housing Trust
Neighborhood Nonprofit Housing Corporation
NeighborWorks Salt Lake
Self-Help Homes
Taylor Springs Apartments
Tooele County Housing Authority
TURN Community Services, Inc.
Utah Community Reinvestment Corporation
Utah Housing Corporation
Utah NAHRO
Utah Nonprofit Housing Corp.
Valley Behavioral Health
Weber Housing Authority
Vermont
Addison County Community Trust, Inc.
Burlington Associates
Cathedral Square Corporation
Central Vermont Community Land Trust
Champlain Housing Trust
Disability Rights Vermont
Housing Trust of Rutland County, Inc.
Housing Vermont
Lamoille Housing Partnership
Vermont Affordable Housing Coalition
Vermont Center for Independent Living
Vermont Housing and Conservation Board
Vermont Housing Finance Agency
Vermont State Housing Authority
Virginia
AHC, Inc.
Alexandria Housing Development Corporation
Alexandria Redevelopment and Housing Authority
Alliance for Housing Solutions
Arlington Partnership for Affordable Housing
Better Housing Coalition
Chesapeake RHA
Community Housing Partners
Hampton Redevelopment and Housing Authority
Harrisonburg Redevelopment and Housing Authority
The Haven, Inc.
Hopewell Redevelopment and Housing Authority
Housing Assoc. of Nonprofit Developers
Linden Capital LLC
MichiHamlett Attorneys at Law
Newport News Redevelopment & Housing Authority
NJR Real Estate Consulting Services, LLC
Norfolk Redevelopment and Housing Authority
Northern Virginia Affordable Housing Alliance
Restoration of Petersburg Community Dev. Corp.
Southside Outreach Group, Inc.
Virginia Coalition to End Homelessness
Virginia Community Development Corporation
Virginia Housing Coalition
Virginia Housing Development Authority
Virginia LISC
Virginia One Development
Virginia Supportive Housing
Wesley Housing Development Corp. of Northern Virginia
Washington
Ally Community Development
American Capital Group
Barrientos LLC
Beacon Development Group
Bellingham/Whatcom County Housing Authorities
Bellwether Housing
Betsy Lieberman Consulting LLC
Bremerton Housing Authority
Campion Advocacy Fund
Capitol Hill Housing Foundation
Cascade Affordable Housing
Catholic Charities Housing Services Diocese of Yakima
City of Seattle Office of Housing
Columbia Gorge Housing Authority
Colville Indian Housing Authority
Community Center for Education Results
Community Frameworks
Compass Health
Compass Housing Alliance
Downtown Emergency Service Center (DESC)
El Centro de la Raza
Enterprise Community Partners Pacific Northwest
Homestead CLT
HomeStreet Bank
Housing Authority of Grant County
Housing Authority of Kennewick
Housing Consortium of Everett & Snohomish County
Housing Dev. Consortium of Seattle-King County
Housing Hope
Housing Kitsap
Impact Capital
InterIm Community Development Association
Imagine Housing
King County Housing Authority
LeadingAge Washington
Longview Housing Authority
Low Income Housing Institute
Makah Tribe
Mark Flynn Consulting, LLC
Mayor of Seattle Ed Murray
McLoughlin & Associates
Mercy Housing Northwest
Northwest Youth Services
Office of Rural and Farmworker Housing
OPAL Community Land Trust
Pacifica Law Group, LLP
Parkview Services
Paul Schissler Associates
Plymouth Housing Group
Rafn Company
Renton Housing Authority
Seattle Chinatown International District Preservation
and Development Authority (SCIDpda)
The Seattle Foundation
Seattle Housing Authority
Seattle/King County Coalition on Homelessness
SEC Affordable Housing
Security Properties
Senior Services
Senior Services of Snohomish County
Shelter Resources, Inc.
SMR Architects
Solid Ground
Spokane Community Housing Association
Spokane Housing Ventures
Spokane Low Income Housing Consortium
Spokane Neighborhood Action Partners (SNAP)
The Summit Group
Tacoma Housing Authority
TPC Affordable Housing Consortium
United Marketing, Inc.
Upper Valley MEND
Walla Walla Housing Authority
Washington Community Reinvestment Association
The Washington Low Income Housing Alliance
Washington State Housing Finance Commission
Watson & McDonell
Yesler Community Collaborative
YMCA of the Inland Northwest
YWCA Seattle
King
Snohomish
West Virginia
Central Appalachia Empowerment Zone of West Virginia
Chaplin Construction, Inc.
Coalfield Development Corporation
CommunityWorks in West Virginia, Inc.
Innovation, LLC
Keyser Housing Authority
Recovery Point of Charleston
RedClay Development of West Virginia
Religious Coalition for Community Renewal
Vandalia Heritage Foundation
West Virginia Community Builders, LLC
Wisconsin
Astar Capital Management
Baker Tilly Virchow Krause, LLP
Bear Development
Cardinal Capital Management
Center for Resilient Cities
Community First Inc.
Elizabeth Moreland Consulting, Inc.
Gorman & Company
Hirsch Group, LLC
Horizon Development Group, Inc.
Inner City Redevelopment Corporation
Journey House
Layton Boulevard West Neighbors, Inc.
Oshkosh Housing Authority
Riverworks Development Corporation
Salous Inc.
SVA Certified Public Accountants, S.C.
The TheoPRO Group
Wisconsin Council for Affordable and Rural Housing
Wisconsin Housing Preservation Corp.
Wyoming
Volunteers of America Northern Rockies
Wyoming Housing Network
______
Prepared Statement of Diane Yentel, President and CEO of the National
Low Income Housing Coalition
On behalf of the National Low Income Housing Coalition (NLIHC), I
want to thank this committee for the opportunity to submit a statement
for the record regarding the hearing, ``Housing Vulnerable Families and
Individuals: Is There a Better Way?'' Given the growing affordable
housing crisis--especially among families with extremely low-incomes--I
applaud members of this committee for looking seriously at reforms to
reduce costs and serve more families in need. Bold action to improve
and expand current Federal housing programs is clearly needed.
NLIHC is dedicated solely to achieving socially just public policy
that assures people with the lowest incomes in the United States have
affordable and decent homes. Our members include State and local
housing coalitions, residents of public and assisted housing, nonprofit
housing providers, homeless service providers, fair housing
organizations, researchers, public housing agencies, private developers
and property owners, local and State government agencies, faith-based
organizations, and concerned citizens. While our members include the
spectrum of housing interests, we do not represent any segment of the
housing industry. Rather, we focus on what is in the best interests of
people who receive and those who are in need of Federal housing
assistance, especially extremely low-income people.
no silver-bullet solution
Today, the affordable housing crisis continues to reach new
heights. Rents are rising, wages are flat, and more people are renting
their homes than ever before. Yet, the supply of affordable housing has
not kept pace. As a result, record-breaking numbers of families cannot
afford a decent place to call home. Every State and every community is
impacted.
The greatest need for affordable housing is primarily concentrated
among extremely low-income renters who earn no more than 30 percent of
their area median income (AMI). NLIHC's recent report, The Gap: The
Affordable Housing Gap Analysis 2016, found that there is a shortage of
7.2 million affordable and available rental homes for the Nation's 10.4
million extremely low-income renters. This means that just three out of
10 extremely low-income families are able to find an affordable place
to call home. As a result, three out of four extremely low-income
families are severely cost-burdened, spending more than half of their
income on rent and utilities. These families are often forced to make
difficult choices between paying rent and buying groceries or visiting
their doctor. In worst cases, they become homeless.
Moreover, NLIHC's Out of Reach report shows the difference between
wages and the price of housing in every State and county. It also
estimates the hourly wage that a full-time worker needs to earn in
order to afford a modest, two-bedroom apartment. In 2016, the national
Housing Wage was $20.30 per hour. A minimum wage worker would need to
work 112 hours a week--or 2.8 full-time jobs--just to afford their
apartment. While the housing wage changes from State to State and
county to county, there is no jurisdiction where a full-time worker
earning the prevailing minimum wage can afford a modest, two-bedroom
apartment.
Housing challenges differ from community to community; there is no
silver bullet solution. Congress and the administration must use every
tool available to solve the problem. A comprehensive set of solutions
to end housing insecurity in America includes: preserving and
rehabilitating our Nation's existing affordable housing stock;
increasing investment in the production of affordable housing for the
lowest-income people; and expanding rental assistance.
the importance of public housing
Public housing is home to more than 1.1 million households and
plays a critical role in providing safe, decent housing to families
with the greatest needs. The preservation of this important community
asset must be a part of any strategy to end housing insecurity.
Research shows that the vast majority of the more than 2 million
people who live in public housing are satisfied overall with their
homes, even though they rightfully push for solutions to maintenance
and management issues. Most residents do not want to see public housing
end; they want to see it improved and expanded.
In fact, far more people are trying to get into public housing than
leave it. In NLIHC's forthcoming report, we found that the average
waitlist for public housing is about 9 months. Among the largest public
housing authorities (PHAs), the waitlist is longer than 2 years. In
many cities, the waiting list is so long that has been closed for
years.
Converting public housing into housing vouchers would result in a
significant loss to the Federal Government and local communities. The
Federal Government has already invested significant resources to
develop, maintain, and operate public housing. Communities will lose an
important asset--and the Federal Government will lose all of this
investment--if Congress were to eliminate public housing.
section 8 housing choice vouchers
Housing Choice Vouchers (HCV) are a proven tool in reducing
homelessness and housing insecurity, as well as helping families climb
the economic ladder. Housing vouchers help people with the lowest
incomes afford housing in the private housing market by paying
landlords the difference between what a household can afford to pay in
rent and the rent itself, up to a reasonable amount. Administered by
the U.S. Department of Housing and Urban Development (HUD), housing
vouchers comprise the agency's largest rental assistance program,
assisting more than 2.2 million households.
Groundbreaking research by Harvard economist Raj Chetty offers
persuasive evidence on the impact of housing vouchers on upward
mobility. Using new tax data, Chetty and his colleagues assessed the
longer-term outcomes for children who moved at a younger age as part of
the HUD's Moving to Opportunity demonstration. Chetty's study found
that children who were younger than 13 when their family moved to a
lower-poverty neighborhood saw adult earnings increased by
approximately 31 percent. Children who were younger than 13 when they
moved also lived in better neighborhoods as adults and were less likely
to be single parents.
Given the voucher program's effectiveness, Congress should not only
expand housing vouchers to more families in need, but also work towards
improving the program's effectiveness in serving low-income families.
While housing vouchers offer families the prospect of moving to areas
of opportunity, barriers to mobility prevent many from doing so. Many
private-sector landlords refuse to accept housing vouchers--whether
because of the administrative costs, because vouchers do not cover the
full cost of rent in high-cost areas, or outright discrimination. In
cases where the utility of housing vouchers is limited, public housing
plays a critical role in addressing the housing needs of low-income
families.
Converting Project-Based Rental Assistance to Vouchers Would Increase,
Not Alleviate, the Affordable Housing Crisis
Due to the low budget caps required by the Budget Control Act, this
Committee faces a very difficult task of finding the resources
necessary just to maintain current rental assistance contracts and
program levels. Since 2011, spending caps have only made it more
difficult for extremely low-income seniors, people with disabilities,
families with children, and people experiencing homelessness to access
safe, decent, and affordable housing.
For that reason, the Campaign for Housing and Community Development
Funding (CHCDF), a coalition led by NLIHC with the support of 75
national and regional organizations, has worked to work to help lift
the low spending caps, prevent across-the-board sequestration cuts, and
ensure the highest allocation of resources possible to support
affordable housing and community development.
NLIHC also serves on the Steering Committee of NDD United, a
coalition that works across industry sectors--from housing and
infrastructure to education and the environment to healthcare and
public safety--to advocate for non-defense discretionary spending,
including funding for the U.S. Department of Housing and Urban
Development (HUD) and Agriculture (USDA) Rural Housing Service.
Even within these budget constraints, we encourage this Committee
to prioritize protecting and preserving existing affordable housing
resources, like public housing.
While expanding housing vouchers to many more families is an
important part of the solution, it alone cannot fully address the scope
of the housing crisis. Additional tools are necessary to address other
challenges, including the need to recapitalize and preserve aging
properties, revitalize distressed communities, provide housing options
for low-income families in tight or gentrifying markets and produce
accessible housing for families with disabilities and special needs.
Addressing these gaps in the rental housing market requires an
investment in bricks and mortar--through the expansion and improvement
of the Low-Income Housing Tax Credit (Housing Credit), national Housing
Trust Fund (HTF), and HOME Investment Partnerships (HOME) program--as
well as the preservation of public housing and the existing affordable
housing stock.
policy recommendations
To reduce costs and improve program delivery, NLIHC recommends
consolidating PHA's administration of housing vouchers, funding a
mobility counseling pilot program, and encouraging HUD to adopt small
area fair market rents (SAFMRs) with tenant protections.
Consolidate PHA's Administration of Housing Vouchers
Currently, 2,400 PHAs administer the Nation's two million housing
vouchers. Of these agencies, 58 percent administer fewer than 400
vouchers. These small housing agencies exist in rural, suburban, and
urban markets. There are 558 housing agencies administering vouchers in
the Nation's 49 most populated metro areas.
Consolidation of the administration of vouchers would result in
administrative cost savings, bring significant benefits to families
with housing vouchers and those in need of housing vouchers, and reduce
HUD's oversight costs.
According to HUD's Housing Choice Voucher Program Administrative
Fee Study, issued in April 2015, large housing voucher programs have
lower costs than smaller programs. Cost estimates for the 130 small
housing voucher programs studied show an inverse pattern of costs per
unit, decreasing steadily with the increase in the number of vouchers
under lease.
Under the current system of multiple housing authorities in a
single housing market, a household seeking a voucher has to apply to
several different agencies to maximize their chances of successfully
competing for a voucher. For example, an eligible household in the
Washington, D.C. housing market would have to submit separate
applications to the District of Columbia Housing Authority, the Housing
Opportunities Commission of Montgomery County, the Housing Authority of
Prince George's County, the Alexandria Housing and Redevelopment
Authority, the Fairfax County Redevelopment and Housing Authority, and
the Arlington County Department of Human Services, not to mention
additional housing agencies in outer ring suburbs from which people
commute to and from jobs in the D.C. metro area.
It is obvious how time consuming and frustrating this would be for
families seeking a housing voucher. It is also costly for a housing
authority to process an application--a cost that is compounded when
several housing authorities are processing applications from the same
household. Under the current system, it is impossible to know what the
true demand for vouchers is because the same household can be on
multiple waiting lists.
Even if a household is lucky enough to rise to the top of a waiting
list and receive a housing voucher, they may face significant barriers
in using the voucher. Housing markets do not recognize jurisdictional
boundaries. If a new voucher holder received their voucher in one
jurisdiction, but found their preferred housing in the next
jurisdiction, the household would have to go through the cumbersome
process of ``porting'' their voucher from one administering agency to
another.
This process can reduce significantly the chances of successfully
executing a lease and moving to the new home.
Consolidation of an area's vouchers into a single administering
entity with a single waiting list, either with a new entity or one of
the existing housing agencies, would significantly streamline the
voucher process for households, the administering agencies, and the
landlords on whose participation the program's success depends.
Regional administration of vouchers would also result in providing
voucher holders with greater choice in where they can use their
vouchers. Federal policy changes to require the consolidation of
voucher administration would provide people more freedom to choose
where they want to live with a voucher, including moving to low-poverty
neighborhoods.
One example of a consolidated housing agency is the Southern Nevada
Regional Housing Authority (SNRHA), which is the successor to the
Housing Authorities of Las Vegas, North Las Vegas, and Clark County.
According to the SNRHA's website, ``Now, all of that expertise is under
one roof and we hope to serve you much more efficiently.'' The SNRHA
administers 10,094 housing choice vouchers.
The statute currently permits voucher administration consortia, but
many housing authorities are reluctant to give up their authority.
Congress should enact legislation that provides incentives--or
preferably mandates--for consolidation and regional administration.
Fund a Mobility Counseling Pilot Program Proposed by the
Administration
Congress should support funding for a mobility counseling pilot
program that was proposed in the President's fiscal year 2017 budget
request. Through this 3-year demonstration, HUD and PHAs will be able
to develop new models for improving voucher mobility. Under the
demonstration, PHAs in about 10 regions would provide counseling to
help HUD-assisted families move to areas of opportunity. PHAs could use
demonstration funds to improve collaboration between agencies and align
policies and administrative systems. Funds could also be used to better
recruit landlords and other activities that promote greater voucher
mobility and housing choice. The proposal also includes a research
component to study what strategies proved most cost-effective.
The Senate's fiscal year 2017 Transportation-HUD (THUD) spending
bill includes $11 million to fund the demonstration and an additional
$3 million for evaluation. The House THUD bill does not include similar
funding.
Encourage HUD to Adopt Small Area Fair Market Rents
(SAFMRs) With Tenant Protections
For several years, NLIHC has advocated for SAFMRs as one means to
help expand affordable housing choice for voucher households. SAFMRs
have the potential to augment the value of a voucher and thus enhance
the ability of a household to use their voucher in more neighborhoods,
particularly areas of higher opportunity.
SAFMRs reflect rents based on U.S. Postal ZIP Codes, while
traditional FMRs reflect a single rent standard for an entire
metropolitan region. By providing voucher payment standards that are
more in line with neighborhood-scale rental markets, SAFMRs aim to
provide relatively higher subsidies in neighborhoods with higher rents
and greater opportunities and lower subsidies in neighborhoods with
lower rents and higher concentrations of voucher holders.
HUD recently issued a proposed rule that would use a formula to
select a limited number of metropolitan areas that would be required to
use SAFMRs. While NLIHC supports changes to the voucher regulations
that enable households to use vouchers in areas of higher opportunity,
HUD must ensure that the final rule prevents adverse impacts on
households currently relying on vouchers.
We are concerned about the potential harm that a transition to
SAFMRs could cause voucher holders currently living in low-cost ZIP
codes where the SAFMR is likely to be lower than the metropolitan FMR.
This could result in a lower voucher payment standard, one that is
below current rents to which landlords are accustomed. If a landlord
does not lower the rent when the voucher payment standard declines--
which is likely--residents would have to pay more for rent and may
become cost-burdened or severely cost-burdened.
Analysis by the National Housing Law Project reveals that if
current voucher households are not held harmless, 78 percent (435,000
households) would likely suffer the impact of reduced payment standards
in the 31 areas that meet HUD's SAFMR criteria. Consequently, we
recommend that the final rule categorically exempt current voucher
households from any reduction in the payment standard as a result of
the transition to SAFMRs.
Moreover, we concerned many landlords may stop accepting vouchers
where payment standards in low-rent neighborhoods decline sharply,
adversely impacting households currently relying on vouchers as well as
future voucher recipients. In some tight rental markets, landlords may
be able to obtain the rents they want without vouchers and without
having to comply with voucher program requirements. This is
particularly true in gentrifying areas.
In order to prevent landlords from exiting the voucher program and
thereby reduce the stock available to future and current voucher
households, NLIHC recommended to HUD that its final rule incrementally
limit how far SAFMRs could fall below current metropolitan FMRs. NLIHC
proposed that for the first year of implementation, SAFMRs be set no
lower than 95 percent of the metropolitan FMR, no lower than 90 percent
the second year, and so on in 5 percent increments.
We also believe that HUD's proposed rule does not account for tight
rental markets. Several of the metropolitan areas on the list of 31
that would be required to comply have very low vacancy rates, little
rental turnover, high and rapidly rising rents, and low growth in the
rental stock. As a result, there is little or no opportunity for
mobility for renters in general and for voucher households in
particular. Voucher households often have to return their vouchers
unused because they cannot find a place to rent. In higher opportunity
neighborhoods where vacancies are scarce, voucher households encounter
strong competition from those without vouchers. Therefore, NLIHC
recommends that any metropolitan area with a vacancy rate of 5 percent
or less not be required to comply with the SAFMR rule.
an alternative approach to increase needed investments
While Federal investments in housing have a proven track record of
reducing homelessness and housing insecurity, these investments are
sorely underfunded. As a result, just one in four families that are
eligible for housing assistance get the help they need. For our Nation
to fully address the affordable housing crisis, we must identify and
allocate resources to increase investment in proven solutions.
Congress can make the investments needed to end homelessness and
housing insecurity without adding costs to the Federal Government
through reform of the Mortgage Interest Deduction. Each year, the
Federal Government spends more to subsidize the homes of 7 million
high-income households through the Mortgage Interest Deduction--most of
whom would be stably housed without the government's support--than it
does to assist the poorest 55 million families. In fact, $8 out of
every $10 under the Mortgage Interest Deduction goes to families making
more than $100,000 a year; $4 out of every $10 goes to families making
more than $200,000.
Specifically, Congress should reduce the size of a mortgage
eligible for the tax break from $1 million to the first $500,000--
impacting fewer than 5 percent of mortgage holders nationally--convert
the deduction into a nonrefundable capped credit and reinvest the
significant savings into programs that serve families with the
greatest, clearest housing needs. These changes would result in 15
million low-income homeowners who currently get no benefit from the
Mortgage Interest Deduction to receive a much-needed tax break, as well
as $220 billion in savings over 10 years to be reinvested in effective
housing programs, including Housing Choice Vouchers, public housing,
and the national Housing Trust Fund (HTF).
The HTF is a dedicated, targeted resource that provides States with
revenue to build, preserve, and rehabilitate housing that is affordable
for extremely and very low-income households. This year, the HTF
provided its first $174 million in allocations to States. NLIHC and our
State and local partners look forward to working with Congress to
expand the HTF, including though housing finance reform and reform of
the Mortgage Interest Deduction.
Thank you again for this opportunity for NLIHC to share our views
on how to improve the way we provide and administer affordable housing
in our country. If you have additional questions, please contact Public
Policy Director Sarah Mickelson at [email protected].
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2017
----------
WEDNESDAY, NOVEMBER 16, 2016
U.S. Senate,
Subcommittee on the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:20 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Susan Collins, (chairman)
presiding.
Present: Senators Collins, Cassidy, Daines, Reed, and
Murphy.
The Automated and Self-Driving Vehicle Revolution:
What is the Role of Government?
OPENING STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. This hearing will come to order.
Good afternoon. I'm pleased to be joined today by our
ranking member, Senator Jack Reed, and by Senator Cassidy and
others who will be joining us, as we hold this hearing to
examine the role of government in enhancing roadway safety
through the careful deployment of automated and self-driving
vehicles, which could revolutionize our transportation system.
I also welcome our panel of witnesses. We are joined today
by Mark Rosekind, the Administrator of the National Highway
Traffic Safety Administration; Deborah Hersman, the President
and CEO of the National Safety Council; Paul Brubaker, the
President and CEO of the Alliance for Transportation
Innovation; and Dr. Nidhi Kalra, the Senior Information
Scientist at the RAND Corporation. I look forward to hearing
from each of you.
The potential of the new technology that we're examining
today is exciting, cars that drive themselves and avoid
accidents, seniors and disabled individuals able to retain or
gain their ability to get around town. At first, it sounds like
science fiction or an advance far, far off into the future. But
this technology is being tested and perfected right now, and it
could save thousands of lives.
According to the most recent statistics from the National
Highway Traffic Safety Administration, more than 35,000 lives
were lost in crashes on U.S. roadways in the year 2015.
Preliminary estimates indicate a 10 percent increase in the
first half of 2016. It is important to highlight that 94
percent of these crashes are the result of human factors or,
simply put, driver error such as distracted driving--sometimes
caused by hands-free technology--impaired driving, and
speeding. These crashes are preventable, and we should be doing
everything we can to eliminate them.
The testing and safe deployment of automated vehicle
technologies has the potential to reduce substantially the
number of driver-related crashes and fatalities. Let me
emphasize that point: if this technology were to be perfected,
automated vehicles could eliminate many of the crashes on our
Nation's roadways and save thousands of lives each year.
While fully self-driving autonomous vehicles are still
years away from being available to the general public, many new
vehicles already have driver-assisted features such as
automatic emergency breaking, rearview cameras, my personal
favorite, and lane-keep assist systems. These technologies are
already making a difference, saving lives and reducing
injuries.
In addition to improving safety, self-driving vehicles can
provide mobility options to our seniors and disabled people,
particularly those living in rural communities like my State of
Maine, where many of our older drivers currently do not have an
easy way to get to the doctor or to the grocery store. Public
transportation is nonexistent in much of Maine, and taxi
service is very limited in rural areas. Seniors who can no
longer drive often have very few options.
A self-driving car, or even one with limited automated
features, could help seniors feel more secure driving at night
and could help those who currently must rely on others to get
around, to maintain their independence. A recent survey of
drivers over the age of 50 showed that almost 80 percent of
those who plan to buy a car within the next 2 years will be
seeking automated features such as blind spot warning, crash
mitigation, and lane departure warning systems. Yet many
consumers remain wary of purchasing a fully autonomous vehicle
anytime soon. I know that the RAND Corporation has done a lot
of work in the area of the potential benefits of automated
technologies for our seniors.
To help accelerate the safe testing and development of
autonomous vehicles, the Department of Transportation released
its ``Federal Automated Vehicles Policy'' on September 20th,
which includes vehicle performance guidance, model state
policy, an assessment of current regulatory tools, and a
discussion of future regulatory tools that Congress may want to
consider.
While this was an important first step, it is clear that
the DOT's guidance document needs further refinement to help
ensure that automakers are able to bring the safety and
mobility benefits of autonomous vehicles into the marketplace
without unnecessary government regulations. I am particularly
interested in hearing from our witnesses today on what
improvements can be made to these guidelines.
Automobile manufacturers face a number of roadblocks
integrating autonomous vehicles onto our Nation's highways.
Some have called on the Administration to put the brakes on
autonomous vehicle deployment by imposing onerous requirements
through a rulemaking process which could take several years to
finalize, and my fear is that that would stifle innovation in
the meantime.
We must recognize that automated vehicle technology is
advancing faster than government agencies can act, and in this
instance impeding the advancement of technology may prevent us
from saving lives. On the other hand, we also know that there
have been some problems with the automated technology that has
increased the incidence of distracted driving and perhaps led
to additional accidents. The Department's guidance provides a
more effective voluntary 15-point safety assessment that
incentivizes automakers to certify that they have addressed all
relevant issues ranging from cybersecurity to human-machine
interface to ethical considerations.
Another challenge facing autonomous vehicles is the vast
number of State and local governments that are seeking to
regulate this technology. Unlike vehicle safety, which is
governed by Federal law, the safety and licensing of drivers
are under the jurisdiction of State governments. While the
Department's guidance deters States from interfering with
Federal vehicle safety standards, one topic we will explore is
whether or not DOT's approach also has the effect of
encouraging State governments to set prohibitive requirements
related to testing, licensing, and registration for automated
vehicle testing.
Given the public's keen interest in self-driving and
automated vehicles, it is important for State governments to
take a balanced approach in allowing the research, development,
safe testing, and deployment of such vehicles. However, I would
note that one serious accident, such as occurred in Florida,
can cause great mistrust of this new technology, and that could
lead to greater State restrictions on testing and deployment.
It is particularly important that DOT work with automotive
manufacturers, suppliers, and technology companies, as well as
with the commercial end users of automated vehicles, to ensure
that they are operating with an abundance of caution to avoid
excessive government intervention that could interfere with the
timely development of technologies that truly could save
thousands of lives.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
I am pleased to be joined today by our Ranking Member, Senator Jack
Reed, as we hold this hearing to examine the role of government in
enhancing roadway safety through the careful deployment of automated
and self-driving vehicles, which could revolutionize our transportation
system.
I also welcome our panel of witnesses. We are joined today by Mark
Rosekind, Administrator of the National Highway Traffic Safety
Administration; Deborah Hersman, President and C.E.O. of the National
Safety Council; Paul Brubaker, President and C.E.O. of the Alliance for
Transportation Innovation; and Dr. Nidhi Kalra, Senior Information
Scientist at the RAND Corporation. I look forward to hearing from each
of you.
The potential of this new technology is exciting. Cars that drive
themselves and avoid accidents. Seniors and disabled individuals able
to retain or gain their ability to get around town. At first, it sounds
like science fiction or an advance far off in the future. But this
technology is being tested and perfected right now, and it could save
thousands of lives.
According to the most recent statistics from the National Highway
Traffic Safety Administration, more than 35,000 lives were lost in
crashes on U.S. roadways in 2015, and preliminary estimates indicate a
10 percent increase in the first half of 2016. It is important to
highlight that 94 percent of roadway crashes are the result of human
factors, or simply put, driver error, such as distracted driving--
sometimes caused by hands-free technology, impaired driving, and
speeding. These crashes are preventable, and we should do everything we
can to eliminate them.
The testing and safe deployment of automated vehicle technologies
have the potential to reduce substantially the number of driver-related
crashes and fatalities. Let me emphasize that point: if the technology
were perfected, automated vehicles could eliminate many of the crashes
on our Nation's roadways and save thousands of lives every year.
While fully self-driving autonomous vehicles are still years away
from being available to the general public, many new vehicles already
have driver-assist features such as automatic emergency breaking,
rearview cameras, and lane-keep assist systems. These technologies are
already saving lives and reducing injuries on our roadways.
In addition to improving safety, self-driving vehicles can provide
mobility options to our seniors and disabled populations, particularly
those living in rural communities like my State of Maine, where many of
our older drivers currently do not have an easy way to get to the
doctor or to the grocery store. Public transportation is nonexistent in
much of Maine, and taxi service is very limited in rural areas. Seniors
who can no longer drive often have very few options.
A self-driving car, or even one with limited automated features,
could help seniors feel more comfortable driving at night and could
help those who currently must rely on others to get around to maintain
their independence. A recent survey of drivers over the age of 50
showed that almost 80 percent of those who plan to buy a car within the
next 2 years will be seeking automated features such as blind spot
warning, crash mitigation, and lane departure warning systems. Yet many
consumers remain wary of purchasing a fully autonomous vehicle anytime
soon. I know Dr. Kalra will provide us with more insight on the
potential benefits of automated technologies for our seniors.
To help accelerate the safe testing and deployment of autonomous
vehicles, the Department of Transportation released its ``Federal
Automated Vehicles Policy'' on September 20th, which includes vehicle
performance guidance, model State policy, an assessment of current
regulatory tools, and a discussion of future regulatory tools for
Congressional consideration.
While this was an important first step, it is clear that D.O.T.'s
guidance document needs further refinement to help ensure that
automakers are able to bring the safety and mobility benefits of
autonomous vehicles into the marketplace without unnecessary government
regulations. I am particularly interested in hearing from all of our
witnesses today on what improvements can be made to these guidelines.
Automobile manufacturers face a number of roadblocks integrating
autonomous vehicles onto our Nation's roadways. Some have called on the
Administration to put the brakes on autonomous vehicle deployment by
imposing onerous requirements through a rulemaking process, which could
take several years to finalize, stifling innovation in the meantime.
We must recognize that automated vehicle technology is advancing
faster than government agencies can act, and in this instance, impeding
the advancement of technology may prevent us from saving lives. The
Department's guidance provides a more effective voluntary 15-point
``safety assessment'' that incentivizes automakers to certify they have
addressed all relevant issues ranging from cybersecurity, to human-
machine interface, to ethical considerations.
Another challenge facing autonomous vehicles is the vast number of
State and local governments that are seeking to regulate this
technology. Unlike vehicle safety, which is governed by Federal law,
the safety and licensing of drivers are under the jurisdiction of State
governments. While the Department's guidance deters States from
interfering with Federal vehicle safety standards, one topic we will
explore is whether or not D.O.T.'s approach also has the effect of
encouraging State and local governments to set prohibitive requirements
related to testing, licensing, and registration for automated vehicle
testing.
Given the public's keen interest in automated and self-driving
vehicles, it is important for State and local governments to take a
balanced approach in allowing the research, development, safe testing,
and deployment of automated vehicles. However, one serious accident,
such as occurred in Florida, can cause mistrust of this new technology,
and that could lead to greater local restrictions on testing and
deployment. It is particularly important that D.O.T. work with
automotive manufacturers, suppliers, and technology companies, as well
as the commercial end users of automated vehicles, to ensure they are
operating with an abundance of caution to avoid excessive government
intervention.
With that, let me call upon my colleague and friend Senator Reed,
the ranking member, for his opening statement.
Senator Collins. With that, let me call upon my colleague
and friend from Rhode Island, Senator Reed, the ranking member,
for his opening statement.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Chairman Collins, for
your leadership on so many issues, but particularly for holding
this very important hearing on the future of self-driving
vehicles. Let me join you in welcoming our witnesses. Thank you
for your service and your expertise.
Automated and self-driving vehicles are not yet common on
our roads, but autonomous driving and safety features such as
automatic emergency brakes and parking assist have been
introduced gradually over the last several years. Manufacturers
and innovators are now poised to take transformative leaps in
the development, integration, and adoption of these
technologies, and what was once novel is at the brink of
becoming commonplace.
As with any change, it brings opportunity as well as risk
and anxiety. Particularly for the millions of Americans who
earn a living as American commercial drivers, that is a
significant issue that we should address. What remains
unanswered is how this transportation revolution will evolve
and what steps regulators and industry should take to foster
and harness the positive aspects of this new technology.
Today auto manufacturers, ride sharing companies, and other
investors are funding research and development on driverless
vehicles. They are also launching pilot programs to gather data
and introduce consumers to different forms of the technology.
Uber is allowing customers in Pittsburgh to share rides in
self-driving cars. Otto, which is a self-driving bus and truck
company owned by Uber, autonomously delivered commercial goods
just last month. Tesla is collecting millions of miles of data
from its semi-autonomous vehicles and announced that it will
potentially make a full autonomous vehicle starting next year.
Google has been designing and testing cars with no human driver
for several years in California. And GM and Lyft have partnered
to build an autonomous fleet that will be available for ride
sharing.
These companies are all using different strategies to
achieve seemingly different goals. Some seek to provide
efficient, accessible, and cost-effective transportation
similar to Transit. Others want to improve freight
transportation through fleets of autonomous trucks that can
save gas and operator on the clock. What is clear is that
technology is fundamentally changing vehicles as we know them.
This innovation has the potential to dramatically improve
highway safety, as well as expand mobility access for thousands
of people, as the Chairman spoke about, seniors particularly.
And it also has safety features which, as the Chairman
commented on, are significant. In 2015, more than 35,000 people
died in crashes on the Nation's highways. The number represents
an 8 percent increase from the previous year and marked the
deadliest year on record since 2008. These vehicles might help
immensely in that regard. NHTSA (National Highway Traffic
Safety Administration) found that 94 percent of those deaths
were the result of human error, so autonomous vehicles could be
a real game changer in this regard.
We have a responsibility to fulfill this technology's
promise and foster American innovation. But we also must be
cognizant of the consequences of these technologies for the
shifts in the American economy and effects on the American
worker. Self-driving cars and trucks will certainly demand new
kinds of jobs and skills, but these jobs may be in different
sectors of the economy. For millions of Americans, particularly
those without a college degree or advanced training, driving a
bus, a cab, or a truck can provide a decent income. In fact,
for many, it is the ticket to the middle class.
In the latest year of data available from the Bureau of
Labor Statistics, there are more than 4 million workers in the
United States employed as drivers of trucks, taxis, chauffeurs
or delivery vehicles. All of these are potentially in a space
where they could be replaced by an autonomous vehicle. So we
have to make sure that this technology not only enables better
productivity but that it doesn't disqualify millions,
literally, of Americans from good, solid jobs.
We need to think through this policy very thoughtfully.
This is a broader conversation not involving just the
technologies but the Department of Labor, policymakers from a
huge swath of the government, so that we get it right, and we
get it right for the American workers as well as for the
technology interest.
Our regulatory agencies--and the Chairman has made the
point that it's not just Federal but its State and local--have
to be harmonized. We have to do this thoughtfully, and that is
why, again, I commend the Chairman for calling this hearing
today.
NHTSA--thank you--recently released a guidance document for
comment with the intent of promoting technological advancement
and preventing a patchwork of State regulations. So thank you,
Administrator Rosekind, for that work.
There are many questions. When will NHTSA initiate a formal
rulemaking on self-driving vehicles? When and how will the
Federal motor vehicle safety standards be updated? How much
data does NHTSA want to collect from industry and consumers,
and how will it protect that data from cyber threats?
We know industry will continue to innovate, deploy, and
develop these technologies at a faster pace than government can
respond, and this will present a challenge. We have to
recognize this up front.
But again, let me thank you, all of our witnesses for
participating in our hearing today. I apologize for my Rhode
Island accent. Other than that, I look forward to the
testimony. Thank you.
Senator Collins. Thank you very much, Senator Reed.
I am going to put all of the witnesses' impressive bios
into the record so that we can proceed with the testimony since
I mentioned all of you in my opening statement.
We will start with the Administrator of the National
Highway Traffic Safety Administration, known as NHTSA, the
Honorable Mark Rosekind.
STATEMENT OF THE HON. MARK ROSEKIND, ADMINISTRATOR,
NATIONAL HIGHWAY TRAFFIC SAFETY
ADMINISTRATION
Mr. Rosekind. Thank you, Chairman Collins, Ranking Member
Reed, other members of the committee. I really appreciate you
holding this hearing today and for the opportunity to testify.
At NHTSA, our mission is to save lives on America's
roadways. For 50 years, we have carried out that mission by
writing and enforcing strong regulations to make vehicles
safer, fighting against drunk-driving, building a national
consensus about seatbelt use, and so many other efforts that
have saved hundreds of thousands of lives on America's roads.
But we have far more work to do, and that work can be
measured by some alarming numbers that all of you cited
already. In 2015, we lost 35,092 people on our public roads. At
NHTSA, we know those are not just numbers. Those are mothers
and fathers, brothers and sisters, colleagues, co-workers,
friends. And the problem is that it's all getting worse.
Last month we announced that roadway fatalities in the
first half of this year are up over 10 percent, and it is
against this backdrop that the Department of Transportation,
under the leadership of Secretary Anthony Foxx, has been
working so hard on our efforts to accelerate the safe
deployment of automated vehicle technologies, because while
automated vehicles carry enormous potential to transform
mobility and reshape our transportation system, it is truly
their awesome potential to revolutionize roadway safety that
has all of us so motivated.
And there is one more number that helps us explain why, and
that number is 94. That's the percentage of crashes that can be
tied back to human choice or error. That's a choice to speed or
drive drunk, send a text message from behind the wheel, or
misjudge the stopping distance. That 94 percent represents the
untold potential of automated vehicle technologies.
We envision a future where advanced technologies not only
help reduce crashes but a world with fully self-driving cars
that hold the potential to eliminate traffic fatalities
altogether.
The Federal Automated Vehicles Policy, which the Department
issued on September 20th, is the world's first comprehensive
government action to guide the safe and efficient development
and deployment of these technologies.
The policy covers four areas: one, vehicle performance
guidance for automakers, tech companies, researchers, and other
developers, testers, and deployers of automated vehicle
technologies; two, a model state policy to build a consistent
national framework for the testing and operation of automated
vehicles; three, an exploration of the use of our current
regulatory tools that can be used to advance these
technologies; and four, a discussion of possible new tools that
the Federal Government may need to promote the safe deployment
of advanced technologies as the industry continues to develop.
I'd like to share just for a few moments a little bit about
our approach.
For 50 years, our traditional approach at NHTSA has largely
been reactive. NHTSA prescribes safety standards and then
responds to problems as they arise. A traditional method of
regulating these new technologies would be to engage solely in
the rulemaking process, writing new regulations that prescribe
specific standards and typically take years to take effect. Our
view is that approach would be slow, it would stymie innovation
and would stall the introduction of these technologies.
Our policy takes a very different path, built on proactive
safety which will better serve both safety and innovation. This
policy allows us to work with automakers and developers on the
front end, to ensure there are sound approaches to safety
throughout the entire development process. This is a new
approach, and it's going to take some adjustment for everyone
involved.
But we are confident that it will help us accomplish two
goals: first, to make sure that new technologies are deployed
safely; and second, to make sure that we don't get in the way
of innovation. Our approach is non-prescriptive. It does not
tell developers how they must provide safety but instead it
builds a transparent and proactive approach to ensure that they
are properly addressing the critical safety areas.
But that future is not without threats. As President Obama
wrote when announcing the policy, quote, ``The quickest way to
slam the brakes on innovation is for the public to lose
confidence in the safety of new technologies. Both government
and industry have a responsibility to make sure that doesn't
happen.''
It is our view that the best way that we can build that
public confidence is by working together, showing the public
that the government is on the side of innovation, and that the
industry is on the side of safety.
I submit the balance of my statement for the record, and I
look forward to taking your questions. Thank you.
[The statement follows:]
Prepared Statement of Hon. Mark Rosekind
Chairman Collins, Ranking Member Reed, and Members of the
Committee: Thank you for holding this hearing and inviting me to
testify. My name is Mark Rosekind, and I am the Administrator of the
National Highway Traffic Safety Administration, or NHTSA.
At NHTSA, our mission is to save lives on America's roadways. For
50 years, we have carried out that mission by writing and enforcing
strong regulations to make vehicles safer, fighting against drunk
driving, building a national consensus about seatbelt use, and so many
other efforts that have saved hundreds of thousands of Americans.
But we have far more work to do. And that work can be measured by
some alarming numbers.
In 2015, we lost 35,092 people on our public roads. At NHTSA, we
know that is not just a number. Every one of those is a mother or
father, a son or daughter, a coworker, a friend. In the United States,
we lose the equivalent of a fully-loaded 747 on our roadways every
single week.
And the problem is getting worse. Last month we announced that
roadway fatalities in the first half of this year are up over 10
percent.
It is against this backdrop that the Department of Transportation,
under the leadership of Secretary Anthony Foxx, has been working so
hard on our efforts to accelerate the safe deployment of automated
vehicle technologies.
Because while automated vehicles carry enormous potential to
transform mobility, reshape our transportation system and transform our
economy, it is their awesome potential to revolutionize roadway safety
that has us so motivated.
And there is one more number that helps explain why. That number is
94. That is the percentage of crashes that can be tied back to a human
choice or error. That's a choice to speed or drive drunk, to send a
text message from behind the wheel or misjudge the stopping distance.
And that 94 percent figure represents the untold potential of
automated vehicle technologies. We envision a future where advanced
technologies not only help reduce crashes, but also make possible a
world in which fully self-driving cars hold the potential to eliminate
traffic fatalities altogether.
The Department of Transportation views this moment as the cusp of a
new technological revolution that may transform roadway safety forever.
The Federal Automated Vehicles Policy, which the Department and
NHTSA issued in mid-September, is the world's first comprehensive
government action to guide the safe and efficient development and
deployment of these technologies. Today, I will discuss that Policy,
how we developed it, and where we are going next.
In January of this year, Secretary Foxx made two important
announcements.
First, he announced that President Obama was making a $3.9 billion
budget request for automated vehicles research. This is a major
commitment from the Administration to advance this technology, and DOT
continues to strongly support this request.
Second, he directed NHTSA to write a new policy covering four
areas: One, vehicle performance guidance for automakers, tech
companies, researchers and other developers and testers of automated
vehicle technologies. Two, a model State policy to build a consistent
national framework for the testing and operation of automated vehicles.
Three, an exploration of the use of our current regulatory tools that
can be used to advance these technologies. And four, a discussion of
possible new tools that the Federal Government may need to promote the
safe deployment of advanced technologies as the industry continues to
develop.
Over the subsequent 9 months, NHTSA hit the road, traveling to
discuss automated vehicles with industry, academics, State governments,
safety and mobility advocates, and the public. This Policy is the
product of that significant input.
Before discussing the individual components, I would like to share
a few thoughts about our approach.
First it is important to understand our traditional approach to
regulating motor vehicles. For 50 years, our approach has largely been
reactive. NHTSA has prescribed safety standards, and then responded to
problems as they arise.
A traditional approach to regulating these new technologies would
be to engage solely in rulemaking process, writing new regulations that
prescribe specific standards. Our view is that approach would stymie
innovation and stall the introduction of these technologies.
It would also be a long process. Rulemakings, and the research
necessary to support them, take years, meaning that any rule we might
offer today would likely be woefully out-of-date by the time it took
effect, given the pace of technological development in this space. Let
me be clear that using the notice-and-comment rulemaking process to
establish new standards will absolutely play an important role as this
technology matures and is adopted. But it is not the only tool in our
bag, and we have created an innovative approach that will better serve
both safety and innovation in the immediate term.
Our Policy represents a continuation of the new proactive safety
approach that we have built at NHTSA under the leadership of Secretary
Foxx. This Policy allows NHTSA to work with automakers and developers
on the front end, to ensure that sound approaches to safety are
followed throughout the entire design and development process. This is
a new approach, and it's going to take some adjustment for everyone
involved. But we are confident that it will help us accomplish two
goals: first, to make sure that new technologies are deployed safely;
and second, to make sure we don't get in the way of innovation.
As the Federal regulator with the responsibility of ensuring
vehicles are as safe as they can possibly be, we play an important role
on behalf of the American public to ensure that vehicle technologies do
not present safety threats.
At the same time, we recognize the great lifesaving potential of
these new technologies, and want to do everything we can to make sure
that potential is fully realized and that they are deployed as quickly
as possible to save as many lives as we can.
Some people have talked about safety and vehicle automation as on
the opposite ends of a spectrum, as if there were a trade-off between
safety and innovation. But at the Department of Transportation, we view
our role as promoting safety innovation. Our Policy is designed to
promote the safe and expeditious deployment of new technologies that
have the potential to reduce crashes and save lives.
Our approach is not prescriptive. It does not tell developers how
they must provide safety, but instead it builds a transparent and
proactive approach to ensure that they are properly addressing the
critical safety areas.
Finally, I want to be clear that while this Policy establishes an
important framework for the development and deployment of automated
vehicles, it is not the final word. In our view, this Policy is the
right tool at the right time. It answers a call from industry, State
and local governments, safety and mobility advocates and many others to
lay a clear path forward for the safe deployment of automated vehicles
and technologies.
But we intend this Policy to evolve over time. That evolution will
be based on comments we receive from the public, our own experience in
implementing it over the coming months and years, and, perhaps most
importantly, based on the rapid evolution of the technology itself. We
have designed this Policy to be nimble and flexible, to allow us to
stay at the leading edge of this revolution.
Before I discuss each component of the Policy, allow me to say a
few words on definitions.
First, it is important to note that with this Policy, we are
officially adopting the SAE International levels of automation, ranging
from zero to five. The primary focus of the Policy overall is on what
we refer to as ``highly automated vehicles'', or HAVs. Those are
vehicles at levels three through five on the SAE level scale, or
vehicles that--at least in some circumstances--take over full control
of the driving task. A portion of the first section of the Policy also
applies to Level 2 vehicle systems, which include advanced driver-
assistance systems already on the road today.
The Policy covers all automated vehicles that are designed to
operate on public roads. That includes personal light vehicles, as well
as heavy trucks. It even includes vehicles that might be designed to
not carry passengers at all.
Finally, I note that most of the Policy is effective immediately.
We expect that developers and manufacturers of AV technologies will use
the Policy to guide their safety approach. Some portions of the
Policy--notably the Safety Assessment Letter in the Vehicle Performance
Guidance--will become effective following a Paperwork Reduction Act
process that we expect to be completed within the next few months.`
Vehicle Performance Guidance for Automated Vehicles
The first section is the Vehicle Performance Guidance for Automated
Vehicles. This is guidance for manufacturers, developers and other
organizations involved in the development of automated vehicles. The
heart of the Guidance is a 15 point ``Safety Assessment'' that spells
out the critical safety areas that developers should address for the
safe design, development, testing and deployment of highly automated
vehicles prior to the sale or operation of such vehicles on public
roads.
The Safety Assessment covers areas such as the operational design
domain--essentially the where and when an AV is designed to operate
automatically--fallback conditions, cybersecurity, privacy, and the
human-machine interface.
We identified these areas through our extensive consultations with
industry, academia and advocates as the critical safety issues that
must be addressed to ensure that automated technologies are safe.
Critically, the Guidance does not specify how AV developers are
intended to address the areas. Instead, the Guidance asks developers to
document their own processes and then provide NHTSA with a Safety
Assessment letter in which they explain their approach. This process is
expected to yield a variety of different approaches for every one of
the areas. That is intentional, and is one of the ways that we are
preserving and promoting the innovation process. Government does not
have all the answers, and our view is that the more approaches that
innovators take to solving these problems, the more likely we are to
find the best way.
Model State Policy
The second section is the Model State Policy. For the last 50
years, there has been a fairly clear division of responsibility between
the Federal Government and the States for the oversight and regulation
of motor vehicles. Generally speaking, it has been the Federal
Government's responsibility to regulate motor vehicles and equipment
safety, while the States have regulated drivers and traffic laws.
That division of responsibility may be less clear in a highly
automated vehicle world where increasingly the vehicle's automated
systems become the driver.
The Model State Policy delineates the Federal and State roles for
the regulation of these vehicles, and it outlines the approach we
recommend to States as they consider the regulation of testing and
operation of automated vehicles on their public roads. Our goal is to
build a consistent national framework for the development and
deployment of automated vehicles, so that users can take their vehicles
across State lines as they can today, and so that developers are
building toward a single set of standards, rather than 50.
The Model State Policy confirms that States retain their
traditional responsibilities for vehicle licensing and registration,
traffic laws and enforcement, and motor vehicle insurance and liability
regimes. At the same time, the Policy reaffirms that the Federal
Government will continue to be responsible for the oversight of vehicle
safety and design, including automated features.
The Policy was developed in close coordination with the American
Association of Motor Vehicle Administrators (AAMVA), individual States
and other stakeholders. It suggests recommended areas for States to
consider in the development of their own regulations, including testing
regimes and registration. It also identifies a number of areas that
need to be further discussed and developed, including how law
enforcement will interact with highly automated vehicles, and the
development of a consistent approach to insurance and liability
challenges. We also note in the Policy that States do not have to take
any action at all.
NHTSA's Current Regulatory Tools
The third section addresses NHTSA's Current Regulatory Tools. This
section discusses how NHTSA will use the tools currently at its
disposal to promote and expedite the safe development and deployment of
highly automated vehicles.
The first of those tools discussed is our interpretation authority.
The current Federal Motor Vehicle Safety Standards generally do not
contemplate automated vehicle technologies. Therefore, it can sometimes
be unclear how those standards apply to advanced technologies. In this
section, we lay out the process by which developers of AV technologies
can submit interpretation requests to the agency to determine whether
and how their technologies conform with the standards. The agency also
commits to a greatly expedited process for reviewing these
interpretation requests. On simple safety-related interpretation
requests, we commit to providing answers within 60 days. Compared to
historical norms, that is lightning speed.
The second tool discussed is our exemption authority. Congress has
granted NHTSA the authority to provide exemptions to manufacturers to
deploy vehicles that do not conform to the Federal Motor Vehicle Safety
Standards. While these exemptions are admittedly limited--to 2,500
vehicles for each of 2 years--the Agency views this tool as an
important way of enabling a manufacturer to put a test fleet on the
road to gather critical safety data and improve its technologies. The
Policy similarly commits to an expedited process on simple safety-
related exemptions, providing an answer within 6 months from the
application.
The Agency's broadest power is its ability to write new safety
standards. While this tool tends to take the longest amount of time--
usually a period of years--it is the method that will ultimately allow
for the large-scale deployment of nontraditional vehicle designs and
equipment under consistent, broadly applicable standards. In addition,
to the extent that performance-based standards are adopted, this tool
has the potential to allow for technological innovation while
maintaining safety.
In this section, we also highlight that the Agency retains its
broad defects and enforcement authority. We use that authority to
investigate any unreasonable risks to safety, and to recall unsafe
vehicles from the road. The same day NHTSA issued the Policy, we also
issued an Enforcement Guidance Bulletin that makes clear that the
Agency's traditional enforcement authorities extend to advanced vehicle
technologies.
Modern Regulatory Tools
The fourth and final section of the Policy discusses Modern
Regulatory Tools, identifying 12 potential new tools, authorities and
resources that could aid the safe deployment of new lifesaving
technologies and enable the Agency to be more nimble and flexible.
Today's governing statutes and regulations were developed before
highly automated vehicles were even a remote notion. For that reason,
current authorities and tools alone may not be sufficient to ensure
that highly automated vehicles are introduced safely, and to realize
their full safety promise. This challenge requires NHTSA to examine
whether the ways in which the Agency has addressed safety for the last
several decades should be expanded and supplemented.
The new tools identified in this section include premarket
approval, expanded exemption authority, imminent hazard authority, new
research and hiring tools, and others that may better equip the Agency
in the future as more technologies move from the lab to the road. These
tools are offered for consideration by policymakers, industry,
advocates and the public as we move forward.
One thing we know for certain is that the agency will need
additional resources as this technology develops and is adopted. I have
great confidence in the NHTSA team's expertise and ability. But it is
undeniable that as more automakers move technology from the lab to the
test track to the road, we will need to make sure our Agency is
properly resourced to maintain pace.
We continue to support the President's budget request for more
research dollars, and are committed to working with you in the coming
months and years to identify what resources--both in personnel and
research funding--will be necessary to achieve our mission.
Next Steps
Finally, with respect to the Policy, I would like to highlight once
again that we fully intend this Policy to be the first iteration of
many to come. The Policy is effective now, and will continue to evolve
based on feedback and our experience implementing it, and, most
importantly, to keep pace with innovation. To that end, each section of
the Policy highlights a series of next steps that we will take to
implement and improve the Policy over time.
The first is our solicitation of public input. We are doing that
through an open comment period that is open now through November 22nd.
NHTSA is also hosting a series of public workshops that began earlier
this month on different sections of the Policy. I will note here that
the full Policy, additional materials, and the portal for public
comments can be found at www.nhtsa.gov/AV.
Over the coming months we will be engaging experts to review the
Policy, issuing further guidance on the Safety Assessment letter, and
engaging stakeholders across the spectrum to help flesh out other areas
of the Policy. For example, we will work with law enforcement
organizations to further the conversation about how AVs will interact
with the police, and work with industry to build the framework for the
data sharing discussed in the Vehicle Performance Guidance. We are also
engaged with other operating modes throughout the Department of
Transportation, recognizing the roles and responsibilities they play
with respect to public transit, commercial freight operations, and the
highway system on which automated vehicles will operate.
We do not pretend to have answered every question in this Policy,
and we will continue the conversation with the public about the best
ways to develop and improve our Policy as we learn more. To that end,
the Department of Transportation has committed to reviewing and
updating the Policy annually.
As I conclude, I want to say a few words about the importance of
the present moment in history. We have an industry that is rapidly
developing innovative new technologies. And we have a government that
is inspired and excited about the future of this technology.
But that future is not without threats. Bad actors or bad incidents
could threaten to derail our collective efforts.
I want to close with the words President Obama used when he
announced our new Policy in an op-ed in the Pittsburgh Post-Gazette. He
wrote, ``There are always those who argue that government should stay
out of free enterprise entirely, but I think most Americans would agree
we still need rules to keep our air and water clean, and our food and
medicine safe. That's the general principle here. What's more, the
quickest way to slam the brakes on innovation is for the public to lose
confidence in the safety of new technologies. Both government and
industry have a responsibility to make sure that doesn't happen.''
It is our strong view that the best way we can build that public
confidence is by working together, showing the public that the
government is on the side of innovation and the industry is on the side
of safety. We encourage you to join with us as we continue to develop
this Policy and show the American public that their safety is the
highest priority for all of us.
Thank you.
Senator Collins. Thank you very much.
Ms. Hersman.
STATEMENT OF HON. DEBORAH HERSMAN, PRESIDENT AND CEO,
NATIONAL SAFETY COUNCIL
Ms. Hersman. Chairman Collins, Senator Reed, thank you for
having me today. I'd like to acknowledge my board chair, Mr.
John Surma, who is here with me in the audience today.
Today we have millions of drivers behind the wheel, we
spend millions of dollars on education and enforcement
campaigns, but we still lose tens of thousands of people on our
roadways and experience billions of dollars in economic losses
as a result of highway crashes. In spite of safer vehicle
designs and record-setting seatbelt use rates across the
Nation, operating a motor vehicle remains one of the deadliest
things that we do every day.
Compared to other high-income countries, the United States'
death rate is more than double our counterparts, and it's not
because we don't have automated vehicles. It's because we
aren't willing to do the hard things that we know will save
lives.
Three to five thousand lives per year would be saved if
everyone buckled up. Ten thousand lives would be saved if
nobody drove drunk. Just three technologies that are available
on cars today--automatic emergency braking, lane departure
warning, and blind spot detection--if these were all standard
equipment on cars, 10,000 lives could be saved.
The AV policy begins an important discussion, and we
applaud NHTSA and DOT for issuing it. Federal leadership on
motor vehicle safety is necessary because we can only have one
level of safety when it comes to our stakeholders and our
constituents. Your constituents need to be confident that
vehicles are safe regardless of where they reside.
Manufacturers need certainty in order to invest in design and
production, and States do not possess the expertise or the
resources to replicate design, testing, and reporting programs.
Further, a patchwork of requirements will result in
confusion for consumers and increased costs for manufacturers
and operators attempting to comply with myriad requirements.
Finally, the absence of a safe, workable standard will
drive development and testing and deployment overseas,
resulting in the flight of innovation from the United States
and the jobs that accompany it to locations outside of our
borders.
NSC fully believes that automated vehicles have the
potential to save lives and prevent injuries, but here are
several key issues that we recommend that policymakers
consider.
Delayed integration into the fleet. It will be a long time
before highly automated vehicles replace our current fleet. How
do we ensure rapid acceptance and adoption of lifesaving
technologies that are available today? Electronic stability
control paints the picture of the headwinds that we're facing.
DSRC--also known as V2V, V2I, and V2X--complementary
technology must be taken into account. We need a belt-and-
suspenders approach when it comes to highway safety.
Data sharing in a post-crash event. My experience at the
NTSB taught me that we must rely on the data for truths. If you
can't access it, you won't learn the lessons.
De-identified data. The automotive industry must figure out
how to balance privacy and proprietary concerns against the
predictive value of big data. Too many lives are at stake.
Cooperation will help us unravel unintended consequences and
identify new failure modes.
Consumer education. Today, 40 percent of consumers are
startled by the way that their car has behaved. We will not
realize the full benefit of technology if we don't keep human
beings in the loop.
Lack of common taxonomy and standards. Today, manufacturers
have multiple names and different performance expectations for
similar systems. Shouldn't all AEB systems prevent collisions?
NHTSA resources. We cannot ask NHTSA to do more with less.
Automated vehicles will require more evaluation, more testing,
and more expertise than NHTSA possesses today.
Although we can imagine a future with automated vehicles,
the transition from Level 1 to Level 5 will be messy as we deal
with predictable human-machine issues. We cannot afford to
ignore the carnage on our roadways that is a national epidemic.
Efforts like Road to Zero will decrease fatalities today,
tomorrow, and in the future if we embrace proven counter-
measures and accelerate deployment of effective ADAS
technologies and highly automated vehicles.
The National Safety Council appreciates the committee's
leadership. If safety for the traveling public is the ultimate
goal, advanced technology provides the most promising
opportunity to achieve that outcome and will go a long way
toward eliminating preventable deaths in our lifetime. Thank
you.
[The statement follows:]
Prepared Statement of Hon. Deborah A.P. Hersman
Chairman Collins, Ranking Member Reed and other members of the
subcommittee, thank you for inviting me to testify before you today.
The National Safety Council (NSC) is a 100-year-old nonprofit with a
vision to end preventable deaths in our lifetime at work, in homes and
communities and on the road through leadership, research, education and
advocacy. Our more than 13,500 member companies represent employees at
more than 50,000 U.S. worksites. For decades we have advocated for
safer cars, safer drivers and a more forgiving environment in and
around vehicles. We have led large scale public education campaigns on
the importance of seatbelts and airbags, eliminating distracted
driving, and helping consumers understand the technologies in their
vehicles to reduce deaths and injuries on our roadways. We also educate
close to 1.3 million drivers a year in Defensive Driving courses.
national highway traffic safety administration automated vehicles
policy
The rapid pace of technological advancement means that regulators
are hard-pressed to keep ahead of industry as manufacturers offer
systems unheard of just a decade ago. However, NSC believes there are
appropriate and necessary roles for both innovation by manufacturers
and regulation by officials charged with ensuring public safety. The
NHTSA (National Highway Traffic Safety Administration) Federal
Automated Vehicles Policy (AV policy) is a step in the right direction.
It provides a framework in which manufacturers can work and States can
establish appropriate enforcement and oversight, while underscoring
NHTSA safety authority and recognizing the need for additional tools to
keep pace in this fast-moving environment. It also provides guidance
for more uniform Federal oversight rather than a potential patchwork of
regulations by the States.
Federal leadership on motor vehicle safety is necessary because
there should only be ONE LEVEL OF SAFETY. Consumers need confidence in
vehicles regardless of where they reside; manufacturers need certainty
in order to invest in design and production, and States do not possess
the expertise and the resources to replicate design, testing and
reporting programs. Further, a patchwork of requirements will result in
confusion for consumers and increased cost for manufacturers and
operators attempting to comply with a myriad of requirements. Finally,
the absence of a safe, workable standard will drive development,
testing and deployment overseas, resulting in the flight of innovation
and the jobs that accompany it to locations outside of the U.S.
the lifesaving potential of advanced technology
NSC believes advanced vehicle technology, up to and including fully
automated vehicles, can provide many benefits to society. The most
important contribution will be the potential to greatly reduce the
number of fatal crashes on our roadways, which are increasing. Every
day we lose approximately 100 people in motor vehicles crashes, and
every year more than 4 million people are injured. Beyond the human
toll, these deaths and injuries cost society over $379 billion,
including productivity losses, medical expenses, motor vehicle property
damages and employer costs.\1\
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\1\ Injury Facts 2016.
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NSC data reveal that the 19,100 roadway fatalities during the first
6 months of 2016 are 9 percent higher than the same period last year
and 18 percent higher than the same period 2 years ago. If we are to
make a meaningful change in this trend, there must be a sense of
urgency coupled with large, near term gains to save lives on our
roadways.
Motor Vehicle Deaths on the Rise
Source: NSC analysis of National Center for Health Statistics (NCHS)
mortality data and NSC estimate for 2016.
While the absolute numbers of fatalities change from year to year,
many of the same behavioral problems remain persistent and have been
represented in the data for decades. For example, in 2014:
9,967 people were killed in alcohol-impaired driving crashes \2\
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\2\ Https://crashstats.nhtsa.dot.gov/Api/Public/Publication/812231.
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3,179 people were killed in distraction related crashes \3\
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\3\ Https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/
812260.
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9,385 people were killed while unrestrained.\4\
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\4\ Https://crashstats.nhtsa.dot.gov/Api/Public/Publication/812246.
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NHTSA estimates that 94 percent of all fatal crashes have an
element of human error. Therefore, if we are to eliminate or reduce the
number of fatalities on our roadways, advances in vehicle technology
must be part of the solution. However, it will likely be decades before
we have meaningful fleet penetration of fully automated vehicles.
Last month, the NSC and the National Transportation Safety Board
(NTSB) hosted a full day event with dozens of expert panelists focused
on Reaching Zero Crashes: A dialogue on the Role of Advanced Driver
Assistance Systems (ADAS).\5\ While there is a great deal of excitement
about highly automated vehicles (HAVs), automated vehicles and their
potential to save lives, it is important to recognize that many legacy
technologies represent the building blocks for fully automated
vehicles. Greater consumer acceptance of the dozens of safety
technologies that are available today would lead to more rapid adoption
of them, saving lives and preventing injuries.
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\5\ Http://www.ntsb.gov/news/events/Pages/2016_dte_RT_agenda.aspx.
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As an example, Electronic Stability Control (ESC) is a technology
that uses automatic computer controlled braking of individual wheels to
help the driver maintain control in risky driving scenarios. ESC
primarily mitigates single vehicle, loss of control crashes in which
drivers would run off the road. For passenger cars as well as light
trucks and vans, it is estimated that ESC systems have saved more than
4,100 lives during the 5-year period from 2010 to 2014, but
incorporation into vehicles on the road remains slow.\6\ The following
charts from the Highway Data Loss Institute (HDLI) reveal how slowly
ADAS technologies are achieving penetration in the U.S. fleet due to
normal turnover of inventory--with the average age of cars in the U.S.
fleet being 11.5 years old.\7\ Electronic stability control has been
available for decades and was mandated on all new passenger cars by the
2012 model year, but in 2015 only 40 percent of registered vehicles
were equipped with ESC. Despite a clear life-saving benefit, full fleet
penetration of this technology is not predicted until the 2040s.\8\
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\6\ Https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/
812277.
\7\ Http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/
publications/national_transportation_
statistics/html/table_01_26.html_mfd.
\8\ Http://www.ntsb.gov/news/events/Documents/
2016_dte_RT_p1_p3_moore.pdf.
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New Vehicle Series With Electronic Stability Control by Model Year
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: HLDI.
Registered Vehicles With Electronic Stability Control by Calendar Year
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: HLDI.
Registered Vehicles With Available ESC, Actual and Predicted
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: HLDI.
ADAS already operate on the roadways today, but more could be done
to encourage greater fleet penetration. Features like lane departure
warning systems, blind spot monitoring, adaptive cruise control and
others help to prevent or mitigate crashes. The cost of these
technologies is declining and their impact is measurable. According to
the Insurance Institute for Highway Safety (IIHS), if four current
technologies--forward collision warning/mitigation, lane departure
warning/prevention, side view assist/blind spot monitoring, and
adaptive headlights--were deployed in all passenger vehicles, they
could prevent or mitigate as many as 1.86 million crashes and save more
than 10,000 lives per year.\9\ However, front crash prevention,
commonly referred to as automatic emergency braking, which was an
option in about half new 2015 model year cars, was in only 8 percent of
registered cars in 2015.\10\
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\9\ Http://dx.doi.org/10.1016/j.aap.2010.10.020.
\10\ Http://www.ntsb.gov/news/events/Documents/
2016_dte_RT_p1_p3_moore.pdf.
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Crashes Relevant to 4 Crash Avoidance Systems FARS and GES, 2004-2008
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Source: Insurance Institute for Highway Safety.
Similar conclusions were reached in a July 2016, Carnegie Mellon
study which stated that just three technologies--forward collision
warning, lane departure warning and blind spot monitoring--could have
prevented or reduced as many as 1.3 million crashes annually and over
10,000 fatal crashes.\11\ This study further found that almost one
quarter of all crashes could be affected by these crash avoidance
systems, but only 2 percent of 2013 model year cars included these
systems as standard.
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\11\ Http://dx.doi.org/10.1016/j.aap.2016.06.017.
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While many of these technologies are available on higher value cars
or as part of an upgraded technology package today, they are not
standard equipment on all makes and models. Safety should not be just
for those who can afford it, especially for technologies that will
result in thousands of lives saved every year. The Carnegie Mellon
study estimated that if all light-duty vehicles were equipped with the
three technologies, they would provide a lower bound annual benefit of
about $18 billion. With 2015 pricing, it would cost about $13 billion
to equip all light-duty vehicles with the three technologies, resulting
in an annual net benefit of about $4 billion or a $20 per vehicle net
benefit. By assuming all relevant crashes are avoided, the total upper
bound annual net benefit from all three technologies combined is about
$202 billion or an $861 per vehicle net benefit, at current technology
costs.
NSC recognizes and applauds the voluntary commitment made earlier
this year by 20 automakers to include automatic emergency braking (AEB)
on all vehicles sold in the U.S. by 2022. Toyota has already committed
to beat this date by several years. Given the slow turnover of the
fleet, we encourage other manufacturers to view the 2022 date as a
finish line rather than a starting point and accelerate the roll out of
AEB and other lifesaving technologies.
Whether mandated or optional, in many cases these systems can
perform driving tasks more predictably, more conservatively and more
safely than a human driver, and may act without driver input if a
driver is distracted, impaired or incapacitated. However, because there
are no minimum standards for many of these technologies, legitimate
questions about their effectiveness remain. The line between ADAS and
highly automated vehicles may be blurred, as we have progressed far
down the path of advanced features with few questions and widespread
acceptance of semi-automated features.
dedicated short range communication
Another component of ADAS and automated vehicle systems is
dedicated short range communication (DSRC), which would allow vehicles
to communicate over dedicated spectrum bands with each other,
pedestrians, and infrastructure to prevent collisions. This technology,
often referred to as V2V (vehicle-to-vehicle), V2I (vehicle-to-
infrastructure), V2P (vehicle-to-pedestrian), or V2X (vehicle-to-
everything), is pending a rulemaking decision by NHTSA to establish
performance standards. NSC encourages NHTSA to release this standard
soon so that implementation of V2X can be more widespread.
DSRC can create redundant safety systems in motor vehicles. In
other modes of transportation, fail-safe designs can support operator
error, but in highway vehicles that task has fallen solely on drivers.
DSRC would allow a vehicle to communicate with a red light to
compensate for a fatigued driver, stop a car to prevent a collision
with a pedestrian if a driver fails to detect him or her, and prevent
or mitigate collisions between vehicles equipped with DSRC. DSRC has
been deployed by some manufacturers, but NSC believes it is an
important option in a safe systems approach to the design of HAVs and
anticipates it will be more widely deployed if there is more regulatory
certainty.
education and training
One component in the AV policy that should be a requirement moving
forward is the incorporation of driver education and training about new
safety technologies. With nearly 17.4 million new passenger cars and
trucks sold in 2015,\12\ understanding the technology on these vehicles
is necessary, yet a University of Iowa survey found that 40 percent of
respondents reported they had experienced a situation in which their
vehicle acted in an unexpected way.\13\ When this occurs in a real-life
driving situation, among multiple drivers, it can lead to disastrous
outcomes.
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\12\ Http://www.autoalliance.org/auto-marketplace/sales-data.
\13\ University of Iowa. National Consumer Survey of Driving Safety
Technologies. July 30, 2015. Accessible at http://ppc.uiowa.edu/sites/
default/files/national_consumer_survey_
technical_report_final_8.7.15.pdf.
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The National Safety Council and our research partners at the
University of Iowa are focused on educating consumers about in-vehicle
safety technology through our MyCarDoesWhat campaign.\14\ This brand
agnostic education campaign informs drivers about how safety
technologies work, how to best interact with them, and how to identify
situations when the technology may not perform optimally and should not
be relied upon. Because of the need for continued human involvement in
the operation of many of these features, the campaign tagline is You
are your car's best safety feature.
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\14\ www.mycardoeswhat.org.
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Visitors to MyCarDoesWhat.org realize improvement in general
knowledge and accurate comprehension of vehicle safety features.
Drivers cannot effectively use these life-saving technologies if they
do not understand both their functions and limitations. The AV policy
proposes that this education be delivered in multiple ways, including
computer based, hands-on and virtual reality training, and other
innovative approaches. The MyCarDoesWhat education campaign follows
that approach, and is developing virtual reality modules for release
early next year. Further, we recommend ongoing evaluation to determine
the effectiveness of the various messages, methods of delivery and
media so they can be improved over time.
standardized nomenclature and performance outcomes
Another way to reduce consumer confusion is to standardize the
nomenclature or taxonomy for advanced technologies. NSC, the State of
California, and Consumer Reports have recommended that, at the very
least, systems that are not completely automated or Level 5 should not
be described as such. ADAS, with emphasis on driver assist, represents
the vehicles being sold today and requires drivers to remain fully
engaged in the driving task. That fact is often lost in marketing,
media reports and consumer expectations. Labeling a motor vehicle as
``autonomous'' today, or even using terms such as ``autopilot'', only
confuses consumers and can contribute to losses of situational
awareness around the driving task.
By establishing standard nomenclature and establishing clear
performance outcomes, consumers will better understand what they should
expect from these technologies. For example, vehicles marketed as
having AEB will not necessarily come to a complete stop before a
collision.\15\ Some AEB systems only operate at higher speeds, and some
are designed to slow rather than stop prior to a collision. These
nuances may not be easily understood by consumers. IIHS reports that
systems with a warning only, but no automatic corrective action, reduce
frontal crash rates by about 25 percent, but vehicles with automatic
braking reduce crashes by more than 40 percent. Vehicles with a warning
and automatic braking reduce crash rates by about 50 percent.
Establishing a standardized, results-based, understandable definition
of AEB and other ADAS technologies would benefit consumers,
manufacturers, and dealers, as well as organizations that evaluate
vehicles for their safety benefits.
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\15\ Http://www.nsc.org/learn/safety-knowledge/Pages/Driver-Assist-
Technologies.aspx.
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Finally, the New Car Assessment Program (NCAP) program has operated
for nearly 40 years with a goal of testing vehicle safety systems and
educating consumers about them. Practically, it has created a mechanism
to allow consumers to evaluate vehicles on safety systems. NSC supports
NCAP and believes it is an important program to improve the safety of
the motor vehicle fleet. Standardized nomenclature and performance
outcomes will ensure NCAP can more effectively compare vehicle safety
systems between manufacturers, and even between a manufacturer's own
models.
data protection and sharing
The National Safety Council is very bullish on ADAS, and eventually
fully automated vehicles, because we know when implemented safely and
properly, they will help us realize huge gains in reducing roadway
fatalities. But a minimum requirement, if we are to realize the life-
saving benefits, will be ensuring that we have reliable event data
recorders that produce data in a standardized format that is
downloadable for investigators, law enforcement, State highway safety
offices, insurers and other relevant stakeholders. Following a crash,
we must be able to answer simple questions like whether the vehicle
systems or the human driver had control of the car, if and how the
vehicle was communicating with the driver, and if all systems were
working as designed.
The AV policy details the importance of data collection as these
technologies begin to be tested in real-world scenarios. Understanding
the circumstances and causes surrounding malfunctions, including at
lower levels of automation, will help make this technology stronger and
safer, and ensure failures are less likely to occur as technology
evolves. This will be especially important in assuring consumers of the
reliability of ADAS and automated technology. As the former Chairman of
the NTSB, I believe that minimum parameters should be set for data
preservation, standardization of formats, ease of access for post-crash
evaluation, and establishment of privacy protections early in the
process. Data-sharing programs require greater maturity and a strong
safety culture committed to continuous improvement.
Event data recorders (EDRs) are widely used throughout the
automotive industry in vehicles of all shapes and sizes, yielding
valuable data in crash reconstruction efforts. Similar devices are used
in other modes of transportation as well. Amtrak utilizes event data
recorders that automatically transmit data from locomotive recorders to
a control center when an event occurs. In the aviation industry, crash-
hardened ``black box'' data recorders store thousands of parameters of
data. Much of this information is collected after normal flights and
analyzed by the operator to learn about and improve operations, and in
the case of an incident, the data is invaluable to investigators to
determine what occurred. The same could be true for motor vehicles.
Missing from the policy, however, is clarification on whether
lower-level systems (below Level 3) should be subject to the same data
collection guidelines. The current event data recorder standards do not
require the majority of Levels 1 and 2 safety systems' sensors be
tracked.\16\ This lack of information limits real world data
availability that could guide the future development of these
technologies to make them safer. Currently, there is no easy way for
manufacturers, law enforcement, investigators or vehicle owners to
understand whether deployed systems were active during a crash, whether
they malfunctioned, or whether they helped mitigate damage or injury or
returned the car to a safe state in event of a malfunction.
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\16\ 49 CFR 563.
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Information sharing is included in the AV policy. However, the
policy fails to mention the public health argument for collecting data
from electronic devices in the car in the event of a crash. Acquiring
an understanding of what happens when systems perform as intended, fail
as expected, or fail in unexpected ways will yield valuable information
for manufacturers--some of whom have common suppliers. Further, in-
service data, as well as near miss and post-crash information sharing,
can help civil engineers and planners design better and safer roadways,
as well as help safety and health professionals design better
interventions to discourage risky driving or affect the behaviors of
other roadway users.
De-identified data sharing has been in existence in the aviation
industry for many years and proven highly successful. The Aviation
Safety Information Analysis and Sharing (ASIAS) system allows for
sharing of de-identified data across the aviation industry, making it
possible for the industry to identify trends and act on them. Analysis
of de-identified data will provide windows in to leading indicators in
the motor vehicle industry. Leading indicators are ``proactive,
preventative and predictive measures that monitor and provide current
information about the effective performance, activities and processes
of a . . . system that drive the identification and eliminate or
control of risks.'' \17\ The NSC Campbell Institute, a leader in
workplace safety, health and sustainability, states that tracking
leading indicators allows world-class safety organizations to make
further improvements to their safety records.\18\
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\17\ Http://www.thecampbellinstitute.org/file/
download.php?id=20130925358263a8956de938e7c00
a2bbbb8413d.
\18\ Http://www.thecampbellinstitute.org/file/
download.php?id=2015092336b107f72d10a379134
af9249d3457ab.
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The AV policy also suggests that auto manufacturers use EDRs to
gain a better understanding of how human operators engage with advanced
technology. This knowledge will allow manufacturers to be nimbler and
make adjustments in near real time for some systems based on what is
actually occurring in the driver's seat, rather than making changes
based on assumptions and estimations that must be accommodated in a
later model year. Collecting and sharing de-identified data about near
misses and other relevant problems could also help by aggregating
useful information for the automotive industry, allowing them to take
proactive steps based on leading indicators rather than waiting for a
crash or a series of crashes to occur. Finally, this data would be
useful to researchers and the safety community in analyzing the safety
benefits--and potential drawbacks--of these technologies as they
continue to mature.
While there are competing priorities regarding protecting personal
privacy and proprietary systems or designs, NSC believes that safety
should be the ultimate priority, and that other concerns need to be
accommodated to prioritize safety. NHTSA should facilitate data sharing
as widely as possible and require that manufacturers provide
accessible, standardized data to law enforcement, State highway safety
offices, investigators, insurers, and/or other relevant stakeholders.
american national standards institute standard
As important as it is for the average consumer to know and
understand the ADAS and automated technology, there is also work to be
done on this issue as it relates to the technology and its rollout to
commercial fleets. As such, NSC is taking a leading role working with
the American Society of Safety Engineers (ASSE) and a wide array of
experts in the automotive industry, technology sector, academia and
fleet management, to develop an ANSI (American National Standards
Institute) standard to address policies, procedures and management
processes that will assist in the control of risks and exposures
associated with the operation of autonomous fleet vehicles on public
thoroughfares.
national highway traffic safety administration resources and oversight
in the midst of changing technology
In response to reports of repeated incidents of unintended
acceleration in Toyota vehicles in 2009-2010, the National Research
Council Transportation Research Board conducted an investigation into
whether NHTSA (National Highway Traffic Safety Administration) had
reached the correct conclusion in its own investigation, as well as to
produce advice on how to best handle future issues involving the safe
performance of vehicle electronics. This research resulted in a report,
released on January 18, 2012.\19\
---------------------------------------------------------------------------
\19\ Http://www8.nationalacademies.org/onpinews/
newsitem.aspx?RecordID=13342.
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The Research Council found that while NHTSA's decision to close its
investigation was justified, it was ``troubling that NHTSA could not
convincingly address public concerns about the safety of automotive
electronics.'' More specifically, the Research Council stated that ``to
respond effectively and confidently to claims of defects in the more
complex electronic systems . . . NHTSA will require additional
specialized technical expertise.'' While they acknowledged it was
unrealistic to expect NHTSA to hire and maintain these specialized
personnel in a constantly evolving field, they made a specific
recommendation that NHTSA establish a standing technical advisory panel
with members representing a wide array of technical expertise central
to the design, development, and safety assurance of automotive
electronics systems.
With technology advancing as quickly as it is, it is difficult to
keep up with advances without appropriate resources. Last year, NSC
supported the administration's NHTSA funding request of $1.1813
billion, which included $200 million for the Autonomous Vehicle
Development program. We encourage this Committee and Congress to fully
fund NHTSA, including requested investments in programs that will
support the development of ADAS and HAVs. We also recommend that NHTSA
consider how to best take advantage of existing knowledge by
establishing an advisory committee or similar mechanism to engage
experts in the field of advanced technology and automotive electronic
systems.
road to zero
On October 5, NSC, NHSTA, the Federal Highway Administration
(FHWA), and the Federal Motor Carrier Safety Administration (FMCSA)
announced the Road to Zero (RTZ) Coalition. RTZ is a partnership
initiative focused on dramatic reductions in roadway fatalities. Over
80 public and private organizations attended the announcement to learn
more about committing to a shared vision of zero fatalities on our
roadways. The first meeting of the coalition will be on December 15.
The purpose of the Road to Zero Coalition is to (1) encourage and
facilitate widespread implementation of countermeasures to reduce motor
vehicle crash deaths in the near term; (2) develop a scenario-based
vision for zero U.S. traffic deaths in the future; and (3) provide a
roadmap for policymakers and stakeholders to eliminate traffic deaths.
NSC is joined on the Steering Group for the Road to Zero Coalition
by the following organizations: Advocates for Highway and Auto Safety,
American Association of Motor Vehicle Administrators (AAMVA), American
Association of State Highway and Transportation Officials (AASHTO),
Commercial Vehicle Safety Alliance (CVSA), Governors Highway Safety
Association (GHSA), Institute of Transportation Engineers (ITE),
Insurance Institute for Highway Safety (IIHS), Intelligent Car
Coalition, International Association of Chiefs of Police (IACP),
Mothers Against Drunk Driving (MADD), National Association of State
Emergency Medical Services Officials (NASEMSO), National Association of
City Transportation Officials (NACTO), National Association of County
Engineers (NACE), and the Vision Zero Network.
On behalf of the Coalition, the NSC will administer a grant program
to support national non-profit organizations committed to roadway
safety programs that address the overlaps and gaps between roadway
users, vehicles and infrastructure. In addition, the Coalition will
look at engaging others in near term solutions and countermeasures to
reduce the death toll on our roadways. Finally, we will also provide
critical input for the development of a future community scenario with
zero traffic fatalities--an effort to look at the measures, programs
and technologies will be necessary to reach zero highway fatalities in
30 years and work back from there. NHTSA, FHWA, FMCSA, and NSC are
sponsoring the development of the scenario-based vision for zero
traffic deaths in the U.S. in a 30-year timeframe, and the RAND
Corporation has been retained to produce the scenario over the next 12-
18 months. I look forward to briefing this Committee and others in
Congress on the results of these activities and the efforts of the
Coalition to reach zero deaths on our roadways.
conclusion
Today, we have millions of drivers behind the wheel, spend millions
of dollars on education and enforcement campaigns, and still recognize
billions in economic loses as a result of crashes. In spite of safer
vehicle designs and record-setting seat belt use rates across the
Nation, operating a motor vehicle remains one of the deadliest things
we do on a daily basis.
NSC believes fully automated vehicles have the potential to save
lives and prevent injuries, but--as outlined above--there are several
key issues that policymakers must address. The AV policy begins this
discussion, and we applaud NHTSA and DOT for issuing it.
It will be a long time before HAVs replace our current fleet. The
transition will likely be messy as we deal with a complex and ever-
changing Human-Machine interface. There will be an evolution of the
existing technologies and perhaps a revolution when it comes to new and
different technologies. We need to be prepared for unanticipated
consequences and new failure modes.
Although we can imagine a future with automated vehicles, it will
be a long and winding road to get to the destination of zero fatalities
as a result of HAVs. We cannot afford to ignore the carnage on our
highways that is a national epidemic today. The U.S. trails other
industrialized countries in addressing highway deaths. Efforts like
Road to Zero will decrease fatalities today, tomorrow, and in the
future if we embrace proven countermeasures and accelerate deployment
of effective ADAS technologies.
NSC appreciates this Committee's leadership on vehicle technology
and safe roadway transportation. If safety for the traveling public is
the ultimate goal, advanced technology provides the most promising
opportunity to achieve that outcome, and will go a long way toward
reaching the goal of eliminating preventable deaths in our lifetime.
Senator Collins. Thank you very much, Ms. Hersman.
Mr. Brubaker.
STATEMENT OF HON. PAUL BRUBAKER, PRESIDENT AND CEO, THE
ALLIANCE FOR TRANSPORTATION INNOVATION
Mr. Brubaker. Chairman Collins, Ranking Member Reed, and
members of the subcommittee, on behalf of the Alliance for
Transportation Innovation, I would like to thank you for the
opportunity to share our views on the role of government in
integrating autonomous vehicles onto our Nation's roads.
The safety and social benefits that can be achieved by
replacing human drivers with modern sensors and computers are
too profound not to be encouraged through government policy.
Yet regulation has failed to keep pace with innovation, and we
see evidence of a significant gap in understanding of these
technologies within all levels of government. It's a gap that
must be bridged so regulators can better understand when it's
best to lead, follow, or move out of the way.
We believe the Administration's recently released AV policy
is a good first step in opening communication channels that can
help to bridge this gap. We will formally be commenting on this
policy by the end of the week.
But despite this disconnect industry and innovators are
still working hard to integrate the development and deployment
of autonomous systems and are investing billions of dollars
with safety top of mind. These technologies are already being
tested on our roads. In fact, just 3 weeks ago we saw the first
commercial delivery of a truckload of beer delivered by a self-
driving tractor trailer. Shortly, some in the auto industry
will be prepared to offer full self-driving capability to the
public, and government leaders must ensure that our current
regulatory approaches do not constrain the development of these
technologies. Lives depend on it.
To put a fine point on the subject, human drivers are
simply killers. Errors in human judgment while at the controls
of motor vehicles account for more than 90 percent of the car
crashes that last year killed over 34,000 people in the United
States and claimed 1.3 million lives around the globe.
Computers don't get tired. They don't text. They don't
drink and drive, and they don't get road rage. Networks,
sensors, maps, computing, artificial intelligence, machine
learning, and vehicle controls work in concert to detect
objects, analyze probabilities, consider options, make
decisions, and take actions, all at the speed of light, and all
with significantly greater reliability and efficiency than
humans.
This capability is improving rapidly, and government needs
to keep pace or risk undermining the promise of tomorrow by
applying the regulations of yesteryear. Government cannot
simply allow itself to be the obstacle to saving lives.
We hear a lot about these 34,000 fatal crashes and the fact
that 94 percent of them are caused by human error. But the
problem with statistics is they numb us with the fact that
we're talking about people, individual parents, siblings, sons
and daughters who are suddenly and cruelly taken away from us.
Sons like Leo Vagias--and his father Teddy is right here behind
me--and his best friend Sam Cali were killed in a very
preventable car crash just this past June in New Jersey in a
scenario that gets repeated too often and claims 96 lives a
day. It needs to stop, and we have a collective obligation--
industry, government, and citizens--to accelerate the
development, testing and deployment of life-saving self-driving
technologies.
But this journey to self-driving is complex, and
integrating these technologies onto our Nation's highways will
require unprecedented coordination and cooperation among
industry, government, and citizens. We must win over a
skeptical public by demonstrating that the underlying
technologies are effective, safe and secure, and because these
vehicles are going to operate on our public roadways, we've got
to ensure that government encourages their safe and responsible
deployment. Legal liability insurance issues must be addressed,
and economic impacts and potential social disruption must be
understood.
Given these complexities, ATI21.org believes that only
executive leadership with Congress on this issue will provide
the necessary national vision, goals, and direction required
across all sectors of our economy. That is why we recently
published our National Strategic Framework to Accelerate Life-
Saving Self-Driving Vehicles. We designed this document to
develop a pathway to successful integration of autonomous
vehicles into America's transportation system.
[The document link follows:]
Http://www.ati21.org/wp-content/uploads/2016/10/Final-ATI-Strategy-
Document.pdf.
One area of emphasis in that framework is data. We believe
that data is the key to speeding the safe deployment of these
technologies. That's why we're recommending the creation of a
National Self-Driving Data Repository. We envision that this is
a highly secured, trusted, opt-in data repository with a number
of positive incentives that can be leveraged in a way to
encourage participation, incentives like indemnification, and
rapid regulatory approvals. Such a repository will help us
better understand the level of safety and performance, as well
as enable us to identify real and emerging potential issues,
and inform regulators, industry and the public based on near
real-time data.
We have shared this national framework with the
subcommittee and with the Trump transition team, and we're
available to discuss this in detail.
[The article link follows:]
Https://www.washingtonpost.com/local/trafficandcommuting/the-next-
president-should-make-driverless-cars-a-white-house-priority-group-
says/2016/10/20/6c548212-9636-11e6-bc79-
af1cd3d2984b_story.html?utm_term=.3299c046b7aa.
The convergence of technology and transportation has the
potential to dramatically improve the safe and efficient
movement of people and goods. Over the next few years the Trump
Administration and Congress will have an unprecedented
opportunity to lead a cooperative effort between industry,
government, and the public that holds the promise of saving
lives. We look forward to working with you to advance this
agenda. Thank you.
[The statement follows:]
Prepared Statement of Hon. Paul R. Brubaker
Chairman Collins, Ranking Member Reed, and Members of the
Subcommittee, on behalf of the Alliance for Transportation Innovation
(ATI21.org), I would like to thank you for the opportunity to share our
views on integrating autonomous vehicles onto our Nation's roads.
ATI21.org is a not-for-profit created to accelerate the deployment
of technologies and innovation that can dramatically improve the safe
and efficient movement of people and goods. Our members are
associations, companies, and government and academic entities, as well
as individuals who are dedicated to our mission.
The need to accelerate the path to self-driving is not only
critical to our country's economic future, but also our technological
standing in the world. The potential safety and social benefits are
enormous, and we are on the cusp of reliably and safely replacing human
drivers with technology enabled mobility platforms--self-driving
vehicles--that will transform how we move people and goods.
Accelerating development and deployment of self-driving vehicles
holds the promise of saving tens of thousands of lives every year,
reducing crash-related injuries, and fundamentally transforming
personal mobility. As soon as we achieve full self-driving, distracted
and drunk driving will no longer claim lives; adult children will not
have to have the conversation with aging parents about taking away
their car keys; the poor will have access to much more convenient and
affordable transportation; and the physically and developmentally
disabled, including my soon to be adult son on the autism spectrum,
will have access to transportation options. There is no doubt that
safe, affordable, accessible, and convenient transportation is critical
for everyone's quality of life.
While the technologies to enable self-driving are being rapidly
developed, the desire to get these capabilities to market are
highlighting profound shortcomings in our national approach to
regulation. Specifically, the regulatory process is simply not keeping
up with the pace of innovation. While this is not unique to self-
driving, the rapid development of autonomous vehicles presents us with
an opportunity to revisit our regulatory approach and offer reforms
that are more suitable to the digital age. It is imperative. In this
case the cost of delay is measured in lost members of our families, of
pain and suffering, and the denial of economic, health and social
opportunity for the elderly, disabled and the impoverished.
That said, in the Obama Administration, Transportation Secretary
Anthony Foxx and Administrator Mark Rosekind of the National Highway
Traffic Safety Administration (NHTSA) get it. It is clear that the
administration has a profound understanding of the critical
technologies that have rapidly developed during the President's tenure
and have laid the groundwork for the next administration to propel us
into the self-driving future. The path will not be easy. There are
considerable and complex cultural and regulatory barriers that must be
overcome, and industry, researchers, the public, and government at all
levels will need to engage and collaborate.
In late September the Department of Transportation issued its much
anticipated autonomous vehicle (AV) policy guidance in what we believe
represented a well-intentioned and thoughtful first-step toward
ensuring that the Department, and NHTSA specifically, is heading toward
a more responsive regulatory approach that is more suitable for
accelerating the safe deployment of highly autonomous vehicles on our
Nation's roads.
While these initial guidelines are not perfect, ATI21.org believes
the Department of Transportation should be commended for recognizing a
number of critical issues that must become priorities for industry and
government to safely deploy autonomous vehicles. We also commend the
Department for its clear willingness to engage with both the
traditional auto industry and technology sectors. We believe such an
open and productive dialogue with all interested parties is the first
step to evolving toward a much more responsive and effective regulatory
framework than the existing model.
Specifically, there are several positive provisions included in
this initial version of the AV policy. First, the Department's 15-point
safety assessment covers all the major key areas that are critical to
the safe design of highly autonomous vehicles. Second, the Department
rightfully asserted its appropriate and exclusive role as the Nation's
vehicle safety regulator and offered a model policy that can help guide
States in formulating appropriate regulatory frameworks. Lastly, the
Department was quite clear that it intended this process to be
iterative and recognized the need to evolve and even adopt new
regulatory models that could keep pace with the innovation cycle. We
believe these are all excellent first steps in developing an
appropriate regulatory framework.
There are however two sections of the AV Policy document that gave
us pause. Specifically, the section on the use of existing regulatory
tools and the examples given as possible future regulatory approaches
is no better and potentially worse than the existing tools.
Although the policy includes language about revising and
streamlining processes related to interpretations and waivers, we
believe the underlying Federal Motor Vehicle Safety Standards (FMVSS),
while arguably effective for traditional motor vehicle design approval,
will prove to be an unworkable foundation for accelerating the design
and deployment of highly autonomous vehicles. As was highlighted in the
March 2016 report by the Volpe National Transportation Research Center,
there are considerable challenges in applying these standards to SAE
level 4 and 5 autonomous vehicles.\1,\\2\ For example, the FMVSS makes
more than 250 individual references to human drivers, and eliminating
traditional design features such as steering wheels and pedals, which
can be anticipated in level 4 and 5 vehicles, would violate roughly a
third of the standards and half of the Series 100 crash avoidance
requirements.
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\1\ John A. Volpe National Transportation Systems Center, Review of
Federal Motor Vehicle Safety Standards (FMVSS) for Automated Vehicles,
Preliminary Report-March 2016, prepared for the Intelligent
Transportation Systems Joint Program Office, NHTSA.
\2\ Levels of driving automation are defined in the SAE
International Standard J3016. It identifies six levels of driving
automation from ``no automation'' (0) to ``full automation'' (5), with
level 4 being ``high'' and Level 5 being ``full.''
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While we commend the Department for beginning what we believe is a
long overdue conversation on the need to create a much more responsive
and timely regulatory approach, we believe the examples offered such as
pre-approval of designs based on the FAA model or the FDA medical
device approach are neither particularly efficient nor applicable or
fitting.
Data is the key to reforming the regulatory process in a manner
that will allow the creation of a regulatory approach that is rapid,
efficient, and effective. Specifically, a central repository for
collecting, storing, and analyzing all operational and testing data
from across the industry is necessary to create a responsive regulatory
environment. Neither the NHTSA nor any existing industry group is
positioned to perform this task. Consequently, we are recommending the
establishment of an independent, federally chartered organization to
securely and confidentially collect and analyze all operational and
test data from across industry that will include simulation data. By
collecting real-time data and applying modern analytical methods, we
are confident that, if properly established, this organization can
rapidly inform industry and NHTSA of real and potential issues. We
recommend that this effort be funded from existing dollars. We would be
happy to consult with the Subcommittee on the specific details of this
recommendation.
The second area we would like to highlight in our testimony this
morning is our call for a National Strategic Framework to Advance Life-
Saving Self-Driving Vehicles. We created this document calling for
presidential level leadership on self-driving.
Accelerating the path to self-driving is an enormously complex
undertaking that will go beyond the responsibility of the U.S.
Department of Transportation. While there are major roles and policy
levers that both the Federal Government as a whole and U.S. Department
of Transportation can take to accelerate deployment and ensure that
only safe vehicles make it to market, it is critical that all levels of
government work together, that industry and the research community
continues to drive innovation and has a path to market, and perhaps
most importantly that citizens are informed, engaged and welcoming of
what will prove to be a major cultural shift.
Not unlike past transitions to transportation-related innovation,
success will depend on high levels of cooperation and engagement across
government, industry, and the public. This was true of steamships,
railroads, motor vehicles and aviation. The disruptive transition to
self-driving will require similar coordination, cooperation, and
support.
As is true with all disruptive innovation throughout history, we
can expect to experience both positive and negative effects as we begin
integrating autonomous vehicles onto the Nation's roads. It is critical
that we thoughtfully consider the obvious consequences, both good and
bad, that will undoubtedly arise from our transition from what we refer
to as the ``crash economy'' to a new mobility paradigm.
As I mentioned earlier, the major reason for making this transition
is to save lives and reduce injuries. Last year, over 35,000 Americans
died in car crashes. This year that number is expected to climb and may
exceed 40,000. Millions more are injured including many with life-
changing debilitating injuries. We know that crashes cost the U.S.
economy almost $1 trillion annually. Let us be clear, we would not
tolerate such cost and carnage in any other mode of transportation, and
now, the tools are arriving to make these tragedies preventable.
Autonomous features and ultimately self-driving vehicles hold
promise to dramatically reduce fatalities and injuries as NHTSA
estimates that more than 94 percent of these crashes are the result of
human error. We simply should not allow more than 90 of our fellow
citizens to die every day when we can create the conditions to prevent
it. The sooner we fully integrate autonomous vehicles onto our
highways, the sooner we will realize a dramatic reduction in the number
of preventable fatalities and injuries.
Getting this transition right will not be easy. Moving from the
crash economy to a dramatically safer, accessible, affordable, and
convenient mobility paradigm is a complex undertaking requiring
unprecedented cooperation and coordination among industry,
associations, and research and government institutions at all levels.
We believe such an effort will require presidential leadership and
that the incoming administration and Congress should work in concert to
create the conditions necessary to accelerate the development, testing,
and deployment of these capabilities as well as proactively address
some of the anticipated consequences of transition.
At ATI21.org, we announced the publication of our initial framework
for accelerating the deployment of self-driving vehicles last month.
The framework is not a prescriptive list of recommended actions but
rather an outline of key challenges areas that must be addressed in
order to accelerate the integration of autonomous vehicles on our
Nation's highways.
Between now and Inauguration Day, we will be soliciting reaction to
the challenge areas and hosting a series of expert panels to explore
and produce recommendations on each challenge area. We intend to update
the framework based on panel input and host a final review and input
session for the entire document on January 4th with the Consumer
Technology Association in advance of the Consumer Electronics Show.
In short, ATI21.org is calling for a National Strategy to Advance
Self-Driving (NSAS) and urging the next president to issue an executive
order that would describe the challenges and create a Program
Management Office (PMO) within the Office of Science and Technology
Policy (OSTP). We recommend funding the activity as a government-wide
technology initiative through existing Office of Management and Budget
(OMB) authority under a provision in the Clinger-Cohen Act. The PMO
would operate under a 4-year charter to collaborate with relevant
stakeholders, assemble experts, develop outcome-focused and actionable
strategies, and identify funding streams to address each of the
challenge areas.
We have identified the following challenge areas:
--Earning public trust
--Increasing confidence in self-driving technology
--Ensuring robust cybersecurity
--Developing standards and regulations that encourage self-driving
--Creating the legal, liability, and insurance framework for
accelerating the deployment of self-driving vehicles
--Adopting reasonable data and privacy policies
--Accelerating the transition to a fully self-driving fleet
--Understanding and planning for economic disruption and labor
transition
As we say in the framework, accelerating the path to self-driving
will not be easy. The incoming president by leading us though this
ambitious effort early in the new term can ensure dramatic progress
toward creating a new mobility paradigm that will create safe,
convenient, resilient, and accessible transportation options to all
Americans regardless of their ability, age, or economic condition.
ATI21.org believes this is a transportation legacy that we can be proud
to leave to future generations.
In the coming months, we look forward to working with the
Subcommittee and Congress to work on creating the conditions necessary
to speed integration of autonomous vehicles on the Nation's highways.
Thank you. I look forward to answering your questions.
Senator Collins. Thank you.
Dr. Kalra.
STATEMENT OF DR. NIDHI KALRA, CO-DIRECTOR, RAND CENTER
FOR DECISION MAKING UNDER UNCERTAINTY
Dr. Kalra. Chairman Collins, Ranking Member Reed, members
of the subcommittee, thank you for the opportunity to testify
today on the future of autonomous vehicles.
My name is Nidhi Kalra, and I'm an Information Scientist at
the RAND Corporation. RAND is a non-profit, non-partisan
research institution committed to improving public policy
through objective research and analysis. I have a Ph.D. in
robotics and have been studying autonomous vehicles for 10
years. And in the interest of full disclosure, my spouse is the
co-founder of an autonomous vehicle start-up in Silicon Valley,
though his work has no bearing on my testimony, or vice-versa.
Now, there are three issues I'd like to discuss today, the
safety of autonomous vehicles, their benefits for mobility, and
the urgency of addressing distortions in the transportation
market so we can harness their benefits and mitigate their
drawbacks.
So first let's talk about safety. Will autonomous vehicles
be safe before they're allowed on the road for consumer use? We
may not know. Real-world driving is currently the only method
of demonstrating their safety. But suppose a fleet of
autonomous vehicles has a 20 percent lower fatality rate than
human drivers. They would have to be driven 5 billion miles to
prove it, and a fleet of test vehicles, 100 test vehicles would
have to be driven 225 years to cover this distance. It's
impossible if we ever want them on the road for consumer use.
But now let's consider two things. First, Americans as a
whole drive more than this every day. We drive 8 billion miles
every day. So once autonomous vehicles are widely deployed for
consumer use, we may know very quickly how safe they are. And
consider that autonomous vehicles will improve over time. So
when a human driver makes a mistake, only that person, at best,
is able to learn from the experience, but that's not with
autonomous vehicles. When one vehicle makes a mistake or has an
experience on the road, that information can be used to improve
the entire fleet.
So experience may be one of the most important tools for
both demonstrating and improving autonomous vehicle safety. So
I think an important question is how do we enable autonomous
vehicles to get experience while mitigating the safety risks
they pose? And I suggest two things--strategic pilot studies
and data sharing--that can help.
Pilot studies could start with real-world testing in lower-
risk conditions like operating vehicles in well-maintained
areas and at low speeds, and then could be expanded as safety
is demonstrated.
As for data sharing, developers are already using the
experiences of one vehicle to improve their fleet, but data
sharing across the industry could mean that the experiences of
every vehicle can improve the entire industry.
Second, let's talk about mobility. Autonomous vehicles
could improve mobility for millions of Americans who are
elderly, young, have disabilities, or live in poverty. But
policies may be needed to make them affordable, available, and
accessible. Policymakers can incentivize developers to bring
these technologies to those markets sooner than they might
otherwise, or to integrate them with transit and para-transit.
Policymakers may need to work with developers to help make sure
they're accessible, meaning that they comply with ADA
guidelines and use different forms of payment, for example.
And while the cost of shared autonomous vehicles is
expected to be low, policymakers could extend transit and para-
transit reduced fares to these other technologies to make them
all the more affordable for these vulnerable populations.
Third, let's talk about market distortions. Autonomous
vehicles could also significantly affect traffic congestion,
energy pollution and land use, maybe for the better, but maybe
for the worse. So to harness their benefits and mitigate their
drawbacks, policymakers should address the existing distortions
in the transportation market that lead to undesirable outcomes
and subsidize desirable outcomes.
Now, there are many policy options to address distortions,
like strengthening the auto insurance market to encourage
safety, implementing congestion pricing to reduce congestion,
and offering rebates for fuel-efficient vehicles to reduce
pollution.
Now, I can't today give each policy the discussion it
warrants, but now is the time to address these distortions,
because autonomous vehicles could improve our transportation
system tremendously if the right market signals are in place.
And there is currently a window of opportunity to send those
new market signals because consumer expectations about
autonomous vehicle performance and cost aren't yet set.
So, let me conclude. In the 1990s, we couldn't forecast the
impact that the Internet has now had. Similarly, today we can't
forecast the impact that autonomous vehicles will have on our
future, but we can shape that future, and I would like to leave
you with two recommendations.
First, as I noted, widespread experience may be the key to
figuring out both how safe autonomous vehicles are and how they
get better. So it's important to get them that experience as
safely as possible.
And second, correcting market distortions will be critical
to encouraging better outcomes for our transportation system
and for our society.
Chairman Collins, Ranking Member Reed, and members of the
subcommittee, thank you for allowing me to appear before you
today, and I look forward to your questions.
[The statement follows:]
Prepared Statement of Dr. Nidhi Kalra
Chairman Collins, Ranking Member Reed, and distinguished members of
the subcommittee, my name is Nidhi Kalra of the RAND Corporation.\1\
Thank you for the opportunity to testify on important emerging
opportunities and risks related to autonomous vehicles. Autonomous
vehicles have the potential to change transportation profoundly, in the
United States and around the world. There is much opportunity for
improvement, but also potential for added risks and harms. How
autonomous vehicles ultimately shape our future is not foretold; it
depends on many technology and policy choices we make today.
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\1\ The RAND Corporation is a research organization that develops
solutions to public policy challenges to help make communities
throughout the world safer and more secure, healthier and more
prosperous. RAND is nonprofit, nonpartisan, and committed to the public
interest.
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Today, I would like to discuss three important questions about the
future of autonomous vehicles and how policies can shape it. First,
will autonomous vehicles be safe before they are allowed on the road
for consumer use? Second, how can autonomous vehicles improve mobility
for Americans who currently may have limited mobility? Third, what
mechanisms can help realize the benefits and mitigate the drawbacks of
autonomous vehicles? I will focus most of my remarks on fully
autonomous vehicles--those that can operate without a human driver some
or all of the time--rather than on vehicles that require continuous
human oversight.
will autonomous vehicles be safe before they are allowed on the road
for consumer use?
In the United States, roughly 32,000 people are killed and more
than 2 million are injured in motor vehicle crashes every year.\2\
Although safety has generally improved over the past several decades,
2015 saw 35,000 road fatalities, the largest increase in fatalities in
this country in more than 50 years. This occurred partly because
Americans drove more and partly because they drove worse.
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\2\ Bureau of Transportation Statistics, Motor Vehicle Safety Data,
Table 2-17, Washington, D.C.: Research and Innovative Technology
Administration, U.S. Department of Transportation, 2015.
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U.S. motor vehicle crashes as a whole can pose enormous economic
and social costs--more than $800 billion in a single year.\3\ And more
than 90 percent of crashes are caused by human errors,\4\ such as
driving too fast and misjudging other drivers' behaviors, as well as
alcohol impairment, distraction, and fatigue.
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\3\ Lawrence Blincoe, Ted R. Miller, Eduard Zaloshnja, and Bruce A.
Lawrence, The Economic and Societal Impact of Motor Vehicle Crashes
2010 (Revised), Washington, D.C.: National Highway Traffic Safety
Administration, DOT HS 812 013, 2014, revised May 2015.
\4\ National Highway Traffic Safety Administration, Traffic Safety
Facts, A Brief Statistical Summary: Critical Reasons for Crashes
Investigated in the National Motor Vehicle Crash Causation Survey,
Washington, D.C.: National Center for Statistics and Analysis, U.S.
Department of Transportation, DOT HS 812 115, February 2015.
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Autonomous Vehicles Present Benefits and Risks to Safety
Autonomous vehicles have the potential to significantly mitigate
this public safety crisis by eliminating many of the mistakes that
human drivers routinely make.\5\ To begin with, autonomous vehicles are
never drunk, distracted, or tired; these factors are involved in 41
percent, 10 percent, and 2.5 percent, respectively, of all fatal
crashes.\6\ Autonomous vehicles could perform better than human drivers
because of better perception (e.g., no blind spots), better
decisionmaking (e.g., more-accurate planning of complex driving
maneuvers), and better execution (e.g., faster and more-precise control
of steering, brakes, and acceleration).
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\5\ James M. Anderson, Nidhi Kalra, Karlyn D. Stanley, Paul
Sorensen, Constantine Samaras, and Oluwatobi A. Oluwatola, Autonomous
Vehicle Technology: A Guide for Policymakers, Santa Monica, Calif.:
RAND Corporation, RR-433-2-RC, 2014; and Daniel J. Fagnant and Kara
Kockelman, ``Preparing a Nation for Autonomous Vehicles: Opportunities,
Barriers and Policy Recommendations,'' Transportation Research Part A:
Policy and Practice, Vol. 77, July 2015, pp. 167-181.
\6\ National Highway Traffic Safety Administration, Traffic Safety
Facts: Crash Stats, Washington, D.C.: National Center for Statistics
and Analysis, DOT HS 811 449, March 2011; Bureau of Transportation
Statistics, Occupant and Non-Motorist Fatalities in Crashes by Number
of Vehicles and Alcohol Involvement (Updated July 2014), Table 2-20,
Washington, D.C.: U.S. Department of Transportation, 2014; and U.S.
Department of Transportation, Fact Sheet: Enhanced Mobility of Seniors
and Individuals with Disabilities Section 5310, Washington D.C., 2015.
This does not mean that 53.5 percent of all fatal crashes are caused by
these factors because a crash may involve, but not be strictly caused
by, one of these factors, and because more than one of these factors
may be involved in a single crash.
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However, autonomous vehicles might not eliminate all crashes. For
instance, inclement weather and complex driving environments pose
challenges for autonomous vehicles, as well as for human drivers, and
autonomous vehicles might perform worse than human drivers in some
cases.\7\ There is also the potential for autonomous vehicles to pose
new and serious crash risks--for example, crashes resulting from cyber
attacks.\8\ Clearly, autonomous vehicles present both enormous
potential benefits and potential risks to transportation safety.
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\7\ Lee Gomes, Hidden Obstacles for Google's Self-Driving Cars:
Impressive Progress Hides Major Limitations of Google's Quest for
Automated Driving, Massachusetts Institute of Technology, August 28,
2014.
\8\ Anderson et al., 2014.
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When the National Highway Traffic Safety Administration released
much-anticipated guidelines intended to outline best practices for
autonomous vehicle safety, many looked to that guidance to answer the
key question: Will autonomous vehicles be safe? I believe the answer is
``maybe.'' Answering the question requires considering two issues.
First, how should autonomous vehicle safety be measured, and second,
what threshold of safety should be required before autonomous vehicles
are made publicly available? In essence, what test do autonomous
vehicles have to take and what constitutes a passing grade? Both are
genuinely open questions, so it is understandable that Federal
guidelines have not yet answered them.
There Is No Proven, Feasible Way to Determine Autonomous Vehicle Safety
There are no road tests that could demonstrate how safe an
autonomous vehicle is--there are too many conditions and scenarios to
test them all. (A road test that a person takes at the Department of
Motor Vehicles also does not prove that he or she will be a good
driver; rather, the road test determines whether the person can perform
a specific set of driving skills under regular traffic situations.
While this type of evidence is viewed as adequate for licensing human
drivers, it is not generally viewed as adequate for robot drivers.)
A logical alternative is to test-drive autonomous vehicles
extensively in real traffic and observe their performance before making
them commercially available. Although this is a helpful first step, it
is not sufficient to prove safety. Even though the number of crashes,
injuries, and fatalities from human drivers is high, the rate of these
failures is low in comparison with the number of miles that people
drive. Americans drive nearly 3 trillion miles every year.\9\ The
35,092 fatalities and 2.44 million injuries in 2015 correspond to a
failure rate of 1.12 fatalities and 78 injuries per 100 million miles
driven. Given that current traffic fatalities and injuries are rare
events compared with vehicle miles traveled, fully autonomous vehicles
would have to be driven hundreds of millions of miles and sometimes
hundreds of billions of miles to demonstrate their reliability in terms
of fatalities and injuries. Under even aggressive testing assumptions,
existing fleets would take tens and sometimes hundreds of years to
drive these miles--an impossible proposition if the aim is to
demonstrate their performance prior to releasing them on the roads for
consumer use.\10\ And, in the meantime, human drivers would continue to
cause avoidable crashes and enormous harms to people and property.
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\9\ Bureau of Transportation Statistics, 2015.
\10\ Nidhi Kalra and Susan M. Paddock, Driving to Safety: How Many
Miles of Driving Would It Take to Demonstrate Autonomous Vehicle
Reliability? Santa Monica, Calif.: RAND Corporation, RR-1478-RC, 2016.
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Developers of this technology and third-party testers need to
develop innovative methods of demonstrating safety and reliability.
These methods may include but are not limited to accelerated
testing,\11\ virtual testing and simulations,\12\ mathematical modeling
and analysis,\13\ scenario and behavior testing,\14\ and pilot
studies,\15\ as well as extensive focused testing of hardware and
software systems. This is a rapidly growing area of research and
development. There are promising ideas but no demonstrated and accepted
methods of proving safety. In sum, no one yet knows how autonomous
vehicles should be tested. It is therefore reasonable that the current
Federal guidelines have not specified a test either.
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\11\ Wayne B. Nelson, Accelerated Testing: Statistical Models, Test
Plans, and Data Analysis, Hoboken, N.J.: John Wiley & Sons, 2009.
\12\ Suren Chen and Feng Chen, ``Simulation-Based Assessment of
Vehicle Safety Behavior under Hazardous Driving Conditions,'' Journal
of Transportation Engineering, Vol. 136, No. 4, 2010, pp. 304-315;
Siddartha Khastgir, Stewart A. Birrell, Gunwant Dhadyalla, and Paul A.
Jennings, ``Development of a Drive-In Driver-in-the-Loop Fully
Immersive Driving Simulator for Virtual Validation of Automotive
Systems,'' paper presented at IEEE 81st Vehicular Technology
Conference, Glasgow, Scotland, May 11-14, 2015; and Stephanie Olivares,
Nikolaus Rebernik, Arno Eichberger, and Ernst Stadlober, ``Virtual
Stochastic Testing of Advanced Driver Assistance Systems,'' in Tim
Schulze, Beate Muller, and Gereon Meyer, eds., Advanced Microsystems
for Automotive Applications 2015: Smart Systems for Green and Automated
Driving, New York: Springer, 2015.
\13\ Khashayar Hojjati-Emami, Balbir Dhillon, and Kouroush Jenab,
``Reliability Prediction for the Vehicles Equipped with Advanced Driver
Assistance Systems (ADAS) and Passive Safety Systems (PSS),''
International Journal of Industrial Engineering Computations, Vol. 3,
No. 5, 2012, pp. 731-1742; and R. Kianfar, P. Falcone, and J.
Fredriksson, ``Safety Verification of Automated Driving Systems,'' IEEE
Intelligent Transportation Systems Magazine, Vol. 5, No. 4, Winter
2013, pp. 73-186.
\14\ California Department of Motor Vehicles, Express Terms Title
13, Division 1, Chapter 1 Article 3.7--Autonomous Vehicles, 2015; and
Michael Sivak, and Brandon Schoettle, Should We Require Licensing Tests
and Graduated Licensing for Self-Driving Vehicles? University of
Michigan: Transportation Research Institute, Technical Report UMTRI-
2015-33, 2015.
\15\ ANWB, Experiments on Autonomous and Automated Driving: An
Overview 2015, 2015.
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There Is No Consensus on How Safe Autonomous Vehicles Should Be
The second issue of how safe autonomous vehicles should be is worth
considering, even if their degree of safety cannot yet be fully proven.
Some will insist that anything short of totally eliminating risk is a
safety compromise. They might feel that it is acceptable if humans make
mistakes, but not if machines do. But, again, waiting for autonomous
vehicles to operate perfectly misses opportunities to save lives
because it leaves far-from-perfect human drivers behind the wheel.
It seems sensible that autonomous vehicles should be allowed on
America's roads when they are judged safer than the average human
driver, allowing more lives to be saved and sooner while still ensuring
that autonomous vehicles do not create new risks. An argument can be
made that autonomous vehicles could be allowed even when they are not
as safe as average human drivers if developers can use early deployment
as a way to rapidly improve the vehicles. The vehicles could become at
least as good as the average human sooner than they would otherwise,
and thus save more lives overall.
The lack of consensus on this point is not a failure of sound
thinking. It is not a failure at all, but rather a genuine expression
of Americans' different values and beliefs when it comes to humans
versus machines. It is therefore reasonable that the Federal guidelines
also do not draw a line in the sand.
While these are difficult decisions, our differences in values and
beliefs can be informed by thinking not only about safety today but
also about the arc of safety in the coming decades. Our discourse on
the question of how safe the vehicles need to be focuses on the safety
of autonomous vehicles at the time that they are first introduced for
consumer use. But this thinking should be expanded to consider the
evolution of autonomous vehicle safety over time, not just at the start
of vehicle deployment. When a human driver makes a mistake on the road,
typically only that individual can learn from that experience to
improve his or her driving habits. The other drivers on the road are
largely unaffected. This is not the case with autonomous vehicles,
which can use experience and learning to improve performance, not just
of the individual vehicle but of the entire fleet. This is because,
when an algorithm or software is updated and improved for one vehicle,
it can be updated for all vehicles. For this reason, experience may be
one of the most important tools for improving autonomous vehicle safety
and, by extension, transportation safety.
Policymakers Can Promote Autonomous Vehicle Safety
This raises an important question: How do we enable autonomous
vehicles to improve as quickly as possible while lowering the risks
they pose? There are several tactics policymakers could consider to
accelerate autonomous vehicles' improvement.
A first step is to conduct real-world but lower-risk pilot studies
of autonomous vehicles. Risk can be lowered first by operating
autonomous vehicles in conditions in which crashes are less likely.
This can include limiting autonomous vehicle pilots to areas with less-
complex terrain, to routes that are well maintained and easier to
navigate, to nondangerous weather conditions, or to some combination of
these controls. It can also include educating communities about safe
behavior in and around autonomous vehicles. Furthermore, risk can be
lowered by designing and operating vehicles so that when crashes occur,
the consequences of the crash to passengers and bystanders are fewer.
This could be accomplished by limiting vehicle speed, ensuring that all
pilot-study passengers wear seatbelts, and so forth. These
strategically limited pilot studies can then be expanded as safe
operation of autonomous vehicles is demonstrated.
A second consideration is the role of sharing driving data across
the industry and with policymakers. Autonomous vehicle developers
already use the experiences of a single vehicle to improve the safety
of their individual fleets. This improvement could occur even faster if
the experiences of each vehicle in each fleet could be used across all
developers to improve the entire industry. There are certainly
nontrivial concerns about protecting trade secrets, but these concerns
could be addressed and must be balanced with the societal need for safe
autonomous vehicle technology.
In sum, it may not be possible to know what the safety risk of
autonomous vehicles is, and Americans may not agree on what it should
be. All the same, there are ways of lowering that risk that deserve
careful consideration.
how can autonomous vehicles improve mobility for americans who
currently may have limited mobility?
For almost all Americans, the ability to get around is essential
for living a rich, productive, and healthy life: being able to get to a
place of work, to visit friends and family, to access healthcare and
other services, to participate in civic activities, and to be connected
to the external world in all other ways. Even with the increasing
ability to interact and transact online, the importance of mobility in
today's world remains vital. Despite its importance, many Americans
have limited, and sometimes very limited, mobility as a result of
advanced age, disabilities, or lack of means. Whatever the reason,
limited mobility has significant negative consequences. Autonomous
vehicles could help.
Autonomous Vehicles Could Help Many Older Americans Who Face Limited or
Declining Mobility
The experiences of older Americans, especially those over 75, are
emblematic of the challenges of limited mobility. The number of
Americans 65 and older will increase from 48 million in 2015 (15
percent of today's population) to 74 million in 2030 (23 percent of the
population). The number of Americans 75 and older will increase from 20
million in 2014 (6 percent of today's population) to 35 million in 2030
(10 percent of the population.) \16\ Older Americans are living longer
and working longer than ever before. The labor force participation of
those over 65 is expected to be 21.7 percent in 2024, up from 12.4
percent in 1994.\17\
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\16\ U.S. Census Bureau, Projections of the Population by Sex and
Age for the United States: 2015 to 2060 (NP2014-T9), spreadsheet,
December 2014. As of November 8, 2016: http://www.census.gov/
population/projections/files/summary/NP2014-T9.xls.
\17\ Bureau of Labor Statistics, ``Civilian Labor Force
Participation Rate by Age, Gender, Race, and Ethnicity,'' web page,
December 2015. As of November 8, 2016: http://www.bls.gov/emp/
ep_table_303.htm.
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Driving is important to their quality of life. Of adults over 65,
80 percent live in car-dependent areas and 90 percent say they intend
to age in place.\18\ Eighty-five percent of adults aged 65 to 84 hold
licenses, and almost 60 percent of adults over 85 hold licenses.\19\
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\18\ David Dudley, ``The Driverless Car Is (Almost) Here,'' AARP
The Magazine, December 2014/January 2015. As of November 8, 2016:
http://www.aarp.org/home-family/personal-technology/info-2014/google-
self-driving-car.html.
\19\ Policy and Governmental Affairs Office of Highway Police
Information, ``Distribution of Licensed Drivers--2014 By Sex and
Percentage in Each Age Group and Relation to Population,'' web page,
U.S. Department of Transportation, September 2014. As of November 8,
2016: https://www.fhwa.dot.gov/policyinformation/statistics/2014/
dl20.cfm.
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Driving is risky for many older Americans. A recent study found
that, when compared with drivers aged 55 to 64, drivers over 75 were
more than 2.5 times as likely to die in a car crash, and drivers over
85 were almost four times as likely.\20\ This is due both to increased
likelihood of getting into crashes and greater vulnerability to
injuries.
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\20\ AAA Foundation for Traffic Safety, ``Drivers Over 65 Almost
Twice as Likely as Middle-Aged Drivers to Die in Car Crashes, According
to AAA Foundation Study,'' February 18, 2004. As of November 8, 2016:
https://www.aaafoundation.org/sites/default/files/DriversOver65.pdf.
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But giving up driving has risks as well. Driving cessation almost
doubles the risk of increased depressive symptoms and is correlated
with (though not strictly a cause of) cognitive, social, and physical
declines and higher rates of entry into long-term care.\21\
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\21\ Stanford Chihuri, Thelma J. Mielenz, Charles J. DiMaggio,
Marian E. Betz, Carolyn DiGuiseppi, Vanya C. Jones, and Guohua Li,
``Driving Cessation and Health Outcomes in Older Adults,'' American
Geriatric Society, Vol. 64, 2016, pp. 332-341.
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Geography can further affect mobility. Approximately 18 percent of
the rural population is 65 years or older, compared with 13.5 percent
in non-rural areas.\22\ Compared with their counterparts in urban
areas, older adults in rural areas must take longer trips for
healthcare and other services and have fewer alternatives to
driving.\23\
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\22\ U.S. Census Bureau, ``Percent of the Total Population Who Are
65 Years and Over--United States--Urban/Rural and Inside/Outside
Metropolitan and Micropolitan Area,'' American FactFinder, 2014. As of
November 8, 2016: http://factfinder.census.gov/bkmk/table/1.0/en/ACS/
14_5YR/GCT0103.US26
\23\ J. E. Burkhardt, A. T. McGavock, C. A. Nelson, and C. G. B.
Mitchel, Improving Public Transit Options for Older Persons Transit
Cooperative Research Program, Washington D.C.: Transport Research
Board, 2002.
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Autonomous vehicles offer a promising solution. Fully automated
vehicles that do not require human intervention would allow many older
adults to travel by car, without having to drive. It could increase
their mobility, with all of the associated social and economic
benefits, while mitigating much of the safety risk. This, in turn, may
allow more people to age in place, remaining in their homes for much
longer than they might otherwise be able to.
Autonomous Vehicles Could Improve Mobility for Many Others
Older adults are just one group of Americans that could benefit
from increased mobility from autonomous vehicles. Many people with
disabilities, young people, and people living in poverty face mobility
challenges that could be alleviated by autonomous vehicles.
In 2010, 56.7 million individuals (18.7 percent of the population)
identified as having a disability.\24\ Only 65 percent of individuals
with disabilities drive, compared with 88 percent of individuals
without disabilities.\25\ In spite of the Americans with Disabilities
Act, which mandates that transit authorities operating a fixed route
system provide paratransit or a comparable service to individuals with
a disability,\26\ individuals with disabilities often have limited
mobility because of a lack of availability or access to services. One
survey showed that 12 percent of persons with disabilities reported
having a harder time obtaining the transportation they need to be
independent, compared with 3 percent of others, the top two reasons
being no or limited public transportation (33 percent) and not having a
car (26 percent).\27\
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\24\ Matthew W. Brault, Americans with Disabilities: 2010, U.S.
Census Bureau, July 2012.
\25\ U.S. Department of Transportation, Freedom to Travel,
Washington D.C.: Bureau of Transportation Statistics, 2003.
\26\ U.S. Department of Justice, Information and Technical
Assistance on the Americans with Disabilities Act, 2016.
\27\ U.S. Department of Transportation, 2003.
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There are also 25 million young Americans between the ages of 12
and 17 who have mobility needs but are not yet old enough to drive or
are novice drivers.\28\ Getting to school and academic enrichment
opportunities, social and extracurricular activities, and even first
jobs can be a challenge. Many depend on buses (principally to school)
or their parents--or forgo travel. For many working parents, there is a
trade-off between supporting their own and their children's mobility
needs.
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\28\ Federal Interagency Forum on Child and Family Statistics,
``POP1 Child Population: Number of Children (in millions) Ages 0-17 in
the United States by Age, 1950-2015 and Projected 2016-2050,'' 2016. As
of November 8, 2016: http://www.childstats.gov/americaschildren/tables/
pop1.asp.
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Americans living in poverty also face mobility challenges. About
43.1 million people (13.3 percent of the population) live in
poverty.\29\ This includes older adults and many individuals with
disabilities. In 2014, 10 percent of older adults and 28.5 percent of
individuals with a disability had a yearly income below the poverty
line.\30\
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\29\ Bernadette D. Proctor, Jessica L. Semega, and Melissa A.
Kollar, Income and Poverty in the United States: 2015, U.S. Census
Bureau, September 2016. As of November 8, 2016: http://www.census.gov/
library/publications/2016/demo/p60-256.html.
\30\ C. DeNavas-Walt and B. D. Proctor, Income and Poverty in the
United States: 2014, Washington D.C.: U.S. Census Bureau, 2015.
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About 24 percent of households below the poverty line do not own a
vehicle, compared with just 2 percent of households with incomes over
$100,000. Individuals living in poverty are about three times as likely
to take transit and 1.5 times more likely to walk.\31\ While these are
desirable ways to get around for environmental and physical health
reasons, they can take much more time and limit travel to destinations
that are accessible by these modes. This is important because research
shows that access to efficient transportation is important for escaping
poverty (via access to education, training, and work) and achieving
upward economic mobility.\32\ In sum, there are millions of Americans
with limited mobility, and autonomous vehicles could help them.
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\31\ Federal Highway Administration, ``Mobility Challenges for
Households in Poverty: 2009 National Household Travel Survey,'' FHWA
NHTS Brief, 2014.
\32\ Raj Chetty and Nathaniel Hendren, ``The Impacts of
Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects
and County-Level Estimates,'' Harvard University, 2015.
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Affordability, Availability, and Accessibility Are Keys to Realizing
These Benefits
Simply bringing autonomous vehicles to market might not fully solve
the mobility challenges Americans face. Autonomous vehicles, like other
transportation options, must also be affordable, available, and
accessible. Fortunately, autonomous vehicles may have advantages over
conventional transit, taxi, or vehicle-sharing services.
For many older adults, individuals with disabilities, and other
people living below the poverty line, the costs of a personally owned
vehicle are prohibitive. The costs of a privately owned autonomous
vehicle are expected to be much higher, particularly initially. Shared
autonomous vehicles will be the key to affordability. Shared vehicles
are vehicles that are not personally owned but instead are available
for many people to use, either on demand or through a reservation
system, and are typically pay-per-use. Some estimates suggest that the
per-mile cost of using a shared autonomous vehicle service could be 30
percent to 90 percent less than owning a conventional vehicle or using
conventional taxis, depending on the nature of the service.\33\ In
other words, the per-trip costs could be comparable to transit, but
with greater convenience and speed.
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\33\ Lawrence D. Burnes, William C. Jordan, and Bonnie A.
Scarborough, Transforming Personal Mobility, The Earth Institute,
Columbia University, January 27, 2013; and Tasha Keeney, ``What If Uber
Were to Adopt Shared Autonomous Vehicles (SAVs)?'' ARK Invest, June 22,
2015.
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Second, shared autonomous vehicles must be available where people
live. Car-sharing vehicles and taxis are not readily available in most
small towns and rural communities because there are too few people to
support the services. Furthermore, those who live in poor urban areas
are another underserved segment in today's mobility market. Transit may
not offer complete solutions, and taxis have historically been scarce
because of the low demand compared to wealthier urban areas.\34\ The
lower cost of shared autonomous vehicles may increase the availability
in underserved regions where other transportation solutions are
limited.
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\34\ Mark W. Frankena and Paul A. Pautler, An Economic Analysis of
Taxicab Regulation, Bureau of Economics, No. 1103, May 1984; Nelson
Nygaard, Boston Taxi Consultant Report, 2013; and Hara Associates Inc.,
Best Practices Studies of Taxi Regulation: Taxi User Surveys, prepared
for San Francisco Municipal Transportation Agency, 2013. Today's ride
share services may be helping provide better service in these
underserved populations (see the Uber-funded study by Rosanna Smart,
Brad Rowe, Angela Hawken, Mark Kleiman, Nate Mladenovic, Peter Gehred,
and Clarissa Manning, Faster and Cheaper: How Ride-Sourcing Fills a Gap
in Low-Income Los Angeles Neighborhoods, BOTEC Analysis Corporation,
July 2015).
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Third, shared autonomous vehicles need to be accessible. This
includes vehicle design, websites, and technology interfaces that are
consistent with Americans with Disabilities Act and other accessibility
standards and guidelines. It also includes implementing diverse payment
systems that do not require smart phones or credit cards. Meeting these
design goals can be expensive. For example, the National Highway
Traffic Safety Administration estimates that the cost of a new vehicle
with adaptive equipment (e.g., mechanical hand controls, power transfer
seats, and lifts and ramps) can be $20,000-$80,000.\35\ The cost for
accessible autonomous vehicles may be lower because the vehicle only
needs to be modified for passenger use; it does not need to be modified
to enable driving.
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\35\ National Highway Traffic Safety Administration, Adapting Motor
Vehicles for People with Disabilities, June 2015.
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Policymakers Can Promote Affordability, Availability, and Accessibility
All of this suggests that autonomous vehicles may increase mobility
for historically underserved populations in a way that is more
affordable, available, and accessible than existing transportation
options. However, there is a clear and essential role for sound policy
in realizing these benefits.
First, policymakers can create incentives for manufacturers to
prioritize these markets and reach them sooner than they might
otherwise. Incentives can include cost-sharing programs, subsidies, or
other financial levers. They can also include partnerships to integrate
both public and private shared autonomous vehicles into existing
transit and paratransit services so that they are complementary rather
than competing. This may involve making payment seamless across modes,
providing transfer benefits across modes, and integrating scheduling.
Private ride-share services are already working with transit agencies
to provide connections to existing transit services, but primarily in
urban areas.
Second, policymakers may need to incentivize technology developers
to ensure that accessibility for diverse populations is a priority when
designing these vehicles. This includes facilitating collaboration
between developers, healthcare providers, independent living centers
and other facilities, and, most importantly, the users themselves.
Participatory design will be key.
Third, while the cost of shared autonomous vehicles is expected to
be lower than many alternatives, public assistance may still be
warranted. In many regions, seniors and individuals with disabilities
ride transit at a discounted rate or even for free. Policies would be
needed to extend these discounts to shared autonomous vehicle services.
In sum, autonomous vehicles present an enormous opportunity to
improve mobility for millions of Americans who are currently
underserved by our existing transportation system. The social, health,
and economic benefits could be enormous. Policymakers can play an
important and distinct role in prioritizing and enabling the technology
so that autonomous vehicles can help democratize America's
transportation system.
what mechanisms can help realize the benefits and mitigate the
drawbacks of autonomous vehicles?
In addition to transforming safety and mobility, autonomous
vehicles may also shape other areas of transportation, including
congestion, energy and pollution, and land use. Some potential impacts
will be positive while others will be negative. All of the impacts are
complex and difficult to predict, but despite the uncertainty,
policymakers can help nudge the free market in the right direction.
The Impacts of Autonomous Vehicles on Congestion
Congestion has enormous societal costs. Travel delays resulting
from traffic congestion caused drivers to waste more than 3 billion
gallons of fuel and kept travelers stuck in their cars for nearly 7
billion extra hours--42 hours per rush-hour commuter.\36\ The total
cost to the United States was $960 per commuter, or $160 billion for
the Nation as a whole.
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\36\ David L. Schrank, Bill Eisele, and Timothy J. Lomax, The 2015
Urban Mobility Scorecard, College Station, Tex.: Texas A&M
Transportation Institute, 2015.
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Even if autonomous vehicles had no impact on the incidence of
congestion, they could reduce the cost of congestion. If individuals
can work in their cars, the cost of the time spent in traffic could be
reduced substantially, even if the time itself is not reduced.
Nevertheless, the potential impact of autonomous vehicles on
traffic congestion itself could be substantial but is uncertain.
Traffic congestion could be significantly reduced because more vehicles
can fit on a given stretch of roadway if they are autonomous. In the
near term, autonomous vehicle platooning (where cars drive close
together to reduce air resistance and increase fuel economy) can enable
greater throughput; in the longer term, if a large number of vehicles
are autonomous, lanes could be made narrower, creating more usable road
space. If autonomous vehicles are much safer, they could significantly
reduce crashes, which are a major source of congestion. Shared
autonomous vehicles could provide better connections to main transit
lines, leading to increases in use.\37\
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\37\ Johanna Zmud, Jason Wagner, Richard T. Baker, Ginger Goodin,
Maarit Moran, Nidhi Kalra, and Dan Fagnant, Policy and Planning Actions
to Internalize Societal Impacts of CV and AV Systems in Market
Decisions, interim deliverable to the National Cooperative Highway
Research Program, Transportation Research Board of the National
Academies of Sciences, Engineering, and Medicine, May 2016.
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However, there is a flip side. Because autonomous vehicles will
lower the costs of driving by car--by enabling productivity in the
vehicle, reducing fuel costs through greater fuel economy, avoiding
parking fees, and lowering insurance costs through greater safety--they
could also increase the amount of driving. Improvements in mobility for
underserved populations would also add to the amount of driving. If
people can do the same things from the comfort of their own cars, fewer
people might take public transit.\38\
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\38\ Zmud et al., 2016; Anderson et al., 2014.
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Accurately predicting the net effect on transportation demand is
impossible because of the disruptive nature of autonomous vehicles.
Just as we could not predict in 1990 how the Internet would change how
and how much we would communicate 20 years later, we cannot confidently
predict today how autonomous vehicles will change how and how much we
will travel 20 years from now.
The Impacts of Autonomous Vehicles on Energy
Autonomous vehicles could increase fuel efficiency, but the net
effect is unclear because they may increase travel demand, which could
negate those gains. To the extent that fossil fuels remain the primary
source of transportation energy, this would have knock-on effects in
foreign oil dependence, air pollution, and greenhouse gas emissions.
The way people operate and maintain vehicles is inefficient.
Aggressive driving alone can drop fuel economy by 25 percent, and not
using cruise control on highways can drop it another 7 percent.\39\
Autonomous vehicles can avoid these behaviors and thus reduce fuel
consumption. Adding to this, even relatively simple levels of
automation can enable platooning.
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\39\ Michael Sivak and Brandon Schoettle, ``Eco-Driving: Strategic,
Tactical, and Operational Decisions of the Driver That Influence
Vehicle Fuel Economy,'' Transport Policy, Vol. 22, July 2012, pp. 96-
99.
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In the longer term, if autonomous vehicles that crash less are
widely used, they could be built lighter, which will further reduce
fuel consumption and emissions. Less obviously, fully autonomous
vehicles might be able to jump-start alternative transportation fuels.
One of the key obstacles to both plug-in electric and hydrogen fuel
cells, which have zero tailpipe emissions and can use renewable energy,
is the lack of refueling or charging infrastructure. This becomes much
less of a problem if cars can drive themselves to refueling or
recharging stations because far fewer stations are needed.\40\ One
recent study showed that electric shared autonomous vehicles could
reduce greenhouse gas emissions in 2030 by 87-94 percent relative to
current conventional vehicles and 63-82 percent below projected model
year 2030 hybrid vehicles because of decreases in future carbon
intensity of electricity, ``right sizing'' of vehicles, and higher
miles traveled per vehicle.\41\
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\40\ Anderson et al., 2014.
\41\ Jeffery B. Greenblatt and Samveg Saxena, ``Autonomous Taxis
Could Greatly Reduce Greenhouse-Gas Emissions of U.S. Light-Duty
Vehicles,'' Nature Climate Change, Vol. 5, No. 9, 2015, pp. 860-863.
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On the other hand, passengers may prefer larger autonomous vehicles
to allow them to take better advantage of the opportunity to do things
other than driving, resulting in lower fuel economy and greater
emissions.\42\ And, of course, they may drive more.
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\42\ Anderson et al., 2014.
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The Impacts of Autonomous Vehicles on Land Use
Automobile use has influenced the form and extent of land
development in the United States, leading in large part to sprawl (that
is, low-density, inefficient land-use patterns).\43\ The land allocated
to automobile infrastructure poses a cost to society: It could
otherwise be used for farms, open space, homes, businesses, and other
facilities, with associated environmental, economic, and public health
effects.\44\
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\43\ Robert Burchell, George Lowenstein, William R. Dolphin,
Catherine C. Galley, Anthony Downs, Samuel Seskin Katherine Gray Still,
and Terry Moore, Costs of Sprawl-2000 TRCP Report 74, Federal Transit
Administration, 2002.
\44\ M. A. Delucchi and J. J. Murphy, ``How Large Are Tax Subsidies
to Motor-Vehicle Users in the U.S.?'' Transport Policy, Vol. 15, 2008,
pp. 196-208.
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Autonomous vehicles may affect land use in two opposite ways, and
both could take place. Commute time and distance are among the key
factors households consider in deciding where to live. While areas
father away from central business districts offer many benefits,
particularly in housing size and cost, a longer commute may be too
costly, both in terms of travel and time costs. However, given the
ability to engage in other activities while in an autonomous vehicle,
the opportunity cost of transportation declines. This could increase
the willingness of households to locate farther away from the urban
core, increasing urban sprawl.\45\
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\45\ Anderson et al., 2014.
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On the other hand, autonomous vehicles could also lead to greater
density in core urban areas. Driving remains the dominant mode of
passenger travel in the United States, even in large cities with good
transit options, but the typical automobile is parked for about 95
percent of its lifetime.\46\ As of a decade ago, the total area devoted
to parking spaces in major central business districts was, on average,
about 31 percent of the district area.\47\ The emergence of autonomous
vehicles could sharply reduce the amount of parking needed in core
urban areas in several ways. First, after dropping off its passenger or
passengers in a downtown location, an autonomous vehicle could pilot
itself to a remote lot in a peripheral area, reducing the amount of
parking needed in the densest urban areas where land values are
highest. Second, as described earlier, autonomous vehicle technology
might lead to a new model for urban mobility in the form of driverless
taxis. Under such a system, autonomous vehicles would not need to park
after every trip; rather, after dropping off one passenger, they would
simply travel to pick up the next passenger. Third, the convenience and
low cost of such a system might induce many urban dwellers to forgo car
ownership, or at least to reduce the number of cars owned. Thus,
driverless taxis could reduce the number of parking spaces needed in
residential buildings, as well as at commercial centers.\48\ These
effects, emphasizing the service character of transportation, could
free up substantial amounts of space in urban areas for other valuable
uses: homes, businesses, parks, hospitals, and so on.
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\46\ Donald C. Shoup, The High Cost of Free Parking, Chicago:
Planner's Press, 2005.
\47\ Shoup, 2005.
\48\ Zmud et al., 2016.
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Driving Externalities May Prevent the Benefits from Being Realized
While the effects of autonomous vehicles are complex, some outcomes
are clear wins. If safe autonomous vehicles are developed and used
widely and responsibly, the current public safety crisis in the U.S.
transportation system could be mitigated. If safe and usable autonomous
vehicles are developed, mobility could increase for millions of
Americans who currently have limited mobility. In addition, if the
potential increase in transportation demand created by autonomous
vehicles were mitigated or decoupled from fossil fuels, there could be
enormous energy security, public health, and environmental benefits.
Related to this, if shared autonomous vehicles are widely available and
widely used, this could reduce private vehicle ownership and the need
for road infrastructure, allowing repurposing of land to more
economically productive uses.\49\
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\49\ Zmud et al., 2016.
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Yet these outcomes may not actually be realized because many
benefits accrue to society rather than to either the producers or
consumers of autonomous vehicles. Consumers may be unwilling to pay for
expensive technology if much of the benefits go to others, and
consequently, producers may be less willing to develop them. Thus,
there is less incentive for producers and consumers to take actions
that would achieve beneficial outcomes.\50\
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\50\ Zmud et al., 2016.
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Safety is a good example of this phenomenon, with significant
consequences for autonomous vehicles. When an individual drives
unsafely or operates an unsafe vehicle, he not only puts his own well-
being at risk but also the well-being of all other road users around
him, including pedestrians and bicyclists. However, in our current
transportation and legal system, an individual is responsible for only
a fraction of the full cost of being unsafe. In many States, motorists
are required to carry only $30,000 (or less) worth of liability
insurance--far less than is necessary to compensate someone for a
serious injury, much less a loss of life. This leaves a huge gap
between the harms that are regularly inflicted by drivers and the
amount available for legal recovery. In essence, society subsidizes
dangerous vehicles and driving behavior, creating less incentive for
safer vehicles and behaviors.
Economists call this an externality. An externality is an effect
that one party imposes on another party without compensating them for
the effect if it is negative or charging them for it if it is
positive.\51\ The free market does not allocate resources well in the
presence of externalities because the true costs and benefits of
actions are distorted.
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\51\ James M. Buchanan and Wm. Craig Stubblewine, ``Externality,''
Economica, Vol. 29, No. 116, 1962, pp. 371-84.
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Consider how the safety externality dampens the market for safe
vehicles, including safe autonomous vehicles. First, buyers' incentive
to purchase safe autonomous vehicles (which we can expect to be
expensive, at least at first) is less than it would be if full social
benefits of safe vehicles were reflected in a lower price tag. Second,
and related, auto manufactures' incentives to create as-safe-as-
possible autonomous vehicles are less than they should be, because
safety is undervalued in the marketplace.\52\ The result is that very
safe autonomous vehicles could be technologically feasible, but fewer
firms will develop them and fewer individuals will buy them because
many of their benefits accrue to the public rather than the purchaser.
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\52\ This externality explains, in part, why there is little market
for vehicles that are designed to better protect individuals outside of
the vehicle in the event of a crash. The technology exists, but the
societal benefit of protecting others does not reach the buyer in the
form of a relatively lower-priced vehicle.
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Safety is just one externality. Many of the benefits and the costs
of autonomous vehicles (and vehicles in general) are external. If a
buyer's car is energy efficient, it helps the buyer somewhat, but most
of the benefits go to other people (e.g., the people who breathe the
air in the area where that vehicle is driven). Those costs (e.g., of
poor air quality) are real and are borne by society. If the benefits of
reducing pollution are not factored into the buyer's cost of the
vehicle, there is little incentive for them to buy it, particularly if
the vehicle is more expensive than less-efficient alternatives.
Policymakers Can Promote Beneficial Outcomes by Internalizing
Externalities
So, how can we solve the externality problem? The key is to use
policy tools to ``internalize'' externalities so that market prices
reflect the true costs and benefits of private-sector actions. This can
be done with subsidies, user fees, mandates, and privileges to ensure
that producers and consumers of autonomous vehicles receive the benefit
from (and are thus incentivized toward) making choices that benefit
society.
As just one example, when a driver uses a busy road, he adds to
congestion that other travelers experience, but he does not have to pay
for the cost of that extra congestion--the lost productivity of others
as they sit in traffic, the delay in goods movement, and the local
increase in pollution. But congestion is a problem that could be
solved. Nearly all passenger vehicles in this country have space for at
least four people, but on average, there are just 1.67 passengers.\53\
Those unused seats are extra, already-built transportation capacity.
But that capacity is not used because, in large part, the costs of
carpooling are internal (the driver bears the cost of the effort and
hassle) but the benefits of carpooling remain external (the driver does
not benefit from reducing society's congestion). High-occupancy-vehicle
(HOV) lanes are one partial remedy: They help internalize the positive
externalities of carpooling by enabling carpoolers to themselves bypass
congestion and get to their destinations faster.
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\53\ Federal Highway Administration, Summary of Travel Trends: 2009
National Household Travel Survey, June 2011. As of November 8, 2016:
http://nhts.ornl.gov/2009/pub/stt.pdf.
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There are many policy options to internalize not only the
congestion externality but also the other driving externalities related
to safety, pollution, oil dependence, and mobility. These include
creating insurance requirements that strengthen the market for road
safety, offering transit incentives that reduce congestion, and
offering rebates for using fuel-efficient vehicles, among others. Each
option has a long history of research and discussion, and these and
other options have been implemented to varying degrees.
It is not possible today to give each policy the discussion it
warrants. Nevertheless, now is the time to revisit the impact of
driving externalities and the policies to internalize them, because
autonomous vehicles could improve our transportation system
tremendously, provided the right market signals are in place. In other
words, because so many of the benefits and costs of autonomous vehicles
would accrue to people other than the buyer, internalizing
externalities is a key step to ensuring that society minimizes their
disadvantages and maximizes their benefits.
There is also a current window of opportunity to send those new
market signals because consumer expectations about autonomous vehicle
costs, performance, and other characteristics are not yet set. For
instance, congestion pricing requires drivers to pay a fee to travel
during peak rush hour, because driving during rush hour imposes higher
congestion costs on everyone than driving at other times does. Although
congestion pricing is widely recognized as an effective means of
internalizing the cost of congestion and thereby reducing congestion,
it has been difficult to implement, partly because drivers are
unaccustomed to paying different prices based on when they travel.
However, today, many private ride-sharing companies charge an extra fee
for their services during rush hour, analogous to congestion pricing.
Because these services are new and the reasons for the charge are
understandable to consumers (greater demand for a limited supply of
goods), these fees have been generally acceptable. Similarly, consumers
may be more amenable to new policies that internalize the externalities
of driving now, before autonomous vehicles are available, rather than
later, once expectations about autonomous vehicles are set. Of course,
these policies must apply to all auto travel, not just autonomous
vehicle travel, for the market signals to be clear.
In sum, it is not possible to fully predict what a future with
autonomous vehicles will look like. However, by using the current
window of opportunity to internalize the externalities of driving, it
is possible to send the right market signals, paving the way for a
future transportation system that maximizes the potential advantages
while minimizing the potential disadvantages. This is an exciting
future of increased mobility and economic growth and greater
transportation safety, efficiency, equity, and sustainability.
[Conflict of Interest Statement: Nidhi Kalra's spouse, David
Ferguson, is co-founder and president of Nuro, an autonomous vehicle
startup. He previously served as a principal engineer for Google's
driverless car project. This written testimony was carefully reviewed
by subject-matter experts within the RAND Corporation; the research
quality assurance team for the RAND Justice, Infrastructure, and
Environment division; and the RAND Office of Congressional Relations.
However, the opinions and conclusions expressed in this testimony are
the author's alone and should not be interpreted as representing those
of the RAND Corporation or any of the sponsors of its research.]
Senator Collins. Thank you very much for your testimony,
and I am going to start my questions with you.
MOBILITY FOR SENIORS
As a senator representing a State with the oldest median
age in the country, I can see tremendous potential for seniors
whose vision has diminished to the point where they no longer
can safely drive being able to use these autonomous vehicles so
that they can maintain a measure of independence and not be
dependent on others. So I see that, in addition to the safety
benefits, and really the two are linked, as being a tremendous
advantage.
Another advantage which I wondered whether you had analyzed
at all is whether there would be an impact on the insurance
market and the rates that individuals would pay for insurance
if they are driving cars with either limited safety features
that have been added to it or are fully autonomous.
Dr. Kalra. I appreciate the note about seniors. My
grandparents are in that same boat, so I understand that very
clearly.
In terms of insurance, yes, in the long run we might expect
insurance rates to go down because fewer crashes mean lower
costs for personal injury and damage, and eventually they may
be needed for declining auto insurance. But in the short run,
it's actually hard to say what the effect of insurance is going
to be, for a few reasons.
First, it may take many years or many decades for the fleet
to become largely autonomous, so the risks may not change as
quickly as we anticipate.
Second, because at least for some types of autonomous
vehicles there's going to be shared control between the human
and the machine, there may be over-reliance on the technology,
which is one of the things we've seen with Tesla. So it may not
necessarily translate into lower crashes or crash rates. That
remains to be seen.
And third, the car repair costs for a crash could actually
increase, because right now if I rear-end someone, it's a few
hundred dollars to bang out that bumper, but in the future it
could be much more expensive.
Now, there's a different issue with people who are insured
at the minimum insurance rate, but that's a little more
complicated. We can go there if you want to.
Senator Collins. Thank you.
EXISTING VEHICLE TECHNOLOGIES
Administrator, we heard Ms. Hersman say that three
technologies, if they were mandated, could save some 10,000
lives. Now, whenever the Federal Government mandates, there is
obviously cost involved. But I am curious whether NHTSA has
considered mandating proven safety technologies that are
available right now on new vehicles as they're manufactured. I
should make that clear.
Mr. Rosekind. In fact, I think as soon as anybody says to
any of you ``We need to regulate to get safety,'' the first
thing you need to ask is what are we going to regulate? Because
for regulation we need performance criteria, testing, we need
to know that there's enough penetration that we have sufficient
data, cost/benefit analyses, et cetera.
I say that because the last technologies that we have seen
come through rulemaking are things like electronic stability
control, that rear visibility camera that you like so much,
advanced air bags. Those took 6, 8, and 10 years to actually
get through the regulatory process. That's really important
because in these new technologies, by the time those rules
would come out it would be irrelevant for the new technology
that would have evolved.
And I say that because, quickly, in September of 2015 we
actually challenged the auto industry: how do you take
automatic emergency braking and make it standard on all
vehicles? This is called democratizing safety. So it's not just
on high-end or an option. Basically what they did was in March
come back, and 20 automakers are going to make AEB standard by
2022 on all vehicles in our country. That will beat regulation
by 3 or 4 years. We can count the lives saved.
So there are ways to do this besides regulation, and I
think we have to use the right tool. For the moment, this
policy is the right tool at the right time.
STATE REGULATIONS OF AUTOMATED VEHICLES
Senator Collins. Well, let me ask you the other side of
that coin. The guidance the Department has put out said a 15-
point safety assessment is voluntary, but as you're well aware,
States like California are already proposing to make it
mandatory for companies that want to test or deploy automated
vehicles. What can you do, what can NHTSA do to ensure that
States do not arbitrarily mandate various aspects of your
guidance document, thereby creating a patchwork of ever-
changing State laws that would stymie innovation and the
deployment of these vehicles?
Mr. Rosekind. Really, a huge part of including that piece,
the model state policy, was to differentiate the Federal versus
State roles. In fact, directly to your point, we make it
absolutely clear that States actually have to do nothing in
this area. They can actually support the advancement of these
safety technologies with no policy or regulations. If they
choose to, we identify some areas where they can move forward.
Everyone on the State level that we've interacted with is
absolutely interested in seeing a consistent framework and
trying to avoid the patchwork. This is an area I think we need
to watch and see it develop.
And California, as you mentioned, if you look at their
early, sort of recommended policies, they've changed
dramatically in their latest proposals because they waited for
this policy.
So I think everybody is seeing an effort and an interest
right now in trying to prevent that patchwork, and we're going
to have to wait and see how it actually develops.
Senator Collins. But should the States even be involved in
this area, or should it be left up to the Federal Government so
that there is a nationwide standard and approach?
Mr. Rosekind. In the policy we make that explicit, here's
what the Federal Government is concerned about, standards for
the vehicles, defects, et cetera, and the States, they still
stay responsible and they don't have to do anything. We make
that explicit.
Senator Collins. You do, but if California is moving
forward to implement your guidance and make it mandatory, isn't
that contrary to the goal of your guidance?
Mr. Rosekind. Two things. One is we are explicit in there
saying that this policy was not intended to codify, and at the
same time I think right now California has not actually put
their regulations out. They've put a proposal out. They've
talked about other aspects, that they want to evaluate it, and
they're even questioning the language that's being used, and
that's what I'm saying. I don't think we even know what their
final stance is going to be, because they have continually
emphasized the need for consistent framework.
Senator Collins. Senator Reed.
CYBERSECURITY
Senator Reed. Well, thank you, Chairman, very much.
I agree with Mr. Brubaker; computers don't get tired, they
don't get road rage, but they open a whole new dimension of
cyber security which we have to deal with. I know,
Administrator, the FAVP encourages information sharing on cyber
security, but we've seen incidents in which systems have been
hacked recently, vulnerabilities in automobiles, GPS systems,
insurance plugins have been used.
So can you give us an idea of what you're doing in terms of
ensuring that we can reassure the public that these vehicles
will not be subject to cyber attacks?
Mr. Rosekind. Thank you for emphasizing this issue because,
as you've heard from pretty much everybody, without public
confidence in these vehicles, it's just not going to happen.
So specifically to cyber security, NHTSA has actually been
on this for many years. In 2012 we formalized that with a
group, an office within the agency. Just recently we have had a
roundtable with 300 people, pulling them together. We had an
intra-government meeting after that, which has resulted in
everything from urging and supporting an agency, Auto ISAC,
Information Sharing and Analysis Center, within the industry.
The industry has come out with their own best practices. Just a
few weeks ago, NHTSA came out with its own cyber security best
practices. Just yesterday the Department of Homeland Security
actually highlighted our cyber security best practices, a model
for other industries to go after.
So the good news is all of this has been done before an
incident has actually occurred within the auto industry. One
that everybody knows about, about a year ago in July Wired
Magazine, that was planned. That was a researcher demonstrating
it could be done. I'd point out that even with the authorities
and tools we had, within 3 days the defect was called and 1.4
million vehicles basically were already under remedy at that
point.
So I would just say it's a constant vulnerability. It
clearly is a threat that needs to be addressed. But for the
moment there's a lot of action going on in that arena.
Senator Reed. Let me just quickly follow up with Ms.
Hersman, and thank you. How do you think outside expertise
could assist in combatting these cyber threats and regulating
advanced technologies like HAVs?
Ms. Hersman. I think there's a tremendous opportunity to
call on experts, just like this committee does. Things change
very quickly, and when it comes to technology, we certainly
can't expect NHTSA to always stay on the cutting edge.
Potentially having advisory groups, organizations that will
assist them in evaluating new cutting-edge technology is an
opportunity that they should consider and take advantage of
going forward. We're going to ask so much of this agency when
it comes to looking at the evolution of technology that we need
to support them and give them opportunities to get the best and
the brightest to weigh in on it.
Senator Reed. Thank you very much.
IMPACT ON LABOR
Dr. Kalra, I seem to be emphasizing the potential
challenges rather than the golden opportunities, but we should
do that. And one of them, as I mentioned in my statement, is
employment, roughly 3 to 4 million jobs that are good jobs.
You've done some work, I believe, on this. You made some
comments in your discussion.
Can you just comment upon the implications of the labor
market, both positive and negative, for these vehicles?
Dr. Kalra. Absolutely. So you're absolutely right that
there are millions of Americans who make their living behind
the wheel, and there's no question that autonomous vehicles do
threaten those jobs. I think we have to stare that back in the
face. The question is what to do about it.
This transition to full autonomy is going to take time, so
time can be an advantage in this respect in that we are ahead
of the curve. We can start thinking now about how to develop an
alternative job market, where that's possible. We also know
that freight may be one of the areas that is first hit because
of the private nature of the industry and because we're talking
about goods movement rather than people movement. So the
technology may make its way there faster. One aspect of that is
that many freight experts project a lack of supply of drivers
in the future, so there may be a little cushion in there.
In terms of on the flip side, autonomous vehicles will
create new kinds of jobs or increase the technical nature of
existing jobs. An auto body shop is not going to look the same
as it does today. So we need to prepare our young people
especially, people in community colleges, for those high-tech
jobs.
The broader issue is that autonomous vehicles could and, I
believe, will democratize transportation and give mobility to
people who currently don't have it. Important to that is
physical mobility. Being able to get around is one of the most
important things to help people out of poverty, getting them
access to training, getting them to jobs. The unfortunate part
is people who have the least access to transportation often are
the ones who struggle to get jobs, people who are in poverty
who can't afford their cars.
So there's two sides of this coin. I think we need to do
everything we can to bring mobility to people who are currently
underserved by our transportation system, while providing
cushion to people who will be negatively affected.
Senator Reed. Your comments seem to be there has to be a
conscious, deliberate planning process because this is coming.
Dr. Kalra. That is right.
Senator Reed. And your best guess at when we'll see, for
example, significant autonomy in freight delivery? Is it 5
years? 10 years? Too far to guess?
Dr. Kalra. I can only guess. I would be surprised if we
don't have it in 10 years. I would be surprised if we do have
it in the next two to three.
Senator Reed. Okay. Anybody else want to take a wild guess,
like the lottery?
Senator Reed. Okay. Thank you, Madam Chairman.
Senator Collins. Thank you, Senator.
Senator Daines.
DATA SECURITY
Senator Daines. Thank you, Madam Chair and Ranking Member
Reed. And thank you for testifying here today. This is a topic
that covers many issues I care deeply about. As a 5th
generation Montanan, we have a lot of open space, a lot of
roadways. In fact, we just wrapped up the election season, and
one of the candidates running for governor traveled 64,000
miles during the course of the campaign on the roads. So that
kind of puts in perspective that we're not as big as Texas or
Alaska or California, but we have to drive a lot more. So I
care very much about what you're talking about, saving lives,
to improve passenger and freight mobility, very important for
us in a State that requires moving our products, ag products
particularly, around the world.
I'm very excited about these new technologies. I spent 12
years in the cloud computing business, executive capacity,
before I came to politics.
So I wanted to follow up on Senator Reed's question on the
cyber piece here, Mr. Rosekind. You said in your testimony that
the quickest way to slam the brakes on innovation is for the
public to lose confidence. I think that's well said. I was a
private employee for 28 years, and the best was when I didn't
have my information compromised, until I became a Federal
employee. Then I got the letter from OPM. Thank you, Federal
Government here. I never had that issue in the private sector.
Mr. Rosekind. I got that letter, too.
Senator Daines. Many of us did. I'm sure if we polled the
audience here, there would be a lot of hands going up. Clearly,
we want to make sure we're protecting privacy and hardening our
systems.
Many consumers no longer have confidence in the government.
I appreciate the fact that you're bringing some advisory groups
in to bring that perspective. Going fast, at the speed of
business out there, sometimes I think government needs to.
How is NHTSA gaining the public's confidence with this
latest guidance that you're looking at here as it relates to
cybersecurity?
Mr. Rosekind. I think in the policy, one of the ways
actually that we're trying to do that is through the innovation
approach. I think, just like when people talk about regulation,
when you talk about cyber security, if someone were to say
regulate that, as you know, the speed that this stuff is
changing, by the time you get through a 6- to 10-year
regulation it's not going to be relevant anymore.
So, one of the 15 safety assessment items is cyber
security. Everybody has to tell us how they're addressing that
particular issue, and our intent here is to see as many
different forms of innovation coming to us as we can, and the
data will drive the safest and best way to protect these
systems. In fact, at some point, if there are best practices,
it should be based on that data. In the future if there's
rulemaking, it should probably be based as a foundation on
whatever those best practices were.
Senator Daines. I know industry has been working
collaboratively to address cyber and published some best
practices in July. How did NHTSA's guidance incorporate their
experiences and expertise?
Mr. Rosekind. We had a lot of interaction with them. We
knew what was coming. In fact, I would highlight not just this
policy but our own best practices came out just a few weeks
ago, and they complement exactly what we know the industry was
doing.
Senator Daines. So I guess my understanding is they didn't
go through a notice and comment process before being issued.
Afterwards DOT solicited comments, and I think they're due next
week. So my question, I guess, is why wasn't there more
consultation with industry before the guidance was issued?
Mr. Rosekind. Well, let's keep them separated. The best
practices came out a few weeks ago, and the policy came out
September 20th. We actually have an extensive amount of open
time. So the policy is under a 60-day comment period right now.
That closes November 22nd. And what was already identified in
here is 23 next steps. So we actually have a whole new set of
public meetings that are coming up to talk about all the
different elements. We just did that last week. We had a
meeting on the letter, which includes the cyber security part.
So there's all kinds of other opportunity for people to add
input.
Senator Daines. And that's helpful, and I know Senator
Collins was talking with us a bit about some of this guidance,
which becomes quasi-regulation. You touched on the time
required to go through the formal rulemaking process, and the
guidance allows you to be more nimble, but it may not always be
as transparent. I think that's one of the political concerns we
hear.
RULEMAKING PROCESS
Should voluntary guidance policies be used to expedite the
rulemaking process or Federal enforcement action?
Mr. Rosekind. I think what we're trying to do is continue
our enforcement and regulatory tools. We have those
authorities. We're not giving any of them up. All we've done is
try and complement those with the way to support innovation at
this time. It is absolutely possible, if you come in with the
right data, that we will use that data to create best practices
and rulemaking. We actually identify potential rulemaking in
here as well. So that is just one more tool that's being
included to deal with this fast-paced technology.
Senator Daines. Thank you. I'm running out of time.
DRIVING IN RURAL AREAS
Dr. Kalra, a question. You discussed lowering the risk to
pilot programs and raised questions about the ability of this
technology to function better than humans in complex
conditions. I come from a State that has a lot of rural roads.
Fifty-four percent of automobile fatalities occur on rural
roads despite the fact that just 19 percent of Americans live
in rural areas.
How do you incorporate issues like we have in Montana of
unmapped roads, gravel, snow, wildlife, where 95 percent of the
roads are rural? As we know, accidents often happen when things
we don't anticipate occur. How do we lower the risk of these
technologies in rural settings?
Dr. Kalra. By testing them in those environments. And I'll
point to the University of Michigan's testing center for
autonomous vehicles, where they are committed to testing on
different kinds of road surfaces, in different kinds of weather
conditions. We need to get autonomous vehicles not only in
sunny Southern California but also in Montana, and I think that
has to be a priority.
Senator Daines. The sun shines a lot in Montana, but we
also have ice and big elk out there at times.
Dr. Kalra. I'm from North Dakota. I know that ice.
Senator Daines. Oh, you do understand that.
Dr. Kalra. I do.
Senator Daines. You might understand ice better than I
understand it, I think.
Anyway, thank you. I'm out of time.
CYBERSECURITY RISKS
Senator Collins. Thank you for raising that very important
issue, which is one that concerns me as well.
Mr. Brubaker, both of my colleagues have brought up the
cyber security issue, which is also of great concern to me as
we've seen we have rogue States and terrorist groups that seem
to be able to hack into virtually any database. What is the
industry doing to address the cyber security risks of
autonomous vehicles, and do you think that there's more that
NHTSA could do to proactively address such a risk?
Mr. Brubaker. Yes, I do. The one thing I would caution is
you want to be very careful in regulating cyber security and
establishing cyber rules because you tend to lock in a solution
that's relevant for that time period, but it's not timeless.
But to answer your specific question about what NHTSA can
do, I would actually start by going across the river to the
five-sided building and start talking to the people who have
been doing embedded system cyber security for years who are
really good at it. One of the key elements of the third offset
strategy the Department is pursuing right now--and I know both
you and the ranking member have a strong defense background, so
you would get this--is really focusing in on automation and
robotics, advanced robotics. So they're doing the kind of cyber
security strategy and employing the kind of tactics that you
need to really lock down these embedded systems, and they've
been doing it pretty successfully for years.
So I think the one thing that we could do is look across
the river, look to the IC, the intelligence community, for
lessons learned on how they do encryption, how they do
authentication. I know that the industry has issued its best
practices but, frankly, when I look at it, I think it's a lot
of reinventing the wheel, a lot of things that have already
been done.
I would also say, again, the caution on the regulatory
piece is we've had the Federal Information Security Management
Act, FISMA, for a number of years, but it didn't prevent the
OPM hack. So you can issue the regulations, and you can comply
with those regulations, and you can go down a cyber security
checklist, but unless it's substantive, and unless it's moving,
because it's a constant game with the adversaries, and you need
to understand their motives and what they're about and do the
risk assessment accordingly and structure your systems from the
ground up.
The one area that I think industry has really got to pay
very close attention to is supply chain integrity, where
they're securing the components, they know where those
components come from, they have visibility end to end, and
there are a handful of companies out there who are focused on
it, automakers that are focused on it. But by and large, the
industry is having a very difficult time adjusting its culture
to harden its systems.
Senator Collins. Thank you.
DISTRACTED DRIVING
Ms. Hersman, yesterday's New York Times quoted you in the
area of distracted driving, and you pointed out that new
technologies that are intended to allow the driver to keep his
or her hands on the wheel may actually be preventing the driver
from paying attention to his or her driving environment, and
the article quotes you as saying it's the cognitive workload on
your brain that's the problem.
Are you concerned that automated and self-driving
vehicles--well, self-driving vehicles are not a problem if we
really get to that stage. But the semi-automated, if you will--
you have your scale for the degree of automation--are going to
produce even more distracted drivers and thus more crashes?
Ms. Hersman. I would say there are always unintended
consequences when we introduce new things. We do know that
people are very distracted today. People are addicted to their
devices that they bring into the car with them. The challenge
with moving to things like hands-free is that people think that
the distraction is in their hands, but the distraction is
really in your brain. We would have outlawed stick-shift cars a
long time ago if it was our hands that were the problem.
So when we look at automating vehicles further, what that
does is potentially has the human being stepping back a little
bit, and human beings typically are not good monitors. When
everything works according to plan 99 times out of 100, it's
hard for the human being to pay attention 100 percent of the
time. In aviation we call this over-reliance on automation. We
saw pilots' skills deteriorate as airplanes performed more
functions for the pilot.
One of the challenges is how do you compel the human being
to pay attention so that when they need to take over or when
they need to intervene, they're ready and they're prepared to
do so? If you could text, if you could read the newspaper, if
you could do other things, 99 percent of the time it might work
well. It's that one time that you need to intervene that you're
not prepared to, and we haven't even touched on impaired
drivers and drivers who might be sleeping, who might be
fatigued or not paying attention.
So there definitely are some risks and some tradeoffs. I
think a number of the panelists have touched on these. That's
why we talk about the messy transition between Level 1 and
Level 5 and having to keep that human in the loop, how can you
compel them when they need to be engaged to do it.
Senator Collins. Thank you.
LESSONS FROM VOLVO DEMONSTRATION
Administrator, last month the world's first shipment by a
self-driving truck was made by an auto Volvo truck. I watched
the video of that. There was a professional driver on board
but, in fact, the truck was driving itself 120 miles along
Interstate 25, and it was operating fully autonomously without
that driver's assistance. It was very exciting to watch, but
I'll have to admit to you it also made me a bit nervous as I
watched it.
Are there any lessons from that test that NHTSA has learned
so far, and would it have any effect on where you're going with
your future guidance?
Mr. Rosekind. Absolutely. Let me just add a little bit to
that confidence. That was actually at 2:00 a.m. in the morning
with a patrol car behind them, so there was a lot more
protection there than just what you see in the video, which was
very promotional.
Having said that, there is a lot of lessons learned, and
part of the reason to have the policy out is so that people are
basically handling all these safety issues before they're ever
out testing or deploying these kinds of things. That's part of
what we're trying to do, is be proactive instead of reactive,
wait for something bad to happen and then react to it. We'd
rather deal with all of these issues, not just with that truck
example but what's going on in Pittsburgh. You cited all of the
exciting things that are happening, but we really need to make
sure that safety is being addressed, at least for these 15
items, before these things get tested or deployed on the road.
Senator Collins. Senator Reed. Thank you.
IMPACT ON LABOR
Senator Reed. Thank you very much, Ms. Chairman.
Mr. Brubaker, you in your testimony note also this
potential labor shift and that we have to be prepared to
respond to it. Could you just give us your advice or your
thoughts on the type of coordination at the Federal level we
have to take to anticipate this and deal with it?
Mr. Brubaker. Sure, absolutely. I want to commend the
subcommittee for the language that they put in the report
language last year asking the Secretary to devote funds to TRB
(Transportation Research Board) to study the economic impacts
of these self-driving technologies because, as we all know,
there will be displacement, and we really need to understand it
and get proactive.
So it's going to involve a number of different Federal
agencies. I mean, the obvious one is the Department of Labor.
They would be best poised to kind of understand where the
shifts are. But I think even to the point where you're
identifying the most vulnerable professions would be very, very
helpful. And then even to the point where if people wanted to
volunteer proactively for retraining and job placement in
needed skill areas, we could coordinate that, and it's one of
the areas that we lay out in our framework. It's the eighth
area where we really need to be mindful of it and very
sensitive.
I mean, I grew up in Youngstown, Ohio, and I saw what
happens when people don't--and how they vote later--when people
aren't treated with respect.
Senator Reed. That's exactly right. I was in Niles a few
months ago, right outside of Youngstown.
Mr. Brubaker. Near my hometown.
Senator Reed. So I get it. We have to be very, very
conscious of this.
NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION GUIDANCE
Doctor, you and RAND published a guide on this technology
in 2014. As you look at NHTSA's guidance, do you think they're
addressing policy areas that need to be addressed at the
Federal level? I have harped on employment and cyber security.
Are there other issues?
Dr. Kalra. Can I ask, do you mean for NHTSA in particular,
or the Federal Government in general?
Senator Reed. NHTSA in particular, and then go big.
Dr. Kalra. Okay. For NHTSA, I think they need to continue
the course that they're going on. Their guidance is admirable.
It threads the needle well on how do you provide guidance and a
framework for safety while allowing innovation to occur. But
one of those items is, for example, ethics, and it asks
developers to say how will the car handle ethical issues. Even
if the reporting is done, it's not clear that reporting will
lead to safety. So there's a gap there because even though one
can follow the guidelines, that doesn't mean autonomous
vehicles will be safe, and that's because no one really knows
how to prove safety in advance of getting these vehicles on the
road.
So I think continuing in that direction is important.
For the Federal Government more broadly, in addition to the
economic issues, I just want to reiterate that there are market
distortions. I know this is wonky, this is what RAND does, but
there are market distortions in our transportation system that
mean that we don't take full advantage of the opportunity for
cost savings.
I'll be very specific. When we have pollution, whether it's
factory pollution or automotive pollution, that's a real cost
to our society. It is paid in healthcare. It is paid. It's not
an invisible cost; it's a real cost. The question is who pays
for it? So as long as the market does not take into account the
costs that we all bear for some of these activities, there
isn't an incentive, a market incentive to reduce them.
So I think that is something that often gets overlooked as
we talk about the safety of autonomous vehicles, which is
understandable. But I would encourage us, if we want this
future of sustainability and efficiency and mobility for
everyone, to look at the other things in our transportation
market that are preventing us already from achieving those
goals.
Senator Reed. Thank you.
Ms. Hersman, in terms of NHTSA's guidance, do you think it
effectively addresses safety concerns from your perspective?
Ms. Hersman. I would say it's a good first step, and I
think we can see the challenge that exists of not having
anything and having a vacuum, and then the States are stepping
in, there's a patchwork system. But I think we're also so in
the early days here. There's so much that we don't know. If
they were to put out regulations right now, they probably
wouldn't be the right ones.
So I think when we look at the balance between the Wild
West of doing nothing and saying nothing on this and letting
everyone do whatever they want versus locking everything down
with prescriptive regulations going into the future, I think
they've really tried to achieve a fine balance there. I think
there's more work to be done, absolutely. But I think this
gives people something to react to. It gives us a framework to
start from.
I do want to go back to the issue of workplace. We're a
safety organization, so we track deaths and injuries. The
transportation industry is one of the most dangerous when it
comes to workers' health and their injuries and deaths. They're
just behind the construction industry for absolute numbers of
fatalities, and just behind agriculture and mining for the
rates. So it's a very dangerous job. Forty percent of workplace
fatalities are motor vehicle crash related.
So those folks, we want to make them safer too. So if we
can have that path to figure out how to take care of them over
the long run, I think this will be good for them as far as
their safety.
ROLE OF GOVERNMENT
Senator Reed. There are so many opportunities for safety,
for improved productivity, for better health effects. But then
there's the other side of the equation of what about the
drivers that have done a good job, the defined pension, et
cetera, and suddenly there's an autonomous vehicles and thank
you very much for your service. We have to deal with that.
And that goes to the question of there are some people that
might prefer the Wild West, let the chips fall where they may
and this will work itself out. But that goes to, Mr. Rosekind,
the agency has to have a role here.
So can you just give us a sense of what that role is going
forward as you deal with a very sophisticated industry that is
conscious of these issues, the safety advocates of the cyber
dimensions? Can you just give us assurance that it won't be the
Wild West but it will be innovative and based on good
experience?
Mr. Rosekind. You've just heard from pretty much everybody
on the panel what a challenging arena to address. How do you
make sure you don't clamp it down, all this great American
entrepreneurial spirit that could save lives and make life so
much better for everybody? Henry Claypool is over there. We
talk about the elderly. He's representing the disabled
community. Never had driver's licenses; don't need them.
Autonomous vehicles can do it. We're just talking about great
entrepreneurship and innovation being tremendous and not
wanting the Wild, Wild West. That's why it's the right tool at
the right time.
The policy is intended, we hope, to be literally as
innovative for the government as it is for the technology
companies. This is a first step. In fact, in there we make a
commitment that in a year, with all of the different 23 next
steps that are going on, on an annual basis this policy will be
reviewed and updated. We can't do that with regulation in any
kind of effective way.
So we're trying to strike for a very first effort that
right balance, to support innovation and safety. People think
they're at the opposite ends. We're trying to support that
middle ground, safety and innovation, because we're talking
about 32,092 lives, and we could save all of them. Autonomous
vehicles should play a critical role in us getting there.
Senator Reed. Thank you.
Thank you, Madam Chairman.
ENERGY AND ENVIRONMENT
Senator Collins. Thank you and I appreciate very much you
bringing up the employment impact, which is certainly something
for us all to think about as well.
I just have a couple more questions. One, Dr. Kalra, do you
see any energy consumption and environmental benefits from the
deployment of autonomous vehicles?
Dr. Kalra. Absolutely. There are tremendous benefits and
risks. But the benefits include, for example, if we have a
large number of autonomous vehicles, we can increase the
throughput of vehicles on our roads, reduce congestion, because
a lot of congestion is actually caused by crashes. So there's a
reduction in congestion, which immediately translates into a
reduction in fuel consumption.
But if we think big, one of the biggest challenges we have
in getting real alternative fuels, like hydrogen, into our
transportation system is the infrastructure problem, meaning
the distribution problem of how many hydrogen stations do you
need. And if an autonomous vehicle, fully autonomous, can drive
itself to a hydrogen station in the future, gas up at 2:00 in
the morning, or maybe there are long lines but no one cares
because there's no one in there, autonomous vehicles could
actually make possible transportation fuels that right now are
struggling to get off the ground because of these logistical
issues.
So the opportunities, dare I say it, are limitless for
improvement. But again, the market signals should also be in
play.
Senator Collins. Thank you.
ETHICAL CONSIDERATIONS
I have one final question that I wanted to ask each of you,
and that is as I have gotten more involved in this fascinating
issue, there is a question that keeps occurring to me, and that
is the ethical considerations that a human driver makes when
faced with two unpalatable choices. I wonder how do you teach a
fully autonomous vehicle judgment, the kind of judgment that
that professional truck driver has because of his or her many
years of experience.
I was thinking--and we've all been in these kinds of
situations where you have to make a split-second judgment on
whether you're going to swerve around a vehicle that suddenly
stopped or has spun on an icy road and risk going off the road
and hitting a tree, perhaps killing yourself and your
passengers, or a pedestrian or a bicyclist has darted in front
of you in the road, and yet if you slam on the brakes you're
going to be back-ended.
I mean, driving is not a simple task. It requires complex
judgments all the time. So how does a self-driving vehicle make
those kinds of judgments?
We'll start with the Administrator, and I'd like to go
right down the line.
Mr. Rosekind. I am going to use that to address two things.
You've just raised a great example of all the unknowns that are
out there still related to autonomous vehicles, and the
questions you've just raised--and there are many, many more
related to ethics--there are no answers right now. But we are
taking hands off the wheel, human hands, and putting them into
the hands of a coder, because that car will be programmed to
make decisions, basically.
So I think that's why, for example, people have questioned
us--it's part of our 15-item assessment. We put ethics in
there, and people have questions. When you think about when
people are really going to accept these and have confidence,
and we know the ethics are going to be an issue people are
going to ask about, there are no answers right now. That's why
it's in there for us to really look at the innovation of what
people bring to this.
But let me just add one element to that that nobody is
really talking about. I've been fortunate over about the last
decade to get to know Captain Gene Cernan, the Apollo 17
astronaut, the last man who walked on the moon. One of my
favorite sayings at safety meetings with him is, you know, I'm
never going to live long enough to make all the mistakes that
could kill me, right? So why does he go to safety meetings? For
just that reason.
So think about how all of us learned to drive a vehicle.
Our experience is those ethical decisions we're going to make
are based on our personal experience. Now, with autonomous
vehicles, if we collect all of this information and share those
cases where somebody died in some unique edge or corner case,
if that information were shared, no other person should ever
lose their life in that same situation because that information
gets shared with the entire fleet, with every vehicle that's
out there. That's the future that we could look toward,
including in these ethical issues. We get to make decisions at
some point that we could share and make sure that everybody
basically is allowed the same opportunity to be safe.
Senator Collins. Thank you.
Ms. Hersman.
Ms. Hersman. I would probably fall back on the 10 years
that I spent at the NTSB and say that we've got to take care of
the data. That means we've got to learn from the data. It's got
to be accessible. We have to have standardized, accessible
formats.
If you think about black boxes on airplanes, that's how we
learn. We know what happened. When it comes to autonomous
vehicles, or even something that's in-between, in order to
understand those decisions or those outcomes that you talked
about, who was in charge? The car, the human, or some
combination of the two?
We've got to share that data. When we talk about mistakes
that occurred or close calls or things that happened, if we
don't have all manufacturers willing to share those lessons
learned, we're going to have to have each provider learn the
lesson anew every time. So we've got to look at this
holistically and say there will be failures. Will there be
deaths? Absolutely, as this technology rolls out. Will there be
things that happen that we don't expect? I can't tell you how
many investigations we went into and people said this was never
supposed to happen. This scenario was 10 to the minus 9th. It
was never going to occur, and it did.
So things will happen, but that data to me is incredibly
important to how this rolls out and to maintain that confidence
going forward. We've got to learn.
Senator Collins. Thank you.
Mr. Brubaker.
Mr. Brubaker. Yes. So these ethical issues when they get
raised cause me to lose the rest of my hair here. Part of the
issue is we're all thinking about this in a human context.
We're all sort of applying that judgment that we have to make,
and what we're not cognizant of or what we're really not
thinking through is that the level of situational awareness
that these vehicles are going to have far exceeds that of a
human. You're talking about redundant sensors. You're talking
about the ability to see far beyond what a human eye can see
and have this 360-degree, 24/7 situational awareness.
The data is important. I agree with the two prior speakers.
But the thing that we have to remember is that this is all
about artificial intelligence. This is about instantly
assessing the situation, constantly assessing it, calculating
probabilities and reducing the risk of being in an emergent
situation where you've got to make two really unpalatable
choices.
So my whole view on this, and this is from having lots and
lots of conversations with people in the AI world and people
who are looking at this and building the sensor suites and
mashing up this technology, that those ethical considerations
are--I don't want to call them a red herring, but in many cases
the whole notion is to create the kind of technology that will
avoid those emerging situations in the first place.
Senator Collins. Thank you.
Dr. Kalra.
Dr. Kalra. I agree with the other speakers in almost every
regard. I do want to say that when we raise these vivid
examples of swerve or do this, people don't actually make
ethical judgments when they decide what to do. They make snap
judgments. They don't have time. They barely react. It's just a
knee-jerk thing that you do without thinking about the
consequences. The ethical things that we do when we drive, or
the unethical things, are driving when we're intoxicated, or
texting while we drive, and autonomous vehicles won't make
those kinds of ethical mistakes.
But the ethical judgments that autonomous vehicles will
have to make I don't believe are the pedestrian versus the
driver but really about how the autonomous vehicle distributes
risk on the road at every moment of driving. The example I'll
give is when I'm driving and there's a bicyclist next to me,
I'll drive in the middle of the lane because I want to
distribute the risk differently between the bicycle, myself,
and the other people who might be on the road. Autonomous
vehicles will have to make those judgments, and I think
attention needs to be placed on how do autonomous vehicles
ethically distribute regular risk on the road rather than in
the sort of imminent crash cases, and there's no answers to
this because even ethicists don't have the thing that's the
right thing to do. But I would urge us to put our attention on
those everyday kinds of ethical problems.
Senator Collins. Thank you very much.
Senator Reed, do you have anything else?
Senator Reed. No.
Senator Collins. I want to thank you all for testifying
today. This was a superb panel.
This technology is so fascinating and moving so quickly,
and the fact that it could substantially reduce or perhaps one
day even eliminate the 94 percent of crashes that are
attributable to human error is truly an astonishing fact, and
that's one fact that prompted me to call this hearing.
I appreciate your advancing our understanding of the
issues, the technology, and the policy considerations that we
will have to face.
CONCLUSION OF HEARINGS
The hearing record will remain open until next Wednesday,
November 23rd, 2016. There may be additional questions
submitted by us or by our colleagues for the record. We very
much appreciate your cooperation, and we look forward to
continue to working with you.
This hearing is now adjourned.
[Whereupon, at 3:53 p.m., Wednesday, November 16, the
hearings were concluded, and the subcommittee was recessed, to
reconvene subject to the call of the Chair.]
MATERIAL SUBMITTED SUBSEQUENT TO THE HEARING
[Clerk's Note.--The following outside witness testimonies
were received subsequent to the hearing for inclusion in the
record.]
Prepared Statement of John Bozzella, President and CEO, Association of
Global Automakers
On behalf of the Association of Global Automakers (``Global
Automakers''), I am pleased to provide the following statement for the
record of the Senate Committee on Appropriations Subcommittee on
Transportation, Housing and Urban Development, and Related Agencies
hearing entitled ``The Automated & Self-Driving Vehicle Revolution:
What Is the Role of Government?'' Global Automakers represents
international automobile manufacturers that design, build, and sell
cars and light trucks in the United States. These companies have
invested $52 billion in U.S.-based facilities, directly employ more
than 100,000 Americans, and sell 47 percent of all new vehicles
purchased annually in the country. Combined, our members operate more
than 300 production, design, R&D, sales, finance and other facilities
across the United States.
The automotive industry is in the midst of an unprecedented wave of
technological innovation that is redefining how we think about
transportation. Advancements in connected and automated vehicle
technology promise to enhance mobility, help save lives, improve
transportation efficiency, and reduce fuel consumption and associated
emissions. Over the past several decades, our members have made
tremendous strides in safety by improving vehicle crashworthiness;
today, automakers are deploying crash avoidance technologies to help
prevent crashes from occurring altogether. Our members are at the
forefront of this innovation, as they have made, and continue to make,
substantial investments in the research and development of automated
vehicle systems and other advanced automotive technologies.
With the introduction of advanced sensors such as cameras and
radar, a number of vehicles on the road today already provide automated
functionality through advanced crash-avoidance and convenience features
like automatic emergency braking, lane keeping assist, and adaptive
cruise control. These systems, which are foundational to the
development of more highly automated systems, are designed to provide
support to the driver only in certain situations. As these systems
become more advanced, a vehicle's capability to operate without active
control by the driver will increase.
The next breakthrough in vehicle safety, and a critical technology
for realizing the benefits of automated driving, is Dedicated Short
Range Communications (DSRC) connected car technology. This technology
supports vehicle to vehicle communications (V2V) allowing cars to have
greater 360-degree situational awareness. Through DSRC, vehicles can
speak to each other and to surrounding infrastructure at the rate of
ten times per second to avoid crashes and improve mobility. This
technology is on the road today; pilot projects and deployments around
the country are using DSRC supported applications to demonstrate the
value of connected mobility to the traveling public. Soon, and
increasingly into the future, we will share our roads with automated
vehicles; V2V has the ability to connect all vehicles, regardless of
mode or level of automation.
While we are indeed at the cusp of a transportation revolution
through connected automation, these transformations are not inevitable
nor accidental. Public policy can either spur investment and
innovation, or hinder them, depending on which policy choices are made.
Effective public policy on connected and automated vehicles should have
two components. First, it should be flexible and provide room for
innovators to develop, test and sell new technologies. Overly
prescriptive and rigid regulation would slow and limit innovation.
Second, manufacturers should be able to build vehicles and systems that
can be sold in all fifty States. A patchwork of inconsistent laws and
regulation would be unworkable.
The National Highway Traffic Safety Administration (NHTSA) Federal
Automated Vehicle Policy, released in September 2016, provides a policy
framework that is more flexible and nimble than the formal rulemaking
process, and recognizes that technology can advance more rapidly than
regulation. Last month, NHTSA issued its Cybersecurity Best Practices
for Modern Vehicles to complement the important efforts already
underway within the Automotive Information Sharing and Analysis Center
(Auto-ISAC) to develop industry-led best practices to enhance vehicle
cybersecurity as systems become more electronic and connected. Issues
of consumer privacy have also been addressed through the automakers'
consumer privacy protection principles. These actions, by Federal
regulators and industry, help spur the development of live-saving
technologies and ensure that the public has confidence in them.
The NHTSA's Federal Automated Vehicle Policy is intended to address
a number of key policy questions and is a positive first step to
demonstrate Federal leadership. The Policy is divided into four main
sections. First, the Vehicle Performance Guidance for Automated
Vehicles outlines recommended practices for the safe pre-deployment
design, development and testing of highly automated vehicle systems
prior to the sale or operation on public roads. The Guidance was
designed to be flexible and dynamic; it is intended by NHTSA to
highlight important areas that manufacturers should consider and
address as they design and test their systems. The Guidance provides
for a ``Safety Assessment Letter,'' a voluntary tool by which
developers would communicate to the agency how it addresses fifteen key
safety areas in designing their vehicles and systems. NHTSA is in the
midst of developing a template for the Letter, and we believe NHTSA
should establish a clearly defined and practicable approach that does
not create an undue administrative burden that could slow innovation.
It is also our expectation that NHTSA will not use the Guidance and the
Safety Assessment Letter as a mechanism for ``premarket approval'' (or
``premarket disapproval'') of automated vehicle technology, as this
would extend beyond the agency's current authority.
Second, the agency has developed a Model State Policy which seeks
to provide guidance to the States in order to help support a more
uniform nationwide approach to automated vehicle policy. While the
Policy cannot in itself preempt State action, it does set a clear
marker in defining the roles of State government in addressing issues
related to vehicle automation. We support the strong statements in the
Policy that affirm that ``[t]he shared objective is to ensure the
establishment of a consistent national framework rather than a
patchwork of incompatible laws,'' and that ``[the] Guidance is not
intended for States to codify as legal requirements for the
development, design, manufacture, testing, and operation of automated
vehicles.''
However, despite the guidance in the Model State Policy, several
States are in the process of establishing their own regulatory programs
for automated vehicles. In some instances, State departments of motor
vehicles would assume the responsibility of determining whether a
particular automated vehicle or system is safe and thus may be sold or
operated in the State. Such State-by-State regulations would present a
significant obstacle to the future testing and deployment of automated
vehicles. While the Model State Policy clearly delineates the Federal
roles and States' roles, it does not clearly limit or prevent State
regulation of automated vehicle design and performance.
Additionally, we have some concerns with certain recommendations in
the Model State Policy that encourage States to regulate automated
vehicle test programs. Already, we have seen State proposals to require
manufacturers to obtain an ordinance authorizing testing from each
local jurisdiction in which testing will be conducted. However, Federal
law authorizes original manufacturers to conduct on-road test programs
and authorizes NHTSA to regulate test programs. Allowing a patchwork of
State and local test requirements for automated vehicle testing would
significantly obstruct the development of these vehicles. We are open
to working with NHTSA and Congress to ensure there is a path forward
for automated vehicle deployment without unnecessary obstacles at the
State level.
Third, the Federal Policy provides a useful description of the
agency's current regulatory tools, which includes issuance of safety
standards, interpretations of the meaning and application of standards,
and exemptions from standards, as well as the agency's ability to take
enforcement action regarding safety related defects. Each of these
tools could have a valuable application in facilitating and regulating
the entry of automated vehicles into U.S. commerce. At the same time,
we must consider the long-term efficacy of these tools in determining
whether other regulatory and non-regulatory policies may be appropriate
and necessary in the future. It is important that any action be data
driven and technology neutral.
Finally, the agency discusses the potential new tools and
authorities that may be necessary in addressing the challenges and
opportunities involved in facilitating the deployment of automated
vehicles. We agree with NHTSA's assessment that new authorities could
assist the agency in facilitating the development and introduction of
automated technology. However, imprudent legislation in this area could
have the opposite effect and delay technology development. For example,
we see no basis at all for any change to the self-certification system
for vehicles. The Federal Policy's discussion of the Federal Aviation
Administration (FAA) process of ``premarket approval'' is not practical
given the structural differences between the automotive industry and
aviation sector, and implementation of such an approach could
significantly slow innovation. Similarly, the Safety Assessment Letter
should not be used as a means to prohibit testing or deployment of
technology without adequate data to support an unreasonable safety
risk.
We believe that NHTSA's Federal Automated Vehicle Policy is an
important first step in the development of a flexible and nimble
approach that can adapt to the pace of technology. However, the
document requires further clarification and refinement to achieve these
goals. Global Automakers is currently preparing comments on the NHTSA
guidance and will provide a copy to the Committee upon submission to
NHTSA. Additionally, we agree with NHTSA that the agency should update
its Federal Automated Vehicle Policy and regularly review the Policy,
as it is designed to never be frozen or final. Global Automakers and
its members remain committed to working with Federal, State, and local
governments to ensure there is a flexible, consistent framework for
automated vehicle technologies so consumers can fully realize the
benefits as quickly as possible.
In addition, the Federal Government must move expeditiously to
establish a framework for the deployment V2V communications through
DSRC connectivity. NHTSA is developing a new vehicle safety standard
that would require vehicles to be equipped with DSRC technology. Global
Automakers looks forward to the release of the proposed rule, and will
continue to work with the Federal Communications Commission to ensure
that the 5.9 GHz Safety Spectrum remains free from harmful interference
to support DSRC technology.
The automobile industry continues to provide innovative
technologies with demonstrable safety, mobility, and environmental
benefits. To achieve these benefits, there must be close collaboration
and coordination among and between government, industry, academia, and
other stakeholders. Global Automakers and our member companies believe
that connected and automated vehicles represent the next giant leap
towards our shared long-term goal of safer and cleaner, and more
efficient vehicle transportation.
______
Prepared Statement of Property Casualty Insurers Association of America
There are public perceptions that auto accidents and insurance
costs are decreasing. In fact, our roads are becoming increasingly
dangerous and auto repair and medical costs are increasing. According
to the National Highway Transportation Safety Administration (NHTSA),
17,775 people died on our Nation's roads in the first half of 2016.
Traffic deaths are increasing at the fastest rate in 50 years, with a
10.4 percent increase in the first 6 months of this year. Even adjusted
for the increase in vehicle miles traveled (VMT), the fatality rate
increased 6.6 percent to 1.12 per 100 million VMT. Non-fatal injuries
are on the rise as well, increasing 28 percent since 2009, according to
the National Safety Council. Someday, self-driving cars may reduce the
number of accidents and deaths. However, the potential of automated
vehicle technology stands in sharp contrast to what is happening on our
roads today.
The Property Casualty Insurers Association of America (PCI) is
composed of nearly 1,000 member companies, representing the broadest
cross section of insurers of any national trade association. PCI
members write $202 billion in annual premium, 35 percent of the
Nation's property casualty insurance. That figure includes over $97
billion, or 42 percent, of the auto insurance premium written in the
United States. PCI's analysis has found that since 2013, auto claims
frequency has increased nearly 5 percent, increasing the overall cost
of claims by more than 18 percent. PCI has analyzed the recent increase
in auto insurance claim frequency and found strong correlations with
traffic congestion and distracted driving, weaker correlations from
increasing populations of novice and older drivers, and some
correlation with liberalized marijuana laws.
While it is important to prepare for the automated vehicle of the
future, we urge policymakers to continue to focus on the auto safety
challenges that face us today, such as distracted and impaired driving.
H.R. 22, the FAST Act, provides for increased public awareness,
improved enforcement, and establishing an enforceable impairment
standard for drivers under the influence of marijuana. These provisions
are critical to reducing accidents, injuries and deaths on our Nation's
roads. The importance of addressing these issues was also the subject
of a bipartisan letter from 23 members of Congress to Transportation
Secretary Foxx urging prompt implementation of these FAST Act
provisions.
[The bipartisan letter is attached.]
NHTSA recently unveiled its ``Federal Automated Vehicle Policy,''
which is intended to provide guidance for States on the testing and
deployment of highly automated vehicles (HAVs). While mentions of
insurance are few, the new policy raises issues that are important to
the automobile insurance market as it seeks to adapt and develop new
products to meet consumer needs.
recognition of state regulation of insurance and liability issues
NHTSA's policy identifies the following as Federal
responsibilities: setting and enforcing safety standards for motor
vehicles, recalls, promoting public awareness and providing guidance
for the States. NHTSA's policy also recognizes that it is the State's
role to license drivers and vehicles, enforce traffic laws, regulate
motor vehicle insurance, and legislate regarding tort and criminal
liability issues pertaining to automated vehicles. PCI shares the view
that the States should continue to have primacy on motor vehicle
insurance and liability issues as they do today, and we support NHTSA's
recognition of that role.
NHTSA's policy also repeats the recommendation from its 2013
guidance that entities testing automated technology should provide
proof of financial responsibility coverage of at least $5 million. PCI
has not taken a position on this coverage requirement. However, as HAVs
are deployed for public use, States will need to consider what, if any,
changes need to be made to existing State motor vehicle financial
responsibility laws.
data collection and access
As policymakers consider what data should be collected and retained
by automated vehicles, it is essential that insurers have reasonable
access to the data for providing customer service for claims handling
and underwriting purposes. In many auto accidents, apportionment of
liability is likely to hinge upon whether or not a human driver or the
vehicle itself was in control and what actions either the driver or the
vehicle took or did not take immediately prior to the loss event.
Access to data for insurers will speed claims handling and potentially
avoid disputes that could delay compensation to accident victims.
Access to historical anonymized data on the different automated vehicle
systems will also be important to help insurers innovate and develop
new insurance products as the nature of the risk changes.
conclusion
Automated driving technology holds great promise for the future.
Implementing clear policies on the Federal and State roles in
regulating automated vehicle technology and ensuring that insurers have
access to vehicle data on reasonable terms to efficiently handle
claims, develop products and underwrite are essential to that future.
However, policymakers must not lose sight of the auto safety issues
that face us today. We look forward to working with policymakers at the
Federal and State level to reduce accidents on our roads today and in
the future.
Attachment
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Affordable Rental Housing ACTION, Prepared Statement of the...... 179
Bozzella, John, President and CEO, Association of Global
Automakers, Prepared Statement of.............................. 252
Brubaker, Hon. Paul, President and CEO, The Alliance for
Transportation Innovation...................................... 220
Prepared Statement of........................................ 222
Capito, Senator Shelley Moore, U.S. Senator From West Virginia,
Questions Submitted by......................................... 62
Castro, Hon. Julian, Office of the Secretary, Department of
Housing and Urban Development.................................. 1
Prepared Statement of........................................ 8
Summary Statement of......................................... 6
Collins, Senator Susan M., U.S. Senator From Maine:
Opening Statements of
Prepared Statements of
Questions Submitted by
Daines, Senator Steve, U.S. Senator From Montana, Questions
Submitted by................................................... 114
Foxx, Hon. Anthony, Office of the Secretary, Department of
Transportation................................................. 67
Prepared Statement of........................................ 75
Summary Statement of......................................... 73
Gentry, Richard, President and CEO, San Diego Housing Commission. 153
Prepared Statement of........................................ 154
Graham, Senator Lindsey, U.S. Senator From South Carolina,
Questions Submitted by......................................... 125
Hersman, Hon. Deborah, President and CEO, National Safety Council 210
Prepared Statement of........................................ 212
Kalra, Dr. Nidhi, Co-Director, Rand Center for Decision Making
Under Uncertainty.............................................. 225
Prepared Statement of........................................ 227
Montoya, Hon. David A., Inspector General, Department of Housing
and Urban Development.......................................... 33
Prepared Statement of........................................ 34
Murphy, Senator Christopher, U.S. Senator From Connecticut,
Questions Submitted by......................................... 65
Murray, Senator Patty, U.S. Senator From Washington, Questions
Submitted by................................................... 120
Olsen, Dr. Edgar, Ph.D., University of Virginia Professor of
Economics and Public Policy.................................... 134
Prepared Statement of........................................ 135
Poethig, Erika, Fellow and Director of Urban Policy Initiatives,
The Urban Institute............................................ 144
Prepared Statement of........................................ 145
Property Casualty Insurers Association of America, Prepared
Statement of................................................... 254
Reed, Senator Jack, U.S. Senator From Rhode Island:
Questions Submitted by....................................... 118
Statements of
Rosekind, Hon. Mark, Administrator, National Highway Traffic
Safety Administration.......................................... 204
Prepared Statement of........................................ 206
Schatz, Senator Brain, U.S. Senator From Hawaii, Questions
Submitted by
Scovel, Hon. Calvin III, Inspector General, Department of
Transportation................................................. 95
Prepared Statement of........................................ 97
Yentel, Diane, President and CEO of the National Low Income
Housing Coalition, Prepared Statement of....................... 193
SUBJECT INDEX
----------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Housing Vulnerable Families and Individuals: Is There a Better Way?
Page
ACTION Campaign Members.......................................... 181
Accountability Through the Tax Code.............................. 179
Addressing Homelessness.......................................... 161
An Alternative Approach to Increase Needed Investments........... 197
Choice Neighborhoods Initiative.................................. 168
Complement to Other Housing Programs............................. 180
Demolition/Disposition Activity.................................. 163
Emergency Relief................................................. 166
Homelessness..................................................... 175
Housing:
Assistance Supply Experiment................................. 165
Choice Voucher Program
First--San Diego............................................. 161
Subsidies.................................................... 167
How to Improve HUD............................................... 176
Importance of Public Housing..................................... 194
Incentive to Address a Market Failure............................ 180
Jobs Plus Demonstration.......................................... 174
Low Income Housing Tax Credits................................... 165
Model Public-Private Partnership, A.............................. 179
Moving to Work Program
No Silver-Bullet Solution........................................ 193
Overview of Current System....................................... 136
Policy Recommendations........................................... 195
Private Market Alone Cannot Supply Affordable Housing............ 148
Project-Based Rental Assistance
And Low Income Housing Tax Credits........................... 167
Proven Tool to Address a Vast and Growing Need, A................ 179
Providing Federal Rental Assistance.............................. 158
Public Housing:
Capital Fund................................................. 169
Conversion--The San Diego Model.............................. 156
Return on Investment............................................. 175
Section 8:
Housing Choice Vouchers...................................... 194
And Work Disincentives....................................... 174
Support the Affordable Housing Credit Improvement Act............ 180
Tenant-Based Rental Assistance
Voucher Programs................................................. 173
Office of the Secretary
Additional Committee Questions................................... 59
Administering Programs Directed Toward Victims of Disasters...... 47
Assisted Housing and Criminal Justice Reform..................... 64
Church Street South Project...................................... 25
Community:
Development Block Grant
Planning and Development Programs............................ 50
Compliance with:
FHA Underwriting Standards................................... 56
The Improper Payments Elimination and Recovery Act of 2010... 51
ConnectHome...................................................... 62
Departmental Enforcement......................................... 52
FHA
Fair Market Rent................................................. 63
Calculations................................................. 22
Family:
Self-Sufficiency Program..................................... 32
Unification Program-Family Self Sufficiency Demonstration.... 63
Federal Programs for Homeless Veterans........................... 19
Fiscal Year 2017:
HUD Budget................................................... 8
Request...................................................... 35
Funding for VASH Vouchers........................................ 17
GAO.............................................................. 60
Goal:
1: Strengthen the Nation's Housing Market to Bolster the
Economy and Protect Consumers.............................. 10
2: Meet the Need for Quality, Affordable Rental Homes........ 10
3: Use Housing as a Platform for Improving Quality of Life... 12
4: Build Strong, Resilient and Inclusive Communities......... 13
5: Achieving Operational Excellence.......................... 16
HUD:
Information Technology Systems............................... 58
Performance and Management Challenges........................ 38
High Income Households in Public Housing
Homelessness..................................................... 27
Housing:
Inspections of Section 8 Vouchers............................ 55
Trust Fund................................................... 61
Vouchers for the Homeless.................................... 21
Lead Paint Inspections........................................... 20
Local:
Building Codes............................................... 56
Housing Policy Grants-Affordable Housing..................... 65
Rent Costs................................................... 28
Moving to Work................................................... 29
National Housing Trust Fund...................................... 22
OIG Program Divisions............................................ 36
Office of Inspector General--Semi-Annual Report to Congress...... 24
Physical Inspections of HUD Assisted Properties.................. 18
REAC Inspection Process.......................................... 26
Rental Assistance Demonstration.................................. 59
Section 811 Supportive Housing................................... 26
United States Interagency Council on Homelessness................ 31
Updating Standards for Lead Paint................................ 20
Waste, Fraud and Abuse in HUD Programs........................... 57
Youth:
Exiting Foster Care.......................................... 30
Homelessness................................................. 32
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
Additional:
Committee Questions.......................................... 111
Resources.................................................... 109
Addressing New and Longstanding Safety Challenges................ 97
Advances Public and Private Sector Collaboration to Accelerate
Cost-Competitive, Low-Carbon Technologies and Intelligent
Transportation Systems......................................... 76
Air Traffic Controller Staffing.................................. 81
Airport:
Certification................................................ 90
Reconstruction Project....................................... 82
Amtrak:
Investments and Positive Train Control....................... 84
Service...................................................... 94
Autonomous Vehicles.............................................. 80
Continuing Diligent Stewardship Over Dot's Critical Investments.. 100
Contract Weather Observers....................................... 91
Criminal Violations.............................................. 108
Cybersecurity.................................................... 105
NextGen...................................................... 106
Enhancing:
DOT's IT Security And Preparedness........................... 103
Surface Transportation....................................... 75
Ensures Transportation Safety Keeps Pace With Changing Technology
and Organizational Needs....................................... 76
Hazardous Materials.............................................. 107
Highway Safety................................................... 116
Investing in Clean, 21st Century Surface Transportation Options
that Reflect America's Changing Demographics and Provide Access
to Opportunity................................................. 76
Invests in 21st Century Government and Project Delivery.......... 77
Maritime Training Vessels........................................ 92
NextGen Modernization............................................ 82
Passenger Facility Charges....................................... 83
Pedestrian Safety................................................ 87
Preparing for Reauthorization of the FAA......................... 77
Sexual Assault and Sexual Harassment
Short Line Rail.................................................. 86
Smart City Challenge............................................. 86
Speed Limiters................................................... 81
Tiger............................................................ 89
Transporting Hazardous Materials................................. 92
The Automated and Self-Driving Vehicle Revolution:
What is the Role of Government?
American National Standards Institute Standard................... 219
Crashes Relevant to 4 Crash Avoidance Systems FARS and GES, 2004-
2008........................................................... 215
Cybersecurity.................................................... 239
Risks........................................................ 243
Data:
Protection and Sharing....................................... 217
Security..................................................... 241
Dedicated Short Range Communication.............................. 216
Distracted Driving............................................... 244
Driving in Rural Areas........................................... 243
Education and Training........................................... 216
Energy and Environment........................................... 248
Ethical Considerations........................................... 249
Existing Vehicle Technologies.................................... 238
How Can Autonomous Vehicles Improve Mobility for Americans Who
Currently May Have Limited Mobility?........................... 230
Impact on Labor
Lessons from Volvo Demonstration................................. 245
Lifesaving Potential of Advanced Technology...................... 212
Mobility for Seniors............................................. 237
Motor Vehicle Deaths on the Rise................................. 213
National Highway Traffic Safety Administration:
Automated Vehicles Policy.................................... 212
Guidance..................................................... 246
Resources and Oversight in the Midst of Changing Technology.. 219
New Vehicle Series With Electronic Stability Control by Model
Year........................................................... 214
Registered Vehicles With:
Available ESC, Actual and Predicted.......................... 215
Electronic Stability Control by Calendar Year................ 214
Road to Zero..................................................... 219
Role of Government............................................... 247
Rulemaking Process............................................... 243
Standardized Nomenclature and Performance Outcomes............... 217
State Regulations of Automated Vehicles.......................... 238
What Mechanisms Can Help Realize the Benefits and Mitigate the
Drawbacks of Autonomous Vehicles?.............................. 233
Will Autonomous Vehicles Be Safe Before They Are Allowed on the
Road for Consumer Use?......................................... 227
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