    [House Hearing, 117 Congress]
    [From the U.S. Government Publishing Office]

                         PERSISTENT POVERTY IN AMERICA:
                        ADDRESSING CHRONIC DISINVESTMENT
                        IN COLONIAS, THE SOUTHERN BLACK
                         BELT, AND THE U.S. TERRITORIES

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

                                 HYBRID HEARING

                                   BEFORE THE

                            SUBCOMMITTEE ON HOUSING,
                             COMMUNITY DEVELOPMENT,
                                 AND INSURANCE

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               NOVEMBER 15, 2022

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 117-102

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                  __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    49-482 PDF                 WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                     MAXINE WATERS, California, Chairwoman

    CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina,
    NYDIA M. VELAZQUEZ, New York             Ranking Member
    BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
    GREGORY W. MEEKS, New York           BILL POSEY, Florida
    DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
    AL GREEN, Texas                      BILL HUIZENGA, Michigan
    EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
    ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
    JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
    BILL FOSTER, Illinois                FRENCH HILL, Arkansas
    JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
    JUAN VARGAS, California              LEE M. ZELDIN, New York
    JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
    VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
    AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
    MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
    CINDY AXNE, Iowa                     TREY HOLLINGSWORTH, Indiana
    SEAN CASTEN, Illinois                ANTHONY GONZALEZ, Ohio
    AYANNA PRESSLEY, Massachusetts       JOHN ROSE, Tennessee
    RITCHIE TORRES, New York             BRYAN STEIL, Wisconsin
    STEPHEN F. LYNCH, Massachusetts      LANCE GOODEN, Texas
    ALMA ADAMS, North Carolina           WILLIAM TIMMONS, South Carolina
    RASHIDA TLAIB, Michigan              VAN TAYLOR, Texas
    MADELEINE DEAN, Pennsylvania         PETE SESSIONS, Texas
    ALEXANDRIA OCASIO-CORTEZ, New York   RALPH NORMAN, South Carolina
    JESUS ``CHUY'' GARCIA, Illinois
    SYLVIA GARCIA, Texas
    NIKEMA WILLIAMS, Georgia
    JAKE AUCHINCLOSS, Massachusetts

                       Charla Ouertatani, Staff Director
                      Subcommittee on Housing, Community
                           Development, and Insurance

                      EMANUEL CLEAVER, Missouri, Chairman

    NYDIA M. VELAZQUEZ, New York         FRENCH HILL, Arkansas, Ranking
    BRAD SHERMAN, California                 Member
    JOYCE BEATTY, Ohio                   BILL POSEY, Florida
    AL GREEN, Texas                      BILL HUIZENGA, Michigan
    VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
    CAROLYN B. MALONEY, New York         TREY HOLLINGSWORTH, Indiana
    JUAN VARGAS, California              JOHN ROSE, Tennessee
    AL LAWSON, Florida                   BRYAN STEIL, Wisconsin, Vice
    CINDY AXNE, Iowa, Vice Chair             Ranking Member
    RITCHIE TORRES, New York             LANCE GOODEN, Texas
                                         VAN TAYLOR, Texas

                               C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        November 15, 2022............................................     1
    Appendix:
        November 15, 2022............................................    27

                                   WITNESSES
                           Tuesday, November 15, 2022

    Arriaga-Salinas, Amber, Assistant Executive Director, Proyecto
      Azteca.........................................................     7
    Bonilla, Yarimar, Director, Center for Puerto Rican Studies,
      Hunter College.................................................     4
    Burt, Kiyadh, Vice President of Policy & Advocacy and Interim
      Director, Hope Policy Institute................................     6
    George, Lance, Director of Research and Information, Housing
      Assistance Council (HAC).......................................     8
    Potterpin, Chris, President, Council for Affordable and Rural
      Housing (CARH).................................................    10

                                    APPENDIX

    Prepared statements:
        Arriaga-Salinas, Amber.......................................    28
        Bonilla, Yarimar.............................................    37
        Burt, Kiyadh.................................................    46
        George, Lance................................................    58
        Potterpin, Chris.............................................    69

                  Additional Material Submitted for the Record

    Cleaver, Hon. Emanuel:
        Written statement of cdcb come dream.come build..............    77
    Hill, Hon. French:
        GAO report, ``Targeting Federal Funds, Information on Funding
          to Areas with Persistent or High Poverty,'' dated July 2020    81
        GAO report, ``Areas with High Poverty, Changing How the 10-
          20-30 Funding Formula is Applied Could Increase Impact in
          Persistent-Poverty Counties,'' dated May 2021..............   151

                             PERSISTENT POVERTY IN
                              AMERICA: ADDRESSING
                            CHRONIC DISINVESTMENT IN
                             COLONIAS, THE SOUTHERN
                              BLACK BELT, AND THE
                                U.S. TERRITORIES

                                  ----------

                           Tuesday, November 15, 2022

                 U.S. House of Representatives,
                               Subcommittee on Housing,
                                 Community Development,
                                         and Insurance,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 10:06 a.m., in
    room 2128, Rayburn House Office Building, Hon. Emanuel Cleaver
    [chairman of the subcommittee] presiding.
        Members present: Representatives Cleaver, Velazquez,
    Beatty, Vargas, Torres; Hill, Posey, Huizenga, Rose, and
    Taylor.
        Ex officio present: Representative Waters.
        Chairman Cleaver. The Subcommittee on Housing and Community
    Development will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the subcommittee at any time. Also, without
    objection, members of the full Financial Services Committee who
    are not members of this subcommittee are authorized to
    participate in today's hearing.
        Today's hearing is entitled, ``Persistent Poverty in
    America: Addressing Chronic Disinvestment in Colonias, the
    Southern Black Belt, and the U.S. Territories.''
        I now recognize myself for 4 minutes for an opening
    statement.
        Persistent poverty is a major problem in this country. And
    in counties around the country, they have a rate of poverty
    that has exceeded 20 percent for 30 years or more in a row of
    the country's 377 persistent-poverty counties. The vast
    majority are in rural and non-metro areas.
        The millions of Americans grappling with persistent poverty
    are diverse. They are located in Appalachian communities in
    States like Tennessee and Kentucky; in Native American
    communities in States like South Dakota; in Latino communities
    in States like Texas; in African-American communities in States
    like South Carolina and Alabama; and in the U.S. Territories.
        These Americans--Americans--are represented in Congress by
    Democrats and Republicans, and by Democratic and Republican
    members of this committee. Addressing persistent poverty is in
    the interest of all Americans, regardless of geography, race,
    or political preference. And addressing persistent poverty is a
    significant challenge, despite flows in the economy. In good
    economic times and in bad, persistent-poverty areas of the
    country are struggling, resistant to time and effort.
        Democrats continue to advocate for rural America and the
    Territories. Under the leadership of Chairwoman Waters, the
    Financial Services Committee passed the Build Back Better Act,
    which would have made a historic level of investments in rural
    and persistent-poverty areas. The housing title of the bill
    would have specifically provided over $100 billion in fair and
    affordable housing investments throughout the United States.
    This would have included $2.1 billion for housing and
    homeownership preservation to increase the supply of housing
    and provide rental assistance in rural communities through the
    USDA, as well as $500 million for infrastructure improvements
    and manufactured housing communities, and $700 million for
    housing and community development investment in colonias,
    including those located outside of the 150-mile area from the
    United States-Mexican border, through the Community Development
    Block Grant (CDBG) program. Territories would have received a
    significant portion of these investments through required
    minimum allocations.
        I hope that this hearing will dive deeper into the
    financial solutions and the Federal solutions on this table and
    the full range of tools at our disposal.
        The Chair now recognizes the ranking member of the
    subcommittee, Mr. Hill, for 4 minutes.
        Mr. Hill. I want to thank the chairman. And I appreciate
    today's topic of the hearing, persistent poverty in America.
        This topic is certainly an important one, and it is a
    troubling one. According to the Census Bureau, the national
    poverty rate was 12.8 percent in 2021, with about 37 million
    people in our nation in poverty, up more than 3 million from
    the prior year.
        It might be hard for some to fathom that in a country so
    blessed with abundance, there are still so many places where
    poverty not only exists but where it has taken root and shows
    no sign of relenting. These places are remnants of a more
    forgotten time in America, before the economic boom that for
    many dominated the latter half of the 20th Century and carries
    on today.
        And despite the specificity of the title of today's
    hearing, these deeply-impoverished areas can, sadly, be found
    in all corners of our great nation: from the southeast counties
    of the Blue Grass State of Kentucky to the Native American
    Reservations of central South Dakota, western Alaska on the
    Bering seacoast, and in my home State of Arkansas.
        These places might not all look alike, but they do share at
    least one major characteristic: They are, for many purposes,
    all rural in nature, and for many, extremely so. So in a lot of
    ways what we are really talking about here today is the impact
    of poverty in rural America. And more of the pointed question
    we need to be asking is why does poverty seem to hit those
    living in the country with such a tremendous impact over those
    in impoverished urban areas, like the south Bronx or Detroit? I
    am not sure we will ever be able to answer that important
    question here today, but let me make a couple of observations.
        First, the high levels of poverty we see in these rural
    areas of our nation, despite 60 years of focused Federal
    efforts to eradicate them, continue. The Department of
    Agriculture's Rural Housing Service was created in 1949 to
    build or improve housing and essential community facilities in
    rural areas. That was followed in 1965 by HUD's efforts under
    urban renewal, and by Sergeant Shriver and the Commerce
    Department's Economic Development Administration (EDA), all to
    try to help economically-distressed areas and cities.
        In fact, if you go back to the launch of the Federal
    Government's 1960's war on poverty, President Johnson boldly
    proclaimed: ``We have declared an unconditional war on poverty;
    our objective is total victory; I believe that 30 years from
    now, Americans will look back on these 1960s as the time of a
    great American breakthrough towards victory of prosperity over
    poverty.'' Well, $22 trillion later, I am reminded of President
    Reagan's quip from 1988: ``President Johnson declared war on
    poverty, and poverty won.''
        These were lofty goals by President Johnson, but after 60
    years and hundreds of billions--as I say, $22 trillion in
    inflation adjusted spending, Big Government approaches to
    battling poverty have not worked for many rural households.
        It seems to me it is a great time to rethink this strategy
    as we try to tackle it. We can no longer define success by
    annual increases in funding levels for programs that fail to
    elevate families out of poverty. Instead, we should focus on
    what is likely to be the most effective way to combat it:
    greater development and deployment of economic opportunity,
    including broadband; better available education in these rural
    areas; private lending and investment; and job creation.
        I have seen that success in Arkansas, Mr. Chairman. One of
    the poorest counties in the First District of Arkansas, in the
    Mississippi Delta is now the world's largest producer of steel.
    And hundreds of people are employed, and that economic
    prosperity and that corridor from Memphis to the Missouri
    border is growing because of those kinds of investments.
        I thank my chairman for this hearing. I look forward to the
    discussion, and I yield back to him.
        Chairman Cleaver. The gentleman yields back.
        The Chair now recognizes the Chair of the full Committee on
    Financial Services, the Honorable Maxine Waters of California.
        Chairwoman Waters. Thank you very much, Mr. Cleaver, for
    this hearing.
        Over 1.7 million people in the U.S. live in rural counties
    experiencing persistent poverty. These rural communities face
    chronic disinvestment and population loss as housing, lending,
    and community development needs have gone ignored. We cannot
    continue to turn a blind eye, especially as inflation, driven
    in large part by rising housing costs nationwide, has
    exacerbated rural job loss, further entrenching persistent
    poverty in many communities.
        One year ago this month, the House passed the Build Back
    Better Act, which included historic investments for housing in
    rural America, but not one single Republican Member supported
    it. I hope we can build bipartisan support for efforts to
    invest in affordable housing, especially in rural areas, and to
    effectively reduce inflation. And I hope, as we go down this
    path for the future, that we can get some support from the
    Republicans.
        Thank you. I yield back.
        Chairman Cleaver. The chairwoman yields back.
        We will now turn to our witnesses: Yarimar Bonilla, the
    director of the Center for Puerto Rican Studies at Hunter
    College; Kiyadh Burt, the vice president of policy and advocacy
    and interim director at the Hope Policy Institute; Amber
    Arriaga-Salinas, the assistant executive director of Proyecto
    Azteca; Lance George, the director of research and information
    at the Housing Assistance Council; and Chris Potterpin, the
    president of the Council for Affordable and Rural Housing.
        Our witnesses are reminded that their oral testimony will
    be limited to 5 minutes. You should be able to see a timer that
    will indicate how much time you have left. I would ask that you
    be mindful of the timer so that we can be respectful of the
    other witnesses' and the committee members' time.
        And without objection, your written statements will be made
    a part of the record.
        Ms. Bonilla, you are now recognized for 5 minutes to give
    an oral presentation of your testimony.

    STATEMENT OF YARIMAR BONILLA, DIRECTOR, CENTER FOR PUERTO RICAN
                       STUDIES AT HUNTER COLLEGE

        Ms. Bonilla. Thank you.
        Good morning. My name is Yarimar Bonilla, and I am the
    director of the Center for Puerto Rican Studies at Hunter
    College, the largest research institute and archive devoted to
    the Puerto Rican experience. I am grateful for the invitation
    to testify today on the question of persistent poverty and
    chronic disinvestment in the U.S. Territories. Alhough, given
    the time limit and the data challenges, I will focus narrowly
    on Puerto Rico.
        When I gathered with my team to present this testimony, the
    first question we asked ourselves was, is persistent poverty
    really the right term for thinking about Puerto Rico's
    challenges?
        The U.S. Government has set 20 percent for 30 years as the
    trigger of an alarm, but the fact is that Puerto Rico's poverty
    rate has been twice that for over half a century. At 40.5
    percent, Puerto Rico has the second-highest poverty rate in the
    U.S., second only to American Samoa, and the absolute lowest
    median income of any U.S. jurisdiction.
        A full quarter of the Puerto Rican population subsists on
    just $10,000 a year. Some assume that these depressed incomes
    are tied to a lower cost of living, but the contrary is true.
    Rent, mortgage, and utility burdens are all higher in Puerto
    Rico than the national average.
        The U.S. Territories as a whole share these concerning
    metrics, leading us to ask whether this is really a question of
    persistent poverty, or rather, of the systemic poverty of
    empire.
        Sadly, those most impacted by poverty and inequality are
    Puerto Rico's children. A whopping 55 percent of Puerto Rican
    children are living in poverty, 60 percent in rural areas. It
    has been shown that the best way to attend [inaudible] is to
    ensure access to public infrastructure and services like
    education that facilitate upward mobility. However, in Puerto
    Rico, acute poverty rates have been met by a systemic
    disinvestment in public infrastructure due to austerity
    measures, leading to the closing of schools, the defunding of
    the university system, and the privatization of essential
    infrastructure, such as roads, tolls, and energy distribution.
        Since the privatization of the grid in 2021, outages have
    become commonplace, even as utility costs rise. This has
    impacted education, healthcare, communications, sales, and even
    the preparation of this testimony. Just yesterday, one of our
    researchers was among the hundreds of thousands without
    electricity due to yet another mass power outage.
        The toughest part of all of this is that those who fail to
    provide us with the most basic of services, services which
    arguably should be guaranteed human rights, seem to operate
    with complete impunity. Although many wring their hands and
    accept this as the unfortunate fate of life in the colonies, we
    remind the Members of Congress that the U.S. Constitution
    grants them the singular power to change the lives of millions
    of citizens and nationals who reside in the Territories.
        The U.S. Supreme Court has established that Congress has
    the power and authority to treat the Territories differently
    than the States. This has historically been interpreted as a
    congressional right to treat the Territories worse, by leaving
    them out of critical Federal programs while failing to address
    their systemically-depressed incomes. However, Congress could
    just as easily treat the Territories better, by attending to
    the demographic particularities and historic legacies of
    systemic dispossession.
        If the U.S. Government recognizes that a persistent poverty
    rate of over 20 percent for 3 decades warrants Federal action,
    we request that the committee ponder what is necessary to
    attend to communities that have had twice that rate for
    multiple generations.
        To begin, Congress must exercise its oversight role to
    critically examine the impact of the Fiscal Board it created.
    What has been the tangible impact and long-term consequences of
    the focus on austerity and privatization? Further, since the
    board conceded that a large portion of Puerto Rico's debt was
    unconstitutional, why is it forcing Puerto Ricans to pay it and
    refusing to have it audited? In addition, HUD and FEMA must be
    held accountable and work in better partnership with local
    watchdogs.
        Discrimination and excessive scrutiny of Puerto Rican
    agencies and applicants in the aftermath of Hurricane Maria had
    been widely documented and [inaudible] yet we already hear the
    same issues are unfolding in the wake of Hurricane Fiona.
        Lastly, Congress must address the exclusion of Puerto Rico
    and other U.S. Territories from Federal programs like SSI and
    other Federal benefits geared at precisely the most-
    disadvantaged sectors of the population. Otherwise, it should
    speak clearly on what moral grounds residents of the
    Territories are excluded from these entitlements. Again,
    Congress can treat Territories differently. It should use that
    power.
        Thank you for your time.
        [The prepared statement of Ms. Bonilla can be found on page
    37 of the appendix.]
        Chairman Cleaver. Thank you.
        Mr. Burt, you are now recognized for 5 minutes.

    STATEMENT OF KIYADH BURT, VICE PRESIDENT OF POLICY AND ADVOCACY
              AND INTERIM DIRECTOR, HOPE POLICY INSTITUTE

        Mr. Burt. Thank you.
        Good morning, and thank you to the committee for having me
    here today.
        My name is Kiyadh Burt, and I am the vice president of
    policy and advocacy and the interim director of the Hope Policy
    Institute (HOPE).
        Since 1994, HOPE has worked to increase financial inclusion
    among the most-vulnerable populations in the Deep South: the
    Deep South States of Alabama, Arkansas, Louisiana, Mississippi,
    and Tennessee, a region that is home to one-third of this
    nation's persistent-poverty counties, most of which are rural.
        HOPE is also one of the largest Black and women-owned
    financial institutions in this country, and on behalf of the
    organization, I am here today to discuss the strategies to
    increase affordable homeownership and housing in this region,
    with the emphasis on increasing opportunities for communities
    of color.
        The first strategy in increasing homeownership and
    affordable housing concerns down payment assistance. In the
    Deep South, there is nearly a 27 percent difference between
    Black and White homeownership. Largely due to financial
    exclusion and exploitative practices, many Black and Brown
    communities simply lack adequate capital to purchase a home.
        Down payment assistance is a critical strategy in resolving
    that gap. Down payment assistance has the ability to transition
    households from a history of renting to a future of
    homeownership.
        HOPE is familiar with the positive impact of down payment
    assistance, particularly through our experience with the
    NeighborhoodLIFT Program, a partnership between Wells Fargo and
    the NeighborWorks America organization, to increase the number
    of first-time home buyers, particularly among communities of
    color. In our experience, when we see an increase in down
    payment assistance programs, we see a clear correlation in the
    increase of homeowners of color.
        The second strategy is that we must ensure that banks and
    credit unions offer mortgage products that meet the needs of
    communities that often find themselves in rural, persistent-
    poverty counties, and also that a secondary market supports
    those efforts. HOPE has an in-house mortgage product that meets
    the challenges of communities that often lack access to down
    payments. This product is manually underwritten. It discounts
    student loan deferred debt, and it also has a loan to value
    ratio of 100 percent, effectively eliminating the down payment
    disparities and challenges.
        Now, what is interesting about our product is that the
    Government-Sponsored Enterprises (GSEs), Fannie Mae and Freddie
    Mac, do not support the flexibility of this product. Their
    inability to purchase these loans really speaks to the lack of
    capacity to provide increased homeownership for these
    communities, and also limits our ability to expand our capacity
    to lend to these communities by the failure of them to purchase
    this loan product.
        And lastly, for strategy, we must hold State Housing
    Finance Agencies (HFAs) accountable for meeting pandemic
    recovery needs of local people. An examination of the Emergency
    Rental Assistance Program shows that State Governments in the
    Deep South did not meet the needs of local people in the
    distribution of rental assistance at levels achieved across the
    country. Such findings call for increased accountability among
    States, particularly States with questionable track records in
    serving the most-vulnerable populations.
        In conclusion, communities in America's Black Belt have
    long endured persistent poverty and its associated ills.
    However, these communities and the institutions that serve them
    have demonstrated the expertise to mitigate the effects of race
    in place, most often with significantly fewer resources than
    other parts of the country. The Community Development Financial
    Institutions Fund (CDFI Fund) has a track record of reaching
    and working with communities in partnership model solutions
    that work. With adequate resources supported in these
    institutions, and increased commitment by others to do the
    same, it is possible to ensure prosperity and mobility in the
    most economically-distressed communities in this country.
        [The prepared statement of Mr. Burt can be found on page 46
    of the appendix.]
        Chairman Cleaver. Thank you very much.
        We will now hear from Mrs. Arriaga-Salinas. You have 5
    minutes to present your oral testimony.

        STATEMENT OF AMBER ARRIAGA-SALINAS, ASSISTANT EXECUTIVE
                       DIRECTOR, PROYECTO AZTECA

        Mrs. Arriaga-Salinas. Good morning, Chairman Cleaver, and
    members of the subcommittee, and thank you for this
    opportunity.
        I am Amber Arriaga-Salinas, assistant executive director at
    Proyecto Azteca. We are a nonprofit construction company based
    in San Juan, Texas, and our mission is to provide affordable
    housing for low-income families who cannot obtain a traditional
    mortgage. Our goal is to empower them to become responsible
    homeowners and move away from poverty to prosperity.
        Colonias are substandard, isolated developments where
    residents lack basic services like potable drinking water,
    sewage treatment, electricity, paved roads, adequate drainage,
    street lights, sidewalks, and decent housing. Cheap former
    agriculture land was sold to low-income families, and
    developers were not required to improve infrastructure. Health,
    safety, economic, and housing challenges plagued thousands of
    colonia residents by the end of the 1970s.
        There are approximately 200,000 people living in Hidalgo
    County colonias. They are industrious, hardworking, and family-
    oriented people, but it is not uncommon for residents to work
    multiple jobs to make ends meet. There is a low rate of
    conventional homelessness, but we do see a great deal of
    overcrowding.
        In 1996, the State legislature began to implement model
    subdivision rules, where many improvements were made, but
    colonias still lack safe, decent, and affordable housing.
        There is a great deal of persistent poverty despite decades
    of economic growth. In 1977, research showed that 40 percent of
    families were living in poverty, but today, we believe that it
    has not changed.
        The McAllen and Edinburg metropolitan areas are some of the
    poorest in the country. There is very limited public
    transportation, and owning a vehicle is a necessity for colonia
    residents in order to maintain a job, go to school, shop for
    groceries, and visit the doctor.
        Drainage improvements cannot keep up with the rapid growth.
    As buildings, parking lots, and highways grow, there is less
    space to divert water. And because colonias are isolated, the
    issues are magnified. There are many health challenges
    associated with flooding, such as diseases and increased mental
    distress.
        Although the infrastructure is poor in colonias, we did see
    a great deal of improvements in great part due to the Colonia
    Ombudsman Program that the State unfortunately vetoed in 2016.
    Housing is the most important component that determines a
    family's quality of life, and communities cannot thrive when so
    many live in unstable conditions. We ask that a program like
    the State Colonia Ombudsman Program be revived in order to
    track improvements. And colonias would have a greater
    opportunity to address affordability, equity, and
    sustainability problems if the term, ``colonia,'' were included
    in the Federal Housing Finance Agency's (FHFA's) Duty to Serve
    (DTS) definition.
        Build Back Better and the American Rescue Plan moneys
    provided great relief for the families that we serve. However,
    Federal dollars are designated to address homelessness and
    rental assistance, and the definitions do not address the needs
    of housing in colonias. Rental units are limited for families
    in colonias. Rental vouchers outside city limits are not
    available. Rentals in colonias actually consist of travel
    trailers parked on lawns. Funds should be set aside in order to
    specifically address the unique need for affordable housing and
    community development in colonias.
        [The prepared statement of Mrs. Arriaga-Salinas can be
    found on page 28 of the appendix.]
        Chairman Cleaver. Thank you very much.
        Mr. George, you are now recognized for 5 minutes to give an
    oral presentation of your testimony.

          STATEMENT OF LANCE GEORGE, DIRECTOR OF RESEARCH AND
             INFORMATION, HOUSING ASSISTANCE COUNCIL (HAC)

        Mr. George. Thank you.
        Chairwoman Waters, Chairman Cleaver, Ranking Member Hill,
    and members of the subcommittee, greetings, and thank you for
    this opportunity to testify on the issue of persistent poverty
    in America.
        My name is Lance George, and I am the director of research
    and information at the Housing Assistance Council. The Housing
    Assistance Council, often referred to by our acronym HAC, is a
    national nonprofit corporation that supports affordable housing
    efforts in rural areas of the United States and the
    Territories. Inherent to HAC is our longstanding attention to
    persistently-poor rural areas and people. HAC's efforts in
    these communities have been at the core of our work since our
    founding over 50 years ago.
        In addition to HAC's direct services, we continually assess
    and study the issue of persistent poverty to help inform
    strategies and solutions for these important communities. We
    know the members of this subcommittee are knowledgeable on the
    issue of persistent poverty, but we wish to highlight five
    quick trends that we believe are key to improving social,
    economic, and housing conditions in these communities.
        No. 1, areas of persistent poverty are not random, and are
    geographically-clustered. While seemingly invisible to much of
    the nation, persistent-poverty counties make up one-tenth of
    all counties and 15 percent of our nation's land mass.
        No. 2, persistent-poverty areas are fluid. According to
    HAC's recent estimates, 70 counties moved off of the
    persistent-poverty list, while 13 countries newly reached this
    threshold. But approximately 78 percent of current persistent-
    poverty counties have been in that state consistently since
    1980. Although, I would note there has been a dramatic
    reduction in these counties over the last 40 or 50 years.
        No. 3, poverty is not new to the Territories. Because of
    the focus of this hearing, HAC would also like to highlight
    that, for the first time, we calculated persistent-poverty
    status for Puerto Rico. All 78 of Puerto Rico's municipios were
    classified as having persistent poverty in 2020.
        No. 4, race and ethnicity are closely aligned with the
    persistence of poverty. Sixty percent of people living in
    persistent-poverty counties are people of color, and 42 percent
    of persistent-poverty counties have majority populations of
    color.
        And finally, trend No. 5, the visible impact of economic
    distress is evidenced in the housing conditions in these
    communities. The incidents of housing units lacking adequate
    plumbing is twice the national rate, and over 380,000
    households in persistent-poverty counties live in crowded
    conditions. Additionally, more than half of persistent-poverty
    renters experience affordability challenges. Mortgage and
    housing finance are similarly unbalanced. Low levels of loan
    applications and loan originations and high rates of loan
    denials and high-cost lending are prevalent in many persistent-
    poverty counties.
        Persistently-poor communities face regional and local
    challenges, yet importantly, have unique assets, strengths, and
    opportunities to combat geographic inequality. HAC recommends
    proactively considering geographic factors in Federal
    policymaking.
        In our experience, and given the persistent-poverty
    landscape outlined before, there are two critical factors
    necessary to build equity in persistently-poor rural places.
    The first is just local organizational capacity. The second is
    access to capital. Additionally, tailoring the Federal
    resources and improving the reliability and availability of
    rural data would also improve equity for persistent-poverty
    communities. An example of this importance of data are HAC's
    development of the colonias investment areas. This research
    created a usable and programmatic definition of, ``colonia,''
    so that mortgage and housing finance resources can be more
    efficiently directed to colonia communities.
        In closing, I would ask for indulgence from the
    subcommittee to add a personal note. I grew up and lived the
    first 18 years of my life in Lewis County, Kentucky, a
    persistently-poor county in Appalachia, that has experienced
    very high poverty rates since the 1960s and before. I wish to
    be clear, I did not live in poverty as a child, but I have
    family, friends, and acquaintances who were poor, and continue
    to live in poverty in the place that I love. And while the
    residents of Lewis County, like those from every persistent-
    poverty community, suffer from distressed economies,
    underresourced assistance, and disinvestment, but they also
    have a rich cultural history, perseverance, and a deep sense of
    pride in their community, and I share that pride.
        Through this paradox of perseverance and pain, HAC
    appreciates the subcommittee's attention and motivation to
    provide meaningful change to the condition of persistent
    poverty in rural America. And the Housing Assistance Council,
    in collaboration with our community partners, stands ready to
    assist Congress in this goal.
        Thank you again for this opportunity to testify.
        [The prepared statement of Mr. George can be found on page
    58 of the appendix.]
        Chairman Cleaver. Thank you, Mr. George.
        Mr. Potterpin, you are now recognized for 5 minutes to give
    an oral presentation of your testimony.

    STATEMENT OF CHRIS POTTERPIN, PRESIDENT, COUNCIL FOR AFFORDABLE
                        AND RURAL HOUSING (CARH)

        Mr. Potterpin. Thank you.
        On behalf of the Council for Affordable and Rural Housing,
    or CARH, I would like to thank you for the opportunity to
    provide this testimony in support of the efforts to address
    chronic disinvestment in the colonias, the southern Black Belt,
    and the U.S. Territories.
        CARH focuses on housing investments and providing
    affordable housing, and that is going to be the focus of my
    testimony.
        CARH is an industry trade association with headquarters in
    Alexandria, Virginia, representing the interests of for-profit
    and non-profit builders, developers, management companies, and
    owners, as well as financial entities and suppliers of goods
    and services to the affordable rental housing industry in rural
    America. My company, PK Companies, based in Michigan, develops,
    manages, and owns approximately 5,000 units of affordable rural
    housing units in about 8 States. We are a second-generation
    company that is committed to efficient, effective, and
    affordable rural housing.
        The members of this committee and the other witnesses have
    done a great job of describing the problem that the southern
    Black Belt, the colonias, and the U.S. Territories are facing,
    and I believe that these problems are expressed throughout all
    rural areas in this country. And there continues to be an
    overwhelming need for both affordable and decent housing.
        The lack of safe and decent housing in rural America is one
    of the greatest contributors to the challenge of poverty. The
    lack of affordable housing reflects the lack of investment in
    these localities more broadly. In fact, rural renters are more
    than twice as likely to live in substandard housing compared to
    people who own their own homes.
        In these areas, we are losing our affordable units. Loss of
    federally-assisted multifamily housing means losing a finite
    resource, and that trend is contributing to challenges in rural
    areas. Most areas never had enough decent, safe, or affordable
    housing, and increasingly, those that did, are losing this
    resource.
        The adverse effects of housing instability, as I said, have
    been covered well in this hearing already, but I want to
    highlight that the number-one impact is on the education and
    health of the country's greatest asset--the children--and it
    has been well-documented.
        Neither the private nor the public sector can produce
    affordable rural housing independently of one another. There
    needs to be a partnership. We actually have a very good Federal
    program built to address this already. Federal programs have
    been very effective, when properly funded and supported with
    technology and government staff. But too often, these programs
    focusing on rural areas have been shorted as compared to their
    urban counterparts, and the agencies have been limited on staff
    levels and training resources.
        Specifically to housing in rural areas, we are talking
    about the USDA Rural Development Program, specifically the
    Sections 514 and 515 loan programs and Section 521 rental
    assistance. They were reasonably well-funded from their
    inception up until the mid-1990s, and produced a large number
    of housing units in rural areas. Since the mid-1990s, these
    programs have not seen proper funding. The majority of the
    existing projects that were built are now 30-plus-years old,
    with no way of preservation or rehabilitation outside of the
    housing tax credit, which predominately goes to urban areas or
    suburban areas.
        We are already losing our affordable housing projects. We
    are down to less than 14,000 projects and properties. Over the
    next decade, as many as three-quarters of all Section 515
    mortgages will mature, and with it, the end of rental
    assistance for the folks in those properties, and that will
    affect approximately 250,000 families and elderly persons,
    leaving them without the ability to house themselves.
        In 300 counties, Section 515 properties are the majority of
    project-based subsidized units, and 90 percent of all Section
    515 properties are in counties with persistent poverty. We do
    have some tools available to help this problem. Rural
    development rental housing programs and the housing credit
    program are the best tools we have to develop more housing
    units from the housing that we have. Section 521 is rental
    assistance for [inaudible] programs and currently subsidizes 63
    percent of the 515 units that are created. We need to increase
    this number to 100 percent.
        Almost all of the residents who live in 515 housing that is
    not subsidized are overburdened, and that is a key tool to
    preserving the housing and using outside private resources to
    rehabilitate and preserve this housing for the next 30 years,
    and stop it from becoming market-rate housing and losing it out
    of the program.
        Rural development needs more specific direction on how to
    use that rental assistance and using it for preservation of
    existing projects. We also need to modernize the housing credit
    to be more focused towards rural and allowed to use for more
    rural projects. We need to allow LLCs and S corps to
    participate more fully in the housing credit and support
    relief.
        I know that I am over now, but we do need to support the
    Rural Housing Office with technology upgrades. Some of their
    programs are still from the 1990s, and they need more staff
    there. They have been chronically-understaffed.
        On behalf of CARH, I would like to thank this committee for
    the opportunity to discuss rural housing issues with you today.
    And with a few relatively minor changes, we can apply the tools
    needed to continue successful partnerships in affordable rural
    housing. Thank you.
        [The prepared statement of Mr. Potterpin can be found on
    page 69 of the appendix.]
        Chairman Cleaver. Thank you for your testimony.
        I now recognize myself for 5 minutes for questions.
        I want to begin with Mr. Burt. Based on your testimony, you
    have a lot of experience in dealing with this issue. What would
    you like to see that could help spur sustainable homeownership
    opportunities for people in rural communities facing persistent
    poverty?
        Mr. Burt. I think we want to see more down payment
    assistance. Earlier in my testimony, I mentioned the
    Neighborhood LIFT Program. Through this program, we have been
    able to provide down payment assistance grants of up to $10,000
    for 359 Mississippians. Approximately one-quarter of the
    mortgages originated were located in rural communities, 90
    percent went to Black households, and 63 percent went to women
    head of household. This program is solid proof that down
    payment assistance is an opportunity to bridge the gap from
    renting to homeownership.
        We actually estimate that we can close the homeownership
    gap in the Deep South through funding the mortgages for 500,000
    people of color. Now, achieving such a goal would require the
    funding and maintenance of a flexible down payment assistance
    program. And to date, we have seen no other set of proposals
    with a greater potential to close this gap than the Downpayment
    Toward Equity Act. This Act appropriately targets down payment
    assistance to first-generation homebuyers, people most in need
    of an equity boost to get into a home. We also remain excited
    about that opportunity and look forward to more possibilities
    of increasing down payment assistance, particularly for rural
    communities, people of color, and communities that find
    themselves in persistent poverty.
        Chairman Cleaver. I agree with you. And I am wondering, Mr.
    Potterpin--I may have misunderstood you, but you were saying in
    your testimony that a great deal of the money went into the
    urban areas and a not so significant amount went into the rural
    areas. Did I interpret that correctly? Federal funds?
        Mr. Potterpin. In regards to the Low-Income Housing Tax
    Credit Program, yes. There are certain set-asides that provide
    housing in rural areas, but not compared to the population that
    lives in rural areas or reflecting the need or the challenges
    that the rural housing is facing.
        Chairman Cleaver. Yes. I represent, believe it or not, a
    large rural area of Missouri, and the problem is not--from my
    perspective; I am interested in yours--based on Washington
    making decisions about where the money is spent. The problem is
    based on the fact that we give the States Federal funds to do
    exactly what you said needed to be done. And my interpretation
    is that the problem comes with the State. And if the money goes
    into entitlement cities, CDBG, they go into entitlement cities,
    and probably in most States, there may be four or five
    entitlement cities, with the exception of Texas, California,
    and New York. But then these smaller communities have to go and
    fight it out--200 or 300 smaller cities have to go and fight it
    out in their State capitals, and even then they get a puny
    piece of the money.
        Mr. Potterpin. That is right.
        Chairman Cleaver. So if we are going to correct the
    problem, it needs to be with what is going on with the Federal
    allocation to the States because that is where the problem is
    most clearly seen. And I have been arguing this for a long time
    now, that we need to take a whole different view of this.
        Even if you have to get the Community Development Block
    Grant, the States will have to--since they are not entitled,
    they have to go out and fight a little community 5 miles down
    the road to get a new water tower. It is a horrible situation
    that needs to be corrected. This might not be exactly what this
    hearing is about, but this creates one of the biggest obstacles
    to providing at least--it still wouldn't be sufficient housing
    dollars or dollars to fight poverty, but it is a serious,
    serious problem.
        Thank you very much. My time is up.
        I now recognize the distinguished ranking member, Mr. Hill.
        Mr. Hill. Thank you, Chairman Cleaver. And first, let me
    thank you for your chairmanship of this subcommittee during
    this Congress, and for our work together and for your
    outstanding voice for the challenges in this subcommittee,
    particularly in housing and community development, with your
    background both in Congress and as a mayor. And while the bills
    that were noticed and attached to this hearing aren't partisan
    and had much bipartisan engagement, I would say, I hope in the
    coming Congress that we will be able to work effectively
    together in a bipartisan way.
        Mr. Chairman, I ask unanimous consent to enter two
    documents into the record, both from the U.S. Government
    Accountability Office. The first is entitled, ``Targeting
    Federal Funds, Information on Funding to Areas with Persistent
    or High Poverty,'' by GAO's Director of Financial Markets and
    Community Investment, Bill Shear, and others. It was issued in
    July 2020. And the second is also by Director Shear and his GAO
    colleagues. It is called, ``Areas with High Poverty, Changing
    how the 10-20-30 Funding Formula is Applied Could Increase
    Impact in Persistent-Poverty Counties,'' that was issued in May
    of 2021.
        Chairman Cleaver. Without objection, it is so ordered.
        Mr. Hill. Both of these reports are focused on economic
    development in areas with persistent or high poverty, and
    discuss how to improve ways various programs can target Federal
    funds, and overall transparency. And I would note that in the
    reports, GAO has found that HUD, USDA, and the Department of
    Commerce's Economic Development Administration (EDA) have not--
    and I am quoting from the report--incorporated leading
    practices for effective interagency collaboration in select
    economic development programs.
        Mr. George, what is your view of that? Could we do a better
    job of interagency coordination to laser-beam all of these
    programs into these counties?
        Mr. George. Thank you, Ranking Member Hill. I agree that
    there could be more coordination and more effort generally. I
    do think the agencies try really hard and are making sound
    investments in these communities. There are some instances that
    were noted in the testimony where there is a lack of adequate
    staffing and resources in some of these agencies to direct
    those funds, but by all means, we think collaboration is a good
    effort across-the-board among the agencies.
        Mr. Hill. Right. Thank you.
        Mr. Burt, first, please tell Bill Bynum hello for me. We
    were on the CDFI advisory board together in the early 2000s,
    and I enjoyed my association with him in overseeing the CDFI
    program at the Treasury. And thank you for being a good
    investor and partner in Arkansas with Hope Federal Credit Union
    and your nonprofit work.
        What is your view of that coordination, on down payment
    assistance? In Arkansas, in talking to the Arkansas Development
    Finance Authority, we have really, because of our--we use the
    bond program to replenish that--we effectively have more down
    payment assistance available than people applying for it, as a
    general statement. I don't want to say any given year, but we
    have a robust State program there.
        But how do you feel about the coordination of these Federal
    programs in persistent-poverty counties, and who stands out?
    Does the Delta Regional Authority help broker some of that, in
    your experience, in the Mississippi Delta?
        Mr. Burt. Absolutely, we do support the interagency
    collaboration in deploying funds to communities that are deep
    in poverty. One of the things that we like to highlight is
    making sure that Federal funds get to the communities that do
    the best work in serving these communities, as evidenced by the
    Emergency Rental Assistance Program, and in some cases, the
    Homeowner Assistance Program is that, at times, our States may
    have the inability, or unwillingness to effectively serve these
    communities.
        From our experience, we saw communities and households
    express challenges in accessing the Rental Assistance Program,
    whether due to an online application or having to have an email
    address or simply lacking access from State agencies that were
    managing the funds to actually access that critical relief.
        But in addition to that, what we also like to amplify is
    that, where there are opportunities, send these funds directly
    to CDFIs with the strongest track record. We have a good
    example of the ways in which CDFIs have the ability to
    encourage public and philanthropic dollars to make a difference
    in homeownership in real communities.
        This question reminds me of a story of Eastmoor,
    Mississippi, a small subdivision in Moorhead, which is a small
    town of about 2,000 people in the Delta. Around 1970, an
    Eastmoor subdivision was built right outside of the small town
    of Moorhead, hastily constructed. And in subsequent years, the
    sewage actually seeped into several yards and caused about 20-
    something homes to be either burned or destroyed.
        In 2015, HOPE put a branch there in Moorhead, and we
    reached out to several partners and got a grant from Goldman
    Sachs, got money from the HOME Fund, got money from the
    Department of Agriculture, and with a few of the philanthropic
    moneys, we were able to provide rehabilitated housing for that
    community. That was 44 houses rehabilitated. That was 44
    households that became homeowners.
        So when we talk about the ways in which agencies could
    collaborate or think about the ways in which we could bring
    about greater resources to these communities, you have to
    include CDFIs with a strong track record and you have to
    include getting the money directly to them.
        Mr. Hill. Thank you, Mr. Burt. My time is over, but thank
    you. I thought your answers were very, very helpful. And I
    yield back, Chairman Cleaver. Thank you for the hearing.
        Chairman Cleaver. Thank you.
        I now yield to the Chair of the full Financial Services
    Committee, Chairwoman Waters.
        Chairwoman Waters. Thank you very much.
        Since Mr. Hill started talking about whether or not there
    is cooperation between the agencies, and Mr. Burt, you
    mentioned how it became difficult to get rental assistance out
    into the community, let me ask you, do you believe that poor
    communities that do not have access to computers, do not have
    access to the technology that is oftentimes needed in order to
    make application for some of what we are sending to the cities
    or the counties or the States, and what do you think we can do
    about that, if you believe that is true?
        Mr. Burt. I do think it is a challenge. That has come from
    my experience being on the ground with communities trying to
    access the rental assistance programs. One of the things we
    want to do is partner with organizations and also raise
    advocacy efforts to get those technologies to these
    communities, and even more importantly, making sure that these
    programs are just simply accessible to the communities where
    they are.
        Simply put, when we construct policies and construct these
    Federal programs that we put under the jurisdiction of the
    States, we want to make sure the States are doing what they
    need to do to make sure the most-vulnerable communities have
    access to these critical funds in a post-COVID reality.
        Chairwoman Waters. Thank you very much.
        Mr. George, how would housing and community development
    investments, like the more than $150 billion my committee
    secured in the Build Back Better Act, help alleviate persistent
    poverty in rural America? And what more can we do to ensure
    that existing Federal housing resources really reach poor rural
    communities?
        Mr. George. Thank you, Chairwoman Waters. I would like to
    follow up on Mr. Burt's comments, candidly, and say that our
    number-one strategy that we posed was organizational capacity.
    At the Housing Assistance Council, we work with local,
    community-based organizations, nonprofit organizations,
    municipalities, Tribal entities, and some for-profit
    developers. And candidly, they know what is best for their
    community. We just try to enhance their services and their
    ability to provide those services. But they are trusted actors
    in these communities, and I applaud the subcommittee for
    including many of these entities in this discussion. These are
    valuable partners that we work with every day and they really
    know their communities.
        So, I think our goal is to enhance those funds to enhance
    the capacity of those local community-based organizations. For
    example, the Housing Assistance Council uses vital resources
    from HUD's Rural Capacity Building grant, and we have made
    valuable investments in many of these organizations, which is--
        Chairwoman Waters. Of the $150 billion that we worked so
    hard for, to get out to assist the housing needs of this
    country, everything from Section 8 vouchers, to money to deal
    with the renovation and repair of public housing, and on and on
    and on, how much would that have helped the poverty in some of
    the communities with which you deal?
        Mr. George. It obviously would have been an immense help.
    It is almost incalculable. But obviously, these communities
    need all the assistance and all the directed targeted
    assistance that they can handle.
        Chairwoman Waters. We are going to continue to fight for
    housing, despite the fact we did not get the support that was
    needed from the opposite side of the aisle.
        But on this issue of whether or not the resources we worked
    so hard for, if we get them signed by the President, they go
    out to the communities. We still have poor communities who are
    not able to access these resources for lack of computers and
    technology. And I had to call in Legal Aid in Los Angeles and
    set up meetings and get people into board rooms, et cetera, to
    try and help people who needed it so desperately.
        What are we going to do? Do we have enough nonprofits that
    can basically utilize these resources and get them out to the
    persistent-poverty communities, or do we need to set up some
    brick-and-mortar offices and locations with big signs on them
    so people can come and get some help for the utilization of the
    resources? What do you think? How are we going to do it?
        My time is running out. I know you have some answers.
        Mr. Burt. I was about to say, I will take it. Again, I
    think the point to be made is that we want to make sure that
    State leadership is doing all that they can to reach the
    communities that are most in need. When you talk about the
    challenges around broadband and technology, money has already
    been deployed to get these communities the technology that they
    need. So, some of this is on nonprofits, but the brunt of the
    responsibility lies on the administrating authority over the
    fund.
        And I would say that we can continue to put pressure on our
    States to do right by the communities that need it, with
    research, advocacy, and data. And I think that may be one of
    the best ways forward.
        Chairwoman Waters. Thank you. And thank you, Mr. Chairman.
        Chairman Cleaver. Thank you.
        The gentleman from Tennessee, Mr. Rose, is now recognized
    for 5 minutes.
        Mr. Rose. Thank you, Chairman Cleaver and Ranking Member
    Hill, for holding this hearing.
        According to the Majority's memorandum for this hearing,
    the focus of the hearing is intended to explore persistent
    poverty in regions that are predominantly rural, so I believe
    that it would have been a good idea for us to have the Rural
    Housing Service Administrator testify.
        I will note that this committee has not had a Biden
    Administration official testify since July 20th. Thankfully,
    that is changing tomorrow, when we will have the bank
    regulators coming before the committee, but this cannot
    continue. One of our core responsibilities as Members of
    Congress is oversight, and we cannot conduct adequate oversight
    when the Majority is shielding the Administration from
    scrutiny.
        As my time is limited, I will dive right into my questions.
    In my district in Middle Tennessee, 12.9 percent of total
    occupied housing units are manufactured homes. Manufactured
    housing is an affordable homeownership option available
    nationwide for minorities, the underserved, and low-income
    borrowers.
        USDA Section 502 offers Federal backing for loans issued by
    approved private-sector lenders to low- and moderate-income
    families for purchased, construction, or rehabilitation of
    modest homes. Eligible borrowers can obtain financing for up to
    100 percent of the appraised value of the home. New
    manufactured homes are currently eligible for financing through
    the Section 502 program, but existing homes are not.
        Mr. Potterpin, do we need to make sure that the USDA
    Section 502 program better supports manufactured housing so
    that more low- and moderate-income rural Americans can access
    financing to purchase manufactured homes?
        Mr. Potterpin. Absolutely. I think that we need to make
    sure that all of USDA's programs--502, 514, 515--have better
    funding and more access to folks to provide more housing units
    and to preserve more housing units.
        Mr. Rose. Thank you. I believe that we need broad-based
    solutions to increase our housing supply to meet demand. This
    includes both single and multifamily options.
        Regarding multifamily, research from the National
    Association of Home Builders and the National Multifamily
    Housing Council notes that regulations imposed by all levels of
    government account for an average of 40.6 percent of
    multifamily development costs.
        Mr. Potterpin, do you believe that when multifamily
    development costs rise, it translates to higher rents and
    reduced rental housing affordability?
        Mr. Potterpin. Yes, it does. And I would also add that
    rural areas are impacted even more because their rents are
    typically lower, but when the costs rise, as they do
    everywhere, and we have less options for contractors or
    competitive bidding, they are feeling the impact even greater.
    And the rents go up a greater percentage. That is why it is
    important to improve rental assistance and the amount of
    assisted units and have more access for these funds.
        Mr. Rose. And just to reiterate, Mr. Potterpin, do you
    believe that multifamily development could help improve the
    supply of affordable housing in rural areas?
        Mr. Potterpin. No question at all. Yes. It is desperately
    needed in almost every rural area. And with minimal investment
    into these programs, we can leverage private dollars on an
    average of $7 to $11 for every dollar invested to create more
    units.
        Mr. Rose. The Community Development Block Grant (CDBG)
    program was created to help urban areas modernize and respond
    to the blight and decay that plagued cities in the 1970s. The
    authorizing statute states that the primary objective of the
    law was to establish the development of viable urban
    communities. Since then, cities now have far greater access to
    economic development and services than their much smaller rural
    neighbors.
        Mr. Potterpin, does it make sense to update the mission and
    purpose of the CDBG program so that it also focuses on the
    unique challenges of rural Americans living in the 21st
    Century?
        Mr. Potterpin. CARH would welcome this being addressed. The
    challenges of rural are different and sometimes greater than
    those facing their urban counterparts, and I think we need to
    update this to give easier access to these funds, as was noted
    elsewhere in this hearing. Rural municipalities often have less
    resources to pursue funds and compete for funds than their
    urban counterparts, so they are at a disadvantage, and they
    need more assistance in doing so on a level playing field.
        Mr. Rose. Thank you. And, Mr. Chairman, I see my time has
    expired, so I yield back.
        Chairman Cleaver. The gentleman yields back.
        The gentlewoman from New York, Ms. Velazquez, who is also
    the Chair of the House Committee on Small Business, is now
    recognized for 5 minutes.
        Ms. Velazquez. Thank you, Mr. Chairman, and Mr. Ranking
    Member, for this important hearing.
        Professor Bonilla, I agree with you in terms of how poverty
    in Puerto Rico is directly linked to the colonia situation in
    Puerto Rico, and that Congress has a responsibility for
    resolving this issue.
        Following Hurricane Maria in 2017, under President Trump's
    leadership, HUD imposed unique restrictions and stalled almost
    $20 billion in Federal disaster funding to Puerto Rico.
    President Biden has since removed this restriction. But can you
    explain how President Trump's decision to set up roadblocks and
    make it difficult for Puerto Rico to access disaster funding in
    2017 has compounded its current recovery efforts?
        Mr. Bonilla. Yes. Thank you, Congresswoman. The Trump
    Administration engaged in practices of overscrutiny of
    applicants of color and put excessive barriers on applications
    for aid on behalf of both individuals and the Puerto Rican
    Government. Some of these measures were placed in the name of
    preventing corruption, but it is important to mention that the
    only people who have been accused of corruption in the wake of
    Maria have been FEMA agents and contractors.
        The delay of Federal aid and of Federal assistance programs
    to which Puerto Ricans are fully entitled as residents of the
    U.S. Territories has caused incalculable damage to a society
    that was already, as I mentioned, experiencing 40-percent acute
    poverty, and that had already been facing measures of
    austerity, that had dismantled the education system, public
    infrastructure, and other public services that were then unable
    to respond and be available to citizens in the time of
    immediate emergency.
        At the Center for Puerto Rican Studies, we call for greater
    scrutiny of these FEMA practices and the practices of other
    government agencies that should be assisting Puerto Ricans in
    their time of need.
        Ms. Velazquez. Thank you. Professor, one of the issues
    facing Puerto Rico after the most recent hurricane is the lack
    of specific data on how low-income Black and rural communities
    remain at a disadvantage on the island.
        What should Congress do to immediately address this
    information gap so it can enhance long-term investment in these
    communities?
        Ms. Bonilla. The first issue is that we need clarity on why
    certain government agencies just suddenly stopped providing
    data for the Territories. One example is the American Housing
    Survey, which just stopped being done in Puerto Rico after
    Hurricane Maria, at a time when this information was the most
    necessary for documenting the challenges of local residents.
        A second example is the Household Pulse Survey, another
    important survey, which not one Territory has participated in.
        We also need greater data related to FEMA claims. It is
    difficult to know where and who was denied and who did not have
    access to aid; 60 percent of applicants were denied, and there
    is really no transparency as to how those decisions were made.
        I should also add that Federal agencies should be working
    with local groups to make sure that the existing mechanisms are
    adequate for the Territories. A primary example is the U.S.
    Census, which in 2020 suddenly added a race question in Puerto
    Rico with inadequate categories and inadequate education
    campaigns. So, we really stress the need for that, yes.
        Ms. Velazquez. Yes. Although FEMA updated its policy last
    year to allow homeowners to self-certify their ownership,
    reports from the ground indicate that FEMA is wrongfully
    denying assistance to eligible survivors of Hurricanes Fiona
    and Ian.
        Wouldn't you agree that it is not enough for FEMA to simply
    change its policy, but it also needs to act with recovery
    partners on the ground to ensure Puerto Rico homeowners get the
    assistance to which they are entitled?
        Ms. Bonilla. Absolutely. We have seen that simply
    [inaudible] is not enough. The community organizations on the
    ground are reporting that we are seeing the exact same issues
    of lack of Spanish translation at FEMA sites, of lack of
    interpretation for deaf communities, and of overscrutiny and of
    a demand for documentation that is not actually necessary to
    apply for aid.
        As one of my colleagues in Puerto Rico says, FEMA must
    learn how to learn; that is, they cannot be impervious to
    changes made at the top, that are announced, and need to
    somehow trickle down so that we actually see them applied and
    in action. And we feel strongly that it is only by working in
    partnership with community watchdogs that we can actually
    ascertain if these changes are being implemented.
        Ms. Velazquez. Thank you.
        Mr. Chairman, I yield back.
        Chairman Cleaver. The gentlewoman yields back.
        The Chair now recognizes the gentleman from Wisconsin, Mr.
    Steil, for 5 minutes.
        Mr. Steil. Thank you very much.
        I want to thank the chairman and the ranking member for
    holding today's hearing. Entrenched multigenerational poverty
    is an incredibly serious challenge in many parts of our
    country. It is true of the areas listed in the hearing title,
    but it is also true in rural and urban communities in
    Wisconsin, in my home State.
        As many of you may know, or some of you may know, I am the
    ranking member on the Select Committee on Economic Disparity
    and Fairness in Growth, what I call the economy, and we have
    really dug into the impact of the persistent poverty that is
    plaguing far too many American families.
        Interestingly, in one of the areas we went to, a colonia in
    Texas on the U.S.-Mexico border, we saw kind of the direct
    impacts that the failure to secure the U.S.-Mexico border has
    had on a lot of the local communities in Texas, where they are
    expending resources at the local and State levels for what
    should be a national solution to that challenge that actually
    would be far better off serving many of the people who are
    suffering from the topic we are discussing today.
        Let me shift gears slightly to you, Mr. Potterpin. Your
    company specializes in developing projects using Low-Income
    Housing Tax Credits, Historic Preservation Tax Credits, and New
    Market and Opportunity Zone Programs.
        Could you offer a few recommendations and improvements to
    those programs that make it easier for developers to add
    affordable units in more challenged communities?
        Mr. Potterpin. Absolutely. Thank you. A lot of the changes
    that I would recommend were actually proposed and still exist
    in the Affordable Housing Credit Improvement Act. That Act
    would have expanded the 9-percent Housing Tax Credit by 50
    percent, and also would have increased rural basis boost. We
    were offered a rural basis boost of up to 30 percent, offering
    more credits to those, and that is essential to allowing real
    deals to compete federally on bond deals, 4 percent credit
    deals where many of the rural deals with lower rents don't
    pencil for those types of credits. That development deals don't
    make sense with a 30 percent boost, many deals now would and
    would offer preservation.
        Additionally, one other thing that is being discussed right
    now that would be very helpful is reducing the bond test from
    50 percent to 25 percent, essentially doubling the capacity of
    4 percent credits in each State. Many States which are now
    using all of their allocation, all of these would offer a lot
    more units and, again, leverage a lot of private dollars to
    provide those.
        Mr. Steil. Thank you very much, Mr. Potterpin. Let me shift
    gears somewhat significantly. We talked a lot about government
    intervention in our more-urban areas or denser-population
    areas. I know your business also does a lot of work in rural
    America.
        Shifting away from just government support, what are the
    chief problems you encounter when your firm is investing in
    rural communities, and what can be done to encourage more
    investment in more-rural or less-densely populated areas?
        Mr. Potterpin. I think a lot of what we are facing,
    especially in the affordable housing world, where we have to
    work with the communities very closely, sometimes we need--we
    are offering lower-rent communities, so we need tax abatement
    or other assistance or at least cooperation from those
    communities. And those communities often don't have the staff
    or the resources that urban communities do to facilitate the
    development and make a more open--
        Mr. Steil. Let me push you there just a little bit, if I
    can. What areas outside of government intervention might be
    helpful, particularly in rural areas, understanding the impact
    that tax structuring can have?
        Mr. Potterpin. Sure. In many areas, most communities are
    often dependent on one big supplier or job supplier, so those
    areas are dependent on that and it is hard to underwrite or
    solicit investment. So if we can find ways to broaden the
    supply base of jobs and the infrastructure, especially
    infrastructure where it is hard to--oftentimes we are coming
    from--if we are looking to develop in rural communities, the
    water infrastructure, the broadband infrastructure, the other
    infrastructure that is necessary to provide amenities and
    provide housing for those residents, it does not exist. Other
    ways to do that would be to improve that infrastructure there,
    or we can work directly with job suppliers.
        Mr. Steil. Thank you very much, Mr. Potterpin. I appreciate
    you and all of our witnesses here.
        Mr. Chairman, thank you for holding today's hearing. I will
    yield back.
        Chairman Cleaver. The gentleman yields back.
        The gentlewoman from Ohio, Mrs. Beatty, who is also the
    Chair of our Subcommittee on Diversity and Inclusion, is now
    recognized for 5 minutes.
        Mrs. Beatty. First of all, let me say thank you, Mr.
    Chairman, and thank you to the witnesses present and on the
    screen. Thank you for allowing us to have the opportunity to
    take a look at persistent poverty in America in those areas as
    cited in the hearing.
        Let me also say thank you--I am sorry our Chair of the Full
    Committee is not here, but certainly we did hear from the Biden
    Administration, and most of us will know that no one has been a
    bigger advocate for housing than Chairwoman Maxine Waters, and
    you, Mr. Chairman.
        And I was very pleased when our HUD Director came before
    the Financial Services Committee--Biden's Administration, just
    for the record--and talked about the $3.8 billion in CDBG, and
    also specifically said that their area of interest in housing
    included working in those underserved areas in cities, small
    towns, and rural areas. So, I think we know where the Biden
    Administration stands on that.
        My first question will go to you, Mr. Burt. And I want to
    make the connection to when we talk about housing, especially
    in the southern States, that we tie it to the racial wealth
    gap. And certainly, we know that it is important to increase
    homeownership for Black Americans. When we think about places
    like Mississippi and Tennessee and Arkansas, I noticed that
    most of you talked about those southern States and talked about
    the percentage of poverty for the nation coming from those
    southern States in rural areas.
        The renowned Bryan Stevenson said, ``The opposite of
    poverty is not wealth, but it is justice.'' So when I look at
    homeownership, I look at the disparities, I look at whether
    those are in Black communities, and in urban or rural areas.
    Certainly, a lot of our Members represent rural areas and also
    are members of the Congressional Black Caucus.
        Can you explain why median home values in Black communities
    are significantly lower than outside of the Black Belt and the
    effect that has had on the racial wealth gap?
        Mr. Burt. Yes, I can. Effectively, in the Deep South, this
    is the region that holds the Black Belt, these counties that
    are majority persons of color. It is not unusual to see that
    they have higher rates of homeownership in the region, given
    that a lot of the housing stock is actually passed down
    generation to generation.
        The issue is that because of historical challenges of,
    again, financial lending exclusion, redlining, and the lack of
    access to affordable mortgages, the quality of housing hasn't
    kept up with the pace of homeownership.
        Said more simply, in Black communities that are in
    persistent poverty, and in rural counties, people may have a
    house, but they don't have the capital, or the access to
    capital to get renovations, or they don't have the access to
    get capital to pull equity and increase the equity out of the
    same housing stock.
        In short, what we see with homeownership is we actually see
    that it is really a function of the lack of affordable
    mortgages. And even beyond that, when we talk about persistent-
    poverty counties, we realize that of the 158 counties that have
    an unbanked and underbanked rate of 1\1/2\ times the national
    average, 75 percent of those counties are persistent-poverty
    counties.
        Again, persistent-poverty counties in our region are
    majority persons of color, and they are more likely to be
    rural. What we see is an intersection of the compounding impact
    of the lack of investment into these communities. So, it is
    affecting not only their ability to get a home mortgage, become
    a homeowner, but also--
        Mrs. Beatty. I am going to have to stop you, because my
    clock is running out, but that was very helpful.
        Mr. George, kind of to segue from that, what do you think
    are some of the things we can do to boost homeownership in the
    southern Black Belt regions?
        And I say that because we know the small number of Minority
    Depository Institutions (MDIs) that we have, and Community
    Development Financial Institutions (CDFIs). What are some of
    the things you think we can do?
        Mr. George. Thank you, Congresswoman. Obviously, to
    reiterate the comment, access to capital is a major strategy,
    and notably, what we would call good capital, improved
    resources to USDA's Rural Development Service, so borrowers can
    get good quality loans and not access to subprime loans or
    chattel loans in many cases.
        Mrs. Beatty. My time has run out, but you can respond more
    in writing, if you like. Thank you.
        Mr. George. Okay. Thank you.
        Mrs. Beatty. I yield back, Mr. Chairman.
        Chairman Cleaver. Thank you. The gentlewoman yields back.
        The Chair now recognizes the gentleman from San Diego, Mr.
    Vargas, for 5 minutes.
        Mr. Vargas. Thank you very much, Mr. Chairman, and I thank
    the ranking member and all of the witnesses today.
        HUD defines colonias as communities located within a 150-
    mile region along the U.S.-Mexico border that, ``lack adequate
    water, sewer, or decent housing, or a combination of all
    three.''
        Mrs. Arriaga-Salinas, you noted that colonias suffer from
    persistent poverty, limited access to healthcare and public
    transportation, and flooding due to lack of adequate
    infrastructure. What can Congress do to prioritize the voices
    of individuals who live in your community as well as colonias?
        In my home State of California, my district is the entire
    California-Mexico border, and all of it is within 150 miles of
    the border. What can we do?
        Mrs. Arriaga-Salinas. I think that there are quite a few
    things that can be done. Coming from a nonprofit, I think
    giving opportunities to nonprofits and local voices is very
    important.
        For colonias, I think the challenges are very unique. There
    are moneys that were mentioned today that would assist with
    rental assistance or to make other developments. However, in
    colonias, we cannot use vouchers for that because people are
    renting a dilapidated mobile home or a shed. That is their
    rental unit. There is no way for them to be able to access
    vouchers when that is their option.
        There aren't enough funds for people to rehabilitate their
    homes. And one of the challenges that we see is that as these
    colonias are annexed into cities, they are not seeing the
    benefits. They are not seeing the infrastructure improvements,
    but their taxes are going up. And I think that when a colonia
    is no longer under that designation, but they are annexed into
    the city, the term, ``rural,'' goes away.
        We are not allowed to use rural development moneys, 502s
    and things like that, because there is population growth, but
    the housing and the infrastructure has not changed, and I think
    that is something that absolutely needs to be addressed.
        When the term, ``colonia,'' dissipates the amount of funds
    that we are able to use, that makes it much more challenging.
    So, I think that recognizing the unique problems in colonias
    would make a great deal of change.
        Mr. Vargas. First of all, thank you for that answer. But
    let me challenge you a little bit on the definition of,
    ``colonia,'' because, again, the definition helps in my
    district, but frankly, the Central Valley of California has
    what I would consider colonias, but it is beyond the 150-mile
    area of the border.
        Do you think that some of those areas should be designated
    as colonias? Why or why not?
        Mrs. Arriaga-Salinas. I absolutely do. I recognize that
    communities that haven't been able to improve their
    infrastructure need the change, because if there is severe
    weather that affects them, and the infrastructure is not in
    place to address that, then the potential damage is just
    magnified. And I feel that would be very beneficial.
        Mr. Vargas. Often, severe weather in central California is
    the lack of water. So it is not the flooding because there is
    too much water; it is the lack of water. It goes the other way.
        Mr. George said that the $150 billion that we put in the
    Build Back Better Act that our Chair fought so hard for would
    help immensely, almost incalculably.
        Mr. Potterpin, you also said that the leverage ratio would
    be 1 to 7 in some instances. Could you tell us then what you
    think, Mr. Potterpin, that money could have gone for or how
    helpful it would have been for this persistent poverty?
        Mr. Potterpin. I concur with Mr. George. Almost
    incalculable, the amounts that were talked about when looking
    at those budgets for Build Back Better. Specifically, in the
    Rural Development, what was slated for the rural development
    budget at that point for the 515 and 521 programs was almost 20
    years of normal funding in 1 year, and it would have--these
    properties are falling behind through deferred maintenance
    every year. There is not enough money to even maintain what is
    there, and this would have put them back on the right track for
    preserving its entire portfolio.
        Mr. Vargas. I am running out of time. Thank you very much.
    I hope we do that. I think the problem was the name. We should
    call it the Republican plan and just pass it.
        Thank you again, Mr. Chairman. I appreciate it.
        Chairman Cleaver. Thank you.
        The gentleman from New York, Mr. Torres, is now recognized
    for 5 minutes.
        Mr. Torres. Thank you, Mr. Chairman.
        I have several questions and comments directed toward Ms.
    Bonilla. One of the root causes of persistent poverty in Puerto
    Rico is the Insular Cases, which, to me, represents a
    continuation of Jim Crow. Denouncing the Insular Cases as a
    vestige of Jim Crow is not hyperbole, it is a statement of
    historical facts. The Supreme Court that gave us Plessy v.
    Ferguson and the doctrine of separate but equal is the same
    court that gave us the Insular Cases, which imposes second-
    class status on the U.S. citizens of U.S. Territories.
        There are more than 3 million American citizens of Puerto
    Rico deprived of equal protection simply because those citizens
    happen to live in an unincorporated Territory, which is a
    second-class status fabricated by the United States Supreme
    Court.
        The term, ``unincorporated Territory,'' appears nowhere in
    the actual text of the Constitution, yet the self-proclaimed
    textualists and originalists on the Supreme Court seem to be in
    no rush to overturn the Insular Cases. How telling.
        As you know, Ms. Bonilla, the Insular Cases enable the
    Federal Government to discriminate against the American
    citizens of Puerto Rico. The American citizens of Puerto Rico
    are excluded from SSI, excluded from SNAP, excluded from their
    fair share of Medicaid funding, and excluded from far too many
    programs to enumerate.
        Do you think there is a single State in the United States
    that could absorb the fiscal shock of losing all of its SSI
    funding, all of its SNAP funding, and most of its Medicaid
    funding? Can you think of a single State that could absorb
    those fiscal shocks?
        Ms. Bonilla. Obviously not.
        Mr. Torres. Is it reasonable to expect Puerto Rico to
    suffer fiscal conditions and constraints that not even the
    wealthiest States like New York or California could survive?
        Ms. Bonilla. Absolutely not.
        Mr. Torres. And the Federal Government denies Puerto Rico
    access to Federal programs that are crucial to the fiscal
    solvency of just about every State.
        Is it fair to say that the United States, by denying the
    island access to that which is essential, has essentially set
    up Puerto Rico to fail?
        Ms. Bonilla. It has set it up to fail, but it has set it up
    to succeed as a colony, which is what the United States wishes
    to hold it as since it is what it continues to replicate in
    Puerto Rico and in the other U.S. Territories.
        Mr. Torres. Do you believe, as I do, that overturning the
    Insular Cases is necessary for the recovery of the island?
        Ms. Bonilla. Honestly, this might surprise you, but I don't
    think it is necessary because it is, in fact, just an excuse. I
    think it would help to remove the excuses that the U.S.
    Government uses to keep treating Puerto Rico differently, but
    the fact is that the U.S. Government, the U.S. Congress, could
    begin to treat Puerto Rico differently today. It doesn't have
    to remove the Insular Cases in order to do that.
        Do I think it is a racist law that brings shame to the U.S.
    Government? Yes. But I don't think it is more than just an
    excuse for the conditions that are currently in place.
        Mr. Torres. As you might know, the Jones Act is a third
    wheel in American politics. Congress is fiercely protective of
    the Jones Act, which discriminates against Puerto Rico. What
    are your thoughts on the disparate impact of the Jones Act on
    the island?
        Ms. Bonilla. Without a doubt, the Jones Act brings nothing
    but increased costs to a place that is experiencing persistent,
    acute, and systemic poverty across every single one of its
    counties and municipios.
        The problem with the Jones Act is that it is not a partisan
    issue. It does not impact one party or another, and it has not
    been taken up by one party or another. But the fact is that the
    only folks who benefit from the Jones Act are the shipping
    industry in the United States. So, it does need to be brought
    under greater scrutiny and questioned and repealed.
        Mr. Torres. Not every State and Territory is subject to the
    Jones Act. Both Puerto Rico and Hawaii have the highest
    electricity costs in the United States, and both Puerto Rico
    and Hawaii are subject to the Jones Act. Do you think that is a
    coincidence?
        Ms. Bonilla. No. Obviously, there are folks who are
    benefiting from the extreme costs that are spent in
    transporting goods to these places. However, I think it is
    important to recognize that some folks benefit, but this does
    not benefit the U.S. economy as a whole, since it actually
    makes it more expensive for many U.S. businesses to operate in
    Puerto Rico because of these excessive shipping costs.
        Mr. Torres. My time has expired. Thank you.
        Chairman Cleaver. Mr. Torres yields back.
        We have no further witnesses.
        Let me thank the witnesses for your testimony, and your
    participation today.
        The Chair notes that some Members may have additional
    questions for these witnesses, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        This hearing is now adjourned.
        [Whereupon, at 11:32 a.m., the hearing was adjourned.]

                                A P P E N D I X

                                November 15, 2022

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