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DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2004
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THURSDAY, MARCH 6, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:03 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond and Mikulski.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
STATEMENT OF MEL MARTINEZ, SECRETARY
ACCOMPANIED BY:
MICHAEL LIU, ASSISTANT SECRETARY, PUBLIC AND INDIAN HOUSING
KENNETH DONOHUE, INSPECTOR GENERAL
JOHN C. WEICHER, ASSISTANT SECRETARY, HOUSING, AND FEDERAL
HOUSING COMMISSIONER
PHILIP MANGANO, EXECUTIVE DIRECTOR, INTERAGENCY COUNCIL ON
HOMELESSNESS
opening statement of senator christopher s. bond
Senator Bond. Good morning, Mr. Secretary. The hearing of
the Senate VA-HUD Appropriations Subcommittee will come to
order.
As we begin our hearings on the fiscal year 2004 requests,
it is a pleasure to welcome Secretary Martinez and other guests
from the Department of Housing and Urban Development who have
joined us here this morning to testify on the President's
fiscal year 2004 budget request. This is your third visit
before the subcommittee on HUD's budget, Mr. Secretary, and I
hope not the last.
As we have discussed, the Department remains a troubled
agency plagued by a morass of program and management problems
that, in most cases, you inherited from previous
administrations. I think I warned you privately before you took
it on that you were taking on a huge challenge and I know you
have found it to be everything that I promised you it would be.
Your committed leadership and steady hand has made a big
difference already, and continued stability at the top can only
strengthen and enhance the reforms that have already occurred
within HUD. Please remember I said that, because there will be
some comments I have later on that really point out some
problems that you and I face together, and we have to resolve
them because we want to see HUD be the kind of agency of which
all of us can be proud.
The request for fiscal year 2004 proposes $31.3 billion, an
increase of $872 million over the fiscal year 2003 funding
level of $30.43 billion. As was the case with the fiscal year
2003, the Subcommittee will be facing some very difficult
funding decisions in fiscal year 2004, including funding
decisions for HUD. In addition, the tightness of the HUD budget
request for fiscal year 2004 only makes these decisions more
difficult, especially since, as always, we will have to stack
up the funding by priorities of the many needs and priorities
of many other agencies and programs within the jurisdiction of
this Subcommittee, including such priorities as VA medical
care, National Science Foundation, the Environmental Protection
Agency and NASA, which itself faces a whole set of special
needs as we attempt to understand what went horribly wrong with
the reentry of the Space Shuttle Columbia.
In addition, HUD's fiscal year 2004 budget request is tied
to a number of very ambitious legislative recommendations and
program changes, which if enacted, and you and we know the
likelihood of that, would represent a landmark restructuring of
many of the Department's most important and largest programs. I
will highlight a few of the most important and potentially
controversial funding decisions and legislative
recommendations.
First, the administration is proposing to restructure the
various Section 8 programs by creating a new Section 8 tenant-
based voucher program that would be called Housing Assistance
for Needy Families, or HANF. HANF would be funded at about
$12.5 billion in fiscal year 2004 and would transition to a
block grant program of the States in fiscal year 2005. As part
of this proposals, the Section 8 project-based programs would
continue to be administered by HUD through State housing
agencies and PHAs.
While I understand the administration's frustrations with
the Section 8 tenant-based voucher program with its annual
rescissions and poor cost projections, HANF does not appear to
be the best possible replacement for the existing voucher
program. Being a former governor and having been an advocate of
block grants, I believe there are areas in which they can be
very helpful, but instead we need to provide more flexibility
in a low-income-housing program based on local decision making,
I fear that HANF merely moves the responsibility for voucher
administration to the States and otherwise appears to duplicate
much of what the HOME program already is capable of doing. HANF
likely will put new burdens on States and localities to meet
rising housing costs as well as low-income housing needs. And
as history tells us, block grant programs seldom receive any
significant increased funding once the programs are
established. I think that is particularly troubling during a
period of time when most States and localities are facing
increasingly difficult financial decisions and large budget
shortfalls, and I find it unlikely that the States would be
willing to pick up any of these responsibilities.
In summary, in my view, HANF is premature. The fiscal year
2003 appropriations bill created a new funding structure for
Section 8 vouchers where PHAs receive the funding for all the
vouchers in use and will be able to apply for any vouchers they
need to help reach the PHA authorized level. This funding
approach, we believe, if we worked it out in cooperation with
my colleagues, this results in a more realistic assessment of
Section 8 funding needs, reducing the need to go through the
annual ritual of rescinding large amounts of unused excess
Section 8 assistance. And as we all know, that becomes a piggy
bank which gets raided not for use in the HUD budget but for
everything else under the sun, and I think it is going to take
several years for us to see if this new system will work, but I
am optimistic that it is a better solution and will give us a
better gauge of both the actual cost and the use of vouchers.
As for public housing, the HUD budget request of $3.57
billion for the Public Housing Operating Fund is roughly the
same as the fiscal year 2003 funding. The HUD budget request of
$2.6 billion for the Public Housing Capital Fund is some $70
million less than the fiscal year 2003 level. I compliment Mr.
Liu, the Assistant Secretary for Public and Indian Housing, on
taking much needed corrective measures when it was discovered
that the Department has been inappropriately awarding PHAs with
additional operating funds by raiding current year public
housing operating funds for prior year obligations. The fiscal
year 2003 appropriations bill put a final stop to this activity
while funding for at least one last time the existing prior
year obligations owed to a few PHAs for fiscal year 2003. While
not a perfect solution, I believe it is a fair solution and
should leave all PHAs on an equal footing. I never ever want to
see this problem again.
I am also troubled by the Department's decision to
eliminate all funding for the public housing HOPE VI program. I
want to give you some history with that HOPE VI program. It
started in the authorizing committee when we finally committed
to tear down the very troubled almost uninhabitable public
housing in St. Louis, and replace it with a model public
housing program. Working through this Subcommittee we designed
the HOPE VI program to carry on with tearing down the most
distressed and obsolete public housing, while replacing the
housing with new mixed income and public housing developments.
This not only provides good housing for low-income families,
but helps to anchor the economic and fiscal redevelopment of
many distressed communities. Frankly, despite the fact that
HOPE VI had problems at its inception, I think it is a program
that works.
The loss of this $574 million HOPE VI program is
particularly disturbing to me because there has never been any
real attempt to have a meaningful dialogue between the
administration and the Congress on the future of HOPE VI. We
have asked and asked, and we have received no discussion, no
dialogue, which puzzles me, why the administration has failed
to discuss the various options related to HOPE VI, eliminating
the program, continuing it, improving it, or creating a
substitute program.
No matter how one views the HOPE VI program, the loss of
$574 million will mean a huge reduction in available resources,
both public and private, for public housing capital needs. This
is a critical concern since HUD has identified some $20 billion
and more in deferred maintenance and capital needs. These
issues are further compounded by the loss of funding associated
with the elimination of the Public Housing Drug Elimination
program in fiscal year 2002.
Now I know the administration is proposing a new public
housing loan guarantee program that could possibly meet some or
many of the goals of the HOPE VI program. We need to know more
about the program, especially its goals and its projected
impact. I am concerned that the $131 million price tag for the
credit subsidy for this new loan guarantee program is paid for
from the public housing capital fund, further eroding needed
funds for capital and deferred maintenance needs.
Many of these policy and funding decisions under this
budget request further underline the need for a housing
production program with many extremely low-income families who
are unable to find affordable housing, and we are willing to
continue to work to find such a program and the funding for it.
We would welcome the opportunity to have input from your
Department and we look forward to working on this question in a
bipartisan basis to come up with a program that meets the
needs.
There are many proposals out there, most of which chase the
elusive phantoms, and they are not the magic pixie dust that is
going to allow us to avoid the Budget Act if we try to raid
that money for a new housing production program.
The HUD budget also calls for consolidating the Homeless
Assistance Grants, as well as a revised formula for the
Community Development Block Grant program. I have supported the
block granting of homeless assistance for many years, so long
as the legislation insures that HUD accountability and
oversight are part of the process. A new formula for the CDBG
program that better targets poor and distressed communities is
a laudable goal. Nevertheless, part of the success of the CDBG
program is that it is a national program that can reach all of
our communities, and that all of the communities have a stake
in the program. Also, I would hate to see that many of the good
ideas in the HUD budget being lost because of the distraction
of a food fight over the formula by which the CDBG program
allocates funding.
There is also a number of other HUD propositions that merit
discussion but in the interest of time, I am only going to
focus on a few more.
The administration has proposed $50 million for what is
called the Samaritan Housing Initiative. The program is
designed as a broad interagency strategy to address
homelessness, involving HUD, HHS and VA and is consistent with
a 2-year innovative demonstration included in the VA-HUD fiscal
year 2003 appropriations bill. The administration is also
proposing $25 million for a lead-based paint abatement program.
Again, this proposal is basically consistent with the new $50
million lead paint abatement program that was included in the
fiscal year 2003 bill. I am very gratified by these common
priorities, but I am going to match these programs and raise
them.
The proposed FHA home ownership program for persons with
poor credit is also a good idea. This proposal would allow
these persons an opportunity to repair their credit and
demonstrate their financial reliability while providing an
opportunity for home ownership. All too often, low-income
persons make financial mistakes while young and without
resources. Unfortunately, these persons are often haunted by
these mistakes and are unable to obtain housing and other
credit as they mature and become more financially responsible.
This is the type of program where the Federal Government can
make a difference and provide a second chance opportunity to
make home ownership a reality.
I am unhappy about a number of HUD funding recommendations
for fiscal year 2004. Most especially, I am unhappy that the
administration continues in every HUD budget request to
recommend eliminating the Rural Housing and Economic
Development Program. I guess nobody listens to us up there.
Urban areas always get the attention of Congress while rural
areas too often are ignored and underfunded. I live in a rural
area where the housing needs are very strong, and I trust you
will find it in other States as well. It has been estimated
that over the last 2 fiscal years, some 4,000 jobs have been
created and over 8,200 persons have been trained. In addition,
over 2,200 housing units have been constructed with some 3,700
rehabilitated. In the last year, 367 businesses have been
created and 1,400 existing businesses assisted. This program is
a good program. It makes a difference with a small price tag
and big results.
I also feel compelled to reiterate that HUD faces many
challenges and there is much more work to be done. As I have
discussed already, the Department has been misleading Congress
for some 10 years by overpaying PHAs for their operating costs
from current year funding for prior year obligations. I
understand this problem has been corrected and I expect it has
been.
However, equally or more serious, at the very end of the
conference on the fiscal year 2003 appropriations bill, the
House and Senate VA-HUD Appropriations Subcommittees were
advised that HUD exceeded its stated employee levels by upwards
of 300 FTEs, with a cost of $30 million that was not reflected
in the HUD fiscal year 2003 budget justification and budget
request. These hires occurred during the spring and summer of
2002 and despite the significant impact on HUD's budget needs
for fiscal year 2003, HUD never once made any attempt to inform
the Congress of its decision to hire significantly more staff
than provided for in the HUD fiscal year 2003 budget
justifications. In addition, HUD only reported these staff
increases when it determined that the fiscal year 2003 budget
request for salaries and expenses could not support the added
staff.
In addition, there are many significant questions as to
whether HUD comported with existing staffing requirements and
hiring procedures, including requirements consistent with HUD's
resource estimation and allocation process or REAP. In fact, it
appears that some HUD offices hired significantly more staff
than needed while other offices hired significantly less. It is
unclear whether there was top level management controls or any
adult supervision during this hiring spree. HUD and the
responsible officials will be held accountable for this mess.
In any case, a $30 million funding shortfall as well as HUD's
failure to provide timely notice of the problem is
unacceptable.
The reform of HUD remains a huge and daunting challenge. It
has been troubled and dysfunctional, but we believe it serves a
critical role, and so we will continue to work together to
rebuild the public confidence in HUD as it performs its many
housing and community development needs.
Mr. Secretary, I look forward to your testimony, and I now
turn to my ranking member, Senator Mikulski.
statement of senator barbara a. mikulski
Senator Mikulski. Mr. Chairman, the public has been waiting
with bated breath to not only talk to Secretary Martinez, but
also to wish you happy birthday. On behalf of the Subcommittee
and myself I am glad your birthday comes before mine. I know
today is your birthday and we want to wish you well.
This is a bipartisan, low-fat muffin, and I want to present
it to you.
This is in no way to indicate that an adequate
appropriation is to let them eat muffins. We really do wish you
good health.
Senator Bond. Thank you.
Senator Mikulski. I want to welcome Secretary Martinez, and
in the interest of time, I will summarize my opening statement.
For fiscal year 2004, the administration's request, which
is a $300 million increase over last year, is only 1 percent.
That indeed, I think is too skimpy to be able to meet the
compelling needs facing us in the area of housing.
My primary principle for HUD is absolutely simple. I
believe that HUD needs to be in the community development
business and not think of itself as just being in the building
business. I think that HUD needs to be able to build
communities, not only houses, communities where people can
live, work, worship and shop, to strengthen communities,
whether in small town U.S.A. or big town America.
And I know, Mr. Secretary, you share my principles that
these homes not only need to be affordable, but the
neighborhoods have to be safe, and that whatever the Federal
Government does, we protect both the taxpayer and the consumer
against fraud.
Looking at what we need to do in terms of neighborhood and
community development, I wanted to first focus my comments on
HOPE VI. The administration has zeroed out HOPE VI at the end
of this year. This means that there is going to be $600 million
cut out of community development. HOPE VI was not about
building new housing for the poor, it was about building new
opportunities for the poor. It was about using typical
architecture, tearing down decrepit housing, and at the same
time using a new empowerment architecture, insisting that the
residents be involved in both the stake in the community as
well as in job training, since public housing should be seen
not only as a way of life but a way to a better life.
We would hope as the loans have been zeroed out, we take a
look at this because the administration does not provide
continued funding for the program, or even suggest how to
improve HOPE VI by simply eliminating it or taking $600 million
out of the people development program and out of the community
development. I think we need a vigorous conversation about HOPE
VI and I will be asking you some questions about it.
It is a program that needs to be reformed or if it is not
going to stay as HOPE VI, we need to then think about how else
we can create hope. Remember, it is not about housing, it is
about opportunity.
The other issue that I am concerned about is brownfields.
Brownfields were eliminated from the budget request last year.
With brownfields, the cleanup responsibility lies with EPA, but
part of the economic development responsibility lies with HUD.
In my own home State of Maryland and in the Baltimore
metropolitan area, a study done for the Maryland Port Authority
showed that we have 3,000 acres of brownfields in and around
the Baltimore waterfront, in Baltimore City and east Baltimore
County.
What a cornucopia of opportunity to turn brownfields into
green fields, not only from the environmental standpoint, but a
tremendous opportunity to create new jobs, new places for work,
and even new housing. Let us take a look at these brownfields
and let us work with Administrator Whitman to look at not only
large communities, but in others that we could do this.
Third, we need to look at the funding and attitudes related
to housing for the elderly. Most of the housing for the elderly
was built in the 1970's and 1980's. It is old. We have many,
many units that were built in the 1960's to the 1980's. We now
have elderly who are now frail elderly, and the buildings
themselves are getting decrepit. We need to look at this and
how they are going to renew those buildings, and also look at
the way the elderly have been aging in place at something
called the naturally occurring retirement communities.
Let us take a look at how with the boomers coming on line,
what are we going to be able to do about this, and I think we
have to have a commitment to what we offer the elderly. And Mr.
Martinez, this could be a successful faith-based program, and I
believe it has been, because it has been a partnership between
the Federal Government with Catholic charities, Jewish
charities, other faith-based organizations. I just think this
is a great opportunity to continue the faith-based initiative
and yet at the same time look at both the housing and the
people who are aging in place.
The other area that I appreciate your work on is fraud. I
know you share with me the total frustration and outrage when
people try to scam the consumer and scam the taxpayer. I want
to salute you for what you have been doing in the area of
fraud. Your approach in trying to deal with the scams and
schemes in settlement costs for home ownership I think should
be absolutely commended, because when people buy their home,
they are looking at not only the price of the home, but also
the price of the settlement, and often there are those hidden
fees that really do gouge that home buyer, particularly that
first-time home buyer. So kudos to you for that.
Second, I want to thank you for your work against predatory
lending. The way you have worked with both me in Baltimore City
and this Committee with Senator Bond to make sure that when we
have FHA mortgage, we are able to provide first-time home
ownership, that we were not using them to gouge people by
selling them houses that were bought at $15,000 and sold 72
hours later for $85,000, with balloon payments of $100,000. So,
congratulations.
But you know, the schemers and the scammers are really
scummers. Wherever you go, they think of something new. We had
a new situation in Baltimore, and you wonder why is it in
Baltimore, because we are pretty tough. But we now have a new
situation where a company is buying up mortgages, and in the
process of buying up these mortgages, what they are doing is
essentially telling, foreclosing people who are making
payments.
There was an investigative report revealed on local
Baltimore TV about this corporation sending false letters to
home buyers telling them they were delinquent in their loan,
that they were going to foreclose, scaring the heck out of home
buyers, actually moving to foreclosure, and creating chaos in
their minds, chaos in the marketplace.
This company provides customer service but they are not the
lender. The Community Law Center in Baltimore has gotten 90
complaints from people being scammed by this corporation. We do
not know whether any of these loans have FHA insurance on them,
but they are approved as an FHA partner. I am going to give you
more information about this. I want to discuss this with the
Inspector General, because we want to know who is this company
and what are they doing. How can we stop the fraud? If someone
has been a victim, where can they go? We want to get at the
system of the fraud, and we want to help the local consumer
that has been once again, schemed and scammed, and get to the
bottom of it. And I know your deep commitment on this, and I
say thank you.
Money is in short supply in the Federal Government, in the
Federal checkbook and it is in shorter supply in the family
checkbook, and we have to stand firmly against any fraud
scheme, scam or scum. I am prepared now to hear your testimony.
Mr. Chairman, thank you very much.
prepared statement of senator patrick j. leahy
Senator Bond. Senator Leahy has submitted testimony which
he would like submitted for the record.
[The statement follows:]
Prepared Statement of Senator Patrick J. Leahy
Mr. Secretary thank you for taking the time to come and testify
before us today, as always it is a pleasure to have you before the VA-
HUD and Independent Agencies Subcommittee.
Last year was a long and trying one where Federal appropriations
were concerned. We had not yet finished our work on the fiscal year
2003 bills when the President's proposal for fiscal year 2004 was
delivered to Capitol Hill.
I know that both Senator Bond and Senator Mikulski worked very hard
to produce VA-HUD appropriations bill for fiscal year 2003 that met the
needs of our Nation's most vulnerable populations and for that I thank
them. They made the best of a very difficult situation.
In the end however under an artificially low spending cap imposed
by the administration it was difficult to adequately fund many
important domestic programs. I am concerned that if we follow up on
this fiscal year with the meager budget proposed by the
administration--by most calculations it amounts to a mere 1.3 percent
increase for HUD programs--we would only entrench this country's
affordable housing crisis.
Mr. Secretary, this administration has talked at length about the
importance of housing and homeownership in creating stability and
promoting wealth--but this budget does not reflect those sentiments.
The administration's proposal to block grant Section 8 voucher
assistance to States is particularly troubling. This program serves
over 5 million low-income families who rely on the rental assistance to
help maintain stable housing. One preliminary study of this policy
estimates that over 137,000 vouchers could go out of circulation if
this proposal is implemented.
Most troubling is that the proposal to block grant is made in the
wake of the bipartisan Millennium Housing Commission report that found
the voucher program to be successful in its mission and at a time when
voucher utilizations rates are going up.
I doubt there is anyone on this Subcommittee who would argue that
the Section 8 program does not have its flaws, and I am not averse to
looking at new ways to make the system more efficient; however we
simply do not have enough details to thoroughly evaluate this proposal.
I look forward to seeing more details as soon as possible.
For the third year in a row, the administration also proposes
severe cuts to public housing. By most estimates the President has
proposed over $2.5 billion in cuts to public housing over the last 3
years.
The Public Housing Capital Expenses program is recommended at $200
million less then fiscal year 2002, and the administration suggests we
eliminate the HOPE VI program that has helped many communities around
the Nation revitalize.
Last year by HUD's own miscalculations there was a $250 million
dollar shortfall in the Public Housing Operating Fund--a shortfall HUD
must make up by borrowing from the fiscal year 2003 allocation. Yet the
administration proposes only a $44 million increase for this fund from
the fiscal year 2002 level, leaving many of us to wonder how HUD will
make up the difference.
Mr. Secretary, it is one thing to argue the merits of expanding
programs in this economic environment, but shouldn't at least live up
to our current obligations?
This budget does not do that.
There is no question that we are facing an affordable housing
crisis in this Nation. Nearly 5 million households in the United States
are paying over half of their incomes to rent alone--leaving precious
little to put groceries on the table, gas in their cars, or buy clothes
for their kids.
My home State of Vermont has not been immune to this trend. The
number of homeless families being served by homeless shelters in
Chittenden County has risen 400 percent over the last 3 years. Many of
these families are working families.
It is in this light that I am troubled by the priorities set forth
in the administration's proposed budget for the Department of Housing
and Urban Development.
Mr. Secretary, I know you did not take on an easy task when you
came on board at this Department, and I look forward to working with
you throughout the year to address these concerns.
Again, I thank you for coming before us today; I have some
additional questions that I will submit for the record.
Senator Bond. Thank you, Senator Mikulski. We are supposed
to have a vote coming up, but I think we will try to move
along. We will go to your testimony and try to get it in before
we have to go to vote.
STATEMENT OF MEL MARTINEZ
Secretary Martinez. Mr. Chairman, in the interest of time
what I would like to do is just offer my full remarks for the
record.
Senator Bond. We will be happy to include them.
Secretary Martinez. And rather than go through more
prepared remarks, perhaps what I could do is just try to go
through some of the things that I know are of interest to the
Chairman and the Ranking Member.
Senator Bond. Please.
Secretary Martinez. First of all, let me say to both of you
that it is a real pleasure to come before you, and it is a real
pleasure to meet with you as your commitment and concern with
this Department and its work, show by your depth and breadth of
knowledge of our programs and your interest in what we do. That
is gratifying and I understand, Mr. Chairman, that at times
with that level of interest and knowledge also comes a little
bit of scolding, and I am prepared for that today as well,
because I do understand that from time to time this Department,
as you well foretold for me at the time of my arrival in this
city, can be a little daunting. So we will be prepared to
discuss some of those issues with you as well.
PROMOTING HOME OWNERSHIP
Let me say that our Department continues to focus on the
issue of home ownership with our $31.3 billion budget, but we
obviously have some things that are very important to us to
move American families into home ownership. The American Dream
Downpayment Initiative contributing $200 million into the HOME
program is the cornerstone of that.
Related to the issue of predatory lending or fraud abuse,
and frankly of providing families with, as you so well said,
Madam Senator, is not a way of life but a way to a better life.
We also believe that home ownership provides that way to a
better life, and so home ownership education is a big component
of this budget. We have made a continuing commitment to
increasing funding in that. In this year's budget, $45 million
is dedicated to home ownership counseling and education.
But we hope to bring families from our minority communities
into home ownership and teach them skills to avoid predatory
lenders, how to avoid bad credit, how to fix that credit, how
to approach the whole home buying process is important.
As you pointed out again, I am working on the issue of
reform, we are proud of that commitment and we continue to look
for that to occur in the late spring or early summer.
In addition to that, we are continuing to promote housing
Section 8 vouchers for home ownership.
HOME PROGRAM
All of these we believe to be significant and important
commitments. In the HOME program, which we believe to be a real
hallmark for providing affordable opportunities for housing for
many families, we, this year, are very proud of the President's
commitment to this aspect of our work. The increase of 5
percent, $113 million devoted to the HOME program, will enable
us with the additional funds that have been committed by the
Congress over many years of over $2 billion yearly, to produce
over 1 million units of housing over the next 10 years.
We believe that is a very substantial production program
that will help us to continue in two veins. Number one, not add
any more rent programs and number two, not raid and lose the
money which is frankly, no more than the insurance reserve
fund, in order to provide about an equal number of homes. So, I
believe that is the right way to go.
HANF
I am willing to engage in vigorous debate over our block
granting of Section 8. I do think it is important to look at
this proposal as a possible way to avoid some of the pitfalls
of Section 8 in the past. I would point out to the Chair that
it is a flexible program where States who might not be in a
position to undertake it, it could still be managed in the
traditional way that we have done it in the past. But it would
open a window of opportunity for those States who would be in a
position to manage it, and perhaps do so in a way that is more
direct and close to the people and perhaps in a more efficient
way that would avoid the problem of recapture that you so aptly
pointed out in your remarks, Mr. Chairman.
HOPE VI
The issue of HOPE VI is one that I find painful to have it
appear as something that we are not committed to. I believe
HOPE VI has been a very successful and good program. I believe
that while it has done a great deal that much of its promise
remains unfulfilled.
One of the things I would like to point is out is the
commitment of HOPE VI over the last 10 years, and it is a 10-
year program, and OMB felt that it was a program for 10 years,
this being the 10th year, and coming up for reauthorization
that we should take a pause and look. The reason for that also
is that while we have funded over 165 programs or projects,
only 14 have been completed to date. So when I say that the
promise remains largely unfulfilled, that is because $2.5
billion that have already been awarded have not come out of the
ground yet.
In addition to that, the round of grants from this year,
which we should be announcing, as well as the ones from next
year, would add an additional billion dollars in grant monies
that would be out.
I am not being critical of those who put these deals
together. They are complicated and by the nature of the deal,
they leverage funds with the private sector. So they are very
good deals and they do take time to come together. But I would
like to just point to a chart that we prepared that would give
you a graphic visual of exactly where the program is in terms
of the spend-out.
As you can see, we have the number of units that have been
planned or funded, and on the right in the red you see the
number of units that have been completed through today. But in
the reinvention of the future of HOPE VI, we could look to a
program that is going to be continuing, that is not going to
end. I will clarify for you that those projects that have
received the grant will continue to see that grant paid out and
their projects will all be done. So no one who was expecting to
do a HOPE VI because they received a HOPE VI grant will be
disappointed, and any who are still hoping to do one can still
enter the next round of funding.
We are also excited, Mr. Chairman, about utilizing the
private resources and private capital to attract private
capital. Some cities like Chicago are committing hundreds of
millions of dollars of their own money to revitalize public
housing neighborhoods, and HUD is also seeking additional
approval of Congress such as the Public Housing Reinvestment
Initiative.
So we look forward to continuing the discussion with you.
Senator Mikulski mentioned the possibility of a task force; I
think that would be helpful. I believe that in coming together
with those who have had an interest or stake in the past, who
have offered possibilities, who have dealt with some of the
problems of displacement of the people and things of that
nature, would also come up with good solutions for us on that
issue.
MANAGEMENT ISSUES
With respect to the issue of management issues of HUD, Mr.
Chairman, I will say to you first and foremost and from the
top, that the buck stops here. You made me well aware of what I
was taking on and I realize that.
And with respect to the hiring issues that have arisen, I
am the person responsible. I am though, and I assure you, Mr.
Chairman, that I am going to be looking into the details of how
the hiring problems occurred. We are taking steps to ensure
that no such lack of coordination at the top takes place in
what traditionally has been a problem since we have
traditionally been undermanned and that has impacted our
program performance.
What we did this year was to try and employ a number of
means to reach our staffing levels. What we did is we overdid
it, and it lacked a certain top control that we clearly
recognize was a mistake, and that we already have and continue
to look to correcting that deficiency in our management. But we
do know that all the hires were from the critical hire list, so
we are hiring people that needed to be there to perform an
important function for HUD.
I will be happy to answer more questions in detail on that
issue, but I did want to let you know of my deep concern for it
and my great commitment not only to this but other areas of
management, to ensure that HUD does not continue to be a
troubled agency.
PREPARED STATEMENT
Mr. Chairman, with that, I think I will just assure you of
my continued desire to work with the Committee and to look
forward to doing so as we go through this next budget cycle,
and look forward to answering your questions.
[The statement follows:]
Prepared Statement of Mel Martinez
overview
Chairman Bond, Ranking Member Mikulski, Distinguished Members of
the Committee: Thank you for the invitation to join you this morning. I
am honored to outline the Fiscal Year 2004 Budget proposed by President
Bush for the U.S. Department of Housing and Urban Development (HUD).
HUD has achieved measurable success since 2001 in carrying out its
mission and meeting the many challenges confronting a Cabinet-level
Department. Today, HUD annually subsidizes housing costs for
approximately 4.5 million low-income households through rental
assistance, grants, and loans. It helps revitalize over 4,000
localities through community development programs. The Department
provides housing and services to help homeless families and individuals
become self-sufficient. HUD also encourages homeownership by providing
mortgage insurance for more than 6 million homeowners, many of whom
would not otherwise qualify for loans.
Supported by HUD's proposed $31.3 billion fiscal year 2004 budget,
this important work will continue. Housing remains a critical component
of both the President's plan to promote economic growth and his focus
on meeting the common challenges faced by Americans and their
communities.
The President does not intend to change his 2004 Budget based on
the program or agency levels included in the 2003 Omnibus bill the
Congress adopted in mid-February. The President's 2004 Budget was
developed within a framework that set a proposed total for
discretionary spending in 2004, and each agency and program request
reflected the administration's relative priority for that operation
within that total. While we recognize that Congress may believe there
is a need to reorder and adjust some of these priorities, the
administration intends to work with Congress to stay within the 2004
overall amount.
HUD's proposed budget offers new opportunities for families and
individuals--and minorities in particular--seeking the American Dream
of homeownership.
It offers new opportunities for renters by expanding access to
affordable housing free from discrimination.
It provides new opportunities for strengthening communities and
generating renewal, growth, and prosperity--with a special focus on
ending chronic homelessness.
And our budget creates new opportunities to improve HUD's
performance by addressing the internal management issues that have long
plagued the Department.
increasing homeownership opportunities
Americans place a high value on homeownership because its benefits
for families, communities, and the Nation as a whole are so profound.
Homeownership creates community stakeholders who tend to be active
in charities and churches. Homeownership inspires civic responsibility,
and owners vote and get involved with local issues. Homeownership
offers children a stable living environment that influences their
personal development in many positive, measurable ways--at home and in
school.
Homeownership's potential to create wealth is impressive, too. For
the vast majority of families, the purchase of a home represents the
path to prosperity. A home is the largest purchase most Americans will
ever make--a tangible asset that builds equity, credit health,
borrowing power, and overall wealth.
Due in part to a robust housing economy and Bush Administration
budget initiatives focused on promoting homeownership, more Americans
were homeowners in 2002 than at any time in this Nation's history. The
national homeownership rate is 68 percent. That statistic, however,
masks a deep ``homeownership gap'' between non-Hispanic whites and
minorities: while the homeownership rate for non-Hispanic whites is
nearly 75 percent, it is less than 50 percent for African-Americans and
Hispanics.
The administration is focused on giving more Americans the
opportunity to own their own homes, especially minority families who
have been shut out in the past. In June 2002, President Bush announced
an aggressive homeownership agenda to increase the number of minority
homeowners by at least 5.5 million by the end of this decade. The
administration's homeownership agenda is dismantling the barriers to
homeownership by providing down payment assistance, increasing the
supply of affordable homes, increasing support for homeownership
education programs, and simplifying the homebuying process.
Through ``America's Homeownership Challenge,'' the President called
on the real estate and mortgage finance industries to take concrete
steps to tear down the barriers to homeownership that minority families
face. In response, HUD created the Blueprint for the American Dream
Partnership, an unprecedented public/private initiative that harnesses
the resources of the Federal Government with those of the housing
industry to accomplish the President's goal.
Additionally, HUD is proposing several new or expanded initiatives
in fiscal year 2004 to continue the increase in overall homeownership
while targeting assistance to improve minority homeowner rates.
As a first step, HUD proposes to fund the American Dream
Downpayment Initiative at $200 million. First introduced in fiscal year
2002, this program targets funding under the HOME program specifically
to low-income families wanting to purchase a home. The fiscal year 2003
appropriations provided for $75 million for this initiative, which will
be sufficient to begin the program. The fiscal year 2004 budget
provides funding to assist approximately 40,000 low-income families
with down payment and closing costs on their homes.
The HOME Investment Partnerships Program (HOME) plays a key role in
addressing the shortage of affordable housing in America. As reflected
in this year's program assessment, the HOME program is successful
because it is well managed and its flexibility ensures local decision-
making. In 2004, a total of $2.197 billion is being provided to
participating jurisdictions (States, units of local government, and
consortia) to expand affordable housing, which represents a 10 percent,
or $200 million, increase for HOME from the 2003 enacted level. The
funds dedicated to expanding and improving homeownership will be spent
rehabilitating owner-occupied buildings and providing assistance to new
homebuyers. Based on historical trends, 36 percent of the
homeownership-related funds will be used for new construction, 47
percent for rehabilitation, and 14 percent for acquisition.
Recipients of HOME funds have substantial discretion to determine
how the funds are spent. HOME funds can be used to expand access to
homeownership by subsidizing down payment and closing costs, as well as
the costs of acquisition, rehabilitation, and new construction. To
date, HOME grantees have committed funds to provide homebuyer
assistance to more than 288,000 low-income households.
To promote the production of affordable single-family homes in
areas where such housing is scarce, the administration is proposing a
tax credit of up to 50 percent of the cost of constructing a new home
or rehabilitating an existing home. This new tax credit targets low-
income individuals and families; eligible homebuyers would have incomes
of not more than 80 percent of their area median.
HUD is committed to helping families understand the homebuying
process and how to avoid the abuses of predatory lending. Housing
counseling has proven to be an extremely important element in both the
purchase of a home and in helping homeowners keep their homes in times
of financial stress. The fiscal year 2004 budget will expand funds for
counseling services from $40 million in fiscal year 2003 to $45
million. This will provide 550,000 families with home purchase and
homeownership counseling and about 250,000 families with rental
counseling.
The fiscal year 2004 budget strengthens HUD's commitment to the
Self-Help Homeownership Opportunity Program (SHOP). SHOP provides
grants to national and regional non-profit organizations to subsidize
the costs of land acquisition and infrastructure improvements.
Homebuyers must contribute significant amounts of sweat equity or
volunteer labor to the construction or rehabilitation of the property.
The fiscal year 2004 budget request for $65 million triples the funding
received in 2002, reflecting President Bush's commitment to self-help
housing organizations such as Habitat for Humanity. These funds will
help produce approximately 5,200 new homes nationwide for very low-
income families. Funds are provided as a set-aside within the Community
Development Block Grant account.
The Federal Housing administration (FHA) is the Federal
Government's single largest program to extend access to homeownership
to individuals and families who lack the savings, credit history, or
income to qualify for a conventional mortgage. In 2002, FHA insured
$150 billion in mortgages for almost 1.3 million households, most of
them first-time homebuyers, which represents a 21 percent increase over
the previous year. Thirty-six percent were minority households.
FHA offers a wide variety of insurance products, the largest being
single-family mortgage insurance products. FHA insures single-family
homes, home rehabilitation loans, condominium loans, energy efficiency
loans, and reverse mortgages for elderly individuals. Special discounts
are available to teachers and police officers who purchase homes that
have been defaulted to HUD and who promise to live in their homes in
revitalized areas.
HUD is proposing legislation for a new mortgage product to offer
FHA insurance to families that, due to poor credit, would either be
served by the private market at a higher cost or not at all. It is
anticipated that borrowers will be offered FHA loan insurance under
this new initiative that will allow them to maintain their home or to
purchase a new home. The new Mutual Mortgage Insurance Fund (MMI)
mortgage loan program is expected to generate an additional $7.5
billion in endorsements for 62,000 additional homes.
Through its mortgage-backed securities program, Ginnie Mae helps to
ensure that mortgage funds are available for low- and moderate-income
families served by FHA and other government programs such as VA and the
Rural Housing Service of the U.S. Department of Agriculture.
During fiscal year 2002, Ginnie Mae surpassed a total of $2
trillion in mortgage-backed securities issued since 1970. Reaching this
milestone means that more than 28.4 million families have had access to
affordable housing or lower mortgage costs since Ginnie Mae's
inception. HUD is proud of Ginnie Mae's accomplishments and its
important role in helping to support affordable homeownership for low-
and moderate-income families in America. HUD's role in the secondary
mortgage market provides an important public benefit to Americans
seeking to fulfill their dream of homeownership.
The fiscal year 2004 budget supports five HUD programs that help to
promote homeownership in Native American and Hawaiian communities.
The Native American Housing Block Grants (NAHBG) program provides
funds to tribes and to tribally designated housing entities for a wide
variety of affordable-housing activities. Grants are awarded on a
formula basis that was established through negotiated rulemaking with
the tribes. The NAHBG program allows funds to be used to develop new
housing units to meet critical shortages in housing. Other uses include
housing assistance to modernize and maintain existing units; housing
services, including direct tenant rental subsidy; crime prevention;
administration of the units; and certain model activities.
The Title VI Federal Guarantees for Tribal Housing program provides
guaranteed loans to recipients of the Native American Housing Block
Grant who need additional funds to engage in affordable-housing
activities but who cannot borrow from private sources without the
guarantee of payment by the Federal Government. Because the grantees
have not applied for all funds appropriated in prior years, the amount
of subsidy required in fiscal year 2004 is reduced from $2 million to
$1 million, and the loan amount supported is reduced from $16.6 million
to $8 million. Prior-year funds remain available until used.
The Indian Housing Loan Guarantee (Section 184) program helps
Native Americans to access private mortgage financing for the purchase,
construction, or rehabilitation of single-family homes. The program
guarantees payments to lenders in the event of default. In fiscal year
2004, $1 million is requested in credit subsidy for 100 percent Federal
guarantees of approximately $27 million in private loans.
The Hawaiian Homelands Homeownership Act of 2000 established the
Native Hawaiian Home Loan Guarantee Fund, which is modeled after
Section 184. The fiscal year 2004 budget will provide $1 million in
credit subsidy to secure approximately $35 million in private loans.
Modeled after the NAHBG, the Native Hawaiian Housing Block Grant
(NHHBG) was authorized by the Hawaiian Homelands Homeownership Act of
2000. The fiscal year 2004 budget will provide $10 million. Grant funds
will be awarded to the Department of Hawaiian Home Lands and may be
used to support acquisition, new construction, reconstruction and
rehabilitation. Activities will include real property acquisition,
demolition, financing, and development of utilities and utility
services, as well as administration and planning.
promoting decent affordable housing
Ideally, homeownership would be an option for everyone, but even
with its new and expanded homeownership initiatives, the administration
recognizes that many families will have incomes insufficient to support
a mortgage in the areas where they live. Therefore, along with boosting
homeownership, HUD's proposed fiscal year 2004 budget promotes the
production and accessibility of affordable housing for families and
individuals who rent. This is achieved, in part, by providing States
and localities new flexibility to respond to local needs.
HUD has three major rental assistance programs that collectively
provide rental subsidies to approximately 4.5 million households
nationwide. The major vehicle for providing rental subsidies is the
Section 8 program, which is authorized in Section 8 of the U.S. Housing
Act of 1937. Under this program, HUD provides subsidies to individuals
(tenant-based) who seek rental housing from qualified and approved
owners, and also provides subsidies directly to private property owners
who set aside some or all of their units for low-income families
(project-based). Finally, HUD subsidizes the operation, maintenance,
and modernization of an additional 1.2 million public housing units.
HUD is proposing a new initiative--Housing Assistance for Needy
Families (HANF)--under which the funding for vouchers, which has been
allocated to approximately 2,600 public housing authorities (PHAs),
would be allocated to the States. States, in turn, could choose to
contract with PHAs or other entities to administer the program. The
funding for both incremental and renewal vouchers will be contained in
the HANF account.
There are a number of advantages to providing the voucher funds to
the States. The allocation of funds to States rather than PHAs should
allow for more flexibility in efforts to address problems in the
underutilization of vouchers that have occurred in certain local
markets. The allocation of funds to the States will be coupled with
additional flexibility in program laws and rules, to allow States to
better address local needs and to commit vouchers for program uses that
otherwise would go unused. In the former Housing Certificate Fund, more
than $2.41 billion has been recaptured over the last 2 years from the
Housing Choice Voucher program. These large recaptures have resulted in
a denial of appropriated housing assistance for thousands of families,
which will be avoided under HANF. The administration of the HANF
program should run more smoothly, with HUD managing fewer than 60
grantees compared to approximately 2,600 today.
Allocation of the funds to the States should allow for more
coordinated efforts with the Temporary Assistance for Needy Families
(TANF) program, and the One-Stop Career Center system under the
Workforce Investment Act, successfully administered by the States, to
support the efforts of those now receiving public assistance who are
climbing the ladder of self-sufficiency.
HUD proposes that fiscal year 2004 be a transition year in which
PHAs would continue to receive voucher funds directly while States ramp
up in preparation for administering the HANF program. Up to $100
million would be made available to assist States with this effort. In
addition, States could apply for incremental vouchers if they are ready
to do so, and could request waivers that would assist in the
implementation of their programs.
The HANF account would contain $13.6 billion in funding for voucher
renewals and incremental vouchers. This would include funding for up to
$36 million in incremental vouchers for persons with disabilities,
additional incremental vouchers to the extent that funding is
available, $252 million for tenant protection vouchers to prevent
displacement of tenants affected by public housing demolition or
disposition of project-based Section 8 contract terminations or
expirations, and $72 million for Family Self-Sufficiency Coordinators.
For fiscal year 2004, the administration proposes separate funding
for vouchers under the new HANF account. The Project Based Rental
Assistance Account will retain funding for renewals of expiring
project-based rental assistance contracts under Section 8, including
amounts necessary to maintain performance-based contract
administrators. An appropriation of $4.8 billion is requested for these
renewals in fiscal year 2004, which is a $300 million increase over the
current fiscal year. In addition to new appropriations, funds available
in this account from prior-year balances and from recaptures will
augment the amount available for renewals and will be available to meet
amendment requirements for on-going contracts that have depleted
available funding, as well as a rescission of $300 million.
It is anticipated that approximately 870,000 project-based units
under rental assistance will require renewal in fiscal year 2004, an
increase of about 50,000 units from the current fiscal year, continuing
the upward trend stemming from first-time expirations in addition to
contracts already under the annual renewal cycle. The HANF account
funds an estimated 30,300 units in subsidized or partially assisted
projects requiring tenant-protection vouchers due to terminations, opt-
outs, and prepayments.
Public Housing is the other major form of assistance that HUD
provides to the Nation's low-income population. In fiscal year 2004,
HUD anticipates that there will be approximately 1.2 million public
housing units occupied by tenants. These units are under the direct
management of approximately 3,050 PHAs. Like the Section 8 program,
tenants pay approximately 30 percent of their income for rent and
utilities, and HUD subsidies cover the remaining costs.
HUD is programmatically and financially committed to ensuring that
the existing public housing stock is either maintained in good
condition or is demolished. Maintenance is achieved through the subsidy
to PHAs for both operating expenses and modernization costs.
Legislation to implement a new financing initiative is included and
enhanced in the fiscal year 2004 budget. This will allow for the
acceleration of the reduction in the backlog of modernization
requirements in public housing facilities across the Nation.
The formula distribution of funds through the Public Housing
Operating Fund takes into account the size, location, age of public
housing stock, occupancy, and other factors intended to reflect the
costs of operating a well-managed public housing development. In fiscal
year 2004, HUD will increase the amounts provided for operating
subsidies from $3.530 billion to $3.559 billion, plus $15 million to
fund activities associated with the Resident Opportunities and
Supportive Services (ROSS) program.
The Public Housing Capital Fund provides formula grants to PHAs for
major repairs and modernization of its units. The fiscal year 2004
budget will provide $2.641 billion in this account. This amount is
sufficient to meet the accrual of new modernization needs in fiscal
year 2004.
Of the funds made available, up to $40 million may be maintained in
the Capital Fund for natural disasters and emergencies. Up to $30
million can be used for demolition grants--to accelerate the demolition
of thousands of public housing units that have been approved for
demolition but remain standing. Also in fiscal year 2004, up to $40
million will be available for the ROSS program (in addition to $15
million in the Operating Fund), which provides supportive services and
assists residents in becoming economically self-sufficient.
To address the backlog of capital needs, the Department is
including a legislative proposal in its 2004 budget called the Public
Housing Reinvestment Initiative (PHRI) that will allow PHAs to use
their Operating Fund and Capital Fund grants to facilitate the private
financing of capital improvements. This initiative also will encourage
development-based financial management and accountability in PHAs.
These objectives would be achieved by authorizing HUD to approve,
on a property-by-property basis, PHA requests to convert public housing
developments (or portions of developments) into project-based voucher
assistance. The conversion of units to project-based vouchers will
allow the PHAs to secure private financing to rehabilitate or replace
their aging properties by pledging the property as collateral for
private loans for capital improvements.
The fiscal year 2004 budget enhances this proposal, which was made
in last year's budget request, by also proposing a guarantee of up to
80 percent of the principal of loans made to provide the capital for
PHRI. There was substantial interest by PHAs and others in last year's
budget proposal; the loan guarantee should greatly facilitate the
involvement of private lenders. The budget includes $131 million in
subsidy for this guarantee, which would allow the guarantee of almost
$2 billion in loans and significantly accelerate the improvement in
public housing conditions.
The PHRI reflects our vision for the future of public housing.
For 10 years, the HOPE VI program has been the government's primary
avenue for funding the demolition, replacement, and rehabilitation of
severely distressed public housing. With $2.5 billion already awarded
but not yet spent, and an additional $1 billion to be awarded in 2002
and 2003, HOPE VI will continue to serve communities well into the
future.
When HOPE VI was first created, it was the only significant means
of leveraging private capital to revitalize public housing properties.
But that is no longer the case. Today, HUD has approved bond deals that
have leveraged over $500 million in the last couple of years. PHAs can
mortgage their properties to leverage private capital. In Maryland,
PHAs are forming consortiums to leverage their collective resources and
assets to attract private capital. Cities such as Chicago are
committing hundreds of millions of dollars of their own money to
revitalize public housing neighborhoods. HUD is also seeking additional
tools from Congress such as the Public Housing Reinvestment Initiative.
HOPE VI has served its purpose. Established to revitalize 100,000
of the Nation's most severely distressed public housing units, the
program has funded the demolition of over 115,000 severely distressed
public housing units and the production of over 60,000 revitalized
dwellings. There are also more effective and less costly alternatives.
The average cost per rebuilt HOPE VI unit is approximately $120,000,
compared to $80,000 in HUD's HOME program. Only 20,000 new HOPE VI
units have been completed to date. On average, 5 years pass between the
time a HOPE VI award is made and a new unit is occupied. In contrast,
during the same period, HUD's HOME program produced 70,000 new rental
units with an average construction time of about 2 years. It is time to
look to the future and pursue new opportunities, such as those I have
noted, which can more effectively serve local communities.
Among HUD's other rental assistance programs, FHA insures mortgages
on multifamily rental housing projects. In fiscal year 2004, FHA will
reduce the annual mortgage insurance premiums on its largest apartment
new construction program, Section 221(d)(4), for the second year in a
row--from 57 basis points to 50 basis points. With this reduction, the
Department estimates that it will insure $3 billion in apartment
development loans through this program, for the annual production of an
additional 42,000 new rental units, most of which will be affordable to
moderate-income families, and most of which will be located in
underserved areas. Additionally, because this program is no longer
dependent on appropriated subsidies, FHA avoids the uncertainty and the
suspensions that have plagued the program in prior years. When combined
with other multifamily mortgage programs, including those serving non-
profit developers, nursing homes, and refinancing mortgagors, FHA
anticipates providing support for a total of some multifamily 178,000
housing units.
In addition to the extensive use of HOME funds for homeownership,
the HOME program has invested heavily in the creation of new affordable
rental housing. The program has, in fact, supported the building,
rehabilitation, and purchase of more than 322,000 rental units. Program
funds have also provided direct rental assistance to more than 88,000
households.
The Native American Housing Block Grant (NAHBG) and Native Hawaiian
Housing Block Grant (NHHBG) are also used for a wide variety of
affordable-housing activities. Several other HUD programs contribute to
rental assistance, although not as a primary function. For example, the
flexible Community Development Block Grant (CDBG) program can be used
to support rental housing activities.
Regulatory barriers on the State and local level have an enormous
impact on the development of rental and affordable housing. HUD is
committed to working with States and local communities to reduce
regulatory and institutional barriers to the development of affordable
housing. HUD plans to create a new Office of Regulatory Reform and
commit an additional $2 million in fiscal year 2004 for research
efforts to learn more about the nature and extent of regulatory
obstacles to affordable housing. Through this office, researchers will
develop the tools needed to measure and ultimately reduce the effects
of excessive barriers that restrict the development of affordable
housing at the local level.
strengthening communities
HUD is committed to preserving America's cities as vibrant hubs of
commerce and making communities better places to live, work, and raise
a family. The fiscal year 2004 budget provides States and localities
with tools they can put to work improving economic health and promoting
community development. Perhaps the greatest strength of HUD's economic
development programs is the emphasis they place on helping communities
address locally determined development priorities through decisions
made locally.
The mainstay of HUD's community and economic development programs
is the CDBG program. In fiscal year 2004, total funding requested for
CDBG is $4.732 billion. Funding for the CDBG formula program will
increase $95 million from the fiscal year 2003 enacted level, to $4.436
billion. Currently, 865 cities, 159 counties, and 50 States plus Puerto
Rico receive formula grant funds.
HUD is analyzing the impact of the 2000 Census on the distribution
of CDBG funds to entitlement communities and States. Based on this
review, revisions to the existing formula may be proposed so that funds
are allocated to those communities that need them the most and will use
them effectively. Any proposals will, of course, consider measures of
need and fiscal capacity, as well as other factors.
Of the $4.732 billion in fiscal year 2004, $4.436 billion will be
distributed to entitlement communities, States, and insular areas, and
$72.5 million will be distributed by a competition to Indian tribes for
the same uses and purposes. This budget presumes legislative changes
proposed in fiscal year 2003 to fund CDBG grants to insular areas as
part of the formula, and to shift administration of the Hawaii Small
Cities program to the State. The remaining $224 million is for specific
purposes and programs at the local level and is distributed generally
on a competitive grant basis.
As it did in fiscal year 2003, the fiscal year 2004 budget again
proposes $16 million for the Colonias Gateway Initiative (CGI). The CGI
is a regional initiative, focusing on border States where the colonias
are located. Colonias are small, generally unincorporated communities
that are characterized by substandard housing, lack of basic
infrastructure and public facilities, and weak capacity to implement
economic development initiatives. The fiscal year 2004 funds will:
provide start-up seed capital to develop baseline socio-economic
information and a geographic information system; identify and structure
new projects and training initiatives; fund training and business
advice; and provide matching funds to develop sustainable housing and
economic development projects that, once proven, could be taken over by
the private sector.
HUD participates in the privately organized and initiated National
Community Development Initiative (NCDI). The fiscal year 2004 budget
will provide $30 million for the NCDI and Habitat for Humanity, in
which HUD has funded three phases of work since 1994. A fourth phase
will emphasize the capacity building of community-based development
organizations, including community development corporations, in the
economic arena and related community revitalization activities through
the work of intermediaries, including the Local Initiatives Support
Corporation and the Enterprise Foundation.
The fiscal year 2004 budget provides $31.9 million to assist
colleges and universities, including minority institutions, to engage
in a wide range of community development activities. Funds are also
provided to support graduate programs that attract minority and
economically disadvantaged students to participate in housing and
community development fields of study.
Grant funds are awarded competitively to work study and other
programs to assist institutions of higher learning in forming
partnerships with the communities in which they are located and to
undertake a wide range of academic activities that foster and achieve
neighborhood revitalization.
The fiscal year 2004 budget requests $65 million for the YouthBuild
program. This program is targeted to high school dropouts ages 16 to
24, and provides these disadvantaged young adults with education and
employment skills through constructing and rehabilitating housing for
low-income and homeless people. The program also provides opportunities
for placement in apprenticeship programs or in jobs. The fiscal year
2004 request will serve more than 3,728 young adults.
The Community Renewal Tax Relief Act of 2000 authorized the
designation of 40 Renewal Communities (RCs) and nine Round III
Empowerment Zones (EZs), and provided tax incentives which can be used
to encourage community revitalization efforts. Private investors in
both RC and EZ areas are eligible for tax benefits over the next 10
years tied to the expansion of job opportunities in these locations.
These programs allow communities to design and administer their own
economic development strategies with a minimum of Federal involvement.
No grant funds have been authorized or appropriated for RCs or Round
III EZs. Round II Empowerment Zone communities have received grant
funding in the past, but after 4 years of funding, still have balances
of unused funds available. Of course, all of the tax and other benefits
associated with Zone designation remain intact. Also, both HOME and
CDBG funds can be used for the same activities.
The administration is deeply engaged in meeting the challenge of
homelessness that confronts many American cities. Across the scope of
the Federal Government, funding for homeless-specific assistance
programs increases 14 percent in the fiscal year 2004 budget proposal.
We are fundamentally changing the way the Nation manages the issue of
homelessness by focusing more resources on providing permanent housing
and supportive services for the homeless population, instead of simply
providing more shelter beds.
HUD is leading an unprecedented, administration-wide commitment to
eliminating chronic homelessness within the next 10 years. Persons who
experience chronic homelessness are a sub-population of approximately
150,000 individuals who often have an addiction or suffer from a
disabling physical or mental condition, and are homeless for extended
periods of time or experience multiple episodes of homelessness. For
the most part, these individuals get help for a short time but soon
fall back to the streets and shelters. Research indicates that although
these individuals may make up less than 10 percent of the homeless
population, they consume more than half of all homeless services
because their needs are not comprehensively addressed. Thus, they
continually remain in the homeless system.
As a first step, the administration reactivated the U.S.
Interagency Council on Homelessness. Reactivating the Council has
provided better coordination of the various homeless assistance
programs that are directly available to homeless individuals through
HUD, HHS, VA, the Department of Labor, and other agencies. $1.5 million
is earmarked within the Homeless Assistance Account for the operations
of the Council in fiscal year 2004.
HUD and its partners are focused on improving the delivery of
homeless services, which includes working to cut government red tape
and make the funding process simpler for those who provide homeless
services. The fiscal year 2004 budget continues to provide strong
support to homeless persons and families by funding the HUD homeless
assistance programs at the record level of $1.528 billion.
Several changes to the program are being proposed that will provide
new direction and streamline the delivery of funds to the local and
non-profit organizations that serve the homeless population.
The fiscal year 2004 budget includes funding for a new program to
address the President's goal of ending chronic homelessness in 10
years: the Samaritan Initiative. Funded by HUD at $50 million, the
Samaritan Initiative will provide new housing options as well as
aggressive outreach and services to homeless people living on the
streets. This program is part of a broader, coordinated Federal effort
between HUD, HHS, VA and the Interagency Council on Homelessness.
In order to significantly streamline homeless assistance in this
Nation and increase a community's flexibility in combating
homelessness, HUD will propose legislation to consolidate its current
homeless assistance programs into a single program.
The administration is also proposing legislation that would
transfer intact the Emergency Food and Shelter Program (EFSP) that was
administered by FEMA to HUD. The transfer of this $153 million program
would allow for the consolidation of all emergency shelter assistance--
EFSP and the Emergency Shelter Grant program--under one agency. EFSP
funds are distributed to a National Board, which in turn allocates
funds to similarly comprised local Boards in eligible jurisdictions.
Eligibility for funding is based on population, poverty, and
unemployment data. The Board will be chaired by the Secretary of HUD
and will include the American Red Cross, Salvation Army, and the United
Way, as well as other experts.
In addition to funding homeless supportive services, the fiscal
year 2004 funds services benefiting adults and children from low-income
families, the elderly, those with physical and mental disabilities,
victims of predatory lending practices, and families living in housing
contaminated by lead-based paint hazards.
Nearly two million households headed by an elderly individual or a
person with disabilities receive HUD rental assistance that provides
them with the opportunity to afford a decent place to live and
oftentimes helps them to live independent lives.
The fiscal year 2004 budget will provide the same level of funding
for Housing for the Elderly and Housing for Persons with Disabilities
as was requested for fiscal year 2003. The effectiveness of the Housing
for the Elderly program was evaluated this past year using the Office
of Management and Budget's new Program Assessment Rating Tool (PART),
and received low performance scores. The administration recognizes the
need to improve delivery of housing assistance to the elderly (Section
202) and will examine possible policy changes or reforms to strengthen
performance. Funding for housing for the elderly is awarded
competitively to non-profit organizations that construct new
facilities. The facilities are then provided with rental assistance,
enabling them to accept very low-income residents. In fiscal year 2004,
$773 million plus $10 million in recaptures will be provided for
elderly facilities. Many of the residents live in the facilities for
years; over time, these individuals are likely to become frailer and
less able to live in rental facilities without some additional
services. Therefore, the program is providing $30 million of the grants
for construction to convert all or part of existing properties to
assisted-living facilities. Doing so will allow individual elderly
residents to remain in their units. In addition, $53 million of the
grant funds will be targeted to funding the services coordinators who
help elderly residents obtain needed and supportive service from the
community.
The budget for fiscal year 2004 proposes to separately fund grants
for Supportive Housing for Persons with Disabilities (Section 811) at
$251 million. The disabled facilities grant program will also continue
to set aside funds to enable persons with disabilities to live in
mainstream environments. Up to 25 percent of the grant funds can be
used to provide Section 8-type vouchers that offer an alternative to
congregate housing developments. In fiscal year 2004, $42 million of
the grant funds will be provided to renew ``mainstream'' Section 8-type
vouchers so that, where appropriate, individuals can continue to use
their vouchers to obtain rental housing in the mainstream rental
market. The Housing for Persons with Disabilities program also received
low performance scores when it was evaluated using the PART. The
Department proposes to reform the program to allow faith-based and
other nonprofit sponsors more flexibility in using grant funds to
better respond to local needs. In addition, the reformed program would
recognize the unique needs of people with disabilities at risk of
homelessness, and give priority to serving this group as part of the
administration's Samaritan Initiative to end chronic homelessness.
One of the targeted uses of new incremental vouchers under the
Section 8 program is for non-elderly disabled individuals who are
currently residing in housing that was designated for the elderly.
Disabled individuals are provided Section 8 vouchers to continue their
subsidies elsewhere. If a sufficient number of applications for these
vouchers are not received, the PHAs may use them for any other disabled
individuals on the PHAs' waiting lists. In fiscal year 2004, the
Department will allocate $36 million for the non-elderly disabled to
fund approximately 5,500 vouchers.
HUD will also provide $297 million in fiscal year 2004 in new grant
funds for housing assistance and related supportive services for low-
income persons with HIV/AIDS and their families. This is an increase of
$5 million over the fiscal year 2003 level and is based on the most
recent statistics prepared by the Centers for Disease Control and
Prevention. Although most grants are allocated by formula, based on the
number of cases and highest incidence of AIDS, a small portion are
provided through competition for projects of national significance. The
program will renew all existing grants in fiscal year 2004 and provide
new grants for an expected three new jurisdictions. Since 1999, the
number of formula grantees has risen from 97 to an expected 114 in
fiscal year 2004.
HUD's Lead-Based Paint Program is the central element of the
President's program to eradicate childhood lead-based paint poisoning
in 10 years or less. In fiscal year 2004, funding for the lead-based
paint program will increase to $136 million from $126 million provided
in the President's request for fiscal year 2003. Grant funds are
targeted to low-income, privately owned homes most likely to expose
children to lead-based paint hazards. Included in the total funding is
$10 million in funds for Operation LEAP, which is targeted to
organizations that demonstrate an exceptional ability to leverage
private sector funds with Federal dollars, and funding for technical
studies to reduce the cost of lead hazard control. The program also
conducts public education and compliance assistance to prevent
childhood lead poisoning. The President's budget requests an additional
$25 million for a new, innovative lead hazard reduction demonstration
program to eliminate lead-based paint hazards in homes of low-income
children, funded under the HOME program. This new program will provide
creative ways of identifying and eliminating lead-based paint hazards--
methods that will serve as models for existing lead hazard control
programs, such as replacing old windows contaminated with high levels
of lead paint dust with new energy-efficient windows.
Also included is $10 million for the Healthy Homes Initiative,
which is targeted funding to prevent other housing-related childhood
diseases and injuries such as asthma and carbon monoxide poisoning.
Working with other agencies such as the Centers for Disease Control and
the Environmental Protection Agency, HUD is bringing comprehensive
expertise to the table in housing rehabilitation and construction,
architecture, urban planning, public health, environmental science, and
engineering to address a variety of childhood problems that are
associated with housing.
HUD is requesting $17 million in fiscal year 2004 to meet the
expanded costs of its Manufactured Housing Standards Program. This is a
$4 million increase over the current fiscal year. These funds will meet
the costs of hiring contractors to inspect manufacturing facilities,
make payments to the States to investigate complaints by purchasers,
and cover administrative costs, including the Department's staff. Fees
have been set by regulation to support the operation of this program.
ensuring equal opportunity in housing
In this land of opportunity, no one should be denied housing
because of that individual's race, color, national origin, religion,
sex, familial status or disability. The administration is committed to
the fight against housing discrimination, and this is reflected in
HUD's budget request for fiscal year 2004.
HUD is the primary Federal agency responsible for the
administration of fair housing laws. The goal of these programs is to
ensure that all families and individuals have access to a suitable
living environment free from discrimination. HUD contributes to fair
housing enforcement and education by directly enforcing the Federal
fair housing laws and by funding State and local fair housing efforts
through two programs: the Fair Housing Assistance Program (FHAP) and
the Fair Housing Initiatives Program (FHIP).
The fiscal year 2004 budget will provide $29.7 million--an increase
of $4 million above the fiscal year 2003 level--under FHAP to support
State and local jurisdictions that administer laws substantially
equivalent to the Federal Fair Housing Act. The increase will provide:
(1) an education campaign to address persistently high rates of
discrimination against Hispanic renters (as identified by the 2000
Housing Discrimination Study); (2) funding for a Fair Housing Training
Academy to better train civil rights professionals and housing partners
in conducting fair housing investigations; and (3) additional funding
for expected increases in discrimination cases processed by State and
local fair housing agencies as a result of increased education and
outreach activities. The Department supports FHAP agencies by providing
funds for capacity building, complaint processing, administration,
special enforcement efforts, training, and the enhancement of data and
information systems. FHAP grants are awarded annually on a
noncompetitive basis.
The fiscal year 2004 budget will provide $20.3 million in grant
funds for non-profit FHIP agencies nationwide to directly target
discrimination through education, outreach, and enforcement. The FHIP
program for fiscal year 2004 is structured to respond to the finding of
the 3-year National Discrimination Study and related studies, which
reflect the need to expand education and outreach efforts nationally as
a result of continuing high levels of discrimination.
Fighting predatory lending is an important activity for FHIP
agencies, as reports continue to show that abusive lenders frequently
target racial minorities, the elderly, and women for mortgage loans
that have exorbitant fees and onerous conditions.
Educational outreach is a critical component of HUD's ongoing
efforts to prevent or eliminate discriminatory housing practices. HUD
will continue its work to make individuals more aware of their rights
and responsibilities under the Fair Housing Act. A major study titled
``How Much Do We Know'' emphasized the continuing need for public
education on fair housing laws; in fiscal year 2004, FHIP organizations
throughout the country will continue to fund a major education and
public awareness campaign in support of study findings.
The colonias have many barriers to fair and affordable housing in
both rental and homeownership. Many of the residents are recent
immigrants unaware of their rights under the Fair Housing Act. Funds
will be targeted to FHIP agencies that provide education and
enforcement efforts in those areas. FHIP-funded fair housing
organizations with grants targeted to the colonias will provide
residents with information on the Fair Housing Act and substantially
equivalent laws and respond to allegations of discriminatory practices.
The FHIP program will continue to emphasize the participation of
faith-based and community partners. Recognizing the tremendous impact
that education has on the implementation of fair housing laws,
virtually any entity (public, private, profit, and non-profit) that
actively works to prevent discrimination from occurring is eligible to
apply for funds under this initiative.
Faith- and community-based partnerships in FHIP will empower
citizens by: (1) encouraging networking of State and local fair housing
enforcement agencies and organizations; (2) working in unison with
faith-based organizations; and (3) promoting a fair housing presence in
places where little or none exists today. HUD will emphasize
partnerships with grassroots and faith-based organizations that have
strong ties to those groups identified in the 2000 Housing
Discrimination Study as being most vulnerable to housing
discrimination, particularly the growing Hispanic population.
Promoting the fair housing rights of persons with disabilities is a
Departmental priority and will remain an important initiative within
FHIP. Fair Housing Act accessibility design and construction training
and technical guidance is being implemented through Project Fair
Housing Accessibility First (formerly called the Project on Training
and Technical Guidance). The project, which is now in its second year,
will provide training at 48 separate venues to architects, builders,
and others on how to design and construct multifamily buildings in
compliance with the accessibility requirements of the Fair Housing Act.
During that same period, Project Fair Housing Accessibility First will
maintain a hotline and a website to provide personal assistance to
housing professionals on design and construction problems.
promoting the participation of faith-based and community organizations
HUD's Center for Faith-Based and Community Initiatives (``the
Center'') was established by Executive Order 13198 on January 29, 2001.
Its purpose is to coordinate the Department's efforts to eliminate
regulatory, contracting, and other obstacles to the participation of
faith-based and other community organizations in social service
programs.
The Center will continue to play a key role in fiscal year 2004 in
facilitating intra-Departmental and interagency cooperation regarding
the needs of faith-based and community organizations. It will focus on
research; law and policy; development of an interagency resource center
to service faith-based and community partners; and expanding outreach,
training, and coalition building. Additionally, the Center will
participate in the furtherance of HUD's overall strategic goals and
objectives--particularly as they relate to partnership with faith-based
and community organizations.
On December 12, 2002, the President issued Executive Order 13279,
``Equal Protection of the Laws for Faith-Based and Community
Organizations.'' Its intent is to ensure that faith-based and community
organizations are not unjustly discriminated against by regulations and
bureaucratic practices and policies. The Order directs the Center to:
(1) amend any policies that contradict the Order; (2) where
appropriate, implement new policies that are necessary to further the
fundamental principles and policymaking criteria set forth in the
Order; (3) implement new policies to ensure collection of data
regarding the participation of faith-based and community organizations
in social service programs that receive Federal financial assistance;
and (4) report to the President the actions it proposes to undertake to
implement the Order.
In compliance with Executive Orders 13198 and 13279, the Center
will continue to participate in implementing HUD's strategic goals and
objectives, as well as the following key responsibilities: conduct an
annual Department-wide inventory to identify barriers to participation
of faith-based and community organizations in the delivery of social
services; initiate and support efforts to remove said barriers; widen
the pool of grant applicants to include historically excluded groups;
identify and reach out to faith- and community-based organizations with
little or no history of working with HUD; work with HUD program offices
to strengthen and expand their faith-based and community partnerships;
and educate HUD personnel and State and local governments on the faith-
based and community initiative.
embracing high standards of ethics, management, and accountability
Improving the performance in HUD's critically needed housing and
community development programs begins at home in the Department, by
embracing high standards of ethics, management and accountability. The
President's Management Agenda is focused on how we can better manage to
fulfill our mission by addressing the Department's longstanding major
management challenges, high-risk program areas, and material management
control weaknesses. Accountability begins with clarity on the
Department's goals, priorities and expectations for performance
results. We have integrated the goals of the President's Management
Agenda with our budget, our annual management operating plans, and our
management performance evaluation processes, to better assure
accountability and results.
A key focus of the President's Management Agenda is to address
deficiencies in HUD's management of its financial and information
systems and human capital, which have hindered the Department's ability
to properly control and mitigate risks in the rental housing assistance
and single family mortgage insurance programs. There are no quick fixes
for these longstanding problems, but we continue to pursue a deliberate
and methodical improvement process that is clearly demonstrating
progress in improving HUD's program delivery structure and performance
results.
Financial Management and Information Systems
A primary focus of the past 2 years has been on addressing the
Department's most significant financial management systems deficiencies
in the FHA, and on stabilizing and enhancing HUD's existing core
financial management systems operating environment. The FHA Subsidiary
Ledger Project is proceeding on-schedule as a multi-year, phased effort
to replace FHA's commercial accounting system with a system that fully
complies with Federal requirements, including budgetary accounting and
funds control and credit reform accounting. A major project milestone
was accomplished with the successful implementation of the new FHA
general ledger system in October 2002. Enhanced funds control
capabilities of the new system are scheduled for implementation in
2004, and FHA will continue to adapt and further integrate its 19
insurance program feeder systems over the next several years to achieve
full systems compliance by 2006.
While FHA awaits the completion of these systems improvements, they
have been working with the HUD Chief Financial Officer on a Department-
wide effort to improve HUD's funds control. HUD's handbook on policies
and procedures for the administrative control of funds had not been
updated since 1984. We updated and strengthened these policies and
procedures in a new Administrative Control of Funds Handbook issued in
December 2002.
With respect to HUD's core financial management system, the HUD
Central Accounting and Program System (HUDCAPS), we have been focused
on stabilizing and enhancing systems operations to support the
accelerated preparation and audit of HUD's consolidated financial
statements. We eliminated two reportable conditions from the OIG's
fiscal year 2000 financial statement audit related to: (1) the
reliability and security of HUD's critical financial systems, and (2)
controls over fund balance with Treasury reconciliations. We prepared
mid-year financial statements in fiscal year 2002 and have begun the
preparation of quarterly statements in fiscal year 2003. Our year-end
audit and reporting process was accelerated by 1 month for fiscal year
2002, and we have plans for further acceleration the next 2 years to
meet the OMB mandate for issuance of our fiscal year 2004 audited
financial statements by November 15, 2004.
HUD has received unqualified audit opinions on the Department's
consolidated financial statements for the last 3 consecutive years--a
strong indicator of financial management stability and accountability.
However, the audit of our fiscal year 2002 financial statements was not
trouble free. It contained 3 material weakness and 10 reportable
conditions. Addressing these remaining internal control deficiencies is
a high priority for the Department.
While HUD's core financial management system, HUDCAPS, is
substantially compliant with Federal financial management systems
requirements, it is inefficient and expensive to maintain. We initiated
the HUD Integrated Financial Management Improvement Project (HIFMIP) to
study options for the next generation core financial management system
to replace HUDCAPS. Previous HUD systems integration improvement
efforts failed to fully meet their intended objectives due to
inadequate planning and commitment. HUD is taking the time to properly
plan this project. A HIFMIP Executive Advisory Committee was convened
in January 2003--with representation from the Principal Staff of HUD's
major organizational components, including FHA and GNMA, and an
advisory role has been provided for the HUD OIG. A new Assistant CFO
for Systems was hired in October 2002, and Project Manager was hired
for HIFMIP in February 2003. The HIFMIP Vision is scheduled for
completion by January 2004, and feasibility studies with a systems
recommendation by July 2004.
HUD's overall fiscal year 2004 information technology (IT)
portfolio will benefit from our continuing efforts to improve the IT
capital planning process, convert to performance-based IT service
contracts, strengthen IT project management to better assure results,
extend the data quality improvement program, and improve systems
security on all platforms and applications. HUD is also continuing to
pursue increased electronic commerce and is actively participating in
the President's ``E-Government'' projects to better serve our citizens
and realize cost-efficiencies through standardized systems solutions in
common areas of information and processing need.
Human Capital Management
HUD's staff, or ``human capital,'' is its most important asset in
the delivery and oversight of the Department's mission. Effective human
capital management is the purview of all HUD managers and program
areas, and improvements have been geared towards meeting HUD's primary
human capital management challenges. HUD has taken significant steps to
enhance and better utilize its existing staff capacity, and to obtain,
develop and maintain the staff capacity necessary to adequately support
HUD's future program delivery. Building upon the REAP and TEAM
management tools, a new staff resource estimation and allocation system
implemented in 2002, HUD will complete a Comprehensive Workforce
Analysis in 2004 to serve as the main component to fill mission
critical skill gaps through succession planning, hiring and training
initiatives in a Five-Year Human Capital Management Strategy.
HUD is working to determine where application of competitive
sourcing to staff functions identified as commercial would result in
better performance and value for the government. We have worked with
OMB to ensure the appropriate amount and mix of competitive sourcing
opportunities, taking into account the workforce we have inherited,
including the significant downsizing and extensive outsourcing of
administrative and program functions over the past decade. HUD's
Competitive Sourcing Plan identifies some initial opportunities for
consideration of possible outsourcing, in-sourcing or direct conversion
studies to realize the President's goals for cost efficiency savings
and improved service delivery. HUD will continue to assess its
activities for other areas where competitive sourcing studies might
benefit the Department.
Strengthening Controls Over Rental Housing Assistance
HUD's considerable efforts to improve the physical conditions at
HUD-supported public and assisted housing projects are meeting with
success. HUD and its housing partners have already achieved the
original housing quality improvement goals through fiscal year 2005 and
are raising the bar with new goals. However, HUD overpays hundreds of
millions of dollars in rental housing subsidies due to the incomplete
reporting of tenant income and the improper calculation of tenant rent
contributions. Under the President's Management Agenda, HUD's goal is
to reduce rental assistance program errors and resulting erroneous
payments 50 percent by 2005. HUD has established aggressive interim
goals for a 15 percent reduction in 2003 and a 30 percent reduction in
2004.
To achieve our erroneous assistance payments reduction goal, we
have taken steps to reestablish an adequate HUD monitoring capacity in
the field to oversee intermediary performance. Field staff is
conducting intense, on-site monitoring reviews to detect and correct
income verification and subsidy calculation errors. We are also working
to provide intermediaries with improved program guidance and automated
tools to more efficiently and effectively administer the rental
assistance programs. Program simplification proposals are also under
consideration, along with a pending legislative proposal for increased
authority to perform more effective computer matching with tenant
income data sources to enable intermediaries to perform upfront
verifications of income used in rent and subsidy calculations. Updated
error measurement studies will be performed on program activity in 2003
through 2005 to assess the effectiveness of our efforts to reduce
program and payment errors.
Improving FHA's Single Family Housing Programs Risk Management
FHA manages its single-family housing mortgage insurance program
area in a manner that balances program risks with the furtherance of
program goals, while maintaining the financial soundness of the
Mortgage Mutual Insurance (MMI) Fund that supports these programs. The
MMI Fund is financially sound and the single-family housing programs
are contributing to record homeownership rates, with a focus on
homebuyers that are underserved by the conventional market.
Nevertheless, overall program performance and the condition of the MMI
Fund could be further improved if all lenders, appraisers, property
managers and other participants in FHA's program delivery structure
fully adhered to FHA program requirements designed to reduce program
risks and further program goals.
In the past 2 years, FHA has initiated or completed numerous
actions to improve the content, oversight and enforcement of its
program requirements, including consideration of alternative business
processes. FHA developed 16 rules to address deceptive or fraudulent
practices. This includes the new Appraiser Watch program, improvements
to the Credit Watch program that will identify problem loans and
lenders earlier on, new standards for home inspectors, a final rule to
prohibit property ``flipping'' in FHA programs, and rules to prevent
future swindles like the 203(k) scam that threatened the availability
of affordable housing in New York City. These reforms, and the greater
transparency they ensure, will make it more difficult for unscrupulous
lenders to abuse borrowers. The HUD budget ensures that consumer
education and enhanced financial literacy remain potent weapons in
combating predatory lending.
In addition, FHA continues to enhance its staff capacity for
administering this program area, and continues to achieve favorable
property disposition results through its performance-based management
and marketing (M&M) contracts. M&M contracts have resulted in a steady
decline in FHA's property inventory, from 36,000 homes at the end of
fiscal year 2000 to 30,113 at the end of fiscal year 2002. The loss per
claim on insured mortgage defaults has been cut from 37 percent to 29.5
percent.
conclusion
As we implement our proposed fiscal year 2004 budget, we will also
judge our success by the lives and communities we have helped to change
through HUD's mission of compassionate service to others: the young
families who have taken out their first mortgage and become homeowners,
the homeless individuals who are no longer homeless, the neighborhoods
that have found new hope, the faith-based and community organizations
that are today using HUD grants to deliver social services, and the
neighborhoods once facing a shortage of affordable housing that now
have enough homes for all.
Empowered by the resources provided for and supported by HUD's
proposed budget for fiscal year 2004, our communities and the entire
Nation will grow even stronger. And more citizens will come to know the
American Dream for themselves.
I would like to thank each of you for your support of my efforts,
and I welcome your guidance as we continue our work together.
Thank you.
Senator Bond. Thank you very much, Mr. Secretary. Senator
Mikulski has agreed that she would go ahead and vote, and she
has a couple of other responsibilities this morning. I am going
to ask some questions and adjourn temporarily until she
returns, and I have asked her since she has some commitments,
to take all the time she needs when she comes back, and then I
will pick up from there.
First, I appreciate your willingness to work with us on
HOPE VI. Surely everybody understands the program has been
around and there are obviously ways that it can be improved or
changed, and I am not resistant to that. But as I believe
Senator Mikulski very clearly indicated, we both have a strong
commitment that this is a vitally needed part of so many
communities in this country. And yes, there are a lot fewer
completed than planned. It takes a long time, as you well know,
to get these things out of the grand. Maybe they could be doing
a better job, but from what I know of the projects, they spend
about 2 or 3 percent in the first year, and then they really
take off over time.
So if there are problems, let us figure out how to proceed,
whether you can revise the program or a new program. As I said,
I am skeptical about a loan program that is structured to
replace it, but we will work together.
HIRING
With respect to the problems in hiring, the personnel
problems, we will look forward to discussing those with you
privately, which I believe would be more appropriate, but
clearly, that one, we have had a couple of thoughts like that
in some of the other departments this committee is fortunate
enough to fund, and for the life of me, I cannot understand why
people cannot count. I know it is complicated, but there are
basic math skills that are needed.
HANF
Let me go back to your proposal for block granting for
needy families. I have expressed my concerns. Clearly you
recognize and we recognize that there has been some problems in
the Section 8 program. Why should we convert it to a block
grant program to the States? Would States be required to
maintain the current Section 8 subsidy requirements in 801 of
30 percent? Why would this be good for Section 8 residents? So
maybe you can share some of your thoughts on this.
Secretary Martinez. Mr. Chairman, I think that those are
all good questions, and questions we should address as we go
forward in implementing legislation for something like this.
First of all, let me say that I find it troubling that what
I think is basically a retail program should be managed from
Washington. The fact that a fair market grant in a given
community somewhere in America would have to have that fair
market grant adjusted by an approval from Washington sometimes
delays that process by 5 or 6 months, which is inevitably built
into the bureaucracy of the Housing Authority and that of our
own Department, and those things occur.
In addition to that, I believe that dealing with over 2,600
housing authorities on this particular program, versus dealing
with 50 States, would ease the way we manage and the way we
handle programs.
In addition to that, I believe by giving the States the
local flexibility in the utilization of the housing vouchers,
that a full utilization of our vouchers would be achieved. I,
like you, am terribly troubled by the recurring problem with
recapture because unfortunately, we find year after year that
that money, as you all pointed out, is not necessarily just
spent on housing and it is----
Senator Bond. Almost never. It gets raided. Everybody sees
the pot of money and it goes to whatever happens to be hot at
the time.
Secretary Martinez. And so you know, I feel like, in any
event, however we can fix that problem and put more money in
the hands of the people who really need it, which is the intent
of the Congress at the time that you appropriated it. So all of
those reasons coming together, in addition to the fact, Mr.
Chairman, that the intent of the welfare plan which the States
are administering, would be a nice conduit for this program to
also fit with.
The population of folks that the States are dealing with on
the welfare roles or in their medical needs also have housing
needs, and now we would put all of that together. It has had a
good reception from a number of governors. I think that wound
ensure that the money would be preserved for housing, that it
would be preserved in the program, much like we now have it. I
think all the safeguards that we would want in terms of
eligibility or whatever else, I think would be built into the
authorizing framework to make it a successful program.
But you know, I know from your experience as a former
governor and your strong knowledge of the program, that I would
really look forward to a dialogue on this on the shortcomings
of this proposal, and perhaps I could persuade you on helping
us to make it better rather than just legislating that it does
not work.
SECTION 8
Senator Bond. Clearly, we have to do some things about
Section 8. We included, as I said, a change in the approach.
The House had one view, we had a different view. I think what
we came up with should be workable, we want to work with you to
find out whether it is, because there is certainly enough
problems in the area, and we have to see how this new fund
works.
And I would like your comments on the approach we took for
fiscal year 2003 and what steps HUD has taken to assure that
HUD has adequate and reliable information to the numbers of
vouchers as well as the number of additional vouchers that are
likely to be used to obtain housing. We found this information
in the past has not been reliable.
Secretary Martinez. Mr. Chairman, I appreciate the new
approach that has been taken. I think it is a step in the right
direction and should help us to a fuller utilization of the
Section 8 vouchers.
What I would like to do with the Chair's permission is to
liberally rely on my Assistant Secretaries when you have
specific questions, and I ask Assistant Secretary Liu to step
up and perhaps address some of those.
Senator Bond. All right. Mr. Liu.
STATEMENT OF MICHAEL LIU
Mr. Liu. Good morning, Mr. Chairman. First of all, we
welcome the fiscal year 2003 reforms as passed by Congress for
the Section 8 program, and we think it is a step in the right
direction for budgetary reform. As the Secretary has mentioned
and I think as you have alluded to, there are still things that
can be done so the program can make things work.
Specifically as to what we are doing as to implement the
fiscal year 2003 proposals, I can assure you that when we first
heard of the possibility, we started working to improve our
reporting requirements because right now we have been faced
with situation where under the best of circumstances they are a
year, sometimes a year and a half old, which has compounded our
problems. We are working toward refining existing systems, so
we are not talking any new systems, but working with the
existing systems to gather information on Section 8, to
streamline the release of information and usage on a much more
current realtime basis, and we are moving forward on that.
Senator Bond. I look forward to working with you on that.
I do have to go for the vote but let me raise one more
thing, and that would be in GAO's report, the GAO asserts that
errors in determining the amount of rental income from the
Section 8 program has resulted in estimated excess of some $2
billion, or 11 percent of the funding in fiscal year 2001. $2
billion would be enough to pay for a new affordable housing
production program. If that figure is accurate, the loss means
that we really are missing some opportunities to utilize it.
What are you doing to reduce that error rate, that overpayment?
Secretary Martinez. Mr. Chairman, we have focused on this
issue, and I would ask Assistant Secretary Liu to address the
specifics.
Mr. Liu. We have aggressively worked to not only have
legislation introduced to get new hires that we need, and
hopefully that will pass. But not waiting simply for the
legislation we have aggressively been trying to get agreements
signed with States around the country to keep better track of
wage and hiring information, which is key to our being able to
keep track of the truth in terms of what is being required.
Senator Bond. Has the IRS given you any help in that?
Mr. Liu. We have talked to the IRS.
Senator Bond. The Committee will stand in recess until
Senator Mikulski returns, and I will be back shortly
thereafter.
HOPE VI
Senator Mikulski [presiding]. The Subcommittee will
reconvene with the concurrence of Senator Bond, and I have a
bipartisan responsibility I must attend to as close to 11:00 as
I can.
As you can see, we have many commitments, Mr. Secretary,
and we know you do as well. Senator Bond is voting and in the
interest of your time and ours, I am just going to proceed.
I am going to start off my questions with HOPE VI, and we
have had many private conversations on the topic. And second, I
also want to thank you and your staff for supporting the study
which resulted in a report on lessons learned on HOPE VI. They
have completed study one, which I think raises some very
significant issues related to the program, but also contains
some suggestions, which I think will maximize this very great
opportunity that I know you and I are committed to.
Second, there has been always the issues of relocation,
where do they go, what happens to them?
And number three, is the focus now on buildings only, or
also on the human development services. And remember, the goal
is public housing, not a way of life but a way to a better
life, and I think we should focus on that.
Now, could you tell us what you are thinking about in terms
of HOPE VI, where do you want it to go once it is zeroed out?
We are very concerned. This is $600 million that we could use.
Secretary Martinez. Senator, I think the reason we are in
this situation is that because of whatever issues did arise
within the administration, that the process of developing an
alternative did not keep pace with the budgetary cycle which
required us to not fund it.
Let us say that our concern on HOPE VI is that we are
studying this and we are looking to have many resources come
together, people in the academic community who have looked at
HOPE VI, in addition to practitioners in the development
projects, mayors who have tried to revitalize urban areas, and
pull together the best of all of that thinking as to how we
should reauthorize a HOPE VI, or whatever we arrive at. We
think that the mission of HOPE VI is not over.
I think what has occurred is that we had a 10-year program
with a substantial amount of money. With this chart I would
like to go through where they are in terms of the opportunity
and the spend-out, and again, it is not to be critical but only
to point out to you that we do have a moment here to take a
breath as we go forward into the future.
But as you see, in Chicago, there are people there that are
doing a terrific job in revitalizing parts of that city, but
you can see that there is still the signs where the spend-out
is not----
Senator Mikulski. Mr. Secretary, my bifocals are not
working.
Secretary Martinez. Let me give you a little help, if I
might, just to be casual if I may.
Basically we are looking at Chicago for instance; they have
been awarded this much, they have only spent this little bit
here so they still have a number of projects, they are going to
be deferred to later.
Senator Mikulski. Let us go to St. Louis and Baltimore.
Secretary Martinez. Baltimore actually has spent well over
50 percent of what they have been granted, so that is the good
news, and St. Louis has a little bit less.
Senator Mikulski. So Mr. Secretary, we have spent a
billion?
Secretary Martinez. Baltimore has been the best relative to
what was awarded.
Senator Mikulski. Let us look ahead to October 1, 2003, for
the fiscal year. Where will we be with this? You indicated that
there is money funded that local communities still will be
completing their project on that is the completion owe money I
got to complete it, so it is not like when it comes to October
1, it stops.
Secretary Martinez. All of these projects, we will still
bring them to completion.
Senator Mikulski. And then they----
Secretary Martinez. At that point HUD would have to go
through one more round of communities out there who today would
be anticipating the possibility of doing a HOPE VI or trying to
put a deal together or maybe some that were in the running this
year but did not quite get to allocation, so next year there
would be one more cycle of HOPE VI grants that we could issue,
all of whom I hope is, and our challenge is to work with the
communities who are doing a good job but who still have
problems.
Senator Mikulski. Let us move on, because I do have to go.
Here is what I am going to say. First of all as I understand
HOPE VI, we spent a total, since the program was created a
decade ago, over a billion dollars, and the results show there
are successes here as well as lessons learned. I do not want to
give up on the HOPE VI framework. I think what you have just
said is you are asking for the opportunity to pull together a
group of people who know the most about HOPE VI, which is the
advocates who have had criticism, academics like the Urban
Institute who have done studies on it, and the mayors who have
to run it. And I think what you are asking for as we have this
small window, is the opportunity to pull together a task force
that could bring forth either a HOPE VI reform package or a new
building on lessons learned, a new framework for legislation.
Secretary Martinez. I would love to pull that kind of thing
together. I would also seek the authority to also commit a
funding package to go with it.
Senator Mikulski. I understand that and also that there is
the authorization issue as well.
Secretary Martinez. Correct. Something has to happen this
year in any event.
Senator Mikulski. I would like to talk about a timetable.
First of all, we asked HUD for a report that was due in June
2003 on the status of severely distressed units, we want to
know what is left out there and the need.
There is a second need that is not related directly to HOPE
VI but it is also important, and that is the backlog on public
housing capital repair. That is both regular public housing--
but I understand there is a huge backlog. I also do not know if
it includes the housing for the elderly. Remember when I said
that most of this housing was built in the 1970's and 1980's.
Secretary Martinez. The 202's would not be included.
Senator Mikulski. So that is a whole other issue there.
Secretary Martinez. Right.
Senator Mikulski. So really this is the program that was
initiated by President Ford, it gained momentum under President
Carter, it was one of the really signatures of the Reagan
Administration, so this is really a bipartisan effort among the
seniors.
I do not know that we want this to go to a commission, that
requires presidential appointments and executive directors, et
cetera, but I am going to ask you internally that you pull
together a task force among the categories of stakeholders that
you have just enumerated, and we will work with you on this to
say where do we go next. And then bring this to the authorizers
and we appropriators to see if we can do something this year so
when the money in the pipeline runs out, we have a new
framework. I really do not believe that President Bush, who I
believe is a real conservative, wants to in fiscal year 2004, a
presidential election year, have a program that just sputters
out.
So much has been done on a truly bipartisan basis, let us
now look at the new framework based on needs both of residents
and the distressed housing, and also on the lessons learned and
where we might need to be placing emphasis on human capital. So
I really extend my hand to you in partnership to work on this.
The only outcome I am interested in is to keep the framework,
physical architecture that develops human capital, and people
have a way of moving to a better life, just like welfare to
work.
Secretary Martinez. Alright.
PUBLIC HOUSING--ELDERLY/MINIMUM RENT
Senator Mikulski. I am very concerned about the issues
related to the elderly housing and we would welcome your ideas
on what we are doing and can do about housing for the elderly
as well as in public housing.
Another issue with which I am concerned is public housing
minimum rent. As I understand it, there are many residents that
are going to be affected by this change. Could you tell me why
HUD should determine minimum rents and not the local public
housing authorities?
Secretary Martinez. Senator, for a long time, housing
authorities have, for the most part, determined a minimum rent,
and in fact today out of the 4 million families that are
currently receiving Federal assistance, only 250,000 will be
affected by this new minimum rent proposal, which is only about
8 percent of the families that are currently served by public
housing.
So the idea is that, at a time when it is felt that a
minimum rent of $50 would be something that all families who
reside in public housing should be contributing, that it is
appropriate to set out a place where all should go. What occurs
often times is that if there is not some clarity on this, that
on the one hand maybe minimum rents will go beyond $50, which
is not appropriate in many cases, or that folks who next door
may be making their $50 contribution have a neighbor who is
equally able to make it or even better off and yet does not
make it.
So our goal is to try to insure that there is some equity
in this. Most housing authorities have a minimum rent fee today
of $25 to $50. Over 50 percent of housing authorities have a
$50 minimum rent, and so we believe that this is trying to
create a little equity in public housing.
And also, this is teaching a certain responsibility because
as you have said, it is not a way of life and there is no such
thing as free rent. So if people have a sense of obligation to
pay in some amount of their money for rent, it can begin to
lead them to a path of self sufficiency and out of the public
housing morass and into a life of their own.
Senator Mikulski. As you know, there are advocates who are
very troubled by this. And local public housing authorities are
troubled. I know Mr. Grazziano and the Baltimore folks are also
troubled by this, and I would ask, number one, that you take a
look at this decision and number two, consult with the local
public housing authorities and see what they think about it.
And the thing we do not want to do with any of these
policies is penalize the poor. I understand the need for
responsibility, we encourage responsibility, but where there is
some unexpected hardships like illness, they may not be able to
pay.
Secretary Martinez. Let me also say, I did not point this
out, Senator, but the elderly and the disabled, of course, are
exempt from the $50 rent, so it is only for the rest of the
population.
FRAUD
Senator Mikulski. Let us go now to issues of fraud. I would
like to bring up the issue that I talked about earlier.
Secretary Martinez. Could I ask the Inspector General to
join me?
Senator Mikulski. Yes.
First of all, I do find it commendable what you have been
doing. We have had prosecutions, we have had indictments, and
even jail sentences as well as FHA reform.
I am not going to name the company but we will share it
with you privately, but it is a Utah based loan server. And
what they do is they send false letters to home buyers telling
them they were delinquent on their loans, that they were going
to be foreclosed on their loans, and to send them money, when
there was nothing wrong with the loan. People panicked and of
course as you know, people will do anything not to lose their
home.
What the TV station has identified, because people went to
TV and the community law center, this company provides customer
services but again, they are not the lender. The Community Law
Center in Baltimore has received 90 complaints from the one
same company. We do not know if any of these loans have FHA
insurance on them. We do know that it is an approved FHA
partner.
And so my questions would be number one, to ask both the
Department and the FHA to look into this and Mr. Donohue, for
you to look into this particular company to stop this, to
identify what they are doing and to stop it, and to see if this
is even going on in other parts of the country, because I do
not believe they are a national company. And then we need to
know if someone has been a victim, where should they go to get
help. Do you want to comment, any of you, on this?
Secretary Martinez. I have also Housing Commissioner
Weicher.
Senator Mikulski. It just seems with flipping when we close
3 loopholes and the scammers and the scummers find 5 more. That
is what a predator is.
STATEMENT OF KENNETH DONOHUE
Mr. Donohue. Senator, we became aware of some of these
tactics in the midwest United States, and we have also seen,
just to add to, we have seen additional types of activities of
this sort. Such as global operations used to identify and
target mortgages facing foreclosure, soliciting financing that
involves high fee structures and charges that add to the cost
of the loan and the price of the mortgage. We have found
entities that pray upon mortgages that----
Senator Mikulski. Can you just tell me what we are going to
do on it?
Mr. Donohue. We are aware of it, we are opening an
investigation with regard to this matter, specifically to the
matter at hand in Maryland.
Senator Mikulski. To the general issue or to this company
as well?
Mr. Donohue. We are looking at the general issue and we are
going to take a specific look at the matter that you have
raised.
Senator Mikulski. Thank you very much. And I want to here
more of your testimony, but I do have this obligation with
Senator Frist. And I want to thank you for listening. Did you
want to add something, Mr. Weicher?
STATEMENT OF JOHN C. WEICHER
Mr. Weicher. Senator, simply that if these are FHA loans,
and you indicated that that has not been established, if they
are FHA loans, we do have the ability to intervene. We have
loss mitigation requirements in the event borrowers are in fact
delinquent. And we certainly have the ability to prevent
foreclosures when borrowers are not delinquent.
Senator Mikulski. And I do not know if they are
foreclosing. I just think they are sending scare letters. They
are not a lender, they are providing so-called customer
services, but they send scare letters and accept payments when
there is no payment to be accepted. These are when loans are
current, when loans are current.
Mr. Weicher. If that is happening, I am not a lawyer, but
to me that sounds like fraud and we would be certainly
interested in sanctioning that entity insofar as it has FHA
approval, and we would be certainly working with the IG.
Senator Mikulski. What I would like to suggest is that at
the conclusion of this hearing, my staff present to you what we
currently know about this, and second, I would ask that you
contact the Community Law Center in Baltimore, they are
energetic lawyers who have gotten 90 complaints from people. So
they have kind of a documentation staff there, and someone
could then see that.
If someone has received one of those, what should they do
and where should they go? Or do you want to think about that
and tell us?
Mr. Donohue. If I may. I would think that if it is a matter
with regard to a violation of Federal law, I think they should
contact us, or speak to the appropriate HUD Field Office--we
work very closely in Baltimore with the FBI and U.S. attorney's
office, any means to get that information to us or contact
directly is fine.
Senator Mikulski. Well, what I would like you to understand
is the specific method, and I would like you to really think
about this, because we do need a method for them to either come
to the Community Law Center or they come to you. So please
think about it, so we can let these 90 people know, but I have
a feeling that there are others out there.
Mr. Chairman, thank you. I hope we pursue this. And then
second, where we are on all of these aspects related to
predatory lending. And if they know we are on it, then it tends
to have a chilling effect. So thank you very much.
Secretary Martinez. You are very welcome.
PUBLIC HOUSING OPERATING FUND
Senator Bond. Thank you very much, Senator Mikulski. I
think that your questions covered a number of the questions I
had, so I am going to try to move on, and Mr. Secretary, I
would also like to discuss with you in private what internal
steps you have taken to ensure that the public housing
operating fund over-expenditure does not happen again. We will
talk about that in a one-on-one conversation.
FAITH-BASED ORGANIZATIONS
With respect to faith-based organizations, I understand HUD
is revising a number of the regulations to make it easier for
faith-based organizations to participate in HUD programs,
including enhanced eligibility for grants. I strongly support
the role of churches and other faith-based organizations in
making our communities strong and safe, but there have been a
number of news reports that infer that HUD is trying to divide
churches and faith-based organizations with expanded access to
Federal funds including grants to build churches where a church
is involved with community issues.
What programs are involved, and is their truth about this
providing grants for church construction, and how would you
deal with this constitutional potential problem here?
Secretary Martinez. Mr. Chairman, we have embraced the
President's call to level the playing field for faith-based
organizations to insure the full participation of the faith
community in a lot of our programs and to insure that the
regulations and other rulings of the game are fair, even, no
matter what the program may be. We are in the process of
finalizing some regulations which we hope will not have the
conclusions that I think some of those news reports have
reached.
We believe that if there is a building related to a church
but not the church itself, which may be involved in a social
service of some sort, that perhaps some funding for
accommodating that work could be done, but we are going to try
to be very clear that we stay away from any direct funding of
church buildings, things of that nature. Houses of worship are
different from places where social services may be rendered.
So we are looking very carefully at these regulations, they
are not final. As we go forward, I think the caution that you
have raised certainly needs to be kept in mind.
Senator Bond. I think it is important to steer that path
very carefully, and I certainly endorse wholeheartedly the
President's initiative.
PUBLIC HOUSING REINVESTMENT LOAN GUARANTEE INITIATIVE
Your budget request for new public housing loan guarantee
program and $131 million in credit subsidy, according to the
budget representation, this program will leverage some $2
billion in loans and accelerate capital improvements. That
sounds like a fairly complex program for most PHAs.
How quickly do you think you could get it up and running,
what do you think the cost of the actual per unit basis will
be, and how will it compare with HOPE VI, what kind of tax
credits are expected to be part of any financing? Mr. Liu?
Mr. Liu. Mr. Chairman, we certainly are excited about the
public housing reinvestment loan guarantee initiative. We
appreciate the concept of loan guarantees which was proposed by
the chairman last year, because we think that credit
enhancement has to be a key component for this concept of
utilizing private sector debt financing to work.
We are building this program on the experience over the
past 4 or 5 years where similar deals without credit
enhancement have gone forward. Over the past 4 or 5 years and
really mainly in the past 2 years, we have raised over $500
million through the debt markets, over 80 transactions of
various sources, where capital fund grants have been used as
either equity and/or as leveraged capital for bond deals,
loans, and other situations.
We have done some analysis of cities where this tool might
be used, and per unit costs ranged from $17,000 to $55,000.
This is really in line with what we are doing now in
rehabilitation and modernization use of the capital fund at
this point in time. So we think that the program can be up and
running fairly quickly. In fact, we have proposals already at
the door from public housing authorities that are interested in
being first in line should the concept move forward.
FHA
Senator Bond. All right, thank you. Let me turn now to an
FHA question. According to the GAO 2003 high risk report on
HUD, the FHA single family mortgage insurance program remains a
high risk area because of continued weakness in the insurance
process, evidence of fraud, and a variety of challenges that
HUD faces in implementing correcting action. What steps are
being taken by HUD to address these concerns?
Secretary Martinez. The FHA Commissioner, Mr. Weicher, is
going to address that, Mr. Chairman.
Mr. Weicher. Yes, Mr. Chairman. We have taken a number of
actions to address the problems of fraud and lender
incompetence in our programs. Senator Mikulski alluded to our
flipping rule. We have a series of rules in process, literally
a dozen rules to address fraudulent or deceptive practices in
FHA loans.
We established a program called Credit Watch where we track
the loan performance of individual lenders to see how their
loans are performing the first couple of years after
origination, compared to other lenders in the market area. We
know that if they are bad loans, the problems arise the first
couple of years.
We originally set a threshold of 3 times the default rate
for the market area as being grounds for sanction. We are in
the process of lowering that quarter by quarter from 3 to 2\3/
4\, 2\1/2\, and by next fall, next October, it will be double.
We are chasing out, removing their ability to do business with
us, those lenders who show early default rates in excess of
their market by a substantial amount unless they can provide
some evidence that there is a reason for that.
We are in the process of extending that to appraisers,
because you cannot really have a predatory loan without a bad
appraisal, or corrupt appraisal. We have issued advance notice
of proposed rule making on that program, we received comments,
and we are in the process of developing a rule to put that into
place.
We are moving on these and it shows up in the overall
performance of the FHA funds as you alluded to in your opening
remarks. We are having fewer claims, fewer losses, and that is
one significant reason why our reserves are increasing.
Senator Bond. Okay. Let me ask you on your risk management,
you launched a demo in 2002 known as the 2001 Accelerated Claim
Disposition Program to reduce foreclosure losses. On October 31
last year, you awarded Salomon Brothers Realty a 70 percent
equity interest in a joint venture to dispose of 5,100
nonperforming loans. HUD said this would help restructure the
mortgage notes to improve performance. What is the status of
that particular program?
Mr. Weicher. This is the Section 601 demonstration
authorized by Congress in, I believe, the 2000 Appropriations
Act. We have, as you described, conducted that auction and made
that transaction with Salomon Brothers, and we are in the
process of providing loans to--and these are loans which have
gone into default but which we have not had to foreclose and
take title.
We pay a claim on the loan to Salomon Brothers. Salomon
Brothers in turn takes the responsibility for management of the
loan. There are a couple of purposes to this. One is that it is
more cost effective for us to sell the notes than to proceed to
foreclosing, taking title and funding the property ourselves.
The other is the private sector has more ways of avoiding a
foreclosure than we do, the private sector can take it down on
a partial basis and write down in ways that we cannot.
In conversations we have had with Salomon Brothers, they
have indicated that over 70 percent of the families in these
homes want to work with them on work-out programs. If they are
able to make that work, then many of those families will remain
in their homes, and they could not have remained in their homes
if they had gone to claim with us, gone to foreclosure with us,
and I think that is going to strengthen the communities, as
Senator Mikulski stressed in her opening remarks, by keeping
stability, keeping people in their homes.
ASSET CONTROL AREA DEMO
Senator Bond. Thank you. In last year's appropriations
bill, we directed HUD to enter into contracts and agreements
under the Asset Control Area demonstration program to design
and promote home ownership. What is the current status of that?
Mr. Weicher. We did, in fact, issue new procedures for the
program on September 15 of last year. We actually issued two
sets of procedures, one, the program as prescribed specifically
by statute, and a second based on our experiences in the
program under our pilot authority. We put together a program
which seemed to us likely to work significantly better. We
received a number of comments on the programs and a number of
expressions of interest from individual communities.
We have received applications under the pilot program from
Baltimore, Camden, Cleveland and Hartford. We have received
expressions of interest and have had conversations with
Rochester, Chicago and Los Angeles. All of those except
Baltimore and Camden participated in the earlier program. We
have revised our proposed procedures in light of conversations
we had with many of these groups and we sent out letters saying
we are ready to accept your application, we sent those out in
late February and we expect that program will be fully
operational soon.
Senator Bond. Why did it take so long?
Mr. Weicher. We met the September 15 deadline. We then
received comments from local organizations on a wide variety of
issues, issues they wanted to have addressed, and we have been
working to address those issues so we have a consistent program
that would work.
Secretary Martinez. One thing I would point out is that
some of these programs that we have inherited, while well
intended, sometimes do not have the built-in tools for us to
properly monitor them like you would want us to do. So I think
we wisely stopped the program when we felt that it just could
not be managed in a way that would ensure good oversight and
then restart them. I understand we may have taken a little
longer than we should have in restarting it, but we put it back
on track and allowed the communities to participate in them.
But the program we had which was littered with fraud and
problems, since we have reinitiated it after stopping it for
only 90 days, I think is really being successful and is, in
fact, fulfilling the promise of what it was intended to do, and
we look forward to the same with this particular program.
INTERAGENCY COUNCIL ON HOMELESSNESS
Senator Bond. Mr. Secretary, you soon will be coming to the
end of your term as Chairman of the Interagency Council on
Homelessness. Our thanks for working with this Committee on
resuscitating the Council, and hopefully you will continue to
play a strong role.
Can you tell us what you think the Council accomplished
during your chairmanship, and I would just ask you to address
the efforts of the council, whether agencies such as VA and HHS
have come forward with adequate resources.
Secretary Martinez. Clearly the revitalization of the
Council on Homelessness by this administration, I think is one
very important step and milestone in the fight to end
homelessness in America. We have taken the approach of
attacking the chronic population as a way of attacking
homelessness in general.
By dealing with the chronic population, the interagency
council's focus on the chronic population, a program designed
to deal with that population, and encouraging others to jump on
that band wagon, has been one of the real successes of the
program. We have cities now like Chicago who are embracing the
concept of ending homelessness, ending chronic homelessness as
a step to ending homelessness.
The Council was able to pull together the resources and the
interests of HHS and VA, along with HUD, to do the Samaritan
Grant program. We think this is an innovative approach which is
going to allow us to deal with that chronic population in a way
that allows them to be helped not just with shelter, but also
with medical needs and the VA with all the programs that they
do. The Samaritan program has a contribution of $10 million and
$10 million from each of those two other departments, with HUD
contributing $50 million from our budget.
We want a greater and fuller partnership because we do know
that the chronic population oftentimes lacks medical care, has
addiction problems and things of that nature.
Senator Bond. I have seen the figures on the addiction
problem, and I would call Mr. Mangano forward to give us a
brief update, if you would please. Welcome.
STATEMENT OF PHILIP MANGANO
Mr. Mangano. The first thing I would like to say, Mr.
Chairperson, is that it is really the personal and professional
commitment and support of Secretary Martinez that has eased the
revitalization of this council in this inaugural year of its
existence, and I would say personally it has eased my own
Baptism into the Federal Government. So I am very thankful to
both Secretary Martinez and to his staff and even as I look at
his staff here, every one of them has made a contribution to
the well being of the council over the last year.
In the council, as Secretary Martinez indicated, we have
developed some themes, and one of the key themes we have
developed is prevention of homelessness. That has been
something that has been absent from Federal policy around
homelessness in the past. So what have we really engaged in for
the last 20 years? We have moved people out of homelessness,
but more people have fallen in, and that has been the
continuous saga. So a lot of the attention of this
administration is on prevention and especially on, as Secretary
Martinez indicated, the President's initiative and the
Secretary's initiative to end chronic homelessness.
We know that the research indicates that 10 percent of the
population consumes over 50 percent of the resources, and our
hope is that by focusing on that population and ending that
population's homelessness, there will be additional resources
to address the homelessness of other populations of homeless
people as well.
We are also looking to increase the access to mainstream
resources on behalf of homeless people. A GAO report in 1999
indicated that the resources that are targeted for homeless
people in the Federal budget are really insufficient, but that
there are hundreds of billions of dollars of resources
available in the mainstream programs. So we have been working,
again, with HUD and HHS and VA and Labor and SSA, to ensure
that better access is available to mainstream programs for
homeless people.
ADDITIONAL COMMITTEE QUESTIONS
Senator Bond. Thank you. We appreciate your good work on
it.
Mr. Secretary, anything you want to add? I have a few more
questions but I am going to submit them for the record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Christopher S. Bond
housing assistance for needy families
Question. Under the proposed funding formula and out-year
estimates, how many vouchers would each State be able to fund under
this formula? How does this compare to current year voucher use? How
does this compare to the number of voucher contracts currently
authorized for PHAs in each State assuming that tenants have no income?
Answer. Under HUD's proposal, the State would receive funding
sufficient to at least cover all vouchers currently under lease through
PHAs within the State. HUD believes that even more families will be
assisted due to the ease with which States can utilize the funding.
Full utilization will also help justify increases in funding.
HUD expects that lease-up and utilization of funds will increase as
a result of the HANF reforms.
Under HUD's proposal any family currently receiving voucher rental
assistance would continue to receive such assistance through 2009. HUD
also anticipates States being able to serve even more families, both
through efficiencies and additional funding.
Question. The administration is proposing to restructure the
various Section 8 programs by creating a new Section 8 tenant-based
voucher program that will be called the Housing Assistance for Needy
Families program or HANF. HANF would be funded at some $12.5 billion in
fiscal year 2004 and would transition to a block grant program to the
States in fiscal year 2005.
HANF does not appear to be the best possible replacement for the
existing voucher program. I have concerns that the funding levels may
be inadequate to meet future voucher use and will burden States at a
time when States are already facing significant budget shortfalls.
Also, while we have not seen the proposed legislation, after the
requirement that States maintain the rental subsidy for existing
voucher holders, this program looks a lot like the HOME program.
Why should Congress convert the Section 8 program to a block grant
program for States? What is the advantage for States? Why would this be
good for Section 8 residents? What is HUD's responsibility under this
proposed program? When will the legislation be submitted?
Answer. HUD and Congress share concerns that this key program is
not functioning efficiently to the detriment of both needy families and
the taxpayer. The tenant-based assistance program now provides rental
and homeownership assistance to more than 1.8 million families. Despite
this success, during the past several years, billions of dollars of
funds appropriated for tenant-based assistance have remained unspent,
and as a result several hundred thousand families have not been
provided housing assistance made available by Congress.
The advantages to providing tenant-based housing assistance through
a State-administered block grant are:
--increasing program flexibility so that funds are used promptly and
effectively to assist needy families;
--facilitating greater program responsiveness to local markets and
needs by delegating decision-making, such as setting rents,
closer to the communities and families affected, by their
elected officials;
--allowing flexibility at the State level for reallocation of funds
or other actions that may be necessary so that program funds
are expended promptly; and
--improving government support of self-sufficiency efforts by
assisted families, by facilitating greater coordination with
the TANF program and other State programs.
States would have control of the funding to directly address the
housing needs of their low-income citizens. States would have the
flexibility to ensure that the funds work effectively in their local
housing markets. States would have the ability to reallocate the funds
or take other actions that may be necessary so that program funds are
expended promptly and meet the needs of low-income families in an
efficient manner. States will also be able to better coordinate housing
assistance with other State-run assistance programs to more effectively
target resources and achieve self-sufficiency for those in need.
The program would be more flexible and would work more effectively
in local housing markets in increasing housing opportunities for low-
income families. Program rules would be greatly simplified, increasing
landlord participation in the program. The program would be able to
react much more quickly to fluctuations in local rental markets to
ensure the subsidy is sufficient to allow families to find housing with
the tenant-based assistance. Economic self-sufficiency and
homeownership efforts by assisted families would receive greater
support through better coordination with other State programs. Under
the HANF program the Secretary will establish performance standards for
States, including the improved living conditions for elderly and
disabled families; the effectiveness of voucher assistance in helping
families move toward homeownership and self-sufficiency; and the extent
to which State or local governments remove barriers to affordable
housing.
HUD is responsible for establishing performance standards for
States that include funds utilization, financial management, number of
families served, quality of housing, reduction of homelessness,
improved living conditions for elderly and disabled families, the
effectiveness of voucher assistance in helping families move toward
homeownership and economic self-sufficiency, and the extent to which
State or local governments remove barriers to affordable housing. HUD,
also, is responsible for ensuring that States are administering the
program in accordance with Federal law and program regulations and will
review the State's performance report. Further, HUD will make such
reviews and audits that are necessary to determine whether the State is
carrying out the housing assistance activities and objectives in a
timely and effective manner, and whether it has met any performance
standards established by HUD for the program.
The legislation was introduced in the Senate on April 29, 2003.
Question. Will States be required to maintain the current Section 8
subsidy requirement that families pay no more than 30 percent of
adjusted income?
Answer. The legislation proposes to greatly simplify the current
income and rent calculations by eliminating the dozens of statutory and
regulatory exemptions and deductions. HANF proposes that a family will
not be required to pay more than 30 percent of gross income. They may
elect to pay more, if they so choose.
section 8 certificate fund
Question. As you know, the VA-HUD Fiscal Year 2003 Appropriations
bill created a new funding structure for Section 8 vouchers where PHAs
receive funding for all vouchers that are currently in use and for any
vouchers that can be used up to a PHA's authorized level through a
reserve fund maintained by HUD. This funding approach should result in
a more realistic assessment of Section 8 funding needs and reduce the
need to go though the annual ritual of rescinding large amounts of
unused, ``excess'' Section 8 assistance.
I would like your comments on this approach to funding Section 8
vouchers. Also, what steps is HUD taking to ensure that HUD has
adequate and reliable information on the number of vouchers in use as
well the number of additional vouchers that are likely to be used to
obtain rental housing?
Answer. The funding methodology for vouchers introduced in the VA-
HUD Fiscal Year 2003 Appropriations bill provides an improved method of
providing public housing authorities PHAs with the appropriate level of
funding required to manage the voucher program and meet current and
future leasing requirements. The methodology also provides the
Department current leasing and cost data to be used as a management
tool necessary for efficient and effective program management in the
following ways:
--significantly reduced program recaptures;
--realistic budget estimates provided to the Congress;
--improved funds control by the Department;
--timely identification of PHAs with poor utilization, to better
target technical assistance resources; and
--early identification of the cost impact related to program policies
for use in shaping future program policy decisions.
The Department has developed a data collection tool for PHAs to
report monthly cost and lease-up levels. The data will be collected via
internet transmission from PHAs and used by the Department to determine
PHA renewal funding levels, administrative fees, and additional
requirements from the Central Reserve. The first submission from PHAs
requests actual data for the prior 6 months. Thereafter, the PHA is
required to report to HUD quarterly. Renewal funding will be based on
more current lease-up and costs identified by the PHA to ensure that
the appropriate level of funding is provided to the PHA.
Prior to using the data to determine funding levels, the data will
be reviewed using a series of quality control edits for accuracy and
reasonableness. PHAs that do not comply with the data collection effort
will have funding provided based on prior year leasing and costs. As
per the law, failure to report on the administrative fee reserve
balance will also prevent the PHA from receiving an administrative fee.
The data collection effort has been reviewed and approved by OMB as
meeting the requirements of the Paperwork Reduction Act. To date, the
following has occurred:
--PHAs have received advance notification of the new requirements.
--A PHA Focus Group was convened to test the data collection effort.
--Based on the comments of the Focus Group, FAQs have been developed
to assist PHAs with reporting.
--A help desk has been established to assist PHAs.
--The website will be launched into production the week of March 24,
with the results used to determine funds required for contracts
expiring April 30, 2003.
--PHA industry groups have been consulted.
This data collection effort is the first step taken by the
Department to ensure that the requirements of the Act are met. The
Department will continue to work toward full automation in the coming
year.
Question. As you know, my staff recommended that HUD update all
Section 8 information as early as last October 2002. Identify all
requests to PHAs for Section 8 utilization information in the last 7
months. (In the past much of this information has been unreliable.)
Answer. PHAs traditionally provide data on utilization to HUD with
their year-end statements. PHA fiscal year ends cover the four calendar
quarters. Therefore, HUD receives year-end information each quarter for
a subset of PHAs.
The data collection tool described in the previous question
requires that all PHAs provide data to HUD each quarter. This provides
HUD with the updated information on utilization for the entire PHA
inventory. The first data requested from PHAs was in March 2003,
covering the period of July 2002 through January 2003. Going back to a
6-month period provides HUD with some historical information that can
be used in trend analysis. The next update will be requested in May
2003, covering the period of February through April 2003. As you can
see from the timeline, HUD's database of PHA information will be
approximately 45 days behind, a major improvement over data
approximately 12-15 months old.
HUD will continue on a cycle of quarterly requests for updates
until the final automated system is complete that will require monthly
updates from PHAs.
section 8 rental subsidy overpayments
Question. According to GAO's most recent evaluation of HUD's Major
Performance and Accountability Challenges, errors in determining the
amount of rental assistance under HUD's Section 8 program has resulted
in estimated excess rental payments of some $2 billion or 11 percent of
the funding for the program in fiscal year 2001. Two billion dollars
are enough to pay for a new affordable housing production program and
is an unacceptable level of loss for this program. This has been a
recurrent problem that has been repeatedly identified over then last 4
years and longer. What is HUD doing to reduce this fraud and abuse and
recover these losses? What has HUD done in the last 12 months? In the
last 6 months? How much money has been saved?
Answer. Under the President's Management Agenda, HUD has
established a goal for reducing both the frequency of calculation/
processing errors and the amount of overpayments by 50 percent by the
year 2005 with interim goals of 30 percent by 2004 and 15 percent by
2003. These goals apply to all HUD's rental assistance programs,
including Section 8 and public housing.
The Department's comprehensive plan for reducing all types of
errors and improper payments is carried out through the following
Rental Housing Integrity Improvement Project (RHIIP) initiatives: (1)
statutory and regulatory simplification, including the Housing
Assistance for Needy Families (HANF) proposal which reduces complex
income requirements to a simple formula (up to 30 percent gross
income); (2) increased HUD monitoring of program processing by HUD
intermediaries, using risk-based targeting indicators; (3) increased
use of automated sources of tenant income data to address the problem
of unreported tenant incomes well as a legislative proposal for access
to the National Directory of New Hires Data Base (HR 1030); (4) new
Fact Sheets, guidebooks, training and technical assistance for HUD
staff and program intermediaries; (5) stronger performance incentives
and sanctions; (6) increased IG investigation of serious tenant fraud
cases; and (7) an ongoing quality control program.
With respect to RHIIP initiatives for regulatory and statutory
simplification, the HANF legislation proposes to greatly simplify the
current income and rent calculations by eliminating the dozens of
statutory and regulatory exemptions and deductions. HANF proposes that
a family not be required to pay more than 30 percent of gross income.
Under the proposed HANF program procedures will simplify and streamline
the rent calculation process and greatly contribute to reducing the
subsidy error. Also, with HANF, States will be motivated to use their
own and new hires database to verify tenants' reported income.
Those RHIIPs initiatives implemented during the last 12 months are:
(2) increased HUD monitoring of program processing by HUD
intermediaries, using risk-based targeting indicators; (4) new Fact
Sheets, guidebooks, training and technical assistance for HUD staff and
program intermediaries; and (7) an ongoing quality control program.
Those initiatives implemented during the last 6 months are: (1)
statutory and regulatory simplification, including the HANF proposal
which reduces complex income requirements to a simple formula (up to 30
percent gross income); (3) increased use of automated sources of tenant
income data to address the problem of unreported tenant incomes well as
a legislative proposal for access to the National Directory of New
Hires Data Base (HR 1030); (5) stronger performance incentives and
sanctions; and (6) increased IG investigation of serious tenant fraud
cases.
The Quality Control Program (7) is the Department's approach for
measuring the extent to which the above-mentioned goals are met. The
measurement of 15 percent error reduction will be reflected in the
fiscal year 2003 Performance and Accountability Report.
public housing operating funding
Question. As I previously stated, Mr. Liu, the Assistant Secretary
for Public and Indian Housing, deserves a lot of credit for taking much
needed corrective measures when senior HUD officials discovered that
the Department has been inappropriately awarding PHAs with additional
operating funds by raiding current year public housing operating funds
for prior year obligations. The VA-HUD Fiscal Year 2003 Appropriations
bill put a final stop to this activity while providing up to $250
million in funding for one last time for existing prior year
obligations owed to a few PHAs for fiscal year 2003.
Nevertheless, how could this overspending happen and how could it
happen without the awareness of the senior officials in the Department
and OMB?
Answer. There are four main reasons why HUD overspending happened:
--HUD failed to develop a new accounting system to track the Interim
Formula and should not have implemented the Interim Rule prior
to doing so. Further, the legacy system had been neglected for
at least a year (2000-2001). So the lack of a system to track
the interim formula made it very difficult to manage the
program.
--No system and poor quality data meant that setting accurate funding
levels, or proration levels, were set with old data, causing
the level to be inappropriately high, which is what caused the
shortfall.
--Culture among PIH staff was such that setting accurate funding
levels was never imperative due to the common practice of using
next year's funding to make up for any shortfall. Such
decisions were apparently made without consulting senior
management.
--Funding levels for each fiscal year had been established based on
data at least a year old. HUD has changed this practice and
will not commit to funding levels until all PHA budgets are
submitted, accepted, and analyzed with regard to current
appropriated amounts.
No senior officials outside of PIH knew about or had any role in
the over commitment of funds.
Question. Identify all HUD officials that knew about this
overspending and all corrective measures taken against these
individuals.
Answer. The Deputy Assistant Secretary and Office Director managing
the Operating Subsidy program are no longer in a management capacity,
nor are they involved with the operating subsidy program. No office
outside of PIH knew about or had any responsibility for the overage.
Question. What steps have you taken to ensure that this type of
mistake does not happen again?
Answer. The Department has taken sound steps to ensure that the
amounts provided in appropriations acts for a specific year will be
spent only for that year's subsidies and that the commitments being
made to PHAs never exceed the amounts provided by Congress. First, the
Department has increased the number of resources available for this
program, both in the terms of Federal employees and contractors and has
created a separate task force to help specifically re-engineer this
program in terms of business process and policy.
In addition, the Department has created a new budget collection and
accounting tool, which captures that data in a format that allows for
easier data analysis, ad-hoc reporting, and program oversight. This
collection tool is currently being used for the collection and
processing of the fiscal year 2003 data. Enhanced data and quality
control checks are being used to ensure accuracy of the data. Full use
of actual budget data will be used in the determination of the final
proration factor--which will never be set again until HUD has collected
all current year budgets and compared total eligibilities with current
year funding.
Question. What steps has the Department taken in corrective
measures against the staff who are responsible for these errors? Have
staff been demoted? Have any of the responsible staff received bonuses
for their work in the last year?
Answer. The Deputy Assistant Secretary and Office Director managing
the Operating Subsidy program are no longer in a management capacity,
nor are they involved with the Operating Subsidy program. None of the
staff has received a bonus.
faith-based organizations
Question. I understand that HUD is revising a number of regulations
to make it easier for faith-based organizations to participate in HUD
programs, including enhanced eligibility for grants. While I strongly
support the role of churches and other faith-based organizations in
making our communities strong and safe, there have been a number of
news reports that infer that HUD is planning to provide churches and
faith-based organizations with expanded access to Federal funds
including grants to build churches where a church is involved with
community issues.
What programs are we talking about and is there is any truth that
HUD is looking to provide grants to churches for church construction?
This would be very controversial and how is HUD dealing with the
constitutional issues?
Answer. HUD has proposed a rule that would eliminate unwarranted
barriers to faith-based organizations in eight HUD programs. The public
comment period closed March 6, 2003, and HUD is currently reviewing the
comments and preparing a final rule.
The eight programs affected by the rule are HOME Investment
Partnerships; Community Development Block Grants; Hope for
Homeownership (HOPE 3); Housing Opportunities for Persons with AIDS;
Emergency Shelter Grants; Shelter Plus Care; Supportive Housing; and
YouthBuild.
The proposed rule clarifies that HUD funds may not be used for the
acquisition, construction, or rehabilitation of structures to the
extent that those structures are used for inherently religious
activities such as worship, religious instruction, and proselytization.
Where a structure is used for both eligible activities and inherently
religious activities, HUD funds may not exceed the cost of the portion
of the acquisition, construction, or rehabilitation attributable to
eligible activities. HUD has at no time intended that its funds be used
to acquire, construct, or rehabilitate sanctuaries and other structures
used principally for worship, and it will clarify this intent further
in the final rule.
public housing hope vi
Question. The Public Housing HOPE VI program has been eliminated
under HUD's Budget Request for fiscal year 2004. This program was
created in large part by this Subcommittee in response to the need to
address the approximately 86,000 units that were termed severely
distressed by the National Commission on Severely Distressed Public
Housing in 1992. However, this program has done much more than just
respond to distressed public housing, it has been tremendously valuable
in turning this distressed housing into mixed income and public housing
developments as well acting as an economic anchor for the redevelopment
of distressed communities.
And while it may be time to move on and build on the successes of
the HOPE VI program, I am concerned that we have not had a meaningful
dialogue on what we have accomplished and need to do next.
The Department has eliminated the program in the Budget Request,
including the funding of some $574 million which is critical funding
needed to address the backlog of some $22 billion in capital needs.
What does HUD believe is the next step?
Answer. The Department is preparing to launch a review initiative
that will consist of a series of meetings with industry experts in the
field of affordable housing. It is intended to seek advice from a wide
range of experts and stakeholders about the state of the program and
its future. We are currently working on the details, including meeting
topics and participants. Second, the Department has executed a
Cooperative Agreement with the Urban Institute to investigate
alternative ways to maximize the amount of private capital that can be
leveraged using Federal funds, investigate more efficient ways to
deliver Federal funds, investigate ways to accelerate project
completion and the construction of units, and assist in the development
of a new definition for severely distressed.
Question. How does HUD currently define severely distressed public
housing and how many units meet this definition now?
Answer. At this time, there are many ways to define severe
distress. HUD has had to work with five different definitions of severe
distress as provided in Sections 18, 24, and 202 of the 1937 U.S.
Housing Act, the HOPE VI appropriations and the Commission of Severely
Distressed Public Housing. Even the National Commission on Severely
Distressed Public Housing acknowledged the difficulty in identifying,
specifically, distressed projects and opted to only estimate the total
number of distressed units nationwide rather do an inventory. We
believe that a standard definition of severe distress must be agreed
upon prior to an evaluation of the entire remaining inventory. The
Department is currently working with the Urban Institute to assess,
among other things, the various definitions and establish one standard
that can be used Department-wide to analyze the entire inventory.
Therefore, the Department does not have a mechanism to review the
entire public housing inventory and determine how many units are
severely distressed at this time.
Question. What criteria did the administration look at in
determining this program had outlived its usefulness?
Answer. The Department provided Congress a report, ``HOPE VI: Best
Practices and Lessons Learned, 1992-2002,'' on June 15, 2002 which
provided a comprehensive, factual, and balanced view of the program.
The report provided information about what has been accomplished and
what questions still remain to be answered. On balance, the Department
believes that it has provided sufficient funds for the HOPE VI program
to achieve its goals. HOPE VI has funded grants to relocate 57,000
families, demolish 77,000 units and build 85,000 of which 45,000 are
public housing (as of March 31, 2003; fiscal years 1993-2001 grants).
We believe the funds already provided, in conjunction with other public
housing programs, have more than addressed the 86,000 severely
distressed public housing units identified by the Commission. Our
report correctly points out, however, that grantees have been slow to
spend funds and rebuild housing. Of the $4.5 billion awarded in the
past 10 years, PHAs have only spent $2 billion. Only 17 of 165 grants
have built all their planned units. In addition, it is important to
remember that PHAs have more tools available to them today than 10
years ago. For example, we now have regulations in place to guide
mixed-finance developments and PHAs may use capital funds for
accelerated modernization. As of March 31, 2003, the Department has
received requests to allow PHAs use Capital funds to collateralize and
pay debt service on nearly $933 million, of which $482 million has been
approved. Furthermore, the Department believes that the Public Housing
Reinvestment Initiative (PHRI) is intended to provide a financing tool
for housing authorities to prevent developments from becoming severely
distressed. It's another development tool to assist PHAs in addressing
the backlog and accrual needs. It's time to reassess how to move
forward and find new, creative ways to revitalize public housing.
public housing capital fund
Question. HUD is proposing some $70 million less in Public Housing
Capital Funds for fiscal year 2004 than fiscal year 2003. In addition,
the fiscal year 2004 funding request is some $200 million less than the
fiscal year 2002 enacted level. These reductions are especially
troubling when considered in conjunction with the administration's
recommendation to eliminate the HOPE VI program and the fact that
public housing throughout the country has a capitalization backlog of
over $20 billion. These funding levels will likely result in deferred
maintenance and deferred capital investment. How does HUD justify these
reductions in funding?
Answer. For fiscal year 2004, the amount of the Public Housing
Capital Fund accrual is estimated to be approximately $2.2 billion.
However, the Department is requesting approximately $2.6 billion for
the Public Housing Capital Fund, which is approximately $400 million
more than fiscal year 2004 estimated accrual needs of $2.2 billion.
Further, public housing agencies (PHAs) are encouraged to use other
vehicles to address needed improvements. For example, PHAs are already
permitted to leverage their Capital Funds to finance additional amounts
needed to make improvements to existing public housing. Such tools have
already leveraged approximately $800 million in the last few years. In
addition, the Department proposes the Public Housing Reinvestment
Initiative (PHRI) that will provide PHAs with further opportunities to
address the physical condition of public housing.
Question. In addition, the HUD Fiscal Year 2004 Budget requests
authority for a new Public Housing loan guarantee program and includes
$131 million in credit subsidy from the Public Housing Capital Fund.
According to HUD budget representations, this program will leverage
some $2 billion in loans and accelerate capital improvements. This
sounds like a fairly complex program for most PHAs. How quickly do you
expect this program to get up and running? What do you expect the
actual cost of this program to be on a per unit basis? How will it
compare to HOPE VI? Will tax credits be expected to be part of any
financing package?
Answer. It is also important to keep in mind that PHRI is voluntary
for PHAs. No PHA will be forced to make use of this new tool. For those
who do choose to participate, PHRI can be up and running in a matter of
months. HUD is giving this initiative the highest priority and will
begin preparations even as the proposal progresses in Congress. HUD has
already had broad discussions with PHAs, their representatives, and
others who would be involved, including potential lenders. Many PHAs
have provided substantial expressions of interest in pursuing PHRI.
Indeed, many are asking whether there is any way under current law to
implement it. Unfortunately, there is not.
The ``cost'' of PHRI is simply the credit subsidy of $131 million,
which comes from public housing capital funds. These funds are set
aside to cover any losses resulting from the 80 percent loan guarantee
and are based on a credit reform analysis by the Office of Management
and Budget. Otherwise, PHRI is not designed to produce any budgetary
impact. Rather, public housing subsidies are merely converted into
Section 8 subsidies to facilitate financing. While PHAs, with HUD
review and approval, have issued debt secured by public housing capital
funds, these transactions are not property-based. Thus, the debt
service coverage they require limits the amount of debt a PHA can
issue. Borrowing under PHRI would not be limited to that degree.
Both PHRI and HOPE VI are programs designed to aid PHAs with
renovating public housing stock, however, the operation and focus of
these two programs are different. HOPE VI is a competitive grant
program directed at enabling PHAs to revitalize severely distressed
developments, while PHRI is a voluntary loan guarantee program that
enables PHAs to access conventional financing to address their backlog
of capital repair needs.
Under the HOPE VI application process, PHAs are scored on their
ability to leverage private and public sector financing in the form of
tax credit equity, loans, or other grants which will augment their HOPE
VI request. The total financing package together with HOPE VI is the
amount necessary to address revitalization needs which often encompass
an array of public housing and community service projects.
PHRI provides PHAs the ability to access adequate mortgage
financing based on projected and specific cost and income analysis for
targeted properties. The 80 percent loan guarantee provides the credit
enhancement lenders seek before making investments.
HOPE VI rewards some PHAs for seeking private/public sector
leveraging; PHRI provides the means to leverage a PHA's greatest
asset--its housing stock and thus addresses required repairs across the
entire inventory of public housing.
The loan guarantee is structured to permit private financing raised
through PHRI to be supplemented by other resources including tax
credits. However, in many instances, tax credits would not be required
for PHRI to finance sufficient capital needed to address backlog needs.
There may be instances where tax credit equity may be necessary to
enable a PHA to cover the debt service associated with the financing
required to address the current and long-term capital needs of selected
properties.
Question. Doesn't this proposal just shift the cost of public
housing from the Public Housing Operating and Capital Funds to the
Section 8 Fund? Why not tie the costs for loan repayments to the Public
Housing Capital and Operating Funds?
Answer. When a PHA obtains capital financing using the PHRI loan
guarantee, PHAs voluntarily select properties to be converted from
public housing contracts to project-based voucher funded contracts. For
PHAs that choose to participate in this program, PHAs could commit
capital and operating funds for initial expenses during the first year
of the project-based voucher contract. After the first year, the
reliance will be on the income and financing stream made possible by
the PHRI.
There are currently tools to access Capital Funds to undertake
modernization projects, namely the Capital Fund Bond Financing Program.
This has been a very successful leveraging mechanism, which has
generated close to $500 million in bond financing for approximately 20
PHAs. But even this successful program will take many years to address
the estimated $18 billion backlog of capital needs. PHRI has the
potential to reach a wide variety of public housing developments in a
project-specific manner. It can be a powerful mechanism to help
identify those developments most in need of additional assistance.
PHRI and the associated loan guarantee is a more feasible property-
based financing tool that is more typical of multifamily rental
financing. In these financial transactions, the rents from the property
and a mortgage on the property are pledged as security for a loan.
Additionally, the Section 8 contract, subject to annual renewals,
provides security with which lenders are more familiar.
staffing
Question. While the Congress was finishing up the fiscal year 2003
Omnibus Appropriations bill, the House and Senate VA-HUD Appropriations
Subcommittees were advised that HUD exceeded its stated employee levels
for fiscal year 2003 by upwards of 300 FTEs with a cost of some $30
million that is not reflected in the HUD Fiscal Year 2003 Budget
Justifications and Budget Request. These hirings occurred during the
Spring and Summer of 2002 and, despite the significant impact on HUD's
budget needs for fiscal year 2003, HUD never once made any attempt to
inform the Congress of its decision to hire significantly more staff
than provided for in the HUD fiscal year 2003 Budget Justifications. In
fact, HUD only reported these staff increases when it determined that
its Fiscal Year 2003 Budget Request for Salaries and Expenses could not
support these added staff.
There also are significant questions as to whether HUD comported
with existing staffing requirements and hiring procedures, including
requirements consistent with HUD's Resource Estimation and Allocation
Process (REAP). It also appears that some HUD offices hired
significantly more staff than needed while other offices hired
significantly less staff than needed. This clearly raises questions as
to whether there were top level management controls on this hiring
spree.
Has HUD reviewed these hiring actions?
Answer. Yes, a thorough review of the hiring actions has been
completed and a Corrective Action Plan has been developed. This Plan is
being submitted to the House and Senate Subcommittees under separate
cover.
Question. To what extent do these hiring decisions comport with
personnel requirements?
Answer. HUD has undertaken a thorough review of all hiring actions
and has determined that there were no violations of any Federal civil
service laws, rules, regulations, and merit system principles.
Question. To what extent do these hiring decisions comport with
REAP?
Answer. REAP was not used as a basis for hiring. The Corrective
Action Plan requires that each program bring their individual offices
into alignment with REAP analyses as well as achieve an overall REAP-
based ceiling. This Plan has been submitted to Congress under separate
cover.
Question. What steps is HUD taking to ensure that similar hiring
binges do not occur in the future?
Answer. Yes, a thorough review of the hiring actions has been
completed and a Corrective Action Plan has been developed. This Plan is
being submitted to the House and Senate Subcommittees under separate
cover.
Question. Are the responsible officials being held accountable for
this hiring problem and in what way?
Answer. Yes, responsible parties are being held fully accountable.
Corrective actions are in place to ensure over-hiring is not repeated.
The Corrective Action Plan will freeze all program offices who are
currently over ceiling. The programs will need to align their offices
with the REAP analyses.
lack of affordable housing
Question. There is a lack of affordable housing in many communities
throughout the country, especially for extremely low-income families
(those at or below 30 percent of median income). Vouchers do not work
well in these communities and housing is too expensive to build to
assist many of these low-income families. While I support a block grant
production program to address these needs, I am willing to look at
other approaches such as tax options, interest rate buy-down approaches
and loan guarantees or a combination of these approaches. I do not
think the proposed HANF proposal will work as currently proposed or
funded. How would you get at this need for affordable housing for
extremely low-income families?
Answer. The Department is confident that the HANF program will work
but remains open to consider other options towards addressing the lack
of affordable housing in communities.
gao high risk--fha single family insurance
Question. According to GAO's January 2003 High Risk Report on HUD,
the FHA single family mortgage insurance programs remain a high-risk
area because of continued weaknesses in the mortgage insurance process,
evidence of fraud and the variety of challenges that HUD faces in
implementing corrective actions. What steps is HUD taking to address
these concerns?
Answer. The Department is attacking these weaknesses on two fronts:
adopting technological advances to limit HUD's exposure to fraud and
misrepresentation and engaging in substantial rule-making to protect
HUD and the borrowers it serves from predatory lending practices.
In May 2002, HUD completed a business process reengineering effort
on its Single Family Mortgage operations. From this work, HUD
identified a number of tools that can be employed to limit exposure,
including those that provide estimates of the property's appraised
value and alert lenders and the Department of recent property transfer,
i.e., ``flipped'' properties. In addition, to combat identity theft,
HUD has been studying various kinds of name and social security number
verification tools that can be obtained directly from the Social
Security Administration.
Predatory lending practices affect FHA's insurance risk and
contribute to community deterioration. To combat such practices, HUD
has published a number of rules to reduce the possibility that
unwitting and unsuspecting homebuyers and homeowners will become
victims of unscrupulous lenders abetted by appraiser collusion. Soon,
FHA will no longer insure properties re-sold within 90 days, and will
require additional evidence of the property's appraised value if the
resale (within 1 year) price exceeds a certain threshold. FHA has also
published rules that will make the lender equally accountable for the
quality of the appraisal, and require that appraisers meet specific
qualification standards in order to make appraisals for FHA insured
mortgages.
fha single family mortgage insurance
Question. I am concerned that FHA single family mortgage insurance
tends to take the highest risk of default despite currently exceeding
actuarial requirements. What is the current rate of default on FHA
single family mortgage insurance? How does this compare to the private
market? At what point does a downturn in the economy put the Mutual
Mortgage Insurance Fund at risk of failing to meet its actuarial floor?
Answer. FHA's total default rate reached 5.276 percent in March
2003. At the same time, FHA's claim rate was an annualized 1.246
percent, which is only slightly above its 10-year average of 1.08
percent. FHA has a higher default rate than the conventional market,
but a lower default rate than the subprime market. Compared to the
conventional market, FHA serves borrowers with lower incomes, poorer
credit histories, and fewer assets. FHA's capital ratio has continued
to grow as the share of first-time and minority homebuyers with FHA-
insured purchase mortgages has increased.
In pursuit of its mission to serve first-time and minority
homebuyers, FHA reached out to riskier borrowers. These borrowers are
more vulnerable to temporary economic setbacks and are more likely,
compared to less risky borrowers, to go in and out of default. To
assist these borrowers to avoid foreclosure, FHA offers incentives to
servicers who practice loss mitigation. By providing borrowers with
forbearance and tailored repayment plans, loan modifications, and soft
second mortgages, servicers assist borrowers to remain in their homes.
Last year, they helped over 68,000 homeowners--up from 50,000 the year
before.
While these families are in the loss mitigation program, they are
counted as defaults. So FHA's default rate appears higher. But the
claim rate has not risen commensurately. Most loss mitigations are
successful--two-thirds result in the owner catching up on the mortgage
and staying in the house. The program is cost effective--FHA spends
about $1,400 per loss mitigation effort, and saves approximately
$30,000 every time and avoids a foreclosure.
As reported in the Actuarial Review of FHA's Mutual Mortgage
Insurance (MMI) Fund for fiscal year 2002, the performance of the FHA's
books of business, measured by the economic value of the MMI Fund, is
affected by changes in economic variables. Higher mortgage interest
rates raise initial and ongoing payment burdens on household cash flows
and claim risks of new originations while decreasing the risk of claims
on older loans with below-market interest rates. Lower mortgage
interest rates have the reverse effect and tend to accelerate
refinancing of earlier originations while increasing insurance claims.
Faster average house price growth facilitates the accumulation of home
equity, which tends to reduce the likelihood of a claim. It also
contributes to greater mobility and household asset portfolio
rebalancing, leading to greater turnover of housing and refinancing,
thereby increasing prepayment rates. Faster income growth reduces the
relative burden of mortgage payments on household cash flows over time,
reducing the risk of claims as mortgages mature.
FHA's actuaries projected that under 5 economic scenarios
(baseline, low house price appreciation, high interest rates, high
unemployment/low personal income, and using 2001 selected loss rates)
the Fund will exceed the capital ratio target of 2 percent.
asset control areas
Question. Under the Fiscal Year 2002 Supplemental Appropriations
Act, HUD was required to enter into new contracts and agreements under
the Asset Control Area Demonstration program no later than September
15, 2002. This is an important program designed to promote
homeownership in distressed communities. What is the current status of
this program?
Answer. On September 15, 2002, via written correspondence, HUD
informed former Asset Control Area (ACA) program participants of the
terms of the revised ACA program. At that time, former participants
also received a chart comparing the Congressionally mandated Program
(i.e., Program A which tracks to Section 602) to Program B which tracks
to requirements delineated in Section 204(g). They were asked to submit
an application for the previous demonstration program, Program A, or
Program B, the revised ACA Program. Although HUD is fully prepared to
implement both programs, the feedback received from most of our former
participants indicated that Program B was the preferred program;
however, several former participants requested further policy changes
to make this program more effective.
From the end of October 2002 to December 2002, HUD held numerous
conference calls and meetings with former program participants to
discuss their additional recommended changes for the ACA Program. We
were asked to consider revising: (1) our demolition policy; (2) the way
we administered the Officer and Teacher Next Door Program in
conjunction with the ACAs; (3) the resale price/the percentage of
allowable net development costs; (4) the Census data used to determine
revitalization areas (i.e., use 2000 data); and (5) our definition of
eligible buyers for the purpose of disposing of multi-use and mixed-use
properties; and (6) the requirement for all properties to be sold to
income eligible buyers (i.e., participants wanted to be allowed to
administer a lease purchase program).
During this period, HUD continued to maintain a good rapport with
former participants, and offered assistance with our newly expanded ACA
application process. Likewise, potential new program participants were
given information about the new ACA Program and encouraged to apply. As
a result, HUD received seven applications from new and former ACA
program participants. While the HOCs reviewed these applications and
worked with participants to obtain missing documents needed to complete
the application process, the headquarters' ACA team developed
operational procedures to accommodate the suggested policy changes.
In February 2003, former and potential program participants
received a letter indicating the final terms of the new ACA Program
with the changes highlighted. HUD offered broader latitude in each of
the six areas identified above. Currently, HUD is reviewing all six
applications and requesting additional documents as required.
Concurrently, HUD is requesting that specific areas be identified for
the proposed ACAs. Contract language is being modified to incorporate
recently agreed to changes. Other concurrent actions include final
internal review of draft regulations, completion of an OMB-required
Front End Risk Assessment, and updates to HUD's internal standard
operating procedures.
fha multifamily and single family contractor accountability
Question. GAO has indicated that HUD has poor control over its FHA
multifamily and single family contractor payment accountability. Please
provide an assessment of FHA versus private sector costs associated
with single family and multifamily asset control. In other words, what
is the per unit cost in the private sector versus FHA of foreclosed
housing, both single family and multifamily? Please identify the
individual costs associated with all units in the FHA foreclosed
multifamily housing inventory. What steps has HUD taken to reduce costs
in the last 2 years? What savings have been achieved?
Answer. Multifamily.--The Secretary is required by statute to
manage and dispose of HUD-held mortgages or HUD-owned multifamily
properties in a manner, that among other goals, preserves certain
housing so that it can remain available to and affordable by low-income
persons; preserves and revitalizes residential neighborhoods, maintains
existing stock in decent, safe and sanitary condition; minimizes the
involuntary displacement of tenants, and minimizes the need to demolish
multifamily housing.
Because of these statutory objectives to maintain and preserve low-
income housing resources, the Department's multifamily disposition
program is significantly dissimilar to private sector objectives at the
time of default or foreclosure of private sector rental housing.
Because of the statutory mandates, the Department undertakes repairs to
preserve occupied mortgagee-in-possession or HUD-owned multifamily
properties. Further, it requires purchasers of many properties, either
at foreclosure or HUD-owned sales, to repair and maintain properties as
affordable rental housing resources via recorded deed restrictions. All
of these actions have a significant impact on the value of these
properties at foreclosure or HUD-owned sales and consequently the
ultimate return to the Department of the defaulted amount of the FHA
insured mortgage or HUD debt.
The preservation and maintenance of these properties is
accomplished through the use of area-wide property management service
contracts. These contracts are procured on a national, competitive
basis. Contracts are awarded on the basis of experience and competency
to perform the required management tasks and reasonable price.
The Department's oversight of managed contracts is conducted in
several ways. Upon the Department's operational takeover of a property,
the property is assigned to a property management contractor. The
property manager performs a repair needs assessment and develops an
operational budget for the property. One of the Department's two
multifamily property disposition centers performs an analysis of the
repair assessment and the operational budget and approves, modifies or
rejects the proposals, as appropriate. Thereafter, the management and
operation of the property is dictated by the approved repair plan and
the operating budget for the property.
At the property level, the property manager is required to obtain
competitive quotes or bids, as required, to engage in any contracting
for services or repairs. Accurate and complete records for all
contracting services are required to be maintained by the property
managers. All activities must be within the approved budget for the
property. Finally, the Department's property disposition centers have
an oversight contractor whose services include the comprehensive and
detailed review and oversight of the property managers' maintenance and
management of the properties. The oversight contractor performs on-site
reviews of operational activities/expenditures performed by the
property managers against file records and site inspections of actual
work performed.
The Department has taken a very aggressive position on expediting
the processing of foreclosure and HUD-owned property sales. By reducing
the time in the foreclosure process, where most properties are not
making mortgage payments, the Department is able to obtain whatever
value remains on the property at the foreclosure sale and eliminate
additional expenditures if the Department is mortgagee-in-possession.
Similarly, expediting the sale of HUD-owned properties, the Department
is able to curtail at an early date funds that may have to be expended
on the property above rental income. This management strategy for the
foreclosure/HUD-owned inventory has reduced the HUD-owned inventory
from approximately 60 properties to 26 properties over the last 2
fiscal years.
The Department does not track private sector foreclosure or lender
owned inventory sales. Because there was no Departmental involvement in
those transactions, we would have no authority to obtain any of that
information. Further, because the Department's foreclosure and HUD-
owned inventory sales are required to meet numerous statutory goals and
objectives versus private sector unrestricted transactions, the
comparison would be difficult, if not impossible to assess two
dissimilar transactions.
Single Family.--HUD has been able to increase the net return that
we realize on the sale of HUD properties over the past 3 years. In
fiscal year 2000, single family property sales numbered 80,628 at a
total value of $4.343 billion (average sales price of $53,865)
representing a recovery rate of 62.9 percent. In fiscal year 2001,
single family property sales numbered 63,581 at a total value of $3.708
billion (average sales price of $58,319) representing a recovery rate
of 66.8 percent. In fiscal year 2002, single family property sales
numbered 59,736 at a total value of $3.801 billion (average sales price
of $63,630) representing a recovery rate of 71.2 percent.
There is no publicly available source of information on asset
disposition costs of private sector institutions, such as Fannie Mae
and Freddie Mac. Moreover, even if daily holding costs were made public
for these institutions, it would be difficult to compare them to FHA
holding costs without knowing exactly what cost items were included. In
other words, there is no single agreed-upon definition of holding costs
in this context.
The Department has done a number of things to be proactive in its
sales program. First, HUD has been offering sales incentives to
encourage owner-occupant purchasers to buy its properties. HUD and its
Management and Marketing Contractors perform outreach to communities to
encourage their participation in our sales program.
HUD has established performance standards and developed tighter
management controls for its management and marketing contractors to
ensure that compliance with contract requirements are adhered to.
Property conditions have improved since implementation of these
standards.
Question. Please identify over the last 5 years, the number of
foreclosed FHA multifamily housing units and the loss per year per
unit. Please identify over the last 5 years, the number of foreclosed
FHA single-family housing units and the loss per year per unit per
State. Please identify over the last 5 years, the number of foreclosed
FHA multifamily housing units and the loss per year per unit.
Answer. The Department has provided the chart below that indicates
by calendar year, the net loss based on number of foreclosed units
where HUD has become the property owner.
----------------------------------------------------------------------------------------------------------------
Net profit or
(loss) Income or (loss)
Calendar year acquisition plus Units per unit
holding costs
----------------------------------------------------------------------------------------------------------------
1998................................................... ($208,484,235) 5,693 ($36,621)
1999................................................... (93,221,230) 3,833 (24,321)
2000................................................... (102,336,898) 3,166 (32,324)
2001................................................... (148,544,223) 4,418 (33,623)
2002................................................... (135,544,682) 2,621 (51,715)
2003 Year to Date 5/1/2003............................. (165,551,410) 1,571 (105,380)
----------------------------------------------------------------------------------------------------------------
The Department has provided the chart below that indicates the
number of foreclosed FHA Single-Family housing units, the average loss
per year, per unit and per State.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002
State ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Units acquired Avg. loss/unit Units acquired Avg. loss/unit Units acquired Avg. loss/unit Units acquired Avg. loss/unit Units acquired Avg. loss/unit
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AK.............................. 79 $26,506 79 $32,059 82 $38,493 72 $33,443 76 $39,231
AL.............................. 723 $15,106 802 $17,955 890 $20,968 1,072 $22,059 1,441 $24,196
AR.............................. 745 $18,793 757 $19,622 780 $20,946 836 $21,303 858 $21,969
AZ.............................. 1,311 $11,529 1,192 $15,179 953 $17,150 1,008 $13,737 1,481 $16,831
CA.............................. 22,666 $42,741 19,002 $38,687 14,398 $33,215 9,210 $24,645 6,243 $18,683
CO.............................. 418 $14,210 526 $15,098 423 $21,381 393 $21,763 696 $27,693
CT.............................. 1,101 $66,540 971 $56,236 811 $49,870 630 $43,929 552 $33,893
DC.............................. 289 $54,354 292 $54,365 265 $62,230 204 $60,564 149 $38,596
DE.............................. 104 $36,380 134 $35,813 138 $37,108 145 $31,193 131 $25,102
FL.............................. 7,366 $23,200 7,119 $24,231 6,671 $22,983 5,564 $18,588 5,504 $16,958
GA.............................. 2,360 $16,720 2,038 $18,333 1,878 $18,230 1,971 $18,101 2,748 $21,213
GU.............................. 0 ( \1\ ) 2 ( \1\ ) 0 ( \1\ ) 5 $77,786 7 $81,262
HI.............................. 194 $84,520 295 $92,765 466 $91,216 363 $81,530 247 $64,306
IA.............................. 129 $14,785 113 $13,162 139 $19,907 163 $21,231 292 $23,774
ID.............................. 249 $22,456 309 $25,340 358 $25,873 381 $25,265 532 $26,835
IL.............................. 2,852 $42,198 2,978 $39,844 2,952 $39,612 2,375 $35,842 3,047 $30,595
IN.............................. 1,027 $23,053 1,251 $23,864 1,377 $25,842 1,669 $29,106 2,453 $32,121
KS.............................. 441 $19,500 487 $19,598 431 $20,516 378 $20,533 621 $21,327
KY.............................. 168 $19,739 241 $19,974 270 $22,861 316 $22,571 459 $27,077
LA.............................. 842 $20,118 835 $20,889 824 $21,024 1,054 $20,842 1,228 $23,280
MA.............................. 422 $56,825 426 $44,347 295 $41,358 191 $34,367 176 $24,620
MD.............................. 3,143 $41,193 4,104 $44,518 3,775 $49,429 3,452 $43,663 3,449 $33,650
ME.............................. 127 $47,637 125 $44,582 152 $43,105 94 $34,124 103 $31,210
MI.............................. 1,246 $16,113 1,067 $17,001 1,057 $19,269 1,215 $22,235 1,859 $26,593
MN.............................. 1,091 $17,585 759 $14,441 436 $12,417 292 $12,006 291 $16,040
MO.............................. 1,206 $22,170 1,281 $21,754 1,155 $21,027 1,084 $20,365 1,496 $22,989
MS.............................. 537 $15,281 557 $16,865 615 $18,082 669 $21,033 793 $20,740
MT.............................. 102 $17,966 143 $22,004 133 $25,359 132 $25,963 184 $26,462
NC.............................. 760 $16,345 737 $17,675 817 $18,458 882 $21,545 1,462 $25,575
ND.............................. 85 $22,443 95 $21,352 96 $22,158 88 $23,646 110 $25,275
NE.............................. 147 $13,187 152 $14,669 176 $18,043 190 $19,353 338 $21,644
NH.............................. 72 $37,819 78 $35,476 43 $29,850 22 $22,414 31 $19,272
NJ.............................. 1,721 $53,531 2,031 $52,850 2,301 $50,446 2,010 $43,931 1,871 $35,393
NM.............................. 206 $20,758 338 $25,517 419 $26,800 513 $28,110 622 $29,784
NV.............................. 859 $14,383 1,129 $20,249 1,126 $26,376 1,152 $25,020 1,440 $23,627
NY.............................. 3,207 $49,408 3,380 $52,135 3,967 $51,535 3,452 $47,229 3,520 $43,040
OH.............................. 1,571 $26,331 1,489 $28,046 1,661 $30,333 1,781 $32,275 2,312 $34,653
OK.............................. 825 $18,946 929 $15,857 863 $19,535 914 $18,842 1,083 $21,884
OR.............................. 102 $21,663 180 $19,409 249 $26,599 343 $27,874 555 $27,799
PA.............................. 2,026 $37,809 2,272 $38,554 2,435 $41,183 2,252 $40,126 2,643 $36,158
PR.............................. 103 $15,503 76 $15,532 152 $16,167 112 $12,689 159 $10,632
RI.............................. 235 $56,414 203 $44,728 202 $45,307 101 $33,135 72 $14,335
SC.............................. 553 $22,313 536 $20,958 564 $20,547 489 $20,700 583 $23,186
SD.............................. 84 $30,553 82 $26,116 86 $21,780 54 $26,628 59 $27,282
TN.............................. 1,504 $17,153 1,694 $17,693 1,620 $19,892 1,893 $20,685 2,562 $24,386
TX.............................. 5,261 $18,700 5,257 $17,565 4,714 $16,360 4,214 $16,921 5,675 $21,602
UT.............................. 192 $17,209 391 $24,689 530 $30,079 749 $29,030 1,365 $36,083
VA.............................. 3,377 $28,653 3,003 $28,846 2,670 $29,281 2,089 $22,937 1,738 $21,378
VI.............................. 0 ( \1\ ) 5 ( \1\ ) 8 $47,907 7 $64,722 4 $72,287
VT.............................. 32 $61,037 25 $50,990 29 $42,263 15 $39,634 16 $41,273
WA.............................. 596 $26,862 715 $24,015 790 $29,490 799 $27,887 1,356 $29,268
WI.............................. 189 $23,057 170 $24,562 242 $26,600 257 $24,182 289 $27,558
WV.............................. 77 $17,610 74 $20,245 63 $26,111 77 $25,655 89 $25,669
WY.............................. 88 $18,515 133 $20,098 126 $23,521 121 $20,924 96 $19,662
---------------------------------------------------------------------------------------------------------------------------------------------------------------
TOTAL..................... 74,008 $32,166 73,059 $31,311 67,591 $31,380 59,514 $28,430 67,166 $26,151
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ No sales.
itag/otag
Question. The HUD IG was required to audit all recipients of
technical assistance under the Mark-to-Market program and determine
whether each recipient was in compliance with the required uses of such
assistance. Under Section 1303 of the fiscal year 2002 Defense
Appropriations Act, HUD is prohibited from providing any additional HUD
funding for 4 years to any recipient who misused such technical
assistance. The HUD IG has identified some 10 instances of abuse. What
steps has HUD taken in response to these determinations?
Answer. The IG published its report on March 31, 2003, and the
Department is in the process of implementing the required sanctions
specified in Section 1303 of the Defense Appropriations Act of fiscal
year 2002.
new york disaster assistance funds
Question. NY/NYC was provided some $3.5 billion in CDBG Disaster
Assistance funds for economic rebuilding efforts in response to the 9/
11 terrorist attacks on New York City. The Empire State Development
Corporation (ESDC) was charged with the administration of these funds.
What steps has HUD taken to ensure these funds have been used in a
manner consistent with the funding agreements?
Answer. HUD is taking a number of steps to ensure that the
Community Development Block Grant disaster funds for New York are used
in a manner consistent with the funding agreement, appropriations
statutes, and waivers and alternative requirements granted and
established for the use of those funds.
HUD program staff conducts management/compliance reviews of ESDC
and Lower Manhattan Development Corporation (LMDC) approximately every
6 months. Reviews of ESDC were conducted in May 2002 and January 2003,
and a review of LMDC was conducted in October 2002; the next review of
LMDC is planned for late April 2003. In addition, HUD program staff
maintains almost daily contact with the grantees either on-site or via
telephone and e-mail to provide oversight and technical guidance, and
HUD monitors grantee expenditures through HUD's Line of Credit Control
System. HUD reviews independent audits of the grantees, as well.
Grantees submit quarterly progress reports to HUD via a web-based
Disaster Recovery Grant Reporting system that are used in HUD's
submission of quarterly reports to the Appropriations Committees.
Also, HUD's Office of the Inspector General submits its reviews of
those grants to the Congress in its semi-annual reports.
cdbg formula funding
Question. I understand that HUD is looking to revise the CDBG
funding formula to allocate more funds to poorer communities and those
in distress. What sort of issues is the Department looking at while
performing this analysis?
Answer. The Department is committed to doing a CDBG formula study
of the effects of adding all the 2000 Census data and considering
options to change the formula factors to ensure that the formula
continues to be highly targeted to need and community distress. The
first phase will be done shortly, probably in spring of 2003. The
second component, which is more complex, will be done in the fall. The
second phase is more complex because HUD must develop a basis to
explore how effectively the targeting is working for the vast majority
of grantees. All aspects of the current formula will be considered,
possible new factors and combination of factors as well as how the
basic formula is constructed. In developing the CDBG dual formula and
assessing the effect of the 1980 and 1990 Census on how the formula
allocated funds, the Department has compared per capita allocations to
CDBG jurisdictions relative to a broad-based measure of community need.
This measure includes indicators of social, economic, and housing
needs. The study currently underway will be similar to those done
periodically since the mid-1970's. In addition, this year's study will
consider the effect of the revisions to the definitions of metropolitan
areas, since they affect CDBG eligibility and the distribution of
funds.
rural housing and economic development program
Question. The HUD Budget request again eliminates the Rural Housing
and Economic Development program. This is a small $25 million program
that makes a tremendous difference for small, rural communities. It has
been estimated that over the last 2 fiscal years, some 4,000 jobs have
been created and over 8,200 persons have been trained. In addition,
over 2,200 housing units have been constructed with some 3,700 units
rehabilitated. In the last year, 367 businesses have been created and
1,400 existing businesses assisted. This is a good program that makes a
difference with a small price tag and big results. Since this program
works and HUD has expertise different from the RDA, why eliminate this
program?
Answer. There will be $100 million available in fiscal year 2004
for the Rural Strategic Investment Grant Program in USDA pursuant to
Section 6030 of the Farm Security and Rural Investment Act of 2002,
Public Law 107-171. This new program will ``provide rural communities
with flexible resources to develop comprehensive, collaborative and
locally based strategic planning processes; and will implement
innovative community and economic development strategies that optimize
regional competitive advantages.'' These are activities that clearly
mirror those in HUD's program. HUD's fiscal year 2004 Budget proposal
to terminate the Rural Housing and Economic Development Program
reflects the existence of duplicative HUD and U.S. Department of
Agriculture (USDA) efforts and the fact that USDA has far greater
resources in this area.
In addition, USDA manages a portfolio of rural housing grant
programs and economic development grant programs. USDA's current rural
development portfolio vastly exceeds HUD's Rural Housing and Economic
Development Program in terms of programs and services from budgets to
staffing. The rural housing grant programs are the Rural Housing
Assistance Program, the Rural Housing Voucher Program, and the Mutual
and Self-Help Housing Program. The economic development grant programs
are the Rural Development Enterprise Program and the Rural Business
Opportunity Program.
section 8 project-based assistance
Question. I remain concerned about the administration's
longstanding commitment to Section 8 vouchers to the detriment of
preserving Section 8 project-based housing especially in tight rental
markets. Over the last 3 years, how many projects and units have opted
out of the Section 8 project-based program with the tenants converting
to Section 8 tenant-based assistance?
Answer. During the past 3 fiscal years, Section 8 opt-outs are
estimated at:
------------------------------------------------------------------------
Fiscal year Contracts Units
------------------------------------------------------------------------
2000.................................... 254 10,256
2001.................................... 224 9,496
2002 (prelim) \1\....................... 169 7,487
------------------------------------------------------------------------
\1\ The Office of Housing is currently conducting its annual
verification survey of potential opt outs. Results of the survey may
vary from the estimated, fiscal year 2002 numbers shown above.
Question. How many of these projects have been elderly projects or
designated for persons with disabilities? How many projects and units
have opted to stay in the program? How many of these projects have been
elderly projects or designated for persons with disabilities? How many
projects and units have opted to stay in the program?
Answer. Within these totals, opt outs of projects targeted to the
elderly or disabled were:
------------------------------------------------------------------------
Fiscal year Contracts Units
------------------------------------------------------------------------
2000.................................... 30 1,519
2001.................................... 41 1,201
2002 (prelim) \1\....................... 20 876
------------------------------------------------------------------------
\1\ The Office of Housing is currently conducting its annual
verification survey of potential opt-outs. Results of the survey will
be available in late spring, and may vary from the preliminary figures
shown above.
During fiscal years 2000-2002, 10,742 contracts (782,427 units)
were processed for renewal and are still active. This includes 4,347
contracts and 318,804 units targeted for the elderly or disabled.
homeless assistance
Question. HUD Budget Request indicates that HUD will be submitting
a legislative proposal to block grant or consolidate the McKinney-Vento
homeless assistance grant program. I support this approach assuming
there is adequate oversight and accountability. Nevertheless, since the
current programs work much like a block grant, what significant changes
will the Department be proposing?
Answer. Our current homeless programs are all competitive, with the
exception of the Emergency Shelter Grant (ESG) program. The proposed
consolidation of the competitive programs is intended to make the funds
more flexible and get the available funds to the communities that need
them more efficiently. The new program will serve all homeless
population, not just particular ones. The program will have a single
menu of eligible activities not different menus of activities for
different projects. The new program will emphasize and provide more
permanent housing and will allow new emphasis on homelessness
prevention efforts.
Question. When can we expect this proposed legislation for our
consideration?
Answer. The Department is currently developing legislation which
will be submitted to Congress in the coming weeks.
mark-to-market
Question. The Section 8 Mark-to-Market program was enacted to
provide a mechanism to reduce the cost of oversubsidized, expiring
Section 8 contracts to market rents while preserving this housing as
affordable, low-income housing. How much Section 8 funding has actually
been saved since the beginning of the program?
Answer. Section 8 savings from the beginning of the program to
March 1, 2003 are approximately $180 million. The Present Value of the
future stream of savings from M2M restructures already completed is
$1.4 billion.
Question. How many projects have been preserved with Section 8
project-based contracts?
Answer. As of March 1, 2003, 1,579 properties with a total of
131,551 units have been preserved through the Mark-to-Market program.
Question. How many projects have been removed from the Section 8
inventory by owners who opted out of their Section 8 project-based
contracts?
Answer. Since fiscal year 1999, 74 properties, with a total of
4,157 units in the Mark-to-Market program, have opted-out of Section 8
project-based contracts.
native american housing block grants
Question. The Native American Housing Block Grant fund has been
largely flat funded at some $650 million since its inception. How many
low-income units have been preserved with these funds? How many new
units are created each year with these funds?
Answer. The Native American Housing Assistance and Self-
Determination Act of 1996, as amended (NAHASDA), provides funds through
the Native American Housing Block Grant (NAHBG) Program to Indian
tribes or their tribally designated housing entities (collectively
``grant recipients''). Grant recipients assist eligible low-income
Native American families through NAHASDA's six affordable housing
activities. Beginning in fiscal year 1998, the first year that funds
were appropriated under the IHBG Program, through fiscal year 2001, the
4 years for which data is available, grant recipients have provided
assistance designed to preserve the viability of, on average, 53,463
units each fiscal year. This information differs from the information
previously reported due to the collection of more accurate data
obtained from the Annual Performance Reports (APR) submitted by grant
recipients.
The unit count includes moderate or substantial rehabilitation, and
modernization and operating assistance related to units currently in
management. It does not include other eligible affordable housing
activities under the NAHBG, such as down payment and buy down
assistance, minor rehabilitation of under $5,000, housing services,
housing management services, crime prevention and safety, and model
activities. The total does include Section 8-type programs operated by
a grant recipient.
Using the 4 years of NAHBG funding data available, on average,
2,536 units have been created each year. Fiscal year 2002 figures are
incomplete as of this date because grant recipients' fiscal years vary
from tribe to tribe, and APRs are not required to be submitted until 90
days after the end of a grant recipient's fiscal year. The Department
will submit information on the first two quarters when it becomes
available.
Under the NAHBG Program, grant recipients are involved in a much
wider variety of programs and projects, often using innovative,
leveraged and mixed financing. Unit totals are not currently available
to track these initiatives and projects.
puerto rico public housing authority
Question. What is the current status of the Puerto Rico Housing
Authority (PRPHA)? This has been the most troubled PHA in the country
over the last decade. I know there has been a lot of progress made.
What is the status now?
Answer. The PRPHA has been making steady progress during the past 2
years in procurement and other areas. Examples of the progressive
initiatives that PRPHA has taken are as follows:
--The PRPHA received a clean audit for the first time for fiscal year
ending June 30, 2002.
--The procurement review of December 2002 showed significant
improvement and no major procurement deficiencies.
--Management decisions to comply with OIG recommendations in Report
00-AT-201-1801 are closed.
--Management decisions to comply with recommendations in OIG Report
00-AT-201-1003 are closed with the exception of those coded J
and recommendations 1A and 1B. For these, the termination date
was extended to August 2003.
--The PRPHA began implementation of a 2-year pilot project to
transfer management of public housing projects to four
municipalities. This new initiative is in partnership with
municipalities to determine new alternatives for management of
public housing. All partners signed a Memorandum of
Understanding on February 28, 2003. Four contracts have been
signed with the Municipalities of Caguas, Carolina, Manati, and
Guaynabo.
--In July, HUD will be providing on-site training and program reviews
to these four municipalities. The PRPHA completed the
negotiations with Management Agents by the first week of May as
scheduled. Report on negotiations and recommendations on
contracts with Management Agents should be reviewed by the Bid
Board and the PRPHA Board of Directors in their meetings the
end of June and beginning of July for appropriate action. To
date, two contracts have been cancelled and management of those
areas reorganized at substantial savings to PRPHA. Preliminary
agreements have been reached with four other Management Agents
for renegotiated contracts with lower management fees.
--Executed an agreement to return to PRPHA control of the HOPE VI
Program that was put under receivership by HUD on July 6, 2001.
financial management and information systems
Question. IT has been a priority for Congress to the extent that
recent VA-HUD Appropriations bills have segregated IT funds to ensure
the funds are not raided for other purposes. What is the status of
HUD's IT systems and when will they be fully up and running and
compatible?
Answer. The administration requested and Congress has approved a
change in the mechanism for funding the Working Capital Fund (WCF).
This change was important for a number of reasons, including the need
to begin funding the maintenance of existing systems and the
development of new Department-wide systems from a central account
rather than the previous process of taxing those program offices which
had the authority to transfer funds to the WCF. A number of HUD
programs could not legally transfer funds without specific authority in
annual appropriations bills.
The Appropriations of the central WCF activities then leaves
program offices with the authority to transfer funds to the WCF only
for the activities which directly benefit the program and especially
the grantees. In doing this we have ensured that program funds are not
raided to pay for Department-wide activities and that central
activities and systems, such as the central accounting system HUDCAPS
is adequately funded through the review and approval process in
appropriations acts. Hence this segregation of IT funds between central
activities and program specific activities, in the administration's
view, will work to strengthen the distinct functionalities of each.
The IT plan called for by Report language in the 2003
Appropriations Act which was submitted to the House and Senate
Appropriations staff on December 15, 2002 and again on March 19, 2003.
Specifically cites the status of each IT project that is under
development. A third submission which will include the information in
the OMB 300 submissions and the full life cycle costs and timeframe for
each major project (about 40) will be submitted to the Congress mid-
June, 2003.
______
Question Submitted by Senator Conrad Burns
elimination of the rural housing and economic development program
Question. Does the Department of Agriculture Budget compensate for
the elimination of the HUD Rural Housing and Economic Development
Program? If so, why?
Answer. There will be $100 million available in fiscal year 2004
for the Rural Strategic Investment Grant Program in USDA pursuant to
Section 6030 of the Farm Security and Rural Investment Act of 2002,
Public Law 107-171. This new program will ``provide rural communities
with flexible resources to develop comprehensive, collaborative and
locally based strategic planning processes; and will implement
innovative community and economic development strategies that optimize
regional competitive advantages.'' These are activities that clearly
mirror those in HUD's program. HUD's fiscal year 2004 Budget proposal
to terminate the Rural Housing and Economic Development Program
reflects the existence of duplicative HUD and U.S. Department of
Agriculture (USDA) efforts and the fact that USDA has far greater
resources in this area.
In addition, USDA manages a portfolio of rural housing grant
programs and economic development grant programs. USDA's current rural
development portfolio vastly exceeds HUD's Rural Housing and Economic
Development Program in terms of programs and services from budgets to
staffing. The rural housing grant programs are the Rural Housing
Assistance Program, the Rural Housing Voucher Program, and the Mutual
and Self-Help Housing Program and the Rural Business Opportunity
Program.
______
Questions Submitted by Senator Pete V. Domenici
samaritan initiative
Question. Mr. Secretary, HUD's proposed fiscal year 2004 budget
includes a $50 million request for the President's ``Samaritan
Initiative'' to move toward ending chronic homelessness over the next
decade. This proposal builds on efforts by this Subcommittee in recent
years to push the Federal response on homelessness in this very
direction--setting a minimum threshold within McKinney-Vento for
permanent supportive housing, ensuring stable funding for Shelter Plus
Care renewals and pushing greater Federal interagency collaboration for
funding of services to chronically homeless individuals. Your budget
proposal includes a reference to an unspecified commitment for $10
million each in fiscal year 2004 from both HHS and the VA toward
services funding as part of the Samaritan Initiative.
Can you identify for the Subcommittee from where within the budgets
of HHS and the VA these funds will be coming?
Answer. HHS funds will come from both the Substance Abuse and
Mental Health Services Administration (SAMHSA) for substance abuse
treatment, mental health and related supportive services and from the
Health Resources and Services Administration (HRSA) for primary health
care services. VA funds will come from its Medical Care appropriation
to enable local VA facilities to address the specific needs of
chronically homeless veterans.
Question. What role do you envision the Interagency Council on
Homelessness playing in allocating these funds?
Answer. The funds being requested for the Samaritan Housing
Program, if approved, would be included in the applicable
appropriations bills of HUD, HHS and VA and, therefore, would become
the responsibility of these agencies to administer. However, there is
no question that all three agencies would actively collaborate among
themselves as well as consult with the Interagency Council on
Homelessness to ensure that the program was established and operated in
a coordinated and effective manner.
section 811 housing for the disabled
Question. Mr. Secretary, the administration is requesting $251
million for the Section 811 program for people with disabilities for
fiscal year 2004. This represents an $8 million reduction from fiscal
year 2003 funding. However, according to estimates included in your own
budget proposal, renewal of all expiring 811 ``mainstream'' tenant-
based rent subsidies will cost $42 million in fiscal year 2004 ($10
million more than in fiscal year 2003). In addition, renewal of
expiring 811 project-based subsidies (known as PRACs) are estimated to
cost $8 million ($2 million more than in fiscal year 2003). This
appears to increase the proposed reduction to the 811 program to at
least $18 million if measured in terms of production of new units for
people with disabilities. Further, this renewal burden associated with
the 811 program is expected to continue growing in the coming years,
consuming an ever greater percentage of the program, severely
undermining 811's role as a production program.
The administration's budget contains an unspecified proposal to
fold Section 811 into the Samaritan Chronic Homeless Initiative. This
appears to be at odds with the targeting requirements for Section 811
that have been established by Congress, i.e. to direct resources to
non-elderly people with severe disabilities that need housing related
supports to live in the community. While this can include people with
disabilities experiencing chronic homelessness, it also includes
individuals that are in transition from institutional settings (nursing
homes, psychiatric hospitals) or adults living with aging parents that
can no longer provide care at home.
Does HUD have an estimate of the reduced number of new production
units and new vouchers under the 811 that would result under the
administration's budget?
Answer. The estimates included in the Department's Budget reflects
that the number of Section 811 units awarded in fiscal year 2004 would
be 1,749. The number assumed to be awarded in fiscal year 2003 is
1,804. That is about a 3 percent decrease in the number of units
awarded with the same level of appropriations. However, these estimates
do not include additional units that may be awarded using recaptures
from prior years or from revised estimates of the amount of new
appropriations needed for renewals. We have found that in many cases,
higher than expected balances remain on contracts approaching
expiration. These additional funds can be used to offset the impact of
renewal costs.
Question. Does HUD have a plan to deal with the rising burden
associated with renewal of project-based and tenant-based subsidies
under the 811 program?
Answer. Within the amounts that are made available in future years,
the Department is committed to maximizing the level of assistance
available to eligible families. The Department has underway an
aggressive and comprehensive effort to move greater numbers of projects
to completion and occupancy as quickly as possible. This effort is also
identifying amounts that can be recaptured from projects that cannot
make reasonable progress so that these funds can be applied to
additional awards. Over the next few years, these efforts should
increase the pace by which additional units are brought into service.
Ultimately, however, additional funding will be required each year to
continue the current level of newly constructed units and, at the same
time, renew expiring contracts.
Question. What measures might be taken to account for this 811
renewal burden as Congress has done for Shelter Plus Care?
Answer. Renewal of expiring rental assistance contracts is an
integral aspect of the Section 811 housing program as it is for the
Shelter Plus Care program. In both cases, funding of renewals is
priority within the amounts appropriated in the account.
Question. Can you please describe for the Committee how HUD's
proposal for integrating 811 into the Samaritan Initiative would impact
current targeting requirements for 811?
Answer. The Department has a pending budget request of $50 million
for the Samaritan Housing Program in fiscal year 2004, in addition to
the $251 million requested for the Section 811 program. For the fiscal
year 2004 Section 811 grant awards, the Department is proposing a
preference for applications that address those disabled fitting the
profile of people at risk of homelessness. This effort to prevent
homelessness is intended to complement the Samaritan program's focus on
addressing the critical needs of those experiencing chronic
homelessness. The details on how the new preference will be
incorporated into existing Section 811 selection criteria will be
developed in the next several months based on discussions with all
interested parties.
metropolitan statistical area
Question. Mr. Secretary, although New Mexico is considered one of
the Nation's poorest States, there is an odd problem in the Santa Fe
and Los Alamos areas with regard to qualifying for HUD assistance. HUD
currently combines these two New Mexico cities into one Metropolitan
Statistical Area or MSA. Although at one time this practice was a
benefit to both communities, it has now become a hindrance to their
ability to receive HUD assistance in meeting actual local housing
needs.
As it is today, Los Alamos County median income is over twice as
high as Santa Fe County, about $82,000 to $40,000. This disparity
clearly has negative impacts in both counties for housing assistance
when Fair Market Rents (FMR) are calculated and then averaged for this
single MSA.
By artificially raising median incomes in one county, Santa Fe, and
lowering it in the other, Los Alamos, neither community has housing
assistance targeted to their real incomes.
One solution, as has been attempted in the State of New York, is to
remove the distortion be separating the affected communities from their
shared MSA. I am attempting to do just that through a piece of
legislation introduced a few weeks ago.
Do you believe that such a legislative fix would adequately solve
this dilemma?
Answer. Separating the counties of Los Alamos and Santa Fe from a
shared MSA would reduce the distortions in income and rent calculations
for HUD programs. Currently, Santa Fe County benefits from the higher
income and higher rents of Los Alamos County. More people could be
served in Santa Fe County with lower FMRs, and lower income limits will
ensure that the needy receive housing services. However, in Los Alamos,
the reverse will occur. A substantially higher FMR for Los Alamos will
mean that there will be fewer people served.
HUD follows the OMB definition of metropolitan areas. New OMB
definitions will be released this summer, and the Department will bring
the issue to their attention.
section 811 housing for the disabled
Question. Would separating Los Alamos and Santa Fe from a shared
MSA remove the distortions and allow more people to receive the
assistance they need?
Answer. No. Breaking out the two areas would have no impact in the
Section 811 distribution. Allocations are done by State or State
portion within a field office jurisdiction; consistent with the
requirements of 24 CFR 791 and the Section 202 and 811 program
requirements. Second, the allocations for Section 811 are not done
separately for metropolitan versus non-metropolitan areas. Third, and
more importantly, given the level of funding in total, New Mexico's
``fair share'' in fiscal year 2002 would have been only 10 units (based
on the minimum number of units set aside for each office). However,
since the New Mexico Office is not a Multifamily Program Center, its
development functions are under the jurisdiction of the Ft. Worth
Office. Under the Ft. Worth Office's jurisdiction, the sponsors
applying to develop Section 202 and Section 811 units in New Mexico had
the ability to compete for 45 units of assistance in fiscal year 2002
rather than the 10 units if New Mexico was advertised separately.
nahasda funding
Question. Mr. Secretary, I serve a State with over 20 Indian tribes
including 19 pueblos and the Navajo Nation. Many of their members live
in substandard housing due to economic circumstances facing the tribes.
Providing adequate housing for low-income individuals and families is
one of the primary tenets of your Department. It is also one tool the
Federal Government has for meeting the spirit of its trust
responsibility for the tribes.
One powerful tool in our belts is the Native American Housing
Assistance and Self-Determination Act of 1996, otherwise referred to as
NAHASDA. NAHASDA has been a great boon to the Indian people through its
consolidation of prior housing programs and allocation of block grants
to the tribes.
That tool, however, seems dulled of late. While the program has led
to heartening developments in Indian country, many still wait for
adequate housing. It is estimated that over 200,000 housing units are
required to meet current needs. While funding for this program is
high--at a requested $646.6 million--it has not increased in many
years. Inflation and population growth have eaten away at the real
value of this money. Perhaps in this round of appropriations we can do
something about that.
First, is it fair to say that the real money value of the NAHASDA
funds has decreased due to its stagnation and the pressures of
inflation and population growth?
Answer. Yes, it would be fair to say this.
Question. In order to combat this situation, would appropriating
$700 million for fiscal year 2004 begin to address some of the
desperate housing needs in Indian Country?
Answer. The NAHASDA program has made significant improvements in
its program delivery and tracking of accomplishments. Grant recipients
assist eligible low-income Native American families residing on Indian
reservations, in the Pueblos, in Alaska Native Villages, and in other
traditional Indian areas. Using NAHASDA's six affordable housing
activities, Indian tribes and their tribally designated housing
entities (TDHE) create housing opportunities for eligible low-income
Native American families.
Beginning in fiscal year 1998, the first year that funds were
appropriated under the NAHBG Program, through fiscal year 2001, the 4
years for which data is available, grant recipients have provided
assistance designed to preserve the viability of, on average, 53,463
units each fiscal year. The unit count includes moderate or substantial
rehabilitation, and modernization and operating assistance related to
units currently in management.
Using the 4 years of NAHBG funding data available, on average,
2,536 units have been created each year. Under the NAHBG Program, grant
recipients are involved in a much wider variety of programs and
projects, often using innovative, leveraged and mixed financing. These
activities stretch NAHBG dollars and result in increased housing
assistance for Native American families.
The 2004 Budget request provides sufficient funding to implement
the administration's goals to address the housing needs in Indian
country.
______
Questions Submitted by Senator Mike DeWine
outreach and technical assistance grants
Question. Mr. Secretary, I am very thankful for all the great work
that your organization has done. As I am sure you are aware, the
Outreach and Technical Assistance Grants (OTAG) have played a valuable
role in permitting housing organizations to hold many community
outreach events including regional and State-wide meetings of housing
organizations, HUD, local officials and non-profit developers to stay
informed about HUD program and coordinate their efforts to preserve and
improve housing in their local communities.
I understand that several organizations have not passed their
audits of this program and that this is not uncommon. As a result of
these findings, HUD has suspended the work of these organizations and
is delaying issuing a Notice of Fund Availability on the basis that the
audit findings are not resolved.
I am concerned that HUD's delay in resolving these audits is
jeopardizing the future of this valuable program. What are your
intentions for the program and how do you plan to deal with this
situation?
Answer. The consolidated audit report was published on March 31,
2003, and the Department is currently implementing the management
decisions associated with these findings.
Regarding the future funding of Section 514 Grants, the Department
has committed to perform a Comprehensive Management Review of the
administration of the Section 514 Grant process, including the
deficiencies identified by the Inspector General in the recent audit
reports. After this review is completed and appropriate program
safeguards are incorporated into the program, the Department will be in
a position to consider new opportunities for funding under Section 514.
gse oversight
Question. Mr. Secretary, Congress passed legislation in 1992
requiring that HUD review all new programs that Fannie Mae and Freddie
Mac are considering before they enter into those programs. In the past
decade, that law has been all but ignored. I know you are committed to
full implementation of laws duly passed. What are you doing to ensure
that a pre-clearance mechanism is established?
Answer. The Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (FHEFSSA) mandated that the Department review the
GSEs' activities for approval in all instances that meet the statutory
definition of a new program. As I stated during the recent budget
hearing, I take this responsibility seriously. It is my belief that the
Department must provide the level of new program oversight envisioned
by Congress when it enacted FHEFSSA in order to ensure that new
programs initiated by the GSEs are consistent with their charters and
public mission. To achieve this objective, I have directed my staff to
thoroughly review the Department's current regulatory procedures in an
effort to promote more efficient and effective regulation.
______
Questions Submitted by Senator Barbara A. Mikulski
new lead-based paint abatement program
Question. In the Public Law 108-7, the Committee created a new lead
based paint abatement program and appropriated $50 million for the
program. Please provide the following information in regards to this
program:
How is the Department collecting the data required to determine
which areas meet the criteria for ``highest lead based paint abatement
needs'' as set forth in the Public Law 108-7?
Answer. The Department is requiring that all applicants for these
grants report to HUD the total number of documented cases of lead-
poisoned children from the most recent calendar year for which data are
available and the number of pre-1940 rental units within the relevant
jurisdiction. HUD will be working with the CDC and Prevention to
conduct quality control on the data submitted by applicants on lead
poisoned children. The Department will also compare reported numbers of
units to 2000 Census data for quality control. HUD will publish these
data in its progress report to the Committee on March 1, 2004 or
earlier, as required. In addition, HUD will publish in the Notice of
Funding Availability data from the U.S. Census showing the 100 areas
with the highest number of pre-1940 rental units.
Question. How many jurisdictions qualify for grants under this
program?
Answer. Approximately 100 areas are eligible for grants. These
areas are identified in an Appendix to the NOFA.
Question. When will the Department issue a NOFA for this program?
When does the Department expect to make awards?
Answer. The NOFA will be published in May 2003. The Department
expects to make awards no later than September 2003.
Question. How will the Department monitor the outputs and outcomes
of grant awards?
Answer. The Department will track both expenditures and number of
units made lead safe through its web-based data system, which helps the
Department ensure compliance with the terms and conditions of the grant
agreement. In 2004, HUD will also be conducting another national survey
of the prevalence of lead-based paint in U.S. housing to measure the
impact of this program and other lead hazard control efforts in
reducing the number of units with lead-based paint hazards. Previous
HUD studies showed that the number of housing units with lead-based
paint declined from 64 million in 1990 to 38 million in 2000 (See
Jacobs et al., ``The Prevalence of Lead-Based Paint Hazards in U.S.
Housing,'' Environ Health Perspect 110:A599-606, October 2002). In
addition, HUD will be working with the CDC to quantify the decline in
the number of lead poisoned children through the National Health and
Nutrition Examination Survey, which showed that the number of lead
poisoned children declined from 890,000 in the mid-1990's to 434,000 in
1999-2000.
housing opportunities for persons with aids (hopwa)
Question. Of the $290,000,000 appropriated to the HOPWA program,
how many of the funds are expected to renew existing grants? How many
grants does this represent?
Answer. HOPWA competitive programs constitute 10 percent of program
funds. In fiscal year 2003, HUD has available $28.811 million to award
for HOPWA projects to be selected under the criteria published in the
Department's SuperNOFA. As required by the Appropriation Act, HUD will
give priority to the selection of competitive grants that provide
permanent supportive housing and meet all program requirements.
Selections will be made later this year after the receipt of
applications and completion of the Department's review of these
applications. It cannot be determined which winning applications will
renew existing grants until the competitive process is completed.
HOPWA competitive grants are funded for up to a 3-year operating
periods. As such, many projects operate for their intended 3-year use
period and are likely to seek additional funding to continue program
operations. Beginning in fiscal year 2001, the Appropriation Act
required that HUD give priority to the renewal of existing projects
that meet program requirements. In fiscal year 2002, the renewal
requirement specified that projects that provided permanent supportive
housing receive priority in the selection process. In those
competitions, HUD established the review criteria in the Department's
SuperNOFA process. At the completion of these prior competitions, most
of the available funding was awarded to renew existing projects, for 22
of 25 projects selected in 2001, and for 14 of 28 projects selected in
2002. In 2001, 3 new projects were selected and in 2002, 11 new
projects were selected for funding along with three transitional
housing projects that receive funding to continue those efforts.
There are nine grantees operating under fiscal year 1999 awards and
21 grantees operating under fiscal year 2000 awards, which would
constitute the likely groups of applicants for renewal requests. Based
on prior experience, HUD does not expect that all of these projects
will seek renewal funding in this period or qualify for selection under
the published criteria as projects that provide permanent supportive
housing, since some involve transitional housing activities.
hopwa renewed grantees
Question. Please provide a list of these grantees, and a brief
explanation of what each grant is being used for.
Answer. The list of these grantees with brief descriptions of their
existing grant is listed below:
Housing Opportunities for Persons with HIV/AIDS (HOPWA)
1999 Competitive Grants--9 Grants Not Yet Renewed
California
City of San Jose, Department of Housing.--$1,346,000, ``Shared
Housing Assistance Placement and Supportive Services'' (SHAPSS) in
collaboration with the AIDS Resources Information & Services of Santa
Clara County and Health. Services include: transitional housing,
roommate referral service, tenant based rental subsidies and supportive
services, serving 80 clients and 15 families.
Colorado
Del Norte Neighborhood Development Corporation.--$959,330, to
rehabilitate a 15-bed single-room occupancy (SRO) facility in Denver.
Project serves very-low income homeless persons living with AIDS,
dually or triply diagnosed with substance abuse and/or mental illness
issues. Services are individually tailored including group and
individual counseling, transportation assistance, food bank access, HIV
education, daily meals, and self-sufficiency training, which are
coordinated with the Colorado AIDS Project.
Delaware
Delaware HIV Consortium.--$934,487, for the acquisition,
rehabilitation and operation of a housing facility in collaboration
with the Connections Community Support Programs, Inc., to develop and
operate ten units of permanent housing with intensive supportive
services with a primary focus on the needs of women with co-occurring
substance use and/or mental health disorders.
District of Columbia
Safe Haven Outreach Ministries.--$1,286,000, to support 46 units of
transitional housing for dually and multiply diagnosed homeless adults.
This program will convert a public housing building, into one- and two-
bedroom units. On-site substance abuse counseling, basic medical care,
mental health treatment, case management, assistance with daily living
and job readiness training which will stabilize 256 homeless
individuals with permanent housing, while clients with former criminal
justice issues will receive assists in reentry supports.
Idaho
Idaho Housing and Finance Association.--$1,299,837 for rental
assistance, will provide low-income persons with long-term rental
assistance in 45 units of short-term rental and utility assistance,
case management, dental and psychiatric services. The project will
expand the existing supportive service delivery system, assisting 384
persons living with AIDS and their families throughout the State of
Idaho.
Massachusetts
Community Healthlink, Inc.--$1,236,000, to establish and operate an
eight-unit residence for pregnant homeless women also challenged with
substance abuse issues. Services and support will focus on preventing
neonatal transmission of HIV and provide prenatal care otherwise not
accessible for homeless women. This project will serve an estimated 48
persons with current needs due to homelessness, pregnancy and substance
abuse and enable them to transition to more stable and independent
living.
Justice Resource Institute (JRI).--$1,256,815, for tenant-based
rental assistance program, with scattered-site rental subsidies to
access housing for low-income and homeless individuals and families
with HIV/AIDS. The program will assist 95 persons and their families.
New Hampshire
State of New Hampshire, Department of Health and Human Services,
Office of Community Support and Long Term Care.--$520,448 in
conjunction with three service organizations will provide housing and
services to 90 persons and 35 families, and an additional 75 persons
will only receive supportive services.
Pennsylvania
Asociacion de Puertorriquenos en Marcha, Inc.--$1,193,511, to
continue La CASA (Community AIDS Services Advancement), a program of
rental assistance, counseling and other services for clients in the
Latino neighborhood of north Philadelphia, serving persons with HIV/
AIDS and their families through 20 units of tenant based rental
assistance, security deposits, housing counseling, case management,
medical monitoring, emergency child care, and transportation within a
bilingual/bicultural setting.
Remaining 2000 Competitive Awards by State
Alaska
Alaska Housing Finance Corporation.--$572,600, to provide housing
and comprehensive support services to 100 households, such as case
management, employment services, treatment and transportation,
especially in addressing needs to access health care in rural areas.
State agencies and community-based organizations have committed over
$2,000,000 in resources.
California
Salvation Army, Southern California Division.--$927,888 to support
operating costs and supportive services at a 45-unit transitional and
permanent housing program for families affected by HIV/AIDS. The
project will adjust to changes in service needs and help maintain
families as they transition to permanent housing.
County of Sacramento, Department of Human Assistance.--$1,300,142
for a collaborative of human service agencies from both the Homeless
Continuum of Care and the HIV Services Continuum in Sacramento. This
project will complete the continuum of care by addressing an
underserved population of persons who are homeless and avoid
traditional shelter programs. The City committed 120 tenant-based
Section 8 permanent housing for clients who successfully complete the
programs.
San Francisco Redevelopment Agency.--$1,370,000 to improve the
current housing conditions for underserved homeless persons living with
HIV/AIDS in the City and County of San Francisco, by assisting persons
with support in getting a job or returning to work. In addition, many
clients may also need support to address homelessness, mental health
and substance use issues, serving 125 households with access to 10
units of service-enriched SRO housing units.
Colorado
Colorado Division of Housing.--$1,370,000 to provide rental
assistance and short-term rent payments and related services in areas
outside the Denver metropolitan area. Nonprofits will offer about 50
units of tenant-based rental assistance and assist 487 households with
short-term rent payments to prevent homelessness. An estimated 537
individuals and their families will receive some form of housing
assistance.
Georgia
City of Savannah, Bureau of Public Development.--$1,197,572 to
expand on collaborations with Union Mission, Inc. and six other project
sponsors with the Savannah-Chatham AIDS Continuum of Care in a one-stop
service and medical center for persons living with HIV/AIDS that will
streamline the intake process for housing services and expand substance
abuse treatment to 20 persons receiving housing assistance.
Hawaii
Gregory House Programs.--$1,030,000 to continue the supportive
housing programs and allow for a continuum of services for persons with
multiple diagnoses who are living in the Honolulu metropolitan area.
The project uses two housing components: 40 units of tenant-based
rental assistance and operational costs for an 11-bed transitional
housing facility.
Illinois
AIDS Foundation of Chicago.--$1,362,846 to direct assistance to
underserved racial and ethnic minority communities that have been
impacted by AIDS and poverty. The Renaissance Care Network assists an
underserved population of African-Americans who reside in the greater
Roseland area of Chicago. HOPWA funds will be used to lease 21
scattered site apartments and an array of supportive services relating
to HIV counseling, testing, outreach, parenting, child care, substance
abuse and mental health.
Kentucky
Kentucky Housing Corporation.--$1,320,000 to support more than 490
persons by establishing a substance abuse treatment network that covers
all 120 Kentucky counties. The project is an expansion and renewal of
the 1997 HOPWA grant in short-term housing assistance which will reach
231 homeless or low-income persons with chemical dependencies in
connection with substance abuse treatment services.
Maine
The AIDS Project (TAP).--$1,333,286 to continue a program and
expand services to underserved persons in rural areas in the remaining
areas of the State where no HOPWA funds have previously been available.
Assistance creates a range of housing options, including 63 units of
tenant-based rental assistance, 39 units of emergency shelter, 42 units
of short-term rent, mortgage and utility assistance as well as 192
security deposits to obtain housing.
Maryland
Health Care for Homeless (HCH), Inc.--$1,301,703 to assist an
underserved population of medically fragile HIV/AIDS homeless persons
in Baltimore with difficult challenges. The Project will connect
housing support for 180 clients with a new level of intensive case
management and comprehensive services to address the needs for the
homeless or those at risk of homelessness and medically fragile.
Massachusetts
Cambridge Cares About AIDS (CCAA).--$1,326,917 to support the Bay
State Supportive Housing Alliance program fill gaps in housing services
through 24 units of transitional housing for 24 months to individuals
and families living with HIV/AIDS across eastern Massachusetts. Eighty-
two persons will be assisted with specialized substance abuse treatment
efforts and related supportive services.
Mississippi
South Mississippi AIDS Task Force.--$935,500 to construct and
operate Client House, an emergency shelter and transitional housing for
low income and homeless people living with AIDS and their families. The
facility will house 12 individuals and 2 families in Biloxi and will
serve the southern six counties of the State. The project is being
coordinated with the Mississippi Department of Health and 25
organizations that provide related supportive services for clients.
New York
Church Avenue Merchants Block Association, Inc. (CAMBA).--
$1,080,000 to renew the multiple diagnoses initiative program Housing
Start. The project provides scattered site apartments in Brooklyn for
40 low-income homeless persons living with HIV, who have mental illness
or chemical addictions or both. The project will link HIV, substance
abuse, mental health services, treatment education, health care,
intensive independent living skills training and other supportive
services with housing assistance to maximize independent living and
self-determination.
Housing Works, Inc.--$707,177 to address the needs of women who are
exiting the criminal justice system, with 12 units of transitional
housing and a range of supportive services to reinforce behavioral
changes, that will reintegrate 75 women into the community pending
release or recently released from incarceration. A minimum of 20 of
these women will receive support such as security deposits and moving
expenses into permanent housing, linked to a full range of medical,
clinical, psycho-social, case management services.
The Fortune Society.--$1,274,875 to develop Coming Home Program to
meet the needs of underserved primarily African American and Latino
homeless persons who are released from jails and prisons, with
extensive substance abuse issues. The program will assist 125 clients
with support in permanent housing, after emergency, transitional,
supported permanent and independent permanent housing in addition to 12
beds for emergency and transitional housing in West Harlem that will
continue as a permanent resource for the target population.
Center for Children and Families.--$1,278,906 to continue New York
City's first system-wide housing assistance program for homeless HIV
and multiple diagnosed minority youth from 18-24 years old in the Times
Square area. An estimated 270 youth will be assisted with overnight
shelter and other support. This program involves the operation of a
number of specialized facilities, such as Safe Space, a 24-hour drop in
center, and using two mobile units which canvass for homeless youth on
the streets.
Pennsylvania
Family Health Council of Central PA, Inc.--$367,040 to establish a
program that links health to housing for clients in a 14 county region
of south and central Pennsylvania through eight area AIDS sponsors.
These providers will deliver rental assistance support to an estimated
150 clients, especially women in rural areas of the State.
Texas
Bexar County, Department of Housing and Human Services.--$1,320,000
to target an underserved population of women with children. Twenty-
eight families who are homeless or at risk of becoming homeless will be
housed in an acquired and rehabilitated building that consists of eight
units of transitional housing. Residents will receive treatment and
family services intended to help stabilize women in housing, help
address health concerns, and when able, move to permanent housing.
Vermont
Burlington Housing Authority.--$471,392 to continue a program of
rental assistance and support services for residents of an 11-unit
supportive housing. A wide range of supportive services is available to
residents, with a combination of public and private funding.
Wyoming
Wyoming Department of Health.--$588,191 to expand services on a
statewide basis through the use of a short-term rent payments program
to respond to client requests. Funds will allow the State and its
sponsors, the Wyoming AIDS Project and Casper Housing Authority to
continue to meet supportive service needs and address short-term
housing assistance of 175 low-income persons.
national homeless data analysis project
Question. Please provide a status report on the national homeless
data analysis project, including an accounting of how the $11,000,000
will be spent, and estimated future costs of this project.
Answer. Congress has directed HUD to improve the collection of data
on the extent and nature of homelessness locally and nationally. HUD
has set October 2004 as the goal for each Continuum of Care (CoC) to
implement a Homeless Management Information System (HMIS). HUD is
providing $4.1 million in technical assistance to CoCs to help ensure
they are able to meet this goal. HUD is also undertaking a $3 million
3-year effort to: (1) develop data and reporting standards; (2) develop
an 80 jurisdiction national sample; and (3) collect and analyze
homeless data from the sample and all CoC systems for an Annual
Homeless Assessment Report (AHAR) to Congress. While implementing a
HMIS is a complex, time-consuming, and costly process, CoCs have been
making progress in meeting the 2004 goal. In spring 2002, 25 percent of
the CoCs reported they had implemented or were upgrading or expanding
their HMIS, 51 percent indicated they were selecting software and
hardware, 22 percent were meeting and considering implementation, and 2
percent had not started to consider a HMIS.
Concerning the fiscal year 2003 funding targeted for additional
HMIS technical assistance requirements: HUD is currently assessing the
nature of community needs for HMIS technical assistance and will
prepare a request for proposals in the near future.
Currently HUD does not have a reliable estimate on the total costs
for CoCs to implement and operate a HMIS. In 2001, 49 dedicated HMIS
projects were funded, totaling $13 million and in 2002, 83 projects
totaling $25 million were funded. Nearly all of these were 3-year
grants. We expect a significant number of communities to apply for
funds in the 2003 competition. In addition, CoCs are using a variety of
public and private sources in addition to Supportive Housing Program to
fund their HMIS. We will conduct further analysis of the HMIS costs
after awarding the 2003 Continuum of Care competitive grants.
fiscal year 2003 technical assistance for homeless assistance grant
program
Question. Please detail how the Department will spend the
$6,600,000 for technical assistance appropriated to the homeless
assistance grants program.
Answer. Of the $6.6 million appropriated for homeless technical
assistance, $3.6 million is being made available through HUD's 2003
SuperNOFA process for technical assistance on the national level. The
remaining $3 million is being distributed to HUD's field offices for
award at the local level to winning technical assistance providers.
As announced in the fiscal year 2003 SuperNOFA, the $3.6 million
national technical assistance funding is focused on the following 5
types of activities: (1) facilitating the exchange of information
between community organizations to assist them to develop and implement
a community-wide discharge plan for individuals exiting publicly funded
institutions; (2) improving the ability of eligible applicants to
develop and operate permanent housing for chronically homeless persons;
(3) developing materials on effective grant administration for grantees
and sponsors; (4) improving the ability of eligible grantees and
sponsors in reaching out to and enumerating chronically homeless
persons; and (5) improving the ability of grantees and sponsors in
coordinating services available through mainstream resources with
current housing units available for homeless persons.
technical assistance in cdbg
Question. Why doesn't the Department request funds for the
technical assistance (TA) in the CDBG account?
Answer. While CDBG TA has not been funded since fiscal year 1999,
the President's Budget requested $7.5 million in 2000, $15 million in
2001, nothing in 2002, $3 million in 2003 and $3 million in 2004. HUD
strongly believes that it needs TA to support the $4.4 billion CDBG
program.
Question. What need do CDBG grant recipients have for TA?
Answer. CDBG grant recipients need TA for training in basic CDBG
implementation as well as in specialized areas as local performance
measurement. Instead of requiring individual grantees to develop ways
to address an issue or a training program, HUD could be providing
methods already proven to be successful. These funds would be provided
through contracts or grants and would not be used to pay HUD staff
travel or training.
In fiscal year 2004, TA would address new homeownership assistance,
affordable housing, timely expenditure of funds, particularly by
States, training programs for grantees staff to ensure better
understanding of accountability requirements, data enhancements, faith-
based community groups, energy enhancement, and meeting lead-based
paint safety requirements.
In addition, some of these funds will be used to implement any
revisions to the Consolidated Plan Improvement Initiative, as required
by the President's Management Agenda, HUD's charge is to streamline the
Consolidated Plan and make it more results-oriented and useful to
communities in assessing their own progress in addressing the problems
of low-income areas.
Question. Has the Department received specific requests for CDBG
technical assistance?
Answer. Over the past 3 years, HUD has received a steady stream of
requests from CDBG grantees for base level technical assistance (TA)
because of considerable staff turnover at the local level as well as
requests from stakeholders for TA to address such emerging issues as
lead based paint hazards and housing and economic development issues
within the colonias.
neighborhood networks
Question. What is the status of the Neighborhood Networks program
in public housing?
Answer. In the 4 years since HUD introduced the Neighborhood
Networks (NN) Centers program, the Centers' services and programs have
expanded widely. Local partners, such as educational institutions and
nonprofits offer tutoring, mentoring programs and other needed
services. The program was developed to serve residents of public
housing who often lack the skills necessary to become economically
self-reliant. The Centers were designed to give these individuals an
educational opportunity practically at their doorstep. Learning how to
use a computer is the core of the Neighborhood Networks' philosophy
because computers have become a gateway to knowledge and employment.
The NN Centers are typically located on-site or near a Public
Housing facility. The Centers are equipped with computers and Internet
access. They help lower-income residents reach their goals and achieve
economic self-sufficiency through access of education and job training;
help children become better students; provide parents and adults access
to job skills; and assist senior citizens to remain independent.
Question. How many grants have been awarded? What is the average
grant award amount?
Answer. Fiscal year 2002 as well as fiscal year 2003 Appropriations
Acts appropriated $15 million from the Public Housing Capital Fund and
$5 million from the HOPE VI program to establish or expand existing
Public Housing NN Centers.
In fiscal year 2002, 78 grants were awarded to PHAs to operate
centers across the country. The average award amount is $168,743. The
fiscal year 2002 HOPE VI funding has not been awarded at this time, but
will be by September 30, 2003. The Department anticipates the award of
approximately 28 grants to HOPE VI sites.
Question. How is the Department monitoring the outcomes of the
program?
Answer. For the fiscal year 2003 Notice of Funding Availability
(NOFA), the Department developed a reporting requirement of performance
measures and outcomes known as the Logic Model. Applicants are required
to address their previous results, and present proposed program
outcomes, outputs, benchmarks, and performance indicators. If the
applicant is a successful awardee, then the applicant is required to
report semi-annual against their work plan the achievement of these
performance measures.
communities served under brownfields
Question. How many communities have been served over the life of
the Brownfields program? What activities does the HUD Brownfields
program fund that are not eligible under the EPA Brownfields program?
Answer. Since 1998, HUD has awarded 108 Brownfields Economic
Development Initiative (BEDI) grants to 85 communities. In some cases,
additional communities may be served through those applications, such
as when a county receives a BEDI grant for the redevelopment of
multiple sites in a number of communities within the county.
The 2002 Small Business Liability Relief and Brownfields
Revitalization Act expanded the funding that EPA can provide to support
the assessment and cleanup of brownfields properties. The authorities
granted to EPA under the new law, however, are limited to property
characterization, assessment, and cleanup. The law permits recipients
of EPA's grants or loans to use funds to conduct planning but only when
associated with property assessment and cleanup. In addition, the law
permits a recipient of an EPA grant or loan to purchase insurance, but
again, only for activities associated with the characterization,
assessment or remediation of a brownfields site. EPA has given out
approximately 400 grants, and their funds can be used for site
beautification projects, known as greenspace.
HUD's objective regarding brownfields is to assist projects whose
focus is the end of the redevelopment process, i.e., projects with
plans by identified parties that will return contaminated sites to
productive economic use, as differentiated from assessment and cleanup
which are the beginning phases of the overall redevelopment process.
Because BEDI grants may currently be used only in conjunction with
Section 108 guaranteed loans, BEDI may support any activities eligible
for assistance under the Section 108 Loan Guarantee program, provided
those activities are undertaken in connection with the redevelopment of
a brownfields site. Communities may seek BEDI assistance for a wide
range of redevelopment activities, including the acquisition,
demolition, clearance or preparation of a brownfields site;
installation of infrastructure; construction or rehabilitation of
housing, commercial or industrial buildings; business loans and job
training to attract or expand businesses; and the establishment of
public facilities such as child care and community centers (the full
scope of eligible activities that may be supported with BEDI funds is
provided at 24 CFR Sec. 570.703).
The Department did not request funding for the Brownfields Economic
Development Initiative in fiscal year 2004, but the Department will
continue to support the redevelopment of brownfields through the
Community Development Block Grants program.
The following table depicts the activities eligible under the
respective EPA and HUD authorizing legislation:
------------------------------------------------------------------------
Activity EPA HUD
------------------------------------------------------------------------
Assessment...................... Yes............... Yes.
Remediation..................... Yes............... Yes.
Acquisition..................... No................ Yes.
Construction and Rehabilitation. No................ Yes.
Business Attraction or Expansion No................ Yes.
Housing......................... No................ Yes.
Clearance and Demolition........ Only If Integral Yes.
to Remediation.
Public Facilities............... Only If Integral Yes.
to Remediation.
------------------------------------------------------------------------
Although BEDI may also finance site characterization, assessment
and remediation activities, between 2000-2002, just 9.1 percent of
funds provided by BEDI grants and associated Section 108-guaranteed
loans were used for this purpose. Indeed, BEDI grantees have
demonstrated considerable success in accessing EPA resources for site
characterization, assessment and remediation, with nearly 82 percent of
BEDI funds allocated to sites that have received EPA brownfields
assistance for the early phases of redevelopment.
hanf funding proposal
Question. The new funding method adopted in the fiscal year 2003
appropriations bill will mean that local agencies will have to draw
funds from their reserves, and possibly from the new central fund, in
order to have sufficient money to pay rent to owners when additional
families succeed in locating units. This could require fairly quick
action by HUD. If owners do not receive timely payments, they are
unlikely to agree to participate in the program. What will HUD do to
ensure that housing agencies can access the necessary funds quickly, so
that owners can be paid on time?
Answer. HUD has implemented a data collection tool that requires
PHAs to submit updates to leasing and cost activities quarterly. This
current data will be used as the basis to fund expiring contracts on a
quarterly basis and provide PHAs with the appropriate level of funding.
There will be times when a PHA must use reserves and/or require
additional funding from the Central Reserve. HUD is well aware of the
importance of providing this funding to PHAs in a timely manner and is
prepared to do so. HUD also has the responsibility to ensure that the
funding required, up to the authorized level, is made available to PHAs
within 30 days of a request. HUD has developed a PIH Notice that
outlines procedures for PHAs to request access to reserves and/or
additional funding. The notice is going through an internal clearance
process and should be issued in the very near future.
Question. Is HUD planning to issue guidance to housing agencies
explaining the new funding method adopted for fiscal year 2003? If so,
when do you anticipate the guidance will be issued?
Answer. HUD notified all PHAs by letter and e-mail of the changes
in the funding methodology resulting from the fiscal year 2003
appropriations and requirements of PHAs. HUD has also developed an
implementation notice that outlines the changes in more detail. The
notice is in internal clearance and should be issued in the very near
future.
unused budget authority
Question. For housing agencies with fiscal years ending 6/30/02, 9/
30/02 and 12/30/02, what percentage of total allocated budget authority
was used, and what was the dollar amount of unused budget authority?
Answer. See table below.
----------------------------------------------------------------------------------------------------------------
2003 2006 2009 2012 Total
----------------------------------------------------------------------------------------------------------------
Table allocated BA used (percent)......... 89.7 95.6 96.3 92.1 94.0
Unused BA................................. $149,506,470 $287,272,551 $107,281,709 $149,018,101 $693,089,101
----------------------------------------------------------------------------------------------------------------
housing assistance for needy families
Question. Does HUD anticipate recapturing the full amount of unused
BA before the end of fiscal year 2003? If not, why not?
Answer. The recapture process in August 2003 will recapture all
unused budget authority from fiscal year 2002 and prior appropriations
that have accrued to PHAs' program reserves. However, a month reserve
amount for all PHAs will be excluded from recapture. In addition, funds
provided to Moving-to-Work agencies units under litigation and certain
special fees intended for future years will also be excluded from
recaptures. Funds provided to Moving-to-Work agencies are excluded from
recaptures pursuant to the legal agreement between HUD and the agencies
involved.
reserves
Question. How much of the BA recaptured during fiscal year 2003
will be needed to replenish PHA reserves?
Answer. PHA program reserves are replenished at the end of each PHA
fiscal year. The fiscal year 2003 appropriation allows for the
replenishment of reserves up to the authorized level of units due to
increased costs from the Central Fund.
The estimate to replenish reserves, based on the cost per unit
currently provided by PHAs, is approximately $200 million.
voucher utilization
Question. What steps is HUD planning to take this year to continue
to encourage PHAs to increase the percentage of vouchers they are
using?
Answer. The Department proposes the Housing Assistance for Needy
Families (HANF) initiative as a means to reform and improve the voucher
program. HANF will provide tenant-based housing assistance through
State-administered block grants. This initiative will simplify current
income and rent calculations by eliminating dozens of statutory and
regulatory exemptions and deductions. Implementation of HANF will:
--provide for the program flexibility and oversight so that funds are
used promptly and effectively to assist needy families;
--facilitate greater program responsiveness to local markets and
needs;
--provide for the administrative decision-making closer to the
communities and families affected, by their elected officials;
--provide for additional program flexibility to address local needs;
--allow flexibility at the State level for reallocation of funds or
other actions that may be necessary so that program funds are
expended promptly; and
--improve government support of self-sufficiency efforts by assisted
families, by facilitating greater coordination with the TANF
program and other State programs.
Question. Is HUD continuing to notify agencies that fail to use at
least 90 percent of their vouchers (or budget authority) that if they
do not improve substantially HUD will reallocate some of their vouchers
to another agency?
Answer. The Department is reviewing procedures related to the
reallocation of vouchers and will determine if reallocation will be
conducted this summer. However, budget reform made by Congress in
fiscal year 2003 may negate the necessity to do so.
Question. Has HUD reduced the number of vouchers allocated to any
agencies due to poor performance during this fiscal year? If so, please
provide details on the agencies and number of vouchers affected. Have
these vouchers been reallocated to other agencies?
Answer. HUD has not reallocated vouchers from under-performing
agencies in fiscal year 2003.
study on voucher utilization
Question. HUD has commissioned a study on how high-performing
agencies have improved voucher utilization that the study contains more
recent data on voucher utilization than HUD has provided to Congress,
and that it has been ready to be issued for 6 months. When this study
will be made public? Please provide the Committee with a copy of the
study.
Answer. The report is being finalized now and should be sent to the
printer in the next few weeks.
voucher utilization
Question. HUD's budget request assumes that the average cost of
vouchers in fiscal year 2004 will be $6,468, including administrative
fees, yet the average cost of the requested incremental vouchers is
$6,545. Please explain the discrepancy. The Congressional Budget Office
in its March baseline estimates that the average cost of vouchers in
fiscal year 2004 will be $6,842. Please explain the discrepancy between
the administration's estimate and CBO's.
Answer. In fiscal year 2004, up to $36 million are requested for
non-elderly disabled vouchers as a set-aside that might result in
approximately 5,500 units depending on the region or area where they
will be utilized. There is a cap on the funding of $36 million that can
be used for the non-elderly disabled vouchers. However, there is no
floor or ceiling on the number of units that can be awarded from the
amount set-aside for this purpose. The estimate of 5,500 units is just
an estimate to provide some context and should not be viewed as an
absolute final number. It should not be used to calculate a per unit
cost of $6,545. The dollar amount is the only limiting factor for non-
elderly voucher set-aside. The average per unit cost of $6,648 was
calculated based on the PHA's latest year-end financial statements and
the actual cost of approximately 2 million units was taken into
consideration. In addition, the local and regional inflation factor was
used to project cost for fiscal year 2004.
The Department does not know the assumptions used by CBO to
calculate the PUC, therefore, we are unable to address the discrepancy
between HUD & CBO.
Question. In HUD's budget justifications, page A-16, the
administration says it is requesting renewal funding for 1,935,649
vouchers. This is only 90.9 percent of the 2,130,000 vouchers that
require renewal in fiscal year 2004. Using the administration's cost
estimate of $6,468 per voucher and including the central fund,
approximately 94.7 percent of vouchers can be supported by the total
budget request of $13.047 billion for voucher renewals. Yet HUD's
Fiscal Year 2002 Performance and Accountability Report states that
voucher utilization reached 94 percent that year, and the Budget
Justifications submitted by HUD to Congress in February 2003 indicate
that HUD anticipates continued improvement in voucher utilization, to
95 percent and 96 percent respectively, in fiscal years 2003 and 2004.
Can you explain these discrepancies?
Answer. The 2.1 million vouchers identified represent the entire
inventory of authorized vouchers projected in fiscal year 2004. Not all
vouchers in the inventory require renewal funding in fiscal year 2004
because existing budget authority exists as a result of a long-term
contract, or new budget authority is available for vouchers awarded for
tenant protection actions and/or incremental vouchers. Further, a 1-
month reserve will be available to PHAs to cover increases in cost or
lease up to the authorized level.
The renewal estimate provided in the budget is based on a leasing
level of approximately 96 percent, and includes funding requirements
for increased costs and additional leasing. This leasing level is
consistent with leasing projected in the fiscal year 2002 Performance
and Accountability Report.
Question. Of the total requested appropriation of $13.607 billion
for HANF, some $12.535 billion represents new budget authority. The
remaining $1.072 billion is assumed to be carried over from recaptures
of voucher appropriations from prior years. Based on the most current
information available, what is HUD's current expectation of the amount
of carry-over funds that will be available in fiscal year 2003?
Answer. The only amounts expected to carryover are $1.072 billion,
which is already assumed in the fiscal year 2004 Budget. All other
funds are expected to be committed for specific purposes or used to
meet the fiscal year 2003 rescission.
severely distressed public housing
Question. Please detail how the Department is complying with Senate
direction to ``submit a report by June 15, 2003, on the number and
location of severely distressed public housing units that are in need
of substantial revitalization or demolition''?
Answer. At this time, the Department does not have a mechanism to
review the entire public housing inventory and determine how many units
are severely distressed. Even the National Commission on Severely
Distressed Public Housing acknowledged the difficulty in identifying
specifically distressed projects and opted to estimate the total number
nationwide rather than do an inventory. Furthermore, a standard
definition of severe distress needs to be agreed upon prior to an
evaluation of the entire inventory. HUD has to work with 5 different
definitions as provided in Sections 18, 24, and 202 of the 1937 U.S.
Housing Act, the HOPE VI appropriations and the Commission of Severely
Distressed Public Housing. The Department is currently working with the
Urban Institute to assess, among other things, the various definitions
and establish one standard that can be used Department-wide.
hope vi
Question. During the fiscal year 2004 budget hearing, Secretary
Martinez indicated that the Department would be convening an ``internal
work group'' on HOPE VI, to consider reauthorization. Please provide a
status report on this work group.
Answer. The Department is coordinating the Public Housing and
Community Development Resources Review Initiative. As part of this
initiative, the Department is convening experts who will provide input
on the type of revitalization program that is needed given the current
public housing stock and 10 years of lessons learned from HOPE VI and
other affordable housing programs.
The HOPE VI Review Initiative convened on May 28 and June 12, 2003.
A final meeting is scheduled for June 19, 2003. In addition, HUD
officials will continue to draw on information from a wide variety of
sources.
The Department also contracted with the Urban Institute to write a
lessons learned report on HOPE VI and the revitalization of distressed
public housing. This report will be used along with the information
collected from the HOPE VI Review Initiative and other sources to
examine alternative methods of public housing revitalization.
interactive web-based lead database
Question. This Subcommittee provided $3.5 million in fiscal year
2002 for the development of an interactive, web-based lead database
that utilizes ``real time'' information and mapping capabilities to
provide local, State, and Federal Government officials, public and
private organizations, health care providers and families with easy
access to childhood lead poisoning prevention data and educational
information, and to facilitate multi-disciplinary collaboration to
further childhood lead poisoning prevention efforts. The Committee is
aware of, and delighted with HUD's goal of having the Lead-Safe Homes
data system fully operational by February 2004. In light of additional
funding provided for abatement of lead in homes, how do you plan to
expand the current pilot program from three cities to a nationwide
interactive web-based database so their abatement funds are used most
efficiently?
Answer. HUD believes this database will help local jurisdictions
target their resources to those areas in greatest need. The data are
most helpful if they are provided at the level of the individual
housing unit and not restricted to only the block or census tract
level. In Boston and Chicago, unit-specific data have been provided,
although in Baltimore, unit-level data have been restricted, reportedly
due to local authorities' concerns about confidentiality of medical
records. The Fiscal Year 2003 Appropriations Act provides that the lead
hazard reduction demonstration program funds can be used for
inspections, risk assessments, interim controls, abatement, and
temporary relocation of families during the hazard control work. Since
explicit language was not provided in the Act, expansion of the
database may not be an eligible expense for grantees under this
program. For the existing lead hazard control grant program, the cost
of database development is an eligible expense and HUD will develop
incentives to encourage its grantees to enter their data into this
system. Additional resources could also be provided through the use of
local matching funds.
Question. Do you see expansion as a slow process, adopting
information from a limited number of cities at a time? Do you envision
rapid expansion once you feel the system is capable of handling data
from numerous cities around the county?
Answer. Because the development costs associated with the pilots
have already been covered, we can achieve significant economies of
scale by expanding the project to other cities. Once the database for
the pilot cities is released and fully operational, HUD expects that
jurisdictions will recognize its value in short order. Several other
jurisdictions have expressed interest, such as Philadelphia, Milwaukee,
Providence, and the States of Maryland and Massachusetts. The expansion
of the database is likely to proceed most rapidly in those communities
at highest risk. However, the expansion of the database is likely to be
slower if it is dependent on the resources of State and local
governments, given their current financial status. Rapid expansion
could be facilitated by additional appropriations for those communities
at greatest risk.
interagency investment in childhood lead poisoning reduction
Question. How does HUD plan to accomplish interagency investment in
ending childhood lead poisoning by 2010?
Answer. At the Federal level, the President's Task Force on
Environmental Health and Safety Risks to Children coordinates all lead-
based paint activity among the different agencies. On April 18, 2003
the President signed an Executive Order extending the Task Force for 2
years. HUD also serves on the CDC Childhood Lead Poisoning Prevention
Advisory Committee as an ex-officio member. At the State and local
level, HUD has been encouraging the creation of strategic plans to
eliminate childhood lead poisoning by 2010. Such plans are under
development in: Detroit; Philadelphia; Rochester, NY; Milwaukee; and
the State of Rhode Island. ``Summit conferences'' to develop such local
plans either have been or will be held shortly in Cleveland and
Chicago. Both HUD and the Centers for Disease Control and Prevention
are requiring their respective grantees to develop local plans to
achieve the 2010 goal.
Question. What other agencies does HUD envision partnering with to
fulfill the goal of eradicating childhood lead poisoning?
Answer. Partnering agencies include, but are not limited to, the
following: Centers for Disease Control and Prevention, Environmental
Protection Agency, Office of Management and Budget, Departments of
Justice, Energy (weatherization), Agriculture (rural housing), Defense,
Treasury, National Institute of Environmental Health Sciences, Center
for Medicaid and Medicare Services, Office of the Public Health
Service, and the Consumer Product Safety Commission.
______
Questions Submitted by Senator Patrick J. Leahy
homeless funds in burlington
Question. Mr. Secretary, I want to raise a concern I have with the
Continuum of Care program that I hope you can address. It has come to
my attention that several years ago the Department made a significant
change in the way it evaluates these grants which has dramatically
impacted one of Vermont's neediest communities.
In 1997 the Department began using the Community Development Block
Grant (CDBG) formula to establish a level of ``Pro-Rata'' need--a base
level of funding for each community. Before this time Burlington, and
the Chittenden County Continuum of Care, often received over $1 million
to run a variety of homeless programs. The need was great and the
programs were widely praised--receiving Best Practices Awards from the
U.S. Conference of Mayors and from HUD.
Based on the new formula Burlington's pro rata need was estimated
at a fraction of what the funds they had been receiving--and HUD
awarded more points to projects that fell within that arbitrary number.
The result was a drastic decline in the number of projects that were
funded and in the total amount of money they received--from $1.6
million in 1996 to $350,000 in 2002. The result has been a slow but
painful erosion of their system of care in the county. This happened at
time when the area was seeing a 400 percent increase in the number of
families seeking assistance.
My question to you is this: Can HUD show any data, or have you
collected any information, that demonstrates a link between community
development needs, as evaluated by the CDBG formula, and the homeless
needs in each individual community?
Answer. Prior to 1994, HUD did not have an objective measure to
assess the need for competitive homeless program assistance, a
statutory selection factor. Individual projects were asked to provide
narratives about the particular homeless sub-population they intended
to serve in their community. As a result, there was no ability for HUD
to assess the need for homeless assistance of one community relative to
another. At the same time, a significant number of communities began
submitting applications, making this relative determination of need
even more difficult. For instance, prior to 1994, fewer than 1,000
projects were submitted to HUD annually for competitive funding. In
1994, 2,655 applications were received.
Beginning in 1994, HUD instituted its pro rata need approach to
provide a more objective and fair measure of need. HUD examined Census
and other data on homelessness to determine how need would be measured.
As there were no readily available and reliable direct measures of
homeless need, HUD turned to the Congress for direction. In creating
the Stewart B. McKinney Homeless Act of 1987, Congress stipulated that
HUD's only homeless assistance formula program, Emergency Shelter
Grants, be allocated using the factors contained in the Community
Development Block Grant (CDBG) program. The CDBG factors prescribed by
Congress are: population, poverty, housing overcrowding, growth lag and
age of housing. Given this direction from Congress and no other readily
useable measures of homeless need, HUD uses the CDBG factors in
determining pro rata need in Continuum of Care competition.
In 2001, Congress directed HUD to review the pro rata need approach
used for HUD's competitive homeless assistance programs. In April 2001,
HUD sponsored a conference on this subject and invited representatives
from numerous national organizations; Federal, State and local
officials, including Congressional staff; homeless providers; homeless
advocates and academics. At the conclusion of the conference, there was
overall agreement that the current approach which utilizes the only
current available data for determining need for McKinney-Vento funding
was working well. This approach will be improved prospectively as we
receive national HMIS data in fiscal year 2005.
Question. Is HUD currently collecting information and data about
homeless populations in order to determine how best to approach these
complex problems or how best to allocate funds?
Answer. With direction from Congress, HUD is working to improve the
collection of data on the extent and nature of homelessness locally and
nationally. HUD has set October 2004 a goal for each Continuum of Care
to implement a Homeless Management Information Systems (HMIS). HUD is
providing financial and technical assistance to Continuums to meet this
goal.
It is noteworthy that the State of Vermont and the Chittenden
County Continuums are collaborating on a State-wide HMIS. It is our
understanding that planning and implementation of this system are on
course for meeting the 2004 national implementation goal. In fact, the
State of Vermont has been a leader in suggesting innovative proposals
for enhancing the HMIS initiative. These efforts will contribute to
better understanding homelessness and how to address it.
Question. Secondly, have you heard from other rural States, such as
Vermont, that are facing similar problems with their funding formula,
and has the Department ever considered the need for a small State
minimum in this program?
Answer. There are two key provisions in pro rata need to help
ensure communities can more fully address their local homeless needs.
The first protects communities that have existing HUD-funded
projects. HUD assures that if the cost of operating such projects for 1
year exceeds the community's pro rata need amount, HUD will provide an
upward adjustment to that amount to ensure that all such projects can
fully operate.
The second provision allows each community to receive additional
funding by requesting as its number one priority, a new permanent
housing project. This provision has been in place for a number of
years. Unfortunately, Chittenden County has consistently declined to
request this bonus funding. Had they requested a fundable project in
2002, the continuum's pro rata need would have doubled from $226,000 to
$452,000. We are hopeful that the continuum will fully exercise its
options in 2003.
The State of Vermont, which administers a Continuum of Care system
covering the remainder of the State, receives significant assistance
through HUD's Continuum of Care process. For instance in December 2002,
the State's Continuum was awarded over $1.2 million in homeless
assistance. As a result, the combined Continuum of Care funding award
amount in 2002 for Vermont was approximately $1.4 million.
______
Questions Submitted by Senator Robert C. Byrd
public housing operating fund
Question. The U.S. Department of Housing and Urban Development
recently revealed a $250 million funding shortfall in the Public
Housing Operating Fund for Fiscal Year 2002. The January 18, 2003,
edition of the National Journal cites a Housing and Urban Development
official saying that an internal problem with HUD's system for
estimating costs had led to the shortfall.
Yet, despite the Department's admission that the funding shortfall
is a result of their own error, the Department has refused to request
additional funding in fiscal year 2004 to rectify the situation.
Instead, the Department of Housing and Urban Development has
significantly reduced subsidies to public housing authorities,
threatening the housing of the nearly 3 million people who currently
occupy public housing.
Why, specifically, is the Department of Housing and Urban
Development experiencing a funding shortfall?
Answer. In 2001, HUD changed its funding formula, in part to
redirect some funding from large to small PHAs. At the time, however,
HUD did not change its reporting and accounting systems to support this
change. This failure led to inadvisable management practices. For
example, HUD used 1999 data for 2001 funding due to an inability to
access 2000 data.
Unfortunately, the previous system made it difficult to forecast
future funding streams correctly and to set percentage funding levels
responsibly, resulting in some years in significant funding shortfalls.
For example, in 1998 (a 100 percent funding year), there was a $102
million shortfall, leading to a 92.5 percent funding level the next
year. In short, poor accounting systems and practices led, in some
years, to the setting of inappropriately high funding percentages,
which in turn led to funding shortfalls.
Over the past decade, HUD's practice at the operational level has
been to automatically dip into future years' appropriations to
compensate for any shortfalls. This is an unacceptable and
irresponsible practice, which had apparently been going on for some
years without the knowledge HUD's senior management or Congress. Upon
senior management's discovery and confirmation of the problem, HUD took
action to inform the appropriations and authorizing committees of both
House and Senate of the practice and the resulting $250 million
shortfall.
Question. Why is the administration not requesting additional
funding to cover this shortfall, thus, choosing to make the residents
of public housing suffer for the Department's mistake?
Answer. When the Department discovered the $250 million funding
shortfall in the Public Housing Operating Fund for fiscal year 2002, it
did have many conversations and meetings with all appropriate parties.
One of the outcomes of these discussions was the inclusion of language
in the 2003 Appropriations Act, which provided the Department with $250
million to cover the funding shortfall in the Public Housing Operating
Fund. While the remaining 2003 funding will not cover 100 percent of
the eligibility needs for the public housing industry, historically the
Department has funded PHAs at less than 100 percent, including a
funding level of 89 percent in 1996. PHAs should be able to accommodate
this level of funding through efficiencies and economies in their
operations and, where needed, by utilizing reserves and other funding
sources available to them.
Question. What specific actions is HUD undertaking to ensure such a
shortfall does not occur again?
Answer. The Department has taken the following actions to ensure
that a shortfall does not occur again in this program. Specifically,
the Department has:
--implemented a new interim Operating Subsidy system that will enable
HUD to provide more timely and accurate funding to PHAs;
--enhanced its internal controls and managerial reporting system; and
--put in place new managerial staff and have added support staff to
ensure that appropriations enacted in 2003 and beyond for this
program are managed in a responsible manner.
Question. Since HUD has announced an intended funding cut in the
operating subsidies provided to public housing authorities, I have
received letters from numerous constituents expressing concern about
this proposal and outlining the ways it would adversely effect the
residents of public housing in West Virginia. Public housing
authorities will have to postpone maintenance and renovation of
apartments, eliminate many tenant services, and possibly closing
housing units.
What do you believe the repercussion to public housing will be by
reducing the operating fund subsidy to public housing as HUD intends?
Answer. HUD did not intend that the funding level of 70 percent
announced in Notice 2003-1 would be the final level. After
Congressional action was completed on HUD's fiscal year 2003
appropriations, HUD did provide full funding to PHAs for their fiscal
year 2002 subsidy eligibility and is now funding fiscal year 2003
eligibility at 90 percent.
Question. What level of funding is required in fiscal year 2004 to
ensure that public housing authorities are not financially penalized
for HUD's mistake?
Answer. In fiscal year 2002, the Department experienced a $250
million funding shortfall in this program. The shortfall occurred
because of system and business process problems that prevented the
Department from timely tracking and accounting for PHA eligibility and
program funds. To cover the shortfall, Congress provided funds in the
fiscal year 2003 Appropriations Act. To ensure that shortfalls do not
occur again and to address issues with the accounting systems, the
Department has enhanced its internal controls, management oversight,
and business procedures for this program. These enhancements will
ensure the proper and timely accounting of PHA eligibility and funds
administration.
For fiscal year 2004, the administration requested $3.574 billion.
This amount should fully satisfy fiscal year 2004 operating subsidy
requirements. No portion of the request will be used for prior fiscal
year shortfalls.
empowerment zones
Question. In 1999, Huntington, West Virginia, and Ironton, Ohio,
were together designated a Round II urban Empowerment Zone. This
program is encouraging significant economic development in the
designated region.
In President Bush's budget proposal for fiscal year 2004, the
success of the Empowerment Zone program is recognized and abundantly
praised. In fact, the budget states:
``The Empowerment Zone initiative helps revitalize city
neighborhoods by attracting business development and providing
employment opportunities to residents of empowerment zones. Empowerment
Zone principles include a strategic vision for change, a community-
based partnership, providing economic opportunity and sustainable
community development.''
The budget continues:
``E[mpowerment] Z[one]s are helping to stimulate billions of
dollars in private investment, reviving inner city neighborhoods and
supporting jobs, and helping families move from welfare to work.''
Yet, the President's budget provides no funding for this program.
Why is there no funding provided in the President's budget for
Empowerment Zones, when the administration has nothing but commendation
for the program?
Answer. The administration is very supportive of the Empowerment
Zone program. Accordingly, HUD is sponsoring three workshops across
America in Jacksonville, FL; Memphis, TN; and Tucson, AZ to train local
leaders on how to let businesses know about the $22 billion in Federal
tax incentives available to them. Empowerment Zones have over $6
billion in incentives targeted towards them. This is far more than the
limited grant funds that Congress has appropriated to local leaders in
the past. It delivers funds directly into businesses' hands without
passing through State and local governments. Round II EZs will continue
to have access to their cumulatively appropriated funds of $360
million.
Additional funding was not recommended for two reasons. First,
there are HUD and Congressional concerns regarding the slow expenditure
of previously appropriated funds. As of January 31, 2003, $212 million
in funds remained unspent and an additional $30 million in fiscal year
2003 funds had yet to be allocated. As the program entered its sixth
year, 63 percent of the funds remain unused. Second, there is a higher
priority assigned to the multi-billion tax credits that are available.
SUBCOMMITTEE RECESS
Secretary Martinez. Mr. Chairman, I appreciate the
opportunity to meet with you to discuss the hiring issue. We
know that is important to you.
Senator Bond. And we have lots of things, as we indicated.
We appreciate your willingness to work on these legislative
proposals. As you noted, we do have some questions about them
and some skepticism on a few of them, but we know that there is
lots of progress being made.
Well, thanks to you and all who participated, and we will
recess the hearing. Thank you, sir.
[Whereupon, at 11:36 a.m., Thursday, March 6, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]