<DOC>
[107 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:89032.wais]
S. Hrg. 107-979
PROPOSALS TO IMPROVE
THE HOUSING VOUCHER PROGRAM
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
ON
PROPOSALS OUTLINED IN THE HOUSING VOUCHER IMPROVEMENT ACT OF 2002 TO
IMPROVE THE SECTION 8 HOUSING CHOICE VOUCHER PROGRAM
__________
APRIL 11, 2002
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
PAUL S. SARBANES, Maryland, Chairman
CHRISTOPHER J. DODD, Connecticut PHIL GRAMM, Texas
TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York WAYNE ALLARD, Colorado
EVAN BAYH, Indiana MICHAEL B. ENZI, Wyoming
ZELL MILLER, Georgia CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware RICK SANTORUM, Pennsylvania
DEBBIE STABENOW, Michigan JIM BUNNING, Kentucky
JON S. CORZINE, New Jersey MIKE CRAPO, Idaho
DANIEL K. AKAKA, Hawaii JOHN ENSIGN, Nevada
Steven B. Harris, Staff Director and Chief Counsel
Wayne A. Abernathy, Republican Staff Director
Jennifer Fogel-Bublick, Counsel
Jonathan Miller, Professional Staff
Sherry Little, Republican Legislative Assistant
Mark Calabria, Republican Economist
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
(ii)
?
C O N T E N T S
----------
THURSDAY, APRIL 11, 2002
Page
Opening statement of Chairman Sarbanes........................... 1
Opening statements, comments, or prepared statements of:
Senator Miller............................................... 2
Senator Corzine.............................................. 2
Prepared statement....................................... 20
Senator Akaka................................................ 3
Prepared statement....................................... 20
Senator Stabenow............................................. 13
Prepared statement....................................... 21
WITNESSES
Ophelia B. Basgal, Executive Director, Housing Authority of
Alameda County and Dublin, California on behalf of the National
Association of Housing and Redevelopment Officials............. 4
Prepared statement........................................... 21
Response to written question of Senator Akaka................ 39
Scott Gardner, President, National Apartment Association and
Crosshaven Properites, Inc..................................... 6
Prepared statement........................................... 26
Response to written question of Senator Akaka................ 39
Ann O'Hara, Associate Director, Technical Assistance
Collaborative
on behalf of the National Low Income Housing Coalition......... 8
Prepared statement........................................... 28
Response to written questions of Senator Akaka............... 40
Benson F. Roberts, Vice President for Policy, Local Initiatives
Support
Corporation.................................................... 10
Prepared statement........................................... 34
Additional Material Supplied for the Record
Letter from Sheila Crowley, President, National Low Income
Housing Coalition to Chairman Paul S. Sarbanes, dated May 24,
2002........................................................... 43
(iii)
PROPOSALS TO IMPROVE
THE HOUSING VOUCHER PROGRAM
----------
THURSDAY, APRIL 11, 2002
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 2:50 p.m., in room SD-538 of the
Dirksen Senate Office Building, Senator Paul S. Sarbanes
(Chairman of the Committee) presiding.
OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES
Chairman Sarbanes. The hearing will come to order.
I would like to apologize to my colleagues and the
witnesses for the delay. I was held up in the Capitol, and I
just could not get out of the situation in which I found
myself.
Since November of last year, we have had three hearings in
the Committee to discuss the increasing demand for affordable
housing throughout the country. The testimony at these hearings
has shown pretty conclusively that housing for many working
families, as well as the poor, is becoming less and less
affordable. Indeed, the data shows that it is working families
who are increasingly feeling the pinch of rents that increase
faster than their wages.
A number of the witnesses we have heard from in the past
several months have made proposals to address this growing
need, for example, the National Housing Trust Fund. Many of us
in the Congress support additional funding for the construction
of new affordable housing. Others would take a different
approach. Senator Jack Reed of Rhode Island, who chairs our
Subcommittee on Housing and Transportation, has been exploring
these issues and will continue to do so.
There does seem to be widespread agreement that housing
vouchers are an important and invaluable part of our Nation's
housing policy. Both the previous and the current
Administrations have consistently included an increase in the
number of housing vouchers in their budget requests for the
Department of Housing and Urban Development, and I and many
others have strongly supported these efforts.
However, we have also heard from housing authorities, low-
income families, housing advocates, and landlords that there
are a number of difficulties in making the vouchers work,
particularly in low-poverty areas. The Housing Voucher
Improvement Act of 2002, the subject of our hearing today, is
designed to respond to these difficulties and to make vouchers
a more effective tool for providing affordable housing to
American families who need help.
The legislation, amongst other things, provides funds to
finance outreach by program administrators to landlords in an
effort to broaden housing choices; to help voucher holders
search for housing, particularly in lower poverty neighborhoods
by, for example, providing transportation services; and to help
with application and credit check fees for voucher holders.
The bill would also: allow housing authorities to increase
their payment standards where there is strong evidence that
this is needed to improve voucher utilization; and, to make it
easier to pair vouchers with existing tax credit and HOME
projects, so that the families with the most severe housing
problems can have some
access to this housing.
In addition, the bill proposes a new kind of voucher,
called Thrifty Production Vouchers. These are project-based
vouchers designed to be used in newly constructed housing that
also receive capital subsidies, such as HOME funds or tax
credits, thereby seeking to enable these new developments to
serve very low-income families. Thrifty Vouchers would seek to
encourage the development of new affordable housing in areas
that are more accessible to jobs, shopping, better schools, and
transportation. No more than 25 percent of the units in any new
development would be able to have these vouchers attached, so
that we can ensure that the new developments are mixed-income
developments.
We, in fact, passed important public housing legislation in
this Committee a few years ago, designed to encourage a greater
mix of income in public housing.
I have asked my staff to distribute a discussion draft of
this legislation to Members of the Committee, to the
Administration, HUD, and to outside groups who have had
experience with a voucher program. And our intent, of course,
is that this hearing be the beginning of a process that will
result in real improvements in this very important program.
Now to begin the conversation, first, I will turn to my
colleagues and then I will present the members of the panel.
Senator Miller.
COMMENTS OF SENATOR ZELL MILLER
Senator Miller. Thank you, Mr. Chairman, but I think I will
pass for the time being.
Thank you.
Chairman Sarbanes. Senator Corzine.
COMMENTS OF SENATOR JON S. CORZINE
Senator Corzine. Mr. Chairman, I appreciate your holding
this hearing. I have a formal statement that I would like
included in the record.
This is an issue that is extraordinarily important to my
State. We have many people on waiting lists to get access to
vouchers. We have a problem that really isn't the heart of this
bill--low-income housing availability to apply the vouchers.
Plenty of people want them. Plenty of people qualify, and
not much place to go because of the lack of available housing.
I hope we will be able to address some of that as well.
Thank you, Mr. Chairman.
Chairman Sarbanes. The full statement will be included in
the record. Thank you.
Senator Akaka.
STATEMENT OF SENATOR DANIEL K. AKAKA
Senator Akaka. Thank you very much, Mr. Chairman, for
holding this hearing and for your bill that we hope will
alleviate the housing situation.
We know that we have a terrible housing problem facing low-
and moderate-income families. This appears to be a way of
helping these people. We know that there needs to be some
changes, which you seem to try and address with this
legislation.
To alleviate this problem, some States, including the State
of Hawaii, have expanded their rental assistance programs. The
purpose of the program is no longer solely to provide qualified
landlords with rental assistance subsidies which assist
eligible tenants to make their payments. Rather, the State of
Hawaii has expanded the program to offer interim construction
financing for rental projects and to provide qualified
landlords with incentives to participate in the Section 8
program. The State of Hawaii has also partnered with nonprofit
organizations in privatizing public housing units.
Hawaii is not the only State that is expanding its Section
8 program. Many States are trying to stretch valuable and
limited housing resources to provide eligible families with
affordable housing.
In looking at your bill, it is an answer to this problem. I
look forward to working with you and the Committee in ensuring
that the Section 8 housing voucher program meets these new
challenges.
I ask that my full statement be placed in the record.
Thank you, Mr. Chairman.
Chairman Sarbanes. The full statement will be included in
the record.
I am always struck, actually, as I was listening to you,
about the Hawaii experience and how many different areas Hawaii
has taken initiatives and instituted policies that really
should command our attention. I know in the health care field,
Hawaii has done a number of very innovative things as well.
Let me turn to the panel. I will introduce each witness one
at a time.
Our first panelist is Ophelia Basgal, Executive Director of
the Housing Authority of Alameda County and Dublin, California.
She has 26 years of experience--she began as a mere child--in
affordable housing development and management, including public
housing and Section 8 programs, use of community development
block grants and redevelopment loans and grants and various
other HUD programs.
In addition to her work with housing authorities, Ms.
Basgal has also completed several private consulting contracts
on housing issues and she is also a member of the Millennial
Housing Commission which will be reporting in the not too
distant future.
We are very pleased that she is here with us today. We
would be happy to hear from you.
STATEMENT OF OPHELIA B. BASGAL
EXECUTIVE DIRECTOR, HOUSING AUTHORITY OF
ALAMEDA COUNTY AND DUBLIN, CALIFORNIA
ON BEHALF OF THE
NATIONAL ASSOCIATION OF HOUSING AND
REDEVELOPMENT OFFICIALS
Ms. Basgal. Thank you, Chairman Sarbanes.
I would like to express my gratitude to you and the other
distinguished Members of the Senate Committee on Banking,
Housing, and Urban Affairs for inviting me to testify on the
draft proposal to improve the Section 8 Housing Choice Voucher
Program.
I am testifying today on behalf of the National Association
of Housing and Redevelopment Officials, the acronym of NAHRO,
which you probably know is one of the Nation's oldest and
largest organizations that represents housing and community
development agencies and their issues. Today, we are focused
primarily on local housing agency and the administration of the
Section 8 programs, since that is the primary issue in this
bill draft.
We certainly acknowledge, and I think the bill does also,
that the program has been quite successful. But clearly, there
are areas of concern. And we also are concerned about the full
utilization of funding and the appropriated units to address
the housing needs that many of you have spoken to. We believe
that this draft bill certainly outlines a number of proposals
that will go a long way toward improving the utilization rate
and the program effectiveness, and many of the recommendations
parallel recommendations that the NAHRO membership's itself has
put forward to help broaden the housing choices for many low-
income families and yield more economic development
opportunities for those who participate in the program.
Specifically, we certainly see the Section 8 program as
only one tool in the toolkit that the Nation has to address
housing needs. And the aspect of the thrifty production
vouchers, we clearly, as Senator Akaka indicated, and also
Senator Corzine, the vouchers are of no use if there is no
units where they can be used. Anything that also helps increase
the supply of units we believe is very important and we believe
that the thrifty production vouchers is one possible way to do
that. We believe that it probably should start as a
demonstration program, given the fact that it is not fully
defined and modeled yet as to how it might work out in the
field, and we may want to start slowly and see how that goes.
We heartily support the bill's recommendations on ways to
improve housing search activities by providing funding. While
it is true that housing authorities' administrative fees
certainly anticipate that housing search assistance is part of
that fee, in difficult rental markets, we simply cannot provide
the kinds of services that families really need to be able to
improve their chances when they locate landlords willing to
rent to them, and particularly to go into low-poverty
neighborhoods and areas where there are jobs and opportunities
for them to improve their economic opportunities as families.
The provisions in the bill that address the fair market
rents and how voucher payment standards are set is also very
welcome by increasing the discretion that housing authorities
have to respond quickly, as rental markets change and rents
increase, rather than having to go through a process of waivers
with HUD and authorization to increase voucher payment
standards. The discretion that this bill would provide would
help housing authorities to respond quickly to changing rental
markets.
What appears to be a very simple recommendation in this
bill, which is actually very valuable is just providing
information to housing authorities in one central location of
where low-income housing tax credit projects are and HOME funds
so that we can refer our families to those, is critical. And
actually, what we need to know is when they are close to
opening those projects because that is when families have an
opportunity to rent units. Certainly, after the fact is
valuable, but even earlier in the development of the units is
even more important to us.
Also the reallocation issue of underutilized vouchers we
believe is critical. There is no question that NAHRO supports
the reallocation of the vouchers to where they can be used. And
we do have some concerns that the reallocation seems to also be
attempting to use regionalization of the Section 8 program as a
way to achieve an efficient use of the vouchers that are
reallocated.
We have some questions about that and believe it raises
administrative difficulties that perhaps the bill does not
fully consider.
We also support the expansion of the self-sufficiency
efforts that are in the bill. We believe that those are needed
and welcome those giving families further opportunity to seek
jobs, have incentives to do so, and we support the bill
provisions.
And finally, the proposals on inspections which really go a
long ways to addressing some of the issues that landlords have
concerns about, and delays in inspection processes in getting
the units under contract, as I am sure my co-testifier here
will say, is that having to hold units off the market while you
are waiting for an inspection, while we would certainly like to
believe that the delays are limited, certainly, as a private
landlord, most of them are not in the business of holding units
off the market when they are ready to rent. And this bill does
address some of those.
I would be happy to amplify on that testimony and answer
any questions as we proceed.
Thank you.
Chairman Sarbanes. Good. Thank you very much.
Our next presenter is Scott Gardner, who is the President
of the National Apartment Association; and the President of
Crosshaven Properties, a property management company based in
Tulsa, Oklahoma, which actually specializes in Federally
subsidized and tax credit properties.
Mr. Gardner has been in property management for over 20
years and has managed residential properties, including
subsidized apartments, conventional multifamily housing,
homeowners' associations, as well as commercial and retail
properties.
Mr. Gardner, we are pleased to have you with us today, and
we would be happy to hear from you.
STATEMENT OF SCOTT GARDNER
PRESIDENT, NATIONAL APARTMENT ASSOCIATION
AND CROSSHAVEN PROPERTIES, INC.
Mr. Gardner. Thank you, Mr. Chairman.
Mr. Chairman, distinguished Members of the Banking,
Housing, and Urban Affairs Committee, my name is Scott Gardner.
I am President of Crosshaven Properties, a privately operated
apartment management company headquartered in Tulsa, Oklahoma.
And as the Chairman said, I am also President of the National
Apartment Association. The National Apartment Association
operates a Joint Legislative Program with the National Multi-
Housing Council, a trade association representing the Nation's
largest apartment firms. It is my pleasure to testify on behalf
of both organizations.
First, we commend the Committee Members for your valuable
work in addressing affordable housing in America. We, too,
believe that meeting the housing needs of low- and moderate-
income families is critical. We agree with those on the
Committee and in the housing community who believe that the
Section 8 Housing Choice Voucher Program can be one of the most
effective means of expanding assets to decent and affordable
housing. But we also believe the program must be improved to be
more transparent, and to be less costly and burdensome in order
to attract greater participation by private property owners.
Without this, the Section 8 purpose of assisting low-income
people cannot be realized.
Chairman Sarbanes, we appreciate your leadership on this
issue and we support many of the provisions of the proposed
Housing Voucher Improvement Act, particularly the proposed
provision to improve the unit inspection process. But, even
with that important reform, the proposed legislation falls
short of creating transparency and fully incorporating the
reforms necessary to generate a broader private owner
participation in the Section 8 program.
My statement today will focus on four key proposals that we
believe would improve owner participation and voucher
utilization: One is improving the Housing Quality Standards
Unit Inspection Process; two, improving the Subsidy Payment
System; three,
increasing the payment standard; and the fourth, amending the
lease addendum.
First, improving the Housing Quality Standards Unit
Inspection Process. Currently, before an apartment is eligible
to lease to a
Section 8 voucher holder, the administrating Public Housing
Authority, or PHA, must inspect that unit for compliance with
HUD-prescribed Housing Quality Standards, or HQS. We agree the
voucher holder should reside in a safe, sanitary environment,
but we believe that this can be achieved without conducting
individual unit inspections.
Although we strongly support Section 9's proposed intent,
we advocate the total elimination of individual unit
inspections. Instead, we would encourage the PHA's to rely on
previously conducted property-level inspections by HUD or the
property lenders. These alternative inspections would eliminate
duplication of effort and reduce occupancy delays caused by
untimely unit inspections.
Second, improving the Subsidy Payment System. One key
element of program administration that would improve
participation in the marketplace is improving the Subsidy
Payment Structure. Just as owners would not regularly accept
late rental payments from non-Section 8 tenants, they must not
be forced to accept late subsidy payments. Although HUD's
regulations allow for sanctions against PHA's for untimely
payments, such sanctions are nominal and are not an incentive
for prompt payment.
One way to achieve the goal of transparency would be to
require that all PHA's make automated electronic fund
transfers, thereby assuring timely subsidy payments and
substantially reducing costs for both owners and the PHA's.
Third, increasing the payment standard. Both the payment
standard generally and the Fair Market Rents, or FMR's,
specifically are far too low to support widespread owner
participation. FMR's must be high enough to encourage owner
participation and, in turn, create a sufficient supply of
apartments.
It is for this reason that NAA and NMHC recommend that the
FMR be based on at least the 50th percentile of area median
rents. We urge that the payment standard be raised to 120
percent of the FMR in high-cost areas and the PHA's be allowed
to raise them to 150 percent in areas where the voucher
utilization rate is less than 80 percent, and where 95 percent
available apartments are already occupied.
We also propose that such increases be authorized where
voucher utilization rates were less than 80 percent for the
previous 6 months, not the proposed 12 months. We feel that 6
months is an adequate period to determine the need for higher
utilization rate, and 12 months will only serve to discourage
owner participation by keeping the subsidy payments too low.
And finally fourth, amending the lease addendum. The
proposed bill does not address amending the lease addendum. HUD
requires owners to increase its standard addendum in each of
the Section 8 leases.
The addendum contains numerous provisions that may override
local practice and even landlord-tenant laws--by the way, NAA
and NMHC prefer owner-resident--and/or necessitate additional
costs that we do not ordinarily expend on our standard,
nonsubsidized leases.
We propose the elimination or modification of this lease
addendum to reflect the standards used with the market leases,
thereby reducing administrative burdens and other costly
procedures. Alternatively, we propose establishing pilot
programs to test alternatives with the current lease addendum.
In summary, we support the Section 8 program and wish to
engage more fully in it. However, such participation is not
economically feasible without reforming the program to reduce
its significant costs and burdens on some apartment owners. I
thank you for the opportunity to testify on behalf of the
National Apartment Association and the National Multi-Housing
Council, and wish to offer our assistance as the Committee
continues with its important work toward creating a more
efficient program.
Thank you.
Chairman Sarbanes. Thank you very much, sir.
Our next presenter is Ann O'Hara, Cofounder and Associate
Director of Technical Assistance Collaborative, and Director of
TAC housing center for people with disabilities.
The Technical Assistance Collaborative has offices in
Boston, Sante Fe, and New Albany, Ohio. It is a national
organization that advocates on behalf of people with
disabilities or other special needs by providing information
and technical assistance to organizations in the areas of
mental health, substance abuse, human services, and affordable
housing.
Before joining TAC, Ann O'Hara served as Assistant
Secretary for Housing and Director of Rental Assistance for the
Commonwealth of Massachusetts, and was responsible for the
administration of 12,000 Section 8 certificates and vouchers.
Ms. O'Hara, we would be happy to hear from you.
STATEMENT OF ANN O'HARA, ASSOCIATE DIRECTOR
TECHNICAL ASSISTANCE COLLABORATIVE
ON BEHALF OF THE
NATIONAL LOW INCOME HOUSING COALITION
Ms. O'Hara. Thank you.
Chairman Sarbanes and Members of the Committee, I am
honored to testify today on proposals to improve the voucher
program. And I appreciate the opportunity in particular to join
the other witnesses on this panel to discuss a subject that is
very important to our Nation's housing policy.
I am here today on behalf of the National Low Income
Housing Coalition, representing its members nationwide who
share the goal of ending the affordable housing crisis.
For the next few minutes, I would like to focus mainly on
addressing the problems of voucher utilization, which have been
well documented in various reports and studies. With 3.8
million extremely low-income families facing worst-case housing
needs, it is critically important that the full benefits of the
voucher program be realized. Otherwise, the promise of a
voucher turns into a cruel reality for low-income households
who have been on waiting lists for years and years.
The problems which this bill helps to address can be
illustrated by one man that I know who would not have been able
to use his voucher without the intervention of national
disability organizations. Matthew Bausch is a 28-year-old man
who was injured in a diving accident. He is now a quadriplegic
and uses a wheelchair. Matthew needed a voucher when he moved
to South Florida for treatment at the Spinal Cord
Rehabilitation Center. Because new vouchers for people with
disabilities have been appropriated by Congress, Matthew got a
voucher within a year. But after a 90-day search, Matthew had
not identified any units, whether accessible or not, that could
fit within the program guidelines. Finally, we helped Matthew
obtain a list of Federal low-income housing tax credit
properties in Florida and a vacant, partially accessible unit
was located for him. However, that is when Matthew's problems
really began.
First, the management company refused to accept the voucher
until disability advocates contacted the State's tax credit-
allocating agency to intervene with the owner. Once that
problem was solved, another one emerged. The tax credit rent
was higher than the PHA's voucher payment standard and the PHA
initially refused to approve an exception. That decision was
eventually overturned, but not before Matthew almost lost the
unit to another prospective
tenant.
The National Low Income Housing Coalition believes that the
policy changes in the proposed Housing Voucher Improvement Act
would help all low-income families, not just people with
disabilities, to successfully use vouchers. These changes
include using up to 2 percent of Section 8 funding for housing
counseling and related activities, and a new voucher success
fund.
The proposed flexibility to increase the payment standard
and strengthen the linkage of vouchers to Federal home and tax
credit finance units, as mentioned by Ms. Basgal, will also
help expand the supply of good quality units that accept
vouchers, which is an important strategy since most
jurisdictions do not have voucher antidiscrimination policies.
Given the tools that would be provided in this legislation,
the Coalition also supports the reallocation of vouchers when a
PHA, after receiving appropriate notice, is unable or unwilling
to make improvements.
However, we recommend that a broader public notice to
tenant organizations and other concerned members of the
community should be provided by HUD so that these groups could
try to work with the PHA's when they are first alerted to their
inadequate utilization rate. Because of the importance of
linking housing and TANF policies, we also support the
provisions which would help tenants achieve greater economic
well-being, including permitting voucher-holders to participate
in the Resident Opportunity Self-Sufficiency program,
additional service coordinators for family self-sufficiency,
and authorizing employment and family reunification incentives
through income disregard policies.
Finally, we would like to express our support for the
Thrift Voucher Production Program, and the policy-linking
vouchers to production strategies for people with the lowest
incomes.
We recommend that the siting and owner waiting list
provisions of this bill also be applied to the project-based
voucher legislation that was passed in the year 2000. However,
we also want to make known that protections need to be in place
for people on housing authorities' tenant-based lists if we are
going to also advocate for owner- and project-based lists.
Again, I would like to thank you for the opportunity to be
here today and also to answer any questions that you may have.
Chairman Sarbanes. Thank you very much.
Our closing panelist will be Benson ``Buzz'' Roberts, who
directs the Local Initiatives Support Corporation--LISC--and
its public policy and Government relations activities.
LISC, as we well know, is a national nonprofit organization
that has provided over $3 billion in financing and
organizational support to nonprofit community-based development
corporations through 40 local offices and the national rural
program.
Mr. Roberts has been involved in the creation of such
policies as the Low-Income Housing Tax Credit, the New Markets
Tax Credit, and the HOME Housing Development Program.
He is a Board Member of the Center for Community Change,
the National Association of Affordable Housing Lenders, and the
National Housing Conference, and co-author of several books and
articles on affordable housing and community development.
Buzz, we are pleased to have you here. We would be happy to
hear from you.
STATEMENT OF BENSON F. ROBERTS
VICE PRESIDENT FOR POLICY
LOCAL INITIATIVES SUPPORT CORPORATION
Mr. Roberts. Thank you very much, Mr. Chairman, and good
afternoon to you and to the Committee Members as well. I am
very pleased to be here today to speak particularly on behalf
of the Thrifty Production Voucher proposal that is contained in
the bill.
Through our work, we have helped nonprofit community
development groups to build or rehabilitate well over 110,000
units of housing, and we use resources like the Low-Income
Housing Tax Credit and HOME in that effort. They are excellent
programs. But there is a limitation to what they or any other
capital subsidy program can do to serve people at the lowest
end of the income ladder.
Extremely low-income people with incomes under 30 percent
of median simply cannot afford to pay rents high enough to
cover the basic costs of operating a property. That means that
even if you were to provide a subsidy to cover the entire cost
of development and there were no mortgage that you needed rent
revenues to pay off, the housing would still be unaffordable.
And that is really what Thrifty Production Vouchers are
designed to address. It is a very important gap in our housing
system.
Now, the obvious solution to this would be to provide some
kind of project-based rent subsidy targeted toward these
families. And the problem we have had in getting the Congress
to provide funds for that is that the cost of renewing those
subsidies year after year after year is daunting. Even the cost
of renewing a tenant-based voucher is $6,000 a year and the
appropriators are reluctant to do too much of that. And so, the
Thrifty Production Voucher approach is designed to address this
cost issue.
What makes Thrifty Production Vouchers thrifty is that they
would use a different payment standard. Now, most tenant-based
vouchers are based on a fair market rent or some small
increment above that. Let us say that that level would be a
$700 payment standard. A low-income tenant can afford $200.
That gap of $500 is what it would cost for the rent subsidy.
A Thrifty Production Voucher is different because instead
of being based on that fair market rent, the payment standard
would be based on the actual operating cost of the property,
not including the mortgage. In most cases, that is going to be
a much lower payment standard and that gap is going to be much
smaller to fill.
And that is why the Thrifty Production Voucher can cost
less. It is not that the tenant is paying more, but it is that
the payment standard is lower. It is a simple math problem and
a simple math solution. There would be a cap set on the total
eligible operating expenses equal to 75 percent of the tenant-
based voucher payment standard, and that is designed to make
sure that thrifties live up to their name. And if the operating
cost is below that cap, then the savings are going to be even
greater.
We estimate that at least there will be about a one-third
savings below the cost of a regular tenant-based voucher, and
in high fair market rent areas, like Newark, for instance, or
the Bay area, or Boston, the savings would be dramatically
greater.
We are looking carefully at some low fair market rent
areas, particularly rural areas, to see that this approach is
going to work. It may need some modification in those areas.
But we think the basic approach will work in the vast majority
of areas.
A key element here, as Mr. Chairman, you mentioned, is that
these vouchers would generally be limited to 25 percent of the
units in a property. And that is important for several reasons.
First, as you suggest, it will promote mixed-income
housing. We want to avoid the overconcentration of very poor
people all in the same buildings.
Second, it will make sure that the properties remain
disciplined by the private market. Most of the units in that
property will not have project-based subsidies attached to them
and landlords will have to make sure that those properties are
competitive in the market. We think that is a very important
and healthy aspect.
And third, this approach would enable the owners to submit
their own actual operating budgets and for those to be
generally acceptable for purposes of setting the subsidy level.
That makes sense because owners would have no motivation to be
wasting money on an entire property if they are only going to
get reimbursed for the costs on up to a quarter of the units in
that property. They will be encouraged to manage costs, we
think appropriately. And they won't have to worry about some
governmental entity coming in and second-guessing their
operating practices or budgets. Again, they would have to stay
under that cap, at least.
In summary, Thrifty Vouchers would really meet a need no
other part of the housing programs currently meet. That is why
they have already won the support from several national
organizations, including the National Low Income Housing
Coalition, the Center for Budget and Policy Priorities, the
Council of State Community Development Agencies, the Enterprise
Foundation, the National Association of Counties, the National
Association for County Community and Economic Development, the
National Association of Local Housing Finance Agencies, the
National Community Development Association, the National
Council of State Housing Agencies, and the U.S. Conference of
Mayors.
That concludes my testimony, and I thank you very much for
your time.
Chairman Sarbanes. Thank you very much. It is a very, very
helpful panel.
As penance for my delayed arrival, I am going to defer my
questioning to the end and yield to my colleagues first.
Senator Corzine.
Senator Corzine. Well, I have to tell you that I am not
sure I can fully understand how this Thrifty Voucher Program
works in these high-cost areas, and how do you feel the
incentive for the local private producer or production would
work.
I would ask Mr. Roberts to comment on that, and Mr.
Gardner.
Mr. Roberts. There are two kinds of developers. Some are
nonprofit developers and they will have a mission motivation to
work these Thrifty Production Vouchers into their properties,
and will be happy to do so.
Many profit-motivated developers who are seeking
allocations of low-income housing----
Senator Corzine. You are talking about HOPE 6 project kinds
of----
Mr. Roberts. They might be. But they might be low-income
tax credit properties.
Chairman Sarbanes. Mr. Roberts, if you could pull that
microphone closer, it would be helpful.
Mr. Roberts. They could be HOME-assisted properties. A wide
range of properties, really. Everyone who competes for
allocations of low-income housing tax credits does so according
to a State's
allocation plan.
There is a Federal requirement that one of the allocation
criteria is the commitment to serve especially low-income
people. So the Thrifty Production Voucher is going to permit
applicants for housing credit allocations to address that
priority. And that is going to be a very attractive tool for
anybody who wants to compete effectively. In many States, there
are two and three times as many applicants for housing credit
allocations as can be accommodated. I believe there will be a
strong motivation,
Mr. Gardner. I believe the Thrifty Voucher Program probably
would be a good thing for new production of units.
However, the key here is to get participation by existing
unit landlords. The broader participation by landlords is going
to address the problem I believe more quickly and more
efficiently than the production of the new units, which can be
held up as long as 6 months from the time it begins.
Our position is that if we can make the program more owner-
friendly, then that would encourage more owners to participate
in the program and even in the high-cost areas, if you can
raise the FMR's to a sufficient level, then you are going to be
able to get participation from these owners.
Senator Corzine. It is really a different issue, though,
than how you utilize these Thrifty Production Vouchers, if I
understand it right. Can you give me a specific example? In
Newark, you cited, and it sounded like you had thought about
that question. And I might follow up on the pursuit of the
specifics of this to be able to understand it a little more
clearly on the specific application.
Mr. Roberts. Sure. Let us say that you are in the central
ward of Newark and you were building a 100-unit apartment
complex. You are assembling your financing at that time, so you
would go to the State for an allocation of housing credits. You
would probably go to the city because you will probably need
some HOME funds. You would go to a bank because you will
probably need a first mortgage. And you would go to the public
housing authority to get an allocation of Thrifty Production
Vouchers.
Now under the bill, the housing authority has to coordinate
with other administrators of capital subsidies so that it will
be easy for you to, in effect, do one-stop shopping for the
resources you need to assemble your project.
You would underwrite the property according to what the
overall rents would be. The Thrifty Voucher would be available
for, say, 20 units, 25 units, maybe. They would not generate
any revenue available to pay a mortgage.
But it also means that if you are a nonprofit community
development group and part of the purpose for developing this
housing is to serve the residents of your neighborhood,
including the poor residents, that now, you no longer have to
jump through hoops in order to figure out how you are going to
serve those people because you will have these vouchers that
will ensure that you can cover your operating expenses for
those units. And then you could use the other 75 units in the
property to help pay off the mortgage. That is basically how it
would work.
Senator Corzine. Thank you, Mr. Chairman.
Chairman Sarbanes. Senator Stabenow.
STATEMENT OF SENATOR DEBBIE STABENOW
Senator Stabenow. Thank you, Mr. Chairman.
First, I appreciate the opportunity to place an opening
statement in the record.
Chairman Sarbanes. Certainly.
Senator Stabenow. And I want to thank you for your
leadership and the proposals that you have put forward.
I wonder if I might speak for a moment on Section 8 and ask
you about the Section 8 rule which prohibits a family from
paying more than 40 percent of their income for rent. This has
been raised by a number of people involved in housing in
Michigan. There is a growing concern that the 40 percent rule
is impeding families from being able to get a Section 8
voucher.
If PHA's are experiencing an underutilization of the
vouchers, and in jeopardy of losing them, do you think that
amending the 40 percent rule would enable a significant number
of families to be able to secure housing and obligate their
voucher, or do you think that that is not a direction that we
should go in? I am wondering if you could speak a little bit
about the pros and cons of the concerns that have been raised?
Ms. Basgal. Certainly. I understand that the reason the 40
percent cap was put in originally was the thought that families
really should pay a reasonable amount of their income for rent.
And it is 40 percent now based on the adjusted income, so this
is after we go through our income calculations and arrive at
the deductions and all of that. It is a problem.
In our area, the number of units that we turn down on a
monthly basis, we track the reasons for those. A full 20
percent of the units that we have to deny in the period of time
that we have been tracking them have been because families
exceed the 40 percent of income. And I would say that we are
one of the MSA's that has the higher rents. Our rents are at
the 50th percentile and, in fact, of the twelve cities that we
serve, nine of those are set at 120 percent of the 50th
percentile rents. So it is not because our payment standards
are too low.
It is very hard to explain to a family who is currently
paying 60 or 70 percent of their income for rent, that they
have found a place that results in them paying 42 percent of
their rent and we cannot approve the unit.
We certainly try to negotiate with landlords and do
everything that we can and there are ways to do it. But simply,
we believe that a change, even as simple as making it 40
percent of gross income, would make many families eligible who
currently cannot meet the test.
Senator Stabenow. Is that something that you would support?
Ms. Basgal. Yes.
Senator Stabenow. Would anyone else like to address that?
Ms. O'Hara. I would. I think those of us who have been
around the Section 8 program as long as I have can remember
when tenants paid 25 percent of their income for rent. And the
current standard of 30 percent, the National Low Income Housing
Coalition believes, is really the correct amount in terms of
tenants being able to comfortably afford, particularly
extremely low-income tenants.
So, we would not support the 40 percent, but feel that,
really, at that point, the subsidy needs to be increased rather
than the share of the tenant's rent.
Senator Stabenow. Anyone else?
[No response.]
Okay. Another question. We are going to be dealing with
welfare reform coming up in the next several months. And I am
wondering if any of you would like to offer your thoughts on
the connection between TANF and housing.
Ms. O'Hara, you discussed a little bit about this in your
testimony, but I wondered if any of you would like to talk
about the role of Section 8 as it relates to what we are going
to be having to address related to TANF.
Ms. Basgal. We work relatively closely with our social
service agency in their efforts to meet the requirements of
welfare reform, and are actually one of their more successful
community-based
organizations that they contract with. We only work with our
particular clientele, but we have found that the combination of
housing assistance with activities aimed toward getting people
to work are very successful.
We see clients much more often than our social service
agency does, and have a more established relationship with
them. They also have a long-standing family self-sufficiency
program and those efforts seem to come together in a way to be
very effective working with this particular population.
Peculiarly, for us, the area that I am from, we have an
extremely large Afghan population. We are one of the few social
service agencies that has people who speak the language that
they speak. And so, we are able to serve that population and
have been very effective in getting those families to work when
other agencies have not been able to.
Clearly, there is a link we would encourage in the TANF
efforts that you seriously consider requiring closer kinds of
consultation of social service agencies with housing
authorities, and that those services be better linked than they
are now because it took me almost 2 years to get the social
service agency to realize we could partner with them.
Senator Stabenow. Yes.
Ms. O'Hara. I would just like to add that the coalition is
currently working right now with several groups on specific
proposals * for better linkage between TANF and housing
programs, and we would be happy to submit those to the
Committee.
---------------------------------------------------------------------------
* Held in Committee files.
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Mr. Roberts. The only thing I would add is that there is
some research that shows that welfare recipients who do have
housing subsidies have an easier time getting off the welfare
rolls and staying off the welfare rolls. So there is a link
between housing stability and family self-sufficiency.
Senator Stabenow. And if I might just ask one more
question, Mr. Chairman.
Senator Mary Landrieu and I have begun a process of working
on the issue of grandparents raising grandchildren. We have
about 2 million grandparents right now raising grandchildren.
There are very unique obstacles that they have in raising
grandchildren.
We are beginning to look at the administration of Section
202 and Section 8 to see what barriers there are for what is
called grandfamilies. We are finding that Section 202
properties do not allow children and Section 8 properties may
not be tailored to the unique needs of these families. And I am
wondering if any of you would want to speak to that since it is
a growing challenge in a family unit that we believe that we
need to recognize.
Ms. O'Hara. We have a wonderful program in Boston,
actually, that was developed a number of years ago. Perhaps we
will talk about the same project. It is a program that links
debt-free capital funding with project- and tenant-based
Section 8's, along with support services for the grandparents.
Senator Stabenow. I am wondering if we were to do some kind
of pilots that allowed grandparents and children to be in our
housing, if that kind of thing is something you would support.
Mr. Roberts. Absolutely. As you just heard, we were very
deeply involved in this Boston pilot and we are working now in
Chicago and other places on other similar grandfamilies
projects, and we would love to work with you on that.
Ms. Basgal. Let me suggest one thing you might consider. If
they are in project-based units, which is 202's and Section 8
project-based, unless they are on a housing authorities wait
list, there is no way that we could provide them a voucher. And
they would not meet the regulatory requirements as being a
special admission.
It may be that you might want to consider on a test basis
or a demonstration basis. If someone's in an assisted property,
and they find themselves in a situation that they be allowed at
least to get on a housing authority wait list or possibly be
considered a special admission, it might be one way to come at
it.
Senator Stabenow. Thank you.
Thank you, Chairman Sarbanes.
Chairman Sarbanes. Thank you very much, Senator Stabenow.
First of all, I wanted to ask about the inspection of the
units that you made reference to, Mr. Gardner. I can understand
that the current arrangement creates problems because if you
are an owner and you have a unit that is waiting to be moved
into because of an inspection, you are losing money.
It is not quite clear to me why what is in the draft bill,
and of course, we have put this out as a discussion draft in an
effort to get the benefit of comments and try to improve it.
But this is really designed to allow you to continue to rent
the unit on a very timely basis, but still provide some
assurance that we would get an inspection so we do not find
tenants in a unit that doesn't meet safe and decent standards,
and if that starts happening, then you have a big ``scandal on
your hands.''
So why doesn't the proposal meet your main concern without
then opening us up to the possibility, because you, as I
recall, said totally eliminate unit inspection, which would
then open us up to the possibility of having some bad units.
Mr. Gardner. Well, when I said totally eliminate unit
inspections, that doesn't mean that the unit will never be
inspected.
For instance, on the complexes I have that have both tax
credit, Section 8, maybe HOME funds, maybe three or four layers
of financing, every one of those agencies wants to inspect the
unit and audit the books every year. So it may be that I go
through three to five inspections on a 60-unit complex in a
year. Plus the inspection issued by the local housing
authority. I have a case where I get either inspections from
the Oklahoma Housing Finance Agency or the Tulsa Housing
Authority, where you have two different authorities that have
purview. So to say that it would eliminate inspections
altogether, I do not believe that is the case.
Most even conventional complexes have inspections done by
their mortgage lenders on a fairly regular basis. Perhaps, and
do not get me wrong, I believe that certainly the provisions in
here would certainly streamline the process.
If I had some confidence that they would be administered
just like I see here--sometimes between here and the real world
gets a little confused, as you may know--I read a lot of
regulations and I am often baffled that what I am seeing is not
what is happening. But I think that the basic premise here is
that these units are being looked at, I believe. And if the
unit is not being looked at, you are right. It does leave that
open for scandal.
However, the difference between the tenant voucher program
as it is today and the project-based program as it has been in
the past, these vouchers are portable. They can leave. They do
not have to live somewhere where it is not habitable. I would
have to give the residents some credit for being able to make
up their mind that this is not a place they would like to live.
On a project-based subsidy, sure, it was a big problem
because they were trapped, more or less, because they were
stuck there because the subsidy was with the unit and not with
the individual.
The portability of the vouchers allowed them to move,
provided there are the units available, which means there has
to be bigger participation by the landlords.
So, I would say, yes, I am going to ask for more than I
get.
Chairman Sarbanes. Does anyone else want to comment on
that, any of the other panelists?
Ms. Basgal. As Mr. Gardner had talked briefly before the
hearing had started, I think he is probably in a different
rental market than we experience.
For example, most of our owners do not own multiple units.
So, we have to inspect the property, the single-family house or
the fourplex, where this may be the first voucher that we go
in.
These provisions are actually very helpful for us, even
though our record is that we inspect usually within 3 days of
the owner requesting the inspection. And I think that most
housing authorities try to be responsive.
As to the issue of the families can vote with their feet if
the unit is not satisfactory, his qualification is most true,
which is if you are having a hard time finding a unit, and a
family is going to take whoever is willing to rent to them even
if the unit doesn't meet the standard that the family might
like or their issues.
I believe that there has to be an inspection. I think the
provisions that are here in the bill are reasonable. I do think
that there is probably some liability questions that we would
have to address that somebody sign something that says, the
unit is habitable. It is standard and subject to an inspection
or something, so we would not take on any liability for the
family going under contract before we have actually seen the
unit.
Chairman Sarbanes. Does anyone else want to add anything?
[No response.]
Okay. Mr. Gardner, the provisions in the draft discussion,
you would like in some respects to go further. But they do
represent a significant improvement over the current situation,
I take it.
Mr. Gardner. Yes, sir.
Chairman Sarbanes. Now, Ms. Basgal, you expressed some
concern about the regionalization of the recapture. I am not
quite clear what your concerns are.
Ms. Basgal. Well, the housing authority A, let us say, who
has vouchers that are to be reallocated, then they would go to
housing authority B. But remember, housing authority A
continues to administer the program for the vouchers that they
still have. So then you end up, if you have a regional
authority, with two housing authorities administering vouchers
in the same geographic area.
You could conceivably have two housing authorities in the
same building because, depending on where the families go,
because the original housing authority continues to administer
the rest of their program. We believe that that creates the
potential for confusion for landlords because they either have
to sit down and get their standards the same.
Chairman Sarbanes. Do you recapture the unused allocations?
Ms. Basgal. Yes, we would recapture.
Chairman Sarbanes. Who would recapture them?
Ms. Basgal. We would recommend that the first step that the
housing authority for whom the units are being recaptured have
an opportunity to enter into some voluntary arrangement with
the housing authority in probably the same jurisdiction, or an
adjacent jurisdiction, to administer those.
Because one of the things that is important that is not in
this bill, although I think it probably will ultimately end up
in there is that there needs to be some preference for the
individuals who were originally on the wait list of the housing
authority who is losing those vouchers, that those families get
some opportunity to have access to those reallocated vouchers.
So if there is this arrangement, at least, between the
housing authorities who say, ``Okay, you are going to get my
vouchers because, for whatever reason, I cannot use them, but
we would like for you to give preference to the people on our
wait list for those reallocated vouchers,'' and we would
actually go further and say, if those reallocated vouchers go
to families who choose to come back into that jurisdiction
where they were reallocated from, that they be administered as
a portable voucher in the way that they would with any other
voucher that goes out. This is complex. It would be better if I
had a graph to show you how they move.
Chairman Sarbanes. Yes. But then what is the sanction on
the housing authority that is failing to utilize its vouchers?
This bill gives them certain breaks to try to use them up, but
they still fail to do so.
Your approach suggests, there is no blame. There is no
falling short of the standard. The assumption in the bill is
that there is something of a falling short of the standard and,
in effect, you are saying to the housing authority, well, you
haven't really been able to do the job, and so you are going to
lose these things. And conceivably, that will then create a
dynamic that will force them to reform, so that that doesn't
happen to them.
Ms. Basgal. We are still in agreement with that. They
should lose them if they cannot use them. No question about it.
Chairman Sarbanes. But if you are going to take their
people off the list, and as I understand it, if someone comes
back into their geographic area, they are going to end up
administering it again. Is that right?
Ms. Basgal. That is what we would recommend as the first
alternative.
Chairman Sarbanes. What is the sanction, then, on the badly
performing housing authority?
Ms. Basgal. First of all, they do not own the full
administrative fee for those units that they would end up
administering under the affordability contract.
Second, presumably, if they have management problems and
they would probably have difficulty in getting the units back
to go under contract, anyway. I mean, there is that aspect of
it.
It is the consumer who would be able to say, ``I am not
going back there with a voucher because either I won't find a
landlord willing to rent to me, or whatever.'' They would be
free to go elsewhere. But I think the problem, Senator, is that
families who choose to come there without reallocated vouchers,
they would be administered as portable vouchers. These vouchers
somehow would take on a different nature.
Chairman Sarbanes. Does anyone else want to comment on
this?
Ms. O'Hara. Yes, I would, thank you.
I think we need to acknowledge the reality that many
States, Massachusetts, where I worked, New Jersey, Michigan,
Hawaii, and Colorado, just to name five, already have dual
administration of the Section 8 voucher program because the
State operates a statewide program with regional agencies,
along with the local housing authority program.
The system has been successfully dealing with this issue of
dual administration for a number of years. I think while the
initial transition from one entity to another needs to be well
managed, it is possible and entirely feasible to take vouchers
from a housing authority that is not performing after a good
period of corrective action and give those to a regional agency
for administration because that is happening in a number of
States already--not the reallocation, but the fact that there
are both regional and local PHA's.
Chairman Sarbanes. Anyone else?
[No response.]
Well, I am going to have to draw the hearing to a close
because a vote has just begun.
Your statements are very helpful. I would invite you, if
you have additional suggestions with respect to the draft, to
send them to the Committee because we hope to refine this
product.
We think that there are some beneficial and important
changes suggested here. And we are hopeful that we will be able
to arrive at a consensus, and although this is a difficult time
for affordable housing, we hope we can move this Voucher
Improvement Act along and at least get the benefit of some of
these provisions. Any additional suggestions beyond those that
are contained in your statements and your testimony today that
you might have, we would really welcome those very much. We
appreciate greatly the obvious thought and effort that went
into the statements that you have submitted as we try to
address this question.
There is a growing body of research that shows that housing
assistance is an important element in the success of moving
people on welfare into work and self-sufficiency. In fact,
there is a study out in Minnesota that having housing
assistance made a rather significant impact on the employment
rates of people and increased their earnings in a very
substantial way. So it really has them across the divide, so to
speak.
In some respects, that is a very encouraging finding
because it really means that if we can move on the affordable
housing issue, it will have a broader repercussion in terms of
changing people's lives. And obviously, that is what we are
seeking to do.
Thank you all very much.
The hearing is adjourned.
[Whereupon, at 3:50 p.m., the hearing was adjourned.]
[Prepared statements, response to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF SENATOR JON S. CORZINE
I would like to thank the Chairman for holding this hearing to
discuss needed reforms to the Section 8 housing voucher program.
Today, over 1.5 million low-income households nationwide receive
Section 8 housing assistance. The program serves at least 60,000 low-
income families in my State of New Jersey. Despite the large number of
families the Section 8 program serves, thousands of families remain on
waiting lists of up to 3 years for these vouchers because of a lack of
funding. Funding, however, is not the only obstacle to improving the
success of the Section 8 program.
In fact, securing a Section 8 voucher does not guarantee that a
family will actually find housing. Nationally, only 68 percent of
families that receive these vouchers are able to find suitable housing.
In many areas, particularly in New Jersey, where vacancy rates are very
low, there is a severe shortage of Section 8 units. For instance, in
Gloucester County, New Jersey, there are 3,300 families on the Section
8 waiting list, but there are only 2,400 Section 8 units in the county.
Furthermore, New Jersey has the second highest housing costs in the
Nation, which makes it more challenging for families to afford housing
even with a voucher.
Mr. Chairman, in addition to reforming the Section 8 program, we
need to significantly invest in the production of new low-income
housing as outlined under the National Affordable Housing Trust Fund
Act. I know that this issue is outside the realm of this hearing, but I
do think that increasing production will improve the success of the
voucher program.
Mr. Chairman, I want to commend you for putting forth a
comprehensive proposal that will no doubt improve the success of the
housing voucher program. Allowing Public Housing Authorities (PHA's) to
increase their voucher payment standard to 120 percent of the Fair
Market Value will help voucher holders who live in high cost areas.
This proposal will also expand opportunities for disabled voucher
holders who generally have higher housing costs.
Mr. Chairman, I am very pleased that your proposal also authorizes
the Welfare to Work vouchers program. Though small, this program has
been very successful in helping families transitioning from welfare to
work find affordable housing. The Welfare to Work vouchers program has
also sparked collaboration between public housing authorities and
welfare and workforce agencies and has lead to very important
partnerships.
Mr. Chairman, in addition to helping low-income families secure
housing, your legislation will also provide public housing authorities
with the tools they need to help these families become self-sufficient.
Allowing voucher holders to participate in the Family Self-Sufficiency
Program, which helps families save for educational activities and
homeownership, will help more low-income families attain these goals.
Mr. Chairman, I look forward to working with you to make these
goals achievable.
----------
PREPARED STATEMENT OF SENATOR DANIEL K. AKAKA
I wish to thank Chairman Sarbanes and Senator Gramm for holding
this oversight hearing today on proposals to improve the Section 8
Housing Choice Voucher program. In addition, I would like to thank our
distinguished guests here today for taking the time to share their
thoughts on critical housing needs facing low- and moderate-income
families.
The Section 8 tenant-based rental assistance program was
established in 1974 to provide eligible families with affordable
housing through rental subsidies. Economic changes occurring in local
housing markets over the last 28 years, however, have resulted in rents
increasing, lower vacancy rates, and landlords opting out of the
program. These changing circumstances have adversely impacted
utilization of the vouchers.
Public Housing Authorities are also facing long waiting lists of
qualified applicants seeking to join the program. Without any housing
units to accept these vouchers, individuals on waiting lists or
receiving vouchers are left without options for housing under the
program.
If the program is left unchanged, the housing situation for low-
and moderate-
income families does not look good. Beginning next year, Public Housing
Authorities that do not meet the 95 percent utilization rate for 2
consecutive years will lose unused vouchers. While I believe that we
should capitalize on all housing vouchers, it is my understanding that
low utilization rates do not adequately reflect the housing demands for
low- and moderate-income families. In many localities, Public Housing
Authorities are unable to secure housing units because of low fair
market rents and landlords who opt out of or refrain from entering the
Section 8 program. For many landlords, the incentives for participating
in the program are outweighed by payment delays or low fair market
rents.
To alleviate this problem, some States, including the State of
Hawaii, have expanded their Rental Assistance Programs. The purpose of
the program is no longer solely to provide qualified landlords with
rental assistance subsidies which assist
eligible tenants to make their payments. Rather, the State of Hawaii
has expanded the program to offer interim construction financing for
rental projects and to provide qualified landlords with incentives to
participate in the Section 8 program. The State of Hawaii has also
partnered with nonprofit organizations in privatizing public housing
units.
Hawaii is not the only State that is expanding its Section 8
program. Many States are trying to stretch valuable and limited housing
resources to provide eligible families with affordable housing.
I am pleased to work with Chairman Sarbanes and this Committee in
ensuring that the Section 8 housing voucher program meets these new
challenges. I look forward to hearing from our witnesses this
afternoon.
Thank you Mr. Chairman.
----------
PREPARED STATEMENT OF SENATOR DEBBIE STABENOW
Thank you, Mr. Chairman. The Section 8 tenant-based housing program
is the largest subsidized housing program our Government runs and for
many Americans it is critical to ensuring that their most basic housing
needs are met. While it will never be the sole solution to our housing
problems, it is an essential component of our larger national housing
policy and I support efforts to strengthen its reach and effectiveness.
I believe a review of the voucher program has a great deal of merit and
I look forward to working with my fellow Senators.
In order to make the program more effective we must begin to ask
some key questions, such as what accounts for the varying success rates
around the country in getting people placed in Section 8 housing?
According to HUD, in 2000, success rates varied widely from one public
housing authority to the next. Some had rates as low as 37 percent
while others were at 100 percent. It is too simplistic to attribute low
success rates simply to tight rental markets. It is also clearly an
unfair overstatement to blame the problem on mismanagement at some
local housing authorities.
I hope that in today's hearing we can delve into the voucher
success rate question and get some feedback from our witnesses about
ways to improve the success rate numbers. I believe we must also
examine ways to tailor the voucher program better to the needs of
different communities and different eligible Section 8 participants.
Chairman Sarbanes has suggested a Thrifty Production Voucher to
make a certain percentage of units in new construction projects
affordable to extremely low-income families. This is an interesting
idea aimed at some of the neediest families. And, I look forward to
exploring this idea further.
Affordable housing remains a great challenge for our country. As
previous hearings have shown, it is not enough to work hard and play by
the rules. People are continually being priced out of the rental
markets around the country. Improving the Section 8 program will be a
positive step forward in alleviating the housing challenge so many
working people face.
I hope that we can work together to move legislation forward
quickly and I commend the Chairman for his legislative proposal.
Thank you.
----------
PREPARED STATEMENT OF OPHELIA B. BASGAL
Executive Director, Housing Authority of Alameda County
and Dublin, California
on behalf of the
National Association of Housing and Redevelopment Officials
April 11, 2002
Good afternoon, my name is Ophelia Basgal. I am the Executive
Director of the housing authorities of the County of Alameda and the
City of Dublin in California. I am testifying on behalf of the National
Association of Housing and Redevelopment Officials (NAHRO). NAHRO is
the Nation's oldest and largest organization that represents the
interests of housing and community development agencies seeking
adequate and affordable housing and strong communities. Today, we are
focused on our local housing agency (LHA's) members that administer
approximately 93 percent of the Nation's Section 8 tenant-based housing
choice vouchers.
I would like to express my gratitude to Chairman Paul Sarbanes,
Ranking Minority Member Phil Gramm, and the other distinguished Members
of the Senate Committee on Banking, Housing, and Urban Affairs for
inviting me to testify today, on proposals to improve the Section 8
Housing Choice Voucher Program.
The Housing Choice Voucher Program provides housing assistance to
over 1.7 million low-income families in privately owned rental units.
Over the last 27 years, the program has been effective in providing
decent quality units at affordable rents to very low-income families in
communities across the country. The mobility aspect of Section 8
assistance (the Section 8 voucher travels with the family as opposed to
being tied to a unit) has given low-income families the opportunity to
gain access to better jobs, better schools, and safer neighborhoods.
Although the program has been quite successful overall, there are
areas of concern. Full utilization of funding and appropriated units is
one concern that has moved to the forefront. Currently the average
program budget utilization rate stands at a 94 percent and we
understand this Committee's concern in finding ways to increase that
rate. NAHRO believes that the utilization rate and program
effectiveness can be increased through some small and large changes.
These changes would all be aimed at serving the maximum number of
families possible, providing broad housing choices to low-income
families and yielding more economic development opportunities for the
participating families.
NAHRO would like to comment specifically on the proposals that are
outlined in the Housing Choice Voucher Improvement Act of 2002.
Thrifty Production Vouchers (TPV)
Supports
NAHRO supports the creation of additional affordable housing
production tools that encourage local involvement and decisionmaking,
which the Thrifty Production Voucher (TPV) proposal would do. While we
have yet to see the financial models of the unit operating cost
formulas and, therefore, are unable to assess the specific market
conditions affecting the program's feasibility, the proposal makes
conceptual sense. NAHRO would support a limited demonstration of the
TPV proposal, so long as it is voluntary, is carried out with
additional funding, and does not divert funds from HUD's existing
assisted housing programs.
NAHRO also supports the proposed program's recognition of the
importance of
decisionmaking at the local level. Community revitalization, for
example, may be a desirable goal in some low-income communities. The
opportunity to use the TPV funds in qualified census tracts based upon
these local determinations of need is a positive option.
Recommendations
(1) NAHRO recommends further review of the tenant-selection process
for TPV local housing agencies' owner waiting lists. Presumably, the
wait list process would comply with the project-based assistance (PBA)
guidelines regarding a separate waiting list for the TPV projects. The
initial PBA guidance requires full notification of every applicant on
an LHA's existing waiting list, which could number in the thousands.
TPV projects are likely to have a small number of units. Notification
of the full wait list would be administratively inefficient and costly
for LHA's. It would be more logical to notify a smaller number of
applicants, reflecting the size of the project. If the project has
twenty units, for example, perhaps notification of forty or sixty
applicants would be sufficient.
(2) The bill proposes that families who are denied a unit by an
owner be entitled to an informal review by the LHA. This could
potentially create confusion for both the owner and tenant as to who
controls tenant selection, which is a critical property management
task. Tenant selection decisions should properly remain under the
purview of the owner. The owner should have clearly defined tenant
selection criteria, perhaps approved in advance by the LHA. If the
tenant believes criteria have been improperly applied, there are other
remedies that can be pursued. If the LHA finds a pattern of
noncompliance by an owner, it should have the authority to deny the
owner participation in the TPV program.
(3) The bill requires that the LHA have an agreement with the
agency that will administer the funds for the construction or
rehabilitation of the TPV housing that will allow the prospective
developer to submit a single application. While the language is
intended to ease the application burden for a prospective developer, it
is written in a way that could preclude a developer from using a
private lender. It is unlikely that a private lender will want to enter
an agreement with the LHA and conform its underwriting application to
TPV proposal requirements and vice versa.
Housing Search Assistance and Voucher Success Fund
Supports
Under the current fee structure, LHA's receive no payment for any
administrative time devoted to voucher applicants that cannot find
housing. While the administrative fee anticipates some of the cost of
housing search assistance, a difficult rental market can require the
extensive type of counseling and assistance that is necessary to assist
extremely low-income families effectively locate and secure private
rental housing. This is especially true in low-poverty neighborhoods.
This type of assistance simply cannot be supported with the current
fee structure. In the past, voucher administrators were provided
special fees to offset initial lease-up costs. Those fees have been
eliminated, forcing some LHA's to scale back their outreach and
counseling efforts. NAHRO supports the bill's proposal to allow use of
unutilized housing assistance funds to assist families in their housing
searches.
Recommendations
(1) The LHA eligibility criteria, which states that the agency
``serves an area in which a large share of the voucher holders live in
a small percentage of census tracts,'' should be further defined to
match specificity given to the success rate criteria, for example 85
percent.
(2) LHA's who used administrative fees in the previous year to
support housing-related activities should not be penalized in the
determination of funding eligibility. Rather, the bill should make
clear that the funds must be used for a maintenance effort and
additional services and activities.
(3) NAHRO also recommends authorization for use of a small
percentage of annual contribution contract project reserves for housing
search assistance for LHA's that have the following characteristics:
<bullet> a success rate in excess of 85 percent;
<bullet> a unit utilization rate of less than 95 percent and;
<bullet> a budget authority utilization rate at or in excess of
100 percent.
Expanding Housing Opportunities
Supports
NAHRO supports the bill's proposal to allow LHA's the discretion to
raise their voucher payment standards to 120 percent, without HUD
approval, so long as they have been at the 110 percent payment standard
for 6 months and provide an initial housing search period of at least
90 days or as a reasonable accommodation for a person with
disabilities.
Recommendations
(1) NAHRO recommends that the success rate eligibility criteria be
reduced from 85 percent to 75 percent in order to maintain consistency
with HUD's current standards for ``success rate'' payment standards,
which currently requires a HUD waiver.
Consolidated Planning
Supports
NAHRO supports the proposed requirement to consult and the comments
of agencies or boards administering programs under Title IV of the
Social Security Act and the Workforce Investment Act. NAHRO presumes
that this is a plan requirement only and not a project-by-project
requirement.
Recommendations
(1) The draft bill would require community development agencies to
specifically address voucher utilization in the consolidated plan. This
would be redundant with a number of current consolidated planning
requirements, including consultation with local housing authorities \1\
and the housing market analysis,\2\ which requires an assessment of the
rental housing market and how that market will influence the use of
funds made available for rental assistance. Further, it would mandate
that community development departments assess a program over which they
have no jurisdiction or control.
---------------------------------------------------------------------------
\1\ 24 CFR Part 91.100(c).
\2\ Cranston-Gonzales National Affordable Housing Act, Section
105(b).
---------------------------------------------------------------------------
(2) The draft bill's section on consultation with social service
agencies is also redundant with current consultation requirement,\3\ as
well as the requirement that agencies specifically look at the housing
needs of "families who are participating in an organized program to
achieve economic independence and self-sufficiency.'' \4\ This section
basically repeats the citizen participation requirement \5\ that
instructs that all public comments be provided along with the agency's
response.
---------------------------------------------------------------------------
\3\ Cranston-Gonzales National Affordable Housing Act, Section
105(e).
\4\ Cranston-Gonzales National Affordable Housing Act, Section
105(b)(1).
\5\ Cranston-Gonzales National Affordable Housing Act, Section
105(c).
---------------------------------------------------------------------------
Access to Home and LIHTC Developments
Supports
NAHRO supports the bill's language. LHA's will be able to access
information on these rental units and use it in their housing search
assistance programs. Currently there is no easy place to find this
information and housing choice voucher holders miss opportunities to
rent in these developments.
Reallocation of Chronically Underutilized Vouchers
Supports
NAHRO supports the reallocation of chronically underutilized
vouchers. Long-term underutilization of appropriated units and funding
because of market conditions or unsatisfactory program management hurts
the communities and families that should be assisted. NAHRO agrees that
the reallocation of unused budget authority should occur first within
the same metropolitan statistical area (MSA) from which funds were
dereserved and then within the State of the agency whose voucher
allocation has been reduced.
Recommendations
Before making recommendations on the proposals it would be useful
to consider why LHA's have specified jurisdictions and how
regionalizing the administration of the reallocated units will possibly
impact the Section 8 program. Almost all the State-enabling public
housing authority legislation was created before there were any rental
assistance programs. The initial focus was on construction and
operation of actual units, which were place-based. Consequently, the
LHA's area of operation was usually defined as the boundaries of the
jurisdiction that established it.
HUD has historically assumed that jurisdictional limitations apply
to Section 8 program administration as well. To start a Section 8
program in a community, an LHA must establish, to HUD's satisfaction,
its operational area based on the State-enabling legislation and a
legal opinion as to that fact. The very existence of portability in the
Section 8 program further underscores HUD's acceptance of juris-
dictional limits. It should also be noted that elected officials of the
jurisdiction that created the agency often appoint boards governing
LHA's. In some cases the elected officials themselves serve as the
governing body.
For metropolitan areas, this bill proposes that a regional
administrator will be appointed for the entire MSA where vouchers will
be reallocated. In nonmetropolitan areas, a State agency or public
housing agency or other entity that serves a ``large'' nonmetropolitan
areas will be appointed to serve the same area where the vouchers will
be reallocated. While the Quality Housing and Work Responsibility Act
of 1998 (QHWRA) certainly gives HUD the authority to preempt local
administration in instances of nonperformance and appoint a new
administrator, the question certainly arises whether this is the best
way to handle the problem of chronically under-
utilized vouchers. In addition, the legislative proposal before us
preempts the local administration only for the reallocated vouchers.
The original LHA with the underutilized vouchers will continue to be
the prime administrator of the units in that jurisdiction.
Imagine the confusion among landlords and tenants who could be
dealing with two different administrators providing Section 8
assistance in the same building. These two administrators could easily
have established different voucher payment standards, arrive at
different ``reasonable rents,'' use different utility allowances, etc.
This kind of variance cannot possibly help the families or encourage
landlord participation.
Furthermore, if a citizen wants to complain about a Section 8
problem unit that is administered by the regional administrator,
instead of going to the board that is appointed or elected by residents
of his/her jurisdiction, he/she would go to a board appointed or
elected in another community. That situation would hardly seem to
engender community support for the program. It should also be noted
that past surveys of Section 8 owners show that they tend to be small
local landlords who reside in the community where they own units. These
owners may prefer working with a local agency that understands the
local rental market and is also locally accountable for its decisions,
rather than a regional entity that is removed from the community.
Therefore, NAHRO recommends a focus on solutions to chronic
underutilization, while giving due consideration to the administrative
complexities and community support issues that are involved.
Recommendations
(1) LHA's should be allowed to first, arrive at voluntary
reallocation arrangements with other LHA's or alternate administrators
in surrounding jurisdictions within the MSA. A minimum level of
performance standards should be required for any alternate
administrators. It is expected that a preference for applicants on the
original LHA's waiting list the reallocated vouchers will be a product
of such a voluntary agreement. In addition, the governing bodies of the
two jurisdictions can reach agreement on administrative arrangements
that will ensure that the vouchers are used in a way that is mutually
acceptable to both communities.
(2) If the LHA is unable to reach a voluntary arrangement with
another LHA or alternate administrator, then HUD should appoint an
administrator for those particular vouchers only. They can be used in
the alternate LHA's jurisdiction and the original LHA's jurisdiction
unless the families choose to exercise portability under the existing
portability regulations.
(3) The proposed legislation requires appointment of a regional
administrator for vouchers for an entire MSA. This means that the
regional administrator would operate not only in the jurisdiction of
the LHA with the reallocated vouchers but could also operate in the
jurisdiction of any LHA in the MSA regardless of their performance. In
short, this proposal would preempt jurisdictional boundaries of LHA's
that have no performance problems. If this is permitted, which it
should not be, it would require extensive coordination among all the
LHA's to address the types of operational differences mentioned briefly
above.
(4) In addition, the proposal requires that the designated regional
administrator receive all the vouchers in the region. For MSA's that
cover large geographic areas, it is quite possible that no single
entity will want to administer all the reallocated vouchers. Given the
potential geographic distances, the coordination that will be required
and the additional administrative requirements, that is preferences for
families in the original jurisdiction, etc., it may not be
administratively cost-effective. Therefore, LHA's interested in
applying for the reallocated vouchers should be allowed to apply for as
few or as many reallocated vouchers as they are interested in
administering. In addition, QHWRA allows for consortia of LHA's and
they should also be allowed to apply for the reallocated vouchers.
(5) As to the selection criteria proposed for administrators of
reallocated vouchers, the criteria should follow those used in the
``fair share'' NOFA process without the need determination since this
was already addressed in the original allocation to the MSA. There is
nothing special about these reallocated vouchers that requires a
different selection criteria.
(6) Finally, any reallocation system should provide some mechanism
to ``return'' the vouchers to the original community if and when they
are able to demonstrate the market conditions or administrative
capability that will result in full utilization.
Self-Sufficiency
Supports
NAHRO supports expanding authorization of existing self-sufficiency
housing programs to other forms of assisted housing, including
privately owned project-based assisted families. NAHRO also supports
the proposal to allow use of Resident Opportunities and Self-
Sufficiency (ROSS) funds to serve Section 8 families and disregards of
payments made for purpose of offsetting increases in rents resulting
from increases in family earned income.
Recommendations
(1) More than twice as many families with children live in Section
8-assisted housing than public housing. NAHRO recommends that the ROSS
appropriation be increased so that services to public housing families
are not reduced because of services provided to Section 8 families.
(2) NAHRO also recommends that funds for the authorized income
disregards for Section 8 participants be appropriated.
Section 8 Inspections
Supports
NAHRO supports all of the proposed improvements to the Section 8
inspection requirements.
Recommendations
NAHRO recommends discontinuing the 100 percent rent abatement
requirement in cases where a HQS violation exists that does not effect
the entire unit. NAHRO believes that LHA's should have the discretion
to abate partial payment since the unit is livable aside from the HQS
deficiency. This is a simple measure that could help agencies encourage
landlord retention by eliminating inflexible bureaucratic requirements
that do not end up achieving the intended objective.
----------
PREPARED STATEMENT OF SCOTT GARDNER
President, National Apartment Association and Crosshaven Properties,
Inc.
April 11, 2002
Chairman Sarbanes, Senator Gramm, and distinguished Members of the
Banking, Housing, and Urban Affairs Committee, my name is Scott
Gardner. I am President of Crosshaven Properties, a privately operated
apartment company headquartered in Tulsa, Oklahoma. I am also President
of the National Apartment Association (NAA), a trade group representing
over 30,000 apartment executives and professionals. NAA operates a
Joint Legislative Program with the National Multi-Housing Council, a
trade association representing the Nation's larger and most prominent
apartment firms. It is my pleasure today to testify on behalf of both
organizations. Our combined memberships are engaged in all aspects of
the apartment industry, including ownership, development, professional
management, and finance. Together, the NMHC/NAA members own and manage
over five million apartment homes nationwide.
NMHC and NAA commend the Members of the Committee for your valuable
work addressing the important issue of affordable housing in America.
We, too, believe it is critical to meet the housing needs of low- and
moderate-income families. And we believe the Section 8 Housing Choice
Voucher Program can be one of the most effective means of doing so;
however, the program's potential has been limited and its utilization
should be greater. We believe that the chief reason for this is that
the program's structure and administration discourage private owner
participation and make it difficult for voucher holders to compete with
unsubsidized residents for vacant apartments. For Section 8 to realize
its purpose, the program must be improved to be more ``transparent,''
which would then result in greater apartment owner participation.
Mr. Chairman, we appreciate your leadership on this issue and we
support many provisions of the proposed Housing Voucher Improvement
Act, particularly the ones aimed at improving the unit inspection
process. We wholeheartedly thank you for addressing those issues.
However, even with this important reform, the proposed legislation
falls short of fully incorporating reforms necessary to generate
broader market support for the Section 8 program.
The best way to increase voucher utilization rates is to address
the problems that have traditionally caused private property owners to
either not participate or to withdraw from the program. My statement
today will focus on four key proposals that we believe would improve
the program and increase owner participation and voucher utilization:
(1) Improving the Housing Quality Standards Unit Inspection Process;
(2) Improving the Subsidy Payment System; (3) Increasing the Payment
Standard; and (4) Amending the Lease Addendum.
Improving the Housing Quality Standards Unit Inspection Process
Currently, before an apartment is eligible to lease to a Section 8
voucher holder, the administering public housing authority (PHA) must
inspect that unit for compliance with HUD-prescribed housing quality
standards (HQS) prior to lease and then annually thereafter. PHA's
handling 1,250 or fewer units must complete the initial unit inspection
within 15 days of a tenancy approval request. Those with more than
1,250 units must conduct the initial inspection within 15 days or
within a ``reasonable'' time after the request. Apartment owners agree
that voucher holders should reside in safe, sanitary environments, but
we believe that this can be achieved without conducting individual unit
inspections.
Unit-by-unit inspections delay resident occupancy even if the PHA
conducts its inspection within the required timeframe. Further, because
of the limited resources available to PHA's for inspections, and the
difficult logistics that accompany inspections, they are infrequently
conducted in a timely manner. Some apartment owners report delays of 30
days or longer. Given that the professional apartment industry relies
on seamless turnover to meet its overhead costs, the financial
implications of such delays to owners are significant.
Not only do unit-by-unit inspections cause intolerable delays in
leasing units, they do not satisfy HUD's objective of protecting
residents and assuring owner compliance with the agency's health and
safety criteria. They do not accurately assess the property's regular
property management practices or HQS compliance. They only reveal the
status of a unit at a particular moment in time.
NMHC/NAA applaud the intent of Section 9 of the proposed
legislation that would speed up the move-in process by allowing
individual unit inspections to take place within 30 days after the
resident moves in and payment commences. This Section would also allow
PHA's to conduct building-wide, rather than unit-by-unit, inspections
in certain cases. It would reward professionally managed properties
that participate in the program and allow PHA's to focus their scarce
resources elsewhere.
Although we strongly support Section 9's proposed intent, we
advocate the total elimination of individual unit inspections. Instead,
we would encourage PHA's to rely on property-level inspection reports
previously conducted for the HUD/Federal Housing Administration (FHA)
or on routine lender inspections. These alternative inspections include
a review of the property's maintenance procedures and maintenance
history. More importantly, relying on these alternatives would
eliminate the current duplication of effort by the PHA's and HUD/FHA,
and would reduce occupancy delays caused by untimely unit inspections.
Improving the Subsidy Payment System
Another aspect of program administration that would improve private
owner participation is improving the Subsidy Payment System. PHA's are
required to make prompt, direct subsidy payments to apartment owners.
Unfortunately, subsidy payments are often not timely, which discourages
owners from participating. Yes, HUD's regulations allow PHA's to be
sanctioned for untimely payments, but these sanctions are nominal
because they must be paid from a PHA's limited administrative fees. As
a result, they do not serve as an incentive for prompt payment.
NMHC/NAA believe more apartment owners would participate in the
Section 8 program if the costs of renting to voucher residents were
more comparable to the costs of serving unsubsidized residents.
Therefore, it is essential to overhaul Section 8's costly payment
structure. Just as owners would not regularly accept late rental
payments from market-rate residents, they should not be forced to
accept late subsidy payments.
One way to achieve the goal of transparency between subsidized
residents and market-rate residents would be to require that all PHA's
make automated electronic fund transfers, thereby assuring timely
subsidy payments. While some PHA's already use automated funds transfer
systems, making this uniform among all PHA's would substantially reduce
costs for both owners and PHA's.
Increasing the Payment Standard
The current payment standard to owners typically ranges between 90
and 110 percent of an area's fair market rent (FMR). Both the payment
standard generally, and FMR levels specifically, are far too low to
support owner participation. FMR's, set annually for each metropolitan
area, must be high enough to encourage owner participation and, in
turn, create a sufficient supply of apartments.
The shortage of affordable housing is a true example of market
supply and demand at work. Private owners must receive sufficient rents
to cover the costs of developing and operating an apartment property or
the property will not be built. If the FMR's are too low, the owners
will not be able to rent to subsidized residents because they will not
generate enough income to operate and maintain the property.
The current FMR level is the 40th percentile rent, or the dollar
amount below which 40 percent of the standard-quality rental housing
units are rented. Establishing the FMR at the 40th percentile is a
primary reason many apartment owners do not participate in the voucher
program. These rents are simply too low to support the property's
operations. NMHC/NAA recommend that the FMR be based on at least the
50th percentile.
We further recommend that the payment standard be raised to 120
percent of FMR in high-cost areas, and that PHA's be given the
flexibility to raise the level to 150 percent in areas where the
voucher utilization rate is less than 80 percent and the market
occupancy rate is greater than 95 percent. It should be noted that in
high-cost areas, even that increase would still be well below market
rents.
We appreciate that the proposed legislation recognizes the
importance of this issue. In Section 5, the proposal would allow
payment to be increased to 120 percent of the FMR where it had been set
at 110 percent or higher for the previous year and voucher utilization
rates were less than 95 percent for the 12 months prior to establishing
the new standard. As previously stated, NMHC/NAA propose a higher
increase, and we advocate that such increases be authorized where
voucher utilization rates were less than 80 percent for the previous 6
months, not the proposed 12 months. We strongly believe that 6 months
is an adequate period after which to determine the need for a higher
utilization rate, and 12 months will only serve to further delay
expanded owner participation in the program.
Amending the Lease Addendum
The proposed bill does not address this issue. HUD requires every
lease to a Section 8 voucher holder include its standard addendum. The
addendum itself requires that the lease include, word-for-word, all of
the addendum's provisions. If there is a conflict between the addendum
and another lease provision, the addendum preempts the lease.
The addendum contains numerous provisions that may override local
practice and even landlord-tenant (NMHC/NAA prefer ``owner-resident'')
laws, putting owners in a very untenable situation. Differences between
Section 8 and market leases also require owners to specially train
their staffs to administer Section 8 leases. This is particularly
difficult in an industry where employee turnover averages 50 percent.
In short, HUD's lease addendum is many times incompatible with
State and local landlord-tenant laws and disregards industrywide model
lease language developed by NAA. This inconsistency creates confusion
among apartment owners and causes difficulties for owners who must
comply with one set of lease requirements for voucher residents and
another for nonvoucher residents residing within the same property.
Apartment owners have told us time and time again that the lease
addendum creates obstacles that discourage their participation in the
program.
We propose the elimination or modification of the lease addendum to
reflect standards used with market leases, thereby reducing
administrative burdens and other costly procedures. Alternatively,
NMHC/NAA propose establishing pilot programs to test alternative, less
conflicting and burdensome lease addendums or the NAA model lease.
NMHC/NAA support the addendum's intended purpose, which is to
ensure the safety of Section 8 residents. However, residents are
already protected by existing local laws. The addendum does not add
anything to these protections, it only adds costly burdens to the
owners, which, in turn, discourages their participation in the program.
In summary, NMHC/NAA support the Section 8 program and wish to
engage more fully in it. However, such participation is not
economically feasible without reforming the program to reduce the
significant costs and burdens it imposes on apartment owners. I thank
you for the opportunity to testify on behalf of the National Apartment
Association and the National Multi-Housing Council, and wish to offer
our assistance as the Committee continues with its important work
toward
creating a more effective and efficient program. Thank you.
----------
PREPARED STATEMENT OF ANN O'HARA
Associate Director, Technical Assistance Collaborative
on behalf of the
National Low Income Housing Coalition
April 11, 2002
Chairman Sarbanes and Members of the Committee, I am very honored
to be asked to testify today on proposals to improve the voucher
program. I appreciate the chance to join the other witnesses on this
panel to discuss a subject that is very important to our Nation's
housing policy.
My name is Ann O'Hara and I am the Associate Director of the
Technical Assistance Collaborative (TAC), a national organization that
provides information, capacity building, and technical expertise to
organizations and policymakers in the areas of mental health, substance
abuse, human services, and affordable housing. I have experience with
the development and administration of rental assistance programs at the
local, State, and national levels. Prior to joining TAC, I directed
Massachusetts's rental assistance program.
I am here on behalf of the National Low Income Housing Coalition,
representing its members nationwide who share the goal of ending the
affordable housing crisis. My fellow members of the Coalition include
nonprofit housing providers, homeless service providers, fair housing
organizations, State and local housing coalitions, public housing
agencies, housing researchers, private property owners and developers,
State and local government agencies, faith-based organizations,
residents of public and assisted housing, and other people concerned
about low-income housing.
Housing Need and the Role of Vouchers
As the Committee is aware, housing affordability and availability
are serious problems. According to HUD, 3.8 million unassisted,
extremely low-income families faced worst-case housing needs in
1999.\1\ These families, with incomes of less than 30 percent of area
median income (AMI), spend more that half of their income on rent or
lived in substandard housing. These families are forced to pay too much
or live in poor quality housing because there are two million fewer
affordable units than there are extremely low-income families, while a
substantial proportion of the units that are affordable to extremely
low-income people are occupied by families in higher income ranges.\2\
As tenant-based subsidies that provide assistance in the payment of
rent for units already in the market that would otherwise be unafford-
able, vouchers are vital in addressing these affordability and
availability problems.
---------------------------------------------------------------------------
\1\ U.S. Department of Housing and Urban Development, A Report on
Worst Case Housing Needs in 1999: New Opportunities Amid Continuing
Challenges (2001), available at http://www.huduser.org/publications/
affhsg/wc99.html.
\2\ Cushing N. Dolbeare, Low Income Housing Profile (2001),
available at http://www.nlihc.org/pubs/index:htm#profile.
---------------------------------------------------------------------------
Currently, 1.5 million low-income families are served by
vouchers.\3\ Choice and mobility are important attributes of vouchers,
as tenants can choose where to use their vouchers, and can take the
vouchers with them if they move. Such mobility gives families with
vouchers the opportunity to move to neighborhoods where poverty is less
concentrated and where they may find improved economic and education
opportunities for themselves and their children.
---------------------------------------------------------------------------
\3\ Meryl Finkel and Larry Burton (Abt Associates, Inc.), U.S.
Department of Housing and Urban Development, Study of Section 8 Voucher
Success Rates: Volume I, Quantitative Study of Success Rates in
Metropolitan Areas (2001), available at http://huduser.org/
publications/pubasst/sec8success.html.
---------------------------------------------------------------------------
But if families with vouchers are finding it overly difficult to
use their vouchers, then the full benefits of the voucher program are
not being realized. A study recently released by HUD found that the
national success rate for vouchers was 69 percent in 2000 for large
metropolitan public housing agencies (PHA's). This means that 31
percent of all families issued vouchers were not able to use those
vouchers. Since 1993, there has been a marked decline in voucher
holders' success in large metropolitan PHA's, as the 1993 success rate
was 81 percent.\4\ Given the length of time a family receiving a
voucher may have waited on the PHA's waiting list for that voucher,\5\
this substantial problem with success turns cruel in the life of an
individual family hoping for a real housing opportunity.
---------------------------------------------------------------------------
\4\ Id.
\5\ According to a summary of a 1999 HUD report, Waiting in Vain:
An Update on America's Rental Housing Crisis, waiting lists were as
long as 10 years in Los Angeles and Newark, 8 years in New York City, 6
years in Oakland, and 5 years in Washington, DC, Cleveland, and
Chicago. U.S. Department of Housing and Urban Development, Waiting
Lists Grow While Affordable Housing Shrinks, Recent Research Reports,
May 1999, available at http://huduser.org/periodicals/rrr/
rrr5__99art1.html.
---------------------------------------------------------------------------
Increasing Voucher Success
If the voucher program is to make good on its promise of a mobile
and flexible subsidy to help poor families pay for housing, then the
success rate of those families in using the vouchers issued to them
needs to increase. The National Low Income Housing Coalition believes
that the policy changes in the proposed Housing Voucher Improvement Act
of 2002 would allow more families to find success with their vouchers.
One way to improve voucher success is to allow PHA's with voucher
success problems to use resources they already have, if available, or
provide them with additional resources to aid voucher holders in their
search for housing. The recent HUD study on voucher success found that
PHA's can intervene in ways that increase success, such as providing
one-on-one briefings to voucher holders on the search process and
reaching out to prospective landlords.\6\ We are pleased that the
Housing Voucher Improvement Act of 2002 proposes two useful ways to
make funds available for search assistance activities.
---------------------------------------------------------------------------
\6\ Finkel and Burton.
---------------------------------------------------------------------------
First, the bill would allow the use of unutilized Section 8 funds
to assist families in finding housing. A PHA with voucher success rates
of 85 percent or lower or with a concentration of voucher holders in
certain areas (leading to a presumption that voucher holders are having
difficulty using their vouchers throughout the PHA's
jurisdiction) would be able to use funds that it does not anticipate
using for rental subsidies for a variety of activities to help families
secure housing. The PHA could not use more than 2 percent of its funds
for this purpose. Alternatively, for PHA's that have utilized a high
percentage of their budget authority but still have voucher success
rates of 85 percent or less or have geographic concentration of voucher
holders, the bill would establish a voucher success fund, subject to
appropriations.
In the case of both initiatives, the eligible activities include
housing and mobility counseling, assistance in paying a security
deposit and credit check and application fees, and landlord outreach
and education. The PHA would need to show progress in the overall
utilization of its voucher funds, increased voucher success or
decreased geographical concentration of voucher holders to continue to
use or receive funds in subsequent years, until its utilization,
success, or deconcentration levels improve to the point that the PHA is
no longer eligible. A PHA participating in
either of these programs would also need to include information in the
PHA's plan about the efforts being taken to increase voucher
utilization and success and how the PHA plans to use the funds
available.
Another policy change that would be authorized by the Housing
Voucher Improvement Act relates to the inspection of units. Units
rented by voucher holders must meet the Federal Housing Quality
Standard, but voucher holders may lose the chance to rent units while
waiting for the PHA's inspection to give the green light for the unit.
While it is important that Federal resources are spent on housing that
meets a standard of habitability, the requirements regarding the timing
of that inspection can be changed to make sure that a housing
opportunity is not lost to the voucher holder. The bill would allow a
building owner to begin receiving payment for the unit prior to an
inspection if the PHA has inspected the building and a reasonable
number of units without finding major problems within the prior 6
months. The PHA then must inspect the unit within 30 days and the owner
must have already agreed to make repairs within 30 days after the
inspection.
Increased Payment Standards
NLIHC has also advocated for PHA's to have more flexibility in
increasing the payment standard for vouchers. HUD's 2000 study
determined that 39 percent of voucher holders were unsuccessful in
tight rental markets and that successful voucher holders needed 93 days
on average to find a unit in tight markets.\7\ If rents tend to be
higher in tighter markets, then PHA's would need greater flexibility to
increase what they pay--the payment standard--to make vouchers work.
Currently, PHA's can increase their payment standard to 110 percent of
the HUD-determined fair market rent (FMR) without HUD's approval.
---------------------------------------------------------------------------
\7\ Id.
---------------------------------------------------------------------------
The bill would allow PHA's to increase payment standards up to 120
percent of FMR, subject to certain conditions. The payment standard
must have been at 110 percent or above for the prior year, and the
PHA's voucher success rate is 80 percent, or a significant number of
voucher holders have been given at least 90 days to search for a unit,
or vouchers have been concentrated in high poverty neighborhoods. All
of these conditions would indicate that voucher holders have had
trouble taking advantage of their vouchers. The National Low-Income
Housing Coalition recommends, however, that the voucher success rate
criterion for increasing the payment standard to 120 percent of FMR
should be 85 percent or below (rather than 80 percent). This would
provide consistency with the success rate of 85 percent that serves as
the threshold for taking advantage of the Voucher Success Fund and
using unutilized funds to improve voucher utilization, success, and
deconcentration elsewhere in the bill.
The bill would also give PHA's the authority to increase the
payment standard for properties in lower poverty areas that were
developed with Federal resources through the Low-Income Housing Tax
Credit or the HOME Program. It makes no sense that properties developed
with Federal resources with the goal of providing low-income housing
should be inaccessible to people holding a Federal rent subsidy
intended to give them mobility and choices; the bill would correct this
predicament.
My own work has made me acutely aware of the additional challenges
faced by people with disabilities. Accessible units tend to be located
in newer properties, which are in better condition and more expensive
to rent. As a result, some people with disabilities may find it more
difficult than other voucher holders to successfully use their vouchers
if the payment standard is insufficient. The bill would allow PHA's to
set the payment standard at up to 120 percent of FMR without HUD
approval as a reasonable accommodation to people with disabilities.
This new authority would restore a policy in effect before the prior
Section 8 certificate and voucher programs merged to become the Housing
Choice Voucher Program.
The need for improvements in the voucher program is illustrated by
the experience of Matthew, a young man in his late 20's who was injured
in a swimming accident and is now a quadriplegic. Matthew moved to
Florida to obtain treatment from the Spinal Cord Injury Center in
Miami. After obtaining a voucher from the Section 8 Mainstream Program
for people with disabilities, Matthew was unable to locate an
accessible unit. Finally, with the help of disability advocates,
Matthew obtained a list of tax credit properties from the State
allocating agency and was able to find a vacant unit built in the
1980's with some--but not all--of the accessible features he needed.
The owner initially refused to accept the Section 8 voucher, and once
again, disability advocates were required to intervene to inform the
owner of his obligations under the tax credit rules.
Matthew's problems were still not over, however. The PHA that had
issued the
voucher initially declined to grant a rent exception, which was needed
because the tax credit rent exceeded the PHA's Section 8 payment
standard. Fortunately, disability advocates again intervened--this time
with the PHA--and an exception rent was finally granted. Just one
example shows how several provisions in the bill would have made
Matthew's search for a place to live with his voucher less onerous.
Improving Planning and Information About Housing Opportunities
Local policymakers are required to evaluate and plan for their
housing needs and involve tenants and concerned community members in
the planning process. Vouchers are an important housing resource and
should be part of this planning. We are pleased that the bill would
require PHA's using funds to improve voucher success report on voucher
issues in their PHA's plans. Under the bill, communities' consolidated
plans also would need to describe the barriers to better voucher
utilization and strategies for overcoming those barriers. The proximity
between a community's job opportunities and housing opportunities for
people receiving welfare assistance would be included in the plan. The
community's development of its housing strategies would require
consultation between welfare and housing agencies.
The recent HUD study verified that voucher holders are more
successful in areas where discrimination is illegal.\8\ While a few
jurisdictions around the country have prohibited landlords from
discriminating against voucher holders as prospective tenants, that is
the exception rather than the rule, so other tools are necessary to
assist tenants in effectively using their vouchers. Owners of
properties developed with funds from the Low-Income Housing Tax Credit
or HOME, regardless of location, are not allowed to discriminate
against tenants because their source of income. But what good is this
policy if voucher holders do not know where these properties are
located? The bill would require the HUD Secretary to provide PHA's with
an updated list of these properties in the area on an ongoing basis.
The PHA's, in turn, have to provide the list to families receiving a
voucher from the PHA.
---------------------------------------------------------------------------
\8\ Id.
---------------------------------------------------------------------------
Reallocation of Vouchers
While there are a variety of factors affecting voucher utilization,
the end result of low voucher utilization is the same: fewer families
are assisted than could be, given the resources available. In an effort
to address this situation, HUD issued a notice in the Federal Register
in November 2001 that it would take unutilized vouchers from areas
where utilization is low and permit reallocation to other areas.\9\
Were HUD certain that low utilization only reflected a lack of need,
then this policy would make sense. But in many cases, low utilization
means that markets are tight, PHA's are having difficulties, and low-
income people need more help, not less.
---------------------------------------------------------------------------
\9\ Housing Choice Voucher Program: Notice of Funding Availability
for Reallocated Baseline Units and Annual Budget Authority and for
Reallocated Baseline Welfare to Work Units and Annual Budget Authority,
66 Fed. Reg. 55,524 (November 1, 2001), available at http://
hudclips.org/sub__nonhud/cgi/pdf/27415.pdf.
---------------------------------------------------------------------------
Under the Housing Voucher Improvement Act, PHA's having low
utilization are at risk of losing their unutilized vouchers, but
reallocation would favor agencies that would serve the same geographic
areas as the original PHA. If a PHA fails to utilize 90 percent of its
tenant-based subsidies or budget authority during the fiscal year, the
PHA would receive a notice to that effect. If, after another 16 months,
the PHA has not yet achieved 95 percent utilization of vouchers or
budget authority, the PHA's unutilized vouchers can be reallocated. The
HUD Secretary would reallocate the vouchers to a regional
administrator, with a preference for an agency that already has the
authority to serve the area that had been served by the PHA whose
voucher allocation is being reduced. Should the Secretary determine
that the primary cause of underutilization is a lack of eligible
families in the geographic area, the Secretary can establish a process
for reallocating vouchers outside the geographic area, but with
priority for reallocation given to a regional administrator or public
housing agency in the same State.
Given the other tools that would be provided by the legislation to
improve voucher utilization and success rates, it seems reasonable to
reallocate vouchers when a PHA is unable or unwilling to make
improvements after receiving notice of a problem, since vouchers not
utilized means families not served. The National Low Income Housing
Coalition supports the balanced approach suggested by this legislation,
but recommends a broader public notice when PHA's are first alerted to
its inadequate utilization rate under the legislation. It would be
valuable for tenant
organizations and other concerned members of the community to know when
their PHA's have been put on notice, so that they can try to work with
the PHA's to improve utilization, rather than having the vouchers moved
to a possibly unknown agency abruptly. Community members and tenant
organizations may have developed relationships with officials at the
local PHA's and prefer the opportunity help the existing PHA's improve
utilization.
Helping Tenants Achieve Greater Economic Well-Being
Debate about the reauthorization of the 1996 welfare law is now in
full swing. The housing circumstances of current and former recipients
of Temporary Assistance to Needy Families can affect those families
ability to make a successful transition off welfare. Inadequate,
unstable housing makes it hard to achieve stable work for parents and
stable schooling for children.\10\
---------------------------------------------------------------------------
\10\ See Barbara Sard, A Housing Perspective on TANF
Reauthorization and Support for Working Families (2002), available at
http://www.cbpp.org/3-12-02hous.htm.
---------------------------------------------------------------------------
The eligibility for programs that provide services to HUD tenants
with the goal of improving their economic well-being could be expanded.
HUD's Family Self-Sufficiency (FSS) program provides subsidized savings
and case management for public housing and voucher tenants seeking
better employment opportunities, while the Resident Opportunities and
Self-Sufficiency (ROSS) program is a funding competition that provides
grants to PHA's, tribal authorities, and tenant groups for projects
that would help tenants improve their economic situation. The bill
would permit voucher holders to participate in the ROSS program.
Currently, the program is limited to public housing tenants.
Under FSS, tenants participate in case management with the goal of
achieving better employment. As the participants' earnings rise, PHA's
take the value of the reduction in the PHAs' portion of the tenants'
rent--which is reduced because the tenants can cover more of the rent
themselves--and put it into escrow accounts for the tenants. The funds
in the accounts are available after 5 years to participants who
successfully complete the program. But all PHA's are limited by law to
one full-time service coordinator for the FSS program, regardless of
the size of the program; the Housing Voucher Improvement Act would
allow for the more than one coordinator, if the funds were available.
Project-based Section 8 tenants, who live in privately owned,
publicly subsidized properties, cannot participate in the FSS program
currently. The Housing Voucher Improvement Act would extend the reach
of this program to project-based tenants. The program could be
administered by the owners of the project-based property, if they
choose, or interested project-based tenants whose landlords do not set
up the FSS program at the building could participate in the local PHAs'
programs.
In general, assisted tenants may not experience the benefits of
increased earnings or other new resources because, as long as they
remain eligible for assisted housing, they pay 30 percent of their
income in rent. But some public housing, voucher and project-based
tenants are authorized to receive a disregard of increased earnings, if
that family participated in a self-sufficiency program, or if an
unemployed member of the household finds a job, or if the family
receives or has received TANF in the prior 6 months. Unfortunately,
there has not been sufficient funding appropriated to support the
earned income disregard for voucher holders or project-based tenants,
which is not an issue for this Committee but rather for the
appropriators. This Committee can, however, authorize a disregard of
any employment incentives that a family receives from another source--
such as a State, other public entity, or private entity--specifically
to offset an increase in rent. The bill includes such an authorization,
which also applies when the incentives are paid to a parent or spouse
who has more recently joined the family in assisted housing, to avoid
discouraging the reunification of a family on financial grounds. The
bill provides that if a PHA or owner of assisted housing receives funds
from a State or local agency to provide employment incentives to
tenants, those funds should not count as revenue for the PHA or owner.
The flexibility and mobility provided by vouchers ideally allow
voucher holders to live near jobs or transportation to jobs. Vouchers
can provide a particularly valuable support to current or former
recipients of TANF as they move from welfare to work. The Housing
Voucher Improvement Act would authorize ``Welfare to Work'' vouchers.
These vouchers would be available to PHA's through competition and
would be limited to PHA's that operate FSS programs. The PHA's would
issue the vouchers to families who receive TANF or had received TANF in
the prior 2 years and who need the voucher to find a place to live
closer to jobs or transportation, to keep an existing job or increase
hours, or to participate in a program to overcome barriers to work.
Thrifty Production Vouchers: An Important Experiment
Housing policy would not improve if new ideas were never tested.
The Thrifty Production Vouchers (TPV's) that would be authorized by the
Housing Voucher Improvement Act present an opportunity to learn whether
we can subsidize more units with fewer resources if the right
incentives are built into the program. The TPV's would provide an
operating subsidy to support units for extremely low-income tenants,
where those units have received full capital funding. With some
exceptions, the units subsidized by TPV's would constitute only one-
quarter of a project's total units. Rents for the TPV units would be
based on operating costs. The mix of subsidized and unsubsidized
tenants at the property would help keep overall operating costs down,
and consequently, TPV rents down.
The TPV projects could have a site-based waiting list or a waiting
list with the PHA. The building owner would enter into a contract of up
to 15 years, with extensions required at least until the 40th year
(subject to appropriations). The TPV tenants would have the same
mobility as tenants in units with regular vouchers that have been
project-based.
Though we have some concerns around the waiting list procedures,
the National Low Income Housing Coalition supports TPV's. We also urge
the extension of the TPV policy permitting an owner list--as an
alternative to a list with the PHA--to properties where regular
vouchers are project-based by the PHA under the project-based voucher
legislation passed in 2000. This would improve the access of homeless
people and people with special needs to housing opportunities, because
they may find it daunting to navigate the PHA's waiting list.
Currently, lists for regular project-based vouchers are kept only by
the PHA.
An issue remains about notice, regardless of whether waiting lists
are kept by the owner or the PHA. Under the Housing Voucher Improvement
Act, when new TPV units become available and a waiting list is
established, whether there is an owner list or a PHA list, the PHA
provides notice to tenants of the opening of the list similar to the
opening of the waiting list for tenant-based assistance and notifies
extremely low-income families that are newly applying for assistance.
The PHA will monitor that an owner maintaining a site-based list gives
preference to families on the PHA's tenant-based list and cooperates
otherwise.
But the National Low Income Housing Coalition has some concerns
that the method for managing waiting lists for TPV's may fail to alert
adequately eligible people on the existing tenant-based list of a new
opportunity. At the same time, a requirement to alert the entire
existing list--that may, in some cases, include thousands of
prospective voucher tenants--about the availability of only a few new
TPV units could be a waste of resources. We hope that a compromise
might be developed as the bill moves forward that would make TPV units
better known and available to people on the PHA's existing waiting
list, without undue burden on the PHA.
Enhanced Vouchers
The National Low Income Housing Coalition has had an ongoing
concern about the displacement of tenants as the result of the
termination of project-based housing assistance, either through the
prepayment of a HUD-subsidized mortgage or an opt-out from a Section 8
contract, or both. Tenants whose buildings undergo such a conversion
are entitled to ``enhanced'' vouchers, with a payment standard that
will cover a new and higher rent at the property following the
conversion, subject to a rent reasonableness evaluation by the PHA.
The point of providing enhanced vouchers is to prevent
displacement, but not all property owners appreciate that tenants have
the right to remain in their units following the conversion. PHA's can
also cause displacement when they insist on rescreening enhanced
voucher tenants for eligibility for tenant-based assistance, even
though the tenants were presumably suitably eligible for assistance as
project-based tenants and the opportunity for rescreening is available
only because of the conversion. This rescreening should not be
permitted.
In addition, enhanced voucher tenants--often elderly--may find
themselves ``overhoused'' at the point of conversion, in a unit that
was once the right size but is no longer because family members have
moved away or died. If there is no appropriately sized unit in the
property, an overhoused tenant must make a good-faith effort to find a
unit elsewhere. A tenant who cannot find a unit elsewhere may stay in
the existing unit for a year and pay rent as if on an appropriately
sized unit. But after a year, the tenant's portion of the rent will
increase to reflect the larger unit and the tenant may need to move
from the property and will receive a voucher at the PHA's regular
payment standard, rather than an enhanced voucher. Overhoused tenants
should not be forced to move until an appropriately sized unit becomes
available at the property, especially as these tenants are likely to be
older and more frail.
As the bill moves forward, we hope that the Committee will consider
improving upon the enhanced voucher protections for assisted tenants
facing a conversion action. Enhanced vouchers are meant to prevent
displacement, not provide an opportunity for displacement simply
because the administration of the subsidy shifts from project-based
administration by the property owner and the local HUD office or
contract administrator to tenant-based administration by the local PHA.
The shortcomings of the notice issued by HUD late last year on its
enhanced voucher policies make it clear that legislation is
necessary.\11\
---------------------------------------------------------------------------
\11\ U.S. Department of Housing and Urban Development, Notice PIH
2001-41, Section 8 Tenant-Based Assistance (Enhanced and Regular
Housing Choice Vouchers) For Housing Conversion Actions--Policy and
Processing Guidance (November 14, 2001), available at http://
hudclips.org/sub__nonhud/cgi/pdfforms/01-41p.doc.
---------------------------------------------------------------------------
The Importance of Voucher Improvements
The Housing Voucher Improvement Act of 2002 proposes a number of
policy changes that would increase voucher success and utilization.
Vouchers are an important piece in our Nation's housing puzzle. We
waste resources, diminish confidence in the program, and dash people's
hopes for housing stability if PHA's hand out vouchers and recipients
are unable to use them. The provisions in the bill make it more likely
that these hopes will be realized in the future.
Thank you again for the opportunity to discuss these issues with
you today.
----------
PREPARED STATEMENT OF BENSON F. ROBERTS
Vice President for Policy, Local Initiatives Support Corporation
April 11, 2002
Good afternoon, Mr. Chairman and Members of the Committee. My name
is Benson Roberts. I am Vice President for Policy at the Local
Initiatives Support Corporation. I appreciate the opportunity to
comment on the Housing Voucher Improvement Act of 2002.
LISC helps neighbors build whole communities in over 300 cities,
towns, and rural areas though 38 offices nationwide. In 21 years, LISC
and its affiliates have raised from the private sector and provided $4
billion to help over 2,000 nonprofit low-income community development
corporations (CDC's) across the country to produce over 110,000
affordable homes and over 14 million square feet of commercial and
industrial space. We also invest major resources in jobs and income
programs, childcare facilities, youth programs, crime and security
initiatives, and many other programs that directly benefit low-income
neighborhoods and their residents. The CDC's have used LISC's funding
to raise over $7 billion in investment. We are deeply involved in and
deeply committed to meeting the needs of low-income families and
communities.
The Need for Thrifty Production Vouchers
The Housing Voucher Improvement Act would create a new kind of
project-based ``Thrifty Production Voucher'' in conjunction with new
construction or substantial rehabilitation. Thrifty Production Vouchers
could be combined as necessary with any capital subsidy program, such
as Low-Income Housing Tax Credits, HOME, or CDBG, or the proposed
affordable housing trust fund. Thrifty Production Vouchers would be
limited to 25 percent of units in a property (with exceptions for
single-family properties and properties serving elderly and disabled
residents and, in some locations, supportive housing for families and
other singles).
LISC strongly supports the Thrifty Production Voucher proposal.
Low-Income Housing Tax Credits and HOME are both excellent capital
subsidies for affordable housing production. Both are flexible
resources administered by States and localities (HOME only). Both reach
genuinely low-income families. Both are cost-effective. Both are
popular among nonprofit and for-profit developers, private financing
sources, and State and local government.
However, there is a limit to how far any capital subsidy program
can go to serve extremely low-income (ELI) families with incomes below
30 percent of median. Most ELI families cannot afford to pay rent high
enough to carry the operating expenses of housing, even if the
development cost is fully subsidized and there is no mortgage to be
repaid from rents. As a result, it is not surprising that a recent HUD
study found that while nearly half of all HOME-funded rental housing
serves extremely low-income households, those households in this
category who lack rental assistance paid an average of 69 percent of
income for rent. This finding should not be read as a criticism of
HOME, but a simple and unavoidable math problem. The same issue would
arise for any capital subsidy program.
The solution would be to provide some form of project-based rental
assistance in conjunction with capital subsidies so that housing that
is produced could serve extremely low-income tenants at rents they can
afford over the long term. However, Congress has been reluctant to
support project-based rental subsidies.
<bullet> Unless restricted to a modest portion of a property--that is,
25 percent--these subsidies could insulate properties from the
healthy discipline of having to compete for tenants in the private
market. Moreover, extremely low-income tenants could be excessively
concentrated within certain properties, instead of participating in
more mixed-income housing. These concerns can be easily addressed
by limiting the share of a property that can receive subsidies. The
project-based Section 8 amendments that Congress approved in 2000
followed this approach.
<bullet> The more difficult problem is the cost of renewing rental
subsidies. Appropriators understand that they will be expected to
renew rental subsidies each year for an indefinite period. Even
tenant-based Section 8 vouchers are expensive to renew--about
$6,000 per voucher every year. As a result, appropriators are
reluctant to fund incremental vouchers to begin with.
The Cost-Effectiveness of Thrifty Production Vouchers
Thrifty Production Vouchers are designed to address this cost
problem.
What makes a Thrifty Production Voucher cost-effective is that the
``payment standard'' would be the property's operating cost, instead of
the housing authority's payment standard based on the fair market rent
(FMR) that is used for regular vouchers. Like regular project-based
vouchers, tenants' share of the rent and utilities would be limited to
30 percent of adjusted income. Operating expenses would not include
mortgage debt service, but would include owner-paid utilities,
contributions to reserves, an asset management fee, and a modest
cashflow allowance.
Since these operating costs are generally substantially below the
FMR, a Thrifty Production Voucher would cost at least about one-third
less than a regular voucher. If the operating cost is below the
maximum, which is particularly likely in areas with high FMR's, the
savings will be greater. A cap on the amount of operating expenses that
could be covered would be set at 75 percent of the regular voucher
payment standard, to ensure that Thrifty Production Vouchers live up to
their name.
Based on data from properties insured by the Federal Housing
Administration, HUD consultants estimated that the average per unit
operating cost in 1998-2000 was $242 (in 2000 dollars). Larger units
will have somewhat higher costs, but newly produced units and units in
partially assisted developments will have lower costs. These data do
not include taxes, utility costs, a replacement reserve, or a cashflow
allowance. Even if these additional expenses were to increase the
average operating cost by $200, however, this average would still be
substantially less than 75 percent of the average national fiscal year
2002 FMR for a 2-bedroom unit, which is $522.
Example
If the housing authority's payment standard, set at 100
percent of the FMR, is $700 monthly and the tenant's share of
the rent and utilities is $200, a regular voucher costs $500.
If the operating cost allowable, or $525, then a Thrifty
Production Voucher would cost $325, or 35 percent less than a
voucher. If the operating cost is below the maximum, the
savings will be greater.
Thrifty Production Vouchers may cost as little as 36-60 percent of
the cost of regular project-based vouchers in areas with high FMR's,
such as the San Francisco, Boston, Denver, and Newark metropolitan
areas.\1\
---------------------------------------------------------------------------
\1\ These estimates are based on a comparison of the expense level
estimated for public housing units in these areas by the Harvard
Graduate School of Design (see http://www.gsd.harvard
.edu/research/research__centers/phocs/news.html), increased by $200 per
unit to account for taxes, utility costs, an asset management fee, a
replacement reserve, and a modest cash flow allowance, with 110 percent
of the applicable FMR. (This comparison is used because project-based
vouchers can pay up to 110 percent of FMR even if this subsidy level
exceeds the PHA's payment standard, so long as the amount is reasonable
for the particular units.
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Since subsidies would generally be limited to 25 percent of the
units in a property, the owner could set the property's overall
operating budget, limited only by the cost cap noted above. Owners
would be strongly motivated to minimize operating
expenses, since they would have to bear at least 75 percent of any
unnecessary expenses.
The ability to set the operating budget should enable owners to
make a long-term commitment to participate in the Thrifty Production
Voucher program. Owners would not have to worry that another entity
would arbitrarily set the operating budget at an unworkably low level.
How Thrifty Production Vouchers Would Work
<bullet> New Thrifty Production Vouchers would be distributed under the
formula used for HOME funds. This could work as follows: if
Congress appropriates funding for 10,000 Thrifty Production
Vouchers, the total amount appropriated would be divided among the
States based on the share of HOME funds that the State and any
participating jurisdictions within the State receive. Eligible,
interested PHA's within the State would apply to HUD for a portion
of the State's allocation, just as PHA's now do with ``fair share''
allocations for regular Section 8 vouchers. (If the housing trust
fund or other new production initiative were enacted, the
distribution formula could be modified to be consistent with the
new subsidy stream.)
<bullet> New allocations would go to current Section 8 administrators.
PHA's that do not also administer capital subsidies would be
required to coordinate allocations with administrators of capital
subsidies and would be eligible for new Thrifty Production Vouchers
only if they demonstrate such an agreement.
This would allow for one-stop shopping for housing sponsors,
facilitate implementation of tenant mobility as described
below, and respect the current roles that different public
agencies play.
Section 8 administrators that already project-base 20 percent
of their
existing voucher portfolios could exceed the cap with new
allocations of Thrifty Production Voucher assistance.
<bullet> Thrifty Production Vouchers would be provided only for ELI
households. The subsidy would cover the gap between the actual
operating expenses (or the rent cap, if lower) and 30 percent of
tenant income. Families would not lose their subsidies if their
incomes increase above the ELI level. Ordinary voucher rules would
apply: families would remain eligible for assistance until 30
percent of their adjusted income equals the allowable rent and
utilities.
<bullet> Limiting Thrifty Production Vouchers to 25 percent of the
units in a property would prevent the overconcentration of poor
tenants and instill market discipline. For 1-4 unit properties,
elderly, disabled, or supportive housing with project-based
subsidies on more than 25 percent of the units, the Section 8
administrator could review the project's operating budget to
determine if operating costs are less than the maximum payment
standard permitted.
<bullet> The initial rent subsidy term would be 15 years, with renewals
through the Section 8 Housing Certificate Fund at least through
year 40.
Subsidies would be subject to appropriations after the first
year, in recognition of Congressional budget rules. If Congress
does not fund the rental subsidy, then sponsors would be
subject only to the income targeting and rent limits required
under other programs assisting the property (that is, Housing
Credits, HOME, CDBG, public housing capital funds, or a future
housing trust fund). It should be noted, however, that Congress
has always renewed all Section 8 subsidies.
Sponsors would have to agree to accept rental subsidies for
40 years, subject to appropriations.
<bullet> The Thrifty Production Voucher cannot support debt service on
assisted units. This means that a full capital subsidy will be
needed for the ELI portion of a property. Even with Thrifty
Production Vouchers, some projects may need a larger capital
subsidy to serve ELI tenants. However, many sponsors are already
using capital subsidies to reduce rents below market on some units.
In addition, rents on at least 75 percent of the units would be
available to support a mortgage.
<bullet> Properties located in lower-income neighborhoods could use
Thrifty Production Vouchers if the PHA determines it would be
consistent with the goal of deconcentrating poverty and expanding
housing and economic opportunities or revitalizing a low-income
community, or will prevent the displacement of extremely low-income
families. Fair housing requirements would apply. The lower-income
neighborhoods would be the same as Qualified Census Tracts in the
Low Income Housing Tax Credit program: they have a poverty rate of
at least 25 percent or at least one-half of the households have
incomes below 60 percent of the area median income.
<bullet> Thrifty Production Voucher landlords could use a site-specific
waiting list if the Section 8 administrator agrees and if the
agency and owner comply with certain procedures to ensure fairness
to applicants on the PHA's waiting list and to meet fair housing
concerns.
<bullet> Thrifty Production Vouchers would have most other features of
the current project-based voucher program, including mobility, but
would not replace the current project-based program, as they cannot
compete in the market for existing housing and cannot cover debt
service. Mobility provisions give departing tenants priority access
to Section 8 vouchers.
The Attraction of Thrifty Production Vouchers
We believe that Thrifty Production Vouchers should be attractive to
the various participants in the affordable housing production system.
<bullet> Housing sponsors could use Thrifty Production Vouchers to
serve at least some extremely low-income families at affordable
rents that will contribute to project stability. Serving these
tenants will help sponsors to compete more effectively for
allocations of Low-Income Housing Tax Credits, a scarce resource
rationed in part based on serving especially low-income tenants.
The requirement that PHA's coordinate with capital subsidy
administrators offers developers a streamlined way to assemble
a viable financing package.
The ability to set the operating budget should enable owners
to make a long-term commitment to participate in the Thrifty
Production Voucher
Program.
Owners would not have to worry that another entity would
arbitrarily set the operating budget at an unworkably low
level.
In the unlikely event that Congress does not renew Thrifty
Production Vouchers, owners would have to meet only the income
targeting requirements of other housing subsidies they receive.
This provision would protect the property's financial
stability.
<bullet> Private investors and lenders should be comfortable with
Thrifty Production Vouchers. Although Thrifty Production Vouchers
would not add to the cashflow available to pay debt service, they
should add financial stability to properties that serve extremely
low-income tenants, thereby reducing risks. The initial 15-year
term equals the recapture period for Low-Income Housing Tax
Credits.
<bullet> Public housing agencies could use the Thrifty Production
Vouchers to grow their
Section 8 programs, without increasing costs or reducing the number
of families receiving tenant-based vouchers.
Section 8 administrators would be permitted to convert
existing voucher authority to Thrifty Production Voucher
assistance and assist more households in light of the lower
cost. PHA's that use this flexibility could exceed the usual 20
percent limit on the total number of vouchers that may be
project-based, without reducing the number of families
receiving regular tenant-based Housing Choice Vouchers.
For example, a PHA that administers 1,000 vouchers is
permitted to project-base up to 200 of these vouchers. For the
equivalent cost of 200 regular project-based vouchers, it could
serve about 266 households using Thrifty Production Vouchers
(or more, if the payment standard is below the 75 percent cap).
Without a budget increase (except for a small increase in
administrative fees), it could serve 1,066 households; 800
families would still receive tenant-based vouchers, and 266
households receive project-based assistance.
Once allocated to properties, PHA's should find it convenient that
Thrifty Production Vouchers would follow virtually all the same rules
as other vouchers, except that PHA's would have to follow relatively
simple steps annually to consider increases in the payment standard.
Thrifty Production Vouchers also offer PHA's an opportunity to
participate more fully in housing production efforts.
<bullet> State and local agencies that administer HOME, Housing
Credits, or other capital subsidies should welcome the availability
of Thrifty Production Vouchers as a valuable tool to serve
extremely low-income tenants in new and rehabilitated housing.
PHA's would have to coordinate the use of Thrifty Production
Vouchers with capital subsidy administrators.
Conclusion
This concludes my testimony. I would be pleased to answer any
questions you may have.
RESPONSE TO WRITTEN QUESTION OF SENATOR AKAKA FROM OPHELIA B.
BASGAL
Q.1. Ms. Basgal, in your testimony, you also mentioned Section
3 in the proposed legislation that would authorize ``Thrifty
Production Vouchers.'' You recommend that Public Housing
Authorities notify a small number of applicants rather than
everyone on the list. While this would be more cost efficient,
would the practice lead to complaints against Public Housing
Authorities, citing discriminatory selection methods?
A.1. Senator Akaka, my recommendation envisions the Housing
Authority notifying families who are at the top of the waiting
list of the availability of the ``Thrifty Production Voucher''
units. There would be no skipping of families on the list and
families would be notified in order. If families indicated they
were not interested in the Thrifty Production Voucher units,
the Housing Authority would move down the list notifying the
next families until a sufficient number had indicated an
interest and been selected as tenants. Therefore, there should
be no complaints about discriminatory selection practices since
these families would be offered the units in order of their
placement on the wait list.
My recommendation was in response to lack of clarity in the
Thrifty Production Voucher proposal, which seemed to require
the Housing Authority to notify everyone on the waiting list of
the availability of the units. As you know, Housing Authorities
often have thousands of families on their waiting lists. To
notify all of them of the availability of a small number of
Thrifty Production Voucher units is not only costly and
inefficient, but it is also unfair to the families since there
would likely to be some preference for families at the top of
the wait list.
I would also note that my recommendation follows the
Housing Authority practice for Section 8 Moderate
Rehabilitation units, which are also project-based units like
the proposed Thrifty Production Vouchers. We begin at the top
of the wait list, moving down until families indicate an
interest in the units and are selected for the Mod Rehab Units.
RESPONSE TO WRITTEN QUESTION OF SENATOR AKAKA FROM SCOTT
GARDNER
Q.1. Mr. Gardner, in your testimony, you discuss Section 9 in
the proposed legislation regarding the unit inspection process
that landlords are required to follow. Under this section,
payments may be made to a landlord prior to the inspection of a
unit if a building inspection has been conducted by the Public
Housing Authority in the last 6 months, the unit inspection is
completed within 30 days, and the Public Housing Authority and
the landlord have an agreement that any repairs on the unit
must be made within 30 days of the unit inspection. According
to your testimony, inspections of each unit would delay
resident occupancy and would be costly to Public Housing
Authorities to implement. As you may know, some housing units
available to low- and moderate-income families do not meet what
most of us would consider suitable living conditions. If
individual unit inspections were not required, how would such
health and safety issues be addressed?
A.1. The portion of my testimony regarding the delays
experienced by owners waiting for inspections was concerned
mainly with the way the system is currently administered. This
is one reason that owners may not choose to participate in the
voucher process. In my testimony I expressed support for the
provisions in Section 9 that would streamline or eliminate
repetitive inspections. However, Section 1 allows the PHA to
decide if they will inspect a reasonable number of units and
waive inspection if no major deficiencies are found. This would
permit a wide variation in the inspection policies from PHA to
PHA and undermine the consistency that you are trying to
accomplish. If an owner is participating in the program and
consistently provides units that meet the HQS standards, then I
believe an occasional property level inspection should be
adequate.
The bigger issue is that, by improving the transparency of
the program, you will have wider acceptance of the voucher
program by owners that had previously been unwilling to
participate due to the perception of the additional effort
needed to accept the voucher. I believe that the very reason
that some of the units available to low-income families do not
meet what most of us consider suitable living conditions is
that the pool of owners that are willing to accept the vouchers
is not as large as it needs to be. Owners with units that
compete in the conventional markets are more likely to have
fewer health and safety issues than those who have chosen to
only cater to those eligible for vouchers. The whole purpose of
making the voucher process as seamless as possible is to
broaden the spectrum of units available to low-income families.
As I stated in the question and answer portion of my
testimony, these residents are not ``trapped'' as they were
with the old project-based subsidy programs, they are free to
move if the unit proves unsuitable and, in fact, are forced to
move now if the owner is unwilling to make the necessary
repairs. I believe that we have to give the residents some
credit to be able to determine if a unit is suitable for them.
As with any prospective resident, the voucher resident can
preview the unit before signing the lease. Perhaps the local
PHA could provide them with a basic checklist so they can do
their own inspections.
There are approximately 6.4 million apartment units that
qualify within the Fair Market Caps for the voucher program.
Given a conservative turnover rate of 40 percent, that would
provide well over 2.5 million units that would be available in
a given year if all owners participated in the program.
Facilitating participation by all owners will give the
prospective resident an even greater choice
of housing options and also empower the resident to make their
own choices about where and how they wish to live and raise
their families.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR AKAKA FROM ANN O'HARA
Q.1. Ms. O'Hara, in your testimony, you discuss increasing the
voucher success rate to 85 percent for Section 5 in the
proposed legislation. Under Section 5, Public Housing
Authorities would be allowed to increase their voucher payment
standard to 120 percent of the Fair Market Rent if certain
criteria are met. The voucher success rate reflects the
proportion of families who are issued vouchers and lease a unit
within the specified timeframe. You also mentioned the study
released by the Department of Housing and Urban Development
which found ``that the national success rate for vouchers was
69 percent in 2000 for large metropolitan public housing
agencies.'' In light of this information, would increasing the
80 percent voucher success rate to 85 percent prevent some
Public Housing Agencies from taking advantage of this provision
to expand housing opportunities for voucher holders?
A.1. In our testimony, we recommended a voucher success rate of
85 percent or below as one of the eligibility criteria for a
public housing agency (PHA) to be able to increase its payment
standard to 120 percent of the fair market rent. For this
purpose, a voucher success rate of 85 percent or below would
permit more, rather than fewer, PHA's to increase their payment
standards. Only those PHA's with success rates above 85
percent, rather than 80 percent (and those without a payment
standard already at 110 percent of FMR) would not be able to
take advantage of the increased payment standard. This
recommendation would achieve consistency with the eligibility
threshold for provisions that would allow the use of unutilized
funds for voucher success activities and would create the
Voucher Success Fund. We are not firmly wedded, however, to the
standard of 85 percent as the threshold for increasing the
payment standard to 120 percent and could be persuaded that
such a standard would allow too many PHA's, including
relatively successful PHA's, increase their payment standards.
Q.2. Ms. O'Hara, in your statement, you discuss Section 3 in
the proposed legislation that would authorize ``Thrifty
Production Vouchers.'' These vouchers would be used by
developers who receive tax credits or HOME funds to expand
housing and economic opportunities to low-income families.
Under this section, Public Housing Authorities and owners would
be responsible for maintaining and managing separate waiting
lists. You stated that Public Housing Authorities may fail to
inform participants of any openings. What steps should Public
Housing Authorities take to ensure the proper dissemination of
this information to low- and moderate-
income families?
A.2. As you have noted, we believe that it is important that
existing tenants on a PHA's waiting list learn of and have
access to new Thrifty Production Voucher (TPV) Units that
become available. The bill requires that a PHA provide
notification of the availability of the TPV Units in the same
manner as it would for the opening of its overall waiting list
for new applicants generally. HUD's ``Housing Choice Voucher
Guidebook'' provides the following guidance for the opening of
the waiting list:
PHA's must affirmatively further fair housing
opportunity. Before opening the waiting list, the PHA
must advertise in a local newspaper of general
circulation and also through minority media and other
suitable means. A PHA's advertising or outreach plan
must be included in the PHA's administrative plan. The
announcements must include information on the time and
place of application taking. If the application period
is limited, the announcement must provide clear
information on the end of the application period. The
public notice must also state any limitation on who may
apply for the available slots in the program.
There are a variety of ways that a PHA could follow this
general guidance so that more low-income families would learn
of this new opportunity, such as advertising in several
outlets, providing the information to community-based
organizations that work with eligible families, and permitting
application in a manner that does not require applicants to
miss work, among others.
We believe that the legislation could ensure that families
already on a PHA's waiting list--who may have been waiting for
a housing opportunity for several years--have the opportunity
to take advantage of newly available TPV units. We understand
and very much hope that the legislation may be changed from the
draft available prior to the April 11 hearing to accomplish
this outcome.
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