<DOC>
[DOCID: f:49104166.wais]
DEPARTMENTS OF TRANSPORTATION, TREASURY, THE JUDICIARY, HOUSING AND
URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR
2006
----------
THURSDAY, APRIL 14, 2005
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:30 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Christopher S. Bond (chairman)
presiding.
Present: Senators Bond, Stevens, Murray, and Leahy.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
STATEMENT OF ALPHONSO JACKSON, SECRETARY
ACCOMPANIED BY:
KENNETH M. DONOHUE, INSPECTOR GENERAL
JOHN C. WEICHER, ASSISTANT SECRETARY FOR HOUSING
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. The Senate Appropriations Subcommittee on
Transportation, Treasury, the Judiciary, HUD, and Related
Agencies will come to order.
We welcome Secretary Alphonso Jackson for appearing before
us today to testify on the Department of Housing and Urban
Development's fiscal year 2006 budget request.
Last year, we did not have the benefit of a complete
statement from you, having been newly confirmed as Secretary
the night before the hearing. This year, I look forward to your
comments after a year on the job.
I think I may have cautioned you about taking the job, but
you do it so well, and we appreciate very much your expertise
and commitment to the program.
The budget request proposes some $28.5 billion, a decrease
of some $3.38 billion or almost 11 percent from the 2005
funding level of $31.9 billion.
Unfortunately, the overall 2006 funding level does not
accurately reflect the requested overall spending for HUD's
many programs. The budget numbers are distorted through a
budget rescission request of $2.5 billion as well as by how FHA
receipts are treated for purposes of the 2006 budget. In fact,
the overall funding for HUD programs is far worse than OMB has
indicated.
Proposed reductions to individual HUD programs include,
among others, some $4.67 billion from CDBG funding, $118
million from Housing for Persons with Disabilities, $14 million
from Housing for Persons with AIDS, $24 million from Rural
Housing and Economic Development, $24 million from Brownfields,
almost $286 million from HOPE VI, $226 million from Section 8
Project-Based Assistance, and $252 million from the Public
Housing Capital Fund.
In addition, the Lead Hazard Reduction Program that Senator
Mikulski and I started has been totally eliminated. This
program is one of the most important things we can do to stop
the lead poisoning of our children in low-income housing in
many major cities.
PROPOSED RESCISSIONS
I also am especially troubled by a proposed $2.5 billion
rescission for which neither HUD nor OMB has been able to or
willing to identify the source of funding. I sincerely doubt
there is adequate money to rescind from HUD programs without
jeopardizing their mission.
These program cuts are even more disturbing because of
reductions and shortfalls in other programs within the
jurisdiction of the subcommittee.
Mr. Secretary, I know you have an obligation to defend the
administration's budget and policy decisions no matter how
problematic. I also understand and support the need for the
administration to make difficult funding decisions in order to
contain and reduce the Federal budget deficit.
Unfortunately, I believe that the President has been
getting some very bad advice from OMB about the housing and
community development needs of the Nation. The HUD budget as
well as a number of other proposed legislative and policy
initiatives reflect this bad advice.
Unfortunately, these problems go beyond HUD, leaving the
subcommittee to confront huge challenges in trying to balance
funding decisions among the many programs and priorities within
the entire THUD fiscal year 2006 Appropriations Bill.
As always, HUD represents one of our largest challenges.
Unfortunately, the administration's overall budget for domestic
discretionary spending will make reversing many of these
recommendations impossible or compel Congress to eliminate
funding from other important and necessary programs.
There is a little bit of good news, Mr. Secretary. I
applaud you for fighting the good fight in attempting to
preserve Section 8 tenant-based vouchers at a level that will
sustain current voucher use. And while I am disappointed over
public housing capital and operating funding levels, I know you
also staved off much larger reductions as proposed by OMB. In
addition, home ownership is at its highest level in history
with some 73.7 million homeowners.
PREDATORY LENDING
I also applaud your efforts to stem the abuses of predatory
lending, something that this subcommittee, with Senator
Mikulski leading, has been championing by banning flipping, by
increasing home ownership counseling, and by putting in place
more stringent appraisal requirements. Unfortunately, this is
the good news, but the list is too short for an agency as
important as HUD.
SACI
For the bad news, I am very disappointed that the
administration has proposed to dismantle the CDBG program along
with some 17 or more other programs and replace these programs
with a new block grant in the Department of Commerce called
Strengthening America's Community Initiative.
The administration also is proposing to fund this
initiative at $3.7 billion, which is an overall reduction of
almost $2 billion or 34 percent from the 2005 level for all
these programs. The proposed elimination of CDBG is a tragedy,
but the reduction in funding makes this proposal a double
tragedy.
Communities across the Nation rely on CDBG to fund critical
housing and community development programs. This program works.
However, without these funds, many local programs will falter
and even fail. Equally important, CDBG is a critical component
of HUD's mission. CDBG helps to make HUD's housing mission
successful. Without CDBG, it is the Department of Housing. And
with all of the changes proposed, HUD would just be about home
ownership and a few rental housing block grants. HUD would no
longer merit cabinet status.
Moreover, the use of CDBG consolidated plans helps to
ensure that communities tie together CDBG, housing funds, and
other Federal and State resources into a comprehensive approval
to local housing and community authorities. As history tell us,
successful community development programs rely on a
comprehensive approach to housing and community development.
Without CDBG, HUD is like a one-armed pitcher trying to field a
bunt.
I know CDBG has problems. CDBG funds are not always used
well or effectively. Even Kansas City, Missouri, with a vibrant
and progressive nonprofit community, recently identified
significant abuses within the CDBG program. However, these
problems are being addressed and resolved. The key is to fix
the problems in good programs, not dismantle the programs.
Moreover, HUD, OMB, and certain interested parties recently
ratified a consensus document to address weaknesses in the CDBG
program by creating an Outcome Measurement System to establish
new benchmarks and better oversight. Since the document
addresses many of OMB's concerns, I am puzzled by the
administration's effort to dismantle a program that has been
redesigned to become more effective according to administration
requirements.
HOPE VI
I am also very much concerned about the administration's
approach to public housing. The administration is seeking to
eliminate HOPE VI as well as rescind the HOPE VI fiscal year
2005 funding of $143 million.
As an alternative, the administration has issued a proposed
regulation that will authorize PHAs to demolish the remaining
obsolete public housing.
As you may know, I set the stage for HOPE VI by including a
demonstration project in the 1990 National Affordable Housing
Act that allowed the demolition and replacement of the Pruitt-
Igoe public housing in St. Louis with vouchers and new housing.
Before this demonstration, PHAs could not be demolished
without a one-for-one hard unit replacement. Because of the
cost of this policy, public housing programs were limited to
the warehousing of the poor in obsolete and deteriorating PHA
high-rises.
HOPE VI provided for the demolition of this obsolete
housing along with the creation of mixed-income, private and
public housing. This program also leveraged private investment
and promoted the revitalization of entire communities.
While HOPE VI is not a perfect solution to all the woes of
obsolete public housing, it has transformed many PHAs and
communities, including many in Missouri, which is now, I
believe, a shining example of how it can work, by replacing
obsolete public housing with mixed-income, public and private
housing. In many cases, HOPE VI housing has leveraged new
investment in communities. This means new business, an
increased tax base, better schools, and safer communities. It
is unfortunate that the budget rules do not recognize these
very tangible economic and social benefits. However, I think
you and I know from personal experience that these benefits are
real and significant.
NEGOTIATED RULE-MAKING
The administration has also broken a promise to develop a
new operating fund formula by negotiated rule-making. Over the
last 5 or more years, HUD has worked with PHAs through
negotiated rule-making to develop a new budget-based operating
plan formula to ensure a more equitable system of allocating
operating subsidies to PHAs. Millions of dollars have been
spent on the process. Nevertheless, a negotiated rule went into
OMB's rule-making review process and came out a much different
flavor of sausage.
One expects OMB to make modest changes to a regulation
under review but one does not expect wholesale revisions in
violation of the spirit of legislation that required the
negotiated rule-making. I have not yet had an opportunity to
review the rule. But to highlight my concerns, I am advised
that under the negotiated rule, 62 Missouri PHAs would have
gained operating subsidies while 41 PHAs would have lost
subsidies. Under OMB's changes, only 13 Missouri agencies would
gain and 91 would lose funding. There is something wrong here.
PUBLIC HOUSING CAPITAL FUND
Equally troubling, HUD's 2006 budget request includes a
$252 million reduction in the Public Housing Capital Fund
despite an estimated $20 billion backlog in modernization
needs.
BLOCK GRANT SECTION 8 VOUCHER ASSISTANCE AND HOMELESS FUNDING
HUD also is proposing new legislation to block grant both
Section 8 voucher assistance and homeless funding. I have not
yet seen the proposal to block grant homeless assistance
funding. I support the approach assuming it is adequately
funded and includes meaningful oversight. Nevertheless, the
process needs sunshine.
I have seen the Section 8 voucher block grant proposal and
it fails on a number of levels. First, the proposal fails to
allow jurisdictions with real flexibility to use these funds
for project-based assistance even in areas of the Nation where
vouchers do not work because of tight rental markets. This
means the administration only wants to provide flexibility on
its own terms and not based on local needs and conditions.
More disturbing, the Section 8 proposal would eliminate the
requirement that 75 percent of all vouchers go to extremely
low-income families, those at or below 30 percent of median
income. This is a critical requirement that ensures those with
worst case housing needs receive priority in the award of
scarce Section 8 housing assistance. Without the requirement,
the number of homeless will continue to grow without real
housing alternatives. This runs counter in my view to the
administration's promise to end chronic homelessness within 10
years. This will promote homelessness rather than end it.
ZERO DOWNPAYMENT HOME OWNERSHIP PLAN
Finally, I am very troubled by the proposed FHA Zero
Downpayment Home Ownership plan. As with last year, the
proposal continues to pose substantial financial risks over
time to the FHA Single Family Mortgage Insurance program, the
Mutual Mortgage Insurance Fund. Without downpayments, new home
buyers will have no stake in their new homes and will have
limited ability to pay for any substantial repairs like a
failed furnace or a leaky roof. As we discussed last year, FHA
was close to bankruptcy in the late 1980's due to defaults from
assisting families to purchase homes with high loan-to-value
ratios. These houses were often in marginal neighborhoods. And
once the homeowners defaulted, the housing would often remain
unsold and thus drive down the housing values throughout a
neighborhood. Some of the neighborhoods are still trying to
recover from the foreclosures. Also, families in default have
their credit ruined.
According to HUD's IG audit of FHA's financial statements
for 2004 and 2003, the Mortgage Insurance Program suffers
increasing default rates and claims. Over the last 5 years,
defaults have increased from 3 percent in fiscal year 2000 to
almost 7 percent in 2004. Claims have risen from $5.5 billion
in 2000 to $8.5 billion in 2004.
Clearly, FHA has effectively become the lender of last
resort, taking on the most risky mortgages with greatest risk
of default. A new zero downpayment program will only enhance
that risk.
I have been working on housing and community development
since I was governor of Missouri. And despite my continuing
efforts to reform HUD and support housing and community
developments, HUD continues to remain in decline, characterized
by failed programs and policy. I still believe this trajectory
of failure can be stopped, but I am dismayed at the lack of
support from OMB.
And I know, Mr. Secretary, you face an uphill battle with
an administration that seems to have little interest or
commitment to HUD's programs and seems to be committed to
dismantling the modest success that HUD has achieved.
I do not understand. When housing and community development
investments work well, everyone benefits through more jobs, an
increased tax base, better schools, and improved communities.
Where we fail to create the right programs or fail to invest in
these programs, neighborhoods deteriorate and the quality of
peoples' lives suffer. It is that simple.
I am not looking for big increases in HUD programs. I
believe that we need to preserve existing programs and try to
build on successes where possible. We may not agree on
everything, but I know you believe in the importance of HUD's
mission and the need for HUD to be a leader and partner in
housing and community development across the Nation.
PREPARED STATEMENT
I look forward to continuing to work with you. However, we
need to revitalize and rebuild the public's confidence in HUD,
and I look forward to hearing your vision for the department's
future.
Now, with apologies for the length of the statement, I had
to get it off my chest, and I now turn to my ranking member,
Senator Murray.
[The statement follows:]
Prepared Statement of Senator Christopher S. Bond
The Senate Appropriations Subcommittee on Transportation, Treasury,
the Judiciary, HUD and Related Agencies will come to order. We welcome
Secretary Alphonso Jackson for appearing before us today to testify on
the Department of Housing and Urban Development's fiscal year 2006
budget request. Last year we did not have the benefit of a complete
statement from you, having been newly confirmed as Secretary the night
before the hearing. This year I especially look forward to your
comments after a year on the job.
The administration's budget request for HUD for fiscal year 2006
proposes some $28.5 billion, a decrease of some $3.38 billion, or
almost 11 percent, from the fiscal year 2005 funding level of $31.9
billion. Unfortunately, the overall fiscal year 2006 funding level does
not accurately reflect the actual requested overall spending for HUD's
many programs. Instead, the overall budget numbers are distorted
through a budget rescission request of $2.5 billion as well as by how
FHA receipts are treated for purposes of the fiscal year 2006 budget.
In fact, the overall funding for HUD programs is far worse than the
administration has indicated.
Proposed reductions to individual HUD programs include, among
others, some $4.67 billion from CDBG funding, $118 million from Housing
for Persons with Disabilities, $14 million from Housing for Persons
with AIDS, $24 million from Rural Housing and Economic Development, $24
million from Brownfields, almost $286 million from HOPE VI, $226
million from Section 8 Project-Based Assistance, and $252 million from
the Public Housing Capital Fund. I also am especially troubled by a
proposed $2.5 billion rescission for which neither HUD nor OMB has been
able or willing to identify the source of funding.
These program cuts are even more disturbing because of proposed
reductions and shortfalls in other programs within the jurisdiction of
this subcommittee. Mr. Secretary, I know you have an obligation to
defend the administration's budget and policy decisions no matter how
problematic. I also understand and support the need for the
administration to make difficult funding decisions in order to contain
and reduce the Federal budget deficit. Unfortunately, I believe that
the President has been getting some very bad advice about the housing
and community development needs of the Nation.
The HUD budget as well as a number of newly proposed HUD
legislative and policy initiatives reflect this bad advice.
Unfortunately, these problems go beyond just HUD, leaving this
subcommittee to confront huge challenges in trying to balance funding
decisions among the many programs and priorities within the entire
TTHUD fiscal year 2006 Appropriations bill in an extraordinary tight
funding year. As always, HUD represents one of the largest challenges.
Unfortunately, the administration's overall budget for domestic
discretionary spending will make reversing many of these administration
recommendations impossible or compel the Congress to eliminate funding
from other important and necessary programs.
To start with the good news, Mr. Secretary, I applaud you for
fighting the good fight in attempting to preserve section 8 tenant-
based vouchers at a level that will sustain current voucher use. And
while I am disappointed over the public housing capital and operating
fund levels, I know you also staved off much larger reductions, as
proposed by OMB. In addition, home ownership is at its highest level in
history with some 73.7 million homeowners. I also applaud your efforts
to stem the abuses of predatory lending by banning flipping, increasing
home ownership counseling and putting in place more stringent appraisal
requirements. Unfortunately, this is the good news but the list is much
too short for an agency as important as HUD.
Now for the bad news. First, I am very disappointed that the
administration has proposed to dismantle the CDBG program along with
some 17 or more other programs and replace these programs with a new
block grant in the Department of Commerce called the Strengthening
America's Communities initiative. The administration also is proposing
to fund this initiative at $3.7 billion which is an overall reduction
for all these programs from the fiscal year 2005 level of almost $2
billion or 34 percent.
The proposed elimination of CDBG is a tragedy, but the reduction in
funding makes this proposal a double tragedy. Communities across the
Nation rely on CDBG to fund critical housing and community development
programs. Without these funds, many local programs will falter and even
fail. Equally important, CDBG is a critical component of HUD's mission;
CDBG helps to make HUD's housing mission successful. Moreover, the use
of CDBG consolidated plans helps to ensure that communities tie
together CDBG, housing funds and other Federal and State resources into
a comprehensive approach to local housing and community development
needs. Without CDBG, HUD's mission will be reduced to almost solely
housing. As history tells us, successful community development relies
on a comprehensive approach to housing and community development.
Without CDBG, HUD will be like a one-armed pitcher trying to field a
bunt.
I know CDBG has problems; CDBG funds are not always used well or
effectively. Even Kansas City, Missouri, with a vibrant and progressive
nonprofit community, recently identified some significant abuses within
its CDBG program. However, these problems are being addressed and
resolved. The key is to fix problems in good programs, not dismantle
the programs.
Moreover, recently, HUD, OMB and certain interested parties
recently ratified a consensus document to address weaknesses in the
CDBG program by creating an Outcome Measurement System to establish new
benchmarks and better oversight. Since this document addresses many of
OMB's concerns, I am puzzled by the administration's efforts to
dismantle a program that has been redesigned to become more effective
and successful according to administration requirements.
I also am very concerned over the administration's approach to
public housing. The administration is seeking to eliminate HOPE VI as
well as rescind the HOPE VI fiscal year 2005 funding of $143 million.
As an alternative, the administration has issued a proposed regulation
that will authorize PHAs to demolish the remaining obsolete public
housing.
As you may know, I set the stage for HOPE VI by including a
demonstration project in the 1990 National Affordable Housing Act that
allowed the demolition and replacement of Pruitt-Igoe Public Housing in
St. Louis with vouchers and new housing. Before this demonstration,
PHAs could not be demolished without a one-for-one hard unit
replacement. Because of the cost of this policy, the public housing
program dictated the warehousing of the poor in obsolete and
deteriorating PHA high-rises. HOPE VI allowed for the demolition of
this obsolete housing and the creation of mixed income private and
public housing that anchored private investment and the revitalization
of entire communities.
While HOPE VI is not a perfect solution to all the woes of obsolete
public housing, it has transformed many PHAs and communities, including
many in Missouri, by replacing obsolete public housing with mixed
income public and private housing. In many cases, HOPE VI housing has
leveraged new investment in these communities. This means new
businesses, an increased tax base, better schools and safer
communities. It is unfortunate that the budget rules do not recognize
these very tangible economic and social benefits.
The administration also has broken a promise to develop a new
operating fund formula by negotiated rulemaking. Over the last 5 or
more years, HUD has worked with PHAs through negotiated rulemaking to
develop a new budget-based operating plan formula to ensure a more
equitable system of allocating operating subsidies to PHAs. Millions of
dollars have been spent on this process. Nevertheless, a negotiated
rule went into OMB's rulemaking review process and came out a much
different flavor of sausage. One expects OMB to make changes to
regulations under review; one does not expect wholesale revisions in
violation of legislation that required negotiated rulemaking. I have
not yet had an opportunity to review the rule. But to highlight my
concerns, I am advised that, under the negotiated rule, 62 Missouri
PHAs would have gained operating subsidies while 41 PHAs would have
lost subsidies. Instead, under the OMB's changes, only 13 Missouri
agencies would gain while 91 would lose funding. There is something
wrong here. Equally troubling, HUD's fiscal year 2006 budget request
includes a $252 million reduction in the Public Housing Capital Fund
despite an estimated $20 billion backlog in modernization needs.
HUD also is proposing new legislation to block grant both section 8
voucher assistance and homeless funding. I have not yet seen the
proposal to block grant homeless assistance funding but I support the
approach assuming it is adequately funded and includes meaningful
oversight.
I have seen the section 8 voucher block grant proposal. Once again,
the proposal fails on a number of levels. First, the proposal fails to
allow jurisdictions with real flexibility to use these funds for
project-based assistance even in areas of the Nation where vouchers do
not work because of tight rental markets. This means the administration
only wants to provide flexibility on its own terms.
More disturbing, the section 8 proposal would eliminate the
requirement that 75 percent of all vouchers go to extremely low-income
families--those at or below 30 percent of median income. This is a
critical requirement that ensures those with the worst case housing
needs receive priority in the award of scarce section 8 housing
assistance. Without this requirement, the number of homeless will
continue to grow without real housing alternatives. This runs counter
to the administration's promise to end chronic homelessness within 10
years.
Finally, I am very troubled by the proposed FHA Zero Downpayment
Homeownership program. As with last year, this proposal continues to
pose substantial financial risks over time to the FHA Single Family
Mortgage Insurance program and the Mutual Mortgage Insurance Fund--
without downpayments, new homebuyers will have no stake in their new
homes and will have limited ability to pay for any substantial repairs
such as a failed furnace or leaky roof.
As we discussed last year, FHA was close to bankruptcy in the late
1980's due to defaults from assisting families to purchase homes with
high loan-to-value-ratios. These houses were often in marginal
neighborhoods, and once these homeowners defaulted, the housing would
often remain unsold and, thus, help drive down housing values
throughout a neighborhood. Some of these neighborhoods are still trying
to recover from those foreclosures, and the families in default often
ruined their credit.
According to the HUD IG's audit of the FHA's financial statements
for fiscal years 2004 and 2003, the FHA mortgage insurance program
continues to suffer increasing default rates and claims. Over the last
5 years, defaults have increased from 2.99 percent in fiscal year 2000
to 6.9 percent in fiscal year 2004. Moreover, claims have risen from
some $5.5 billion in fiscal year 2000 to some $8.5 billion in fiscal
year 2004, a 54 percent increase while insurance-in-force has decreased
13 percent to $430 million during the same period. Clearly, FHA has
effectively become the lender of last resort, taking on the most risky
mortgages with the greatest risk of default. A new zero downpayment
program will only enhance this risk.
I have been working on housing and community development issues for
most of my career from the governor's office in Missouri to my current
position on the Appropriations Committee in the Senate. Unfortunately,
despite my continuing efforts to reform HUD and support housing and
community development initiatives, the Department of Housing and Urban
Development remains in decline, characterized by failed programs and
policies. I still believe that this trajectory of failure can be
stopped, but I am dismayed by the lack of progress.
Mr. Secretary, I know that you face an uphill battle with an
administration that seems to have little interest or commitment to
HUD's programs and instead seems committed to dismantling the modest
successes that HUD has achieved. I do not understand--when housing and
community development investments work well, everyone benefits, jobs
are created, taxes are collected, and schools and communities improve.
Where we fail to create the right programs or fail to invest in these
programs, neighborhoods deteriorate and the quality of peoples' lives
suffer. It is that simple.
I am not looking for big increases in HUD programs. I do, however,
believe that we need to preserve existing programs and try to build on
these modest successes where possible. We may not agree on everything,
but I know you believe in the importance of HUD's mission and the need
for HUD to be a leader and partner in housing and community development
initiatives throughout the Nation. I look forward to continuing to work
with you on making the Department a strong leader and partner. However,
we need to revitalize and rebuild the public's confidence in HUD, and I
look forward to hearing your vision for the Department's future.
Thank you. I turn now to my Ranking Member, Senator Murray.
STATEMENT OF SENATOR TED STEVENS
Senator Stevens. Mr. Chairman and Senator Murray, I have to
Chair the Commerce Committee markup, but would you permit me
just 3 minutes.
Senator Bond. Senator Stevens.
Senator Stevens. I am here to ask you to meet me in Alaska
this year before this bill is marked up, before this bill is
reported to the floor.
IHBG FUNDING IN ALASKA
There have been developments in your Department that affect
our State that are staggering. Our field office is down in
Stockton, California. Your Department has recognized now what I
call rogue villages and taken away from a regional housing
authority the jurisdiction over housing and given it to--in one
instance to a group that calls themselves a village, but their
traditional village is 200 miles from where they say they have
the right to conduct housing.
And they have taken some 55 villages away from the existing
housing authority and turned it over to this rogue group and
they are not building housing. They are just employing their
own people.
What is going up our way now is just staggering as far as
the activities of your Department. And if we cannot get
together on some understanding of what is going to happen, I am
going to offer a series of amendments to this bill to mandate
that these practices be changed.
We cannot exist this way. Your people, who never come to
Alaska, sit down in the field office in California and decide
what is right in Alaska. Now, that just cannot go on.
The relationships with the State are so strained that the
people down there reduced the housing allowance for operations
in Alaska, the highest in the Nation, a 53 percent cut in
Alaska compared to an average 20 percent throughout the
country.
Now, we have some people who are really in need for housing
in the villages. But people sitting down in California, I do
not know what they are doing down there. But these decisions
are--I did not know it till just recently, and they are
staggering.
PREPARED STATEMENT
I would urge you to come up and let us go out and look at
these things and you meet the people that claim to be--that
have the right to build these houses in an area they never
lived in, they do not represent, and the people in the area
oppose them. That is other than a few people that are off the
reservation, so to speak.
But I do think this has to be changed. And I ask that my
statement appear in the record. I appreciate your courtesy.
[The statement follows:]
Prepared Statement of Senator Ted Stevens
Good morning Secretary Jackson--I am pleased to see you here this
morning.
I must leave this hearing shortly to chair a markup session of the
Commerce Committee, but I would like to ask for your help on some
matters within your agency that are causing problems for us in Alaska.
The first is the matter of how HUD allocates its Indian Housing
Block Grant funding. Within the State of Alaska, we now have some 231
federally-recognized ``tribes,'' some with no or only a few members.
This was a policy promulgated by the previous administration and is one
with which I do not agree. In Alaska, our Native housing programs were
traditionally operated by regional Native housing organizations which
were large enough to bring economies of scale to housing programs
across our vast State. Since the passage of the Native American Housing
and Self Determination Act in 1996, and especially since the 2000
census, HUD has been moving to transfer some of this funding away from
regional housing authorities and put it into the hands of small
villages and ``tribes'' in Alaska. The most egregious example of this
misguided policy has occurred in the Cook Inlet Region, which includes
Anchorage. The Cook Inlet Housing Authority has been stripped of a
substantial portion of its Indian housing funds. Those funds have been
awarded to a so-called tribe called Kanatak to cover the entire Mat-Su
Valley part of the Cook Inlet region. However, Kanatak's traditional
lands are located hundreds of miles away on the Western coast of
Alaska, and have not been occupied since 1956. As a result, the Cook
Inlet Housing Authority's funding now covers only 8 communities in the
region, down from the 55 communities it has traditionally covered and
should be covering right now.
I hope you will agree to help resolve this situation in the near
future--it is making it very difficult to provide economical housing
for our Alaska Native population.
On another matter, I have heard from our Alaska Housing Finance
Authority that your department is proposing to cut the operating
subsidy it receives to operate public housing across Alaska by 53
percent the largest cut proposed for any housing authority in the
Nation. I also understand that changes in the operating subsidies--the
so-called ``Allowable Expense Levels'' are being proposed as a result
of a study done by Harvard University. However, that study did not
examine the particular conditions in Alaska, but still proposed a cut
almost twice as large as the next largest cut. The AHFC has told my
staff that they will not be able to continue to operate public housing
in Alaska if a cut of this magnitude is allowed to go forward.
I believe a number of these problems stem from the Department's
senior management not being familiar with Alaska. We used to have a HUD
Field Office in Alaska, but that was closed about 10 years ago, and now
our field office is located in Santa Ana, California--a place that has
little in common with Alaska. I hope you will give some consideration
to establishing more of a presence in my State, which covers an area
one-fifth the size of the entire lower 48.
Mr. Secretary, I invite you to bring your senior staff and come to
Alaska to see for yourself what our housing problems look like and how
they differ from those in most lower-48 communities. I hope you will do
that and will work with me to solve these and other problems.
Senator Bond. Thank you, Senator Stevens.
And, Mr. Secretary, you have only been in this position
about a year, but I would suggest to you that those suggestions
are ones which you should adopt.
I will explain to you later if you have any questions.
Now I turn to Senator Murray.
STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Well, thank you very much, Mr. Chairman,
and I will join with you welcoming Secretary Jackson to our
subcommittee this morning.
Mr. Secretary, you have had a distinguished career serving
in the public housing field in Dallas, St. Louis, and
Washington, DC. Your expertise and your commitment are needed
as families throughout our country are really struggling with
the high cost of housing.
Unfortunately, Mr. Secretary, you have been handed a very
difficult budget to defend. I have always said that a budget is
a statement of priorities. In looking at this budget, it is
hard to reach any other conclusion than that housing is not a
priority for this administration.
And we are not just talking about numbers. The cuts and
problems in this budget will affect the lives of some of our
most vulnerable neighbors.
I wish the Bush Administration valued them more and was
willing to give us a budget that does make housing a priority.
But sadly this appears to not be the case.
So we will do our best with the budget the administration
has sent us. But I do want to note that the situation is
actually worse than some of the figures we are going to be
hearing today.
In looking at the budget before us, some might see a 12
percent cut from last year. But when you take a closer look at
the numbers, you see the cuts are actually closer to 20
percent. And that is because this budget calls for a large
number of rescissions, $2.65 billion.
I know last year before HUD came under the jurisdiction of
our subcommittee, the administration sought approval to cut
about $1.5 billion that were appropriated but never spent. Now
the administration wants to go into the current year's budget
and cut an additional $2.65 billion.
So when you add in the rescissions on top of the regular
budget cuts, the size of the administration's proposed cuts to
HUD grows to almost $6.5 billion or a 20 percent cut from last
year.
That is a very dark picture for American families and for
cities and for communities that are really trying to help and
develop distressed areas.
As I look at these rescissions, what I see is troubling.
But what I do not see is even more troubling. I do not see a
detailed explanation specifying where $2.5 billion of the
proposed rescission is coming from.
It is like the administration is asking us for a
sledgehammer and then telling us not to worry about where they
are going to use it. Well, I want you to know I am worried.
Under these proposed rescissions, HUD is granted the
blanket authority to take away the funding from any program in
the agency. That means that additional cuts can come from
programs serving the homeless or the disabled or individuals
living with HIV and AIDS. They can eliminate housing vouchers
for the working poor or cut back on locally based Meals on
Wheels programs.
All that is in addition to the administration's proposal to
eliminate the Community Development Block Grant Program and the
variety of support programs and services it funds.
So the administration is saying not only are we going to
cut funding for HUD programs, but we are asking to open up a
previous appropriations act and cut another $2.5 billion
however we see fit. That could have a very painful impact on
many of our neighbors.
HOPE VI
The only part of the rescission that the administration has
provided any information about concerns the HOPE VI program. So
let us look at what the administration proposes.
The HOPE VI program has the worthy goal of tearing down
old, dilapidated public housing units and replacing them with
affordable housing units for mixed-income populations. The
President plans to eliminate that program for next year.
But it gets worse. The administration also wants us to go
back and rescind the $143 million that we already appropriated
for this program for this current year.
So it is not enough just to kill it for next year, they
want us to gut it this year and undo Congress' work of the past
year. Together these proposals represent the elimination of
some $300 million in HOPE VI grants.
This idea of unaccountable, undefined, blanket rescissions
really concerns me deeply, Mr. Chairman. I have served on the
Appropriations Committee for the great majority of my almost 13
years in the Senate and I believe we have a responsibility when
we appropriate taxpayer dollars to know where they are going.
And by the same measure, when we are asked to take funds
away from agencies that have already received them, I want to
know precisely what projects or grants or services that we
already funded will now be cut.
So I hope to use a portion of the hearing this morning to
get a clear and precise answer from Secretary Jackson as to the
likely impacts of this budget proposal and what will result if
he is required to cancel more than $4 billion in funding
already appropriated to his agency over the course of this year
and next.
The challenges that are facing the Department of Housing
and Urban Development are daunting and the administration's
proposed budget cuts make it even worse.
PREPARED STATEMENT
I cannot make the administration treat housing like a
priority, but I can do everything possible to make sure we do
not make things worse. I want to give the Secretary the
resources he needs to protect and expand housing opportunities
for the poor and community development programs for local
communities.
Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Senator Patty Murray
Thank you, Mr. Chairman.
I want to welcome Secretary Jackson to the subcommittee this
morning.
Mr. Secretary--you have had a distinguished career serving in the
public housing field in Dallas, St. Louis, and Washington, DC.
Your expertise and your commitment are needed as families
throughout the country struggle with the high cost of housing.
Unfortunately, Mr. Secretary, you've been handed a very difficult
budget to defend.
I've always said that a budget is a statement of priorities, and
looking at this budget it's hard to reach any other conclusion than
that housing is not a priority for this administration.
And we're not just talking about numbers. The cuts and problems in
this budget will affect the lives of some of our most vulnerable
neighbors.
I wish the Bush Administration valued them more--and was willing to
give us a budget that makes housing a priority.
But sadly that is not the case, so we will do our best with the
budget the administration has sent us.
But I do want to note that the situation is actually worse than
some of the figures we'll hear today.
In looking at the budget before us, some might see a 12 percent cut
from last year.
But when you take a closer look at the numbers--you see that the
cuts are actually closer to 20 percent.
That's because this budget calls for large number of rescissions--
$2.65 billion.
I know that last year--before HUD came under the jurisdiction of
this subcommittee--the administration sought approval to cut about $1.5
billion dollars that were appropriated but never spent.
Now the administration wants to go into the current year's budget
and cut an additional $2.65 billion.
So when you add in these rescissions--on top of the regular budget
cuts--the size of the administration's proposed cuts to HUD grows to
almost $6.5 billion, or a 20 percent cut from last year.
That is a very dark picture for American families and for cities
and communities that are trying to develop distressed areas.
As I look at these rescissions, what I see is troubling--but what I
don't see is even more troubling.
I don't see a detailed explanation specifying where $2.5 billion of
the proposed rescission is coming from.
It's like the administration is asking us for a sledgehammer and
then telling us not to worry about how they'll use it. Well I am
worried.
Under these proposed rescissions, HUD is granted the blanket
authority to take the funding from any program in the agency.
That means additional cuts can come from programs serving the
homeless, the disabled, or individuals living with HIV/AIDS.
They can eliminate housing vouchers for the working poor or cut
back on locally-based meals-on-wheels programs.
All that is in addition to the administration's proposal to
eliminate the Community Development Block Grant program and the variety
of support programs and services it funds.
So the administration is saying not only are we going to cut
funding for HUD Programs, but we're asking to open up a previous
appropriations act and cut another $2.5 billion however we see fit.
That could have a painful impact on many of our neighbors.
The only part of the rescission that the administration has
provided any information about concerns the HOPE VI program--so let's
take a look at what the administration proposes.
The HOPE VI program has the worthy goal of tearing down old,
dilapidated public housing units and replacing them with affordable
housing units for mixed income populations.
The President plans to eliminate this program next year.
But it gets worse.
The administration also wants us to go back and rescind the $143
million that we already appropriated for this program for the current
year.
So it's not enough to kill it next year--they want to gut it this
year and undo Congress's work in this area.
Together, these proposals represent the elimination of some $300
million in HOPE VI grants.
This idea of unaccountable, undefined blanket rescissions concerns
me deeply.
I have served on the Appropriations Committee for the great
majority of my almost 13 years in the Senate.
I believe we have responsibility when we appropriate taxpayer
dollars to know where they are going.
By the same measure, when we are asked to take funds away from
agencies that have already received them, I want to know precisely what
projects, grants or services--that we already funded--will now be cut.
So, I hope to use a portion of our hearing this morning to get
clear and precise answers from Secretary Jackson as to the likely
impacts of this budget proposal and what will result if he is required
to cancel more than $4 billion in funding already appropriated to his
agency over the course of this year and next.
The challenges facing the Department of Housing and Urban
Development are daunting. And the administration's proposed budget cuts
make it even worse.
I can't make the administration treat housing like a priority, but
I can do everything possible to make sure we don't make things worse.
I want to give the Secretary the resources he needs to protect and
expand housing opportunities for the poor and community development
programs for local communities.
Thank you, Mr. Chairman.
Senator Bond. Thank you very much, Senator Murray. Senators
Durbin and Leahy have submitted written statements which will
also be made a part of the record.
[The statements follow:]
Prepared Statement of Senator Richard J. Durbin
Mr. Jackson, thank you for testifying before this subcommittee
today. I am very concerned about the housing cuts that have been
proposed for HUD. These cuts could severely hinder HUD's ability to
address community development needs in cities, towns, and communities
across the country. They jeopardize housing for low-income individuals,
families, the elderly, and the disabled.
I remain troubled about the President's proposal to eliminate the
Community Development Block Grant (CDBG) program and replace it with a
new initiative within the Department of Commerce. CDBG has supported
State and local governments' community development and neighborhood
revitalization activities for over 30 years. It has provided more than
just economic opportunities. The funds have been used to conserve and
expand affordable housing, improve access to public water and sewer
facilities, create jobs, and improve lives. These are the building
blocks for our neighborhoods.
Communities across Illinois, like Pekin, a town with approximately
34,000 people, or Cooksville, a village with slightly over 200 people,
received CDBG funds for revitalization efforts. In Chicago, a community
group received a CDBG grant to start a ``Safe Passages'' program--a
shuttle service for children in the neighborhood tutoring program. It
provided students with free transportation--a safe passage--from
tutoring programs, through some of the toughest gang territories in
Chicago, to a Boys and Girls Club where the children can swim, play
sports, and eat a snack or a meal. Before ``Safe Passages'' and the
CDBG grant, kids in this neighborhood stayed home after school or hung
out on the corner and were recruited by gangs. Today, they have a way
out.
I am also concerned about the President's request for $268 million
for the Housing for Persons with AIDS (HOPWA) program, a cut in funding
from the $282 million appropriated last year. Of the 15,000 people in
Chicago who may be homeless on any given night, 8 percent have HIV.
Nationwide, the Centers for Disease Control estimates that there are
886,575 people living with HIV/AIDS, and approximately 50 percent need
some form of housing assistance. HOPWA provides this vital assistance
and creates access to medical care and support services. In 2005, HOPWA
provided support for 122 jurisdictions eligible for formula
allocations. HUD announced that two additional jurisdictions will be
eligible for funds in 2006, but overall funding for the program
continues to decrease. Senator Martinez and I are currently circulating
a letter that will be sent to this committee urging $385 million for
fiscal year 2006. I hope this committee will take the request into
consideration.
I have concerns about several other programs that are slated for
cuts. For instance, this is the third consecutive year that the
President has proposed eliminating HOPE VI. This funding has been
crucial for several Illinois communities.
In fiscal year 2002, the Winnebago County Housing Authority
received a HOPE VI revitalization grant for $18.8 million. The funding
was granted to demolish Champion Park Apartments, 61 subsidized low-
rise apartments, and replace them over the next 2 years with 156 homes
throughout the neighborhood.
I was pleased to see an increase in the President's budget for
Homeless Assistance Grants. Last year, 20 of my colleagues and I sent a
letter to this committee urging funding for renewals of expiring grants
to permanent supportive housing serving the homeless. Although our
request was not granted, the committee and the administration have
acknowledged the importance of permanent supportive housing in the
fight against chronic homelessness.
If the administration is going to continue to live up to its
commitment to end chronic homelessness, we must also ensure that the
proper infrastructure is in place. The Housing Choice Voucher Program
has been a large part of that infrastructure. But, with formula changes
and funding shortfalls, the wait lists are growing and families with
vouchers are being told that they are losing their assistance. We must
ensure that funding for vouchers is made available so that those in
need of subsidized housing don't add to the number of people on the
streets.
Finally, Mr. Jackson, you have spoken about home ownership as part
of the President's vision of an ``ownership society''--that it ``is the
key to financial independence, the accumulation of wealth, and,
stronger, healthier communities.'' I agree that home ownership is often
a key to achieving the American dream. However, in light of the
proposed HUD budget cuts, we must not lose sight of those who will be
left alone--those who cannot achieve home ownership. We must continue
to focus attention and funding on community development and on
increasing our supply of decent, safe and affordable housing for all.
I appreciate the opportunity to speak with you today. I look
forward to hearing your testimony.
______
Prepared Statement of Senator Patrick J. Leahy
Secretary Jackson, I would like to welcome you today in your first
appearance before our newly reconstituted and renamed subcommittee.
It's a new name, but I think you will see some familiar faces. Mr.
Secretary, Senator Bond and Senator Murray--I look forward to working
with you all as we tackle this new bill in the upcoming fiscal year.
This is my first hearing as a member of the subcommittee and I have
to say that I wish it could start on a more positive note.
Unfortunately the President's proposed budget for the work of your
department is one that again invites disappointment and even
incredulity, not praise.
For the fifth year in a row the President has sent up a budget that
ratchets down affordable housing among our budget priorities, and that
would increase, not lessen, the burden put on the shoulders of our
Nation's struggling low-income families.
The budget before us signals a substantial retreat in our
commitment to help provide access to safe and affordable housing for
all Americans. The public housing operating fund has been reduced by 10
percent, funds for housing for persons with disabilities have been cut
in half, HOME formula grants have been reduced, fair housing programs
have been slashed and lead-based paint grants have been cut.
Most egregious is the complete elimination of the Community
Development Block Grant program--a proposal that has been met with what
can be mildly described as skepticism by most members for the United
States Senate. When all is said and done, the HUD budget is reduced by
12 percent. One of the few programs to see an increase in this budget
proposal is the Section 8 program, and even that increase will only be
enough to restore half of the cuts that were made this year as a result
of inadequate funding in fiscal year 2005.
If a budget is a reflection of priorities, and of course it is, the
message being sent here is that the people who struggle in our society
and who need the helping hands offered by these programs to put decent
shelter over their heads do not matter. Our Nation's core affordable
housing and community development programs are being chipped away, year
after year. I hope to hear from you today about the vision you have for
the Department of Housing and Urban Development and how you expect to
run efficient and effective programs like these, when they are slowly
being starved to death.
Senator Bond. And now, Secretary Jackson, we welcome your
statement. The full statement will be made a part of the record
as always and we would appreciate your advising us orally of
the things that you think should be especially highlighted.
STATEMENT OF ALPHONSO JACKSON
Mr. Jackson. Thank you. Chairman Bond, Ranking Member
Murray, and distinguished members of the subcommittee, thank
you for inviting me here this morning.
And I am honored to outline the 2006 budget proposed by
President Bush for the United States Department of Housing and
Urban Development. And I appreciate you letting me submit the
whole record to the committee.
HOME OWNERSHIP
Over the past 4 years, HUD has expanded home ownership,
increased access to affordable housing, fought housing
discrimination, tackled homelessness, and renewed its
commitment to those most in need.
HUD's $28.5 billion budget for 2006 seeks to build on our
success and lend a compassionate hand to individuals in need,
while also using taxpayers' money more wisely.
In June 2002, President Bush challenged the Nation to
create 5.5 million new minority homeowners. In 2004, more
Americans achieved the dream of home ownership than at any
other time in our Nation's history. Today, nearly 70 percent of
all American families own their homes, an all-time record.
Since the President challenged us in August of 2002, 2.2
million more minority families have become homeowners. This
represents about 40 percent of the goal. As a result, for the
first time in the history of minority home ownership, it is
over 51 percent.
Despite this progress, we have a long ways to go. For many
families, high down payment and closing costs represents the
greatest barrier of home ownership.
Since President Bush signed the American Dream Downpayment
Act into law in December of 2003, HUD has distributed $162
million in funds to over 400 State and local governments.
These funds have already helped thousands of families
purchase their first home and more than 50 percent of the
buyers were minorities.
The 2006 budget requests $200 million to fully fund the
program and help an estimated 40,000 homeowners. The budget
also proposed $40 million for housing counseling to assist some
700,000 families to become homeowners.
SECTION 8 REFORM
The fiscal year 2006 budget will make government a better
steward of the taxpayers' money. Reform of the Section 8
Housing Choice Voucher Program is important.
In fiscal year 2001, HUD's three Section 8 programs
consumed 43 percent of the annual budget. That percentage has
increased to 57 percent in 2005.
The rate of increase combined with the extreme complex set
of laws and regulations has resulted in a program that is
difficult to sustain.
In the past, funds were distributed to the public housing
authority for a specific number of vouchers based upon the
number of units leased. Congress recently converted the unit-
based allocation system to a budget-based system.
However, for the budget-based system to work, program
requirements must be simplified and PHAs must have greater
decision-making flexibility.
Chairman Allard, who is on the Appropriations Committee,
has introduced and authorized legislation to implement the
Section 8 reform. Section 8 programs will fill an important
component of HUD's mission and I am committed to it and its
success.
HOMELESSNESS
Throughout the budget, we will strengthen the assistance to
the most needy. That is children from low-income families, the
elderly, those physically and mentally disabled, victims of
predatory lending, and families living in housing contaminated
by lead-based paint.
The administration is committed to ending homelessness and
has aggressively pursued the policy to move more homeless
families and individuals to permanent housing.
The budget provides a record-level resource of permanent
and supported housing for the homeless. This budget provides
$1.4 billion for homeless assistance grants. Twenty-five
million will go to the present Re-entry Initiative.
The budget also proposes $39 million in funds for HUD's
Fair Housing Programs to ensure that everyone has access to
suitable living conditions, and a suitable living environment
that is free from unlawful discrimination.
All of us share the goal of creating housing opportunities
for America. And we have done a great job in the past 4 years.
We should be proud of a lot of the things that we have done,
but we should not be satisfied because there is an awful lot to
be done.
I look forward to the challenges ahead and will seek the
open communications to new home ownership, affordable housing
opportunities, economic growth, and prosperity.
PREPARED STATEMENT
I would like to thank you, Mr. Chairman, and the ranking
member of the subcommittee for your support and for your
continued support in the future. And I will look forward to
your guidance.
[The statement follows:]
Prepared Statement of Alphonso Jackson
Chairman Bond, Ranking Member Murray, distinguished members of the
subcommittee, thank you for the invitation to join you this morning. I
am honored to outline the fiscal year 2006 budget proposed by President
Bush for the U.S. Department of Housing and Urban Development (HUD).
Over the past 4 years, HUD has expanded home ownership, increased
access to affordable housing, fought housing discrimination, tackled
homelessness, and made a new commitment to serving society's most
vulnerable. The Department has implemented innovative solutions to
address our Nation's housing needs, and our results have been
impressive and measurable.
HUD's $28.5 billion in new net budget authority for fiscal year
2006 seeks to build on our success and lend a compassionate hand to
individuals in need, while also using taxpayer money more wisely and
reforming programs in need of repair. The HUD budget proposed by the
President reflects this intent through three broad, yet focused
strategic goals: promoting economic opportunity and ownership, serving
society's most vulnerable, and making government more effective.
In his February 2 State of the Union Address, the President
underscored the need to restrain spending in order to sustain our
economic prosperity. As part of this restraint, it is important that
total discretionary and non-security spending be held to levels
proposed in the fiscal year 2006 budget. The budget savings and reforms
in the budget are important components of achieving the President's
goal of cutting the budget deficit in half by 2009 and we urge the
Congress to support these reforms. The fiscal year 2006 budget includes
more than 150 reductions, reforms, and terminations in non-defense
discretionary programs, of which eight affect HUD programs. The
Department wants to work with the Congress to achieve these savings.
The funding reductions, reforms, and terminations contained within
HUD's fiscal year 2006 budget represent difficult choices in an era of
significantly diminished resources for all domestic discretionary
programs. These decisions were made thoughtfully, following an analysis
of each program's current funding levels and an assessment of future
needs.
PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP
The President's vision of an ``ownership society'' has been a
central theme of his administration. Ownership--and home ownership in
particular--is the key to financial independence, the accumulation of
wealth, and stronger, healthier communities.
Home ownership creates community stakeholders who tend to be active
in charities, churches, and neighborhood activities. Home ownership
inspires civic responsibility, and homeowners are more likely to vote
and get involved with local issues. Home ownership offers children a
stable living environment, and it influences their personal development
in many positive, measurable ways--at home and at school.
Home ownership's potential to create wealth is impressive, too. For
the vast majority of families, the purchase of a home represents the
path to prosperity. A home is the largest purchase most Americans will
ever make--a tangible asset that builds equity, good credit, borrowing
power, and overall wealth.
In 2004, more Americans achieved the dream of home ownership than
at any time in our Nation's history. Today, nearly 70 percent of
American families own their homes--an all-time record--and minority
home ownership has surpassed 51 percent for the first time in history.
That figure, however, points to a significant home ownership gap
between non-Hispanic whites and minorities. In June 2002, the President
challenged the Nation to create 5.5 million new minority homeowners by
2010. Since the President's challenge, 2.2 million minority families
have joined the ranks of homeowners, and we are on track to meet the
5.5 million goal.
The administration is working to make home ownership more
affordable and more accessible. Government should do everything it can
to help families find the security, dignity, and independence that come
with owning a piece of the American Dream.
For many Americans, high downpayments and closing costs represent
the greatest barrier to home ownership. To help overcome this obstacle,
the President proposed the American Dream Downpayment Initiative to
provide low- and moderate-income families with the funds and support
needed to purchase their first home. On December 16, 2003, President
Bush signed the American Dream Downpayment Initiative into law, and
since then, HUD has distributed $162 million in downpayment funds to
over 400 State and local governments. These funds have already helped
over 3,500 families purchase their first homes--of which more than 50
percent were minorities. The 2006 budget requests $200 million to fully
fund the Initiative.
Helping families learn about the loan products and services
available to them and how to identify and avoid predatory lending
practices is critical to increasing home ownership. Housing counseling
has proven to be an extremely important element in both the purchase of
a home and in helping homeowners keep their homes in times of financial
stress. The fiscal year 2006 budget proposes $40 million for Housing
Counseling to assist over 700,000 families to become homeowners or
avoid foreclosing on their homes. This effort will fully utilize faith-
based and community organizations.
To remove two of the largest barriers to home ownership--high
downpayment costs and impaired credit--the budget proposes two mortgage
programs. The Zero Downpayment Mortgage allows first-time buyers with a
strong credit record to finance 100 percent of the home purchase price
and closing costs. For borrowers with limited or weak credit histories,
a second program, Payment Incentives, initially charges a higher
insurance premium and reduces premiums after a period of on-time
payments. In 2006, these new mortgage programs will assist more than
250,000 families achieve home ownership.
The President is also proposing a new Single Family Homeownership
Tax Credit that could increase the supply of single-family affordable
homes by an additional 50,000 homes annually. Under the President's
plan, builders of affordable homes for moderate-income purchasers will
receive a tax credit. State housing finance agencies will award tax
credits to single-family developments located in a census tract with
median income equal to 80 percent or less of area median income and
will be limited to homebuyers in the same income range. The credits may
not exceed 50 percent of the cost of constructing a new home or
rehabilitating an existing property. Each State would have a home
ownership credit ceiling adjusted for inflation each year and equal to
the greater of 1.75 times the State population or $2 million. In total,
the tax credit will provide $2.5 billion over 5 years.
As you know, tax legislation is the responsibility of the Treasury
Department, but we will be working with Treasury's Office of Tax Policy
to ensure that the credit legislation addresses issues such as
disclosures, so that the credit operates smoothly.
The Homeownership Voucher program, while still new, has
successfully paved a path for low-income Americans to become
homeowners. Together with pre- and post-home ownership counseling,
strong and committed collaboration among Public Housing Authorities
(PHAs), local non-profits, and lenders has proven to be essential in
making the program work for families across the country. The greatest
challenge to the success of the program is finding lenders who are
willing to participate.
Government-sponsored enterprises were chartered to help low- and
moderate-income families secure mortgages. HUD recently published a
rule that requires Fannie Mae and Freddie Mac to increase their
purchases of mortgages for low- and moderate-income households and
underserved communities. These new goals will push the GSEs to
genuinely lead the market in creating home ownership opportunities for
those traditionally underserved by the mortgage markets, particularly
first-time homebuyers.
In addition to increasing the housing goals annually from 2005
through 2008, HUD's rule establishes new home purchase subgoals in each
of the three goal areas. This is intended to focus the GSEs' efforts on
the purchase of home mortgages, not refinancings. HUD projects that
over the next 4 years, GSEs will purchase an additional 400,000 home
purchase loans that meet these new and more aggressive goals as a
result of the new rule.
As the primary Federal agency responsible for the administration of
fair housing laws, HUD is committed to protecting the housing rights of
all Americans, regardless of race, color, national origin, religion,
sex, familial status, or disability. This commitment is reflected in
HUD's budget request for fiscal year 2006.
The goal of HUD's fair housing programs is to ensure that all
families and individuals have access to a suitable living environment
free from unlawful discrimination. HUD contributes to fair housing
enforcement and education by directly enforcing the Federal fair
housing laws and by funding State and local fair housing efforts
through two programs: the Fair Housing Assistance Program (FHAP) and
the Fair Housing Initiatives Program (FHIP).
The fiscal year 2006 budget will provide $23 million through FHAP
for State and local jurisdictions that administer laws substantially
equivalent to the Federal Fair Housing Act. The budget also provides
$16 million in grant funds for non-profit FHIP agencies nationwide to
directly target discrimination through education, outreach, and
enforcement.
The fiscal year 2006 budget requests $583 million to fund Native
American Block Grants (NABG). These grants are used by tribes and
tribally designated housing entities to develop new housing units to
meet critical shortages in housing. Although NABG funding has been
reduced in fiscal year 2006, HUD expects that all program requirements
will be met, including new housing development, housing assistance to
modernize and maintain existing units; housing services, including
direct tenant rental subsidy; guaranteed lending; crime prevention;
administration of the units; and certain model activities.
SERVING SOCIETY'S MOST VULNERABLE
Ending Chronic Homelessness.--The administration is committed to
the goal of ending chronic homelessness, and has aggressively pursued
policies to move more homeless families and individuals into permanent
housing. A chronically homeless person suffers from a disabling
developmental, physical, or mental condition or a substance abuse
addiction. They have been homeless for a year or more, or they have had
repeated periods of extended homelessness. They may occasionally get
help and leave the streets, but they soon fall back to a life of
sidewalks and shelters.
Research indicates that although just 10 percent of the homeless
population experiences chronic homelessness, these individuals consume
over half of all emergency homeless resources. Housing this population
will free Federal, State, and local emergency resources for families
and individuals who need shorter-term assistance.
In July 2002, the President reactivated the Interagency Council on
Homelessness for the first time in 6 years, bringing together 20
Federal entities involved in combating homelessness. Since its
inception, the Interagency Council has helped State and local leaders
across America draft plans to move chronically homeless individuals
into permanent supportive housing, and to prevent individuals from
becoming chronically homeless. Today, 47 States and more than 200
county and city governments have joined the Federal effort.
The budget provides a record level of resources for permanent
supportive housing for homeless individuals who have been on the
streets or in shelters for long periods. The 2006 budget provides $1.44
billion for Homeless Assistance Grants ($25 million of which is for the
Prisoner Re-Entry Initiative), $200 million more than in 2005.
Altogether, the administration requests $4 billion in 2006 for Federal
housing and social service programs for the homeless, an 8.5 percent
increase.
Housing for Special Populations.--Housing Opportunities for Persons
with AIDS (HOPWA) provides formula grants to States and localities to
provide housing to ensure persons with AIDS can continue to receive
health care and other needed support. The program also provides
competitive grants to nonprofit organizations. In fiscal year 2006,
HOPWA will fund an estimated 25 competitive grants and will provide
formula funding to an estimated 124 jurisdictions and in total will
provide an estimated 67,000 households with housing assistance.
The fiscal year 2006 HOPWA funding request represents a 5 percent
decrease from the fiscal year 2005 funding level. The reduction was one
of a number of difficult choices the administration made in formulating
the fiscal year 2006 budget, but one which is in consistent with the
goal of restraining spending in order to sustain economic prosperity.
HUD is seeking changes in the HOPWA formula that will improve the
targeting of the program, so that HOPWA better supports those whom it
was created to serve--the most vulnerable persons, and individuals who
are homeless or with very low incomes--ahead of other low-income
households.
The fiscal year 2006 budget proposes to fund grants of $119.9
million for Supportive Housing for Persons with Disabilities (Section
811). Section 811 provides assistance to expand the supply and the
availability of affordable housing for persons with disabilities. The
administration is proposing the elimination of the program's new
construction component, resulting in a $118.2 million funding decrease
from fiscal year 2005. The Section 811 program will continue to support
all previously funded housing subsidies under the program and up to
1,000 new housing vouchers. The administration intends to undertake a
study of the Section 811 program to determine the most efficient use of
the limited funding available for it.
HUD's Office of Lead Hazard Control and its Healthy Homes
Initiative work to eradicate childhood lead poisoning and prevent other
housing-related childhood diseases and injuries. The fiscal year 2006
budget proposes $119 million to fund these two programs, a net decrease
of $47.6 million from the fiscal year 2005 appropriation. The Lead
Demonstration Project accounts for $46.6 million of this decrease.
Areas with high incidence of lead poisoning have now developed greater
capacity, and therefore activities previously funded under the
Demonstration program will be addressed through the regular grant
program.
MAKING GOVERNMENT MORE EFFECTIVE
Reforming Community and Economic Development Programs.--The budget
proposes a new program within the Department of Commerce to support
communities' efforts to meet the goals of improving their economic
opportunity and ownership. This initiative will consolidate programs
such as Community Development Block Grants into a more targeted,
unified program that sets accountability standards in exchange for
flexible use of the funds.
Reforming Low-Income Housing Assistance.--Another way in which the
fiscal year 2006 budget will make government a better steward of
taxpayer money is through reform of the Section 8 Housing Choice
Voucher Program.
HUD has three major rental assistance programs that collectively
provide rental subsidies to approximately 4.8 million households
nationwide. The major vehicle for providing rental subsidies is the
Section 8 program, which is authorized in Section 8 of the U.S. Housing
Act of 1937. Under this program, HUD provides subsidies to individuals
(tenant-based) who seek rental housing from qualified and approved
owners, and also provides subsidies directly to private property owners
who set aside some or all of their units for low-income families
(project-based).
The Housing Choice Voucher Program, the best known of the Section 8
rental assistance programs, provides approximately 2 million low-income
families with subsidies to afford decent rental housing in the private
market. Generally, participants contribute up to 30 percent of their
income towards rent, and the government pays the rest.
In the past, funds have been appropriated for a specific number of
vouchers each year. These funds were then given to PHAs based on the
number of vouchers they awarded and at whatever costs were incurred.
In 2001, the Housing Certificate Fund, under which both the
project-based and tenant-based Section 8 programs are funded, consumed
43 percent of HUD's annual budget. That had risen to 57 percent in
fiscal year 2005, and the trend line continues to increase dramatically
in the Department's fiscal year 2006 budget. This rate of increase,
combined with an extremely complex set of laws and rules that govern
the program, has resulted in a program that increasingly is difficult
to sustain.
In response to rapidly increasing costs, Congress recently
converted this ``unit-based'' allocation system to a ``budget-based''
system. This made sense, but for the budget-based system to work,
program requirements need to be simplified and PHAs need to be provided
with greater flexibility.
The administration proposes to simplify Section 8 and give more
flexibility to PHAs to administer the program to better address local
needs. Building on changes in the 2005 Consolidated Appropriations Act,
the administration will shortly submit authorizing legislation to this
committee that expands the ``dollar-based'' approach. PHAs will
continue to receive a set dollar amount as in 2005, but they would have
the freedom to adjust the program to the unique and changing needs of
their communities, including the ability to set their own subsidy
levels based on local market conditions rather than Washington-
determined rents. Local PHAs will be able to design their own tenant
rent policies, and in turn, reduce the number of errors that are made
and create incentives to work. The administration's plan will eliminate
many of the complex forms that are currently required to comply with
program rules, saving both time and money. Furthermore, the
administration's proposal will reward PHAs for good management through
performance-based incentives. These changes would provide a more
efficient and effective program, which helps low-income families more
easily obtain decent, safe, and affordable housing.
Human Capital.--After many years of downsizing, HUD faces a large
number of potential retirements and the loss of experienced staff.
HUD's staff, or ``human capital,'' is its most important asset in the
delivery and oversight of the Department's mission. HUD has taken
significant steps to enhance and better use its existing staff
capacity, and to obtain, develop, and maintain the staff capacity
necessary to adequately support HUD's future program delivery. HUD has
revamped its hiring practices, and now fills jobs in an average of only
38 days, instead of the 96-day average originally cited by the
Government Accountability Office. Moreover, HUD has synchronized the
goals and performance plans of its managers with the overall aims of
the agency, and is developing a new managerial framework through recent
hiring and executive training programs.
Competitive Sourcing.--In April, HUD announced its first public-
private competition, focusing on the contract administration and
compliance monitoring functions associated with its assisted
multifamily housing properties. Through this competition and others
that are being considered, HUD hopes to realize cost efficiencies and
significantly improve performance.
Improved Financial Performance.--HUD has striven to enhance and
stabilize its existing financial management systems operating
environment to better support the Department and produce auditable
financial statements in a timely manner. While still suffering from
internal control weaknesses, HUD met the accelerated timetables for
producing its performance and accountability report, and improved the
reliability, accuracy, and timeliness of financial systems. HUD is
continuing efforts to reduce its internal control weaknesses from 10 to
7 by next year.
E-Government.--HUD completed security reviews for all of its
information systems in calendar year 2004, and plans are in place to
eliminate security defects by next year. HUD awarded its large contract
for core IT infrastructure, successfully resolving a protest that
lasted for 2 years.
HUD Management and Performance.--Today, public and assisted housing
residents live in better quality housing with fewer safety violations
than 4 years ago. HUD increased the percentage of projects meeting its
physical condition standards in public housing by 9 percentage points
(from 83 percent in 2002 to 92 percent in 2004) and in subsidized
private housing by 8 percentage points (from 87 percent in 2002 to 95
percent in 2004). HUD now turns around at least 45 percent of public
housing authorities classified as ``troubled'' within 12 months rather
than the 2 years allowed by regulation. New rules and procedures have
virtually eliminated property flipping fraud from the FHA insurance
programs, and close monitoring will continue to prevent such abuses.
New rules and procedures have forced out bad appraisers from the FHA
program and our ``Credit Watch'' lender monitoring initiative will
continue to bar other individuals who improperly raise the risk of loss
in these programs. Since 2002, HUD has worked with stakeholders to
streamline their Consolidated Planning process into an easy-to-use and
helpful tool for communities.
Faith-Based and Community Initiative.--HUD expanded its outreach to
community organizations, including faith-based organizations,
attempting to level the playing field for its formula and competitive
grants. HUD has removed all discriminatory barriers to participation by
such organizations. HUD's technical assistance has helped these
organizations understand the application process as well as the
responsibilities for implementation. These organizations are beginning
to compete more widely and effectively as shown in their success in
increasing the number of grants from 659 in 2002 to 765 in 2003, a 16
percent improvement.
Improper Payments Initiative.--At the beginning of the President's
first term, HUD committed to working with its stakeholders to reduce
the improper payment in rental subsidies by one-half by 2005. At that
time, over 60 percent of rental subsidies were incorrectly calculated
by program sponsors due to improper interviews, inadequate income
verifications, misunderstood program rules, and computational errors.
Other errors resulted from inadequate verification of tenants' self-
reported incomes. Four years later, HUD has achieved exactly what it
committed to do. There has been a 27 percent reduction in improper
subsidy determinations by program sponsors over the past 4 years. More
importantly, there has been a 50 percent reduction in improper payments
amounting to $1.6 billion.
Beginning in 2005, HUD will expand the verification of tenant self-
reported incomes to include recent wage data. This has the dual benefit
of both improving accuracy and providing more privacy because income
data will be matched electronically whereas current procedures require
a paper verification letter to the tenant's employer. These stewardship
efforts improve confidence that the right person is getting the right
benefit in a timely, dignified, and private manner as intended under
law. Because this is the first quarter that agency efforts were rated,
progress scores were not given.
All of us share the goal of creating housing opportunities for more
Americans. We have done great work over the past 4 years, and we should
be proud of everything we have accomplished together. But we should not
be satisfied, because our work is far from being finished.
I look forward to the work ahead, as we seek to open the American
Dream to more families and individuals, and open our communities to new
opportunities for growth and prosperity.
I would like to thank all the members of this subcommittee for your
support of our efforts at HUD. We welcome your guidance as we continue
our work together.
Thank you.
Senator Bond. Thank you very much, Mr. Secretary.
CDBG AUDIT OF PROGRAM ABUSE
Mr. Secretary, you are probably well aware, as we are all
too well aware in Missouri, of a recent audit conducted for the
City of Kansas City that revealed that a not-for-profit agency
has billed for some $1.1 million in Federal housing funds for
just two homes on Tracy Avenue. The audit found the contracts
may have violated Federal regulations.
As you know, there is great concern in Kansas City over
misuse of dollars. I have visited there. I have called on the
IG to investigate. I visited the area with HUD officials
because we understand that the abuse of taxpayer dollars cannot
be tolerated.
While I understand this is an ongoing investigation, I
would like to know what you can tell me directly about it and
what HUD is doing to prevent possible abuses from happening
again as well as your assurance that there will be continued
attention to this matter.
Mr. Jackson. First, Mr. Chairman, I want to thank you for
bringing the matter to our attention. We quickly began the
process of evaluating exactly what has taken place.
We are in the process of finding out and we will, when it
is finished, make our findings to you. We will also take the
appropriate action.
As you know, we allocate the funds to the cities and the
cities have the responsibility to make sure that there is
checks and balances. But that does not in any way relieve us of
our responsibility. I take that responsibility greatly.
So I will tell you that, as you know, we sent a General
Deputy Assistant Secretary out with you to make the finding----
Senator Bond. Right. We appreciate that.
Mr. Jackson [continuing]. We will continue to do that. We
are going to make every effort to make sure that that does not
happen again. I will report to you as soon as we have the final
findings.
Senator Bond. Thank you very much, Mr. Secretary.
Is Mr. Ken Donohue, the HUD IG, available?
Mr. Jackson. Yes.
Senator Bond. Mr. Donohue, could you come up to the
microphone. You know I asked you to review the use of CDBG
funding as it pertains to the rehabilitation of the two houses
on Tracy Avenue. I know that you have been reviewing the city's
use and I would like to know what your views are or what you
can tell us at this time.
Mr. Donohue. Yes, Mr. Chairman. Thank you very much.
As you know, we did conduct a series of audits with regard
to the Kansas City housing programs. The most recent being the
HEDFC Program.
And I really do appreciate the chairman's interest with
regard to the Tracy Avenue project. You agree an expensive
amount of rehabilitation was spent on those two single-family
homes.
I want to assure you that we are continuing to review this
matter and follow-up on your concerns. I can report out to you
today that based on these audits, the Department has issued a
limited denial of participation on the HEFDC and some of its
officials.
This will require the City of Kansas City to assume control
of the $50 million to $80 million with regard to the portfolio
administered by HEFDC. And I believe the city is currently in
negotiations to award a contract.
Senator Bond. We thank you and we look forward to your
final report.
When I was there with the representative of Secretary
Jackson and the Mayor of Kansas City, the City Manager
expressed a strong commitment to take over the administration
of the program and to deal with those abuses.
I know there are many more steps, but we appreciate your
role in undertaking that.
REVIEW OF HOMELESS ASSISTANCE GRANTS
Mr. Secretary, another, if you will permit me, another
parochial interest, very important to the City of St. Louis. I
recently sent a letter March 11 asking HUD to review the award
of only $4.2 million in homeless assistance grants to the City
of St. Louis.
The City was eligible to receive $10.8 million if it scored
82 points on a continuum of care application. It scored 81
points and gets $4.2 million instead of $10.8 million.
This funding is critically important. And I know that there
are difficulties in reviewing and sometimes they are
subjective.
I would like to know the status and would also like to know
what steps HUD takes to ensure the results in the reviews are
just, especially when the loss of funds by the narrowest
margins is such a large magnitude.
Mr. Jackson. Mr. Chairman, thank you very much.
We are totally evaluating the allocation. There was a
technical mistake. And clearly from my perspective, it deserves
us to look again at the process that we used.
I think you said it well. In many cases, yes, we try to be
objective, but sometimes it is very subjective.
We hope to have an answer to you very quickly, as I have
said, because it is important that St. Louis receive those
monies.
Senator Bond. Thank you very much, Mr. Secretary.
Now I turn to Senator Murray.
Senator Murray. Thank you, Mr. Chairman.
RESCIND UNOBLIGATED CASH AND CARRY-OVER FUNDS
Mr. Secretary, your fiscal year 2006 budget seeks authority
to rescind $2.5 billion in unobligated cash and carry-over
funds from fiscal year 2005 and previous years.
Your language allows you to take this funding from any
account within HUD. I was not on the subcommittee that funded
HUD last year and I am troubled by this practice where you kind
of ``one hand giveth and the other hand taketh away''.
Can you please tell us today precisely which programs you
intend to cut in order to achieve your proposed rescission of
$2.5 billion?
Mr. Jackson. Ranking Member, I cannot. And what I will do
is in all honesty go back and look at possibilities.
Initially we had said the Section 8 program, but it
permitted us to take it from other places within our budget.
I can respond to you for the record and get that to you
specifically.
Senator Murray. Well, do you think you will be in a
position to identify where these cuts are coming from before we
mark up this appropriations bill probably in July?
Mr. Jackson. We have the next 18 months to identify. And
usually we will not start that process until June or July.
Senator Murray. So when we are marking up the
appropriations bill, we will have no idea where you are going
to be taking those from?
Mr. Jackson. I will tell you we will have to in all honesty
look at the budget. It is a very, very tight budget that we are
operating under and I do not want to give you specifics today
and then find out that 6, 7 months from now those are not the
specific areas where the rescission will come.
And I am trying to be as straightforward as I can with you.
I cannot today give you the specific areas.
Senator Murray. Well, I think that makes it really hard for
this subcommittee to write a bill when we do not know where you
are going to be taking money away from.
A similar rescission totaling $1.5 billion was imposed on
this current year. And you do plan to accommodate that
rescission, I understand, by recapturing unused voucher funds
from Section 8?
Mr. Jackson. That is correct.
Senator Murray. Can you guarantee me that a rescission of
$2.5 billion as recommended in your budget will not result in
the loss of housing or other essential services to any of our
low-income individuals or families served by HUD?
Mr. Jackson. No, I cannot do that.
Senator Murray. So it could possibly come from those?
Mr. Jackson. Yes.
Senator Murray. Well, I understand that many of your grants
to actually eliminate homelessness remain unobligated because
the grants are not transmitted to the housing agencies until
late in the year.
Can you guarantee that none of your proposed $2.5 billion
will be derived by limiting available assistance to the
homeless?
Mr. Jackson. Homelessness is an extreme priority for us
just like the Section 8 program. I will do everything within my
power to make sure that those are not rescinded.
Senator Murray. Well, Mr. Secretary, there are very few
programs I know of that have such wide bi-partisan support by
members of Congress, governors, mayors. We have been flooded by
people supporting the Community Development Block Grant.
The administration is planning to merge this program with
17 others and then cut the available funding by more than a
third. The rationale that has been presented in the President's
budget for consolidating and cutting these programs is that the
existing programs are cumbersome, duplicative, ineffective, and
unaccountable.
Do you feel that CDBG is unaccountable under your
authority?
Mr. Jackson. Absolutely not. And that is not the basis for
the consolidation. What we are saying is to try to get all of
the economic development programs in one place.
And I think it would be very hypocritical on my part,
having been chairman of two community development agencies, one
in St. Louis and one in Washington, DC, and I have seen the
effects of those programs which are very positive around the
country, specifically in Washington. It has been extremely
effective in Seattle and Spokane.
So I think to say that the program has been ineffective--
there are problems in the program. There is no question, as
just the chairman just said.
But you have to note that once those were brought to our
attention by OMB, the thing that I did specifically was to
compel people in the profession, the industry, and members of
OMB staff to go out and make recommendations how we could
better make the program work.
And we came back with those specifics and we have submitted
those to your committee and to the Senate and to the House as
to how we can better make the program work.
CDBG CONSOLIDATION
Senator Murray. Mr. Secretary, in the President's budget,
he said that he is consolidating and cutting these existing
programs because they are cumbersome, duplicative, ineffective,
and unaccountable. Those are the administration's words.
So you are telling me they are not unaccountable?
Mr. Jackson. I am telling you the Community Development
Program is not unaccountable. I am saying to you that the
Economic Development Program for consolidation purposes, yes, a
number of them exist around six or seven different agencies and
they are encumbered because some, I do not think, should be----
Senator Murray. Well, what is cumbersome or ineffective?
Meals on Wheels, elderly and child day care? What programs that
CDBG supports are cumbersome and unaccountable?
Mr. Jackson. Well, I do not think they are not specifically
talking about the Community Development Program. We are talking
about the Economic Development Program. We are consolidating
for the purpose of economic development.
Senator Murray. Well, the administration is planning to
merge CDBG with 17 others and then cut that funding by a third.
And in the budget itself, the President said the reason he is
merging CDBG is because it is unaccountable and duplicative and
ineffective.
And so I am just asking you which programs under CDBG? Is
it Meals on Wheels? Is it child care? What is it that is
cumbersome, unaccountable and ineffective?
Mr. Jackson. I am saying to you, Ranking Member, that is
not my perspective of what the bill says. We are talking about
economic development programs, not the Community Development
Program per se. And that to me is a very different perspective.
You are asking me their ineffectiveness----
Senator Murray. I am just reading the words of the
President's budget.
Mr. Jackson. I understand what you are saying. I am saying
to you, are you asking me there is ineffectiveness in the
Community Development Program? Yes. I think you have seen one
example which the chairman gave. But I'm saying overall, there
is a great deal of good that comes from the Community
Development Program.
Senator Murray. Thanks, Mr. Chairman.
RESCISSION OF $2.5 BILLION FOR FISCAL YEAR 2006
Senator Bond. Thank you, Senator Murray.
Let me go back to this proposed rescission of $2.5 billion.
My staff has asked HUD and OMB for justification of the
rescission.
Where did you come up with it? I hope that this was not a
Professor Swag estimate of $2.5 billion. Is there some kind of
analysis that is performed to justify the level of rescission
in the budget? There has to be a rationale for a $2.5 billion
cut. What is it or where is it or when are we going to get it?
Mr. Jackson. As I said to the ranking member, Mr. Chairman,
we will start the process probably in June or July looking at
where the rescissions will occur. To tell you specifically
where they will occur, I am not in that position to do that
today.
Senator Bond. Well, Mr. Secretary, we understand the House
is going to act on all these bills in June. We are going to be
acting on them in July. And we need to know what we are buying.
Are we buying a pig in a poke or are we buying a rational
plan? At this point, I lean towards the pig. I want to see the
plan. And June or July, unfortunately I tell you, is not an
adequate time for us to do our work. We have got to have it
before we start trying to allocate the headaches that this
budget causes us. So, please, we need this by the end of April.
Mr. Jackson. I will make every effort to get it to you as
quickly as possible.
Senator Bond. Thank you. We need it by the end of April.
TRANSFER CDBG PROGRAMS TO COMMERCE
Moving on to the CDBG, I got this wonderful November 20,
2004, consensus document, where a joint HUD, OMB, grantee
outcome measurement working group reached consensus on an
outcome measurement system to implement the CDBG program. This
group spent significant time to make CDBG more effective. I do
not understand after we have gone through all this effort to
make it work why the administration wants to eliminate CDBG and
begin again at Commerce.
But I have got some practical questions. How could a new
block grant work even if enacted this year? Even if we were to
pass it--and I am going to do my best to make sure we do not--
how could the Department of Commerce or any department actually
get a new program on track, create regulations, educate
grantees, and get the money out the door?
What is going to happen to existing projects? Where does
all this go and how does some other agency get a handle on it?
Mr. Jackson. I think, not passing the buck, Mr. Chairman, I
think you are going to have to ask the Secretary of Commerce.
We simply zeroed out $4.5 billion out of our budget for
2006. How it is going to be implemented, what is going to
occur, legislation now is being drafted by Commerce to that
effect.
And we will have input in that legislation. But that
question I cannot answer at this point.
STAFFING REQUEST
Senator Bond. Well, I would look at your staffing request,
staffing and salaries. HUD is requesting an increase of $32.5
million over the 2005 level, a total of $1.15 billion for
salaries. At the same time, the administration is proposing
elimination of CDBG block granting, homeless, Section 8, as
well as reduced regulatory requirements over PHAs. Your
staffing requests are going up while the OMB budget requests
for programs are going down.
How could you need even half that amount if we were to
adopt all of the draconian cuts and removals from HUD
jurisdiction? What are your true S&E needs were we to enact all
these changes?
Mr. Jackson. Those are our true S&E needs. And I will tell
you that we have cut our staff substantially over the last 2
years. And it is because in many cases, we have had an increase
in the cost of living, increase in merit salary that in essence
requires us to cut the staff but at the same time to meet the
criteria.
We feel today that it is very difficult for us to carry out
some of our missions without an increase in staff and we are
asking, as we have said before, for the increase in staff. And
that is what we are projecting within the budget because we
have to.
Let me say this to you, Mr. Chairman. When I go out into
the field--and I am probably one of the few secretaries that
has ever spent any time in the field. I think I have been, of
our 81 field offices, I think have been to 53 of them. I have
been to every one of our regions.
And when I walk in there and realize that there is not
enough personnel within those specific field offices or
regional offices to carry out the work, I think it is
imperative that I ask not only the administration but also the
Congress to give me leeway to make sure that those positions
are filled.
Senator Bond. Thank you, Mr. Secretary. We want to see that
your programs work. We want to see that the ones that should be
in HUD stay in HUD. I know you are going to have to travel to
Alaska and the great Northwest but please stop in the Midwest
on the way back.
Mr. Jackson. And I can assure you I am going to stop by
Senator Murray's State, too, before I get there or on the way
back, one of the two.
Senator Bond. Yes. All right. Well, I will turn the
questioning over to Senator Murray now.
Senator Murray. We are a stop on the way to Alaska, so it
does work.
NEW CDBG FUNDS TO BE SPENT ON HOUSING ACTIVITIES
Mr. Secretary, you are the chief administrator for the
Nation's housing needs. So can you tell me what percentage of
the Bush Administration's new Consolidated Block Grant Program
will be spent on housing activities?
Mr. Jackson. No, I cannot. I think again until the
legislation is developed by Commerce, I cannot.
I can tell you 2005, $4.5 billion.
Senator Murray. We have not gotten any authorizing
legislation yet. You say that is going to be developed by the
Department of Commerce?
Mr. Jackson. Yes.
Senator Murray. And that you would not have any say in that
at all?
Mr. Jackson. No. We will have input in it, yes.
Senator Murray. So you will have input?
Mr. Jackson. Yes.
Senator Murray. So I will assume you will advocate for
housing needs?
Mr. Jackson. Absolutely.
Senator Murray. And you know that roughly a quarter of CDBG
funds today are used for housing. What would you advocate for
under the new----
Mr. Jackson. Again, I will tell you that, as I said a few
minutes ago to you, I am convinced that the Community
Development Block Grant Program has some ineffectiveness. But
as a whole, it is a very excellent program that has done a lot
for cities in this country.
So I will continue to advocate the flexibility and that as
much money as can be appropriated be appropriated for housing
and community development, that is infrastructure, development
zones.
Senator Murray. As this authorizing legislation is put
together and you are advocating to the Department of Commerce,
what programs will you tell them should not be cut or what
current uses under CDBG will you tell them have to remain as
part of authorizing legislation? What do you think is
important?
Mr. Jackson. I think all of it is important.
Senator Murray. So you are not going to tell them that
anything is not eligible anymore? Everything will still be
eligible? Is that what you----
Mr. Jackson. I think that we have sent over to Congress
some suggestions and that is for a proposal as to how we can
best redistribute the Community Development Block Grant fund on
an equity basis. That is for you all to decide.
We did not make a recommendation because we thought that
clearly that was not within our purview. And let me tell you
why we did that. It is because there are some inequities that
exist within the program.
Once OMB did the pilot study for us, we said let us look at
this and make the best recommendation to Congress that we can
make. As a whole, I think we have done that. We have also made
recommendations how to best administer the program.
So when you start looking at the program, it is a very
difficult process to say what should or should not be cut. In
my perspective, all of those programs are very important.
Senator Murray. So everything that is currently eligible
for use under CDBG you believe will still be eligible for----
Mr. Jackson. I will truly advocate that they should be.
Senator Murray. So we are going to take CDBG, combine it
with 17 other programs, and then cut the funding by a third and
everything is still eligible?
Mr. Jackson. My position is--again, I will go back. We
reduced our budget by $4.5 billion. How that is going to play
out in Commerce, I do not have the legislation before me. And
once we have input in the process, I will tell them what I
think is very important.
Senator Murray. But you cannot give us any programs? Meals
on Wheels, do you think that is affected? Child care? Elderly
care?
Mr. Jackson. Yes.
Senator Murray. It is going to be tough, Mr. Chairman. I am
looking forward to seeing the administration's proposal.
All right. Well, let me ask one more question in my time
then.
FOSTER CARE HOUSING
Mr. Secretary, there are some studies out there indicating
that the primary reason why as many as 30 percent of our
children who are in foster care today cannot be reunited with
one or both of their parents is because they do not have
adequate housing.
These are the cases where a parent has gotten over their
substance abuse problems, fulfilled other requirements, and the
judge is ready and prepared to reunite the kids with their
parents as long as they find adequate housing.
Now, the average welfare family has 2.7 children and the
cost to the taxpayer of keeping those kids in foster care is
about $48,000 a year. Your agency, however, provides housing
for families of this kind for a subsidy of about $13,500 a
year.
Do you not think it makes more sense both for the families
and for the taxpayer to make an aggressive effort to find
housing for this population so kids can get out of foster care
and be reunited with their parents?
Mr. Jackson. I surely do. And let me tell you that that is
why we have increased the homeless budget by $1.4 billion, but
we have also created the Interagency on Homeless where we have
four agencies working together to deal with the homeless
problem from a holistic point of view, but from a whole
perspective.
I had a chance about 5 weeks ago to be out in California
with Governor Schwarzenegger to see a program called Path that
is doing exactly what the President has set forth.
It starts with the person who has been on the streets or
family that has been on the streets more than 90 days. And they
start with basically looking at them from a physical, mental,
and medical perspective, then training them for job training
and putting them through.
So I totally agree with you that it is much cheaper and
much more productive to house them the way you have said with
our program than to keep a child in foster care.
Senator Murray. Okay. I understand that the Tenant
Protective Fund has a special designated program just for
family reunification. In fact, I believe Senator Bond was
instrumental in getting that program authorized.
Mr. Jackson. That is correct.
NEW VOUCHERS FOR THE TENANT PROTECTIVE FUND
Senator Murray. But I also understand that no new vouchers
have been issued for that program for the last 4 years and I
just want to know why your agency has not issued any new
vouchers to get some of those families reunited.
Mr. Jackson. We are issuing the vouchers. And let me say
this to you. Most housing--well, not most--all housing
authorities realize that the homeless families take priority on
their waiting list.
If we can find or if you can denote to me those that are
not doing that, I will be happy to speak with them. But that is
a top priority of every housing authority in this country.
Senator Murray. Well, I understand you are issuing
renewals, but you are not issuing any new vouchers. And I have
heard that that is because you want to leave that funding
available for your rescissions. Is that correct?
Mr. Jackson. That is not true.
Senator Murray. Okay. So why have no new vouchers been
issued?
Mr. Jackson. We do not have new vouchers to actually issue
at this point. I mean, we have funded the program and the new
Section 8 voucher program by $1.1 billion increase.
What is occurring is this, and we are going to have to deal
with this, is that pre-1998, housing authorities received a
budget base amount of money. And I can tell you because I am
probably the only Secretary ever to appear before you have ran
a housing authority.
In Dallas, we got $20 million as an example and we housed
as many people as we could. Today it is unit-based. Well, we
just moved away from the unit-based. But it was unit-based.
And what occurred is this. With the unit-based, we also put
another appendage to it that 75 percent of those vouchers must
be used for people 30 percent or less of median.
What that created was a symptomatic problem. When we did
that, 90 percent or over 90 percent of those people do not pay
anything to live. In fact, we pay them to live in subsidized
housing. We pay their utilities. We pay their expenses.
So what we have seen is the Section 8 budget rise
exponentially, but we are not housing any more people. If I go
back to 1995, when I left the Housing Authority in Dallas, I
will bet you that today that 60 percent of the people who were
on that waiting list are still there today.
Senator Murray. That is right because housing prices have
increased.
Mr. Jackson. No, they have not. They have increased in your
area. They have increased on the east coast. But west,
southeast, the housing costs for apartments have gone down.
But, yet, we are paying extremely high prices because the unit-
based system has protected landlords to charge what they wanted
just to get a person in.
I think competitively, once we go back to a system where
people are paying, I think we will have a different situation.
That is why we have suggested that we raise the limit to 60
percent of median where we do have people.
Pre-1998, a person spent about 3.5 years on a voucher.
Senator Murray. Are you going to protect areas that have
higher housing costs?
Mr. Jackson. Today they're spending 8.
Senator Murray. Are you going to protect areas like the
Northwest and Northeast that----
Mr. Jackson. Absolutely. And I think that that flexibility
in the flexible voucher program gives the housing authority
with a budget-based process and the flexibility they have to
decide what they want to pay for a voucher.
Senator Murray. My time is up.
Senator Bond. Thank you, Senator Murray.
HOPE VI
I am going to try to wrap up my questions on this round.
Obviously as you might expect, I have an extensive question on
the HOPE VI rescission since I spent so long working to get it
established and know how it works.
I am going to give you some time and maybe somebody at OMB
can help you write a rationale of why you are trying to not
only gut it but also rescind prior year funding.
IMPACT OF THE BUDGET-BASED SECTION 8 VOUCHER PROGRAM
Let me move to the Section 8 vouchers. You know, we work
with you and I think we reformed the Section 8 voucher program
as a budget-based program by requiring HUD to allocate funds by
a budget-based formula. Unfortunately, we have not been able to
get the data for the 2005 bill to make sure we included enough
funding. We did the best we could, but I would like to ask you
what is the impact of the approach? Are the number of vouchers
going to decrease from the high point? What is HUD doing to
ensure that PHAs are providing better data? Are they lowering
payment standards and what has been the impact of this new
budget-based program for Section 8 tenants?
Mr. Jackson. I welcome that question and let me tell you
why, Mr. Chairman, because I think we have not held the public
housing authorities accountable in the unit-based system.
I do believe that the passage of the budget-based program
last year, if with the passage of the flexibility this year,
will give housing authorities the abilities to house more
people and to have a tremendous turnover.
I think we have to look at the basis for the Section 8
program. And I think over the years, we have lost that
perspective and I am not talking about the Congress. I am
talking about the housing authorities.
The Section 8 program was created as a transition between
public housing and conventional housing. And when I say that, I
mean whether it is affordable rental property or home
ownership.
We have, over the last 15 years, made it a substitute for
public housing. And since 1998, we have made it basically
public housing in many ways when we said only 30 percent or
less must get 75 percent of the vouchers.
To me, there are still people in this country at 60 percent
of median who can use a voucher for a period of time. Pre-1998,
we spent about 3 years with the voucher, 3.5 years. Since 1998,
it has gone to about 8 years.
But the key to it is that we are not serving any more
people. We are serving the lowest of the lowest and we have
planned projected prices that clearly should not be paid in
many parts of the country.
That is not in Senator Murray's area in the West Coast or
in the East Coast. Maine, Massachusetts, yes, those are very
high markets. But in the Southeast, the South, and the
Southwest, the markets are not that high. In the Midwest, the
markets are not that high. We have ample rental apartments, but
still we are paying this unit-based cost.
So my contention is, Senator, if we can pass the flexible
part of the Voucher Program now that it is already budget
based, we can begin to house more people and they will not be
on the program as long.
NEGOTIATED RULE-MAKING
Senator Bond. I raised concern earlier about the public
housing negotiated rule-making. The negotiated rule was based
on a study conducted by the Harvard University Graduate School
of Design. Unfortunately, the OMB-revised rule appears to
deviate significantly from the negotiated rule. Is not this
revision, substantial revision a violation of the negotiated
rule-making process which we are required by statute?
Mr. Jackson. I had a meeting yesterday with the leadership
of the three major entities that represent housing authorities.
That is the Council on Large Housing Authorities, five of the
Public Housing Authority directors, Ann Clap of the Council on
Large Housing Authorities. They perceived that it is.
We think that we were very candid with them in our process
of negotiation when we said that there is always possibilities
that there will be changes. During the comment period, you will
have a chance to make your wishes known.
We think that probably 85, 90 percent of what we negotiated
is within the rule today. Were there changes? Yes. Will they
have a chance to make sure that their voices are heard?
Absolutely. Are the housing authorities losing? Yes.
But the majority of the housing authorities are gaining
under the present negotiated rules, Chairman Bond. And, you
know, we think 80, 85 percent of them are gaining. Will we ever
get 100 percent? No.
But we believe--and we are open, as I told all three of the
representatives yesterday, to listening to them and to go back
and see if there is some efforts we can make to correct some of
the concerns that they have.
FHA MORTGAGE INSURANCE
Senator Bond. One final question is going to be on FHA
mortgage insurance. And I would invite Mr. Donohue to come back
up to the table and just give us a quick summary of what is
happening with the increasing FHA defaults and what is your
assessment of the Zero Downpayment program based on the audits
you have conducted on the FHA mortgage insurance program.
Mr. Donohue. We have done substantial work as far as audits
with regard to the FHA default and we concur with the spiked
increase of defaults in the past few years. I believe you
quoted 6.9 percent for 2004.
I believe in our review, the zero down payment or no out-
of-pocket money for the recipient has inherent problems that
can impact on the FHA funds even though I know FHA is
increasing the premium amounts, but I do think that this could
have an impact on the function and operation of FHA.
Senator Bond. Mr. Secretary, home ownership is at an all-
time high, 73.7 homeowners. However, some people are not ready
for home ownership.
Mr. Jackson. That is correct.
ZERO DOWNPAYMENT ACT
Senator Bond. Why should we take the risk to the FHA fund
when it appears that the only way you can reach out is to
provide people no-cost housing which we have seen unfortunately
leads to defaults? And it is not only disastrous for the
community but disastrous for the credit history and the
reputation of the families who get this so-called benefit.
Mr. Jackson. Mr. Chairman, FHA claims are down 15 percent
from last year. And why I think it is necessary, I will tell
you. Again--and I do not say this for advisement. I am probably
the most traveled Secretary to the persons that we serve.
I would just like to use an example of a family that I met
in Las Vegas, the Gonzaleses, who came to this country, I
think, some 20 years ago. The wife works in the hotel, but she
works in the maid service. The husband works in the kitchen of
another major hotel.
Together they make about $40,000 each. I believe that the
most difficult things that they said to me with them is the
ability to make the down payment and closing costs. They are
paying about 42, 43 percent of their money for rent.
If we can get them into a home, I am convinced in my heart
that they are going to stay in that home. They will probably be
paying about 30 percent of their income for rent.
See, I believe this. I will not call the name of my friend
because if I call him, you and I will both know him. But I have
a friend who is a major doctor who has defaulted on two homes
and both of them were zero down payments. He still has another
million dollar home with a zero down payment.
I believe that if we can give low-and moderate-income
persons the same opportunities, we will not have a huge default
rate. I believe we should give them that opportunity.
And, you know, I will just close with this, something that
my mother used to say, and this is why I stress home ownership
a lot but also affordable housing. To live with a dream might
be madness, but to live without a dream is insanity.
There are a lot of people who want home ownership. I think
if we can help them through what the President has put forth
with the American Dreams Down Payment Act and Zero Downpayment
Act a number of people who would not have the opportunity to be
homeowners will be.
Senator Bond. I appreciate your explanation. But when you
look at what happens, I am afraid that is a path for a lot of
hardship for communities and families.
Senator Murray.
FARM LABOR HOUSING
Senator Murray. Thank you. I just have a couple more
questions and I will submit some. I have some more on HOPE VI
too.
But I wanted to ask you about a significant need across the
country and my home State and that is for seasonable and
permanent farm labor housing.
I am aware of the assistance of the Department of Labor and
Agriculture in this area as well, but it really is not enough
to meet the needs out there.
Can you talk to us about what HUD's current authority is
and activities related to farm labor housing and do you think
your agency is doing everything it can in that area?
Mr. Jackson. I am just not sure. I have to ask the
Assistant Secretary Weicher.
Mr. Weicher. I am sorry, Senator Murray. We do not have
responsibility for----
Mr. Jackson. I did not think so.
Mr. Weicher [continuing]. Lending. We do not have the
responsibility for the Rural Housing programs and the Old
Farmer's Home Administration. We can make loans in rural areas
and we do, but those are separate programs.
Senator Murray. So you do nothing for farm labor housing?
Mr. Weicher. I beg your pardon?
Senator Murray. You know, I notice that you talked a lot
about homelessness and I know that the President reactivated
the U.S. Interagency Council on Homelessness so cabinet-level
leaders can work together on that problem.
The farm labor community is one of the most poorly-housed
populations in the Nation and the only government solutions
really are spread out over three different departments.
Mr. Secretary, you are the lead national official for the
Nation's housing needs and farm labor housing is one of those.
Would you see any merit in convening a cabinet-level
working group to address farm labor housing and would you be
willing to work with me on this?
Mr. Jackson. Absolutely.
Senator Murray. Well, I would like to----
Senator Bond. Senator Murray, excuse me. I have been
summoned back to my office and if you don't mind, I will give
you the----
Senator Murray. Great.
Senator Bond. I thought you might just like a little bit of
practice in case. So with that----
Senator Murray. Senator Leahy and I will be more than----
Senator Bond [continuing]. I thank you, Mr. Secretary, for
your noble efforts to answer some unanswerable questions. I
intend to ask others the same questions.
And, Senator Leahy, you can continue with Senator Murray.
Senator Murray [presiding]. I just have one additional
question----
Mr. Jackson. Thank you, Mr. Chairman.
Senator Murray [continuing]. And I will turn it over to
Senator Leahy. But thank you, Mr. Chairman.
Mr. Secretary, I have one other question. I do want to
follow up the farm labor housing with you. It is a critical
housing issue and we have not done enough. We need to do more
and I want to work with you on that.
ERROR IN DISTRIBUTION OF SECTION 8 FUNDS
But let me ask you one other question. I recently heard
from King County Public Housing Authority. It is one of the
largest public housing authorities in my State. And they tell
me that as a result of a computing error that was executed by
HUD in the distribution of Section 8 funds, they are enduring a
loss of $800,000 this year.
And I am told that HUD staff admitted to them that this was
done in error, but HUD is also telling them they now do not
have the money to rectify that error, their error.
As a result, this agency is contemplating sending out a
letter to all the families on their waiting list explaining
that as a result of those losses, they are going to be
terminating that waiting list since no families on the waiting
list will have any hope of getting a housing voucher at any
time in the future.
There are currently 5,000 seniors, disabled people, single
parents, and refugees who are on that waiting list who are
about to get that notice because of an error made by HUD.
Are you familiar with this situation?
Mr. Jackson. Yes.
Senator Murray. Well, I would appreciate your response then
today on what----
Mr. Jackson. We are resolving that situation and it should
be resolved immediately with the King County Housing Authority.
Senator Murray. And will we be getting a phone call today
regarding that?
Mr. Jackson. I cannot say today, but Assistant Secretary
Liu has been in contact with the executive director there.
Senator Murray. Well, as of last night, they had not heard
anything. Can we have someone call us today----
Mr. Jackson. I surely will if they have not.
Senator Murray [continuing]. And let us know when that
phone call is going to be made and how that will be rectified?
Mr. Jackson. I sure will, Senator.
Senator Murray. Thank you very much.
Senator Leahy.
STATEMENT OF SENATOR PATRICK J. LEAHY
Senator Leahy. Thank you. Thank you, Senator Murray.
Secretary Jackson, I would like to welcome you, in your
first appearance before our newly reconstituted and renamed
subcommittee. Sometimes it is hard to keep track of all the
name changes.
I see some familiar faces here, of course, Senator Bond,
who just stepped out, and Senator Murray, two people with a
great deal of experience.
So I am looking forward to working with all of you as we
tackle this new bill in the upcoming fiscal year.
This is my first hearing as a member of the subcommittee,
although I have been on the full committee for nearly 30 years.
I wish we could start on a more positive note.
But if we look at the President's proposed budget, it calls
for a total of 12 percent in cuts to housing and community
development programs. Some days I wish our housing and
community development programs were treated with the same
expanding budget as they are if they are in Baghdad or
somewhere in Iraq and not here in the United States.
ELIMINATION OF CDBG PROGRAM
Most egregious I find is the complete elimination of the
Community Development Block Grant programs. I know that has
been raised this morning, but I have got a couple of questions
on it.
And I am not suggesting it is an either/or thing with Iraq,
but we do fall over ourselves to increase, for example, law
enforcement money for Iraq at the same time we eliminate the
Cops program here in the United States.
We work to increase housing in Iraq, we cut it here. We
increase some of the educational funds for Iraq, we cut it here
in the United States.
And after a while, people are justified in asking do we
have to be an either/or as a great nation?
CDBG is the largest program up for elimination. And the
President says he calls it a Strengthening America's
Communities Initiative, some of us however call it the
Abandoning America's Communities initiative.
Under the proposal, 18 community and economic development
programs would be abolished. A new block grant program will be
established at the Department of Commerce.
Now, I see no specifics in the goals of this program. We
have no information on how the money is going to be allocated.
We have no information on what activities will be eligible. We
do know however that it is going to be $2 billion less than was
spent last year in community and economic development.
And considering the fact that your agency, Secretary
Jackson, is principally responsible for housing and community
development, why would you agree to turn this over to the
Department of Commerce? They have no experience in this field.
Your department has decades of experience. You have superb
professionals at HUD, from both Democratic and Republication
administrations. Commerce has none of that expertise.
How do you justify this?
Mr. Jackson. Senator, as I said before the House Committee,
we made what we perceived as a logical argument as to where the
Economic Development Program should be housed, that is the
Strengthening America's Community Initiative Program. The
decision was made that it would go to Commerce.
We are in full agreement that the economic and development
programs from those 17, 18 departments should be consolidated.
We felt that we could do the job at Housing. But Commerce also
had an economic and development program.
And the decision was made and I fully support the
consolidation. I will tell you that right now of those
programs.
Senator Leahy. Does this not eliminate community
development as part of HUD's core mission?
Mr. Jackson. We have zeroed out $4.5 billion that was
allocated for the Community Development Program. We still have
the HOME program and other programs that were under the
community development----
Senator Leahy. If you have got 37 percent less money, how
are you going to do it?
Mr. Jackson. Senator, as I said to the Ranking Member
Murray, we zeroed out $4.5 billion out of our budget. I cannot
comment on what the budget will look like or what the programs
will look like at Commerce.
What I said to her is that we will use our vast experience
in giving advice to Commerce as to what we think is very
important with the Community Development Program.
Senator Leahy. Do not hold your breath waiting for them to
take that advice because basically they cut the money, they got
rid of HUD's core mission, and handed it over to somebody who
has no experience.
The budgets for HUD when they've come up here over the
years have been littered with bullet holes. One year, it is
Section 8. Next it is Public Housing. Next it is CDBG.
It appears to me that the administration just abandoned
HUD. Obviously you feel differently. Your testimony says you
feel differently. But it is awfully hard to see it otherwise.
ADDITIONAL COMMITTEE QUESTIONS
Thank you, Senator Murray. If I have other questions, I
will submit them for the record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Arlen Specter
CDBG AND LOCAL COMMUNITY SUPPORT
Question. The President's fiscal year 2006 Budget proposes to
consolidate 18 economic development programs, including HUD's CDBG
program, into one program within the Department of Commerce. In fiscal
year 2005, the CDBG program was allocated $4.11 billion. However, the
President's fiscal year 2006 Budget would provide only $3.7 billion for
the consolidated initiative, which includes all 18 programs. I have
heard from many Pennsylvania communities that the CDBG program provides
critical funding to support many community development activities such
as housing rehabilitation, public facilities, public services and
economic development.
With the elimination of the CDBG program--the largest source of
Federal assistance to State and local governments for community and
economic development projects, how do you propose to work with local
communities to continue to meet HUD's mission to support community
development and address the housing needs of society's most vulnerable?
Answer. HUD will continue to administer all its housing and
homeless assistance programs that provide much needed assistance in
accordance with HUD's mission. The new program, Strengthening America's
Communities Initiatives (SACI), at the Department of Commerce will also
address community and economic development needs in a productive and
targeted manner.
HOPE VI
Question. HOPE VI enhances communities by decentralizing poverty
and giving families an opportunity to live in mixed-income
neighborhoods with better educational and employment opportunities. I
have visited HOPE VI sites throughout Pennsylvania and have discovered
the critical impact that reconstruction in these public housing
developments has on revitalizing neighborhoods. In the past, HUD
officials have cited problems with the slow pace of HOPE VI
reconstruction and high costs, in comparison to other HUD programs.
However, I have often heard from my constituents that delays of HOPE VI
projects were linked to HUD's approval process. Can you respond to the
concerns raised by my constituents that delays in HOPE VI projects were
often the result of HUD policies?
Answer. Since its inception as a demonstration program, HOPE VI has
pursued the ambitious and complex goal of revitalizing the Nation's
most severely distressed public housing developments. In pursuit of
this objective over the last 12 years, the program has evolved
significantly in its structure, methodology, and administration,
offering an unprecedented learning opportunity for HUD and HOPE VI
grantees.
As the program evolved, the mixed-finance development approach was
incorporated into the HOPE VI program. In accordance with 24 CFR 941,
subpart 6, which controls such development, the Department has been
reviewing the PHAs' development proposal and legal documents for each
construction phase in each HOPE VI grant. Due to the size of the HOPE
VI grants, combined with other leverage funds that the PHAs have
obtained, each grant may be broken out into 5 or 6 construction phases,
resulting in a complex, and potentially time-intensive review process.
Despite the complexity of the mixed-finance approach, the time it takes
to complete construction has actually decreased significantly over the
life of the HOPE VI program. Where the average grant completion time
was 8 years HUD is endeavoring to lower that average to 4\1/2\ years.
This reduction in time is due to the heightened emphasis HUD
continues to place on meeting deadlines and completing HOPE VI
developments. Earlier in the HOPE VI Program, grantees were having
difficulty constructing the required housing units in accordance with
their original production schedules. HUD made significant strides to
improve its oversight of HOPE VI grantees and management of the HOPE VI
program between 2001 and 2004 in an effort to increase unit production
and decrease delays in completing HOPE VI developments. These changes
resulted in a shift from oversight and management approaches that
included fluid production deadlines and expectations to a more balanced
approach that makes HOPE VI grantees and HUD staff accountable for the
progress of HOPE VI projects. Although grantees have clearly grown in
capacity since the inception of the program, HUD's attention to
deadlines and timely completion of developments has forced grantees to
adhere to schedules and complete projects as planned. In turn, HUD
continues to work internally to minimize the time necessary for review
and approval by developing model documents, waiver opportunities and
other streamlining procedures.
Question. Additionally, as HOPE VI has accomplished one of its
goals of demolishing 100,000 units--which suggests to me that the
program has been effective--how does HUD propose to accomplish this
level of reconstruction in the future if HOPE VI is eliminated?
Answer. Rather than funding new rounds of HOPE VI grantees in
fiscal year 2006, the Department believes that it is more responsible
for the Department to aggressively manage and complete the grants
currently awarded, many of which are years from completion. This pause
will also give the Department time to continue to develop better
methods for assessing distress, develop new financing tools and
delivery mechanisms that are less costly and more efficient, and
explore the need for a new public housing revitalization program that
is designed to address the scope of severe distress present in today's
public housing inventory.
The Department recognizes the importance of addressing the current
capital backlog within the public housing inventory. In most cases,
this need can be more appropriately met through other modernization and
development programs operated by the Department e.g., the Capital Fund,
Capital Fund Financing Program and Mixed-Finance development. The
Department continues to encourage housing authorities in need of this
assistance to submit project proposals to these programs. To date, the
Department has approved over $2.4 billion in transactions using the
Capital Fund Financing Program, with approximately $94 million in
additional funds in the pipeline. Of the approved transactions, over
$254 million will be used for development activities.
MOVING-TO-WORK
Question. Moving-To-Work (MTW) has enabled public housing
authorities to implement federally-funded housing programs based on
local needs by providing budget flexibility and regulatory relief. On
December 15, 2005, I, along with 11 Senators, sent you a letter
supporting the extension of MTW agreements to 2011 for public housing
authorities that request an extension of their current demonstration
term. We have received your response and understand that participants
whose agreements are expiring in 2005 will be offered a 1-year
extension. While we thank you for your response and the 1-year
extension, could you please clarify why some public housing authorities
initially received MTW extensions through 2011?
Answer. No housing authorities have received an extension to
continue their MTW demonstration until 2011. Agreements for three of
the demonstration participants have expiration dates that far out.
Oakland and Baltimore only recently executed their agreements and were
given the now standard 7-year term. Their Agreements expire in 2011 and
2012 respectively. Due the complexities of Chicago's Transformation
Plan, their initial Agreement provided for a 10-year demonstration
term, which expires in 2011.
Question. You also stated in your letter that HUD is currently
examining potential legislation to determine if a successor program to
MTW would be useful. Why is HUD examining this possibility, rather than
expanding the current MTW program?
Answer. The examination of the MTW Demonstration and the
overwhelming support it has received has led to the proposed
legislation embodied in Title III of the State and Local Housing
Flexibility Act of 2005. Title III would expand the program to allow
even more Housing Authorities to participate. It would also establish a
permanent program that includes features derived from the MTW
Demonstration: the fungibility of programs, and flexibility to develop
different approaches to providing housing assistance. At the same time,
the proposal corrects some of the difficulties in the Demonstration
that made it difficult to administer and to measure. These include
requirements for uniform reporting and provision of uniform evaluation
measures.
OPERATING FUND
Question. The Quality Housing and Work Responsibility Act of 1998
requires that HUD develop a formula for allocation of Public Housing
Operating subsidies through a negotiated rule making process that
includes the active participation and consensus of stakeholders. In
2000, Congress further directed HUD, in conjunction with the Harvard
University Graduate School of Design, to conduct a study of the cost of
operating a well-run public housing authority. It is my understanding
that following completion of the cost study that HUD worked through a
negotiated rule making process to develop a consensus with public
housing authorities, private housing professionals and affordable
housing advocates on the amount of subsidies, as well as transitional
costs to implement the rule. I am gravely concerned that public housing
authorities throughout Pennsylvania have contacted me recently
asserting that the published rule alters this negotiated agreement
reached on a consensus basis. Could you please provide me with an in-
depth explanation of why HUD made changes to the negotiated funding
rule prior to publication?
Answer. Consistent with requirements under Executive Order 12866
entitled ``Regulatory Planning and Review'' and other rulemaking
authorities, the negotiated rule underwent further HUD and Executive
Branch review prior to publication. As a result, certain of the
committee's recommendations were revised to better reflect the
administration's policies and budgetary priorities. Although changes
were made to certain of the committee's recommendations, the proposed
rule stays committed to the Harvard Cost Study and Negotiated
Rulemaking recommendations.
Question. Additionally, HUD's fiscal year 2006 Budget proposal was
developed after the conclusion of meetings conducted as part of the
negotiated rulemaking process. Does your budget request accurately
reflect the funding necessary to implement the negotiated rule,
including transitional costs?
Answer. The 2006 request of $3.4 billion represents approximately
89 percent of operating subsidy PHAs that are eligible under the
proposed Operating Fund Rule. The proposed rule retains the Negotiated
Rulemaking recommendation for a transition policy of up to 5 years to
allow time for PHAs to align their resources with the new funding. The
proposed rule provides PHAs with tools to convert to new asset
management by providing monthly fees beyond the Harvard cost study for
information technology, asset management, and asset repositioning. The
proposed rule also provides PHAs with the ability to maximize other
revenues streams without receiving an offset in subsidy. PHAs currently
have approximately $2.8 billion in operating reserves that they can use
for transition costs.
______
Questions Submitted by Senator Pete V. Domenici
COMMUNITY DEVELOPMENT BLOCK GRANTS
Question. The President proposes a reorganization of economic and
community development programs by consolidating them in the Department
of Commerce. This consolidation includes taking the CDBG program out of
HUD and transferring it to the Department of Commerce.
Eighteen programs from 5 agencies are involved in the proposed
consolidation. The administration requests $3.7 billion for the new
``Strengthening America's Communities Grant Program.'' These programs
are currently funded at $5.3 billion, so the proposed consolidation
comes with a reduction in funding of $1.6 billion below the current
level. By far the largest program in the proposal is the CDBG program,
which currently receives about $4.7 billion. The administration knows
Congress will not approve the proposed restructuring of economic and
community development programs. We have seen proposals such as this
from previous administrations. However, the proposed funding reduction
will have a significant impact on the ability of the Appropriations
Committee to support ongoing programs in the fiscal year 2006 spending
bills. Mr. Secretary, is your department working on actual legislative
language to reorganize the economic and community development programs
of the Federal Government?
Answer. The Department of Commerce has the lead on developing the
legislative package to implement the Strengthening America's
Communities Initiative (SACI). HUD has provided consultative support.
Question. If your department isn't doing so, is another department
or agency within the administration working on such legislation?
Answer. The Department of Commerce has the lead on developing the
legislative package to implement the Strengthening America's
Communities Initiative (SACI). As stated, HUD has provided consultative
support.
Question. Do you anticipate that the administration will actually
submit such legislation to the Congress?
Answer. HUD is advised that the Department of Commerce is
developing legislation that will be submitted to Congress.
Question. Since Congress has no intention of approving the proposed
reorganization, what impact do you anticipate your Department to
experience when Congress has to reduce ongoing programs by $1.6 billion
to stay within the overall discretionary spending gap proposed by the
President?
Answer. It is important to note that overall funding for 35 Federal
community and economic development programs is only reduced 4 percent,
roughly in line with other domestic spending. The President, via his
2006 Budget, has proposed to consolidate 18 programs (from five
agencies) within the Department of Commerce, including the CDBG
Program. These programs would be consolidated into one new program--The
Strengthening America's Communities Initiative. This initiative would
support communities' efforts to meet the goal of improving their
economic conditions through, among other things, the creation of jobs.
Question. Are you concerned about this eventuality?
Answer. As you know, CDBG funds are distributed according to
statutory formula. If CDBG funds are significantly reduced, we are
still required to distribute them according to the law. Nevertheless,
HUD employees remain committed to the goals of promoting economic
opportunity through community revitalization, home ownership, servicing
society's most vulnerable--homeless individuals and families--and
ending chronic homelessness.
______
Questions Submitted by Senator Patty Murray
CDBG TRANSFER
Question. The administration has stated publicly that so-called
affluent communities should not receive assistance from its new smaller
substitute community development program. What will this mean for
communities that might be comparatively affluent but still have
significant pockets of poverty in their service area?
Answer. It is important that Federal funds for housing and
community development be distributed in a way that maximizes their
impact. In general, affluent communities possess the resources and tax
base to provide services to their pockets of poverty, while distressed
communities often lack adequate tax bases. While the distribution of
funds cannot be changed without authorizing legislation, HUD will
continue to examine certain policies and/or regulatory issues that
would improve the program's effectiveness. For example, HUD's recently
released CDBG formula study identified four distinct alternatives to
the current formula, but Congress could opt for a variety of other
approaches that HUD, or a new program, would implement. A policy review
of this nature could provide an extensive menu of options for changing
the allocation of Federal community and economic development funds.
Further, CDBG grantees continue to express a need for HUD to provide
technical assistance that would help improve grantee performance.
Question. Will they be blocked from participating in your smaller
substitute community development program?
Answer. According to the Department of Commerce, the final number
of communities that receive funding will depend on eligibility
criteria, but the administration believes that funding should be
targeted to those communities most in need. This will provide a greater
level of funding to many communities than they currently receive.
According to the Department of Commerce, for example, by funding only
communities with poverty rates above 10 percent, approximately 700
communities and 50 States could receive funding that is higher than
their fiscal year 2005 CDBG funding levels.
Question. A great many communities across the Nation build low
income housing through the Section 108 loan guarantee program. With
HUD's approval, they obtained a loan guarantee by pledging their future
year CDBG funds. What would become of this Section 108 loan guarantee
commitments if the CDBG program were eliminated?
Answer. The fiscal year 2006 Budget proposes to eliminate the
Section 108 Loan Guarantee Program. However, we believe that existing
Section 108 funded activities will continue to be viable because of
other collateral that was pledged before the loan was approved.
Question. Will HUD still expect the communities to pay off these
guarantees after you have gone ahead and eliminated the CDBG program?
Answer. Communities will continue to have obligations for Section
108 loan guarantee repayment. In some cases, communities may need
assistance in meeting their obligations. This is being taken into
consideration as part of the development of the Strengthening America's
Communities Initiative (SACI) legislation.
CAPITAL NEEDS OF PUBLIC HOUSING
Question. Mr. Secretary, the most recent study of the capital needs
of public housing was published in 1998. That study, which was financed
by HUD, estimated that there was an estimated capital needs backlog of
$22.5 billion. The study also found that an additional $2 billion in
needs was likely to accrue each year thereafter.
Your budget asks us to cut the Capital grant program by a quarter
of a billion dollars. You also want us to rescind almost $150 million
in dollars already appropriated for the HOPE VI program and zero out
the program next year.
Mr. Secretary, I understand that, in a hearing before the House
Financial Services Committee last month, you stated that the capital
backlog has been reduced to $18 billion over the last 4 years.
How is it that the capital backlog has been reduced by $4.5 billion
when funding for all your capital programs have barely kept pace with
the level of accruing deterioration each year?
Answer. The administration's proposed budget provides sufficient
funds to cover the accrual needs of Public Housing Authorities (PHAs).
HUD commissioned a study of the capital needs of PHAs, which was
released in 1998. That study identified an annual accrual of capital
needs of approximately $2 billion per year, as well as a backlog of
capital needs. The administration's proposed budget would provide
Capital Fund Program (CFP) monies in excess of the annual accrual need,
allowing PHAs to meet their accrual capital needs, as well as enabling
them to address some of their backlog capital needs.
Further, activities such as the demolition and disposition of
public housing projects have resulted in the demolition of more than
100,000 units of public housing since the preparation of the capital
needs report in 1998. The vast majority of these units were distressed
and therefore were the most expensive to maintain. This reduction in
the number of public housing units has served to reduce both the
backlog of physical needs as well as the annual accrual. It should also
be noted that replacement units added to the inventory since the
preparation of the report are new and therefore less expensive to
maintain.
In addition to annual appropriations PHAs now are able to access
the private financial markets and unlock the value of their portfolios.
HUD has been implementing the Capital Fund Financing Program (CFFP),
which was authorized under the Quality Housing and Work Responsibility
Act of 1998 (QHWRA). Through the CFFP, PHAs leverage funds from the
private market via a pledge of their future CFP grants. HUD has
approved CFFP Proposals in excess of over $2.4 billion, involving over
102 PHAs in more than 40 transactions. Funds derived from the CFFP have
enabled PHA's participating in the program to address a significant
amount of backlog physical needs.
In the future, HUD looks forward to expanding the CFFP to permit
PHAs to use the Federal Public Housing Operating Fund in the same
manner, and expand the use of mortgages to raise additional private
capital.
Question. Does HUD have a new study to back up your assertion that
the capital backlog has been reduced by $4.5 billion? Would you please
provide that study to the committee?
Answer. The Department is proposing to conduct a study of backlog
needs in 2007.
FARM LABOR HOUSING
Question. Mr. Secretary, in our Hearing on April 14, 2005, I
addressed the significant needs in Washington State for seasonal and
permanent farm labor housing. As you are aware, the farm labor
community is one of the most poorly housed populations in the Nation
and the only government solutions are spread out over three different
departments. Since you are the national official responsible for the
Nation's housing needs, I asked that you raise this issue to the
highest level by convening a cabinet level working group to look at
creative solutions, including working with the private sector to
address this problem. Mr. Secretary, I would like to thank you for
agreeing to this request and working with me on this issue.
Can you tell me the progress of your efforts with this goal?
Answer. As you know, I am dedicated to increasing the minority home
ownership rate in the United States, as well as expanding home
ownership opportunities for very low-income populations. Under my
leadership, HUD has expanded the resources and opportunities available
to farm labor populations, and is now actively implementing policy
recommendations that enhance the management, coordination, and delivery
of HUD programs and services that improve the lives of farm labor
populations throughout the United States. At my direction the
Department continues to make enormous strides in delivering programs
and services to these marginalized populations. These efforts are
occurring through HUD's competitive and formula grant structures, as
well as ongoing program processes which collectively have allowed HUD
to invest over $32 million in fiscal year 2004 in farmworker
communities and colonias areas.
Some of this assistance includes: (a) $2.3 million in Housing
Counseling Grants awarded to organizations providing counseling
services to migrant/permanent farmworker communities and colonias
located in Washington, Oregon, Florida, New Mexico, California, and
Arizona; (b) $3.2 million in Continuum of Care/Emergency Shelter
Homeless Assistance that entails funding to communities with high
concentrations of migrant and permanent farmworker populations and
colonias regions, and; (c) $3.2 million in Rural Housing and Economic
Development (RHED) grant funds.
I am very committed to insuring that HUD continues proactive
efforts to improve the deplorable housing and living conditions of farm
labor populations. These proactive efforts include equipping
organizations that provide services to farm labor populations with the
tools necessary to initiate and sustain housing and development
services. One such technical assistance effort is the Rural Housing and
Economic Development Gateway. A joint collaborative project between HUD
and the Housing Assistance Council (HAC), a nonprofit organization that
has been helping local organizations build affordable homes in rural
areas since 1971. The Rural Gateway assists rural communities--
including farm labor populations--improve local housing and economic
conditions by providing information resources, technical assistance,
training, and investment capital to rural communities.
I know that decent, safe and sanitary housing is a critical
foundation for farm labor populations. However, there are other basic
necessities that play a vital role in addressing the plight of these
communities. This is why I have given my unyielding support to the
development of the Federal Interagency Partnership for Colonias and
Migrant/Farmworkers Communities. The Partnership, initiated by HUD,
provides a continuous dialogue with other Federal agencies that provide
services to these distressed communities to join in coordinated joint
ventures that expand the benefits to farm labor and colonias
populations. The Federal Interagency Partnership includes 14
organizations within Federal agencies that have agreed to identify,
collaborate and streamline service delivery available to these
distressed communities. In sum, the Partnership allows for the
maximization of Federal services assisting farm labor and colonias
populations. In addition to HUD, Partnership members include:
--Corporation for National Service;
--Department of Agriculture/Office of Rural Housing Service;
--Department of Education/Office of Migrant Education;
--Department of Health and Human Services/Offices of Minority and
Special Populations and International/Global Health Affairs;
--Department of Justice/Office of Civil Rights;
--Department of Labor/Employment and Training Administration;
--Department of Treasury/Community Development Financial Institutions
Program and the Community Adjustment and Investment Program;
--Environmental Protection Agency/Office of Pesticide Programs, and
Office of Environmental Justice;
--Federal Deposit Insurance Corporation;
--General Services Administration/Computers for Learning Program;
--Internal Revenue Service/Stakeholder Partnership, Education and
Communication (SPEC) Group/Wage and Investment Division.
These entities are working with HUD to implement collaborative
projects, such as the Legal Working Group and the Government Kiosk
Project, that introduce and expand housing resources and opportunities
to farm labor and colonias populations.
I have also given my support to the Legal Working Group for
Colonias and Farmworker Populations. The Legal Working Group, a direct
product of the Federal Interagency Partnership, consists of attorneys
from 10 Federal departments and agencies who have jurisdiction over
colonias and farmworker issues. The Legal Working Group works to
address civil rights violations perpetrated on migrant and permanent
farmworker populations as well as colonias residents. Residents of
these communities face unique legal issues ranging from discrimination
based on national origin to predatory lending and illegal land sales.
The Legal Working Group was started to assist local community
organizations--including legal aid groups--across the Nation address
the unique needs of these marginalized populations. The goal of the
Legal Working Group is to connect Federal, State, and local government
agencies with community organizations so they can discuss and solve
legal problems that impact farmworker populations in a timely manner.
By working in a collaborative and coherent fashion, government agencies
and the respective services they provide are more effective and
responsive in addressing local problems.
Another effort that I enthusiastically support is the Department's
Government Kiosk Project, which provides very low-income populations
with useful and timely information. The Department of Education,
Department of Labor, Internal Revenue Service, and Environmental
Protection Agency have recently joined HUD in bringing information the
public needs, right to them. These Departments are a part of the
project's efforts to provide information in a user--friendly format,
and that dispenses important and useful government information to
citizens--particularly low-income residents and those who do not have
ready access to the Internet. The Government Kiosks are located in
visible, high traffic areas such as shopping malls and mass transit
centers, which assist in delivering useful and critical information--in
both English and Spanish languages--to underserved populations.
Visitors can access information on how to buy a home, apply for student
loans, make their homes safe from pests, save for retirement, and find
out if they are eligible for a Federal income tax credit.
The Department is also responsible for conducting the National Fair
Housing Policy/Training Conference. This conference provides another
avenue for enhancing services to migrant and permanent farmworker
communities and colonias residents. I know that many attendees found
the information on predatory lending practices and persistent obstacles
limiting equal access to housing very beneficial and insightful.
Question. Will you work closely with me and my staff and provide
the support and technical assistance necessary to address barriers and
find solutions needed to properly address this problem?
Answer. I am unequivocally committed to providing the necessary
support and technical assistance required to alleviate existing
barriers and develop sustainable housing and development solutions that
introduce and expand affordable housing units to farm labor populations
throughout the United States.
My commitment is illustrated in the recent phase one completion of
a Geographic Information System Statewide Mapping effort that
identifies communities utilizing HUD's HOME Investment Partnerships
Program (HOME) and Community Development Block Grant (CDBG) funds. This
map identifies specific farm labor housing projects that have recently
been completed, or are currently under development. Utilizing this
information, HUD will provide tailored services such as housing
counseling and financial literacy education, to identified farm labor
populations.
At my insistence HUD has also been providing needed technical
assistance and funding to units of local government and non-profits
providing services to farm labor populations in the Pacific Northwest,
including the State of Washington. This assistance has led to the
development of over 500 temporary or permanent housing units and
related water and wastewater infrastructure systems.
The Department also provides assistance to areas with high
concentrations of farm labor populations, such as the Yakima Valley
area of Washington. One recent effort connects economic development
projects with local and regional farm labor housing efforts.
Subsequently, new farmworker housing is being developed while
simultaneously expanding job creation opportunities for this
population.
An additional benefit of this proactive activity is that HUD is now
working with the Diocese of Yakima Housing Service and the Office of
Rural Farmworker Housing to develop a needs assessment for the local
farm labor population. The results of the assessment will provide a
framework from which CDBG, HOME and other public funding resources will
be pulled together to design and build affordable housing units, as
well as introduce job creation opportunities for the farmworker
population.
The Yakima Valley Needs Assessment project mirrors a similar
project that HUD recently completed in Manatee County Florida. The
Manatee County Florida Farmworker Needs Assessment was initiated to
address unmet local needs and capitalize on existing assets and
partnerships with local governments, nonprofit groups, faith-based
organizations, and local housing providers. Due to the absence of
farmworker data and statistics, local organizations were challenged to
obtain funding that would address the deplorable living conditions of
area farmworkers. In response, HUD funded the design and implementation
of a survey instrument that collected local farmworker housing
statistics, work conditions, income, area demographics, financial
literacy levels, and health conditions.
The collected data has been analyzed and is having an enormous
positive impact. Nonprofit and government entities are now able to
accurately demonstrate the fundamental needs of the local farmworker
community. A collateral benefit is that the survey has prompted local
service providers to develop a farmworker profile, an outreach plan,
and an action strategy from which to address identified needs.
As these examples and technical assistance projects illustrate, I
know the value and importance technical assistance brings to
communities that so desperately need affordable housing and economic
development opportunities. I will continue to work and provide
technical assistance and other resources that alleviate the plight of
farm labor populations. I look forward to working with you and your
staff.
Question. What are HUD's current authorities and activities related
to farm labor housing?
Answer. The Department administers the Southwest Border Region
Colonias and Migrant/Farmworker Initiative (SWBR Initiative), to help
these distressed communities to address their respective needs. The
SWBR Initiative is not a program and as such, does not have specific
grant dollars, but works to coordinate HUD services and programs going
to these communities. The SWBR Initiative also works to identify
existing resources, and collaborate with Federal, State and local
partners to improve the plight of colonias and farmworker communities.
The mission of the SWBR Initiative is to improve the housing and living
conditions of migrant and permanent farmworker communities located
throughout the United States, and colonias located along the U.S.-
Mexico border.
To maximize resources HUD staff routinely conducts joint workshop
sessions that combine information on, and access to, several resources
together, such as conducing sessions that consist of housing
counseling, financial literacy education and other asset building
resources.
Over the past few years HUD, working through the SWBR Initiative,
has invested over $120 million in farmworker communities and colonias
through the Department's competitive and formula grant structures, as
well as on-going program processes.
Under my direction, during the past few years, HUD has initiated a
number of projects that address the needs of farmworkers and their
families residing in the Pacific Northwest. HUD sponsored a
Practitioners Conference entitled ``Harvesting Hope for Our
Communities--A Tri-State Practitioners' Conference'' that was held in
Yakima, Washington. The conference brought together nearly 300
attendees to not only discuss the challenges faced by farmworker
communities, but also to develop useful and practical strategies, share
techniques and methods, and formulate new partnerships to spur action
and activities.
Recent HUD efforts include conducting the first annual Yakima
Valley Homeownership Fair at the Sun Dome in Yakima, Washington. The
fair attracted over 1,750 attendees and over 25 exhibitors. The fair
was held in Yakima Valley, the agricultural center of Washington State
and home of a large migrant and permanent farmworker population.
Informational materials, and on-site workshops, were available in both
English and Spanish languages.
With my support, HUD has also been proactive in outreach
activities. In fact, only recently HUD staff participated in a
bilingual (English and Spanish) radio broadcast (KDNA) in Granger,
Washington that highlighted HUD's Federal Housing Authority home
ownership information. The listening audience consists of over 25,000
Spanish-speaking daily listeners located in Central Washington and
South Central Oregon. These areas consist of very large populations of
migrant and permanent farmworkers.
This proactive activity also includes the recent distribution of
HUD excess computers to various educational institutions located
throughout the Yakima Valley of Washington. The recipient educational
institutions have large populations of very low-income students that
have no access to computers. Over 20 educational institutions,
including rural communities with large farm labor populations, received
over 125 excess HUD computers and related equipment.
Another proactive activity that I am happy to report on is the
placement of a HUD government kiosk in Sunnyside, Washington. As I
mentioned earlier, HUD's government kiosk provides and dispenses
important and useful government information--such as how to buy a home,
save for retirement, and eligibility for a Federal income tax credit--
to citizens, particularly low-income residents and those who do not
have ready access to the Internet. Information is accessible in both
English and Spanish languages.
The placement of a government kiosk in Sunnyside, Washington is
especially beneficial when one considers that Sunnyside has one of the
largest concentrations of migrant and permanent farm labor populations
in Washington State. The importance and utility of the government kiosk
is demonstrated in the fact that this particular kiosk is the fourth
active in the Nation, with a monthly average of nearly 900 hits a
month.
At my insistence, HUD has also been actively engaged in expanding
our partnerships with Community and Faith-Based organizations. Only
recently, HUD staff met with 90 individuals representing faith and
community-based organizations at a 2-day grant-writing workshop. The
workshop took place at the Holy Family Activity Center, Diocese of
Yakima and was conducted by HUD's Faith Based and Community Liaison.
The session provided attendees with effective grant writing techniques
and assisted in strengthening the capacity of emerging organizations to
compete for HUD and other Federal grant opportunities.
An additional technical assistance workshop that also recently took
place was entitled, ``Making Connections through Housing and Economic
Development.'' The workshop facilitated discussion and cultivated
partnership opportunities between housing and economic development
organizations, professionals and public agencies that provide a variety
of services to the Yakima Valley farmworker population.
HUD has also been actively engaged in expanding the positive
benefits of existing service providers. One example is HUD's assistance
to a non-profit--La Clinica Self-Help Housing--based in Pasco, WA. La
Clinica, has been in operation for the past 11 years, and is
responsible for the development of 160 homes located in Benton,
Franklin, Yakima, Grant and Adams County, Washington.
With HUD's assistance La Clinica has now started to work with
several additional funding resources, including the U.S. Department of
Agriculture Rural Development program, and HUD's Community Development
Block Grant program, HOME Investment Partnerships program, and the
Housing Counseling program. These efforts recently allowed La Clinica
to dedicate 10 new homes to local farmworker families in Pasco,
Washington.
My directions to staff have served as a catalyst for HUD staff to
become actively and intimately engaged with local and regional efforts.
This can be seen in HUD's recent participation in the Washington State
Farmworker Housing Trust (WSFHT) Advisory Board. The WSFHT is a non-
profit organization founded in 2003 to bring new resources to meet the
need for decent and affordable farmworker housing in Washington. The
Trust is a unique collaboration of growers, farmworker advocates,
housing providers and community leaders.
To advance the objectives of the WSFHT, HUD recently provided
technical assistance funds that were utilized to organize and
facilitate the WSFHT Capacity Conference in Yakima, Washington a few
months ago. Participants at the conference developed a plan that will
focus on building capacity to produce and effectively manage farmworker
housing in the State.
HUD's recent participation also includes providing assistance to
the WSFHT Board that centered on how to design, structure and implement
an effective needs assessment instrument. The WSFHT hopes to design and
implement a farmworker needs assessment survey that will be used to
define the magnitude and scope farmworker housing and living conditions
and related needs in the State of Washington.
Question. Do you believe your agency is doing all that it can in
this area?
Answer. As exemplified by my instructions and guidance to HUD
staff, and subsequently by the proactive actions of HUD staff I believe
that the Department is maximizing available resources and efforts to
address the housing and living conditions of farm labor populations
throughout the United States. As demonstrated by these actions I am
firmly committed to ensuring that decent, safe and affordable housing
is made available to migrant and permanent farm worker populations. My
unyielding advocacy and support of HUD's Southwest Border Region
Colonias and Migrant/Farmworker Initiative underscores the importance I
place on introducing and expanding HUD services and programs to these
marginalized populations. I am working to institutionalize HUD services
and programs that benefit these communities so that they are not one-
time successes.
The benefits of this focused and concerted effort can be seen in
the investment of over $120 million in the past few years that
benefited migrant and permanent farmworker populations throughout the
United States.
To further the efforts and critical work that the SWBR Initiative
continues to undertake, I am reassigning personnel to the State of
Washington whose task will be to continue to introduce and expand HUD
services to migrant and seasonal farm labor populations located in the
Pacific Northwest Region.
Through the Federal Interagency Partnership for Colonias and
Migrant/Farmworker Communities, I will continue to support the
identification of existing resources, and collaborate with Federal,
State and local partners to improve the plight of these communities, as
well as the collaborative joint-ventures, such as the Legal Working
Group for Colonias and Farmworker Communities and HUD's government
kiosk project.
During my tenure, HUD has made enormous advances to ensure housing
and development efforts are made available to farm labor populations. I
will continue to make available every resource so that the plight of
these populations is alleviated to the fullest extent possible.
CONSORTIA
Question. Your agency has consistently encouraged public housing
authorities to streamline their operations to reduce the demand for
administrative funds. Many public housing authorities in Washington
State participate in a consortium so that they can achieve economies of
scale in their purchasing of services. However, efforts to form
consortia like these have been frustrated by HUD's inability to fully
implement the consortia provisions required by the 1998 Quality Housing
and Work Responsibility Act (QHWRA). In the 6 years since this law was
enacted, HUD has not yet made its data and regulatory systems
compatible with joint filing by consortia. Why has the Department not
yet fully implemented consortia provisions of QHWRA?
Answer. PHAs have always had the ability to form consortia for
purchasing and contracting activities and the Department has encouraged
that. Formation of consortia under Section 13 of QHWRA allows for PHAs
to band together under a formal consortium agreement and subject to a
joint PHA Plan filed with HUD for the administration of their public
and assisted housing programs. Both types of consortia have been
addressed in HUD's procurement handbook for Public and Indian Housing
Authorities. HUD has not made its data and regulatory systems
compatible with joint filing by consortia of all PHA reporting
requirements because consortia are not legal entities HUD contracts
with directly, which forms the foundation for all HUD systems.
Consortia do not meet the standards of a reporting entity. Financial
statement reporting and audits are governed by HUD's Uniform Financial
Reporting Standards (UFRS), which follow Generally Accepted Accounting
Principles (GAAP) and Government Accounting Standards Board (GASB)
Statement 14, which defines financial reporting entities. Following
from this, HUD assesses individual PHA performance pursuant to the
funding and regulatory contracts between both parties, and includes as
components of the evaluation process individual PHA financial
statements, audits, and the physical condition of contractually covered
public housing units.
Question. For example, I understand that the Department has not yet
enabled agencies to jointly file with HUD items like tenant-income
data, Public Housing Authority Plans, and audits. If you are serious
about encouraging PHAs to reduce the demand on administrative funds,
shouldn't these long overdue technology upgrades be a very high
priority for the agency?
Answer. PHAs can and do submit joint PHA Plans to HUD. The PHA Plan
template used for submitting plans includes a consortia designation.
HUD has also substantially streamlined annual PHA Plan contents for
PHAs with less than 250 units, which represents a group very likely to
also form consortia, and reduces administrative burdens. Joint filing
of tenant data and audits is not possible for consortia because PHAs
are legal entities that contract directly with HUD for funding under
various Federal housing programs. PHAs are regulated under Annual
Contributions Contracts, grant agreements, and other funding
instruments that require PHA level reporting to HUD. Financial
statement reporting and audits are governed by HUD's Uniform Financial
Reporting Standards (UFRS), which follow Generally Accepted Accounting
Principles (GAAP) and Government Accounting Standards Board (GASB)
Statement 14. GASB Statement 14 defines financial reporting entities.
Consortia are not legally created organizations and do not otherwise
qualify as reporting entities, and thus joint filing of audits for
consortia is not possible. Where HUD treats multiple PHAs as one entity
for consolidated reporting purposes, it is because they are legally and
organizationally consolidated into one PHA entity. They transferred
their units, funding, contracts, physical assets, and program
administration to a consolidated PHA, which could include a regional,
metropolitan, State, or county PHA.
MOVING-TO-WORK DEMONSTRATION PROGRAM
Question. Mr. Secretary, three of the larger PHAs in my State--
Seattle, King County, and Vancouver, participate in your ``Moving to
Work'' demonstration program. This program helps ensure that low-income
individuals will not be penalized by losing their tenant support as
they struggle to transition off of public assistance. I understand that
HUD has submitted legislation to the authorization committee to expand
the number of PHAs that can participate in the Moving to Work program.
If your legislation is not enacted, is there any risk that the PHAs
currently participating in the program will have their participation
terminated?
Answer. No. The proposed Moving-To-Work (MTW) provisions in the
State and Local Housing Flexibility Act will not terminate current
program participants. This legislation provides automatic 3-year
extensions for those MTW agreements that expire in 2005 and 2006. PHAs
have the opportunity to enter the program automatically with the
enactment of the legislation. At the end of any expired agreement
period under the MTW Demonstration, PHAs can opt into the MTW program
as described in the legislation under the established eligibility
provisions. All existing MTW agreements would be honored to the end of
their term. If legislation is not enacted, MTW PHAs would have to seek
extensions on an individual basis.
Question. Is there anything in your legislation that imposes new
requirements on those PHAs that already participate in the program?
Answer. Yes. Section 302(h)(1) provides that a PHA's performance in
the MTW Demonstration and in the MTW Program would be assessed under
applicable assessment systems that evaluate a public housing agency's
performance with respect to public housing and voucher programs. This
means that a PHA in the MTW Demonstration would be assessed by the
Public Housing Assessment System (PHAS) or the Section Eight Management
Assessment Program (SEMAP) until January 1, 2008. Thereafter, the MTW
PHA in the demonstration or in the program would be required to meet
performance standards developed pursuant to Section 302(h)(2). In
addition to the requirements of section 302(h)(1), Title III may or may
not affect current MTW agencies depending on existing individual
agreements. Housing agencies in the demonstration negotiated contracts
that provided specific conditions and imposed requirements, some of
which may be different from the requirement of the proposed program.
Housing agencies that elect to join the MTW Program when their
contracts expire, or those that elect to opt out of the MTW
Demonstration early and enter the MTW Program, will then be subject to
the requirements of the program.
SECTION 8 VOUCHERS
Question. Mr. Secretary, we have heard from many housing groups
that, during last year's consideration of the Appropriations bill, HUD
understated the amount of funding that would be needed to maintain the
same number of Section 8 vouchers that were active in 2004. As a
result, the program was under-funded by roughly $570 million and 80,000
vouchers have been lost. We have also been told that your fiscal year
2006 request will restore half or 40,000 of these vouchers. Are these
figures accurate in your view?
Answer. No. HUD did not understate the amount of funding that would
be needed to maintain the same number of vouchers that were needed
based on the May through July 2004 reporting period. The fiscal year
2005 Appropriations Act provided a specific amount for the Housing
Choice Voucher program to fund the voucher needs for that period and
for the adjustments allowed for enhanced vouchers and the first time
renewal of tenant protection vouchers and HOPE VI vouchers. As a
result, the Department had to prorate downward the 2005 budgetary
allocations to PHAs by approximately 4 percent. Our fiscal year 2006
Budget request seeks to restore the entire 4 percent proration
reduction.
Question. Will the actual number of vouchers decline by 80,000 this
year?
Answer. No. A recent analysis of actual costs and leasing levels
per data submitted by PHAs to the Voucher Management System through
April 2005 are very constant over the 12-month period ending April 30,
2005. The difference in vouchers leased for the period May through July
2004, compared to February through April 2005, is less than 3,000
vouchers.
Question. If not, what are your precise estimates for the number of
vouchers that were funded in 2004 and 2005?
Answer. Actual vouchers leased and funded for calendar year 2004
were 2,024,553.
Based on the funding provided in the fiscal year 2005
Appropriations Act, the Department expects to fund approximately
1,980,000 vouchers in calendar year 2005.
Question. How many vouchers will be funded if we fully fund your
request for 2006?
Answer. It is too early in the calendar year to estimate how many
additional vouchers can be funded since only 4 months of data is
available in 2005. Assuming the existing leasing levels and HAP costs
can be sustained using the 2005 budgetary allocations, and existing
inflation assumptions hold true, it is reasonable to conclude that an
additional 40,000 to 50,000 families may be assisted.
Question. Based upon HUD's ongoing monitoring of rent burdens, can
you tell me the percentage of families paying more than 30 percent of
adjusted income for rent as a national average in fiscal year 2003 and
fiscal year 2004? Can you tell me the current percentage?
Answer. Current percentages are as follows:
--Fiscal year 2003--68 percent;
--Fiscal year 2004--66 percent;
--Current--69 percent.
Under existing program requirements, new families and movers may
elect to pay up to 40 percent of their income towards rent. For
existing families in the program who chose not to move, there is no
limitation on the percentage of their income they can pay towards rent.
Although the percentages provided above indicate that the number of
families paying more than 30 percent of income ranges between 66 and 69
percent, more than 60 percent of those families' rent burden is between
30 and 35 percent of adjusted income. The average rent burden for all
vouchers is approximately 39 percent and does not represent a
significant increase in the 35 percent average rent burden measured in
1990.
Question. What percentage of families has a rent burden exceeding
40 percent of adjusted income?
Answer. The percentage of families in public housing who have a
rent burden exceeding 40 percent of adjusted income is as follows:
--Fiscal year 2003--14 percent;
--Fiscal year 2004--16 percent;
--Current--18 percent.
Question. The Department's fiscal year 2005 voucher funding
implementation notice States that HUD will reduce existing voucher
payments reserves from the previous standard of 1 month's funding, to
no more than 1 week's reserve level. Some portion of this reduction was
to be used to satisfy fiscal year 2005 rescission requirements.
Does the Department plan to recapture or reduce reserves for any
agency below the 1-week level during fiscal year 2005?
Answer. It is not the Department's intention to reduce any PHA's
reserves below the 1-week level during fiscal year 2005 or fiscal year
2006.
REUNIFICATION OF CHILDREN WITH THEIR PARENTS
Question. I understand that the Tenant protection Fund has a
special designated program for family reunification. In fact, our
Chairman, Senator Bond was instrumental in getting this program
authorized. However, I understand further that no new vouchers have
been issued for this program since fiscal year 2001 and historically
HUD has made approximately 39,000 vouchers available for the family
unification program. I also understand that it is up to each individual
PHA to decide if these vouchers keep their identity after they expire.
How many of the original 39,000 family unification vouchers are still
used for that purpose and if you are under the authorized level, can
PHAs move traditional vouchers into the family unification program?
Answer. PHAs that received Family Unification Program (FUP)
vouchers were obligated to use those vouchers for that targeted
population for 5 years. HUD awarded 3,920 FUP vouchers in fiscal year
2000 and 958 FUP vouchers in fiscal year 2001, so 4,878 vouchers are
still required to be used for family unification purposes. PHAs that
decide to voluntarily continue the FUP voucher program after the 5-year
requirement is completed are not required to report those vouchers as
FUP vouchers in HUD data collection systems. HUD therefore does not
know the actual number of vouchers originally allocated for FUP that
continue to be voluntarily used for this purpose.
Under the housing choice voucher program, PHAs may establish local
selection preferences for admission to the program that reflect the
local needs and priorities of the community. PHAs may use vouchers that
were not originally allocated as FUP vouchers for family unification
purposes by establishing a local selection preference for qualifying
families.
Question. Why hasn't your agency requested or issued new vouchers
to get more of these families reunited over the last 4 years?
Answer. PHAs currently have the ability to use their vouchers to
promote family unification by establishing local preferences for
admission to the regular voucher program for qualifying families. A
special set-aside of vouchers is not necessary in order for PHAs to
serve this particular population. The Housing Choice Voucher Program
has grown into a complex, overly prescriptive program that is
increasingly difficult to administer. The present program has separate
rules for more than a dozen different types of vouchers. A major
component of program reform and simplification is to allow local PHAs
to decide how best to use vouchers to address the needs and priorities
of their community, rather than to continue to dictate these decisions
from Washington through a myriad of complicated boutique voucher
programs.
Question. Is there any truth to the assertion that you have not
issued new vouchers out of the Tenant Protection Fund because you want
to leave that funding available for your proposed rescissions?
Answer. No. There is no truth to the assertion that HUD has not
funded tenant protection voucher requirements. HUD has and is issuing
new vouchers out of the Tenant Protection Fund for tenant protection
assistance to assist families impacted by public housing relocation and
replacement activities and conversion actions related to HUD's
multifamily portfolio. As of June 9, 2005, HUD has allocated 16,211 new
vouchers out of the tenant protection line item appropriated in the
fiscal year 2005 Consolidated Appropriations Act.
Question. Do you intend to propose rescissions from the Tenant
Protection fund for fiscal year 2005, or if we accept your proposal for
fiscal year 2006?
Answer. The rescission language enacted under the Housing
Certificate Fund gives the Department flexibility to take the
rescission from any account within the Department. The Tenant
Protection set-aside can certainly be subjected to the rescission if
there are unobligated balances remaining under this set-aside. However,
at this time there is no specific proposal to rescind Tenant Protection
funds.
HOMELESSNESS
Question. Mr. Secretary, does HUD intend to provide a legislative
proposal for the ``Samaritan Initiative,'' and if so does it limit
supportive services such as case management and would this have a
negative impact because providers and communities would not be able to
fund the housing and supportive services necessary to achieve the goal
of ending homelessness?
Answer. As presented in the 2006 Budget request, HUD proposes to
consolidate its 3 competitive homeless grant programs into a single
program. This new consolidated program will include the eligible
activities similar to the Samaritan Initiative, which will focus on the
chronically homeless, and will combine housing subsidies paired with
quality case management. A key ingredient to the overall success of
ending chronic homelessness is to effectively access mainstream
healthcare, social services and employment resources so that HUD's
limited homeless assistance funding can be increasingly devoted to
housing.
HOPE VI
Question. Mr. Secretary, your budget proposes to eliminate all
funding for the HOPE VI program next year, and you are also asking us
to rescind every penny of the $143 million that we appropriated for the
program this year.
This program is designed to assist public housing agencies in
demolishing their most dilapidated housing units and replacing them
with new, safe and affordable units for mixed-income individuals. I
understand that part of your agency's rationale for decimating the HOPE
VI program is that you believe that the program has already achieved
its intended goals.
Do you believe that we have already eradicated all of the
dilapidated public housing units in America?
Answer. The Department has not had the opportunity to eradicate
every unit of dilapidated public housing in America. However, HUD has
met its goal to eliminate 100,000 units of the worst public housing
through HOPE VI Revitalization and Demolition grants, as well as other
funding and approval mechanisms. Since surpassing the goal to eliminate
100,000 units of severely distressed public housing by fiscal year
2003, HUD has continued its commitment of removing this housing from
the public housing stock. Through fiscal year 2004, HUD had approved
for demolition a cumulative total of 165,155 units and PHAs had
completed demolition of 116,545 total units.
Since the Department has met this demolition goal, the HOPE VI
program is no longer necessary. However, the Department recognizes that
there is an estimated $18 billion capital backlog in the public housing
inventory. While there is clearly serious need for investment in the
inventory, it is not clear how much of this backlog is represented by
severely distressed units needing wholesale demolition and replacement
as articulated by HOPE VI. Current definitions used by the Department
to define severe distress were developed in response to a sub-set of
the public housing inventory that by and large no longer exists i.e.,
severely distressed, super-block, high-rise, public housing
developments with significant social problems in major cities like
Cabrini Green and Robert Taylor Homes in Chicago. A new method for
assessing severe distress, one that considers the nuances of today's
public housing inventory and is more objective, should be developed
before HUD funds additional wholesale revitalization of public housing
communities.
In the interim, the needs of the remaining public housing inventory
can be more appropriately met through other modernization and
development programs operated by the Department e.g., the Capital Fund,
Capital Fund Financing Program and Mixed-Finance development. The
Department continues to encourage housing authorities in need of this
assistance to submit project proposals to these programs. To date, the
Department has approved over $2.4 billion in transactions using the
Capital Fund Financing Program, with approximately $94 million in
additional funds in the pipeline. Of the approved transactions, over
$254 million will be used for development activities.
Question. I understand that HUD wants to address the remaining
dilapidated public housing units by finalizing regulations requiring
all the public housing authorities to demolish their most dilapidated
housing. That will be a huge undertaking.
Are you proposing to give the public housing agencies any
additional resources to accomplish this massive goal of demolishing all
dilapidated public housing?
Answer. The Quality Housing and Work Responsibility Act of 1998
(QHWRA) revised Section 202 for mandatory conversion, and added another
possibility for removals by crafting a voluntary conversion option as
well. More than 140,000 severely distressed housing have been
demolished over the last 10 years. As a result, it is anticipated that
mandatory conversions will affect the last remaining units that do not
meet the minimal threshold conditions and the related formula cost
test. The Department has requested additional vouchers to cover
Mandatory conversion needs for fiscal year 2006. PHAs will be
responsible for using their existing resources to pay demolition and
relocation costs as they do now under Section 18, Demolition and
Disposition.
Question. Your budget is proposing that capital grants to the
public housing authorities be reduced by over a quarter of a billion
dollars or almost 10 percent next year. Some experts have observed that
cuts in funding to help housing authorities maintain their units will
mean that we will just create more dilapidated buildings that will be
eligible for HOPE VI grants.
How do you respond to that assertion?
Answer. The administration's proposed budget provides sufficient
funds to cover the accrual needs of Public Housing Authorities (PHAs).
HUD commissioned a study of the capital needs of PHAs, which was
released in 1998. That study identified an annual accrual of capital
needs of approximately $2 billion per year, as well as a backlog of
capital needs. The administration's proposed budget would provide
Capital Fund Program (CFP) monies in excess of the annual accrual need,
allowing PHAs to meet their accrual capital needs, as well as enabling
them to address some of their backlog capital needs.
Further, activities such as the demolition and disposition of
public housing projects have resulted in the demolition of more than
100,000 units of public housing since the preparation of the capital
needs report in 1998. The vast majority of these units were distressed
and therefore were the most expensive to maintain. This reduction in
the number of public housing units has served to reduce both the
backlog of physical needs as well as the annual accrual. It should also
be noted that replacement units added to the inventory since the
preparation of the report are new and therefore less expensive to
maintain.
In addition to annual appropriations, PHAs now are able to access
the private financial markets and unlock the value of their portfolios.
HUD has been implementing the Capital Fund Financing Program (CFFP),
which was authorized under the Quality Housing and Work Responsibility
Act of 1998 (QHWRA). Through the CFFP, PHAs leverage funds from the
private market via a pledge of their future CFP grants. HUD has
approved CFFP Proposals in excess of over $2.4 billion, involving over
102 PHAs in more than 40 transactions. Funds derived from the CFFP have
enabled PHA's participating in the program to address a significant
amount of backlog physical needs.
In the future, HUD looks forward to expanding the CFFP to permit
PHAs to use the Federal Operating Fund in the same manner, and expand
the use of mortgages to raise additional private capital.
PROPOSED SECTION 811 CUT
Question. Mr. Secretary, why is Section 811 Housing for Persons
with Disabilities being singled out for a 50 percent cut in this budget
including the elimination of all funding for new production and
rehabilitation of accessible housing units?
Answer. The cut in the Section 811 Budget was one of several
difficult decisions that the Department had to make this year. As you
know, significant cuts and changes were also proposed for other
programs, such as the Community Development Block Grant program.
Question. This proposal to eliminate the project-based side of
Section 811 appears to be completely at odds with the administration's
stated goal of promoting community-based alternatives to costly and
ineffective institutional settings for people with severe disabilities.
Why is HUD seeking to cut Section 811 funding by 50 percent at a
time when HHS has been working so hard to promote independence and
community integration for people with disabilities through the
President's New Freedom Initiative?
Answer. The Department will continue to support the President's New
Freedom Initiative by supporting and fully funding the 40,000 units
that are supported by Section 811 funds.
Question. How will HUD ensure that low-income people with
disabilities continue to have access to affordable housing in light of
the fact that rental subsides alone are not sufficient because rental
units are not available in most communities?
Answer. The Department will continue to support the 200,000 units
that are occupied by persons with disabilities in various HUD programs.
As you know, this includes 40,000 units that are supported by the
Section 811 program. These units are located in many communities
throughout the United States.
OPERATING FUND NEGOTIATED RULE
Question. The cost of implementing the recommendations of the
Operating Fund rule negotiated between HUD and stakeholders was nearly
$4 billion in 2003 dollars. In addition, agencies will incur transition
costs for the conversion to property-based rather than agency-wide
accounting and management required by the rule. Your budget requests
just $3.4 billion for the operating fund for fiscal year 2006. Your
department arrived at a negotiated agreement with stakeholders on this
rule in June. Did funding needs of the negotiated rule figure into your
budget request?
Answer. The issue of ``transition costs'' was discussed during
negotiated rulemaking but was not agreed to in the final Agreement.
Hence, the fiscal year 2006 Budget request does not include any funding
for transition costs. However, that PHAs currently have approximately
$2.8 billion in operating reserves that they can use for transition
costs.
Question. As I understand it, the Operating Fund proposed rule
recently sent to Congress is materially different than the rule
negotiated with public housing stakeholders last June.
Isn't changing the terms of the rule after you have arrived at a
negotiated position a fundamental breach of this agreement?
Answer. Consistent with requirements under Executive Order 12866
entitled ``Regulatory Planning and Review'' and other rulemaking
authorities, the negotiated rule underwent further HUD and Executive
Branch reviews prior to publication. These changes were necessary in
order to incorporate changes reflective of budget and policy
priorities.
Question. The Department released data regarding the impact of the
previously-negotiated rule on individual agencies. When do you plan to
release agency-level data regarding the impact of you proposed rule? I
think this would be key to a productive comment period on the proposed
rule.
Answer. Impacts of the proposed rule on PHAs were presented to the
various public housing trade associations and other representatives and
posted on REAC's Operating Subsidy web-site: http://www.hud.gov/
offices/pih.
______
Questions Submitted by Senator Richard J. Durbin
Question. The President's budget proposes a 5 percent cut in fiscal
year 2006 funding despite the acknowledgment that two new jurisdictions
will become eligible for formula funding, bringing the total number of
jurisdictions eligible for formula funding to 125. The proposed 2006
funding levels of $268 million would return HOPWA to a funding level
between the 2001 ($257.4 million) and 2002 ($277.4 million) when there
were only 103 and 107 jurisdictions, respectively. This means that the
current HOPWA program must support more grantees with less money than
ever before. Why is the Department withdrawing necessary funds while
increasing eligible jurisdictions?
Answer. The Department's fiscal year 2006 Budget request of $268
million for the Housing Opportunities for Persons with AIDS (HOPWA)
program will provide continued housing support for the most vulnerable
individuals and their families living with HIV/AIDS. The funding
request is approximately at the same level as recent program
expenditure patterns (the most recent 3-year average was $274 million
for all HOPWA grantees). HUD estimates that HOPWA housing subsidies and
support in community residences and through direct rental assistance
will enable over 67,000 households to reduce their risks of
homelessness and improve their access to healthcare and other support.
In addition, HOPWA grantees have shown good success in leveraging other
resources to operate these housing programs by committing State, local,
and private resources to their community efforts. On a technical note,
the qualification of new formula recipients has a minimum effect on
formula distributions. This is because they qualify for the smallest
allocations, (generally around $350,000) and because the newly
qualifying cities are in metropolitan areas that are likely to have
been included in a grant to the State in a prior fiscal year. This
latter change would have no net fiscal impact but would change the
entity responsible for managing these grant activities. The correct
number of HOPWA formula eligible communities in fiscal year 2006 will
be 122. This number is being updated based on the use of AIDS
surveillance data recently obtained from the Centers for Disease
Control and Prevention (CDC). HUD has determined that the number of
formula recipients in 2006 will only increase by one additional
recipient (Palm Bay, Florida) as this metropolitan area meets the
statutory eligibility requirements with a population of more than
500,000 persons and a cumulative number of cases of AIDS of greater
than 1,500 cases of AIDS. Further, this area had previously been
included in formula funding to the State of Florida, and as such, no
significant net effect will occur, as the amount of funds allocated to
the State will be proportionately smaller. Also, in fiscal year 2005,
one newly designated recipient (Lakeland, Florida) made use of the
authority provided in a new administrative provision to the HOPWA
appropriations act that with the agreement of their State, allows the
State to continue to serve as the grantee for managing the HOPWA
program in their metropolitan area. The required data from CDC involves
the use of cumulative cases of AIDS in making these determinations,
which includes a significant number of persons who have died due to
AIDS. In 1999, HUD recommended an updated formula based on a CDC
estimate of persons living with AIDS adjusted for area housing costs.
The need to update the formula was further identified in the recent
PART review for this program and a more accurate distribution could be
based on a CDC report for persons living with AIDS and area housing
costs.
Question. HUD is in the process of foreclosing on Lawndale
Restoration, 1,240 project-based Section 8 apartments in Chicago's
Lawndale Community. In the past, project-based vouchers would have been
maintained after foreclosure. However, HUD is not offering that
possibility, and is instead offering tenants Housing Choice Vouchers.
If all qualifying tenants receive Housing Choice Vouchers, tenants of
Lawndale Restoration will comprise a group that is 25 percent of the
tenants who have been relocated from the Chicago Housing Authority
during the past 5 years under its Plan for Transformation.
HUD is not offering other more flexible approaches that take into
consideration whether project-based assistance, Housing Choice Vouchers
or a combination of the two would be more appropriate rental assistance
for this property. Why?
Answer. Over the last several years, the Department has not offered
a project-based Section 8 contract after foreclosure. The Department
believes that residents want flexibility, and the option to relocate if
they so choose. The housing choice voucher gives residents that
ability. In the case of the Lawndale project, the Department is aware
of residents that have indicated their desire to relocate and there are
some residents who want to remain at the project.
Although the Department will be issuing vouchers to eligible
residents, no resident will be required to leave the project if they
desire to stay. If a resident who desires to move from the development
is unable to find other housing, they will always have their current
housing available to them. If a resident decides to move permanently
from the complex, it is because they desire to do so and not because of
the foreclosure action.
Question. Some studies have indicated that 15 percent of voucher
holders in Chicago are unable to sign a lease within 6 months that they
have to find an apartment. Given the saturation in Chicago, explain how
an additional thousand families from Lawndale Restoration will impact
the housing market in Chicago?
Answer. The Department engaged a contractor to perform a market
study in Chicago last year. The purpose of the study was to determine
whether the rental market in Chicago could absorb the number of
families projected to be relocated from public housing to private
sector housing (assisted by the Housing Choice Voucher program) as a
result of redevelopment activity at the Chicago Housing Authority. The
market study concluded that there is an ample supply of vacant
affordable private sector housing to absorb the families projected to
be housed in private sector housing. The market study estimated that
there would be 40,000 affordable vacant units in the local rental
market annually. Based on the market study, the Department believes
that the private market can absorb the families that would be impacted
by the Lawndale restoration.
Question. Will these families be able to find decent housing in
Chicago?
Answer. The Department engaged a contractor to perform a market
study in Chicago last year. The purpose of the study was to determine
whether the rental market in Chicago could absorb the number of
families projected to be relocated from public housing to private
sector housing (assisted by the Housing Choice Voucher Program) as a
result of redevelopment activity at the Chicago Housing Authority. The
market study concluded that there is an ample supply of vacant
affordable private sector housing to absorb the families projected to
be housed in private sector housing. The market study estimated that
there would be 40,000 affordable vacant units in the local rental
market annually. Based on the market study, the Department believes
that the private market can absorb the families that would be impacted
by the Lawndale restoration.
Question. Beyond the Housing Choice Vouchers, will HUD assist these
families in finding housing? If so, how?
Answer. The Department has already provided relocation assistance
(including the costs to move, transportation to find alternate housing,
housing counseling, etc.) to the 180 residents who were required to
move from three of the buildings currently being demolished. HUD is
also providing the same relocation assistance to 35 residents of
another building in the complex that has severe structural problems.
For the remaining buildings, the Department is not requiring the
residents to relocate and therefore there will be no other assistance
provided except for the housing choice voucher. The purchasers of the
buildings will be required to provide relocation assistance while they
make the necessary repairs to the buildings if the residents have to be
relocated during construction. If a resident decides to move
permanently from the complex, it is because they desire to do so and
not because of governmental action and no government relocation
assistance to those residents will be provided.
Question. On March 10, 2005, I sent a letter to HUD requesting that
the Department reconsider HUD's decision to deny the Kankakee County
Housing Authority funding for its entire voucher allotment. Please
update me on the status of this request.
Answer. The Senator's request on behalf of the Kankakee County
Housing Authority (KCHA) concerned HUD's denial of a request from that
agency that HUD adjust the leasing figures used to calculate KCHA's
calendar year 2005 voucher program renewal funding. As background, in
December 2004, HUD provided to each Housing Authority (HA) the leasing
and cost information, based on each HA's prior submissions, that HUD
intended to use as the basis for calculating each HA's calendar year
2005 funding for voucher program renewals. Each HA was given the
opportunity to request an adjustment of any data that was not accurate
or that qualified for adjustment under the terms of the fiscal year
2005 Appropriations Act. KCHA responded to that information and
requested that HUD adjust its leasing numbers to include a number of
vouchers that had been provided to KCHA in a tenant protection action
in August, 2001, but which were not yet under lease during the period
HUD was required to use to calculate calendar year 2005 funding. KCHA's
request was denied because the vouchers provided to KCHA in 2001 had
been in their inventory for a sufficient period of time that they
should have been under lease by the time period used to calculate the
calendar year 2005 funding, which was May through July of 2004. The
fiscal year 2005 Appropriations Act provided that HUD make necessary
adjustments for costs related to first time renewals of tenant
protection vouchers. At the time of KCHA's request, the vouchers in
question had been renewed three times; as a result, KCHA was not
eligible for an adjustment to their leasing numbers.
SUBCOMMITTEE RECESS
Senator Murray. Well, thank you very much, Senator Leahy.
And I agree with you and appreciate your words today.
This subcommittee will stand in recess until Thursday,
April 21, when we will take the testimony from OMB Director
Bolten. And I can assure you we will be talking about the HUD
budget among other things.
[Whereupon, at 11:05 a.m., Thursday, April 14, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]