From the Office of Senator Kerry

Thursday, May 16, 2002

Mr Chairman, I want to take this opportunity to thank you for holding this important hearing on affordable housing and federal housing policy. You have been a leader in the Senate on housing issues, and I look forward to working with you on this critical issue. I very much appreciate the opportunity to discuss the National Affordable Housing Trust Fund Act of 2001 that I introduced last year. I look forward to working with you, Chairman Sarbanes, and others to enact this legislation during the 107th Congress. I ask that my full statement be included in the hearing record.

Today, our nation is facing an affordable housing crisis. For thousands upon thousands of low-income families with children, the disabled, and the elderly privately owned affordable housing is simply out of reach. Recent changes in the housing market have further limited the availability of affordable housing across the country, while the growth in our economy in the last decade has dramatically increased the cost of the housing that remains. The Department of Housing and Urban Development (HUD) estimates that more than 5 million American households have what is considered worst case housing needs. Since 1990, the number of families who have worst case housing needs has increased by 12 percent -- that's 600,000 more American families that cannot afford a decent and safe place to live.

At the same time, there has been a tremendous decline in the available stock of affordable housing. Between 1993 and 1995, there was a decline of 900,000 units of affordable housing available to very low-income families. From 1996 to 1998, there was 19 percent decline in the number of affordable housing units. This amounted to a dramatic reduction of 1.3 million affordable housing units available to low-income Americans.

The lack of available affordable housing has also increased the cost of existing housing. The cost of affordable housing increased above the rate of inflation for the fourth consecutive year in 2000. On average, a person needs to earn more than $11 per hour just to afford the median rent on a two-bedroom apartment in the United States. There is not one metropolitan area in the country where a minimum-wage earner can afford to pay the rent for a two-bedroom apartment. Just to afford a two-bedroom apartment in Boston, you must earn at least $35,000 a year. Teachers, janitors, social workers, police officers and other full-time workers are having trouble affording even modest two-bedroom apartments in major cities across the nation.

This problem is only getting worse. Many current affordable-housing providers are deciding to opt-out of their Section 8 contracts or are prepaying their HUD-insured mortgages. These decisions have and will further limit the availability of affordable housing across the country. For example, over the next five years, the Commonwealth of Massachusetts could see a dramatic reduction of available affordable housing units as Section 8 contracts expire. More than 40,000 units of the existing 60,000 Section 8 housing units could potentially be converted to market-rate apartments or condominiums. Within the city of Boston, more than 16,000 of the 22,000 Section 8 units are eligible for a conversion.

Despite the fact that more families are unable to afford housing, we have decreased federal spending on critical housing programs such as the Public Housing Capital Fund, Elderly housing, and Public Housing Drug Elimination Grants since Fiscal Year 1995. The return to deficit spending let alone the disappearance of what were once budget surpluses makes it almost impossible for any significant increases in the HUD's budget over the next decade. So we're left with a question of choices. HUD's budget for FY 2002 is only $30 billion. Had we reserved one year's tax cut for the wealthiest one percent of Americans we have could taken care of all the public housing capital backlog that we face today.

The question is, what do we do today to face - and to finance - this mounting challenge?

We know we can no longer ignore the lack of affordable housing and the impact it is having on families and children around the country. I believe it is time for our nation to take a new path -- one that ensures that all Americans, especially our poorest children, have the opportunity to live in decent and safe housing.

And the good news is that it's within our means to take those steps today.

I wrote legislation establishing a National Affordable Housing Trust Fund to produce 1.5 million units of affordable housing over the next 10 years using excess revenues from the Federal Housing Administration (FHA) and the Government National Mortgage Association (GNMA). The goal of my legislation is to create long-term, affordable, mixed-income developments in areas with the greatest opportunities for low-income families. Seventy-five percent of the Trust Fund assistance will be given out, based on need, through matching grants to states. This will help ensure that new rental units are built for those who need assistance most: extremely low-income families, including working families. A portion of the Trust Fund will also be used to promote home ownership for low-income Americans.

The National Affordable Housing Trust Fund bill is cosponsored by a bipartisan group of 26 Senators. Similar legislation has been introduced in the House of Representatives and currently has 174 cosponsors, including 9 Republicans. The Trust Fund has been endorsed by more than 2,200 community organizations around the United States in an effort led by the Low Income Housing Coalition. Funding for the Trust Fund would be drawn from excess revenue generated by the FHA and the GNMA beyond the amounts necessary to ensure their safety and soundness. These federal housing programs generate billions of dollars in excess income, which currently go to the general Treasury. It is time to stop taking housing money away from federal housing programs and to start putting in new money to produce affordable housing. According to current projections, approximately $26 billion will be available for the Trust Fund between now and 2008.

Because of the positive effect that the affordable housing trust fund would have on America's children, my legislation was included in the Act to Leave No Child Behind, a comprehensive proposal by the Children's Defense Fund to assist in the nurturing of our nation's children. We also must do everything we can to preserve the existing affordable housing units from opt-outs and prepayments so housing remains available for low-income families, the disabled, and the elderly. That is why I worked with Senator Jim Jeffords to introduce the Affordable Housing Preservation Act, which will provide federal matching grants to states that provide non-federal funds for the preservation of affordable housing. The bill allows flexibility in determining how to achieve the goal of preservation, within guidelines that promote long-term solutions built upon cooperation among state, local, nonprofit and private-sector participants. This will help provide some much needed long-term stability for affordable housing in our country.

I support a proposal by Chairman Sarbanes to develop thrifty vouchers -- these are vouchers that are designed to provide rental assistance to extremely low income families in units that seperately receive a capital subsidy. For example, if 25-units of a 100-unit building were built using funds from the National Affordable Housing Trust Fund so that there is no debt service on those units, a Public Housing Authority could allocate 25 project-based thrifty vouchers to that building so they can serve the extremely low income residents. The vouchers are "thrifty" because they pay only up to 75 percent of the payment standard since they do not have to support debt service payments on a mortgage. Until the trust fund passes, the thrifty vouchers can be used with HOME or CDBG funds.

We need to bring housing resources back up to where they belong and begin again the production of affordable housing in the United States. Everyone here knows that decent housing, along with neighborhood and living environment, play enormous roles in shaping young lives. Federal housing assistance over the past generation, has benefitted millions of low-income children across the nation and has helped in developing stable home environments. However, recent changes in the housing market, along with the potential decline in federally subsidized housing units in the near future, clearly show that we need to take additional steps to both produce and maintain affordable housing units. Otherwise, many more children and their families will live in substandard housing or become homeless. These children are less likely to do well in school and less likely to be productive citizens. They deserve our best efforts and require our help.

Mr. Chairman, thank you for this opportunity to testify.