<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:28697.wais]
S. Hrg. 109-487
HUD'S FISCAL YEAR 2006 BUDGET
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HOUSING AND TRANSPORTATION
of the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
ON
THE PRESIDENT'S PROPOSED BUDGET REQUEST FOR FISCAL YEAR 2006 FOR THE
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
__________
APRIL 21, 2005
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
ROBERT F. BENNETT, Utah PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky EVAN BAYH, Indiana
MIKE CRAPO, Idaho THOMAS R. CARPER, Delaware
JOHN E. SUNUNU, New Hampshire DEBBIE STABENOW, Michigan
ELIZABETH DOLE, North Carolina JON S. CORZINE, New Jersey
MEL MARTINEZ, Florida
Kathleen L. Casey, Staff Director and Counsel
Steven B. Harris, Democratic Staff Director and Chief Counsel
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
______
Subcommittee on Housing and Transportation
WAYNE ALLARD, Colorado, Chairman
JACK REED, Rhode Island, Ranking Member
RICK SANTORUM, Pennsylvania DEBBIE STABENOW, Michigan
ELIZABETH DOLE, North Carolina JON S. CORZINE, New Jersey
MICHAEL B. ENZI, Wyoming CHRISTOPHER J. DODD, Connecticut
ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware
MEL MARTINEZ, Florida CHARLES E. SCHUMER, New York
RICHARD C. SHELBY, Alabama
Tewana Wilkerson, Staff Director
Mark A. Calabria, Senior Professional Staff Member
John M. East, Legislative Assistant
Jonathan Miller, Democratic Professional Staff
Jennifer Fogel-Bublick, Democratic Counsel
(ii)
C O N T E N T S
----------
THURSDAY APRIL 21, 2005
Page
Opening statement of Senator Allard.............................. 1
Opening statements, comments, or prepared statements of:
Senator Reed................................................. 2
Senator Corzine.............................................. 8
Prepared statement....................................... 33
Senator Sarbanes............................................. 10
Senator Schumer.............................................. 13
Senator Martinez............................................. 16
WITNESS
Alphonso Jackson, Secretary, U.S. Department of Housing and Urban
Development.................................................... 2
Prepared statement........................................... 33
Response to written questions of:
Senator Reed............................................. 39
Senator Sarbanes......................................... 46
Senator Schumer.......................................... 47
Senator Martinez......................................... 48
Additional Material Supplied for the Record
Letter from various organization submitted by Senator Sarbanes
dated April 20, 2005........................................... 50
Letter from Nan P. Roman, President, The National Alliance to End
Homelessness to Senator Sarbanes dated April 20, 2005.......... 52
(iii)
HUD'S FISCAL YEAR 2006 BUDGET
----------
THURSDAY, APRIL 21, 2005
U.S. Senate,
Subcommittee on Housing and Transportation,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Subcommittee met at 2:27 p.m., in room SD-538, Dirksen
Senate Office Building, Senator Wayne Allard (Chairman of the
Subcommittee) presiding.
OPENING STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. I am going to go ahead and call the
Subcommittee on Housing and Transportation to order, and I know
that we are starting here just a minute or two early. We are
going to have some votes this afternoon, and they are
anticipated, at least the last time I looked--to start about
2:15 or so, and I was hoping that what we could do is begin to
get some testimony quickly, get some things put in the record.
I am going to keep my comments very brief, and then hopefully
we will give the minority an opportunity. I think they are on
their way, and they can make a comment. If not, perhaps maybe
the Secretary can make a few comments, and then when they show
up, we will give them an opportunity to make some comments for
the record.
If at all possible, I am going to try and get this hearing
concluded around 2:55, and the reason for that is out of
respect for the Secretary's time. I know he is a very busy
person, and we are going to have at least 4 votes, maybe 5, and
in my mind I am figure it is an hour and a half where everybody
is going to just have to sit here in recess while we do all our
work on the floor. And so I hate to have you wait here for an
hour and a half.
That is the plan of action right now, and I just would like
to welcome everyone to this hearing of the Subcommittee on
Housing and Transportation, and today we will be discussing the
FY2006 budget of the Department of Housing and Urban
Development.
I just want to personally welcome you, Mr. Secretary, to
the Subcommittee. We appreciate your making time in your busy
schedule to be here with us today.
Secretary Jackson. Thank you very much, Mr. Chairman.
Senator Allard. And so why don't I go ahead and recognize
you. You can begin your testimony, and then when the minority
shows up, I will give them an opportunity to make some comments
for the record.
STATEMENT OF ALPHONSO JACKSON, SECRETARY,
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Secretary Jackson. Thank you, Chairman Allard, and also
Ranking Member Reed. We will present the 2006 budget here, but
to save time I will submit the full budget to you all.
Over the past 4 years, we have had a very unique experience
in the Administration by promoting homeownership and increasing
accessibility to housing and fighting housing discrimination. I
will submit to you all a $28.5 billion budget for HUD for 2006.
In June 2002, the President challenged us to create 5.5
million new minority homeowners. I can tell you today that when
he challenged us to create 5.5 million new minority homeowners,
he also said that we had to continue the strong housing market
that we had. Since that time, we have created 2.2 million
minority homeowners, which is 40 percent of our goal, and to
date, 51 percent of those homeowners are minorities.
We have also had very strong evidence of the housing
market, and it has been helped by the President's signing of
the American Dream Downpayment Act, which we distributed $160
million to over 400 State and local governments. But the most
important part of that distribution is the $40 million that we
used for housing counseling. We have found that by counseling
people, they take the responsibility and understand the
necessity of what goes with owning a home.
The 2006 budget is the steward of the taxpayers. That is
what we say. We have the Section 8 choice voucher, and we are
pleased to tell you that Section 8, we funded it fully. But if
we look at the history of Section 8, it has gone over the last
5 years from 43 percent of our budget to 57 percent in 2005. At
this rate we cannot continue to fund the program without
cutting other programs. So, therefore, we are asking the
Congress to pass what we call the flexibility bill as it
relates to voucher and to go back to a budget-based system.
Mr. Chairman and Mr. Ranking Member, but specifically Mr.
Chairman, for your leadership in introducing S. 771,
authorizing legislation to create flexible voucher, I would
like to give my thanks and the thanks of the Department.
With that, Mr. Chairman, I am open to answer questions from
and the Members of the Committee.
Senator Allard. Thank you, Mr. Secretary.
I know that Senator Reed has a rather lengthy statement
that he wants to make. I said that is okay, we will give you a
chance to do that. And like I say, this is a minute-by-minute
thing, but my latest memo here shows that the votes have been
pushed back a bit, so that will continue to help serve our
needs this afternoon as we hopefully get adequate discussion on
issues that your Department is facing. So, I want to thank you
again for being here, and now I recognize Senator Reed.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you, Mr. Chairman for holding this very
important hearing on the HUD budget for fiscal year 2006.
I would also like to thank, obviously, Secretary Jackson
for appearing before us to testify on behalf of the Department.
Secretary Jackson. Thank you.
Senator Reed. The Administration's budget request for the
Department of Housing and Urban Development for fiscal year
2006 is $28.5 billion, a decrease of $3.3 billion, or almost an
11-percent decrease from the fiscal year 2005 funding level of
$31.9 billion. However, this 11-percent cut does not fully
reveal the true extent of the devastating cuts to HUD programs
because 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 this fiscal year 2006
budget.
In fact, the overall funding for HUD programs is far much
less than the Administration has indicated. Proposed reductions
to individual HUD programs include, among others, some $4.6
billion from Community Development Block Grant 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 IV, $226 million from Section 8 project-based
assistance, and $252 million from the public housing capital
fund.
I am also especially troubled by this proposed $2.5 billion
rescission for which neither HUD nor OMB has been able or
willing to identify the source of funding for this rescission.
Let me say a little more about some of these cuts. First,
the Administration's proposal to dismantle the CDBG program
along with 17 other community development programs and these
programs with a new program at the Department of Commerce is a
terrible idea. The Administration proposal to fund this new
initiative at $3.7 billion is a 34-percent overall reduction
for all these programs from the fiscal year 2005 level of
almost $2 billion.
Basically, this proposal will eliminate one of our most
important and successful Federal community development
programs--the Community Development Block Grant program, CDBG--
and replace it with a program that will provide fewer resources
to fewer people. CDBG was established in 1974 to provide
Federal funding directly to local communities for housing
rehabilitation, job creation, and infrastructure projects for
low- and moderate-income families and neighborhoods. Over the
past 30 years, CDBG has become the glue that holds together
other Federal and local programs serving low-income people.
Although the Administration is pretending otherwise, the
real issue with Federal community development assistance is not
the current structure of the existing programs, but the desire
to cut back domestic spending.
I am also very concerned over the Administration's approach
to public housing. The Administration is seeking to eliminate
the HOPE VI program as well as rescind the HOPE VI fiscal year
2005 funding of $143 million. The Administration has also
broken a promise to develop a new operating fund formula
through a negotiated rulemaking process. 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.
Finally, I am concerned about the Administration's $46.6
million cut in funding for HUD's Office of Lead Hazard Control.
As you are probably aware, this cut would eliminate the Lead
Demonstration Program that I created, along with Senators
Mikulski and Bond, to provide targeted funding to communities
with the highest incidence of lead-poisoned children in the
country. Your rationale that areas with high incidences of lead
poisoning have now ``developed greater capacity and can compete
for money in the regular grant program'' is a deep
misunderstanding or misrepresentation of our demonstration
program. In fact, our program only provides money to
communities with a demonstrated need. It targets funding to
communities with the worst problems. This HUD cut, which will
harm children, is especially troublesome.
Given the Nation's current fiscal problems, I am not
expecting a big increase in the HUD budget. However, I think
the Administration's proposals will hurt some of the most
vulnerable people in our Nation--children, the elderly, the
disabled, and those with AIDS--and I think you have a lot of
explaining to do, Secretary Jackson, in your testimony. I look
forward to your testimony.
Just a final point. Everywhere I go in Rhode Island, in
fact, around the country, one of the great needs is for housing
for all of our citizens. You know, you do not have to go far.
It is not an urban problem. It is a rural problem. It is not a
Northeast problem. It is a Southwest problem. It is a West
Coast problem. It is a problem across this country. And to cut
the budget for the agency whose task is to assist local
communities with their housing needs by such a significant
amount flies in the face of the reality that faces this country
and faces families across this country. And I find it, to be
kind, problematic.
Thank you.
Senator Allard. Thank you very much for your statement,
Senator Reed, and I thought we would proceed right on to
questions.
First of all, I would just like to take this opportunity to
raise a concern that I think is going to affect HUD's ability
to operate effectively and efficiently, and that is, the
Department currently faces staffing vacancies.
Secretary Jackson. Yes.
Senator Allard. And of the 11 Assistant Secretary level
positions at the Department, 8 are or will very shortly be
vacant, and that includes a number of critical positions, as I
see them. There is the General Counsel and Chief Financial
Officer.
Additionally, half the regional director positions are
vacant, and I think that these vacancies seriously inhibit your
help that you badly need in running the Department, Mr.
Secretary.
Now, I know that we have a real need there, but I also
realize that you are not the one that does the nominating and
whatnot. I assume that you are communicating with the President
your open vacancies that you have in the Department so he is
well aware of what your situation is. Is that correct?
Secretary Jackson. Yes, Mr. Chairman, we are. And we are
moving expeditiously on many of those. They are going through
the clearing process with the FBI.
Senator Allard. Okay. And now, the budget assumes a
staffing level of 9,900, and that is a reduction of 123 FTE's.
Most of the reduction comes from the assumed elimination of
OFHEO's 225 FTE's.
Secretary Jackson. Yes.
Senator Allard. And given these reductions in staff levels,
you are requesting an increase of $34 million for salaries and
expenses. Would you explain that ambiguity, if you would,
please?
Secretary Jackson. We are not hiring new persons. What we
are requiring is to meet the pay raise that was mandated, and
we are asking for the extra money just to meet the pay raise so
that we will make sure that our employees get what is due them
and are pleased to get it.
Senator Allard. Okay.
Secretary Jackson. So we are not asking for any new
employees.
Senator Allard. Good. And then on the staffing decisions,
how are those being made? And how are you assuring that we get
the right people and the right programs to administer?
Secretary Jackson. I will tell you that we have been in
constant contact with personnel from the White House, and
myself, the Deputy Secretary, and the Chief of Staff, we have
interviewed a number of persons for the Assistant Secretary
level, the General Deputy Assistant Secretary level. And we are
looking at, I think, a tremendous crop of people who are
willing to leave the private sector and come and work with us.
I am just pleased, as an example, with the core people who want
to be General Counsel for HUD. I think we are very fortunate to
have the quality of people that are willing to do that for the
salary that it pays.
Senator Allard. Thank you.
Now, I want to talk about the FHA zero downpayment
proposal. As part of the budget, the Department proposed or
reproposes the FHA zero downpayment legislation. As you know, I
am a strong supporter of homeownership opportunities and have
worked closely with you on the American Dream Downpayment Act.
Secretary Jackson. Yes.
Senator Allard. And various other proposals to promote
ownership. However, I am concerned about this proposal here.
First, what assurances do we have that such a program would
create sustainable ownership?
Secretary Jackson. We believe that the most difficult
problem that low- and moderate-income people face is the
downpayment and closing costs. It is not the sustainability of
the rent. We believe that if we can go to the zero downpayment,
we will encourage and increase homeownership at a faster rate.
Will we have defaults? Yes. I cannot sit here and say we
will not have defaults. But we will work with those persons who
want to go, and we are not going to change or let down the
standards any.
What we are saying is that after a period of time--and I
cannot remember that, I think it is 4 years--we will reduce the
rate. But we believe deeply that, if given the opportunity,
they will sustain themselves. And we have been able to see it.
Even with the American Dream Downpayment Act, those persons who
get into a home stay. And a lot of times you have persons who
are paying 40, 45 percent of their income for rent. In most
homes that are owned by Americans, it is either 30 or 31 or 32
percent. So they will be saving money that can be used to help
their children, their children's education, or do other things
with it.
Senator Allard. Thank you very much for your responses. I
see that my time has expired. I am going to hold the Members on
the Committee to a pretty strict 5-minute time limit because of
our limited time that we are going to be in session. Then we
will give plenty of time to keep gumming around as long as we
have time here in the Committee. So, I will recognize you
first, Senator Reed, and then Senator Corzine.
Senator Reed. Thank you very much, Mr. Chairman.
Mr. Secretary, let me follow up on some of the comments I
made in my opening statement. As you know, I am particularly
concerned about the cuts to the lead control program. It is
effectively going to eliminate about 30 percent of the
resources that are going to into that program. An underlying
assumption is that we are committed as a Nation and you are
committed as an administration to eliminating lead poisoning by
the year 2010.
According to the Federal Strategy to Eliminate Childhood
Lead Poisoning by 2010, of which HUD was the key author, an
average of 230,000 units need to be evaluated and identified
lead paint hazards controlled each year. Last year, HUD created
approximately 8,800 lead-safe units through its lead program,
and that Federal strategy report recommended increasing Federal
funding of the lead hazard control program.
How will a $47.6 million cut in the HUD demonstration
program enable the Department to do its part to end this
program and achieve the goal by 2010?
Secretary Jackson. Senator Reed, we believe that we have
made great strides based on the demonstration program that you
authored. We feel that now we have eliminated a lot of lead
hazard problems that exist in this country, and we believe that
within this budget that we have, we can continue to address
those issues.
But let me say something else to you that I think is very
important. I understand the question that you asked, but I was
presented with a very difficult circumstance. We have an
expanding Section 8 budget, and I had to prioritize and look
across every program that we had and decide how we best could
serve the needs without putting persons out on the streets. And
we made priorities.
Was it easy? No, sir, it was not. Did I relish that? No, I
did not. But choices has to be made, and we made the choices,
and we felt that we had done quite a bit in the lead base
program and that we could still present and command a program
that would address the needs of those most vulnerable to lead.
Senator Reed. There are other choices that you could have
made, Mr. Secretary, and that would be to raise the top line on
your budget, to have the President say that he is committed to
ending lead in 2010, not just rhetorically but actually, to say
he is committed to keeping people in homes. That choice was
ignored.
Secretary Jackson. No, I would disagree with you. We are
committed----
Senator Reed. So you have as much money as you need to
eliminate childhood lead poisoning by 2010.
Secretary Jackson. Yes, it is still our goal to do it.
Senator Reed. It is your goal. Will you do it with this
funding?
Secretary Jackson. You know, I cannot tell you we will do
it. We are going to make every effort to do it, and I believe
we can do it with this funding.
Senator Reed. Well, you are not making every effort, Mr.
Secretary, when you cut $47 million out of the program.
What you are doing is----
Secretary Jackson. I understand what you are saying, but I
would say I think we have enough to administer the program in a
very formidable way.
Senator Reed. Let me tell you, last year approximately 9
percent of children in St. Louis--that is about 1,100
children--were poisoned by lead. In my home city of Providence,
about 9.5 percent of the children in the city were poisoned.
That is about 831 people. In some school districts in
Rochester, New York, one out of every three children is
poisoned.
This is a completely avoidable but very dangerous childhood
disease that has irreparable damage to children, and, you know,
I do not think it is a choice between putting people on the
street and letting children be poisoned. I think it is a choice
between getting more resources into your Department and other
Federal priorities of this Administration, principally the tax
cuts.
Let us go to CDBG. In 2004, Secretary Bernardi, who is
sitting there, who is the distinguished former Mayor of
Syracuse, New York, said this: ``HUD has a long history of
being there and providing help for people, particularly those
with the greatest needs, our lower-income constituents. CDBG
has certainly been there during boom years and, most
importantly, in times of tightening budgets, which place
greater demands on existing services. We must continue to
support and build upon programs that work, those that have a
proven record of flexibility and the ability to fit in with
local determined needs. CDBG is such a program. It ranks among
our Nation's oldest and most successful programs. It continues
to set the standard for all our block grant programs.''
What has happened in a year that would cause you to reduce
CDBG funding significantly, on the other of 30 percent, if it
has been such a successful program that is flexible, that
works, and, in fact, you propose to restructure the program
almost completely?
Secretary Jackson. Mr. Ranking Member, I will not sit here
and tell you that the Community Development Block Grant program
is not a success. If I did that, I would be pretty
hypocritical, having been chairman of two community development
agencies, one in DC and one in St. Louis.
What we did is zeroed out $4.5 billion out of our budget.
It was going to Commerce. We made a logical argument that we
felt that all of the economic development programs should be
consolidated at HUD.
Senator Reed. Commerce you mean, Mr. Secretary.
Secretary Jackson. No, we made initially the argument that
it should be at HUD, and the decision was made to send it to
Commerce, and we did what was asked of us. We zeroed out $4.5
billion. But I will not sit here and tell you that the
community development program has not been a very active and
stabilizing program.
Senator Reed. I respect your stating what you and your
Deputy Secretary have made clear, that this is a successful
program. I think anybody who has been in local government, as
you have and as the mayor has, understands that this is a
program that not only provides resources but also flexibility.
That is why the Secretary said it. It is a model of Federal-
city relationships. And to cut it--and your rationale now is
you were just told to do it and you are carrying out your
orders. But that is not a good justification for----
Secretary Jackson. No, we did not cut the program. What we
did is zeroed out of our budget $4.5 billion to be----
Senator Reed. Transferred over to Commerce.
Secretary Jackson. To Commerce. So our position is that the
program----
Senator Reed. I do not want to use up my time, but I want
to understand the bookkeeping here. The money that will be sent
over to Commerce is significantly less than what you spent last
year on the program. Is that correct?
Secretary Jackson. You know, Senator, I really cannot
answer that question for you because I really do not know.
Senator Reed. Well, if you do not know, Mr. Secretary,
then----
Secretary Jackson. I just know we zeroed out $4.5 billion
out of our budget. Now, how they are going to use it at
Commerce, I cannot tell you.
Senator Reed. Thank you, Mr. Secretary.
Senator Allard. Senator Corzine.
STATEMENT OF SENATOR JON S. CORZINE
Senator Corzine. Thank you, Mr. Chairman. I have a formal
statement for the record.
Senator Allard. We will make that a part of the record,
Senator.
Senator Corzine. I did not hear Senator Reed's statement,
but I am sure I will echo a lot of the same themes. I am
troubled with the decline in budget top-line numbers for HUD,
and I am particularly troubled with the CDBG efforts. And I
must tell you that hardly anything is bringing more rants and
raves from State and local communities than the CDBG cuts. I am
very troubled with a number of the changes in the public
housing operating fund, basically a reduction to 89 cents for
every dollar needed to cover basic housing operation costs.
Our local authorities are going to have to turn to the
State. I am a little more interested in the State now than
maybe even I was prior to recent days.
[Laughter.]
Somebody is going to have to make up the differences. You
know, devolution of responsibility when a State is already
running a $4 or $5 billion budget deficit is hard to
understand. HOPE VI, which has been an extraordinarily
successful, leverageable program in New Jersey, is zeroed out
in the budget. I do not know where to start. I also have the
same issues on lead. I know the Administration has a very
laudable goal of ending homelessness in America. I think the
steps that we are taking with respect to a lot of the issues,
acknowledging we have serious budget problems--Senator Allard
and I sit on the Budget Committee, and we heard more than
enough to scare people on both sides of the aisle about where
we are going. But these budget problems are not going to go
away. They are just going to go either to the State government
or to the local government. And I do not understand actually
why we are pulling so fundamentally away from providing support
for housing.
I guess my question is: What is the philosophical thrust of
this? We have an affordable housing gap in this country. We
have talked about that under the context of the GSE's. What is
driving this push-away from HOPE VI, the changes in operating
rules that reduce Section 8 housing subsidies for these homes?
What is the philosophy? Is it just simply budget?
Secretary Jackson. Let me say this: The philosophy that the
President and I have is that we are going to do everything in
our power to serve the needs of those most in need. And I
believe that, clearly, when we talk about a number of
programs--and let me use the HOPE VI as an example. The HOPE VI
program has been, in certain places, an excellent program.
Senator Corzine. Extraordinary.
Secretary Jackson. No, I would not say extraordinary,
Senator. I would say that of the 200 or so awards that we have
made, we have only finished, in the last 12 years, 33 of them.
We are standing with $3 billion outstanding that is over 5
years old. So it is not extraordinarily successful. And when we
dreamed up the HOPE VI program, I was one of the committee
who----
Senator Corzine. My point was it is extraordinary in those
communities where it has been properly executed and changed,
and one wonders why we do not use the example of those places
that have been successful to try to get this program to be a
driver of economic renewal in our communities as opposed to
zeroing it out because there have been flaws in how the money
has flowed.
Secretary Jackson. I do not think it is just flaws. I think
that the program from its inception has not operated as the
people who were writing the legislation--and a number of
Members are still in the House--thought it would be. It has not
worked as well as we thought, and the key to it is we still
have over $3 billion outstanding.
I believe also that it is my responsibility to make sure
the Section 8 program works, and I have been very honest with
the Committee, and I will be very honest today. It is eroding
the budget. Just 5 years ago, it was 43 percent of our budget.
Today, it is 57 percent of our budget. I had to make very
difficult choices in order to make sure that the Section 8
voucher program was funded fully.
Senator Corzine. Just so you know, make sure that you
recognize that the growth in that budget is absolutely
indicative of the demand for affordable housing in this
society, which we are not providing enough of. I mean, it is
indicative of a demand.
Secretary Jackson. No, it is----
Senator Corzine. The lines for people who want to sign up
for Section 8 vouchers and/or housing rental units is
extraordinary in my State. Maybe it is different in other
places.
Secretary Jackson. No. It is extraordinary. But I think the
real issue is what has happened to the program since 1998. We
made a decision to serve 75 percent of the vouchers to 30
percent or less than median in this country, where before it
was 50 percent of median, and the average stay on the program
was just a little over 3 years, where the average stay today is
almost 8 years. So we are increasing budgets, but more people
are not being served, and that is the thing that disturbs me
tremendously.
In your part of the country, in Senator Reed's part of the
country, it is very difficult to really use a Section 8
certificate or voucher. We know that. But in the Southwest and
the Southeast, it is not that difficult. But the prices the
landlords are getting for these vouchers are exorbitant. They
should not be there.
So if we can have the flexible voucher program and give the
flexibilities to the housing authorities to use, I think we
will see more people being housed quicker and less people
staying longer on the program. And I know some people will say
that is not true. Well, you know, I have the dubious
distinction of being the only Secretary of HUD that has ever
run a housing authority. I ran three of them. And I had a
budget that they gave me, and I housed people on Section 8. I
do not see a problem going back to budget base and flexibility.
If given flexibility, you know what you have to do with those
vouchers. And I believe that that is the way we are going to
stop the exponential growth of this program. Otherwise, it is
going to eat away at our budget continually.
And let me say this when you say there is a need. I do not
see that we have an affordable housing problem in the United
States. I think we have it by regions. If you are talking about
your part of the country, we have a serious problem. If you are
talking about Rhode Island, we have a serious problem. But if
you are talking about Dallas, if you are talking about Fort
Worth, if you are talking about Chicago, no, it is not a
serious problem like you will see in New Hampshire, Maine, and
other places.
Senator Allard. Senator Corzine, thank you, and you and
Senator Sarbanes came in after I explained where we are on this
Committee. I am going to try to keep the 5-minute rule as
strict as I can because we have about four or five votes that
are going to be coming on the floor. They have been delayed, so
it is going to help us out this afternoon to manage it. And
that takes up nearly all of our hearing time that we had set
aside.
We are on the first round of questioning, so I want to give
Senator Sarbanes an opportunity to make an opening statement
and to go ahead and ask questions if he would like. Myself,
Secretary Jackson, and Senator Reed have taken our full
statements and put them in the record, and we will put your
full statement in the record, Senator Corzine, and then I will
call on Senator Sarbanes.
Senator Sarbanes, we are in the first round, and you are
up.
STATEMENT OF SENATOR PAUL S. SARBANES
Senator Sarbanes. Thank you, Mr. Chairman.
Mr. Secretary, I guess I am wondering what happened to the
HUD budget on the way to the Congress.
[Laughter.]
It must have gotten waylaid somewhere. One hopes it was not
like this when it came out of the Department, but who knows,
and maybe we might examine that here today.
My reading is that the overall funding levels have been cut
about 12 percent from fiscal year 2005 to fiscal year 2006. Do
you disagree with that?
Secretary Jackson. I cannot tell you that they have been
cut. We shifted $4.5 billion out of our budget to go to
Commerce.
Senator Sarbanes. Yes, that is interesting. Was that your
idea to send it over there to Commerce?
Secretary Jackson. I think just before you came in,
Senator, I said to Senator Reed that I think that HUD made a
logical argument that economic development should, with the
community development program, stay at HUD. The argument we
felt was very strong. But the decision was made to consolidate,
and I totally support consolidating the programs. They should
be consolidated because the way they are piecemeal today is not
good, because a lot of times we do not know what economic
development----
Senator Sarbanes. Now, the consolidation I think was about
$4.7 billion out of the HUD budget?
Secretary Jackson. It was $4.5 billion out of our budget.
Senator Sarbanes. Yes, and it was consolidated into an
agency over at Commerce?
Secretary Jackson. Yes.
Senator Sarbanes. And was their budget about $370 million?
Secretary Jackson. Yes, their economic development program
was about $370 million.
Senator Sarbanes. $370 million.
Secretary Jackson. Yes.
Senator Sarbanes. And you sent over there $4.5 billion.
Secretary Jackson. We zeroed $4.5 billion out of our
budget.
Senator Sarbanes. Boy, that is the tail wagging the dog, is
it not? So it seems to me. Public housing has been cut. You are
talking about eliminating the HOPE VI program. Actually, are
you also talking about rescinding what the Congress
appropriated this year for HOPE VI?
Secretary Jackson. No. We have the HOPE VI NOFA on the
street. We have not rescinded it.
Senator Sarbanes. $143 million that we appropriated for the
current fiscal year, you are not proposing to rescind it?
Secretary Jackson. We had proposed, but it was told to us
that we move forward with it, and we have.
Senator Sarbanes. Oh, good. Who told you that?
Secretary Jackson. Senator Bond, for one.
Senator Sarbanes. Oh, good.
[Laughter.]
Senator Corzine. You should ask him how many Missouri
projects are in HOPE VI.
Senator Sarbanes. I am going to get to that one.
[Laughter.]
I understand the disabled housing program, Section 811, is
being cut 50 percent and further being restricted to voucher
assistance only. Is that correct?
Secretary Jackson. It is not--yes, it is. What we did is we
were still under all of the outstanding vouchers, but we are
not building 1,500 new units.
Senator Sarbanes. The experts tell us that for the disabled
though you need--they need the services to go along with the
housing. I am quite interested in this subject because I just
introduced legislation to encourage providing services for the
elderly as well. What the experts are telling us is that just
the housing alone is not enough to meet the problem. You need
the services to go with the housing, both for the elderly, but
even more so for the disabled.
Secretary Jackson. Yes.
Senator Sarbanes. But you are not going to continue the
program of constructing housing specifically designed for the
disabled; is that correct?
Secretary Jackson. Yes. We did not put in for 1,500 new
units, but we will continue to fund the 40,000 units we have
out there and provide the assistance.
Senator Sarbanes. Mr. Chairman, I would like to put in the
record two letters of opposition to the block granting of the
Section 8 voucher program and the eliminating of the various
protections that have ensured that it provides affordable
housing, first and foremost, to those who need it most.
Senator Allard. We will be glad to put that in the record,
and would you like to put your full statement in the record,
Senator Sarbanes?
Senator Sarbanes. I am almost at the end of it here.
[Laughter.]
Senator Allard. Okay.
Senator Sarbanes. One is signed by 39 organizations that
says that the Administration's proposal represents a seismic
shift in national housing policy. ``The program changes
proposed would be devastating to those current participating in
HUD affordable housing programs, as well as the millions in
need of such assistance.'' And it is signed by, amongst others,
the Low Income Housing Coalition, Catholic Charities, Jesuit
Conference USA, Enterprise, Lutheran Services in America,
United Cerebral Palsy, and the Volunteers of America.
The second letter sent by the National Alliance to End
Homelessness explains, ``Section 8 is particularly important in
providing supportive housing, the key to meeting the goal set
by President Bush in 2002, of ending chronic homelessness in
this country in 10 years.''
Mr. Chairman, in closing, because I see I have used up my
first round here, I just want to quote Senator Bond, our
colleague, to whom you made reference earlier, Chairman of the
Appropriations Subcommittee with jurisdiction over HUD. Senator
Bond said to you, Mr. Secretary, at your last appearance before
him. Senator Bond said, ``I believe that the President has been
getting some very bad advice about the housing and community
development needs of the Nation.''
Now, are you the one who gives him advice, the President,
about housing and community development needs, or has that
advice been coming from somebody else?
Secretary Jackson. No. I give advice to the President about
housing needs, especially as it relates to HUD.
Senator Sarbanes. And do you think Senator Bond was
referring to you when he said that, or maybe some other
advisers that the President was hearing from?
Secretary Jackson. I think you would probably have to ask
the Senator that.
Senator Sarbanes. Okay, thank you.
Thank you, Mr. Chairman.
Senator Allard. Thank you, Senator Sarbanes.
Senator Schumer, we are in a first round of questioning,
and if you can possibly put your full statement in the record,
it would help us, and we have four, maybe five pending votes on
the floor, so I am trying to move things along.
STATEMENT OF SENATOR CHARLES E. SCHUMER
Senator Schumer. I will be quick.
Senator Allard. And would like to give you your full 5
minutes, and if we have time I would like to go through a
second round of questioning. Just before I recognize you, I
would like to--again, we have heard some dismal stories here,
but there is a good story out there in that homeownership is at
an all-time high in this country, and so housing programs have
been working.
Senator Schumer.
Senator Schumer. Wait till we undo Fannie and Freddie, and
then we will undo that one good point too.
[Laughter.]
But in any case, I want to thank you, Mr. Chairman, for
holding this hearing. I will be quick with my questions because
I know we have to move along.
The first issue--and this is also good news--smaller but
very consequential. We have in New York City an epidemic of
distressed HUD housing facing enforcement action, and if we do
nothing, particularly when the leases expire, they will just be
put on the market. New York City, even in the poorest
neighborhoods property values are way up, so that you could
profitably just have these rents float to market. It would just
throw 17,000 people out of housing with nowhere to go. Our real
estate market is tight.
And the Secretary has been very helpful. We have already
solved the problem of Logan Gardens. We are about to solve at
Adventist Francis and Gates Patchen, so we are working our way
through them. And I wanted to thank the Secretary for that. He
is working.
Secretary Jackson. Thank you.
Senator Schumer. With the cooperation of yourself and New
York City's HPD Commissioner, Sean Donovan. So that is the good
news front. And I take it we will continue to work in that
direction as we work through those projects.
Secretary Jackson. We surely will.
Senator Schumer. Great. Now, the bad news is operating
subsidies. We have in New York City 600,000 people in public
housing. When I was in the House we already crossed the bridge
that we were not going to build new public housing, and the
amount of money to build new public housing is minimal. In some
years it has been zero, and it was very expensive to build
public housing, and there were better ways. The 80/20 does a
very good job, in my opinion, at least in high cost areas like
New York, of providing affordable housing, so I was not wed to
that.
On the other hand it has been immutable that operating
subsidies would continue to come through. You have a huge
investment. New York's 600,000 people is more than all but 8 or
9 cities in the United States. New York City happens to have a
well-regarded housing authority and it maintains the housing
quite well. Most of the projects have been federalized over the
last 20 years. How can we cut the operating subsidies the way
we are? I mean everywhere we look Section 8, which was regarded
as a good healthy program, we are not getting--and a free
market program, or at least as free market as when the
Government gets involved in housing as you could, is going
down. And now these operating subsidies.
The housing authorities were promised that their loss would
not exceed 5 percent. They were promised that. Every one of
them thinks it. Now we are seeing that they are losing huge
amounts of money. I think in Niagara Falls it was 47 percent.
New York City would lose $185 million. It makes no sense to cut
the operating subsidy. If you want to say, oh, the locality
should pick these things up, well, you could say that about
everything, and frankly, the localities have less money than
the Federal Government. So you are just going to take this
wonderful grand investment that has housed so many poor people,
and basically put it on the road to poor housing, which it is
not now. Can you please explain to me first what made HUD
change its mind with the 5 percent, getting away from the 5
percent cut, but the overall rationale of cutting operating
subsidies which means it is like not maintaining your car, or
it is like a private homeowner not maintaining their home.
Secretary Jackson. Mr. Senator, I cannot talk to you about
5 percent. I am not sure about where you got the 5 percent
from, but I can talk to you about the negotiated rulemaking
that we had with the industry. And what we said is that if the
housing authorities are going to be able to sustain themselves
is that we must look at better ways of managing those
authorities. And you talk about housing authorities, about 70
percent of them benefit from the negotiated rulemaking that we
did. There are some that will suffer, there is no question
about it.
But let me say this to you. You know, when I ran housing
authorities in St. Louis, Dallas, and in Washington, DC, the
operating subsidy was never more than 92 percent. We were
funding it at 90 percent. It has been and will still be, I
think, at a level that the housing authorities will be able to
carry out their mission.
Are we asking them to manage better? Yes. But I had to
manage three housing authorities with never having 100 percent
of subsidy.
Senator Schumer. Let me give you one example. Is New York
City not managed well?
Secretary Jackson. I think New York is managed well.
Senator Schumer. How do they deal with $185 million cut?
Secretary Jackson. Well, I cannot specifically speak to
what their cuts are today.
Senator Schumer. There are people in this audience who were
part of the negotiation.
Secretary Jackson. Yes.
Senator Schumer. Well, I will take a liberty here. How many
of you were told that 5 percent would be the limit of the cut
by HUD? Raise your hands. There are a few hands there. There
were.
So we should go back. I would ask you to go back and
reexamine that issue. I understand you are part of the
Administration and doing your job for the man who appointed
you, the President. But a Housing Secretary has some obligation
to fight for the constituency, which is housing, and nowhere,
not Ronald Reagan, not George Bush the first, has done this
kind of cut to operating subsidies that we have seen here.
Secretary Jackson. Senator, I would disagree. I have
operated three housing authorities. I know what I have been
funded at, and I was never funded at 100 percent. I think only
once in the 8 or 9 years I ran a housing authority I was funded
at 95 percent, but most of the time I was funded at 90 to 92
percent.
Senator Schumer. Can you cite for me a year where the cuts
in operating subsidies have been greater than this budget?
Secretary Jackson. I am not sure when you say ``the cut''
because right now New York City has over $400 million in
reserve, and we just permitted them to issue a $600 million
bond issue that will be used for renovation of their housing
authority buildings.
So, I think that with us doing that, we put them in a very
unique position where other housing authorities wish they were.
Senator Schumer. But that is, I am told here, some are
going to be funded at 50 percent. That is a big difference than
90 percent.
Secretary Jackson. I do not know of any housing authority
that is going to be funded at 50 percent.
Senator Schumer. Can you guarantee to us that every housing
authority will be funded at 90 percent?
Secretary Jackson. I cannot make a guarantee that every
housing authority will be funded, but I am saying----
Senator Schumer. You just said that it was going to be 90--
--
Secretary Jackson. I think we are funding most housing
authorities at 90 percent.
Senator Schumer. Well, maybe most. I do not know ever if
that is true, but I would urge you to submit to me in writing
the percentage that each city, each of the 100 largest housing
authorities is funded at under your proposal, okay?
Secretary Jackson. Sure, I will be happy to.
Senator Schumer. Thanks.
Senator Allard. I would like to also now recognize Senator
Martinez. We are in the first round of questioning. If you have
an opening statement, you can put that in the record, and we
are trying to control the time here to 5 minutes. We have
obviously gone over that a number of times, but we are
expecting some votes here on the floor and there will be about
four or five of them. So proceed, please.
STATEMENT OF SENATOR MEL MARTINEZ
Senator Martinez. Rather than an opening statement, I
simply wanted to give a warm welcome to my colleague and dear
friend, Secretary Jackson.
Secretary Jackson. Thank you.
Senator Martinez. Secretary, that little seat looks so
lonely from over here.
[Laughter.]
I used to sit over there a time or two and I want to
welcome the other good friends from HUD who I had the privilege
of working with, and helping to do a lot of the things that I
think made America a better place in terms of housing.
I want to ask you in two specific areas. One is one of my
passions that I know you share was the issue of homeownership.
Would you review for us--and if it has been already done I do
not suppose you will mind doing it again--the successes we have
had in the recent past in terms of homeownership rates, how
that has been accomplished and what you foresee in the future
in terms of homeownership?
Secretary Jackson. Back in June 2002, as you were Secretary
then, President Bush challenged you and myself to increase
minority homeownership by closing the gap that exists between
blacks, hispanics, and white Americans. And he challenged us to
create 5.5 million new minority homeowners by 2010. As of
today, we have created 2.2 million new minority homeowners,
specifically black and hispanic, so I think we are about 42
percent in a positive role, and I believe that we will get
there before 2010.
Many of the homeowners that we have created have come out
of public housing and Section 8, because not only did we create
the homeownership for them, but we also created counseling for
them. We went from $8 million a year in counseling when we
first walked in, to over $40 million, and we can help some
800,000 people a year. And on a number of occasions I have been
with the President where we have seen people graduate from
public housing, from Section 8, and become homeowners. And I am
extremely pleased, even though I realize that everyone
immediately will not own a home. But we have been very
successful.
Senator Martinez. In this budget what is the funding for
the American Dream Downpayment Initiative?
Secretary Jackson. $200 million, which will help an
additional 40,000 families.
Senator Martinez. Good. One other thing that I know you and
I worked an awful lot on was on the issue of chronic
homelessness. I know that your commitment continues. Can you
review for us what this budget will do in terms of homeless
Americans and the chronic particularly?
Secretary Jackson. We are making every effort with the
Samaritan Program to meet the needs of the chronic
homelessness, and not in a sense where we address one portion
of it. The President has insisted that we address the whole
perspective of a person. And I had a chance to see how our
money was working just about 5 weeks ago when I went out to Los
Angeles with Governor Schwarzenegger to visit Path, and that is
a center where a person comes in off the streets, has been
there more than 90 days. First, they address the mental and
physical part of the person. Then they talk to the person,
trying to find out what they really want to do, and help them
find jobs and security, and then help them find housing.
So the program we are putting in place now is quite
different than those piecemeal programs that had existed over
the last 12 or 13 years. We are trying to address the whole
person because we realize right now that about 80 percent of
our budget is taken care of by less than 10 percent of the
chronic homeless people. So unless we get them off the street
and keep them off the street, we are not going to be very
successful.
Senator Martinez. Mr. Chairman, I do not know how much time
I have. I just want one quick comment.
Senator Allard. You have two minutes.
Senator Martinez. Mr. Secretary. I know you and I have
discussed the issue of CDBG, where we have a difference of
opinion in terms of the propriety of moving this program,
frankly, and even diminishing the funding of it. I hold the
view very strongly that CDBG belongs at HUD, that it is a
program that has worked well at HUD, it should continue to be
at HUD. While I have great faith in the Secretary of Commerce,
who also is a friend, I just do not believe that the nexus that
exists between cities and HUD is something that can be
replicated by another department.
The continuity in issues of community development and
housing that exists between HUD and communities is unique. And
I think for that reason it is very unwise to move a very
successful program. And the criticisms I have heard of it, I
just do not think are well thought out, out of HUD and to the
Department of Commerce. I think that CDBG has worked well, and
you know the old adage, ``If it ain't broke, don't fix it.'' I
do not think CDBG is broke.
With that I would just like to ask you about the Section 8
program in the budget. How much of your budget is Section 8? I
used to worry greatly about what someone described to me--I
believe it was maybe Senator Bond--the Pac Man of the HUD
budget being Section 8 as it consumes more and ever increasing
portions of the budget, but how the budget treats Section 8 and
what your thoughts were on the flexible voucher program.
Secretary Jackson. The last part, I support the flexible
voucher program because that is the way I administered the
Section 8 program in three housing authorities and that is the
way all housing authorities administered it before 1998. So
when they say we are making a step backward, no, we are
actually going forward and giving the housing authorities more
flexibility. I think they have been hindered. And we have
received numerous letters from housing authorities who say that
they are willing to do that because it will give them more
flexibility.
When we walked into HUD we were spending about 42 to 43
percent of our budget for Section 8. Today, in the 2006 budget,
it is 57 percent of our budget. We cannot continue the program.
and I guess when I see people say, well, it is going to hurt
the homeless, well, I want to say this clearly. Very few
homeless people get priority anyway in housing authorities.
Housing authorities are not serving the homeless. And so when
they come and tell you that, that is absolutely not true. Now,
they will make the argument to the Senate, but they will not
make the argument to me because I ran three housing authorities
and I know how much homeless people are served. You serve
people that are 30 percent or less, or up to 60 percent. And
those are persons who usually are working in many cases, and
some are not.
But I want to say that in the end I think that we cannot
continue unless we give the housing authorities more
flexibility. You all gave us the budget base last year, but
with that budget base we have to have flexibility so that they
can serve the constituents.
Senator Martinez. Thank you, sir. My time is up.
Thank you, Mr. Chairman.
Senator Allard. Mr. Secretary, that is exactly what we are
trying to do with the legislation that we are introducing here,
to try and give local housing authorities more flexibility and
try and carry on with what the appropriators, Senator Bond in
particular, had to do last year in their budget as a Member of
the Appropriations Committee. I do appreciate your comments in
that regard.
One program I want to run by you, and it is a request for
homeless assistance grants where you propose $25 million for a
prisoner reentry initiative.
Secretary Jackson. Yes.
Senator Allard. I applaud you for this effort, and it is
important to try to prevent homelessness, particularly among
those discharged from institutional settings. I think that is
particularly a tough situation. Could you please describe the
initiative and what you expect to accomplish?
Secretary Jackson. When the President spoke of this some
months ago, it was his intent to try to stop recidivism,
because one of the major problems that many people leaving
prison face is first, finding a stable environment to live in,
second, a stable job. And hopefully what the reentrance program
will do is to help them in both of those situations, where they
can become productive citizens. We are looking forward to
carrying it out.
Senator Allard. Thank you. I also wanted to bring up
another issue that is not under the jurisdiction of this
Committee, but I think it is important in the overall picture
of what we are trying to accomplish as far as housing is
concerned, and that is a single-family homeownership tax
credit.
Secretary Jackson. Yes.
Senator Allard. I was pleased to read the proposal for a
single-family homeownership tax credit patterned after the very
successful rental tax credits. And although it is not within
Banking Committee's jurisdiction, I am a very strong supporter
of the proposal. In fact I have joined Senator Santorum and
Senator Sarbanes both in introducing the tax credit
legislation. I think it was just yesterday it was introduced,
and hopefully that will be swiftly enacted.
Could you please elaborate on what this proposal would mean
for homeownership?
Secretary Jackson. If we are able to pass that and get it
funded as we should, we are talking about $2.5 billion in tax
credit that will go to developers to write down the cost of
building no-market housing--some will call it affordable
housing. Take as an example, we know that in the suburbs of Los
Angeles to build a home, before it ever comes out of the ground
because of regulatory barriers that exist, environmental,
street and sewage, it is somewhere between $92,000 and about
$109,000. If we can write down 47 percent of that, it becomes a
home that a teacher, a fire person, a police person, or a nurse
can afford. But to date if we do not write it down, it will not
occur. And I think that we must give developers incentives to
come back into the urban areas and develop our urban core.
And if we can get this Single-Family Affordable Tax Credit
Act passed, it will do just that, it will give them the
incentives. We have seen how successful the low income tax
credit has been in this country, and I perceive that the
Single-Family Affordable Tax Credit Act will do exactly the
same thing for people in the middle, who in many cases, you
take a family of 2 or 5 with both of the parents being
teachers, who are making just $100,000. Today, they cannot
afford a home in California. With the Single-Family Tax Credit
Act I believe clearly they would come within the purview of
being able to own a home.
Senator Allard. I share your enthusiasm. I think the Rental
Tax Credit has been very successful.
Secretary Jackson. It has been.
Senator Allard. I know that the Colorado Housing Authority
has been a strong proponent of these tax credits as a way of
increasing affordable housing in the State of Colorado, and
they appreciate the flexibility that goes with that.
Secretary Jackson. And Denver has done a very excellent
job.
Senator Allard. Thank you. I appreciate you mentioning
that.
I have not used up all my time because I want to make sure
that both Senator Reed and Senator Sarbanes has time on the
second round, so I am going to call on Senator Reed.
Senator Reed. Thank you again, Mr. Chairman.
Mr. Secretary, I would like to look at the Section 8
program. In your comments, you suggested it is just growing so
dramatically that it is devouring all other programs. And I do
recognize, as you do, that part of the growth stems from
Congressional actions increasing the number of eligible
persons. In addition, part of the growth, and there have been
estimates about a third of the growth related to the perfect
storm of hot housing markets, prices going up, incomes
declining, people qualifying for Section 8.
It seems though the Congressional Budget Office has found
that actually the growth in spending, their projection in March
2004 is that the growth in spending would slow to 1.8 percent
in fiscal year 2005, so that we might have seen the crest of
the wave already. And in addition, your own data from the
Voucher Management System shows that quarterly growth in
average voucher course have been steadily declining since
spring 2003. So again I think we have the question of whether
this is the uncontrolled program that you suggest in your
comments.
But I have a more specific question. If this is such a
unmanageable and out-of-control program, how can you get $2.5
billion of rescission money out of it to plow back into your
budget? I mean you seemed by rescinding $2.5 billion that you
actually had $2.5 billion in Section 8 monies hanging around.
That is not indicative of a program that is bursting at its
seams, and in fact you have to steal from other programs to
fund it.
Secretary Jackson. We have until 2006 to find that
rescission, and it does not necessarily have to come out of the
Section 8 program. We have said that we will look at the
Section 8 program, but it does not have to.
And let me say to you, when you say that the voucher cost
is going down, the cost of the voucher that we project should
be cheaper than what we are paying in many locales. The only
place that we have serious problems meeting the needs of the
vouchers are in areas where you are from, Rhode Island, New
Hampshire, Maine, and California. Other places, landlords are
far exceeding what the market value of apartment complexes are
in those areas. The Southeast, the Southwest, and the Midwest,
we are paying heavily.
And I still say this to you, Senator, that pre-1998, 70 to
80 percent of the people who want a voucher pay their
utilities, they pay their 30 percent of adjusted gross income,
because we have now 75 percent of the people on vouchers, we
are paying their utilities and we are paying them to live on a
Section 8 voucher. And we have to understand that the voucher
was never created as a substitute for public housing. It was a
transitional proposal to go from public housing into market
rate housing. But we have made it a permanency, and I do not
think it should be permanent. I have said that and I still say
it today.
Senator Reed. Let me just go back, and to respond to your
answer. So there is a distinct possibility that the cuts that
have been proposed in other programs, like Hope VI and lead
abatement, all those might be further cut if you cannot find
the $2.5 billion in the rescission in Section 8.
Secretary Jackson. That is always a possibility, yes.
Senator Reed. Well, that seems to be a very dire
possibility since you are already cutting significantly from
practically every program, or at least most of the programs.
And, you know, again, I do not think this, from the numbers I
have seen--and we can debate, I think, in a very principled and
conscientious way what these numbers suggest--but it seems to
me that the Section 8 program is not out of control. In fact,
it might be stabilizing in some respects.
Now, let me turn to another question, which is that you
talk about your proposal to give flexibility to local housing
administrations with respect to Section 8. What does that mean
in practical terms? What can they do if your proposal is
adopted that they cannot do now? And I ask this with all
sincerity.
Secretary Jackson. If they choose to continue to serve 75
percent, 30 percent of low-medium, they can. Our flexibility
says you can go up to 60 percent of medium and serve those
persons. We are giving them the right to serve people who today
are still what we call ``the working poor'' who cannot get on a
voucher today, the opportunity.
Senator Reed. Who loses out, Mr. Secretary, given the fact
that this funding is not going to increase dramatically? In
fact, you are taking money away from it. Who loses out in this
flexibility?
Secretary Jackson. I do not think anyone loses out. I
think, in fact, you will have a greater turnover because you
will have people who are not going to be on the program as long
as the people who are serving on the program today. And I think
we must give people incentives to get off this program, and we
are not.
Senator Sarbanes. Is the incentive to just knock them off ?
Secretary Jackson. We are not going to knock anyone off,
Senator.
Senator Reed. Mr. Secretary, how can you not knock anybody
off, but they are going to leave voluntarily in a context of
the same resources. I just do not understand.
Secretary Jackson. That is easy. I will be happy to explain
it.
Senator Reed. Please.
Secretary Jackson. At the housing authority, I ran in
Dallas, somewhere between 20 and 25 percent of the vouchers
turned over every year. Rather than those vouchers going
directly to 75 percent of the people, the housing authority can
make a decision that they are going to put 25 percent of those
vouchers to people between 40 and 60 percent of medium. And the
other 75 might go to 30 percent of medium. They do not really
have that flexibility now, but they will have it if they so
choose. And they will know that the people who are at 40 or
above will be paying for their utilities and be paying their
rent.
Senator Sarbanes. But what happens----
Senator Allard. Wait a minute. Excuse me, Senator Sarbanes,
I do want to kind of control our time here closely so everybody
has an equal shot. And Senator Martinez would be next,
alternating between parties, and then you will be next.
Senator Martinez.
Senator Martinez. Thank you, Mr. Chairman.
If you have a follow-up to that, I do not mind yielding a
moment of my time. I do not want to be too generous, Senator,
but you are always generous with me. I do not mind returning
the kindness.
Senator Sarbanes. You are using all your vouchers for
people below 30 percent of area median income (AMI). Let's
posit that as a given.
Secretary Jackson. Basically, yes.
Senator Sarbanes. All right. Then you are going to give
discretion to use these vouchers for people 40 to 60 percent.
So the housing authority is going to take some of its vouchers
and use them for people 40 to 60 percent. What is going to
happen to the people at 30 percent?
Secretary Jackson. The people at 30 percent stay on the
vouchers until they get off of them.
Senator Sarbanes. You are just shifting them.
Secretary Jackson. No, you see----
Senator Sarbanes. You just said that----
Senator Martinez. No----
Secretary Jackson. But Senator, we did that until 1998, and
the program did not grow exponentially. When we decided that we
were going to house people 30 percent or less than medium, we
had a growth in the program, not a growth in the number of
people who were serving.
And I want to say this to you: If the housing authorities
would do their job by validating the income of people, a lot of
the people who we perceive as 30 percent or less, you will see,
will not be 30 percent or less of medium.
Senator Sarbanes. Now that is a different point.
Secretary Jackson. But that is a factual point. Because I
was one of the few housing authorities in the country that did
rent verification every 6 months. And a lot of people came off
the program.
Senator Sarbanes. Would you concede my point if income
verification did not lead to what you just asserted?
Secretary Jackson. I am not sure what you asked me.
Senator Sarbanes. You are saying to me, to defend what you
did, that these people are really not at 30 percent of income
and if you do proper income verification you will establish
that fact.
Secretary Jackson. That is correct.
Senator Sarbanes. If you do not establish that fact by
income verification, then the point I made is right on point,
is it not?
Secretary Jackson. That we would put people off the
program?
Senator Sarbanes. Yes.
Secretary Jackson. No. No one is being put off the program.
Once they turn in their voucher, we can utilize that voucher as
the housing authority sees fit. But we are not taking someone
off of the program.
Senator Martinez. Mr. Secretary, and people on the voucher
stay on the voucher?
Secretary Jackson. They stay on the voucher until they turn
it in.
Senator Martinez. And when there is a vacancy--See, one of
the things I think has been missing in this discussion is the
fact that some housing authorities cannot fill all their
vouchers----
Secretary Jackson. That is correct.
Senator Martinez. --with 30 percent. And so when you give
them flexibility, then all of a sudden those housing
authorities that chronically get the money rescinded, which is
where this rescission comes from, all of a sudden now have the
flexibility, by their own decisionmaking, to fill their
vouchers with people who otherwise would not be able to get a
voucher. In fact, no one would get a voucher because they
otherwise wouldn't be used because in that particular
marketplace they cannot use them all up under the 30-and-under.
Secretary Jackson. They cannot. And let me say this to you.
What the flexibility does is give the housing authority the
right to decide how to use their vouchers. I believe that it is
important, and we have tried this with a pilot program which we
call Move to Work with a number of housing authorities. And we
said, what you do is give us a plan of how you are going to
spend your money and your Section 8 money, and as long as you
hold to the plan and it does not in any way affect our
abilities to regulate you, then use it.
I think right now, if you go to San Francisco or if you go
to Senator Reed's Providence, Rhode Island, we can go to 110
percent of medium. But in Rhode Island you still cannot house a
family of five in a decent apartment at 110 percent of rent.
But if we give the Providence Housing Authority the right to
have flexibility, they can choose to go to 150 percent of
medium if they choose, without asking us, to house their
person. Because what we are doing is saying we are going to
give $20 million. You spend it as you see fit to house as many
people as you want to house. So you have given them more
flexibility.
Senator Martinez. So you are giving the local authority the
ability to manage the resources that they are given in order to
house more people.
Secretary Jackson. Which they do not now, because we tell
them what to do.
Senator Martinez. Right. And all wisdom--I believe I might
have said that sitting where you sit today--all wisdom does not
emanate from Washington, but in fact some local officials could
make those decisions and further utilize the resources that
Washington sends.
Secretary Jackson. And I can tell you this. You are
correct. When I was in D.C., we gave back vouchers every year
because I could not get HUD to let me go up to 130 percent, 135
percent of medium to house people. So then we got criticized by
HUD to say you are not spending your money. Well, it was a
double-edged sword. I am saying if we created a budget base for
housing authorities, let us give them the flexibility now to
house as many people as they can.
Senator Martinez. Senator, if I--go ahead.
Senator Allard. Senator Martinez, it is your time.
Senator Martinez. Yes, thank you.
If I could ask you about the Section 8 impact on the
budget. We began to discuss that in the last round, but I want
to come back to that. Because I used to be greatly concerned
that at some point or another the continued growth
geometrically of the Section 8 program vis-a-vis the rest of
the HUD budget was preventing us from doing so many other
things at HUD, or would eventually for sure do that.
Can you comment on that and how this flexibility might help
that problem as well?
Secretary Jackson. I think it will do exactly what, I think
it was either Senator Reed or Senator Sarbanes was alluding to
a few minutes ago. It will stop the exponential growth of this
program. Because at that point, the vouchers will be turning
over much quicker than what they are doing now. And you will
have more people paying for the amenities of their apartment
rather than us paying for all the amenities for people to live.
What we call that at HUD is ``negative base rent'' because we
are paying them to stay.
So, I do believe that, clearly, if the housing authorities
have that flexibility, the program will stop growing, and we
have projected it. It will not keep growing at 8, 9, or 10
percent a year, as it has been for the last, I guess, 6 years
or so.
Senator Martinez. With the moments I have remaining, can
you tell me something about the housing market, the current
status of it in terms of, you know, the somewhat slow but the
rising interest rates that there has been. I know Mr. Weicher
behind you probably used to keep me posted on that, but I
always like to know--you know, you read about housing bubbles
and such as that. Can you speak to that issue?
Secretary Jackson. I can tell you that the housing market
has not slowed at all. I mean, I was saying the other day to a
friend I remember when we had a president back in the 1970's
and it was 19 percent. And I bought my first house, and it was
unbelievable. Well, today it is at about 5.25 percent, and it
has gone from 4 percent. So people are buying homes because it
is their belief that it is the best time to get it. Do we think
that the interest rate will grow some? Maybe 6 percent. But I
do not think we are going to have that in the next 3, 4, or 5
years. I think the housing market will still be very strong.
And I think that is in essence what--I am not sure that he
appeared before this Committee--but Chairman Greenspan said it
is a unique market. And in places like Washington, DC, you put
a house on the market and you do not just get a buyer, you get
people bidding on it.
Senator Martinez. Thank you, Mr. Secretary.
Senator Allard. Senator Martinez, I am of the understanding
that you at one time were in charge of a housing authority. I
do not know whether it has just been one or two. I know that
Secretary Jackson referred to his, at least two housing
authorities you have been in charge of.
Secretary Jackson. Three.
Senator Allard. Three. And I think that the experience from
both of you--and that discussion here has been most helpful to
this Committee, and I wish that we could bring in more
practical experience from the local aspect. And I could not
agree with you more, that we need to have more flexibility at
the local, and it is good to hear both of you refer to that. In
fact, the legislation I am working with HUD to give us more
flexibility locally, and I hope that you would look at that,
Senator Martinez, and perhaps be a cosponsor with me on that.
Senator Martinez. I certainly would.
Senator Allard. Now let me recognize Senator Sarbanes.
Senator Sarbanes. Thank you very much, Mr. Chairman.
Mr. Secretary, I want to follow this line of yours and
former Secretary Martinez that all wisdom does not emanate from
Washington, DC. I am a supporter of the negotiated rulemaking
process where it is practicable. In fact, doing the
negotiations over the 1998 public housing bill, I joined with
my colleague, Senator Connie Mack of Florida to push a
reluctant HUD Secretary--that was Andrew Cuomo--to accept
negotiated rulemaking for a number of rules in that
legislation.
Now, I understand that HUD undertook a negotiated
rulemaking with the public housing authorities over how to
establish a new operating fund formula. I further understand
the group came to an agreement, and then HUD published a rule
that was substantially different from the rule that had been
agreed to.
Secretary Jackson. I do not perceive it is substantially
different. There are some differences. And I think that when we
negotiated, we told them that there possibly would be changes.
But I also, after that occurred, Senator, met with the industry
groups again and let them tell me what they thought should be
in the rule. And they are sending me a letter. I am open to
look at it and to meet with them. We perceive we have not
violated our agreement with them. But at the same time, having
come out of the industry, I believe it is imperative for me to
listen to what they have to say and what their comments are.
Senator Sarbanes. One of the things you knocked out, as I
understand it, was the stop-loss provision. That actually was a
provision that HUD itself had proposed. Is that correct?
Secretary Jackson. Yes, I think we did propose the stop-
loss provision.
Senator Sarbanes. HUD proposed it as part of the agreement,
and then you knocked it out of the agreement.
Secretary Jackson. Yes, I think so. I have to get back. I
cannot tell you specifically. I will be happy to answer that
for you. I will get back to you on that.
Senator Sarbanes. All right, if you could get back to us.
Secretary Jackson. I surely will.
Senator Sarbanes. Now, Mr. Secretary, you know, in our job
we read around this paper, that paper, and so forth. And so I
was interested in your column on Social Security in The Wall
Street Journal. I thought it was a step outside the traditional
expertise of a HUD Secretary, but in any event I was pleased to
read it. It is entitled, ``It Really is Black and White.'' Did
you pick that title?
Secretary Jackson. No, I did not pick that title. I think
the papers put the titles on them, from everything I have been
able to discern.
Senator Sarbanes. Okay. Now, the point is, as I gather that
you are making, is that African-Americans get a bad deal under
Social Security because they do not live as long as white
Americans. Is that right?
Secretary Jackson. I want to tell you that they get a bad
deal. They do not have the years that white males have in
collecting their Social Security benefits.
Senator Sarbanes. You said there that the average white
male would collect 7 years of benefits and the average black
male would collect less than 1 year of Social Security.
Secretary Jackson. Just about a year of Social Security,
yes.
Senator Sarbanes. Now, where do you get that from?
Secretary Jackson. Data that has been provided to me.
Senator Sarbanes. What if I said to you that the data I
have from the CDC shows that the life expectancy at age 65--not
at birth; I am going to come back to at-birth. And if that is
the figure you are using, which I presume it is, I am going to
point out why it is faulty--but that the life expectancy at age
65, at retirement age, differs only 2 years between whites and
African-Americans, males. That would undercut a lot of the
assertion you made in your column, would it not?
Secretary Jackson. Well, you can say that and I cannot stop
you from saying it. I think I am accurate.
Senator Sarbanes. But that is what the statistics----
Secretary Jackson. Well, I use statistics also, and mine
does not say that.
Senator Sarbanes. What statistics did you use?
Secretary Jackson. I will be happy to forward those to you,
if you would like to----
Senator Sarbanes. I would like it if you do.
Senator Allard. I believe that is out of the Social
Security Administration or similar.
Secretary Jackson. Right.
Senator Sarbanes. No, no. What is being used, Mr. Chairman,
and we need to nail this discrepancy, is the expectation at-
birth of how long you will live.
Senator Allard. So you are assuming in that, if you were
born today, that down in the future that our health care will
have affected minorities to a point where their life would be
that much better; where today, I think Social Security would be
talking about those that are retiring today, where yours would
be talking about 50 or 60 years down the road.
Senator Sarbanes. No, no, no. I am talking about the ones
retiring today.
Senator Allard. Because I could not understand what you
were meaning by ``at-birth,'' where your starting time was.
That could explain the difference in these figures.
Senator Sarbanes. If you take at birth, there is a greater
difference, because African-Americans face a greater hazard in
the earlier years.
Senator Allard. That is true.
Senator Sarbanes. Low birth weight, higher infant mortality
rates, lack of access to decent medical care, and so forth.
Clarence Page says when he heard about that gap in black life
expectancy that the first question we should ask is shouldn't
we be doing something to increase black life expectancy. But
that is not what the Secretary said in his column. What the
Secretary said in his column is that the average white male
would collect 7 years of benefit at retirement and the average
black, 1 year. That is just not the case.
Secretary Jackson. Well, that is what I believe----
Senator Sarbanes. At retirement, the life expectancy is a
difference of less than 2 years at that point.
Secretary Jackson. That is your perception, Senator.
Senator Sarbanes. No, no, no. Those are the figures from
the CDC. It is not about perception.
Secretary Jackson. Then, that is their perception. And I do
not think Clarence Page is any authority on anything.
Senator Sarbanes. So much for Clarence Page. But what do
you think about the CDC?
Secretary Jackson. That is their number. Those are not the
figures that----
Senator Sarbanes. They are not an authority on anything
either?
Secretary Jackson. Those are not the figures that I am
dealing with. And if you want me to submit those, I will be
happy. You know, the one thing I do understand is I am black
and I am in America, and I know the extension between white
males and black males. And that is specifically what I am
talking about--not blacks and whites generally, black males and
white males.
Senator Sarbanes. Yeah.
Secretary Jackson. And it is a difference of 7 years.
Senator Sarbanes. What is a difference of 7 years?
Secretary Jackson. The ability to receive your Social
Security benefits.
Senator Sarbanes. At retirement?
Secretary Jackson. Beginning at retirement.
Senator Sarbanes. No, sir. That is not what the CDC tells
us.
Secretary Jackson. Okay.
Senator Sarbanes. The CDC tells us that the most recent
life expectancy at age 65, that the difference for men is 2
years.
Secretary Jackson. I am not sure what point you are trying
to make, Senator. What is it that you want to make the point to
me? I am not sure what you are trying to make.
Senator Sarbanes. The point I am trying to make is that
your point is not accurate and is overstated.
Secretary Jackson. That is your position. And I accept and
respect your position. I think I am correct.
Senator Allard. Let me intervene here, if I might.
Senator Sarbanes. Why don't you submit a statistical
analysis that shows that you are correct.
Secretary Jackson. I said that in the beginning, I would
submit it to you.
Senator Sarbanes. Take these CDC figures on life expectancy
at retirement and then present your point. Okay?
Senator Allard. I was going to suggest that, Senator
Sarbanes. Let's go ahead. I want to make sure that Committee
Members have an opportunity to ask questions related to the
mission on HUD and also talk about our homeownership society
and homeownership opportunities. And I would like to move on
now and just make a brief comment. I know Senator Martinez has
a question, too, and then I will come back to the other side
over here.
But, you know, these are interesting figures, I guess, and
I think they can be straightened out if we all sit down and
look at where our sources are and everything and see what we
mean by what we are saying. But at any rate, I think what is
the valid discussion of this Committee is homeownership society
and homeownership opportunities for African-Americans and all
minorities. That is what it is all about. We often talk of
homeownership and it also extends, I guess, to retirement
ownership. I think of so many people that go to retire, they
rely on the equity of their home to help them get through
retirement.
Secretary Jackson. That is correct.
Senator Allard. So, I think ownership is good, whatever the
statistics. And I know that Senator Martinez wanted to ask a
question, and then we will go back and give some more time to
the other side. We are getting awfully close to a vote time, I
believe.
Senator Martinez. I just really want to get back to the
2006 HUD budget and I wanted to ask you, although I concur in
your comments, Mr. Chairman, about the ownership society, the
importance of it to all Americans.
Mr. Secretary, I wanted to ask you, because I asked you
about the Samaritan grant program for chronically homeless, if
you might know the funding level for that program in this
coming year.
Secretary Jackson. I am not sure what--But what is it? I
know it is $200 million more. What is it? Is it an increase of
$200 million?
Two hundred million dollars more.
Senator Martinez. Well, that is a very substantial
increase, by the way, because as I recall, the program began
with about $64 million or $46 million, something like that. So
this is a very dramatic uptake on the funding levels.
Secretary Jackson. That is correct.
Senator Martinez. I heard so much about the decimation of
everything that is going on in HUD and I do not believe that to
be the case. And I am really pleased that this particular
program would help the most vulnerable population in America
and has been, I think, very successful. I am proud to see that
that legacy continues on that program and that it will continue
to be helping the chronically homeless, which ultimately, I
think, will help all homeless Americans to become something
other than homeless because of so much funding going to that
particular program.
But anyway, thank you for your testimony. I am going to
have to head over to HUD. I appreciate seeing all of my good
friends at HUD, and Deputy Secretary, great to see you as well,
and I congratulate you for your work and your continued
perseverance.
Secretary Jackson. Thank you, Senator.
Senator Martinez. It sure is much more pleasant on this
side of the aisle.
Senator Allard. Okay, thank you very much, Senator
Martinez. In the fairness of balance, I will go ahead and yield
to Senator Reed and I will let you and Senator Sarbanes kind of
divide for the next 5 minutes of this Committee, and then we
will adjourn.
Senator Reed. Thank you, Mr. Chairman.
Just following up on the Section 8 program, because of its
size and its centrality, this notion of flexibility, it seems
to me, you would give these housing agencies a certain of money
each year.
Secretary Jackson. Yes.
Senator Reed. And from what you said, Mr. Secretary,
everyone would be taken care of because no one would give up
their voucher they have today unless they did it voluntarily,
yet they could move things around and get more people on in
certain areas. But it seems to me that it is a classic block
grant approach, that it would not be responsive to the actual
demands of the community. You know, if a housing agency found
itself without adequate resources because of increased rents,
it would not be reflected in their grant. They would just have
to be a little more flexible. That is one of the problems I
have with your explanation.
Secretary Jackson. Senator, I would say this. I think the
example that I gave is the example, when I used in
Massachusetts, New Hampshire, Rhode Island, or even here in DC,
where I could not go past 110 percent of medium in that area.
So a lot of people went without a voucher. And we returned
money. If you give the flexibility, where a family of four or
five, they can go up to 125 percent, then they can house that
person. So, I think that is the flexibility that most housing
authorities want.
Senator Reed. Mr. Secretary, but doesn't that presume that
you are fulfilling all of the needs of people up to 110
percent? Were you doing that in Washington?
Secretary Jackson. Oh, yes. But it was very difficult
because of the rental market that we were in.
Senator Reed. Right.
Secretary Jackson. Yes.
Senator Reed. But you were filling all the needs up to 110
percent?
Secretary Jackson. Yes, we were, as much as we could. And
we still had excessive money because people could not find
housing to live in in the District.
Senator Reed. But that seems to be a problem as much as
just the market, as much as the program.
Secretary Jackson. There is no question.
Senator Reed. Well, as you must know from my comments, I am
very skeptical of the proposal to rescind money from Section 8
and the notion of simply curing all of this by giving a
flexibility. Because implicit, I think, in what you have said
is the notion--at least, it comes through to me--that what we
want to do is get people off the Section 8 program.
Secretary Jackson. I think that should be our objective, is
to get people off the program, to cut down the number of years
that they are on the program. And before, as I said to you
before, the concept that we are bringing before you is not a
new concept. This is the concept that housing authorities
worked under pre-1998.
Senator Reed. Just a final point, because I do want to
yield some time to Senator Sarbanes. This would make a lot more
sense to me if there was a robust HUD budget that would provide
opportunities for programs complementary to Section 8. And we
have talked about some of them here--first-time homebuyers,
adequate public housing monies to provide. But this is a budget
that cuts everywhere. And I think it is naive to assume that
you are going to just simply get these people who are currently
Section 8 recipients off into other housing opportunities. I
just think it is terribly naive. And the budget, I think, is an
absolute disaster. I think we will come back here in a year, if
this budget goes through, and find that homelessness is
increased, that many more people are looking for Section 8's
that cannot get them, that we will be really turning our back
on a lot of--not even to mention disabled Americans, which we
are not putting any more resources in, effectively, and others.
So, thank you.
Secretary Jackson. Thank you, Senator.
Senator Sarbanes. Mr. Secretary, do you think enough
resources have been committed to address the affordable housing
problem to take care of the problem?
Secretary Jackson. I think we have. Through the voucher
program, yes, I think we can address the affordable problem
that exists in this country. But I also think that we can
address it by spending the over $3 billion in the Hope VI
program that we have outstanding by more than 5 years. I think
there are ways, yes, we can address it if we spend our money
wisely. I think we can address it, housing authorities, by
doing exactly what New York City did by issuing a $600 million
bond issue to work for the rehabilitation of their units. And
we have been extremely flexible with housing authorities around
the country in doing this. The best example I can give you,
Senator, is Chicago. Mayor Daley is remaking the whole public
housing issue in Chicago better for everyone.
Senator Sarbanes. We have a deficit problem that we are
confronting in the Federal budget, correct?
Secretary Jackson. Do we have a deficit?
Senator Sarbanes. We do have a deficit.
Secretary Jackson. Yes, we do have a deficit.
Senator Sarbanes. Do you believe that in fact there are so
many resources put into housing that we could take substantial
amounts of money out of housing and still meet the affordable
housing problem?
Secretary Jackson. I am sorry, I am not sure what you are
asking on that question.
Senator Sarbanes. I am trying to get a read on what your
evaluation is of the resources needed to address the affordable
housing situation.
Secretary Jackson. As I said----
Senator Sarbanes. Is it your position that we are putting
too many resources into trying to address the affordable
housing issue?
Secretary Jackson. No.
Senator Sarbanes. No. Do you think we are putting enough
resources into addressing the affordable housing--
Secretary Jackson. Yes, I do.
Senator Sarbanes. You do?
Secretary Jackson. Yes.
Senator Sarbanes. How does that square with what we hear
reported to us about the need for affordable housing, and the
inability to provide it?
Secretary Jackson. Well, let me say this to you. The reason
in many cases we have a regional problem with affordable
housing has nothing to do with the resources of the Federal
Government. It has to do with regulatory barriers that exist in
States. And it is important to understand, as I just told you,
before a house ever comes out of the ground in California, you
are somewhere between $92,000 and $109,000. That house cannot
be affordable. The only way to make that home affordable is to
do what I just said a few minutes ago, is, if you all passed a
single-family affordable tax credit act for $2.5 billion, we
can give developers incentives to write down the cost of that
home where people who want an affordable home can afford it.
I do not think the Government can make any----
Senator Sarbanes. I think that answer that you have just
given me directly contradicts your previous answer, that you
thought enough resources were currently available. Because you
have just outlined to me, as I understand it, at least, that in
order to address that housing problem, we need to commit more
resources.
Secretary Jackson. I do not think it is contradictory.
Senator Allard. Well, Senator Sarbanes, I think you are
talking about resources that get allocated through Government
through a spending program. He is talking about resources, they
are not allocated through a spending program, but are also
allocated through the tax code. So you have tax credits. And
you combine them all together, then you have more going into
housing. And I think that is the difference in your two
arguments. You are looking at the spending side, he is looking
at the total side with the tax credit.
Senator Sarbanes. No, I am looking at the total side.
Senator Allard. I do not hear you mentioning the tax
credit.
Senator Sarbanes. He is telling me on the one hand that
there are adequate resources available to address the
affordable housing problem. Then the next answer he gives me is
he uses an example--I did not volunteer the example, it was the
Secretary who volunteered the example. The next example he uses
is we need to enact a program whose cost on the revenue side,
because of its tax implications, I guess, is--I think you said
$2.5 billion.
Secretary Jackson. Yes.
Senator Sarbanes. There is a further commitment of $2.5
billion, by the Secretary's own statement, to try to get at the
affordable housing problem.
Secretary Jackson. I said to you, Senator, that yes, I do
believe--and I do not think it is contradictory--that I do
believe that HUD has adequate resource to address affordable
housing. But even with those adequate resources that we have to
address, the ability of having affordable housing in this
country depends on the State that you are in, and it is a State
problem. It is not a Federal Government problem. We cannot tell
California what the regulatory codes of their State should be.
They have to dictate that. So if we can help with, as we did in
low income tax credit, with developers to develop it and write
down the cost of housing to make it more affordable for
Americans, yes, I think we should do it. But that does not mean
we are not putting adequate resources into affordable housing.
Senator Sarbanes. I supported the low income housing tax
credit to try to address the affordable housing problem, but I
recognized that it represented a commitment of resources in
order to try to deal with this problem. And I take it that is
what you are saying today, we need to commit more resources.
Secretary Jackson. No, I am saying to you in certain areas,
like California and other areas, yes, I think we have to try to
help States--well, not so much States, try to help those
persons living in these States meet their needs of
homeownership.
Senator Allard. I hope we can draw this to a close?
Senator Sarbanes. Yes, I see the light.
Senator Allard. Okay. Mr. Secretary, thank you very much.
Secretary Jackson. Thank you all very much.
Senator Allard. I think you are doing the right thing of
looking to local control, and I believe you are doing the right
thing in saying that we do not need to appropriate all the
dollars that go into affordable housing. I think we can use the
tax code to create some incentives out there. I think that has
helped us in the past and, hopefully, it will continue to
perform for us in the future.
I want to thank you for taking your time to be here. I want
to apologize for having to cut the hearing short. I would also
like to apologize to the minority Members that are here for
having to cut it short, but we do have votes on the floor. It
is 4 o'clock. We got almost everything in except for the last
30 minutes.
Secretary Jackson. Thank you.
Senator Allard. I want to thank the Members for
participating, and to you, Mr. Secretary.
Senator Sarbanes. Mr. Chairman.
Senator Allard. Yes.
Senator Sarbanes. I just want to suggest that if it eases
consideration of all these problems, maybe we can replace the
cost of the housing voucher with a refundable income tax
credit--
[Laughter.]
Senator Sarbanes. --if that puts it into a context and
makes it more amenable. And instead of giving the housing
voucher, we would just do a refundable income tax credit that
would provide an equal or more amount in order to obtain
housing.
Senator Allard. We will give you the last word, Senator.
The hearing is adjourned.
[Whereupon, at 4:03 p.m., the hearing was adjourned.]
[Prepared statements, response to written questions, and
additional material supplied for the record follow:]
PREPARED STATMENT OF SENATOR JON S. CORZINE
Secretary Jackson, it is good to have you here today to discuss
HUD's fiscal year 2006 budget. I hope this will not be the only
opportunity this year to discuss some of the critical housing policy
and funding issues that are on the table.
Frankly, I have a lot of questions about the President's budget
proposal and about the future of our affordable housing programs under
this Administration. I realize that these are tough budget times, but
every year the HUD budget seems to take the biggest hit.
Secretary Jackson, when we met last year in my office--just before
your nomination hearing--we had a good discussion about the importance
of HUD's community economic development programs. You assured me then
that you were committed to maintaining and strengthening these
programs, which include the Community Development Block Grant. Yet,
this budget not only proposes shifting all of HUD's community
development programs out of HUD and into the Department of Commerce,
but it also reduces CDBG funding by 35 percent. That translates to a
$40 million cut for New Jersey.
The Administration has again proposed eliminating the HOPE VI
program, a program that has done enormous good in my State and around
the country. Since the creation of the HOPE VI program in 1992, New
Jersey has received $389 million in funding to revitalize and rebuild
decaying public housing developments. With that Federal funding, New
Jersey leveraged $700 million in private sector funding. HOPE VI
works--we have seen it work in New Jersey.
Unfortunately, the list of cuts keeps going. While the President
did propose an increase for the Section 8 program, he has also proposed
legislation that I believe would undermine the Section 8 program. This
legislation, which I understand Senator Allard has introduced, would
eliminate critical protections in the program that ensure the neediest
families have access to vouchers. It would allow public housing
authorities to charge rents irrespective of a family's income. Even
more concerning is the fact that this proposal would grossly underfund
the Section 8 program.
Mr. Secretary, the Section 8 program is our largest housing
assistance program. Sixty-five thousand families in New Jersey rely on
Section 8 in order to afford housing. These families are by and large
extremely low income. Without Section 8 assistance, many of them would
be homeless.
In President Bush's first budget to Congress, he announced that he
wanted to eliminate homelessness by 2010. Mr. Secretary, if we block
grant this program we will double homelessness by 2010. In fact, the
Housing and Community Development Network of New Jersey has estimated
that under current funding levels, which are inadequate, 11,500
families in New Jersey will lose their vouchers by 2010.
Mr. Secretary, I hope that you will come back to the Committee so
that we can have a dedicated discussion on the issue of Section 8.
Finally, I want to mention HUD's proposed operating subsidy rule.
This is another issue that I think merits its own hearing. In 1998,
Congress mandated that HUD engage in a negotiated rulemaking with the
public housing community to develop a new funding mechanism for
operating subsidies. HUD did that. And, then it proposed a completely
different rule. Under this new rule, New Jersey housing authorities
will see a $17.3 million reduction in funding. These cuts will starve
housing
authorities of the funds they need to maintain staffing and continue
operations.
Mr. Secretary, I wish I could congratulate the Administration for
something in this budget. Unfortunately, I cannot. I really hope that
we can work together to ameliorate some of these cuts and to develop
bipartisan solutions to the very serious housing affordability crisis
our Nation is facing.
----------
PREPARED STATEMENT OF ALPHONSO JACKSON
Secretary, U.S. Department of Housing and Urban Development
April 21, 2005
Overview
Chairman Allard, Ranking Member Reed, Distinguished Members of the
Subcommittee, thank you for the invitation to join you this morning. I
am honored to outline the fiscal year (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 homeownership, 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 nonsecurity 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 nondefense 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 homeownership in
particular--is the key to financial independence, the accumulation of
wealth, and stronger, healthier communities.
Homeownership creates community stakeholders who tend to be active
in charities, churches, and neighborhood activities. Homeownership
inspires civic responsibility, and homeowners are more likely to vote
and get involved with local issues. Homeownership offers children a
stable living environment, and it influences their personal development
in many positive, measurable ways--at home and at school.
Homeownership's potential to create wealth is impressive, too. For
the vast majority of families, the purchase of a home represents the
path to prosperity. A home is the largest purchase most Americans will
ever make--a tangible asset that builds equity, good credit, borrowing
power, and overall wealth.
In 2004, more Americans achieved the dream of homeownership 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
homeownership has surpassed 51 percent for the first time in history.
That figure, however, points to a significant homeownership 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 homeownership 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 homeownership. 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 homeownership. 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.
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
homeownership 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 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-homeownership counseling,
strong and committed collaboration among Public Housing Authorities
(PHA's), local nonprofits, 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 GSE's to
genuinely lead the market in creating homeownership 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 GSE's' efforts
on the purchase of home mortgages, not refinancings. HUD projects that
over the next 4 years, GSE's 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 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 nonprofit 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 toward 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 PHA's 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 PHA's need to be
provided with greater flexibility.
I would like to thank you, Chairman Allard, for your leadership in
introducing S. 771, authorizing legislation to implement Section 8
reform. This legislation will simplify Section 8 and give more
flexibility to PHA's to administer the program to better address local
needs. PHA's 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 PHA's 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 plan will eliminate many of
the complex forms that are currently required to comply with program
rules, saving both time and money. Furthermore, the legislation will
reward PHA's 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.
Conclusion
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.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED
FROM ALPHONSO JACKSON
Q.1. What is your response to criticism from the disability
community that these cuts send the message to the public that
HUD is not particularly committed to fair housing education and
enforcement to safeguard the rights of persons with
disabilities and other minorities impacted by housing
discrimination?
A.1. The Department continues to demonstrate in manifold ways
its commitment to fair housing education and enforcement on
behalf of people with disabilities and others affected by
unlawful discrimination.
While the Department's fair housing programs have undergone
cuts, HUD has placed a greater emphasis on high profile,
systemic enforcement actions to obtain relief for a large
number of people. The Department has also made its funds go a
long way through the development of enforcement methodologies
and public-service announcements that can be replicated and
redistributed by other agencies. We believe these actions, and
the Department's continued response to individual complaints,
will have a measurable impact on discrimination against people
with disabilities and other populations.
Notably, in fiscal year 2006 the Department's recently
formed systemic investigations unit will be fully operational.
That unit has already launched two large, Secretary-initiated
investigations, and is reviewing others for possible approval.
The unit will investigate allegations of housing providers who
have a policy or widespread practice of discrimination, to
include owners of large apartment complexes who may have
violated the Fair Housing Act's accessible design and
construction requirements, housing providers operating in
several States, real estate agencies engaged in racial
steering, and lenders engaged in predatory lending practices.
The creation of the unit allows HUD to consolidate multiple
cases it may receive against the same housing provider or
launch its own investigation against such a housing provider,
where warranted.
HUD's Fair Housing Training Academy, now in operation, is
helping the Department promote consistent performance among the
101 Fair Housing Assistance Program agencies investigating fair
housing cases under their respective State and local laws.
Since the establishment of the Academy, the Department has been
able to reduce some FHAP training and technical assistance
costs. Moreover, costs for the Training Academy decline in
subsequent budget years, such as fiscal year 2006, as the
Academy becomes more self-sustaining and no longer needs funds
for start-up costs such as curriculum development.
The Department's enforcement on behalf of people with
disabilities goes well beyond its enforcement of the Fair
Housing Act. Under its authority to enforce Section 504, the
Department has conducted 100 compliance reviews of recipients
of HUD funds in fiscal year 2004, which will result in the
creation of thousands of accessible dwelling units. HUD
targeted large Public Housing Authorities for its compliance
reviews in order to create the largest number of accessible
units for people with disabilities. This includes 478 units at
the Miami-Dade Housing Agency, 104 units at the Housing
Authority of the City of Las Vegas, and 775 units at the
Housing Authority of Baltimore City. As part of HUD's education
and outreach effort, HUD regularly meets with various
disability rights organizations to identify issues/areas of
concern, including additional means of expanding fair housing
enforcement.
HUD is also conducting a study on the nature and extent of
discrimination persons with disabilities face when seeking to
rent housing. This study tests paired-testing methodologies and
is developing methods to measure housing discrimination against
persons with disabilities. Results of the study will help the
Department formulate policy to address such discrimination. The
study will be published this summer. The study will pay
dividends for the Department and the fair-housing/disability-
advocacy community as it makes available a testing methodology
that groups throughout the country may use to measure the level
of discrimination against people with disabilities in their
communities.
Finally, the Department continues to fund the Fair Housing
Accessibility FIRST initiative. FIRST is a major education and
outreach program, which provides training and technical
guidance on a national scale to assist architects and builders
to design and construct apartments and condominiums with the
legally required
accessibility features. The American Institute of Architects
has accredited the FIRST training program. FIRST has required
fewer funds in the years since the initial start-up year, and
has a sustained impact on the construction of new multifamily
housing as more members of the housing industry are educated on
the Fair Housing Act's accessibility requirements. In fiscal
year 2004, FIRST trained a total of 3,560 builders, developers,
code officials, architects, and others involved with the
development of more than 1,150,000 multifamily housing units.
All in all, HUD's awareness studies and tracking surveys
show that HUD's enforcement actions and high-profile education
efforts do resonate with the public and have resulted in
increased awareness of fair housing rights and
responsibilities.
Q.2. According to statistics from the National Fair Housing
Alliance's latest report on trends in fair housing, fair
housing complaints filed through HUD, FHAP, and the National
Fair Housing Alliance all increased in 2004, with complaints on
the basis of disability constituting the single largest
category of complaints (31 percent of all complaints). Yet, in
your fiscal year 2006 Budget, you proposed reducing FHEO's
funding by 29 percent overall ($14 million)--including a 38
percent (or $10 million) reduction in the FHAP program. How can
you possibly justify reducing funding for fair housing
enforcement in the face of increasing reports of
discrimination?
A.2. The proposed fiscal year 2006 budget for fair housing is a
reduction from the fiscal year 2005 level of 13.7 percent in
FHAP and an 18.9 percent decrease in FHIP. Furthermore, the
salaries and expenses budget for FHEO is 4 percent above the
fiscal year 2005 level. This decrease largely reflects cost-
savings that HUD will achieve through performance-based
reimbursement of the FHAP agencies, consolidation of training
programs, and improvements in the dissemination of cutting-edge
fair housing enforcement, education, and outreach materials.
This comes at a time when the Department is better managing
its Fair Housing Act caseload and, for the first time,
completing the majority of its cases within the 100-day
timeframe set forth in the statute. As the Department goes into
fiscal year 2006, it will have a fully operational systemic
investigations unit, which will investigate high-profile,
large-impact cases that result in widespread changes in
industry practices and obtain relief for multiple people.
The work of the systemic investigations unit will
complement that of the FHAP agencies, who will continue to play
an integral role in fair housing enforcement. The Department
recently opened the National Fair Housing Training Academy to
provide training that will result in more consistent and higher
quality investigations among HUD offices and FHAP agencies,
providing for greater cost-effectiveness. Among the 101 FHAP
agencies, the Department has also put new performance measures
in place, which reimburse those agencies on a sliding scale,
based on the timeliness and the quality of their
investigations.
In general, the Department's training and education efforts
are self-perpetuating and consolidate many previous activities.
For example, the Fair Housing Training Academy required funding
at a much higher level during its first year for curriculum
development and other initial costs. In fiscal year 2006, the
Training Academy will require less funding as it becomes more
self-sustaining. Furthermore, the Training Academy fulfills
most of the training needs of the FHAP agencies thereby
reducing that historic budget item and former technical-
assistance funding.
The Training Academy will also serve as a clearinghouse for
fair housing materials produced by FHIP recipients and FHAP
agencies under education-and-outreach and administrative
funding. By giving FHIP recipients and FHAP agencies access to
materials produced by other organizations, this will eliminate
the creation of duplicate materials and will enable groups to
expand the types of enforcement, education, and outreach activities
they are able to perform. The Disability Discrimination Study, to be
issued in the summer of 2005 is just one example. While the
Department worked with Access Living, a disability advocacy
group in Chicago to design the groundbreaking testing
methodology that formed the basis of the study, the Department
will widely disseminate the study and its accompanying testing
guidebook so that other disability advocacy groups will be able
to use this same methodology to test disability discrimination
in their own communities.
Finally, the Department has produced a series of highly
acclaimed public-service announcements on housing
discrimination. TV and radio stations continue to broadcast
these popular ads, well beyond their initial intended run. The
Ad Council, which, with civil-rights groups, received the grant
to produced the ads, reported that public awareness of the Fair
Housing Act's requirements increased from 67 percent to 74
percent in just the ads' first-year run.
On all fronts, the Department is making sure that its
activities are cost-effective, producing widespread and
sustained impact on housing discrimination.
Q.3. Among the specific steps that need to be taken, outgoing
FHA Commissioner Weicher committed 3 years ago to making 213 a
``Multifamily Accelerated Processing'' program. What are your
current plans regarding completing that process?
A.3. I have been unable to confirm any such commitment at this
time. However, as the Department is currently reviewing the
existing regulations for this program, we will also commit to
reviewing the applicability of the ``Multifamily Accelerated
Processing'' for this program.
Q.4. What will you or the Department do to update and make the
FHA 213 (co-op) insurance program more user-friendly?
A.4. HUD acknowledges that co-op homeownership has not received
full support by the Department. HUD is currently analyzing the
regulations to create a more effective utilization of its
Cooperative Homeownership program. We believe that cooperative
housing is a good vehicle for prospective homebuyers in that
they provide some of the tax and equity benefits of single-
family homes.
Q.5. Former FHA Commissioner Weicher commissioned a contracted
study with the Hollister Group and other consultants in 2004
entitled, ``Cooperative Housing Market Assessment'' to help
evaluate the efficacy of cooperatives in assisting HUD to
achieve the President's ownership society objectives. This
study was completed last year but has still not been publicly
released. Can you please provide me with a copy of this study?
A.5. It is my understanding that the report is under review by
the staff. I will commit to discussing with staff the potential
release of the report to the public.
Q.6. Can you tell us the specific criteria used to award bonus
points during the fiscal year 2004 grant round?
A.6. No bonus points were awarded in connection with the fiscal
year 2004 Housing Choice Voucher Program/Family Self-
Sufficiency Notice of Funding Availability (HCV/FSS NOFA).
Applicants were funded based on priority categories that were
established in the HCV/FSS NOFA that was published in the
Federal Register on May 14, 2004. Funding was awarded to PHA
applicants that qualified for the first three funding
categories: Priority 1--Renewal PHA's with qualifying
homeownership programs; Priority 2--New Applicant PHA's with
qualifying homeownership programs; and Priority 3--Renewal
PHA's requesting an initial FSS homeownership coordinator.
There was sufficient funding for all eligible applicants in
priority categories 1 and 2, but not enough to fund all
Priority 3 applicants. Consequently, HUD calculated the FSS
Homeownership Percentage and Positive Escrow Percentage for
each of the eligible Priority 3 applicants as required by the
NOFA. Priority 3 applicants were then funded in order starting
with those with the highest FSS Homeownership Percentage first.
In the case of two applicants with the same FSS Homeownership
Percentage, Positive Escrow Percentage and HCV program size
were used to determine funding order.
Q.7. In the fiscal year 2004 Family Self-Sufficiency (FSS)
coordinator grant round announced in December, about a third of
all previously funding programs (256 programs) did not receive
funding. Of the $47.7 million available for this purpose, only
$44.5 million has been released. This undistributed $3.2
million is the equivalent of 68 FSS coordinators. When and how
do you intend to make funds available to local agencies?
A.7. HUD received requests from 873 applicants asking for a
total of $72.8 million for HCV/FSS coordinators, but had only
$47.7 million available. Of the $3.2 million that remained
after the first round of funding was announced, all but $16,800
has been awarded to eligible applicants. Since the remaining
balance is not sufficient to fund a full position, it will be
offered to the highest ranked unfunded application to partially
fund a position.
Q.8. How many families are currently under lease?
A.8. As of the April 2005, PHA submission, there are 2,014,171
units currently under lease.
Q.9. I am concerned that the upheaval and shortfalls of the
past year have caused a reduction in the number of families
assisted in the voucher program. According to HUD's Voucher
Management System data, how many voucher families were under
lease in January 2004?
A.9. The total number of units under lease in January 2004 was
2,004,341. This number includes 14,978 5-year Mainstream units.
Q.10. Provide information on what has happened to affected
troubled properties and tenants after Section 8 contract
termination, foreclosure, or disposition sales since January 1,
2001.
A.10. Attached please find the data on properties after Section
8 termination and foreclosure/disposition since January 1,
2001.*
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* Held in Committee files.
Q.11. Please provide any internal HUD policy guidelines or
memoranda on the following issues: (i) retention or use of
project-based Section 8 under existing contracts with REAC
scores below 60 or at foreclosure; (ii) criteria for commencing
foreclosure and for establishing the terms of foreclosure
sales, including use restrictions, purchaser qualifications,
Section 8 assistance, or other subsidies; (iii) taking
possession of properties as mortgagee-in-possession, making
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repairs, or accepting deed-in-lieu of foreclosure;
A.11. Attached please find the following: (1) the Department's
policies and procedures for taking mortgagee-in-possession; (2)
criteria for commencing foreclosure; and (3) processing and
approving the disposition of HUD-owned multifamily projects.*
---------------------------------------------------------------------------
* Held in Committee files.
Q.12. Please provide a list of properties (name, location, HUD
program(s), number of units, number of assisted units, and
occupancy rate) with HUD-held mortgages in foreclosure or
property disposition pipeline, and reason(s) for foreclosure
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(financial or covenant default).
A.12. Below is a list of the properties including the name,
location, HUD program(s) and number of units with HUD-held
mortgages in the foreclosure pipeline and the reason(s) for
foreclosure. Please note that we do not have records on
occupancy rates.*
---------------------------------------------------------------------------
* Held in Committee files.
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At this time, the Department does not own any properties
and therefore, there is no property disposition pipeline.
Q.13. I am very concerned about a disturbing pattern in the
Department's handling of ``troubled'' privately owned, HUD-
subsidized and assisted multifamily housing--buildings where
owners are delinquent on mortgage payments or have failed to
maintain property standards. In limited situations,
preservation strategies are not feasible. However, we have
heard from Members and community groups in New York,
Massachusetts, Illinois, Ohio, Pennsylvania, Texas, Florida,
Maryland, and here in Washington, DC, that the Department has
consistently failed to use its authority to further
Congressional goals of preserving and improving affordable
housing and preventing tenant displacement. In fact, in almost
every case, the Department has usually pursued a policy of
converting to vouchers--the exact opposite of what should be
done to save these buildings as affordable housing and promote
neighborhood revitalization without displacement. I am
requesting information regarding the Department's policies and
rationales, and the extent of the problem today.
Please provide a list of properties (name, location, HUD
program(s), number of units, number of assisted units, and
occupancy rate) with one or more failed REAC scores and their
status in the enforcement process (in workout negotiations,
under correction plan, pending termination).
A.13. As part of the Department's mission to ensure that
residents reside in decent, safe, and sanitary housing, the
Department initiated a protocol whereby, if a project received
an inspection score under 60 on a scale of 1 to 100, that
property would be referred for potential enforcement action.
The Department meets with the owner to discuss the
ramifications of failing physicals, and issues a notice of
violation and/or default offering an opportunity for the owner
to cure the default and conducts a reinspection no sooner than
60 days from the first inspection. Should the project fail a
second inspection, the Department will take the necessary
actions to permanently cure the problems of the project. The
Department works with the owner to review options available,
ranging from paying the mortgage off and making the necessary
repairs to selling the property, changing management, or
refinancing. The
Department's first priority is to work with the owner to make
the necessary repairs. However, if the owner fails to make the
repairs, the Department will review its options, including the
abatement of the subsidy, foreclosure, acceleration of the
mortgage, and will subsequently sell the mortgage note.
Since the inception of this protocol the Department's
property portfolio was roughly 30,000 properties, of which,
37,757 inspections have been conducted and released to owners
of 26,000 properties. Many of the properties were inspected
more than once, due to annual inspections. Some received two or
three inspections under the concept of offering the owners
opportunities to make the necessary repairs. There are 17,500
properties that have been inspected only once as they either
received an acceptable score or are awaiting a second
inspection. There are 9,118 properties that have had more than
one inspection because they have had annual inspections or they
were inspected 2 or 3 times in an attempt to allow the owner to
cure the default.
Currently, of the 2,586 properties that received their
first score under 60, only 1,334 properties received a second
score over 60 and will be inspected in the future according to
outstanding protocol; 739 properties had one failed inspection
and are awaiting a second inspection; 513 properties have had a
second failed inspection, so some action was in order. Of the
513 properties, the field offices have submitted 133 corrective
plans that are now under review in headquarters. Only 380
properties have thus far been subjected to some decisive
action, either initiated by the owner or the Office of Housing.
The attached reports will further outline the resolutions.*
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* Held in Committee files.
Q.14. As part of the House Appropriations Committee's fiscal
year 2005 VA-HUD Report (H.Rpt. 108-674, page 67), HUD was
directed to come forward with programmatic guidance for the 811
``mainstream'' program by March 15, 2005. This guidance was to
include: Targeting of rental assistance consistent with
longstanding 811 targeting criteria, that is targeting to
individuals with the most severe disabilities; maintenance of
these vouchers upon turnover; and retention of a meaningful
role for nonprofit disability groups in the program.
This language also expressed strong concerns regarding the
diversion of 811 tenant-based assistance to the Section 8
voucher program. Can you provide an update on progress in
developing this required programmatic guidance for the 811
tenant-based program?
A.14. On February 1, 2005, the Department issued Notice PIH
2005-5 (HA) on the New Freedom Initiative and the Housing
Choice Voucher (HCV) program. This Notice clarified that to the
extent practicable, vouchers awarded for the purpose of serving
nonelderly disabled families must continue to be awarded to the
same target population upon turnover. The Notice also clarified
that ``to the extent practicable'' meant that all nonelderly
disabled families on a PHA's waiting list have been issued
these turnover vouchers, and PHA outreach efforts, specifically
directed to nonelderly disabled families, yielded no eligible
applicants. The Notice also clarified that, under the Section
811 Program of Supportive Housing for Persons with
Disabilities, vouchers must be issued and reissued upon
turnover to both elderly and nonelderly disabled persons.
Notice PIH 2005-5 (HA) defined the continuing role of nonprofit
disability groups in providing referral services and housing
search assistance and transitional services to the disabled
population that receives HCV.
In regard to the diversion of Section 811 assistance, on
August 4, 2004, the Department issued Notice 2004-13 (HA),
which implemented six new codes to be used with data submitted
on Form HUD-50058 (Family Report). One of the codes, MS5
specifically tracks vouchers issued and leased under the
Section 811 program in the Public Housing Information Center
(PIC). Failure to serve disabled families as required will
result in the forfeiture of these vouchers.
Q.15. The limited information we have received regarding the
Administration's fiscal year 2006 request for Section 811 does
not specify how the remaining estimated $35 million for Section
811 would be spent (the fund leftover after the $85 million for
tenant-based and project-based (PRAC) renewals are taken care
of.) Would this remaining $35 million stay in the 811 program
for new ``mainstream'' vouchers, or would it be needed for
contract amendments for prior year commitments (fiscal year
2002 and fiscal year 2003) for 811 tenant-based awards?
A.15. If there are funds that are leftover after the
Department's amendment and renewals needs are met, these
remaining funds will be available for incremental tenant-based
assistance. The President's budget indicates that ``up to
$34,000,000'' may be available for incremental tenant-based
rental assistance.
Q.16. How about under the Administration's proposal for fiscal
year 2006?
A.16. Based on historical data, we estimate that more than
155,000 beds may be produced with fiscal year 2006 funding.
Q.17. How many units of supportive housing do you expect will
be produced with fiscal year 2005 Homeless Assistance Grants
Funding?
A.17. Communities can use the Homeless Assistance Grants (HAG)
funding to provide housing as well as an array of supportive
services. Both the law and HUD provide communities with
flexibility in using these funds to address local needs. As
such, the number of units of housing funded in fiscal year 2005
is largely dependent on local needs. With this caveat, HUD
estimates the HAG funds will provide renewal and new funding
for more than 150,000 beds.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES
FROM ALPHONSO JACKSON
Q.1. Why did HUD propose and accept a stop-loss provision in
the negotiated rule only to drop it in the proposed rule?
A.1. The stop-loss provision would have allowed a PHA to
discontinue its subsidy reduction (stop-loss) by demonstrating
that it has successfully converted to asset management. Upon
further consideration, HUD believes that the Harvard Cost Study
methodology should be equally applied to all PHA's, and that
this stop-loss provision would weaken the goal of
redistributing operating subsidies to PHA's who have
historically been underfunded in the current formula. In
addition, in accordance with the Committee's recommendations,
the proposed rule continues to allow PHA's to substitute
independent cost data for use as a basis of subsidy funding
through one of the five categories of appeals.
Q.2. Please submit supporting materials for the data Secretary
Jackson used in The Wall Street Journal op-ed, ``It Really is
Black and White . . . Private Social Security Accounts Will
Help Lift Minorities Out of Poverty,'' dated April 19, 2005.
A.2. Senator Sarbanes' argument is similar to Paul Krugman's in
The New York Times on January 28, 2005, where he states,
``Blacks' low life expectancy is largely due to high death
rates in childhood and young adulthood. African-American men
who make it to age 65 can expect to live, and collect benefits,
for an additional 14.6 years--not that far short of the 16.6-
year figure for white men.'' The Secretary, however, was not
referring to African-Americans that made it to the age of
retirement. He was referring to all African-Americans, and
using the full-benefit Social Security retirement age
applicable to individuals born in 1960 and later (age 67). The
data source for life expectancy at birth is the National Center
for Health Statistics, National Vital Statistics Reports, Vol.
49, No. 3, June 26, 2001. http://www/cdc/gov/nchs/data/nvsr/
nvsr49/nvsr49_03.pdf. [-SSA, Housing Branch]
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SCHUMER
FROM ALPHONSO JACKSON
Q.1. Why has the Department proposed a cut in the Public
Housing Operating Fund?
A.1. The Department has not proposed a cut for Operating Fund.
The $3.4 billion request for fiscal year 2006 would fund PHA's
at an 89 percent proration level, which is the same as the
current proration level for fiscal year 2005.
Q.2. Why did HUD drop the stop-loss provision that would allow
for PHA's to lose only 5 percent?
A.2. The stop-loss provision would have allowed a PHA to
discontinue its subsidy reduction (stop-loss) by demonstrating
that it has successfully converted to asset management. Upon
further consideration, HUD believes that the Harvard Cost Study
methodology should be equally applied to all PHA's, and that
this stop-loss provision would weaken the goal of
redistributing operating subsidies to PHA's who have
historically been underfunded in the current formula. In
addition, in accordance with the Negotiated Rulemaking
Committee's recommendations, the proposed rule continues to
allow PHA's to substitute independent cost data for use as a
basis of subsidy funding through one of the five categories of
appeals.
Q.3. What is the current and expected funding level? Can you
cite for me a year where the cuts in operating subsidies have
been greater than this budget?
A.3. Historically, the lowest proration level in the Operating
Fund has been 89 percent (1996). At the request of $3.4
billion, the proration level for 2006 is estimated to be 89
percent. The current proration level for fiscal year 2005 is 89
percent.
Q.4. How does NYCHA deal with a $185 million drop in subsidy?
A.4. Please note that in fiscal year 2003 dollars, NYCHA's
operating subsidy would decrease by $129 million or 17 percent
under the proposed rule. With the transition policy, NYCHA's
loss would be limited to 24 percent in Year 1. As a result,
under the proposed rule, NYCHA would have their reduction
limited to approximately $31 million in Year 1. NYCHA has the
following resources to deal with the loss of $31 million.
<bullet> Operating subsidy is only one of NYCHA's revenue
streams that provides resources for the operation and
maintenance of their public housing stock. A review of
NYCHA's last audited financial statement reveals that the
total revenue stream for NYCHA's public housing program was
over $1.3 billion, of which $563 million, or 43 percent,
came from tenant rent, $711 million, or 54 percent, was
from operating subsidy, and the remainder of the balance
consisting of other smaller revenue sources. Therefore,
NYCHA's Year 1 loss is approximately a 2.5 percent
reduction of their entire public housing fund budget.
<bullet> Consistent with the Harvard Cost Study's finding,
PHA's who would receive less subsidy tend to have larger
reserves than the PHA's who would receive more subsidy.
More specifically, NYCHA's losses would be cushioned by the
approximately $409 million it has in operating reserves.
<bullet> The proposed rule also allows PHA's to maximize other
revenue streams without receiving an offset in subsidy, as
the current rule requires.
Last, the Harvard Study found that NYCHA had historically
been overfunded even after taking into account the special cost
features associated with New York City in general. It should be
noted that NYCHA currently receives $759 million in operating
subsidies, which represents 22 percent of total annual
operating subsidies while managing 13.3 percent of the 1.2
million public housing units available nationally. Under the
proposed rule, NYCHA's share in operating subsidy would
modestly decline from 22 percent to 19 percent.
Q.5. What is the expected increase or decrease in subsidy for
the largest 100 PHA's?
A.5. At the request of $3.4 billion, the proration level for
2006 is estimated to be 89 percent. That said, Appendix A shows
the estimated increase/decrease in subsidy under the proposed
rule versus the current formula for the 100 largest PHA's in
terms of number of units under management.
For the 100 largest PHA's, the distribution of PHA's whose
subsidy will increase/decrease under the proposed rule formula
is provided below.
<bullet> number of PHA's with increase in subsidy: 66
<bullet> number of PHA's with decrease in subsidy: 28
<bullet> PHA's with no change: 6 *
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* 5 are PHA's that participate in the Moving to Work (MTW) program
and their formulas will continue to be calculated pursuant to their MTW
agreement. In addition, the Harvard Cost Study did not provide a new
Project Expense Level (PEL) for the Virgin Islands, HUD is assuming
that the Virgin Islands will continue to receive funding at the current
formula level.
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RESPONSE TO WRITTEN QUESTIONS OF SENATOR MARTINEZ
FROM ALPHONSO JACKSON
Q.1. Why did HUD publish a rule that is substantially different
than the negotiated rule?
A.1. Consistent with rulemaking policies, as well as the
Department's obligations under Executive Order 12866 (entitled
``Regulatory Planning and Review'') and other rulemaking
authorities, the draft rule underwent further review at HUD and
executive branch review prior to publication. As a result,
certain of the Committee's recommendations were revised to
better reflect Administration 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 recommendations, namely:
<bullet> The proposed rule adopts the Harvard Study's
methodology for estimating operating costs as well as the
broader reforms in the area of asset management.
<bullet> The Harvard Study was silent on a transition policy.
However, the proposed rule retains the Committee's
recommendation of a transition policy to allow time for
PHA's to align their resources with the new funding. As a
result, PHA's who stand to gain also have their increases
limited to soften the impact on PHA's who face decline
under the new formula.
<bullet> Similar to the Committee's recommendations, the
proposed rule went beyond the Harvard Cost Study's
recommendations by providing PHA's with the tools to
convert to asset management by providing fees for
information technology, asset management, asset
repositioning, and rental income stability.
<bullet> The proposed rule retains the five categories of
appeals recommended by the Committee, which would allow a
PHA to appeal its new operating fund amount.
<bullet> The proposed rule also allows PHA's to maximize other
revenue streams without receiving an offset in subsidy, as
the current rule requires.
<bullet> The redistribution remains largely intact, with 81
percent of all PHA's gaining under the proposed rule (the
same as under the Committee's recommendations).
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