[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
LIVING IN AMERICA: IS OUR PUBLIC HOUSING SYSTEM UP TO THE CHALLENGES OF
THE 21ST CENTURY?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FEDERALISM
AND THE CENSUS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
FEBRUARY 15, 2006
__________
Serial No. 109-136
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
------ ------
David Marin, Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Federalism and the Census
MICHAEL R. TURNER, Ohio, Chairman
CHARLES W. DENT, Pennsylvania WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut PAUL E. KANJORSKI, Pennsylvania
VIRGINIA FOXX, North Carolina CAROLYN B. MALONEY, New York
------ ------
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
John Cuaderes, Staff Director
John Heroux, Counsel
Juliana French, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on February 15, 2006................................ 1
Statement of:
Lazio, Rick A., executive vice president, Global Government
Relations and Public Policy, JPMorgan Chase Bank; Henry
Cisneros, chairman, Cityview, former Secretary of HUD;
David G. Wood, Director, Financial Markets and Community
Investments, Government Accountability Office; and Renee
Lewis Glover, former commissioner, Millennial Housing
Commission, chief executive officer, Atlanta Housing
Authority.................................................. 10
Cisneros, Henry.......................................... 19
Glover, Renee Lewis...................................... 44
Lazio, Rick A............................................ 10
Wood, David G............................................ 21
Solomon, Rod, counsel, Hawkins Delafield & Wood, LLP, former
HUD Deputy Assistant Secretary for Policy; Conrad Egan,
president, National Housing Conference, former executive
director of the Millennial Housing Commission; Alexander
von Hoffman, senior fellow, Joint Center for Housing
Studies, Harvard University; Edgar O. Olsen, professor of
economics, University of Virginia; and Michael A. Stegman,
Macrae professor of public policy, planning and business,
and director, Center for Community Capitalism, Kenan
Institute of Private Enterprise, adjunct professor of
entrepreneurship, University of North Carolina at Chapel
Hill....................................................... 65
Egan, Conrad............................................. 83
Olsen, Edgar O........................................... 100
Solomon, Rod............................................. 65
Stegman, Michael A....................................... 113
von Hoffman, Alexander................................... 90
Letters, statements, etc., submitted for the record by:
Clay, Hon. Wm. Lacy, a Representative in Congress from the
State of Missouri, prepared statement of................... 8
Dent, Hon. Charles W., a Representative in Congress from the
State of Pennsylvania, prepared statement of............... 132
Egan, Conrad, president, National Housing Conference, former
executive director of the Millennial Housing Commission,
prepared statement of...................................... 85
Glover, Renee Lewis, former commissioner, Millennial Housing
Commission, chief executive officer, Atlanta Housing
Authority, prepared statement of........................... 46
Lazio, Rick A., executive vice president, Global Government
Relations and Public Policy, JPMorgan Chase Bank, prepared
statement of............................................... 14
Olsen, Edgar O., professor of economics, University of
Virginia, prepared statement of............................ 102
Solomon, Rod, counsel, Hawkins Delafield & Wood, LLP, former
HUD Deputy Assistant Secretary for Policy, prepared
statement of............................................... 68
Stegman, Michael A., Macrae professor of public policy,
planning and business, and director, Center for Community
Capitalism, Kenan Institute of Private Enterprise, adjunct
professor of entrepreneurship, University of North Carolina
at Chapel Hill, prepared statement of...................... 116
Turner, Hon. Michael R., a Representative in Congress from
the State of Ohio, prepared statement of................... 4
von Hoffman, Alexander, senior fellow, Joint Center for
Housing Studies, Harvard University, prepared statement of. 92
Wood, David G., Director, Financial Markets and Community
Investments, Government Accountability Office, prepared
statement of............................................... 23
LIVING IN AMERICA: IS OUR PUBLIC HOUSING SYSTEM UP TO THE CHALLENGES OF
THE 21ST CENTURY?
----------
WEDNESDAY, FEBRUARY 15, 2006
House of Representatives,
Subcommittee on Federalism and the Census,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
room 2247, Rayburn House Office Building, Hon. Michael R.
Turner (chairman of the subcommittee) presiding.
Present: Representatives Turner, Dent, Foxx and Clay.
Staff present: John Cuaderes, staff director; Jon Heroux,
counsel; Juliana French, clerk; Adam Bordes, minority
professional staff member; and Jean Gosa, minority assistant
clerk.
Mr. Turner. A quorum being present, this hearing of the
Subcommittee on federalism and the Census will come to order.
We want to welcome you to the subcommittee's oversight
hearing entitled, ``Living in America: Is our Public Housing
System up to the Challenges of the 21st Century?'' This will be
the first in a series of hearings designed to examine the state
of public housing system in the United States.
Congress first authorized public housing in 1937 as part of
Franklin D. Roosevelt's Depression-era public works legislative
package. Over the years the program has evolved from a public
works program designed to serve predominantly working families
on a temporary basis before moving on to permanent market-rate
housing after a few years, to one serving poorer families who
are more likely to become long-term residents, with fewer
options for securing permanent unsubsidized housing.
In my hometown of Dayton, OH, the Dayton Metropolitan
Housing Authority serves close to 15,000 families through its
public housing communities or Section 8 vouchers. While we have
made significant progress in the housing arena over the last 10
years, addressing the housing needs of the city's poorest
families remains a significant challenge as we seek to create
quality affordable housing for all families.
Despite several minor attempts to reform our public housing
system, by the mid-1990's, there were still far too many cases
where public housing did not provide quality, affordable
housing to the Nation's neediest families. In 1998, Congress
passed the Quality Housing and Work Responsibility Act to
address the many problems within the public housing system.
This landmark legislation was the largest overhaul of the
public housing system in its long history.
Today, public housing programs serve more than 3 million
families at a price of more than $20 billion annually in
Federal funding. Public housing programs consume nearly 60
percent of HUD's entire annual budget.
In recent years, public housing programs and housing
assistance have taken a back seat in the national debate. But
with a combined Federal, State and local government investment
of more than $50 billion, it is time we begin looking to see if
these funds are being well spent. In this hearing, we will look
at our public housing system from a broad view. Later, we will
narrow the subject matter of any follow-on hearings based on
what we learn in part from our witnesses today.
This hearing will examine the factors that led up to
Congress' decision to reform the Nation's public housing
programs in 1998, as well as the recommendations made by the
Millennial Housing Commission in its 2002 report entitled,
``Meeting our Nation's Housing Challenges.'' We will examine
the present state of public housing and take a broad look at
how effective reform legislation has been in creating better,
safer and more affordable housing for the Nation's low and
moderate-income families.
We have on our first panel the Hon. Rick Lazio of JPMorgan
Chase. Representative Lazio is the former chairman of the House
Financial Services Subcommittee on Housing and Community
Opportunity, and the author of the Quality Housing and Work
Responsibility Act of 1998.
Next we have the Hon. Henry Cisneros, who was the Secretary
of Housing and Urban Development from 1993 to 1997, and is
currently chairman of CityView.
Next we have David Wood, Director of Financial Markets and
Community Development at the Government Accountability Office.
Last, we have Renee Glover, a former Commissioner on the
Millennial Housing Commission and currently the CEO and
president of the Atlanta Public Housing Authority.
On our second panel we have five distinguished witnesses.
First is Rod Solomon, who is counsel with the law firm of
Hawkins Delafield & Wood, and was the Deputy Assistant
Secretary for Policy at HUD.
Next we have Conrad Egan. Mr. Egan is currently president
of the National Housing Conference, and the former executive
director of the Millennial Housing Commission.
Following Mr. Egan, we will hear from Dr. Alexander von
Hoffman, a historian and senior research fellow at Harvard
University's Joint Center for Housing Studies.
Next we have Dr. Edgar Olsen, professor of economics at the
University of Virginia.
Last, we have Dr. Michael Stegman, who is the director of
the Center for Community Capitalism at the Kenan Institute of
Private Enterprise, and an adjunct professor of
entrepreneurship at the University of North Carolina.
I look forward to the expert testimony our distinguished
panel of leaders will provide to the subcommittee. I thank you
for all your time.
I recognize Mr. Clay, our ranking member.
[The prepared statement of Hon. Michael R. Turner follows:]
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[GRAPHIC] [TIFF OMITTED] T7282.003
Mr. Clay. Thank you, Mr. Chairman. Let me first begin by
thanking you for starting this legislative session with a
review of our Nation's public housing program. This topic is of
significant importance to all of our constituents, from Dayton
to St. Louis, and everywhere in between.
Since its origins dating back to the Great Depression,
public housing programs have served as a bedrock of support for
millions of families, elderly and disabled individuals. At the
same time, however, these programs have struggled to mitigate
significant economic and social ills that have prevented our
capital investments and programmatic goals from achieving their
intended outcomes. Public housing, nevertheless, is in more
demand than ever, as economic disparities and escalating
housing costs have forced an overwhelming number of individuals
to seek assistance.
Being from an urban center like St. Louis, I know firsthand
the value of public housing to my constituents. Our local PHA,
the St. Louis Housing Authority, has a budget of approximately
$60 million that is derived entirely from HUD. Its public
housing program has a budget of $33 million to support
approximately 3,800 units located in 33 developments throughout
the city. Unfortunately, however, approximately 700 of these
units are not suitable for use because of modernization or
demolition activities, and the average age of a public housing
building is 38-years-old. Complicating matters is the strain on
its Section 8 Housing Voucher program, which provides roughly
4,900 vouchers annually, yet has nearly 3,200 applicants on its
Housing Choice Voucher waiting list.
While I approach today's hearing with an open heart and
mind, I believe any long-term approach to public housing reform
needs to be undertaken with care and consideration for all
program beneficiaries. To meet this requirement, I believe a
hold harmless mechanism that would protect families from cuts
in the future ought to be considered as part of any future
authorizing legislation.
Mr. Chairman, I thank you very much. I yield back the
balance of my time.
[The prepared statement of Hon. Wm. Lacy Clay follows:]
[GRAPHIC] [TIFF OMITTED] T7282.004
[GRAPHIC] [TIFF OMITTED] T7282.005
Mr. Turner. Thank you, Mr. Clay.
We will now start with the witnesses. Several witnesses
have kindly prepared written testimony which will be included
in the record of this hearing. The witnesses will notice that
there is a timing light at the witness table. The green light
indicates that you should begin your prepared remarks, and the
red light indicates that your time has expired. The yellow
light will indicate when you have 1 minute left in which to
conclude your remarks.
It is the policy of this committee that all witnesses be
sworn in before they testify. If the witnesses would please
rise and raise their right hands.
[Witnesses sworn.]
Mr. Turner. Please let the record show that all witnesses
have responded in the affirmative.
I want to thank each of you again for the time that you are
taking to be here, both in the preparation that it took and the
time that you are taking out of your schedules.
This committee is just beginning its process of looking at
the issues of public housing. Last year we focused on CDBG and
brownfields and brownfield redevelopment, holding over 5
hearings, both in Washington, DC, and field hearings on the
issue of CDBG and prospects for its reform and to preserve that
program, and then also brownfields, how we might be able to
assist communities, making sure that they have more effective
tools for the redevelopment of abandoned factory sites.
This is a beginning process so it is very important that we
begin with each of you because you come to the table with
significant knowledge in what has occurred in the past and
where we have fallen short in the past, and a vision of what we
might need to do in the future. So I appreciate you coming and
sharing that with us. As I was telling Rick Lazio, that each of
you have come to contribute to our to-do list, and we greatly
appreciate the skill and knowledge that you are going to bring
to the table to permit us to do that.
With that, I would like to begin with Rick Lazio.
STATEMENTS OF RICK A. LAZIO, EXECUTIVE VICE PRESIDENT, GLOBAL
GOVERNMENT RELATIONS AND PUBLIC POLICY, JPMORGAN CHASE BANK;
HENRY CISNEROS, CHAIRMAN, CITYVIEW, FORMER SECRETARY OF HUD;
DAVID G. WOOD, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY
INVESTMENTS, GOVERNMENT ACCOUNTABILITY OFFICE; AND RENEE LEWIS
GLOVER, FORMER COMMISSIONER, MILLENNIAL HOUSING COMMISSION,
CHIEF EXECUTIVE OFFICER, ATLANTA HOUSING AUTHORITY
STATEMENT OF RICK A. LAZIO
Mr. Lazio. Thank you, Mr. Chairman. I am delighted to be
here. I want to congratulate you for assembling two wonderful
panels, people that I have had the pleasure of working with
before, and I am sure they are going to be able to provide
great insight into the current state of housing policy in
America. I also want to acknowledge Congressman Clay. It's
wonderful to see you again, and I thank you for the opportunity
and the respect you show for showing up for this.
I thought I would, as I said, dispense with the written
testimony. My pal here, Henry Cisneros, is kidding me a bit,
because he is pushing this timer in my face. I said, ``Was this
always this uncomfortable?'' He said, ``Yeah.'' Did we saw off
the legs or--[laughter]--I have great respect for the people
who have testified in the past in front of my committee, and I
want to begin by acknowledging a really terrific, ideal
partner, and that was Henry Cisneros. It seems almost quaint in
this era to have a Republican chairman and a member of the
Democratic administration really bond the way I would like to
think that we did. But it's been a great relationship. I have
tremendous respect for him, and I'm sure would not have been
able to accomplish what we did accomplish without his strong
support and leadership. So it's been a loss for the country not
to have him in public service.
When I was elected we were in the minority, and having been
in the minority and the majority, I would say that being in the
majority is more fun, but 2 years later the Republicans did
sweep into the majority, and one of the great advantages of
getting the gavel as housing chairman was not to really have
any history, any partisan history. There was nobody's mess to
clean up for. There was no doctrinaire, paradigm to try to fit
into, per se, which was an advantage in terms of having a clean
slate from which to work.
The second major advantage was that there was a sense of
urgency and a general sense of consensus, I think, that there
were fundamental problems and challenges affecting public and
assisted housing. That created the imperative to work to try
and have a more fundamental reform, which is in fact what we
did.
The last advantage that I had was to be given the gift of
time. At the time I took the gavel, there were calls on both
sides of the aisle for either a dismantling of HUD or
dismantling of public housing and a vouchering out of public
housing, and I was given time by the then-Speaker Newt
Gingrich, to learn and listen and go out in the field which is
exactly what I did, and I would strongly recommend to this
committee, to be a good listener, to go out into the field and
listen to the tenants, listen to the people who were struggling
with these issues every single day. We'd airlift in and presume
to know the answers, and in fact, we really didn't know the
answers, hardly knew what questions were the right questions to
ask to being with, but we got there. Places like Desire and New
Orleans, or Robert Taylor Homes and Cabrini Green, and places
from Brownsville and New York, to St. Louis and parts west, and
that informed us greatly.
I was committed to take time to listen, and what I saw and
heard was that tenants wanted clean, safe, healthy housing.
They wanted a place where if they had children they could raise
them and have the confidence that they had in the environment
where those children could have the opportunities that perhaps
they did not have. Seniors wanted to live without being
harassed. The people expected to have the light bulbs work, the
doors on hinges, and the windows intact. Public housing
officials wanted more flexibility. They wanted to be trusted to
do their job. They wanted to spend less time hassling with
trying to fit into programs, that while well intentioned, had
grown to be so prevalent that their very local needs were not
always met.
So there were two thrusts to the reform that we came back
with. One was really what I call more of a group of management
reforms, beginning with consolidating literally dozens of
programs, again, that were well-intentioned programs, but which
didn't fit the needs of every single housing authority, and to
consolidate them into two major grants, one a capital, and one
an operating grant program for the Federal Government to fund,
in that sense providing more flexibility again for housing
authorities to address those needs.
Then there were other things, for example, like repealing
the one-for-one replacement rule, which again, while well
intentioned, had the perverse impact of keeping dysfunctional
units, debilitated units online, still costing housing
authorities to maintain them because they didn't really have
the money to replace them, or the site-based waiting list for
public housing, so that a senior who wanted to stay in the same
neighborhood that they had lived their whole life could go on a
waiting list for just that one building as opposed to having to
take the first unit that came up. And these operational
management reforms, I think, were generally and fairly widely
supported at the time.
A second group of reforms had to do with creating a more
dynamic atmosphere, an atmosphere where people who had the
capacity to have a job and to earn an income could do so
without having disincentives. So we provided more flexibility
in terms of the income targeting to create more mixed income to
provide more sustainable development, but also provide the
opportunity for there to be more role models for people in
these buildings, so that when a job became available that you
could hear from word of mouth, so that children could see that
a parent gets up in the morning and goes to work, that we
thought that was intrinsically positive, that we modified the
Brooke amendment, which again, while well intentioned, setting
rent at 30 percent of income, had the perverse impact of
effectively having a marginal tax on anybody who wanted to work
overtime or get a better job or get married to somebody who had
a job. They would do the rational thing, which was either to
work off the books, not an ideal situation, or to choose either
not to get married or not to take that work opportunity. So we
created a tenant choice so that tenants would either have a
flat rent or they'd be able to rely on that same guarantee of
having no more than 30 percent of their rent, their income as
rent.
The goal was to empower tenant groups to allow them to be
entrepreneurial. I remember, for example, in one of my visits
at the Cabrini Green there was a tenant leader who talked about
the fact that the basement had been dominated by drug dealers,
that the tenants had been kicked out, and if they just had the
authority, that they could come back, and they were going to do
what they needed to do to help inform the law enforcement
officials to kick out the criminals. But they wanted to put new
lights in there. They wanted to clean the basement. They wanted
to put washers and dryers in the area to service not just that
building, but other buildings. But there was no incentive to do
that because if they actually earned money because of that,
that money would go back out of the building, and so we sought
to change the law so that they could do that, that we could
empower again local tenant groups to have more decisionmaking.
If I think about it thematically, a lot of this had to do
with devolving decisionmaking back to local communities, with a
sense that communities each had distinct needs, and that
housing, while we focused on it from a policy standpoint, was
not all that there was, that for different groups, the
disabled, people with AIDS, the seniors, they needed supportive
services and they needed it onsite. We need to provide the
flexibility for housing authorities and tenant groups to do
that, that we needed to provide for a mixed income, and
leveraging and private sector, public-private partnerships,
because it wasn't just about housing, it was just as much about
making sure that people could live in a place where they could
have access to a good education for their children, where they
can get to transportation and get a job, where they can live in
a safe place without fear of being harassed or being victims of
crime, where they could go and get decent banking services and
decent prices for groceries, and not have to pay more than more
affluent people in the suburbs were paying.
And so we came to understand that we need to provide the
flexibility. I look at the 1998 act and its predecessor, the
1996 bill, and I think we perhaps started our work, but we
certainly haven't finished it. The need to continue to marry
resources and leverage up and use HUD and private sector
resources to focus on bricks and mortar and to get other
agencies within the Federal Government to address some of the
softer needs, but just as important, needs of supportive
services, should be a high priority I think for this committee
and for this Congress.
I will sort of wrap up by saying that I believe that our
debate on the floor was a contentious debate. It was one of the
longest debates I think that we had during that Congress, but
in the end, over 100 Democrats supported the bill, and they
supported the 1996 bill. As I was saying to Secretary Cisneros,
it seems almost quaint now to have that level of bipartisanship
where Republicans and Democrats were able to address a problem
and look at a solution that reflected the values of the two
great parties, of compassion and understanding, or addressing
needs of the poor, of responsibility and work and family, and
both parties could walk away and think that they had done
something important for the community. My hope is, with
appropriate levels of funding and with continued tweaking, that
we will get there. And I hope that this was a modest but
important step forward to achieve that goal.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Lazio follows:]
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Mr. Turner. Mr. Secretary.
STATEMENT OF HENRY CISNEROS
Mr. Cisneros. Thank you, Mr. Chairman. Let me begin by
thanking you and Congressman Clay for your diligence in digging
into a subject that's frequently not studied because it doesn't
generate headlines and it requires a lot of digging into
difficult things, but your work as a former mayor of a great
midwestern city, and Congressman Clay's representation of a
city in which some of the breakthrough moments for public
housing have occurred, Pruitt-Igo on the negative side, and yet
some of the Hope VI developments in St. Louis that are models
for the entire country.
I also want to thank Congressman Lazio. What you saw here
in his statement is the same passion and conviction he brought
to the debate in the 1990's, and literally millions of lives
have been touched by Rick Lazio's work and leadership.
Rick, thank you for just being a great public servant and a
great guy.
I also want you to know, Mr. Chairman, that you have in
Renee Glover, the best public housing administrator in the
country today, doing the best job for her city. Atlanta, not
only has public housing has been transformed, but the city has
been transformed by the work that Renee has begun there.
As Congressman Lazio mentioned--and I am going to call him
Congressman Lazio for the rest of his life, no matter what else
he's doing--this is a time of reform for public housing. We
tried to build on the reforms of my predecessor, Jack Kemp, our
own work and that of Secretary Cuomo and the Clinton
administration, and now Secretary Jackson, who brings the
unique perspective of the only HUD Secretary who's ever been
the director of a public housing agency, and in fact, he's been
the director of several. We're at a point of convergence in
which ideas and experiences and lessons are coming together
from the experience of the 1990's and the early years of this
decade.
Among the reform lessons of the last decade, witnessed by
four HUD Secretaries, are the following. First, we know that
reforms in physical design matter, the scale of buildings, the
trading off of the high rises for townhomes, the creation of a
sense of defensible space and privacy for families instead of
having to walk the hallways of those buildings to have their
own entrances. The new urbanists have made a contribution in
walkability and bringing the street grid back to the
developments. And the use of the physical redesign in
conjunction with Section 8, so that we have less dense density
in families who live in Section 8 settings, that's one set of
reforms that's been very powerful.
Another set of reforms have been the roles of private
investment in public housing, the kind of efforts that Hope VI
ushered in, where market mechanisms were introduced, not just
on the projects that are Hope VI, but into the thinking of the
authorities themselves. And as Congressman Lazio mentioned, the
importance of mixed income in the resident base has been very
important to the residents and to the communities.
And perhaps the most important reforms have been the way
public housing authorities think of themselves. Most now think
of themselves as among the biggest real estate entities in a
city. They have more land, more apartments or units, more
management responsibility than almost any other real estate
entity in town. The best of them, like Renee in Atlanta, or in
Seattle, where the Seattle Housing Authority, one of the
highest graded in the country, owns 4,500 unsubsidized
apartments that they have acquired, apartments in private
apartment buildings, that function like large multi-family
units. And they make those work for the families that have to
be subsidized, by cross-subsidizing and creating really
attractive settings. The really sophisticated housing
authorities now use low-income housing tax credits, new market
tax credits, State and local bonds, capital grants, private
investment, foundation support, local trust funds, State
programs and generated revenue streams of their own from their
private market activities.
So it is a whole new ball game. It really is a time of
reform. It's appropriate that we would be before the Committee
on Government Reform. We have better physical settings, mixed
income opportunities for residents, more market type mechanisms
and incentives at play, and yet, all at the service of trying
to put people who make less than 30 percent of area median
income into housing. As I say, a whole new ball game.
I believe we're going in the right direction, and that a
lot of important ideas are converging. The asset-based focus is
correct to provide project-based accounting and budgeting.
Communities that can function more like private multi-family
properties is the right thing to do.
It will also require--and this is important that the
committee note--greater flexibility, because we cannot
micromanage to the project level as some HUD guidance continues
to do. There's an inherent contradiction in saying we're going
to a project-based system, and yet continuing the holdover
command and control regulations that the bureaucracy wants to
impose. The right approach is to set standards and hold
authorities to standards, but give them the flexibility to
work.
Finally, and most importantly, I think, it requires the
continuing provision of adequacy of resources. It is a
fundamental reality, even in a project-based world, that
housing authorities cannot raise rents above the 30 percent of
adjusted family incomes, so they need adequate operating
subsidy, because even going to a different structure, they
can't take care of the poorest without adequacy of operating
subsidies.
Again, even in a project-based framework, they can't take
money from projects to fund central office operations if
there's not excess cash coming off of the projects. So for a
period of time, the Federal Government will continue to provide
significant operating subsidy resources. It's my understanding
that the estimate for what it takes to make this transition is
about $4 billion this year, and the 2007 budget allows for
about $3\1/2\ billion, so about half a billion off.
Similarly, on the capital front, with the elimination of
Hope VI, it means inadequate production of new affordable
units, maybe the end of some of the physical reforms that I've
been describing, if the capital subsidies are not adequate. We
made tremendous progress, meaningful reforms. I think we can
see that we're headed down a path that, frankly, could not have
been foreseen. Not even Jack Kemp, my predecessor, who's a
great friend, in his most exalted visions of what public
housing could be, could see where we're headed, very positive
directions. We've learned some important lessons, but we must
stay the course of reform, and that includes a recognition of
flexibility and the recognition of adequacy of resources in
this time.
Millions of American families will live better lives
because of these reforms, and their children will have a
platform for the self-reliant lives that we want for them.
That's what public housing traditionally has meant, and it can
mean that again for families.
Thank you.
Mr. Turner. Thank you, Mr. Secretary.
Mr. Wood.
STATEMENT OF DAVID G. WOOD
Mr. Wood. Thank you, Mr. Chairman. GAO is often asked or
mandated by the Congress to examine specific aspects of the
public housing program. My statement today is based on a number
of reports that we've issued in the last few years. Generally,
our work involves examining how well HUD administers the
program, including its oversight of local housing agencies. In
carrying out our work, we sometimes survey local agency
officials or visit public housing developments for firsthand
observations.
In doing so we've identified challenges faced by both HUD
and local agencies in fulfilling program requirements.
In keeping with the theme of your hearing, I'm going to use
my time to briefly highlight our work on the Hope VI program
for revitalizing severely distressed public housing. As
Secretary Cisneros noted, in several ways this program
represents an alternative to traditional public housing
projects. It's designed to allow Federal and private funding to
be combined to produce mixtures of public, other subsidized
and/or market rate housing units. The program may also involve
local nonprofit and community groups, particularly in the
provision of supportive services such as job training. In the
year beginning in November 2002, we issued three reports
examining various aspects of this program.
For the first report we examined the extent to which public
housing agencies had leveraged their Hope VI grants with other
funds. We found that the extent of leveraging had generally
increased over the life of the program, from about 58 cents for
every Hope VI dollar in 1993, to about $2.63 for every Hope VI
dollar in 2001. The average over the period was about $1.85. Of
that amount, 79 percent, however, was leveraged from other
Federal sources, including equity provided to the low-income
housing tax credit program. Of the non-Federal portion, 9
percent was from State or local governments, and 12 percent was
from the private sector. We also found that housing authorities
had leveraged funds to provide community and supportive
services, a total of about $295 million between 1993 and 2001.
This leveraging had also increased over the life of the program
and represented about 41 percent of all funds allocated for
supportive services.
Our second report examined HUD's oversight and management
of the program. Among other things, we found that the majority
of local housing agencies had not met deadlines in their grant
agreements. For example, of 42 grants for which the time for
construction had expired, only 3 had actually completed
construction. We recommended that HUD ensure that its field
offices perform required annual project reviews and that the
agency develop meaningful enforcement policies. HUD agreed with
those recommendations and took corrective action.
Our third report in November 2003 examined program impacts
on existing residents of project sites and on surrounding
neighborhoods. We found that of the 49,000 residents displaced
from sites that had received Hope VI grants through 2001, about
half relocated to other public housing, about one-third used
vouchers to rent private housing, and the rest had moved
without giving notice or had been evicted.
Overall grantees expected about 46 percent of original
residents to return to the revitalized sites, but that
percentage varied greatly among sites. Because of the lead time
required, and other factors, we limited our examination of
potential neighborhood impacts to the 20 sites that had
received grants in 1996. We found that neighborhoods near those
sites had generally experienced improvements, according to
changes and measures such as education, income, housing values
and crime. In four locations we also compared changes in these
measures to those in similar nearby neighborhoods with public
housing, but without a Hope VI project. With some exceptions,
we generally found greater positive changes in the
neighborhoods with Hope VI projects. However, because many
other factors can affect the measures we were using, we could
not determine the extent to which Hope VI alone contributed to
the changes.
We noted that several studies conducted by universities and
others also showed that the neighborhoods in which Hope VI
sites are located, had experienced improvements in key
indicators.
Mr. Chairman, that concludes my prepared statement. I'll be
glad to answer any questions that you or other Members may
have.
[The prepared statement of Mr. Wood follows:]
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Mr. Turner. Thank you.
Ms. Glover.
STATEMENT OF RENEE LEWIS GLOVER
Ms. Glover. Good afternoon. I want to thank the chairman
and the ranking member for this opportunity to provide
testimony.
I also want to take a minute to recognize Secretary
Cisneros, who, without question, was one of the finest
Secretaries ever, and interestingly enough, he is really the
genius behind so many of the reforms growing out of the Hope VI
program, because by providing greater flexibility, it really
allowed the private sector and other market forces to really do
what they could do to empower the program. And in so many ways
he's not given credit for it, but I wanted to acknowledge him
because that took courage of conviction.
I also want to thank Congressman Lazio for his forward
thinking because he is absolutely right, with all the
regulatory entanglement nothing can really move forward, and
the courage of the 1998 law really has made a big difference.
So, thank you.
I believe that we all agree that reform is needed, but what
is often overlooked is the real revolutionary change that is
occurring today, and there are two causes for this: the Hope VI
program and the deregulation through primarily the Moving to
Work Demonstration Program. When I say revolutionary change, I
mean a sheer sea change, because, quite frankly, what the Hope
VI program has allowed is to truly step back and come up with
local solutions to what are really local problems. The problem
that is probably the biggest challenge with the public housing
program is the concentration of families in poverty.
And so the question is: is there a thoughtful way, through
resources, to deconcentrate families so they in fact can have
an opportunity to achieve the American dream. What the Hope VI
program has unleashed is the power of deconcentrating poverty,
public-private partnerships, leveraging private resources,
market forces, new partnerships, partnerships with the local
school systems, with mayors and others, and, quite frankly,
human development. I think if we look back at the terrible
tragedy in New Orleans, what we see in terms of the families
coming out of those conditions is the product of concentrating
families in poverty.
In Atlanta alone, during this past 10 years, which, quite
frankly, in the total scheme of things is a short period, we
have developed using private sector development partners over
11 mixed-income communities, and having an economic impact of
about $3 billion. That has also unleashed the power of about
1,070 acres of land. In addition, the families who have been
impacted by the program have moved on to the work force, who
have moved on to purchase homes and what-have-you, and they are
in fact realizing the power of being in the mainstream of
America.
The second, I think, most important benefit of the Hope VI
program is that the private sector cares about these issues,
and before, the private sector did not care about these issues.
So now the private sector development community and private
investors are now coming up with ideas of how can we continue
this revolution without Hope VI dollars.
I still believe, however, that, notwithstanding all of this
progress, there is much to be done. And so Senator Mikulski and
Senator Bond from the Missouri area, have cosponsored a new and
refreshed and reformed Hope VI program based on the learnings
and best practices from the Hope VI program, and I believe that
Congress should in fact embrace it and move it forward, because
even though there are criticisms about the program, no one, not
a single person, understood the great power that this program
was going to unleash, not only just in Atlanta, but throughout
the country.
The second very positive change is deregulation, and the
Moving to Work Program has been going on since 1996, which has
in effect allowed housing authorities, in a demonstration
manner, to look at different ways of doing local problem
solving, serving families without all of the regulations and I
think that we are seeing really outstanding results growing out
of that as well.
So I would say in order to keep the revolution moving
forward, the Congress should in fact adopt and implement the
Hope VI program and fund it, most importantly, so that we can
continue this great revolution, because the families are in
fact critically important, and I believe that if we can figure
out how to deconcentrate families from terrible outcomes of
poverty, we should have the courage to do it.
Deregulation, I believe, is going to be the real power to
cut down on the costs of the program. As the Secretary
commented, HUD is now looking at powering down the resources to
the individual properties, but if the micromanagement
continues, that will continue to drive costs, and I believe,
the deregulation growing out of that effort won't be
successful. There are about 3,400 public housing authorities.
2,800 own less than 500 units. We could easily just deregulate
those without a whole lot of difficulty, and just have a very
simple agreement with some outcomes, and that would address a
huge part of the issue, and then the remaining entities could
be brought into the Moving to Work Program, and that would be a
very thoughtful way of moving toward deregulation for the
entire industry.
And last but not least, money makes everything happen, and
if in fact we have the mission of serving families who earn
less than 30 percent of area median income, which is very
little money, then there must be funding to support the
programs.
Thank you.
[The prepared statement of Ms. Glover follows:]
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Mr. Turner. Thank you.
Mr. Secretary, I know that you are under a time constraint,
so I wanted to check with you on your timeframe. Are you OK?
Because we can focus questions in your direction if we need to.
Mr. Cisneros. I'm fine.
Mr. Turner. I appreciate all your testimony. As you know,
from your personal experience and background in this topic,
this is a very broad spectrum that we are looking at today, so
our questions to each of you are going to focus on just one or
two aspects of what we are looking at, and that certainly
should not be interpreted as our lack of interest in other
areas. Each of you in your written testimony have given us a
very broad overview of some of the things that we need to do
and some of the things that work, great policy discussions
throughout the documents that you have given us.
Most of the topics that people have raised fall in about
four different categories. One, management of the facilities
themselves; two, resident-focused comments, intervention,
economic mobility, transition from public housing; three,
financial, both our financial participation on the Federal
level, but also financial structures and creativity in looking
at capital structures, budgeting and the private-public
partnerships that might bring additional financial resources;
and then one that's almost architecture in nature both by
buildings themselves, but also in the place where the residents
live, looking through both vouchers and mixed-use developments,
and mixed-use economic structures.
I am going to begin my questions by first telling you a
story and asking your response to that, and then my second area
of focus, which I am going to actually ask the question about
first before I tell you the story. And that is, I would like
each of you, after I get your comments on my experience that I
had with public housing, is to give your thoughts on ways that
we can increase our intervention for residents even if we have
the appropriate structure and type, but even if we have very
well-managed facilities, and even if we are doing everything we
can with the public dollar and trust, the focus of being able
to impact the lives of the people that live in public housing
or Section 8 voucher programs is important, and I know each of
you have thoughts and background experience in that. So if you
could also comment on that.
Now for my story. As I served as Mayor for the city of
Dayton, I did not have direct authority or control over public
housing as is usual in many communities. I had appointment of
two seats out of five on a regional board. I was very active in
transitioning our neighborhoods to market-rate housing
production. We had, in our neighborhoods, many abandoned lots,
many abandoned structures. We went into the neighborhoods. We
acquired the lots, built new housing, the abandoned housing
rehabilitated, and bring the community back into a focused
neighborhood to see what was possible. One of those
neighborhoods we abutted against a public housing development,
and the public housing development had been the site of crime
and drug activity and was largely viewed as a budding influence
in the area, both for the residents that were there and for the
community that we were actively redeveloping with market-rate
housing.
I approached the public housing authority, and I posed the
question to them as to the long-term future for that site,
since, as we were beginning to redevelop housing there was a
market demand for market-rate housing. This piece of property
would be a great addition to our efforts. And I was told that
in fact this site was scheduled to be remodeled, and there was
going to be additional investment that was going to occur. And
I told them perhaps we could make a deal and you could save
those funds of redevelopment. What could we do to transition
this site that we might be able to gain the land and put it
into productive use.
I was very well aware that they had a significant amount of
vacancy in other units, and wondered about the ability to
transition both new individuals that are moving into the
facility, or perhaps even people who live there, to other
facilities. I was told that the people who lived in this
particular housing development would not move, but that if this
facility was demolished, that because they were on borderline
for economic mobility, that there was enough affordable housing
available in that area, that they would most likely leave
public housing and go out into the marketplace. Of course, I
thought that was the whole idea. So my next question was, well,
why wouldn't that be a good thing? I was told, well, that
facility contributes an administration portion of overhead
costs to our larger metropolitan housing authority, and
therefore, their decision would be not to lose this facility
because they didn't want it to impact their bottom line, even
though it might be better for the community, better for the
residents that were there.
That is more along the lines of a management issue. At that
point I obviously got much more involved in public housing, and
that facility is transitioning to market housing today. But I
would like your thoughts first on management decisionmaking.
How do we go about the process of making certain that in
management decisionmaking that we do provide incentives, and
that those who have leadership responsibilities for public
housing are looking holistically at the impact for the
residents, impact for the communities?
And then second, I would love your insight on things that
we might be able to do better for resident intervention.
Mr. Lazio.
Mr. Lazio. Mr. Chairman, I think that the first thing that
comes to mind is that you have to align the incentives for
creativity correctly so that the maximum amount of options are
before the housing authority's management, whether it's a land
swap, providing for, as the bill did, a vouchering out. You
have to, it seems to me, you have to be tenant centric on this.
Looking at your situation, looking at this building or a series
of buildings as a cross-subsidy opportunity for their other
areas, seems to me that they got to provide the opportunity for
them to think more broadly about mixed use in some other spot,
or some other way in which some of that revenue shortfall might
be addressed. But if you're focused on the tenants, and you
want to give them the maximum opportunity to, as I said
earlier, get to the right school district for their children or
get closer to a transportation hub so they can get to jobs,
have a better life, then it may be that in your case that a
vouchering option ought to have been explored.
I do think that it would be a terrible mistake to presume
that all tenants in public housing want to stay there. It is
also an equal mistake, in my opinion, to suggest that the
entire policy of the Federal Government ought to be to promote
homeownership, because I do think there are people that will
always need and desire rental housing, and that it is at least
a responsibility of the Federal Government, has been since the
1937 act, to provide it in a safe and healthy way, be a good
partner.
Looking for creative ways in which you can leverage other
government money, other local government money, other local
government assets, whether it's buildings or land, providing
enough incentives so that they can consider these type of
swapped arrangements, and including the possibility of tenants
moving and having a choice through a Section 8 voucher program,
or by converting that voucher to homeownership, which is also
provided for in the bill so that you could provide for the
value of a Section 8 voucher for down payment assistance or to
service a mortgage. Those are the kind of things I think that
need to be laid out to a management authority of a PHA in the
situation that you have outlined.
Mr. Turner. Mr. Secretary.
Mr. Cisneros. Mr. Chairman, I have to take a slightly
different tack than what you did as Mayor. One of the things I
felt strongly about as Secretary was that we couldn't, in the
zeal for reform, give up sites because we needed the hard
units, and that the proper thing in a case like that would be
to redevelop that site with the housing authority still having
a major role, perhaps more mixed income, perhaps with private
units in there and so forth. Not because for administrative
reasons, but because one of the great sort of moral dilemmas
for me through this whole process has been, as much as I favor
what we've done with Hope VI and the use of Section 8 and the
deconcentration, and the lower densities, the critique is we
gave up too many hard units and there's too many people who
need the units.
So I guess my tack would have been a different one in that
case, trying to redevelop that piece of ground, make it
compatible with what was around it. I've just seen so much
evidence across the country that could be done, whether it's
Park Duvall or the site in Newark that was at the epicenter of
the riots in 1965 that now has Hovnanian Builders building
across the street from it. I mean cities are being transformed
because of what's being done with those sites, and still keep
some hard units, some percentage of units for the very, very
poor.
So that's a different kind of perspective, but if I may
offer that.
Your second very briefly, resident intervention. I think--
I've often felt that what we're missing in the key intervention
is a linkage to education, and Renee has done a good job, for
example, at Centennial Homes with a magnet school built into
the project, at University Homes near the Atlanta University
complex. Denver has done some connection to the community
college. I'd like to just kind of throw out an idea that's been
a pet sort of thing of mine for a lot of years. A couple of
housing authorities picked up on it, but maybe the Government
Reform Committee would find it interesting, and that is a
concept that I called ``Campuses of Learners.'' Imagine that we
thought of public housing sites--keep in mind we want these to
be temporary places for people to live before they go on to the
rest of their lives--that we thought of them more, as we think
of residential camp housing on a university campus. People are
there while they're learning, while they're improving their
lives, while their children are learning, while they're
enhancing their skills. And really build in a linkage of
training and community college, and even higher education, and
computers onsite and all the rest of it, but it's designed to
be there to give you the resources where you can go on with the
rest of your life, just as we think of a university campus.
That's kind of an abstract notion, but a way to maybe
accomplish what we really want to accomplish both in the
physical site and the self-improvement for families and
individuals.
Renee knows a whole lot more about this than I do.
Ms. Glover. I just wanted to add that it's interesting,
when you get on the ground, there's always, I think, the
misperception that the families are more tied to these
properties than you might think. And one of the things that Mr.
Wood alluded to, is that if you were to do an assessment of
what's going on with these sites, particularly the large,
distressed sites, you would see very high rates of crime, very
low work force participation, very, very low levels of income
and so on.
So the question is, is there a way of creating a healthier
environment so that you can get better outcomes for the
families, and at the same time, having more powers of incomes
on the neighborhoods, because, not surprisingly, the families
want what every other American wants. So one of the things that
has been so powerful with the Hope VI program is bringing in
the private sector, creating a community that in fact is a
community, and it is not all about poverty and despair, but
it's really a market-rate community with affordable units as a
part of it, so that we're actually creating communities for
workers, middle management and senior management.
And you get so many wonderful benefits from that, because
what you have is role models in terms of families working and
encouraging the families to work. Working with the schools is
so critically important, and in fact, that's one of the reforms
in Senator Mikulski's legislation, because, quite frankly,
schools drive neighborhoods. Nobody picks up the paper on
Sunday, when they're looking to locate their families and say,
``I want to find the worst school in the district so I can
purchase a home.'' So the linkage of great schools and great
communities is critical. The families really love the Section 8
voucher because it represents choice, and the key is
administering the program well so the family's not moving from
one bad situation to another.
So I think that if we could eliminate a lot of the myths, I
think aligning the incentives and the funding is the way that
you get to better decisionmaking. What we have seen, that $3
billion worth of economic impact that we have had is both on
the plot of ground, and if you think about 1,078 acres of
under-performing real estate throughout a city, and that's just
10 of the projects--there were 40 some of them--then you can
see the power, empowering of that real estate. But more
importantly, tapping into the human potential because 6,000
families were living in these conditions, and I will tell you,
we have not had any resistance, once you get on the ground
working with the families, about do you want a better
opportunity, because the answer is always yes, yes, yes. What
they're concerned about is not having the resources to relocate
their family so that they can too achieve the American dream.
Not everybody wants to achieve homeownership, but I promise
you, everybody wants a better educational opportunity for their
children and a decent healthy environment, and they do not want
the stigma of being labeled poor and being institutionalized in
poverty.
So I think that there's a lot of great best practices that
we can use to approach the reform and be thoughtful about it,
and also get significantly better outcomes and better
decisionmaking.
Mr. Turner. Excellent, thank you.
I just want to say with respect to that particular
development that we were facing, it was a 7-year discussion
then that the community undertook as to what to do, both with
the leadership of the housing authority and this property, all
of which took in the components of--as a result of the
leadership of Congressman Lazio and Secretary Cisneros, of the
options that you then gave communities to undertake. The
concern wasn't the initial approach and the initial discussion,
it was one where the authority was unmotivated as a result of
their own bottom-line view versus, as with Ms. Glover, what we
see as so many times the great things that are accomplished are
accomplished because of leadership at the local level. There
has to be a way, as you provide Federal tools that are
creative, and transitioning of creativity at the local level,
that we encourage them to take advantage of those.
Mr. Cisneros. Congressman, if I may, Mr. Chairman, the
problem that we encountered when the Hope VI program started
was that in many cities the public housing had been built in an
earlier era at the edges of where the work and the employment
was and where the workers were needed. As the cities began to
rebound and the downtowns rebounded, this became very valuable
property, so we had a lot of people coveting, developers
coveting that land, and we took the position that this was for
public housing, and that as problematic as it was, we needed to
redevelop it, but not sell it off because the losers were going
to be the poorest folks.
When you operate at the national level, you have to be sort
of gross about this and set policies because otherwise they're
violated in the specific case, and that's why I ended up, you
know, in that posture, that where possible, let's redevelop
them and save the housing, rather than allow high-rise office
towers on that site.
Mr. Turner. Certainly you have to look at the core mission
of the public housing.
Mr. Lazio. I'd add one thing, Mr. Chairman, also if I can.
Increasingly you're seeing housing authorities use the low-
income housing tax credit program, which has been an incredibly
successful program for the Federal Government, to be able to
access some dollars, and in a case like this--and I don't
really know what the facts are on the ground, but it might well
have been that option which would get you to a mixed income,
provide some additional dollars, maybe redevelop the site
consistent with the community and still have enough money to
put maybe other units online or provide vouchers would have
been the win-win.
Mr. Turner. Thank you.
Mr. Clay.
Mr. Clay. Thank you very much, Mr. Chairman.
First, I would like to start with Congressman Lazio.
Welcome, and it is good to see you again.
Mr. Lazio. Thank you, great to see you too.
Mr. Clay. Let me say that the 1998 reforms were a positive
development, particularly the authorization of Hope VI and its
value to public housing authorities across the country. My
concern, however, is that we are underfunding Hope VI and the
voucher programs within HUD. Would you agree with the premise
that policy reforms can only work if they are adequately
funded?
Mr. Lazio. Yes.
Mr. Clay. OK, you agree with that one. [Laughter.]
Now, this year--there is no argument about that, OK.
[Laughter.]
You don't want to expand on it, do you?
Mr. Lazio. Congressman, there's an old story over in
Russia, and I asked somebody about how he thought the economy--
give me a summation in one word of how he thought the economy
was. He said, ``Good.'' I said, ``Well, could you expand on
it?'' He said, ``Not good.'' [Laughter.]
Mr. Clay. I will serve you up another softball then. How
about this one: this year the public housing capital fund
program is funded at $2.4 billion, even though capital
improvement needs are estimated to be nearly $20 billion across
the Nation. As a representative of the banking industry, can
you offer us some perspective on the benefits and shortcomings
in this program? Are PHAs able to leverage adequate private
sector financing for new development need?
Mr. Lazio. I'm not sure I could answer that question of
whether it would satisfy me or would satisfy you, Congressman,
because I don't know that I'm up to speed quite enough. But I
will say this, that the public funding does matter, that it can
provide flexibility, which I think we have, and we could
provide the incentives and the option to leverage and to
provide these public-private pools of capital, and to leverage
off of them, and that ought to be done. But that is not going
to completely substitute for a Federal commitment, a public
commitment to public housing and assisted housing.
Mr. Clay. Thanks for that response.
Let me ask Secretary Cisneros, and good to see you again
also.
Mr. Cisneros. Yes, sir.
Mr. Clay. Is there a model for best practices for PHAs
across this country, and do they even pay attention to them,
and have you seen any PHAs that have taken these best practices
to heart and transformed their agency?
Mr. Cisneros. Yes, sir, I think there are some very good
public housing authorities, and some model cities. It's not
just because she's here, but one of them, truly, is what Renee
has done in Atlanta. It's worth a trip there to see the
highlight projects and the combination of projects and what
they've meant for that city.
It's relatively easy to define the high performers because
HUD has a grading system for management, for properties, for
outreach, etc., and among the highest performers traditionally
have been Seattle, Denver, for example, and I would comment you
to those because they're just good operations, just creative
people. They understand their role in the real estate market of
that town, of those cities. And those have been good examples.
There are other cases that are maybe not as great for the
whole authority, but some sites that are spectacular, like Park
Duvall in Louisville, for example. I think some of the
Baltimore projects, where they took down all of the high-rises,
four big complexes each with about 12 high-rises, they're all
gone, and now townhouses and reasonable scale in their place.
Another example, what McCormack Baron has done in your city, at
what was Murphy and is now a different name, is an example of
wonderful school, training right onsite, families in the town
homes. Those would be some that I would cite for you.
Mr. Clay. Darst-Webbe is what you were looking for. Darst-
Webbe.
Mr. Cisneros. Right.
Mr. Clay. On another front, because of your close ties to
Texas and San Antonio, I wanted to hear some of your thoughts
on how FEMA and HUD have fared in housing displaced residents
of the Gulf Coast, many whom have moved to Texas after the
storm. Has the Katrina disaster housing assistance program been
an adequate response to the roughly 75,000 citizens of New
Orleans who relied on Section 8 program housing?
Mr. Cisneros. You really don't want my--we were trying to
keep this on a high tone, and we're trying to keep this
positive. [Laughter.]
Mr. Clay. I want you to try to answer that one, and we'll
move on.
Mr. Cisneros. Truly, there's almost nothing about the
Katrina situation that we could cite as a model of how to help
a city to recover or treat people who have been displaced. In
my own city, we've had tens of thousands of people who were
living in an old Air Force base hangar for the longest period
of time. They've now begun to filter into other housing through
churches and so forth, but I must say, very little can be
attributed to the responsiveness of the U.S. Government.
Mr. Clay. So HUD included, the response could have been
better.
Mr. Cisneros. Yes, sir. I wish I could be more positive
about it.
Mr. Clay. Thank you for your answer. I appreciate that.
Mr. Wood, you have stated that a November 2002 review of
Hope VI budgeting by a sample PHA revealed a 60/40 split in
public and private financing of program activities. Can you
describe what types of private sources are involved in Hope VI
financing, and is there adequate capital available to the PHA
community for development needs?
Mr. Wood. The 60/40 split I believe refers to the
involvement of private capital for supportive services. The
amount of private funds involved in the capital projects that
those grantees that we looked at was actually much smaller, it
was about 12 percent. But the leveraging for community and
supportive services had to do with things like job training,
providing transportation or meals and things of that sort.
Mr. Clay. Thanks for that.
Ms. Glover, your testimony really piqued my interest about
how you connect education or opportunities to residents, and I
was wondering, the education or opportunities, do they expand
to the adults also?
Ms. Glover. Well, they certainly can. But let me just
expound a little bit on the education reform, because in all of
these communities there are neighborhood public schools, and so
the opportunity is to connect the education reform that's going
on in every city in America, and certainly that is one issue
that has enjoyed, I think, consistent support regardless of
Republican, Democrat. Everybody knows that education is the
great equalizer.
So what we have done is working with the public school
system, as we reform these communities, and we reform the
social environment from which the children are coming to attend
the public schools, this creates the opportunity for the school
system to leverage their reform efforts, because what has
happened in too many of our urban cities, is that the schools
have become crisis centers rather than great places of
education, and that's why this notion of moving away from
concentrated poverty is so important, because you really can
leverage so many opportunities because at the end of the day,
environment matters. What we needed to be looking at is how can
we create opportunities and environments for families so that
they are not harmed by the environment, but in fact, can afford
the housing, can also have a great opportunity in terms of
education and what-have-you.
I will just point out that in each case of the 42
properties, 26 of which were serving families in Atlanta back
in 1994, there was a captive elementary school inside of each
one of those communities, and without exaggeration, those were
the worst public elementary schools in the entire system. So
you have a bad social environment and a bad school environment,
we can all sit here and predict the outcome. So this really
creates the opportunity, which I believe is so important in
linking both education reform with the housing reform, and I
think we'll start seeing much greater and many more success
stories around education.
Mr. Clay. Let me just point out to you that there is a
direct link to educational performance by students, and
educational attainment of their parents. And when they come
home with homework and their parents don't understand and
cannot help children, then it bears a direct link to those
students' performance, and I just wanted to make you aware of
it.
Ms. Glover. Oh, absolutely. I'm very aware of that. You're
absolutely right.
Mr. Clay. If you have an opportunity to address it, that
would be pretty interesting.
Ms. Glover. OK.
Mr. Clay. Let me ask you about your testimony. You spoke to
legislative reform, and what should be undertaken by Congress
in order to improve the Section 8 program. I guess my real
concern is that Congress can institute all of the new reforms
at once, but we will be back here in another 5 years if we
don't make a full commitment to funding these programs. Can you
offer us some ideas on how we can establish more significant
and reliable funding mechanisms?
Ms. Glover. Well, I think the starting point is really an
agreement among Congress about what it is that we're trying to
accomplish. If in fact we agree that we want to have families
living in healthy environments, and if we want to serve
families who earn 30 percent or less than the area median
income, then we have to look at the local real estate markets
to determine what the rents are in less impacted neighborhoods,
because what affords the rent is what the family is paying
based on 30 percent of their income together with the subsidy
that is provided by the voucher.
So if indeed we want families living in healthier
communities and not in very distressed communities, there is a
price to be paid, and over time--see, I believe that if we in
fact can improve the environments where families in fact are
raising their children, that over time there will be less of a
need for the subsidies, but there's going to be a transition
period, and so I think it's strictly a matter of agreeing on
what policies we want to support and then put the funding to
it. So there's a way of getting at that number, but certainly
if you make the subsidy more shallow, that is going to cut down
on the opportunities in terms of good housing opportunities for
families using that voucher.
Mr. Clay. I thank you for your response. I thank all of the
witnesses for their response. Perhaps I will take Mr. Cisneros
up on his suggestion to come and see your housing authority.
Ms. Glover. We'd be delighted to have you come, sir.
Mr. Clay. And come and see Mayor Franklin. Thank you all.
Thank you, Mr. Chairman.
Mr. Turner. OK. Mr. Dent.
Mr. Dent. Thanks, Mr. Chairman, and good afternoon.
A couple questions on Hope VI. As you know, Hope VI was
created to help demolish some existing public housing units,
the more stressed housing units. That has been a success with
my community. Allentown, PA has just received a $20 million
grant, for which we are very grateful, and we are going to take
out one of the oldest housing projects in the Nation and turn
it into a much more appropriate housing mix than had been the
case.
My question to the panelists, would you conclude that the
program has accomplished its goal and its purpose? The goal
was, I guess, to demolish about 86,000 units, and we are
approaching that number. Do you believe it has accomplished its
purpose, I guess is the question I would have. Maybe we should
direct it to former Secretary Cisneros.
Mr. Cisneros. I will be happy to begin, sir. I believe it
has accomplished its purpose and that it is one of the great
untold bipartisan successes of the last decade or so. The
origins of it are in the Jack Kemp period at HUD, where he had
Hope I, II, III, IV, V, and VI, which came about as a result of
a commission on the emergency status of the most distressed
public housing in the country. In the fall of 1992 they
finished their work, so before we came into office. Then it
fell to us to write the regs and implement Hope VI, and I chose
to build on what Jack had done, despite, you know, the kind of
the pressure to sort of separate from the previous
administration and start something completely fresh. It didn't
make sense to start over, so we sort of continued the genetics
of it, if you will. So I see it as a bipartisan program.
And when folks like Rick Lazio weighed in and the Speaker
in that era, to tweak the program and improve it, it truly has
been a major contribution.
One, there are multiple reports. This report that Mr. Wood
made today from the Government Accountability Office, but also
the Urban Institute and the Brookings Institution and others,
which have basically documented that cities are different,
central cities are different where Hope VI has succeeded,
because now investment is possible. Where there were sinkholes
for just no energy, no investment, today they're magnets for
investment. And I could cite city after city, Chicago, Newark,
Pittsburgh, all kinds of places that were hopeless in these
neighborhoods that today are thriving.
Now, the down side--and I'll be very brief--is I think we
have to be careful not to lose track of the number of people we
were serving before, and that's what the critics come after us
on, and I accept the critique. In downsizing, in making it less
dense, we use Section 8 to send people other places. Don't know
exactly where all those folks went and don't know what happened
in their lives, and we ended up with fewer hard units to serve.
That was the right thing to do for all the reasons that I've
cited. But for me there will always be a sense of obligation to
make sure we keep the numbers strong, so that we actually
didn't end up cutting people off, you know, and sending people
to homelessness or other bad conditions. But I do believe the
program accomplished its purpose.
Mr. Dent. I guess then the next question would be what
remains to be done, I guess, where do we go from here?
Mr. Cisneros. I would say more of the same. There's yet a
lot of cities and a lot of sites that are as bad as what we
fixed. We fixed the worst I think. Renee could speak to that,
you know, because she's in the field every day. But I would say
another decade of this, and we will have turned public housing
around. It will be a different creature than it was in 1992.
Mr. Dent. And another issue that I've noticed in the urban
areas where I live is not simply public housing, but what we
would call row homes in a place like Allentown. Many of your
eastern cities have them. We have row homes that were once
owner occupied, were since converted to apartment units or a
home that one family--maybe a three-story home--converted to
three apartment units. You mentioned density, increasing the
density in town, more garbage, more kids at school, more cars
in the streets. And I have noticed one thing that we have been
very successful in our area, at least a slow process, but
trying to deconvert these apartments back to owner-occupied
settings. Many people paying those rents they are paying could
easily afford a mortgage. Many don't realize that, but that is
a reality.
I guess my question is: what role should the Federal
Government play in deconversion of those types of housing units
that are not publicly owned? What can we do to help that,
because that would do a great deal to empower people and their
neighborhoods.
Mr. Cisneros. I think the Federal Government does have a
role through CDBG, through the proposed Homeownership Tax
Credits, for example, through other programs that give more
resources to local government to enact programs like that. I
don't think it warrants a Federal program for that end, but I
do think that Federal resources are needed. Local governments
just don't have the money.
Mr. Dent. Correct. In my view, that would probably do more
to help restore neighborhoods to their former luster than
anything else we could possibly do, must simply because you are
lowering debts and you are creating ownership opportunities.
Does anybody else have any thoughts on that?
Mr. Lazio. The only thing I would add to that, two things
if I can, Congressman. One is that there is actually authority
in the bill to use the value of a rental voucher for
homeownership, either for down payment assistance or to help
service the mortgage. And you are absolutely right, we saw this
in places like Long Island where I was from, where people were
in basement apartments, but the voucher that they were being
given to pay the rent was more valuable than the cost of
servicing a mortgage for them. They could own their own place
and build some equity and have the stability of homeownership,
so for some people that's really going to work, and it's a
matter of bringing this to the attention, in part, of the local
housing authorities.
The second part of it is vouchers, especially rental
vouchers, only really work when you have some slack in the
market, so you have places for people to go to. That's why when
people talked about a vouchering out model, I thought, well,
that's a one-size-fits-all for all communities. There's going
to be situations where actually giving someone a voucher will
be meaningless because the market is so tight they have nowhere
to go.
So incentivizing the construction of market rate units that
are still at the same time affordable is important, and I would
say, politically, if I could add this last point, in my
experience, to talk about housing, affordable housing in terms
of providing opportunities for entry-level workers, no company
in your back yard is going to be able to grow if there is not
decent housing for people who are moving up the ladder, who are
starting in entry level and middle management, and that does
resonate with a whole different group of constituents.
Mr. Cisneros. Very good point.
Mr. Dent. My observation has been the programs have been
enormously successful where tried, but there is not enough
funding to facilitate the deconversion process fast enough. You
know, we get some very good examples of success, but we just
can't do it quick enough. It is much easier, apparently, to
convert these owner-occupied residences to apartments than
going back the other way, and so I am just trying to accelerate
that process. Any thoughts you have as to how we can do that
with our Federal dollars is appreciated.
Mr. Cisneros. Your nonprofits in your community can play a
role.
Mr. Dent. Correct, and our nonprofits are doing that.
Again, it is about funding, but they have done a terrific job
and we have used them very effectively actually.
Ms. Glover. I just want to speak very quickly to whether
Hope VI has met its mission. I think it met its initial
mission, but I think Secretary Cisneros was absolutely right,
another 10 years would be very, very important.
And I wanted to inform the process just a little bit on
what the Hope VI money does because I think that there's a
sense that it's really not leveraging and meeting its goal.
Basically, it pays for the cost of relocating the families, the
cost of demolition, the cost of the human services programs
that are critically important so that the families, who in fact
are using vouchers and entering the mainstream for the first
time, can be successful in community.
And last, but not least, buying down the cost in a mixed-
income community of that affordable unit so that the rents can
be affordable to the families who need it, thereby leveraging
private resources for housing for middle management and senior
management.
So that if you leverage it correctly, you really can have a
very important impact, and certainly, I think if you drive
around urban America, you know, based on your own observations,
that more is needed.
And I wanted to mention that another area are these very
old project-based Section 8 properties that are coming to the
end of the life of the voucher, and that too will need some
repositioning because if not, it will opt out, and the private
sector will in fact take over those resources that had indeed
provided affordable housing for cities. So I think that there
needs to be some attention paid to those older properties
because they are opting out, not because people are not
committed to affordable housing, but because there are no
resources to help in preserving the stock and doing the same
type of treatment that we've seen with Hope VI.
Mr. Dent. Thank you.
Mr. Turner. I want to thank all of our panelists, but first
off, let me thank Mr. Wood and Ms. Glover for your
participation, the technical expertise that you bring to the
table. This is our first hearing and it is an overview, and we
are going to now take up issues that are more specifically
targeted, and I am certain that we are going to be in touch
with you, not only as we continue this process to get your
insight, but as we begin to pick those issues and ideas, to get
your input on how we might focus and topics that we might be
able to make an impact on.
And for Congressman and Mr. Secretary, if you look at all
the testimony that is going to follow in panel two, almost all
of the policy discussions, when they talk about what has
happened in the most recent past and then what things that we
need to look forward to, most of those policy issues come from
the discussion that you two gentleman had and the initiatives
that you have given, and opportunities that you have given to
communities. So let me thank you for your contribution to the
intellectual focus of when everyone takes up the issue of how
do you undertake reform for public housing, and also how do you
function, and how do you make certain that it serves our
communities. Your willingness to spend your time to come speak
to us and talk about those topics of which you both have,
obviously, a great deal of love, and a great deal of expertise,
is very much appreciated. I am certain that we will be in touch
with both of you also as we take up issues and ideas.
We want to, from this testimony, see what areas need
additional focus and oversight, so that we can then look to see
some of the things that you two undertook that have not been
implemented correctly, or that now have done their job and need
to be tweaked so that they can serve more effectively.
Before we close completely, I wanted to give the two of you
any opportunity for closing remarks that you might have.
Mr. Lazio. Mr. Secretary.
Mr. Cisneros. Thank you, Rick.
Mr. Chairman, let me just thank you again, and Congressman
Clay and Congressman Dent, and the rest of your committee,
because I know that the mandate of the Government Reform
Committee is broad, and you could take on any number of
subjects. This is an important subject.
First of all, there is a real opportunity here to build on
some reforms. Second, it is an unsexy subject, so it's just not
taken up frequently, but this is an opportunity to really
transform public housing in America. We'll end up with
something completely different if we build on the themes that
we've learned the last years. So your voice of leadership,
bipartisanly, could make a huge difference, and I just want to
encourage you to take that theme of reform and march on. Thank
you.
Mr. Turner. Thank you.
Mr. Lazio. The only thing I would add to that in
associating myself with the Secretary's comments is, is that
there is no lack of hunger or need for more creativity by
members of this committee or of this body. And if you would
look at this as if Henry and I were never here and you want to
create something from scratch, I guarantee you're going to find
some great ideas that will be able to be leveraged by some of
the great housing advocates that are in this room.
And just to make this last point, as you consider how
you're going to evaluate our housing policies, you'll be doing
the right thing by listening, and I would really encourage you
to get out in the field also and hold some field hearings and
speak to the people and tenants whose lives are impacted every
day by this.
Thank you.
Mr. Turner. Excellent.
I am going to recognize Mr. Clay for closing comments.
Mr. Clay. Thank you, Mr. Chairman.
Just very briefly, I would like to take this opportunity to
recognize a young man that is with me today, who is serving as
my shadow today. He is an 8th grader from Oneness-Family School
in Bethesda, MD. I wanted to introduce him and insert in the
record his name, Remington Williams, who is with us today, and
thank him for being here.
Mr. Turner. It is wonderful to have him with us.
Mr. Clay. Thank you. Thank you all.
Mr. Turner. Panel one, thank you so much. We will turn to
panel two then. We appreciate you attending.
Panel Two includes Mr. Rod Solomon, Mr. Conrad Egan, Dr.
Alexander von Hoffman, Dr. Edgar Olsen, and Dr. Michael
Stegman. We will take a few minutes recess as we change panels.
[Recess.]
Mr. Turner. Gentlemen, thank you for joining us. We will
now hear from our second panel. Today we have Rod Solomon,
counsel with the law firm of Hawkins Delafield & Wood; Conrad
Egan, president of the National Housing Conference; Dr.
Alexander von Hoffman of Harvard University Joint Center for
Housing Studies; Dr. Edgar Olsen of the University of Virginia;
and Dr. Michael Stegman of the University of North Carolina.
I thank each of you and welcome you, appreciate the time
that you have taken to participate and the time that you are
spending with us here.
Before we begin, I would like to remind our witnesses that
oral testimony would be limited to 5 minutes. We do have your
written testimony, and we appreciate the information you
provide to us there. You will notice that there is a timer on
the witness table. The green light indicates that you should
begin your prepared remarks, and the red light indicates that
your time has expired. The yellow light indicates that you have
1 minute in which to conclude your remarks.
It is the policy of this committee that all witnesses be
sworn in before they testify, so will the panel members please
rise and raise your right hands?
[Witnesses sworn.]
Mr. Turner. Let the record show that all witnesses have
responded in the affirmative, and we will begin with Mr.
Solomon.
STATEMENTS OF ROD SOLOMON, COUNSEL, HAWKINS DELAFIELD & WOOD,
LLP, FORMER HUD DEPUTY ASSISTANT SECRETARY FOR POLICY; CONRAD
EGAN, PRESIDENT, NATIONAL HOUSING CONFERENCE, FORMER EXECUTIVE
DIRECTOR OF THE MILLENNIAL HOUSING COMMISSION; ALEXANDER VON
HOFFMAN, SENIOR FELLOW, JOINT CENTER FOR HOUSING STUDIES,
HARVARD UNIVERSITY; EDGAR O. OLSEN, PROFESSOR OF ECONOMICS,
UNIVERSITY OF VIRGINIA; AND MICHAEL A. STEGMAN, MACRAE
PROFESSOR OF PUBLIC POLICY, PLANNING AND BUSINESS, AND
DIRECTOR, CENTER FOR COMMUNITY CAPITALISM, KENAN INSTITUTE OF
PRIVATE ENTERPRISE, ADJUNCT PROFESSOR OF ENTREPRENEURSHIP,
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL
STATEMENT OF ROD SOLOMON
Mr. Solomon. Thank you, Mr. Chairman, Congressman Clay,
Congressman Dent. I'm Rod Solomon now with the law firm here
and formerly a HUD official with the honor of helping Congress
develop the public housing reform law, and then coordinating
implementation at HUD for 5 years.
Last year the Brookings Institution published my report,
which reviews progress under the 1998 law, and I'd ask
permission to have the report included in the hearing record.
Thank you.
The law contained many initiatives. My report tracks
progress on 54 provisions, each with its own story. But more
generally, I reviewed progress regarding four broader
objectives: one, improving or replacing the public housing
stock; two, increasing tenant self-sufficiency and promoting
public poverty deconcentration; three, improving or replacing
public housing management; and four, improving the voucher
program.
Overall we should recognize the enormous change that's
occurred in these programs and many of the PHAs. We
successfully eliminated the vast majority of notorious bad
public housing projects, replaced them with mixed income or
lower density public housing, and substantially with vouchers,
and greatly upgraded management in many large cities. Voucher
reform supported expansion in the number of families assisted
by half a million between 1997 and 2003.
With respect to public housing improvement and replacement,
in addition to replacing the worst projects, HUD eventually
implemented the ability for housing authorities to borrow
against receipt of future capital money. About $2.2 billion has
been approved after an extensive HUD process, of which about
$1.3 billion was for three transactions.
With respect to self-sufficiency and deconcentration of
poverty, the replacement of those large distress projects
helped. Further, the percentage of families with children in
both programs, where their largest source of income was
earnings, increased from about a third to about half between
1995 and 2001, and remained significantly higher than before
that period. Those changes though almost certainly result more
from economic trends and welfare reform than from the act. The
percentage of extremely low-income families we serve in the
programs increased somewhat in both programs.
With respect to public housing management, we've seen vast
improvement in a number of large cities such as Washington
here, Chicago and Philadelphia. The improvements mostly were
brought about by local or HUD initiatives rather than the act.
Some of the act's basic provisions to bolster management were
delayed for years in implementation or otherwise did not have
the expected impact. The act and related HUD actions did
encourage improvements in physical conditions in public
housing, and expedited obligation of capital funds.
For vouchers, cost has been the dominant issue lately. The
increase in pre-unit costs relates partly to measures taken in
the act or by HUD to address concerns that some families who
receive vouchers were not successfully finding units, still
were paying unreasonable percentages of their incomes for rent,
or finding units only in areas with high-poverty
concentrations.
I have some general recommendations for your to-do list, as
the chairman called it. First, your work generally should
emphasize the importance of these programs and their need for
adequate funding.
Second, the subcommittee should examine additional steps
HUD could take to collect, analyze and release critical data
that will help us monitor the progress in these programs.
Third, the subcommittee should examine further
opportunities for HUD to expedite reform. Regulations still are
not in place with respect to significant aspects of the act.
These include, among others, rules to allow aspects of
leveraging capital for public housing and for housing
authorities' voluntary conversion of public housing to
vouchers. HUD needs to finish the guidance job in a manner that
supports the reforms. The subcommittee also should examine how
HUD could simplify requirements further. For example, the
approval process for borrowing against future capital funds
needs to be streamlined and the new regulatory emphasis on
management of individual properties, rather than the entire
PHAs, must be implemented with substantial flexibility.
Fourth, with respect to potential legislative issues, the
committee should review whether initiatives such as loan
programs can reasonably be expected to replace the Hope VI
grant program. The subcommittee also should consider the need
for further initiatives to sustain and increase leveraging of
private capital funds. The administration, several years ago,
proposed a mechanism for property-based financing along the
same lines other affordable housing improvements are financed,
and that approach should be reviewed again.
Finally, the subcommittee should review areas where
experience indicates that statutory simplification is critical.
This will include, I think, public housing rent requirements,
which are very complex. More generally, Congress should aim to
require local performance and retain in the measures protecting
fundamental program elements, continued availability of units,
income targeting of families to receive assistance, and
affordability of Government assisted housing, and otherwise
leave plenty of room for local innovation.
Mr. Chairman, thank you again, and I'll be pleased to
respond to any questions.
[The prepared statement of Mr. Solomon follows:]
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Mr. Turner. Mr. Egan.
STATEMENT OF CONRAD EGAN
Mr. Egan. Thank you, Mr. Chairman, and Mr. Clay and Mr.
Dent, for the opportunity to present today principally as to
former executive director of the congressionally chartered
Millennial Housing Commission. With your permission, I would
like to place the Commission's report into the official record
of this hearing. Thank you, sir.
In the report the Commission presented to Congress in May
2002, there are two recommendations to improve public housing
and the Housing Choice Voucher Programs. At this point I would
also like to particularly acknowledge the leadership of Ophelia
Basgal and Renee Glover, who were two public housing authority
directors present as commissioners on the Millennial Housing
Commission, and particularly Renee Glover, who was the chair of
our Public Housing Committee. Of course, you heard her earlier
today and you know what kind of contribution she's made, not
only to the national housing scene, but also particularly in
Atlanta.
First, the Commission recommends a gradual transition from
the current agency-based system to a property-based system with
subsidies falling to specific properties based on the rents
they would command after any needed renovation in the
conventional real estate market. This transformation would
enable public housing authorities to rehabilitate properties
using funds raised in the private capital markets.
Second, the Commission recommends principally for the
Housing Choice Voucher Program, measures to match voucher
holders with services that complement efforts to support
employment and other opportunities, and this challenge, of
course, came up earlier today in this hearing. Most
importantly, though, the Commission asserts that the Housing
Choice Voucher Program is distinctly worthy of additional
funding in substantial annual increments.
In the remainder of my statement let me focus on the first
recommendation where the Commission specifically recommends the
application of private real estate principles. First, a
comprehensive approach is recommended for severely distressed
properties. Some public housing properties are in such poor
condition or so poorly located that they do not warrant
additional involvement. These properties are good candidates
for demolition and replacement with vouchers of hard units. The
Hope VI program must be maintained principally because the
private sector is typically unable to provide the first-in
capital necessary to attract additional significantly greater
investments for these properties, and I also would like to
acknowledge, as Renee Glover did earlier today, the recently
introduced legislation by Senators Bond and Mikulski to
significantly improve and reform the Hope VI program.
Second, much of the remaining public housing inventory
would shift over time to the property-based financing model by
converting operating and capital funding to long-term contracts
linked to each public housing property. These contracts would
provide reliable funding to cover operating costs, debt service
on loans for capital costs and replacement reserves. Subsidy
levels would be based on each property's market rent. Capital
improvements would be financed through loans secured by a
mortgage, which could be backed by FHA mortgage insurance. No
additional support would be necessary for the majority of
public housing properties.
Property-based financing is not, however, appropriate in
all cases. For small properties and for those whose capital
needs required rent substantially above market-based rent
levels, the alternatives include using the Hope VI program,
agency-based financing, and additional housing development
vehicles, including the long-term housing tax credit and
housing grant programs. Public housing authorities should
therefore continue to be able to leverage some of their subsidy
funds by using various agency-based mechanisms. A property-
based financing strategy would be appropriate for most
properties and has several merits.
The long-term costs of this capital improvement approach
would likely be lower than the current approach. Improvements
can occur quickly before properties deteriorate further, and
finally, property-based financing provides another level of
operational oversight from lenders and investors, thus
substituting standard real estate practice for HUD oversight.
I would also like to emphasize the point that Secretary
Cisneros made earlier, that it is important to keep the units
that are going to be moved from some of these sites, and I
would glad to comment further on that during the question and
answer period.
The Millennial Housing Commission's basic recommendation in
this area is that the public housing authorities must be
permitted and encouraged to utilize the private sector's
financial resources by converting their developments to a
property-based model like the rest of the world of real estate.
Thank you, Mr. Chairman, for the opportunity to make this
presentation.
[The prepared statement of Mr. Egan follows:]
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Mr. Turner. Dr. von Hoffman.
STATEMENT OF ALEXANDER VON HOFFMAN
Mr. von Hoffman. Thank you, Mr. Chairman, and members of
the subcommittee for this opportunity. As a historian I am
delighted, not to say even surprised, that our elected
representatives are crafting policies by trying to understand
how we got here. The history of public housing is long and
complicated, but I would pull from three major lessons, which I
hope will guide future policies. These are just broad strokes
as it were.
The first lesson would be that the intentions of the
original public housing advocates offer inspiration for today's
programs. The program we have today is not necessarily what its
creators intended. The original advocates, in the 1930's,
conceived of public housing as varied, as flexible, as
democratic, and locally controlled, more bottom-up than top-
down. Instead of a monolithic agency they envisioned an
assortment of entities, local governments, unions and
nonprofits developing and managing public housing. The
residents were to have a large say in what went on in their
developments because they were to be represented in the
organizations that actually developed the public housing.
There were to be a variety of types of housing, rentals,
cooperatives and homeownership, and the originators of public
housing wanted to replicate the vital community life of
America's neighborhoods and small towns. Early prototypes, for
example, contained kindergartens, playgrounds, community
centers and stores, which was intended to create a sense of
community and function as communities.
So the public housers certainly did not get everything
right, but I think some of their core ideas are worth
incorporating today. So thinking of that, if we think how to
implement their idea of variety, public housing authorities
should form partnerships with nonprofit and for-profit housing
developers. It's very interesting how in sync some of these
ideas are with what happened with Hope VI and the 1998 reforms.
To implement the idea of flexibility, housing authorities
should become entrepreneurial, try many approaches, as Renee
Glover had done in Atlanta, perhaps developing mixed income
housing in which market-rate units subsidize low-income units.
Authorities could sell old properties and use the profits from
that to develop new hard units, or they could be like the
Cambridge Housing Authority in my hometown, and create low and
moderate-income assisted living facilities. They're all new
horizons that could be reached.
To implement the idea of democracy, I would hope we
continue to encourage as much resident participation as
feasible, as was originally envisioned. Just some examples, a
number of cities have preserved the Expiring Use Housing
recently by assisting tenants to buy their buildings and run
them as cooperatives, cooperatives, which were an important
element in the original public housing ideal.
And then to implement this idea of community existing in
new housing developments would continue and expand on
incorporating community facilities and services, even going so
far as stores and work places.
The second major lesson in policy history is that
circumstances change and we should be prepared to adjust when
they do. For example, the clientele for public housing has
changed dramatically over the years. The assimilated immigrants
and middle-class African Americans, who were the first tenants,
were gradually replaced by low and extremely low-income
households, often single mothers with nowhere else to go. Today
circumstances are changing again. Low-income people, like
everyone else, are moving to the suburbs, and these communities
may not be prepared. We should encourage housing authorities to
form regional alliances to help solve the new emerging regional
housing problems.
At the same time, immigration has raised the number of
foreign-born low-income residents, who often are unaware of
their housing choices. We should make every effort to
incorporate poor immigrants into appropriate housing programs.
And the third lesson I would draw from history is that a
single policy, even a good one, is not a panacea. For much of
its history, public housing adhered to a kind of environmental
determinism that held that modernist style high-rise slabs or
low-rise barracks would solve all their residence problems. But
people thrive in a variety of housing types, and one should
avoid, even if it's new urbanist, a single formula for
architecture. Recently, many embraced the idea that mixed-
income housing will cure concentrations of poverty. This will
do some good, but mixing extremes of incomes will not cure the
complex problems of people, who for reasons of health or family
situations, are chronically unemployed.
Another popular cure-all is homeownership. Again, some low-
income families will benefit from buying houses, but others may
find it too burdensome to keep up mortgage payments and
maintain a property. In short, it will take not one, but an
array of approaches to solve low-income housing needs of people
who may have multiple problems.
There's much more to be learned from the history of
housing, but I hope that these observations are helpful to the
committee as it goes about its task of planning for the future.
Thank you.
[The prepared statement of Mr. von Hoffman follows:]
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Mr. Turner. Thank you.
Dr. Olsen.
STATEMENT OF EDGAR O. OLSEN
Mr. Olsen. Thank you, Mr. Chairman. I welcome this
opportunity to talk with you and the members of your committee
about the future of the public housing program. I speak from
the perspective of a taxpayer who wants to help low-income
families, albeit, a taxpayer who has spent more than 30 years
studying the performance of housing programs.
My testimony is right up the alley of this committee. It
concerns how to get more for the money spent on current
programs. In the case of public housing it's possible to get
much more. The evidence on program performance indicates that
the housing voucher program has outperformed the Public Housing
Program in every respect. My written testimony mentions some of
this evidence and contains references to the papers and reports
that provide the details.
The largest difference between housing vouchers and public
housing is in their cost for providing equally good housing.
The evidence is unanimous that it costs much less to provide
equally good housing with housing vouchers than with public
housing projects. Therefore, shifting the budget for public
housing to housing vouchers will allow us to serve all of the
families served by public housing equally well, that is,
provide them with equally good housing for the same rent, and
serve hundreds of thousands of additional families.
Alternatively, it would allow us to serve current recipients
much better without spending any more money, or equally well at
a much lower taxpayer cost.
The 1998 Housing Act made a small step in that direction.
My testimony describes a much more significant initiative that
would gradually lead to the elimination of the public housing
program in its current form. It's important to realize that the
poor performance of the Public Housing Program relative to the
Housing Voucher Program is not due to differences in
administrative competence. Both are administered by the same
local public housing agencies. At HUD, the Secretary for Indian
and Public Housing oversees both programs.
The difference in performance is due to fundamental
differences in the design of the programs. The voucher program
relies on the incentives of recipients to get the best housing
possible for the money spent on it. Public Housing Program
relies on civil servants, who have weak incentives for good
decisions and who do not even know whether they have made bad
decisions unless their decisions are extraordinarily bad.
My proposal requires no additional Federal funds. It's a
proposal to better use the funds and assets currently available
to public housing agencies. New legislation is needed to
realize the large gains that would result from a major shift of
resources from public housing to housing vouchers. The
following proposal will achieve these large gains in an orderly
fashion.
First, Congress should require every local housing agency
to offer each current public housing tenant the option of a
portable housing voucher or remaining in its current unit on
the previous terms. The latter option ensures that no public
housing tenant will be harmed by this legislation. Families
that accept a voucher would benefit because they would move to
housing, neighborhoods, and/or locations that they prefer to
their public housing units. Housing agencies should be required
to pay for the vouchers from their current operating and
modernization subsidies. This ensures that each housing agency
receives the same amount of Federal money as it would have
received under the current system.
My proposal would not require housing agencies to sell
their projects beyond the current requirements. However, it
would allow them to sell any of their projects to the highest
bidder. Requiring sale to the highest bidder will produce the
most money to operate and modernize the housing agency's
remaining projects.
Many housing agencies would surely choose to sell their
worst projects. These are the projects that would be abandoned
to the greatest extent by public housing families that are
offered vouchers, and they are the projects that will be the
most expensive to renovate. When a project is sold, the
remaining tenants in that project should be offered the choice
between vacant units and other public housing projects of a
housing voucher.
When public housing units are vacated for whatever reason,
the housing agency should be allowed to charge whatever the
market will bear for them. This will provide additional revenue
to housing agencies without additional Federal subsidies. More
importantly, it will make their revenues depend in part on the
desirability of the housing that they provide. The absence of
this connection is the primary source of the excessive cost of
the Public Housing Program.
When a current public housing tenant either gives up its
voucher or leaves its unit without a voucher, the housing
agency should be required to offer a housing voucher to a
family from its public housing waiting list, using its existing
preference system. This ensures that the housing agency will
continue to provide housing assistance to the same number of
families, and indeed, the same types of families.
If the preceding proposal is adopted, the Public Housing
Program in its current form will wither, but public housing
agencies will do a much better job helping low-income families
with their housing.
I appreciate the willingness of the members of this
committee to listen to the views of a taxpayer whose only
interest in matters under consideration is to see that tax
revenues are used effectively and efficiently to help low-
income families.
[The prepared statement of Mr. Olsen follows:]
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Mr. Turner. Dr. Stegman.
STATEMENT OF MICHAEL A. STEGMAN
Mr. Stegman. Thank you, Mr. Chairman. The views I express
today are informed by almost 40 years of academic and
professional activities in affordable housing and community
development policy and practice, and by service in the
administrations of both Presidents Carter and Clinton at the
U.S. Department of Housing and Urban Development.
After addressing the issues of public housing's continuing
role in the affordable system, I will respond to the specific
questions you put to our panel. I refer you to my written
testimony for more complete responses.
The public housing inventory peaked around 1991 at 1.4
million units. Over the following 10 years it declined by
nearly 160,000 units, which was the size of the national public
housing stock in 1983. Today the inventory is smaller still.
Given its modest size, one might think that it would be hard to
make a case for public housing's continuing importance. After
all, 5 years ago, public housing accounted for less than 1 out
of every 25 rental housing units in the country. But looked at
another way, even at 4 percent of the national rental
inventory, public housing accounted for nearly half of all
rental units in the country renting for under $250 a month or
less in 2001. And notwithstanding ongoing demolition and
transformation campaigns, its value as an essential housing
resource is likely to be even greater in the future because
private rents are rising much faster than inflation, and much
faster than the incomes of families who are on the lower
reaches or rungs of the income ladder.
HUD's own latest figures for 2003 underscore this point.
There were only 78 affordable units for every 100 extremely
low-income households in the country, while the ratio of
available and standard units is much less, 33 units per 100
households.
The 1990's saw a series of fundamental changes in law and
policy, including the creation of Hope VI, the introduction of
mixed income and mixed financing opportunities and enactment of
QHWRA in 1998. Taken together, I think these reforms have the
potential to dramatically improve the lives of public housing
residents and reconnect them with economic opportunity and
reverse the fortunes of the very neighborhoods and communities
that have been blighted by obsolete and dangerous projects.
As a result of these developments, in my view, public
housing is more innovative and dynamic today than at any time
in its 69-year history. So in partial answer to the question
posed in the title to the hearing, while public housing is not
yet fully up to the challenges of the 21st century, it has come
back a long way in a relatively short period and continues to
have a significant amount of untapped housing and neighborhood
development potential. But it will only be able to fulfill that
potential through deep, trusting, stable and adequately funded
partnerships with residents, their communities, governments at
all levels, and the private sector.
While each of these partnerships may be fraught with
tensions, the public housing system can only be as strong as
the weakest link in this chain of critical relationships.
And so, Mr. Chairman, as we look to the future, the
greatest challenge public housing authorities face is living up
to their obligations to become outstanding asset managers, so
that by example they can demonstrate their worthiness of the
large and long-term commitments it is so essential for their
partners and would-be partners to make, because one of the most
important roles of State and local government and community
service organizations in the public housing system revolves
around the provision of essential services. To public housing
residents, it is important that this subcommittee grasp the
depth of resident needs as it contemplates the importance of
the partnerships that I alluded to.
Here is what a recent set of Urban Institute surveys found
about the needs of families living in five representative Hope
VI sites. There's no reason to believe that these families are
much worse off or much better off than other families living in
public housing and communities across the country. The mostly
African-American women residents are very poor; 35 percent had
incomes of less than $5,000 a year. Less than half were
employed. And like their non-public housing counterparts, many
cycled in and out of employment. Overall, their health was
significantly worse than the average American adult; 41 percent
reported their overall health was fair or poor, a rate over
three times greater than self reports of a fair or poor health
for all adults in the country nationally, and about twice that
of Black women nationally.
Obesity, hypertension, diabetes, arthritis, asthma rates,
were all higher than national prevalence rates. Almost half
were diagnosed as obese. More than a third had been diagnosed
with hypertension. The prevalence more than 30 percent higher
than for Black women nationally. And one in eight Hope VI
adults reported having an asthma attack in the past year, about
three times the share of asthma attacks reported by a national
sample of adults.
Mr. Chairman, public housing authorities alone cannot be
expected to meet these urgent needs of their residents, but as
PHAs transition out of the service business into the asset
management business, because of staff shortages, budget
constraints and lack of ongoing engagements, many existing
local, public and private social service organizations are
finding it hard to incorporate the needs of public housing
communities into their priority work plans, and the impacts of
budget cuts and community services, block grants, CDBG and
other social services, eventually and inevitably come home to
roost in public housing.
Mr. Chairman, 11 percent of CDBG goes into services, not
bricks and mortar. The elimination of that program last year in
the administration's proposal would have wiped out over $300
million of services that go to low-income people in low-income
communities.
Finally, in terms of the role of capital markets in public
housing, I'd say things are progressing nicely. I would take
one exception to Mr. Wood's testimony about not counting
private equity generated by the sale of low-income tax credits
as part of private equity leveraged by public housing funds.
When companies take the research and development tax credit, we
don't count that as a Federal investment. We count that as
private capital investment, and the same should be true with
respect to the low-income housing tax credit. When you factor
that into the Hope VI leveraging, we find that only 53 percent,
in one study only 53 percent of total project costs were
Federal costs on Hope VI projects; 28 housing authorities, 49
Hope VI grants, only 53 percent of Federal capital, the rest
private, including significant amounts of private mortgage
capital.
Thank you very much.
[The prepared statement of Mr. Stegman follows:]
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Mr. Turner. Thank you.
I want to return to the property discussion of the example
that I laid out for a public housing development that was in my
community, the issue of attempting to transition it, the public
housing authority's view being that it is a contributor overall
to the administration overhead of the umbrella organization,
and the threat of losing those funds. I am going to overly
simplify the characterization of Congressman Lazio's and
Secretary Cisneros' response, but Congressman Lazio advocating
for voucher opportunities for the residents, Secretary Cisneros
stating a policy which I would describe as--again,
oversimplifying; I know he would have had much more to
contribute overall to the discussion if we had continued down
the line--but to characterize the initial comments as a ``once
public housing, always public housing'' land view of this is an
asset as a specific site.
I wonder if--many of you have used the term ``property-
based management'' and many of you have used the term ``asset-
based management,'' and as asset-based management for real
estate, while public housing that has an opportunity to
transition doesn't necessarily mean that a decision that was
made 40 years ago to locate public project housing X on this
spot X, means that this spot X should remain either in the
hands of public housing or transitioning to a use that
accommodates public housing. And we see all over the country
communities that are making that transition of looking at
public housing opportunities at a different location versus a
specific location, and working in partnership.
I would like, if you would, for each of you to talk about
the issue. And we all raised the issue of if you have a project
that is obsolete and needs to be removed, and providing
economic diversity to a community and for the residents that
live there. Let's focus our comments, if you will, on the issue
of the opportunities of redevelopment for these sites. Mr.
Solomon.
Mr. Solomon. Mr. Chairman, I think you're right that it's
being looked at all over the country and it's very site
specific and inventory specific, and I think that's what asset-
based management is in part. I would like to point out that to
a substantial extent, this is happening, meaning that public
housing is being disposed or demolished in those situations
about 135,000 units since all of this activity started.
Nevertheless, the way the system is set up now, it does have
the local management actors that have to decide whether this
right.
And I agree with something Congressman Lazio said, which
is, we have to try to get the incentives right so that the
housing authorities looking at this, the cities are going to
come out OK in terms of both money and hopefully will see a
bigger picture that will realize that when it's a better
interest for the residents and future residents and families
they're trying to serve, to convert, that will also be in their
self-interest and they'll be commended for it. And I think we
have some work to do there.
We also have some work to get the tools in place that were
even in the 1998 act so that this can fully occur where it
should.
Mr. Turner. Mr. Egan.
Mr. Egan. Mr. Chairman, I think that the approach needs to
be tailored to the individual circumstances. I think our goals
should be, as many of us have said here today, to do what's
best for the community, to do what's best for the residents and
also, I agree, to do what's best for the taxpayers.
Therefore, public housing authorities and their
counterparts and partners in the public and private sectors
should have the maximum amount of flexibility and the broadest
range of options to achieve the best solutions for those
communities. The solution will vary from market to market. In a
soft market situation where there are plenty of additional
vacant units available, the best option may very well be a
voucher type approach. Where the market is very tight like the
Washington, DC market, for example, the strategy might be to
hang on more to a property-based approach. But I think
regardless, the goal should be to try to create to the maximum
extent possible, opportunities for the residents to rejoin the
rest of the world of society.
I think the statistics that Mike Stegman just gave us here
today are very telling, and I think are a demonstration that
what we need to do is to give those residents an option to kind
of rejoin the rest of society and to reconnect, as the case may
be, with the kind of services and institutions that the rest of
society is able to enjoy.
Let me give you just one quick example, if I could, which I
think demonstrates a particular solution in a particular place.
One of my additional responsibilities is to chair the Fairfax
County Redevelopment and Housing Authority. I'm in my 5th year
as the chair of that venerable institution. And we are, I
think, a very entrepreneurial agency. One of the things that we
did recently was to look at one of our older properties which
needed rehabilitation, and we made a decision to take half of
the public housing authority funding and move it to other units
in the county which we purchased on a scattered-site basis
through the county's inclusionary zoning ordinance, and to
convert those units in that property to a low-income housing
tax credit.
So on the one hand we created a mixed-income community
onsite and we gave the residents who were able to move to these
property-based units elsewhere in the county an opportunity to
connect into, as I said, the rest of the world of society, but
I think it's going to vary from place to place, and that's why
the PHAs need flexibility and options.
Mr. von Hoffman. I would just say everybody's job would be
a lot simpler if Americans would just stay still and stop
moving around, and that is a kind of larger context. And again,
times change. You know, the old neighborhoods are not inhabited
by the same people they used to, and it's in that context that
I think you encountered this situation in Dayton. You have
changes go on, and I'm concerned with the nonprofits who do
low-income housing with the public housing authorities, that
they listen to people like Conrad and Renee Glover, and think
beyond what's happening just this moment or what they used to
do, and think about the change in the population, because poor
people are moving out. So we might think about producing hard
units as well as vouchers and creating communities that will
help integrate people.
That said, I have to endorse the idea of situation by
situation because a lot of people are going to fear when this
happens a real estate grab, quite frankly, that has happened on
occasion in the Urban Renewal Program over time. Local
government people made deals with important entrepreneurs that
basically move an area out of poor people's hands into wealthy
people's hands for that. So I would say that I embrace the
spirit of change and flexibility, but probably will need to
have some safeguards to make sure it's done right.
Mr. Olsen. No competent economist would agree with a
proposition that the fact that a piece of land was once used
for public housing it should always be used to house subsidized
families. I mean, as you mention, the location of jobs has
changed vastly over the years, and so the best place for low-
income people to live has obviously changed vastly.
Beyond that I would say the evidence indicates that all
forms of unit-based assistance, all types of housing projects,
have excessive costs for the housing provided. So I think as a
general matter we should be moving away from designating
specific properties for low-income people, and giving them
vouchers and letting them live where they want to live.
Mr. Stegman. I don't think all of our programs ought to be
run by economists. [Laughter.]
And there are other values that go into this. But if you go
back to Congressman Lazio, aligning incentives is absolutely
critical. Even in the public-private partnerships we don't want
the public partner taking all the risks and the private partner
getting all the gain. That's not a market-driven strategy.
Rod Solomon will remember this. The public housing folks
came to the Secretary--I was his Assistant Secretary for
Policy--with the proposition to encourage demolition, we ought
to give housing authorities 3 years--correct me if I'm wrong,
Rod--3 years of operating subsidies for units that don't exist
anymore. Phantom operating subsidies to really align the
incentives that you, Mr. Chairman, were talking about. They
couldn't afford to lose the operating subsidies, and so we were
seeing housing authorities not doing probably what they ought
to have been doing. Can you imagine GAO finding 3 years of
operating subsidies for units that don't exist? You know,
you've got to have a way of kind of couching that, but the
alignment of incentives is absolutely critical.
If we go to project-based budgeting and project-based asset
management in the context that you're talking about or in the
context that Ed Olsen is talking about, if that development
can't be occupied by rent-paying people, it will drain the
resources of the authority so that they can't manage their
portfolio, and they will find it in their interest to do
something about it, not just keep it up as kind of an
archaeological kind of--anyway. [Laughter.]
Mr. Turner. I appreciate the discussion because you have
all identified, and wonderfully, the broad range of issues that
need to be taken up when a decision like that is made, and they
are many, and what a great description each of you have
contributed to that. I appreciate it.
Mr. Clay.
Mr. Clay. Thank you, Mr. Chairman.
I will be quite brief in the interest of time. Just for a
panel-wide question--and perhaps you can help me understand it
better--one concern I continue to have is that new reform
efforts to place individuals into privately owned multi-family
structures will result in unit shortages due to budget
limitation and market rental costs that continue to rise. How
does a fixed budget program like Section 8 adjust in this
environment? And I would love to hear from all of you on that,
or anyone who wants to take a stab at it. Mr. Solomon?
Mr. Solomon. If the answer is how do they adjust to a flat
budget, they don't, if rents are going up in the locality. So I
heard the question you asked in the last panel, and I think
part of this is how do we have a system for the voucher program
that tries to be responsive to the cost changes and is still a
responsible system in terms of cost. I think we have to start
with, as one of the panelists said, defining what we're trying
to do in the program. If we're still going to serve people who
are paying 30 percent of their median--I'm sorry--of their
income as rent, and we're still going to target to serve the
very poorest families, who our studies have shown are the ones
with the most need in terms of needing to be served, then per
unit that's going to cost a certain amount.
And when Congress sets these budgets, Congress has to be or
should be very clear about, OK, these are the kinds of
parameters, this is what we're aiming to do, and this is how
many families we can serve with these budgets. We, taxpayers
have to leave it to all of you, knowing those facts, to
evaluate the importance of staying at 2 to 2.1 million families
assisted.
Mr. Clay. Thank you.
Mr. Egan. Mr. Clay, let me respond to your question by
going back to the example I cited, which I cited for a reason.
Because I think what, the basic points I want to make is that
the answer to your question varies significantly from market to
market, and I agree generally that Congress has the burden of
trying to fund the Section 8 Housing Choice Voucher Program in
as predictable and sustainable a manner as possible.
Increasingly, the investment community is relying on that
Section 8 subsidy to make major decisions about debt and equity
investments.
But in a very tight market like Cambridge, MA and Fairfax
County, I would suggest, just kind of off the top of my head--
I've been trying to run some quick numbers here--that we can
probably provide to a family, housing assistance at half the
price in a property-based solution than in a voucher-based
solution. Specifically, the units that we were able to purchase
with the public housing authority we moved out of the one
development and used to buy on a scattered-site basis townhomes
in other parts of the county. That's probably costing us about
$1,000 a month, all in, because we were able to purchase the
units at a significantly lower price through our inclusion
rezoning ordinance.
Give a Housing Choice Voucher to a family in Fairfax
County, they're going to end up having to pay probably double
that to find a comparable unit.
Mr. Clay. OK. Thank you for that response.
Mr. von Hoffman. I would just speak to this briefly. In
Cambridge, since Conrad brought it up, which is an extremely
high housing market, the housing authority there, as in other
places, ended up having to purchase apartment buildings in
order for there to be properties to use the vouchers. It
becomes so tight that you really need some creative solutions.
Mr. Clay. Let me ask you about that, doctor. In an ideal
situation, do you foresee there always being a need for public
housing and available units, or do you think we could
transition people and families to homeownership, to mortgage
rate rental units or will there always be a need?
Mr. von Hoffman. I think there will always be a need, and I
think Americans generally will feel there's a need. And I think
you can look at what's happened in the nonprofit and community
development movement over the last 30 or 40 years to see that
given the opportunity, people have used the low-income housing
tax credit to create communities. I think, again--that was my
point about the panaceas--to think that one thing will
transform someone's life is just naive. And you can look at
history or you can look around you and see that. I think that
well-done public housing projects, as they were conceived and
have been very effective at different points in time, or
nonprofit developments, or even for-profit, commercial
developments that are done with this in mind, are a very good
way of bringing people along, integrating--Renee Glover's
example is wonderful--integrating education, job training, or
just stability.
Mr. Clay. And mixed use is included in there, mixed-use
unit. Anybody else? Yes, sir.
Mr. Olsen. Well, first, I mean we haven't had a fixed
budget for the voucher program. The voucher program budget has
risen rapidly in recent years, and I don't favor a fixed
budget, because if we had a fixed budget, with inflation it
would mean we would have to serve fewer people or we would
serve the people served not as well. So I certainly don't favor
a fixed budget for the voucher program. On the contrary, I
favor a rapidly rising budget for the voucher program to serve
more people, funded by vouchering out project-based assistance,
so just transferring the total budget toward the vouchers. So I
favor an entitlement housing voucher program for the poorest
people.
Mr. Clay. Entitlement.
Mr. Olsen. Yes.
Mr. Clay. Thank you.
How about you, Dr. Stegman?
Mr. Stegman. Mr. Clay, the budget-based Section 8 kind of
policies, if continued, would have either one of three effects
or a combination of them. As rents go up and you keep the
budget as it was based on the number of people being helped the
previous year, either you assist fewer households, you raise
tenant contributions to rent, or you use your program for
higher-income households so that they really have a need for
lower subsidies.
I think a bigger problem is that only a quarter of eligible
households receive housing assistance. That's really the bigger
kind of issue. We're not in an entitlement situation, but when
we look at Section 8, it's the only safety net program that I'm
aware of where the market kind of sets the subsidy level. It's
a market-based, that's what housing costs in an area that is
not concentrated poverty, and so on. And when we look at
market-based programs, it seems to me those who support them
need to support the kind of market principle, which is paying
the market rents. When you fix the budget you don't pay the
market rents.
Mr. Clay. All right. Thank you all. Did you want to answer?
Mr. Olsen. I'll followup on that. There have been studies
of the adequacy of fair market rents that indicate that these
rents and the maximum subsidies in the voucher program greatly
exceed what is necessary to occupy units meeting HUD's minimum
housing standards. So we could take the money from the voucher
program right now--we want to phase this in and grandfather
people--we could take that money, offer less generous subsidies
to a lot more people. That's what I think we should do.
Mr. Clay. OK. But then what do you do with the current----
Mr. Olsen. Grandfather them, allow them to continue on the
current system, and just as there's turnover--every year
there's about a 12 percent turnover rate--phase them into a
less generous voucher program where you're serving more people
though.
Mr. Clay. OK. But there were probably incentives for them
being involved in the program to begin with, don't you think?
Mr. Olsen. Well, that provides significant benefits to
them, absolutely. But I think we need to grandfather to make it
politically feasible to do something like that.
Mr. Clay. I thank you for that, and I thank all the
witnesses for their response.
Thank you, Mr. Chairman. I yield back.
Mr. Turner. I also serve on the Armed Services Committee,
and there is a hearing that is ongoing for which I might need
to leave in the middle of--so we might have to cut short the
answers to this question, and if we do, what I'm going to ask
is that we adjourn, and then if you are unable to--if we don't
get to you, which I do believe we will, if you would submit
your answer in writing.
One of the issues that I think is most important that we
focus on, besides financial issues and impact on budget,
besides the housing structure and environment and quality
housing and affordability, is the issue that most of the
residents that we have in public housing that have opportunity
for economic transition, in other words, non-elderly, non-
disabled, most likely have some other issue that is
complicating the expression of poverty that requires
intervention through some social services, through education,
through skill sets. What comments or thoughts might you have as
to how we might better improve our ability to go beyond just
the four walls of looking at providing a place for families to
live, but opportunity for skills and transitional? Start with
Mr. Solomon.
Mr. Solomon. First of all, Mr. Chairman, I'm glad you
mentioned non-elderly, non-disabled, because we sometimes
forget that in public housing half of our occupancy is elderly
and disabled. So focusing on the other group, the families, I
think, given the way the budgets have been in recent years and
what might be reasonable to expect, and the expertise that
agencies have in our communities, we're really talking about
how to get help from outside the public housing system and
outside public housing authorities to focus on these residents,
and really bring some both case work and figure out the help
they need and try to get it to them.
The act that was passed in 1998 did say that housing
authorities are to use their best efforts to get cooperation
agreements with local agencies, that will kind of offer
services like employment assistance, other types of assistance.
Housing authorities say that they're doing that, but I think
the committee could see a little bit more what's happening with
that. It's also something where HUD, with all of its regional
offices, could use the presence of those field people to help
join that effort locally and help engage the housing
authorities where they are not doing it themselves or having
trouble doing it with some of those other public and private
sector agencies and entities that can help these residents.
Mr. Turner. Thank you.
Mr. Egan.
Mr. Egan. I think the general principle is that the
relationship between the public housing authority and the
residents should not cease at the point where the resident
moves to additional opportunities, but there should be an
ongoing relationship, presumably using private sector
community-based services to help that family make that
transition. Very specifically, I would recommend looking at
some of the lessons that have come out of the Hope VI program
in that regard. You talked about, at least Mr. Clay talked
about visiting Atlanta. I'm sure that an onsite review of their
experience would be very, very useful. Also, I think
particularly the experience in Chicago with the transformation
of the massive units of housing, and specifically the effect of
the Gautreaux decision, which preceded the transformation.
Literally as we speak, this moment at the Urban Institute, Alex
Polikoff is releasing his book on the history and analysis of
the Katrow decision. So I would recommend that counsel may wish
to speak with Dr. Polikoff about the experiences of that
program.
Mr. Turner. Thank you.
Mr. von Hoffman. I, just briefly, take a sort of historical
view and say the reason we have this problem is because in the
1950's housing authorities and housing people generally were
kind of blind-sided by the fact that they were going to need
social services for their residents, and so we're kind of
playing catch-up. I agree completely, Hope VI points the way
and it's the enlightened housing authorities. I would also say
there are many nonprofit, and there are some for-profit
community development groups that have housing developments
where they have job training, they have case workers. Here in
D.C., Jubilee Housing, and you can go on to some of this faith-
based work as well, that provide examples.
And then finally, I would just say I think in general in
this case, as well, it would be great to lower the barrier
between something called public housing and those entities, and
the community, meaning that there are other low-income people
or other people who have these problems and needs, and there is
no reason to say that we're going to target only the people
inside the walls of housing development, and that way we might
have efficiencies of scale too, because we're serving a wider
number of people.
Mr. Turner. Dr. Olsen.
Mr. Olsen. I think we shouldn't expect housing programs to
solve all problems. For example, many children in public
housing projects get a lousy education, and that's because
they're in a lousy public school. There are just many problems,
many important problems that housing authorities should not
attempt to address.
So I would really prefer a more minimalist approach. The
thing that they should do is make sure that low-income people
live in adequate housing, and they should do it in a cost-
effective way. Now, if they can do that first, then we can go
on to other things.
But the one other specific thing I'll mention is there has
been a lot of discussion about the work disincentive effects of
housing assistance. The estimates that are available suggest
that indeed all forms of housing assistance have work
disincentive effects. People earn less than they would have
earned in the absence of it. The magnitude is on the order of
13 percent. And this has to do with the subsidy schedule which
basically says, under the basic subsidy, is the more you earn,
you know, the more you pay in rent for your public housing
unit, the less of a subsidy you get.
So I think the QHWRA provisions that allowed housing
authorities to experiment with the rent schedule, I think is
trying to address that, and may well be able to address it, but
I don't think we have any systematic evidence on this, and I
think we should. I think we should try to learn something from
the experiences of different housing authorities in a very
systematic way because I think that is an important issue and
that is something that housing authorities can do something
about.
Mr. Turner. Dr. Stegman.
Mr. Stegman. I mean I would agree with Ed that housing
agencies don't have either the capacity, the skills, or ought
not necessarily have the responsibility of meeting all of the
other needs of families, but there is a moral obligation, once
the housing authority gets involved in the lives of families,
particularly if we're talking about moving them in order to
transform a neighborhood. It is absolutely incumbent upon us to
make sure that these residents who have all of these multiple
problems, get as good services as they can to put them on the
path to a better life.
The problem that we have here with Hope VI is the physical
improvements are generational. I mean they're going to be
around forever, but the short-run costs are being borne by
families who are being relocated to--some cases we don't know
exactly how well they're doing. We know there are a lot of
needs that aren't being met, and a lot of this dates back to
the time that every housing authority had a police force, every
housing authority was expected to do all the social services.
They were not connected to the community, and we're trying to
change that. That's why I said if they become outstanding asset
managers, and really, experts in what they're supposed to be
doing, they will be better partners if we can support the
funding of the social service networks adequately in the
community. These folks are part of the community. That's the
only way it's going to ultimately be done.
Just one idea. I mean, the Chicago Housing Authority uses
connectors. They don't provide the services, but part of their
transformation is actually--I mean you could call them
coordinators. You could call them case managers. But
essentially they are trying to connect the residents in these
transformed communities, those who are being relocated and so
on, with social services. They're not providing the services
themselves, but they are providing some resources to connect
them.
Mr. Turner. Excellent.
I want to thank each of you for participating, not only,
again, for the written testimony that you have provided to us
and the wonderful research that you have included with it, but
your preparation for today and the answers of your questions
today.
This is, as I stated, our beginning overview of the issue
of public housing. I hope that each of you will be available to
us as we look to becoming more focused on specific topics, and
will be free to contact us as you have ideas of things that you
think that we should be looking at. This is a broad topic, but
one that your research and insight proves is certainly
important to us from our community standpoint and from the
lives of the people that live in public housing.
With that, I will close the hearing, and thank you so much
for attending.
[Whereupon, at 4:33 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Charles W. Dent and
additional information submitted for the hearing record
follow:]
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