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PUBLIC HOUSING MANAGEMENT: DO THE PUBLIC

HOUSING AUTHORITIES HAVE THE FLEXIBILITY

THEY NEED TO MEET THE CHANGING DEMANDS 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

MAY 10, 2006

Serial No. 109–209

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

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

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

CHRISTOPHER SHAYS, Connecticut

VIRGINIA FOXX, North Carolina

——— ———

WM. LACY CLAY, Missouri

PAUL E. KANJORSKI, Pennsylvania

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

(III)

C O N T E N T S

Page

Hearing held on May 10, 2006 ............................................................................... 1

Statement of:

Apple, Doug, general manager, New York City Housing Authority ............ 29

Hiebert, Curt, executive director, Keene, NH, Housing Authority .............. 57

Johnson, Gregory D., executive director, Dayton Metropolitan Housing

Authority ....................................................................................................... 10

Martens, Betsey, co-executive director, Boulder Housing Partners ............. 41

Peterson, Terry, chief executive officer, Chicago Housing Authority ........... 23

Rudman, Steven D., executive director, Housing Authority of Portland ..... 34

Letters, statements, etc., submitted for the record by:

Apple, Doug, general manager, New York City Housing Authority, prepared statement of ........................................................................................ 31

Dent, Hon. Charles W., a Representative in Congress from the State

of Pennsylvania, prepared statement of ...................................................... 87

Hiebert, Curt, executive director, Keene, NH, Housing Authority, prepared statement of ........................................................................................ 59

Johnson, Gregory D., executive director, Dayton Metropolitan Housing

Authority, prepared statement of ................................................................ 12

Martens, Betsey, co-executive director, Boulder Housing Partners, prepared statement of ........................................................................................ 43

Peterson, Terry, chief executive officer, Chicago Housing Authority, prepared statement of ........................................................................................ 25

Rudman, Steven D., executive director, Housing Authority of Portland,

prepared statement of ................................................................................... 36

Turner, Hon. Michael R., a Representative in Congress from the State

of Pennsylvania, prepared statement of ...................................................... 3

(1)

PUBLIC HOUSING MANAGEMENT: DO THE

PUBLIC HOUSING AUTHORITIES HAVE THE

FLEXIBILITY THEY NEED TO MEET THE

CHANGING DEMANDS OF THE 21ST CENTURY?

WEDNESDAY, MAY 10, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FEDERALISM AND THE CENSUS, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 10:03 a.m., in room

2154, Rayburn House Office Building, Hon. Michael R. Turner

(chairman of the subcommittee) presiding.

Present: Representatives Turner and Clay.

Also present: Representative Emanuel and Senator Sununu.

Staff present: John Cuaderes, staff director; Juliana French,

clerk; John Heroux, counsel; Peter Neville, fellow; Adam Bordes,

minority professional staff member; and Cecelia Morton, minority

office manager.

Mr. TURNER. Well, good morning. And a quorum being present,

this hearing on the Subcommittee on federalism and the Census

will come to order.

Welcome to the subcommittee’s hearing entitled, ‘‘Public Housing

Management: Do the Public Housing Authorities Have the Flexibility They Need to Meet the Challenging and Changing Demands of

the 21st Century?’’

This is the second of a series of hearings on public housing. Congress first authorized public housing in 1937 as part of Franklin

D. Roosevelt’s Depression-era public works legislation package.

Public housing over the years has changed from a public works program designed to serve predominantly working families on a temporary basis to a program that serves poorer families on a permanent basis.

By the mid-1990’s, conditions in many public housing projects

around the country were deplorable. The picture of public housing

most Americans had was that of substandard high-rise buildings

with high crime, rampant drug use and extreme poverty.

In the eyes of conservatives and liberals alike, the system was

a failure. It failed to provide safe, affordable, quality housing to

those families most in need. Many pointed their finger at HUD;

others laid blame on the shoulders of the public housing authorities

themselves. In fact, by the end of the 1970’s, much of the focus had

turned toward public housing management as the problem.

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In 1979, a Massachusetts court placed the Boston Public Housing

Authority in receivership. By 1995, three more authorities, Washington, DC, Pennsylvania, and Kansas City, MO, were placed into

receivership. By 2001, HUD had placed an additional 11 housing

authorities into administrative receivership, including Chicago and

New Orleans.

In 1998, Congress passed the Quality Housing and Work Responsibility Act of 1998. The goal of Congress was to streamline the system, provide public housing authorities with more management

flexibility, and create more accountability within the system. Eight

years after the legislation’s enactment, our Nation’s public housing

system is still undergoing dramatic changes in how it is funded

and how it is managed. Some of those changes have worked, and

some have not. A recent report released by the Brookings Institution opined that HUD’s aggressive efforts to improve the management of the most troubled housing authorities have been effective,

but the act’s success in deregulating public housing management

with increased accountability has been mixed.

The purpose of this hearing is to examine whether HUD has appropriately implemented reform in keeping with the spirit of the

act’s stated purpose of deregulating and controlling public housing

authorities and providing for more flexible use of Federal assistance. The subcommittee will hear from several witnesses representing various public housing authorities from around the country. We’re interested in hearing their views on HUD’s implementation of the act and its new management rules, and hearing some

of their incredible and exciting successes. It is our hope that the

public housing authorities here today will comment on what steps

HUD could take to further improve the public housing system

while increasing accountability, whether that means expanding

programs like Moving to Work Demonstration, or finding some

other mechanism.

With that, I would like to thank each of the panelists who are

here today and look forward to their comments.

[The prepared statement of Hon. Michael R. Turner follows:]

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Mr. TURNER. And before we move on, I would like to yield to our

ranking member, the gentleman from Missouri Mr. Clay, for any

remarks he might have.

Mr. CLAY. Mr. Chairman, thank you for today’s hearing on the

continuing regulatory challenges facing our Nation’s public housing

authorities.

As housing costs continue to rise, and our financial support for

public housing declines, I believe we must proactively pursue solutions that can improve agency performance in an era of stagnant

resources.

Our Nation’s public housing programs have been a bedrock of

support for millions of families, elderly and disabled individuals

since their establishment under FDR’s New Deal. They are facing

increasing pressures, however, due to limited Federal funding options, insufficient regulations that limit the amount of capital for

long-term development projects, and growing economic disparities

among our citizens who rely on housing programs for their survival.

I readily admit there are no silver bullet solutions to these problems, but remain open-minded to new ideas that may potentially

improve the lives of residents.

My hometown of St. Louis is a model for the challenges facing

an urban PHA on a limited budget. Our local PHA, the St. Louis

Housing Authority, has a budget of $60 million that is derived entirely from the U.S. Department of Housing and Urban Development. It has extensive waiting lists for this housing voucher program, and its public housing units are in desperate need of repair

and renovation.

That said, I come into today’s hearing wondering whether current HUD regulations, demonstration program efforts or deregulatory proposals offered by our witnesses can possibly be helpful to

my constituents. In particular, I realize that several panelists represent PHAs participating in the Moving to Work demonstration

program. While they tend to speak mostly of the flexibility associated with MTW, I’m looking to hear more about improvements in

services and quality-of-life issues for their residents. Does MTW

offer significant relief for all agencies, both large and small, and

have services for residents measurably improved since the pilot’s

inception? These are important milestones to meet if we are to consider a pilot program appropriate for widespread application.

I look forward to our testimony today, Mr. Chairman, and I yield

back. Thank you.

Mr. TURNER. Thank you, Mr. Clay.

We also have with us here today Senator John Sununu from New

Hampshire, who would like to briefly introduce a witness from his

State, and I yield to Senator Sununu.

Senator SUNUNU. Thank you very much, Mr. Chairman. And it

is a pleasure to be here and to introduce and to welcome one of the

leading lights in housing authorities in New Hampshire, Curt

Hiebert.

And I do want the committee to know that I risked a great deal

of scorn and ridicule from my former colleagues by coming across

to this side of the Capitol, but it’s important. It’s important for the

reasons that both you and the ranking member mentioned in your

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opening remarks: We need to look at opportunities to really

strengthen, I think, the role provided by the housing authority

leadership that we see on the panel today, find solutions that enable them to use their creativity to help their clients, to help their

constituents.

Curt Hiebert has been the director of the Keene Housing Authority in New Hampshire since 1987. My staff have put together a few

talking points, and I think most of them were issues that I dealt

with before with Curt and with others, but this was certainly a

new piece of information that he has been the Director of the Housing Authority for 20 years, is really an impressive dedication, and,

I think everyone would agree, gives him a great wealth of knowledge how things were done under previous administrations, under

previous bureaucracies, under previous leadership both at the Secretary level and at the elected level here in Washington and in

New Hampshire.

He has been the president of the New Hampshire Housing Authority, he has been on the legislation committee, or the vice president for legislation for the Public Housing Directors Association nationwide. And as you can imagine, because of this experience, he

has been a great resource to me. He has been extremely helpful in

understanding what has worked in New Hampshire, what he has

seen implemented elsewhere in the country, and instilling in me an

understanding that what works for one housing authority doesn’t

necessarily work for another.

It’s kind of exciting for me to see some of the leadership from

Chicago, from New York and New Hampshire—even Portland is a

very big city. So I’m sure you will see and hear a great perspective

on different approaches and different solutions that work in different settings. But for us in New Hampshire, the Moving to Work

Program has worked, and Curt has made sure that the flexibility

that Moving to Work has provided has been put to very good use.

I have visited the housing authority in Keene where Curt helps

to operate 800 units of public housing and Section 8 vouchers, not

8,000, not 18,000 or 28,000, which obviously is the norm in a city

like Chicago or New York. But those are 800 units and families

that really depend on his ability to lead and to implement the Moving to Work Program. They have developed end structures that

preserve their affordability, which is a huge goal for you all, but

also that encourage self-sufficiency, and that allow him to deliver

different tools to different families, depending on their particular

needs.

And I think everyone would agree, when you have a family that

needs assistance, of course there are the essentials, food and shelter, education, sometimes transportation, but what is most important in the long run is that you develop independence, that you develop self-sufficiency. And I think that has been the cornerstone of

the Moving to Work program.

Curt Hiebert is a real hero in New Hampshire’s housing programs because of the commitment he has shown for years. And I

hope that what they have done in Keene will provide an outstanding example of the approaches and innovation that we should seek

to encourage as a Congress and expand wherever possible.

Thank you, Mr. Chairman.

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Mr. TURNER. Thank you, Senator. I want to thank you for your

leadership on neighborhood and community development and lending your support for this hearing today and introducing Curt. We

look forward, too, as this committee continues to look into the issue

of how we might be able to assist public housing authorities in

their role in our communities, and working with you in ways that

we might be able to implement some of the recommendations that

we find. So thank you for participating.

Senator SUNUNU. It’s my pleasure.

Mr. TURNER. Next we have one of our colleagues, Rahm Emanuel

from Illinois, who is here with us today to introduce Terry Peterson. Terry just recently gave me a tour of some of the great successes that they have in Chicago, so I know you must be very

proud of the things that they’re accomplishing there, and we appreciate you being here today.

Mr. EMANUEL. Thank you, Mr. Chairman. Thank you to the

ranking member.

In between having worked at the White House and run for Congress, I served as vice chairman of the Chicago Housing Authority,

which oversaw and implemented and began the stages of the plan

for transformation.

Chicago was known at one time as having the worst public housing in the country, and it earned that title. It did have at one time

the worst public housing in the Nation, and today, by all accounts,

the Wall Street Journal recently noted that what’s going on in Chicago since public housing was started under Franklin Roosevelt is

the most amazing transformation of public housing ever conducted

anywhere in the country. That is not to take away from what everybody else is doing, but if you can accept the city of Big Shoulders, we would like to promote what we’ve done, and done under

Terry’s stewardship.

I think some of the accomplishments should make any person,

Democrat or Republican, but especially Republicans, warm their

heart. We’ve gone from 58 high-risers to only 5 left. And by the

time Terry is done, there won’t be a single public high-rise building

in Chicago left. They will all have been taken down to no higher

than six stories is my recollection.

Second, Chicago at one time had 2,500 bureaucrats in the CHA,

Chicago Housing Authority. Today there are less than 450.

Third, one-third of the entire Chicago public housing, 27,000

units, one-third of it will be mixed income. No other public housing

authority will have accomplished that goal. And all of the others

will have been revitalized, rebuilt.

Last, he has done this in a way that is not to have walked away

from public housing, but to revitalize it in a way that the Wall

Street Journal noted that is now the most impressive transformation of public housing since its original days in 1937.

When Terry took over and I was vice chair, the people in public

housing were isolated culturally, economically, geographically and

from a service standpoint. They had their own child care centers,

they had their own police force, they had their own garbage service,

they had their own transportation system, and so they were literally physically, the residents, isolated from the rest of the city.

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The public housing authority got out of other businesses and focused on its job of providing housing.

I actually also left out of there one other accomplishment, which

was to live in public housing, you had to work, and it went back

to an original idea that was essential as a premise, which is to get

public housing, you had to take some responsibility, and work was

a main issue of showing that you took responsibility for your life.

And today the residents of public housing are a part of the city

of Chicago rather than isolated. They are part of that city both geographically, economically, service wise, and, most importantly, culturally, because if you isolate them culturally, they will never be

part of the overall city.

And I am proud of what we’ve done under Terry’s stewardship

and Mayor Daley’s stewardship and direction, because the truth is

Terry had a great life as alderman of the 17th ward, and the mayor

could have gone on to another reelection without taking on public

housing. It takes a lot of courage to take on public housing and

take on people’s lives who have had their dreams shattered, and

give them a sense of hope, which is why HOPE VI—contrary to

some budgetary attempts, HOPE VI was essential to getting to

where we are today, and eliminating HOPE VI would be wrong,

and it should not be done.

And I am proud of what Chicago has accomplished, not just for

the balance of only 5 high-risers out of 58, only 450 bureaucrats

out of 2,500, those are all nice landmarks, but the most important

landmark is the people in Chicago public housing feel they’re part

of Chicago. And having taken down those barriers and integrated

them into the rest of the city, we have a chance of taking another

generation and not isolating them, but integrating them completely

economically, culturally and physically into the city. And that’s

why the Chicago public housing revitalization, it is more about

bricks and mortar; as Terry always says, it’s about people’s lives.

Thank you, Mr. Chairman, for the time.

Mr. TURNER. Thank you.

We will now turn to our witnesses, and I will introduce our panel

that we have with us today.

First on the panel we have Greg Johnson, the executive director

of the Dayton Metropolitan Housing Authority, my own town. I appreciate you being here, Greg. Mr. Johnson took over Dayton’s

housing program after it had many years of difficulty. He has done

a great job in turning around that program, and I look forward to

working with him in the future.

Next we have Terry Peterson. Rahm has done an excellent job

in telling the situation that you were facing in Chicago. And I

greatly appreciated the time that you spent with us and the staff

of this committee in showing us what is possible in public housing

and what you’re accomplishing. You’re certainly to be commended,

and we look forward to hearing your insight as to how those principles can be translated nationally and ways that we might be able

to help you additionally.

Next we have Doug Apple, who is the general manager of the

New York City Public Housing Authority from the Big Apple; and

we have Steven Rudman—and I’ve got permission from Doug. He

said that everybody does that to him, so.

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We also have Steve Rudman, who the is chief executive officer

and executive director of the Housing Authority of Portland, OR.

And next is Betsy Martens, co-executive director of Boulder

Housing Partners in Boulder, CO.

And next we have Curt Hiebert, who was introduced by the Senator, and, of course, we heard some of the wonderful things that

you’re doing there, chief executive officer of the Keene Public Housing Authority in Keene, NH.

I thank you all for agreeing to testify before our subcommittee

today. Each of our witnesses has kindly prepared written testimony

which will be introduced to the record of this hearing.

Witnesses will notice that there is a timer light 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 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, and so I will ask if this panel would please rise

and raise your right hands.

[Witnesses sworn.]

Mr. TURNER. Let the record show that all the witnesses have responded in the affirmative, and we’ll begin our testimony with

Greg Johnson.

STATEMENT OF GREGORY D. JOHNSON, EXECUTIVE

DIRECTOR, DAYTON METROPOLITAN HOUSING AUTHORITY

Mr. JOHNSON. Thank you, Mr. Chairman and members of the

subcommittee. I take as a great pleasure of being here today to

have been able to speak before you.

I want to start off by saying Dayton Metropolitan Housing Authority has gone through a lot of changes over the last few years,

and we look forward to progressing.

I want to talk about the operating fund rule, and I do support

the idea of project basing and asset management, but there are

three critical concerns that I would like to address this morning

with you as we start our discussion that I think will hamper housing authorities from being flexible and going forward to providing

quality housing.

Inadequate funding I want to bring up as one major concern.

Right now there is a proposal for 78 percent of funding being as—

last year we were funded at 89 percent, which caused a great concern for housing authorities across the country, which called for

layoffs in staff and services being cut.

The other item inadequate funding would be the rent or nonfunding of authorized vacant units. These are units that are being

turned for new residents, and also units that are under modernization.

Another one of my concerns is the micromanagement. When we

look at the new operating fund rule, the cost allocations in how

we’re supposed to allocate certain expenses from central down to

the front line or project level, it’s going to be critical to stay within

some of the HUD guidelines to make sure that happens.

And last but not least, I wanted to talk about the new rent calculation. If we look at the new rent calculation and how housing

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authorities are supposed to survive, it calls for asking our tenants

for more income, and I’m not sure how you get more dollars out of

tenants that don’t have a lot of money to give you.

So those would be my three main concerns when we’re looking

at the new operating fund rule that poses a lot of challenges for

housing authorities in the next upcoming year.

I would like to mention just a little bit, I do believe that Dayton

Metropolitan Housing Authority would benefit greatly from an

MTW program. It would allow us to be a lot more flexible with our

dollars than what we receive for supply services that we’re not able

to supply through funding today.

We had a Jobs Plus program at Dayton Metropolitan Housing

Authority which actually worked great. It’s where residents were

encouraged to get a job, and then froze their rent without a rent

increase, and we had the support from HUD on the funding on the

rent adjustments. So I would like to say thank you for allowing me

to speak this morning, and that’s it.

[The prepared statement of Mr. Johnson follows:]

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Mr. TURNER. Terry.

STATEMENT OF TERRY PETERSON, CHIEF EXECUTIVE

OFFICER, CHICAGO HOUSING AUTHORITY

Mr. PETERSON. Thank you, Mr. Chairman and subcommittee

members, for allowing me the opportunity to testify.

My name is Terry Peterson, and I’m the chief executive officer

of the Chicago Housing Authority.

In the last 7 years under the leadership of Mayor Richard M.

Daley, Chicago has transformed an agency overseeing some of the

most notorious public housing developments in America into a wellmanaged, forward-thinking public agency overseeing a national

model of community rebirth and renewal. This was possible in

large part because of the local flexibility and funding commitment

embodied in CHA’s 10-year MTW agreement and the support of the

U.S. Department of Housing and Urban Development Secretary

Alphonso Jackson and former Secretary Mel Martinez.

MTW allows PHAs to make decisions and create programs that

meet the needs of each individual city. CHA created an MTW plan

in conjunction with the residents which met the residents’ specific

needs, worked within the context of the larger local housing market, and allowed CHA to maximize dollars leveraged.

In 1999, CHA was the poster child for what was wrong with public housing. Over one-third of our units were vacant. Most units

were in deplorable condition; 14,000 units were in such bad condition that HUD mandated their demolition. Public housing families

were physically and socially isolated, cutoff from the rest of the city

of Chicago for decades, and as a result faced multiple barriers to

self-sufficiency.

Public housing was considered a blight on neighborhoods, resulting in lower property values in the surrounding area. In 2000,

CHA, the city of Chicago and HUD signed a 10-year MTW agreement providing CHA unprecedented local flexibility and funding

commitments which were essential to ending the isolation and

breaking the cycle of poverty that had so long persisted in and

around CHA developments.

Key provisions included, one, a 10-year program commitment.

This provided the consistency that is essential to allowing us to

maximize private investment in public housing; two, flexibility with

the use of funding sources. This enabled CHA to pay for relocation

and relocation counseling and social services; three, a commitment

to provide the same number of affordable housing opportunities in

2009 as CHA was offering in 2000. This prevented CHA from losing thousands of hard units of affordable housing in what are now

hot real estate markets.

In large part because of the flexibility in the funding commitment, CHA has made substantial progress. Since January 2000,

CHA has rehabilitated or replaced more than 14,000 units, or 57

percent of the 25,000 unit goal; 8,000 units in mostly gallery-style

high-rise buildings were demolished, and construction is under way

on almost every mixed-income site.

Where CHA began construction activities, neighborhood revitalization followed. A steady funding stream is one of the most important features of CHA’s MTW agreement. As a direct result of

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steady funding, CHA obtained significant funding from the private

market that allowed CHA to leverage Federal public housing dollars at a rate of 1 to 4. $242 million of CHA dollars triggered over

$1 billion in public and private investments in CHA mixed-income

communities. For example, in December 2001, the CHA issued the

first publicly offered tax-exempt revenue bonds secured solely by

public housing capital funds. Proceeds were used to fund a portion

of the cost to rehabilitate approximately 12,000 of CHA senior and

scattered site units, and effectively jump-start the first critical redevelopment phase. CHA also leveraged social service dollars; $118 million in CHA social service has triggered over $156 million in support from other

public and private sources.

CHA’s MTW agreement will expire on January 6, 2010. CHA has

already made significant investments in time and resources in developing a successful program. These programs are important to

our continued success. Permanently authorizing CHA’s MTW

agreement will allow CHA to continue to operate under the same

terms and conditions. Without permanent authorization, progress

made to date will be at risk. CHA supports the proposed MTW

charter bill which would make permanent our current MTW agreement and allow us to continue to rebuild the lives of public housing

residents.

In conclusion, it is important that we continue to stay the course.

As mentioned before, I believe that public housing residents are

looking for a hand up and not a handout, and by putting in place

the MTW agreement, we will be able to continue to support this

type of progress that public housing wishes.

Thank you, Mr. Chairman.

Mr. TURNER. Thank you.

[The prepared statement of Mr. Peterson follows:]

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STATEMENT OF DOUG APPLE, GENERAL MANAGER, NEW

YORK CITY HOUSING AUTHORITY

Mr. APPLE. Good morning. I’m Douglas Apple, the general manager and chief operating officer of the New York City Housing Authority. I want to thank you, chairman, and ranking member, Congressman Clay for allowing us to be here today to testify.

Being from New York, I can talk very fast, and I need to because

we have a lot to say. And I think what you will hear from us is

somewhat of a different story than what you just heard from Terry,

for example.

New York City has been—was the first housing authority, actually started in 1934, even before Federal legislation, and is the biggest housing authority here in the country. We serve 1 out of every

12 New Yorkers, more than 650,000 families, people in our Section

8 and public housing program.

And we believe—and being New Yorkers, we always do this, but

we think we are the best housing in the country. We have not had

to go through some of the difficult times that Chicago and other cities have, we have not done wholesale demolition, and we believe

that’s because we’ve always been able to provide quality services,

always really served a mixed-income population.

Today over 45 percent of our families work that live in public

housing. We have less than 16 percent families on public assistance. So we believe that the strength of the public housing in New

York City is because we serve a wide variety of individuals.

But given that, the challenges have become more complicated in

the last few years. Reductions in Federal funding, increased regulation, and really a change in the public housing environment with

an aging infrastructure has made it a greater challenge for us to

succeed, but we’re determined and committed to do that.

In New York, we’ve recently announced a seven-point plan to

preserve public housing. That plan has essential elements that includes an enormous commitment from our mayor, Mayor Michael

R. Bloomberg, who will provide a $100 million transitional aid

package to the housing authority while we make some difficult decisions in New York, decisions that are right for New York City

about preserving public housing. We did a $600 million capital fund financing bond issue last year

that will give us a significant infusion of capital dollars to modernize and maintain our housing stock. In doing so, we were Triple Arated by Standard and Poor’s. I think that those are the kind of

measures that HUD needs to think about and Congress needs to

consider when you think about how you want to regulate housing

authorities. Outcome measures, measures that show performance

are really where I think housing authorities are going, and I think

the regulatory structure needs to catch up to that.

MTW is a way to achieve that, and we wholeheartedly embrace

it. And, in fact, New York, unlike some of the other cities you’re

going to hear from today, does not have MTW status. It is something that is one of our highest priorities for this year.

We also have been very active in new developments. The mayor

has put forth the largest single municipal affordable housing program in the government in the Nation’s history, a $31⁄2 billion affordable housing program that will produce 168,000 new and renVerDate 11-MAY-2000 11:32 Mar 05, 2007 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 D:\DOCS\32546.TXT HGOVREF1 PsN: HGOVREF1
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ovated housing units in the next 10 years. The housing authority,

in conjunction with our housing partners in New York, the city’s

Housing Development Agency and the city’s Housing Finance

Agency have a pipeline of over 3,000 new housing units using public housing land and public housing buildings. It will allow us to

spur new forms of construction to serve a range of New Yorkers,

both in terms of low income and moderate income, and work force

housing.

One of the biggest challenges we face in a very tight and very

hot real estate market in New York is really providing quality

housing for the folks that really drive New York, the folks that

make $30,000, $40,000, $50,000; the teacher, the fireman, the folks

that work in our hotel industry and our entertainment industry.

We see the public housing authority as a vital engine in doing so.

We believe that MTW is necessary to allow housing authorities to

perform in their local economies, to be successful in their cities,

and to really thrive.

The Congressman, Congressman Clay, asked for concrete examples of services that we can provide better to residents, and how

flexibility can help us do so. We’re putting in place a whole new

technology base. We have 2 million work tickets a year, maintenance requests from our residents. It is now done in 200 separate

locations. We have no way to monitor quality. We have no way to

assure services. We’re putting in place a new system that will centralize that, using technology and a call center based in Queens

that will allow us to assure quality, schedule appointments, and

really provide quality service to residents.

Some of the aspects of the operating rules proposed by HUD will

limit our ability to do that, so we would encourage you to look very

closely at the rules HUD is providing to make sure that they give

the housing authorities the flexibility to provide quality services to

residents.

Thank you.

[The prepared statement of Mr. Apple follows:]

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Mr. TURNER. Steven.

STATEMENT OF STEVEN D. RUDMAN, EXECUTIVE DIRECTOR,

HOUSING AUTHORITY OF PORTLAND

Mr. RUDMAN. Thank you, Chairman Turner, Ranking Member

Clay, for the opportunity to testify today.

The question you’re asking about public housing flexibility is indeed a critical one for our industry. I’m speaking as the director of

the housing authority in Portland, OR, a midsized housing authority that’s had the privilege of working under MTW for the past 7

years, recently extended for 3 more. So I would say as an MTW,

the answer is yes, MTW does go a long way in removing barriers

to effective management of resources in an environment where it’s

exceedingly difficult to manage.

HAP owns over 4,000 units of work force and special needs housing in addition to 2,500 units of conventional public housing, so we

have an excellent vantage point from which to view the transition

of traditional public housing to an asset management model. We

also understand what it takes to develop new housing. We serve as

developer for 21 of our 33 local developments, and are currently

self-developing two HOPE VI projects.

I’d like to briefly make four points. First, housing authorities

must be allowed to be true asset managers of public housing. At

HAP, we initiated our transition to property-based management

well before HUD issued its prescriptive operating rules because it

made good business sense to us.

However, the shift will not be compete without access to capital

markets or the ability to use debt financing as a tool in managing

public housing. HUD has taken a step of allowing financing on future capital grants through QHWRA, but this tool is limited and

has a finite cap.

Housing authorities should be able to attach debt to conventional

public housing much more broadly by using operating funds in addition to capital funds to develop new housing, and by granting

mortgages and security interests in public housing properties to

help need tremendous capital needs.

My second point is that the flexibility very few of us have under

MTW should be extended to a broader group. This flexibility gives

MTW agencies tremendous ability to tailor policies and programs

to local conditions, needs and priorities.

We’ve used this flexibility to expand our self-sufficiency program

in Portland. Over 500 households from public housing in Section 8

have graduated off public assistance; 40 percent of those have become homeowners. We also use it to approach our Section 8 funding crisis in innovative ways.

The third point is one I know you have heard from others in a

previous committee hearing in terms of the need to increase support for HOPE VI. This program has been invaluable in replacing

the Nation’s most distressed public housing with vibrant mixed-income communities. There is no other development tool for public

housing that comes close to matching the benefits of HOPE VI,

which leverages private investment and supports critical social

services and community development activities.

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My fourth and final point is this: I’d like to urge anyone who is

considering the design of new public housing initiatives to build in

requirements for collaboration from the outset. Housing policy

shifts over the last several decades have resulted in housing authorities serving a very poor client base. Even as an MTW, over 90

percent of our Section 8 and public housing households are in way

below 30 percent of median income, and 50 percent of that population are elderly and/or disabled, and that population continues to

grow.

We provide a safety net in our communities, but we cannot do

it alone. It takes much more than housing to help create positive

change in our clients’ lives, and funding for social services and community development activities is as great of a challenge as it is for

funding for affordable housing.

It is critical for those of us who have some resources to support

the most vulnerable, to find ways for those precious tools to be

used more collaboratively and systemically. I believe Federal funding and policy can promote greater ways to do just this.

Finally, I just have a concern. While flexibility is a key question,

so is adequate funding. They’re not mutually exclusive, and one

does not compensate for the other. All the flexibility in the world

will not maintain the decades-old physical housing stock that continues to age as we sit here. It will not reverse market trends

which are driving rents and home prices up in our region and other

areas of the country. It will not offset the effects of working with

the very poor population that has increasingly less access to services.

We can and we will as an industry improve how we manage public housing, but it will take good management, program and policy

flexibility, as well as adequate resources to preserve this resource

well into the century. I thank you for your support in the past, and

look forward to efforts in the future.

[The prepared statement of Mr. Rudman follows:]

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Mr. TURNER. Betsey.

STATEMENT OF BETSEY MARTENS, CO-EXECUTIVE DIRECTOR,

BOULDER HOUSING PARTNERS

Ms. MARTENS. Thank you, Mr. Chairman, members of the committee, for this opportunity to testify today and for holding these

hearings which are not only well-timed, but absolutely essential.

I’m Betsy Martens, the co-executive director of Boulder Housing

Partners, the housing authority serving the city of Boulder, CO.

I am also pleased to serve as the chairperson for the Public

Housing Subcommittee of NAHRO, the National Association of

Housing and Redevelopment Officials, and as a member of

NAHRO’s Board of Governors.

Mr. Chairman, we face a significant problem in the management

of public housing today. In my portfolio of 991 units, of which I

have 6 different housing types, public housing is by far the most

difficult thing I manage. In my written testimony I’ve tried to give

you a reasoned and articulate response about why that is, but for

purposes of summation here today, I want you to know that public

housing is so difficult to manage because it’s unlike any other asset

in my portfolio. Other than roofs or walls or residence, it bears no

resemblance to real estate. Its current regulations are complex,

cumbersome and constantly changing, and they quite literally put

the asset at risk.

I suggest that we have to do five things. First, we need to reform

the way rent operates in public housing. There are two fundamental problems; the first is that rental income is not tied to the economics of public housing, and I’ll come back to that in a second.

The second is that rent structure is complex, invasive and very expensive to implement. We need to replace it with a simple system

that empowers our residents and also preserves our collective investment in public housing.

The second point and second thing we need to do is attend to the

very real capital needs of this portfolio. My public housing was

built in 1972, which means it’s nearing the end of its physical life

cycle. Despite careful attention to maintenance and good stewardship of the asset, we have significant deferred maintenance. We

need a national preservation strategy for this essential irreplaceable asset.

The third thing we need to do is achieve meaningful flexibility

and deregulation. Contrary to its intent, QHWRA has not deregulated our agency; I suggest that it has reregulated our industry. We

spend as much, if not more, staff time in HUD compliance than we

ever did.

The fourth thing we need to do is recognize that public housing

residents come to us with problems that are not only or always economic. I think we need to end the decades-old debate about whether we’re property managers or social services providers. The two

are inextricably linked, and we are both. We need to incorporate

resident services into the fundamental program and recognize it as

a cost of doing business.

And finally, I believe we need to restructure the underlying finance. Currently the system is upside down, and I believe that

most of the problems that we’re talking about here today in this

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panel could be solved if we could change the way funds flowed to

public housing. I need an economic rent that covers my cost to operate, including resident service, and allows me access to the capital markets. A subsidy then would bridge a family’s income to the

rent.

Mr. Chairman, I just talked to you about the need for flexibility,

and I have to underscore a concern in our industry as HUD mandates a transition to asset-based management.

The principles of asset-based management are excellent, they’re

well-tested, they come to us from the private sector, and I’ve been

using them in my housing authority for more than 10 years where

they make sense. Most housing authorities don’t have a public

housing portfolio in which it justifies a project-based management

approach. We’re in an all-too-familiar pattern of HUD prescribing

a one-size-fits-all solution where the very essence of asset management contravenes that idea.

Asset management means portfolio responsiveness and lots of

flexibility. We’re very, very concerned about the way HUD is approaching not only asset management, but project-based management. I think HUD should promote the principles of the best practices in the industry, but not insist that there is only one way for

us to manage.

In closing, I’d like to say that it’s imperative that we find reasoned and responsible change. I see the industry at a tipping point

where we risk losing the deep affordability that public housing represents for millions of families for whom we cannot afford to lose

this affordability. We need to take a very deep and thoughtful look

at the programs and start testing new ideas through pilot programs.

Mr. Chairman, absent a very thoughtful and reasoned policy

about public housing, I’m seeing my colleagues exit in ways that

I think put this country at risk.

Thank you for this opportunity to testify. I offer all that my staff

and my colleagues and the Rocky Mountain States can bring to the

discussion as it proceeds. Thank you very much.

Mr. TURNER. Thank you.

[The prepared statement of Ms. Martens follows:]

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Mr. TURNER. Curt.

STATEMENT OF CURT HIEBERT, EXECUTIVE DIRECTOR,

KEENE, NH, HOUSING AUTHORITY

Mr. HIEBERT. Thank you, Mr. Chairman, Mr. Ranking Member.

I appreciate very much the opportunity to talk to you today. And

I’m very humbled and flattered by Senator Sununu’s introduction;

I’m not sure if my family and friends would recognize who he was

talking about.

I won’t take a lot of time telling you again who the Keene Housing Authority is, but we are one of the original 24 Moving to Work

demonstrationsites.

And Representative Clay brought up a very valid point earlier

when he was talking about a concern about MTW. Our entire MTW

program was developed and consisted with a concentration on the

need—the individual needs of families and elderly, and continues

to do so. That’s what MTW has enabled us to do.

Since 1999, this program resulted in significant positive changes

in not only our ability to administer our Federal housing programs,

but also has dramatically changed the ability of our residents and

Section 8 participants to stabilize their housing situations and

achieve self-sufficiency.

Mr. Chairman, small housing authorities are struggling to keep

their heads above the sea of paper, an over proscriptive process developed by the Department. Over 2,000 of the 3,300 housing authorities across the country have less than 250 units of public housing. I don’t presume to speak for all of them, but the KHA faces

the same issues that they do, and I would like to share some of

those issues with you.

The KHA is one of the smallest housing authorities to participate

in the MTW program, and our statistics and numbers may be insignificant compared to some of the other figures you’ve heard today,

but I can’t emphasize enough that to a smaller community or a

smaller housing authority, even the loss of a seemingly small

amount of funding or an addition of significant and unnecessary

administrative burden can result in a proportionately large reduction in their ability to serve their residents and program participants.

The vast majority of housing authorities are well-run, administratively lean, and struggling under reduced funding accompanied

by increased micromanagement, and—the phrase you’ve heard

again and again—one-size-fits-all regulations designed to deal with

extremely large cities or housing authorities that have problems

not applicable to those smaller communities or housing authorities.

QHWRA itself was designed to deal with a number of different

issues, and, to quote one of those issues, deregulating and decontrolling public housing authorities, thereby enabling them to perform as property and asset managers, HUD’s response to this is

the currently proposed project-based accounting and property-based

management regulations. Although touted as being formulated

with industry input, I think the more accurate statement would be

that it was formulated over industry concerns and objections. This

incredibly convoluted and complex process of counting instead of

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merely applying currently acceptable CAP accounting principles

sets up a massive prescriptive and proscriptive process.

Even though smaller housing authorities will have some simpler

procedures than larger ones, the entire process will burden smaller

housing authorities and complicate larger ones. The end result is

the exact opposite of deregulating and decontrolling.

Project-based management is supported by housing authorities,

but if its purpose is to identify and dispose of properties that don’t

sustain themselves, the end result of reduced operating and capital

funding by HUD will result in a dramatic reduction of the extremely valuable resource that the public housing industry represents. For instance, it doesn’t take the proverbial rocket scientist

to understand that it takes more time and effort and money to

manage and maintain and capitalize family housing than it does to

manage housing by the elderly. Recommendation: Reduce the

micromanagement of the currently proposed PBA/PBM regulations

and allow the congressionally mandated housing subsidy recalculation to go forward as approved in the negotiated rulemaking, and

allow housing authorities to operate under GAAP principles like

virtually every other nonprofit in the country.

Another object of QHWRA was creating incentives and economic

opportunities for residents of the dwelling units assisted by public

housing agencies to work, become self-sufficient and transition out

of public housing.

The current rent system for public housing in Section 8 has resulted in a system that encourages deceit; confuses applicants, tenants, housing authority staffs, policymakers and the general public.

There are significantly different rents for virtually identical housing. The system punishes work, and the system, not surprisingly,

results in errors.

The recommendation: The Keene Housing Authority and several

MTW housing authorities have developed effective alternative rent

structures that preserve affordability, encourage self-sufficiency,

provide a safety net for those that have circumstances beyond their

control, and increase housing choice. In 1999, 46 percent of our

families were working full time; now 65 percent are. Since 1999,

average family income has increased by 30 percent.

My final recommendation: To conclude, I believe that HUD has

lost its compass in following the directive of QHWRA to develop

policy implementation and deregulate and decontrol housing authorities. The Department has become increasingly directive and

intrusive in the daily operation of local agencies, even attempting

to influence or control uses of non-HUD and non-Federal resources.

Please expand the Moving to Work program, reform assisted rent

structure, and ensure that housing programs have adequate and

predictable resources.

Thank you very much, Mr. Chairman.

Mr. TURNER. Thank you very much.

[The prepared statement of Mr. Hiebert follows:]

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Mr. TURNER. It is so motivational listening to all of you because

you’re such experts on something that is so important.

And Betsey, you were saying, I think, something that is such an

important point that we hear in each of your testimony is the

broad range of issues that you have to manage. You’re not just a

federally regulated agency, you’re also a property management

agency, you’re also a social service agency. The different functions

that you have to perform really require the level of talent that we

see in front of us, and I want to thank you all for your dedication

in what you do.

I have a few specific questions, and I have some global questions,

some policy things. On the policy side, the types of discussions that

you’ve heard nationally, where people were trying to make—recall

judgments that I would think, in looking at the broad spectrum of

the types of communities that you have, that we would probably be

surprised at the unanimity that you might have in advice to us.

And then there are some things that each of you said in your testimony that I want to highlight. So you’re going to find that there

is not too great of an order to the types of things that we’re trying

to hit with you. And at the end, after Mr. Clay and I are finished

with our questions—and I see Mrs. Foxx has joined us—we’re also

going to give you an opportunity to add anything else to the record

that we might miss. So as we’re going through this today, and if

you take your notes as to things and points you want to make, if

you have not gotten to them, we are going to give you some catchall time to give us some closing comments and thoughts.

Greg, I’m going to begin first by putting you on the spot for just

a moment, and that is, each of you are here today because of the

success that you have had both in your organization and the success that you have brought to the table. That is not necessarily

true of all public housing authorities, and it is not necessarily true

of the history of all public housing authorities that you represent.

And that is something that I think whenever we talk about the

need for flexibility and the need for increased funding, that we

have to be aware there is always the need for improvement in overall performance.

And so, Greg, I’m going to ask you a question, and I’m going to

let you pick, but lead you a little bit. Greg, you took over a housing

authority that you had to immediately take a significant attack to

the budget, and that is something that requires not only diligence,

but skill, because you have to find the right things in which to cut,

but you also have the determination to be successful to conclude it.

I’d like you to highlight, if you would, just a couple of the things

that you found that needed to be addressed in your housing authority that was not funding—not spending that would violate any rule

or regulation, but that perhaps that doesn’t—violates the primary

goals and objectives of the organization. I’m going to give you one

hint which you can highlight or not highlight, and that is, I’m more

interested in the number of vehicles that you are faced with. But

if you give us a couple of examples of things that you found that

allowed you to be more efficient in tackling your budget.

Mr. JOHNSON. Thanks, Mr. Chairman.

When looking at the housing authority’s budget, first thing you

look at is your employees, because it’s the largest cost that you

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have, but also wanting to maintain a certain level of services to the

residents is a high concern.

What I found—what we found in Dayton was that we had a lot

of duplication of services, and a lot of dollars spent not toward our

asset, a lot of dollars spent on marketing and things like that. So

one of the things I did was to look at where people were placed and

placed appropriate staff on the maintenance side where that would

take better care of our asset, and cut down some of the marketing

and things like that. So that really helped our budget in Dayton.

But even with doing that, in looking at our asset, we still need

additional dollars to maintain or raise the level of our asset in Dayton to the level that I think we should be providing to our residents

and clients. So coming from the finance department, that was relatively easy for me to identify some of the places where we can

make a quick impact and put more dollars back into our asset.

Mr. TURNER. Terry, one of the things that you spoke to us about

when we were in Chicago was that even with the increased opportunity to have requirements for the goal of economic transition for

your residents, for moving residents to work and independence, you

found instances where you might want to be more restrictive than

what HUD had permitted, and you related to us some difficulty in

getting approval for that. I was wondering if you might talk about

that for a moment.

Mr. PETERSON. Thank you, Mr. Chairman.

Two things. One is in our mixed-income development sites—and

we’ve got 10 underway now—we’ve got requirements such as working, drug testing, going to school, but you’ve got to be on a track

to move toward self-sufficiency. But we’re also going to rehab about

6,500 units of traditional public housing, mostly two to three-story

walk-ups. And what we don’t want to have, while we’re expecting

to have success, we’re at 99 percent lease up at the mixed-income

sites, we don’t want to have at our rehab public housing units public housing residents moving back and not being on a track to move

forward.

And so one of the things that we have requested from HUD is

the ability to put in a 30-hour-per-month—it’s called Economic

Independence Program, which is you would have to be either going

to school, working, engaged in something for 30 hours a month and

moving toward self-sufficiency. I think the regulations only call for

8 hours per month. Well, at 8 hours per month, that’s not going

to get us very far in terms of working with residents. And what

we’ve said is if you’re not a senior, if you’re not disabled, we think

you should be engaged in some activity moving forward.

Because of the flexibility that we have, let’s say, for example, if

a resident wants to go back and complete their high school diploma

and get a GED, the Chicago Housing Authority, we will assist in

helping them pay for that. If a mother needs access to daycare, we

will assist in paying for that.

So we feel that we’re in a position to help our residents move forward, but with, you know, HUD telling us that the most that they

can support us is 8 hours when we think 30 hours makes more

sense, it hampers our ability to help our families to move forward

toward self-sufficiency, especially in light of the fact that I’ve got

about 30,000 individuals on the waiting list looking to get in public

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housing. So we’re trying to move families who are in traditional

public housing into hopefully affordable and then hopefully home

ownership, but we can’t do it at 8 hours per month social services.

Mr. TURNER. Doug, in your testimony you mentioned that if you were in the Moving to Work program, that you estimated a $40

million fiscal impact to your deficit. Can you elaborate on that,

please?

Mr. APPLE. Sure. Unlike other cities, again, we’ve actually taken

some significant steps to control our spending in the past few

years, and, really, I know everybody’s had to do that in different

ways. I’m sure Greg had similar challenges, though a very different

size, but I think the challenges you hear are the same across the

country.

We’ve actually reduced our head count of over 1,400 positions, a

more than 10 percent reduction in out head count in the past 3

years, taken over $400 million in spending cumulatively out of our

budget, and done that in a way that we believe we’ve still maintained the high quality of services by decentralizing functions, by

putting in place technology that takes antiquated processes and allows us to do them more efficiently.

Without MTW we’ve only been able to take that so far. So we see

that the opportunities that MTW provides is really allowing us to

really make decisions locally to invest our resources strategically

where we think it will have the best benefit for residents in our

community.

So, for example, we have been able to rent—take savings out of

our Section 8 program by creating new ways of doing business. We

now, for example, have less staff to do inspections. We have almost

over 85,000 vouchers in use today in New York City. We have 15

percent less inspectors to do that work because we implemented a

couple of years ago a hand-held technology that allows inspectors

to do the inspection onsite, to send the information, you know,

through a telecommunications link back to our system, to generate

the letter to the landlord immediately, and to then get the landlord

to be able to do the repairs promptly. So it resulted in better service to landlords and to residents, and allows us to do the job more

effectively.

The savings we generate from that program we can’t reuse, we

can’t reinvest it back in vouchers or back into public housing.

Something like MTW could allow us to do that. So when we looked

at our programs, without increasing appropriations $1 to New York

City, we believe that we can take $40 million of spending out of

our various programs, actually doing it in ways that are smart and

improve services, but that reinvest them back into either public

housing or into new vouchers for families that are on our waiting

lists, which in New York are over 250,000 families.

Mr. TURNER. Thank you for that.

Steve, in your testimony you talk about the goal of transition to

independence. You even raised the issue of homeownership and the

types of barriers that are faced when you look really at the type

of intervention that is necessary for the residents in public housing.

Could you people talk for a moment about—and Betsey had raised

the issue of the social service function, the really inventory function

that you do of the needs of the residents. Can you talk a moment

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about the residents and their needs and how that can affect and

impact a Moving to Work program and your success?

Mr. RUDMAN. Yes. Thanks, Mr. Chairman.

I think it is important to recognize that in our case about half

of the residents that we serve are elderly and/or disabled, so the

ability to actually move off the program may not be there. But we

start with the notion of being a successful resident, being a resident in good standing where there is responsibility. But for those

families whose working life is ahead of them, our organization is

trying to triple the number of people that we currently serve to actually look at kind of a voluntary way where folks look at a horizon

of about 5 years. And we think if we surround supportive services

of child care and employment, educational kinds of opportunities

locally, that housing is a necessary, but insufficient, ingredient to

help a family achieve self-sufficiency.

You know, the FSS, or Family Self-Sufficiency program, that

HUD offers does have an ability for folks on that we house in public housing or Section 8 to save money. And I think it is assetbuilding more than it is income that really helps folks move ahead

in this society. So we’re looking at ways to expand our asset-building approaches where residents can begin to save money and be

able to buy a house, go to school, buy a car, and live more like

mainstream Americans.

Mr. TURNER. Betsey, in your written testimony, you tell a fascinating story of a woman who was the victim of theft identity. And

it’s a great story because it tells of not just of the difficulty that

she went through, but of the administrative burden that is placed

upon you and the difficulty you have when something like this

comes up in getting it resolved and how it fits into HUD’s bureaucratic processes.

I was wondering if you might talk about that issue for a moment,

and tell us, again, focusing on, you know, the burden that’s placed

upon you, but also what would you like to see in HUD where that

burden could be lessened?

Ms. MARTENS. Thank you for that question, Mr. Chairman. For

context for the audience, the chairman refers to a problem that I

testified about regarding the EIV system. And I have to tell you

that even as I walked out the door to fly here, my staff were following me with more examples of—the last one was a 79-year-old

woman living in Boulder who is supposed to be working two jobs

in a Mexican restaurant in Georgia. So I think the point is that

when we have an income system where rent is based on—a system

we put so much, so much pressure on the definition of income, and

we are creating so many mechanisms around the integrity of rent

that we have pretty much wrapped ourselves into paralysis on this.

I think the—well, we think that the EIV system holds some certain promise for being able to verify incomes. It’s classic in the pattern of HUD rolling something out before it’s field tested and

ready. Because I mentioned to you in my testimony that we will

now suffer sanctions in trying to correct the problems that we see

coming up almost daily.

So the EIV system where we submit our transactions to HUD

through the 58 system, if our income—so if our alleged Fisher

woman has income solely from Social Security, we report that. But

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HUD’s system shows us that she has actually quite a good income,

working at the fish factory in Portland, ME. So they will count that

as a discrepancy. And now they will say, if you have more than 5

percent discrepancies, we’ll hold your money back. A little bit worse

than that is the problem for a 70-year-old woman to try to navigate

that system.

I just can’t imagine that this is what we anticipate when we’re

trying to create an equitable system for rent. The solution for me

is to vastly simplify the system, and I advocate one of two things.

We either take rent based on gross income, just a simple percentage of gross income; and for elderly, for those who qualify for medical deduction, we’re just taking a straight standard deduction.

I also mentioned in my testimony, hopefully descriptively, what

it takes for us to calculate rent. You know, we sit there with almost

a year’s worth of receipts for bananas, if someone has a potassium

deficiency. We don’t have the time or money to be doing that. We

need to just take straight gross income or I think for families who

work and can really—you know, are moving toward self-sufficiency.

We really need to look hard at a flat rent system.

Mr. TURNER. Curt, you made a pretty stunning statement in your

Section 8 description, and I’ve got the hearing testimony. I’m going

to read it, and I’d like for you to elaborate on this because it’s a

pretty powerfully packed sentence that I know has lots of components to it. So I’d like for you just to talk about it a little bit more.

You say, ‘‘The current rent system for public housing and Section

8 has resulted in a system that encourages to cheat, confuses applicants, tenants, housing authority staff, policymakers and the general public.’’

I mean, those are some very strong conclusions of which I know

that not many would disagree with you; but if you could provide

us—for the purposes of when we’re done, have a record—some of

the types of things that you see that result from that or the big

cause in that and ways in which it might be able to be remedied.

Mr. HIEBERT. I would be glad to, Mr. Chairman. In the written

testimony I’m submitting as well, there’s a chart that’s been reduced down to about 18-by–24. It shows a flow chart similar to a

computer that shows just how complicated it is to figure out somebody’s rent.

These are some of the steps that it takes for not only a staff

member but a resident to figure out their rent. It is—as a matter

of fact, I think it’s shorter than the IRS schedule in figuring out

your income tax. That’s one of the things. It’s the complicated nature of it. Nobody can understand it. People—two families living in

the same building——

Mr. TURNER. Can you please make certain we have a copy of that

for the record?

Mr. HIEBERT. I would be glad to submit one for the record.

Mr. TURNER. Since the Senator’s gone, I can probably say it’s

probably even shorter than passing legislation through the Senate.

Mr. HIEBERT. And probably as painful, Mr. Chairman.

The other thing that happens is that there’s an inequality in

rent. Two families with very similar gross incomes living in identical apartments right next to each other might have vastly different rents.

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Also, when it’s based on an income, the tendency is to want to

not have your rent go higher. We punish working families. If they

get a raise, if their spouse gets a raise, gets a job, we say, thank

you very much, the rent is going up. Keene Housing Authority and

some of the other MTW agencies have dealt with this by removing

that as a factor. We determine eligibility to the programs, but we

make the radical assumption that people do not want to live in

public housing for the rest of their lives, and that assumption is rewarded. People want to move up and out, and it’s beneficial financially to the housing authority. By the time they are ready to leave

and graduate from our programs—that’s a term we use and was

used earlier today, when they graduate from the programs.

In the old system, when somebody is fortunate and works hard

and gets a job and their rent goes up high enough, they leave.

When something happens 6 months later and they don’t have a

support mechanism, where they lose the job or their boss turns into

a jerk—and in my line of work, everybody’s boss turns into a jerk

after 6 months—they very often end up back on our waiting list.

Develop a system that doesn’t do that; that encourages people to

graduate and stay a productive member of our communities.

Mr. TURNER. Thank you very much.

Mr. Clay.

Mr. CLAY. Thank you very much, Mr. Chairman. I’d also like to

thank the panel for your testimony today, and I certainly appreciate the service you give this Nation in your local communities.

Let me start with Mr. Apple. I realize that New York City desires to become another moving-to-work demonstration participant,

but your operating budget deficits appear to pose significant

threats to your long-term strategic goals. Are increases in financing

the silver bullet solution, or are there also regulatory challenges

that are just as menacing?

Mr. APPLE. Thank you, Congressman.

Yes, what I would say is that—and you heard it again and again

today—that some of the regulatory challenges have enormous impact on our ability to provide quality service to residents, especially

in the environment of diminished resources.

So the, as Betsey talked about, the EIV system, I mean, we have

181,000 families we serve in public housing and another 85,000

through Section 8, so over 265,000 families that we do that system

for every year. It’s a huge, huge complicated issue.

We think we’ve done it as well as anybody. We actually are well

under the 5 percent standard that HUD sets for errors. We find

some of the same problems that Betsey talked about; people working in Chicago and living in New York. Things like that happen all

the time, but we’ve been able to manage it. But it comes at a real

cost.

So, again, finding ways to use this flexibility, not to let housing

authorities to, you know, do what they want because, as you can

see, housing authorities make smart decisions in their cities.

And I also wanted to sort of touch upon something that the

chairman said and I think Curt also mentioned is the one-size-fitsall approach really doesn’t work. I mean, what works in New York

City is obviously not going to be the same as it works in Boulder,

CO, or Keene, NH. And the system today really doesn’t recognize

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that, and it’s not fair to the Keenes and the Boulders; and it certainly isn’t working for the New Yorks and, you know, Chicagos in

that regard as well.

So I really would encourage you to think of ways to really create

a system that reflects that diversity and the strength of public

housing in this country and also create standards.

None of us are saying that we shouldn’t be held accountable.

None of us are saying that there shouldn’t be a standard that we’re

held to by the Federal Government. We all embrace that. In fact,

you can see we’ve all far exceeded that, but use reasonable standards. You know, Standard and Poor’s rated us a Triple-A. There’s

a standard you can hold your hat to.

Mr. CLAY. So I keep hearing this recurring theme that tells me

that HUD might be too bureaucratic. It may be too immersed in

red tape. I don’t want to get anybody on this panel in trouble, and

it may be reflected by the way you answer, answering this inquiry.

But is HUD too burdensome? Nobody speak.

OK. Let me ask these two here. OK. Betsey.

Ms. MARTENS. I know, I’m surprised we didn’t fall all over each

other to answer that question. Yes, yes, yes is the answer. I think

here—let me tell you this, I think as the manager of, you know,

a medium-sized public housing authority, the way I should start

my day, I should turn on my computer, and I want to be able to

see, what’s my daily cash? What were my maintenance staff doing

last night? What are the move-outs coming up in the next 30 days?

That is how you manage an affordable housing program.

Instead, an environment with HUD, many of my colleagues—this

doesn’t include me—you have to go to the HUD homepage to see,

what is the new notice? What has HUD said today? What are we

supposed to be doing today? I’m constantly in conversation with my

colleagues saying, haven’t you read 2006–6? Oh, my gosh, no. I’m

running a business.

Really need to be able to allow us to manage to the high standards that our local communities set for us, that our mission requires of us.

Mr. CLAY. That indicates a lack of communication on the part of

HUD as well as a lack of a working relationship there. If you say

you have to go to the Web page and see what the regulation of the

day is, it’s become too bureaucratic.

Curt, go ahead.

Mr. HIEBERT. I would echo that sentiment. The emphasis is on

process rather than on results, coming from the department. We

have, as Betsey was saying, the results we all want are very simple; and when you get a book of or notices of regulations that are

an inch-and-a-half thick that you have to plow through and figure

out on a simple process, it may become weekly to try to figure out.

We are drowning in a sea of paper.

Mr. CLAY. Sounds like a maze. Thank you very much for that response.

One last question, Mr. Chairman; and this is for Mr. Peterson.

Mr. Peterson, are you certain that CHA will be able to maintain

the same number of units available to beneficiaries even though

capital funding and operating costs have been reduced in real dollar terms? Hasn’t the real estate market in a city like Chicago beVerDate 11-MAY-2000 11:32 Mar 05, 2007 Jkt 000000 PO 00000 Frm 00078 Fmt 6633 Sfmt 6633 D:\DOCS\32546.TXT HGOVREF1 PsN: HGOVREF1
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come prohibitively expensive for public housing expansion? And as

an addendum to that, has your authority explored any possibilities

for home ownership tenants once they graduate from your program?

Mr. PETERSON. Yes, sir.

Mr. Congressman, let me just take the second question first. At

all of our mixed-income sites, we have set aside a percentage of the

units for home ownership. We encourage our residents to move toward home ownership. We’ve actually used a voucher program by

another means of working with public housing residents to move

toward home ownership.

In terms of funding to continue the success that we’ve had in

Chicago, one, not only do we need consistent funding, but we need

adequate funding. There’s nowhere where we can go to the private

market and try to leverage private resources without knowing that

we’ll have adequate capital funding over a period of time to pay

those dollars back.

The thing that I like about the MDW agreement is that it gives

you flexibility both with capital funds as well as operating funds.

So while we talk about flexibility, I think one of the points made

by Betsey was the need for adequate funding.

You know, every year when you face cuts and both the capital

funds and operating subsidy, it makes it difficult for us to be able

to go out to the market. We were the first housing authority, I

mentioned, to go out to the bond market, $291 million, Triple-A

rating again from the rating agencies; but it was based upon the

fact that we were able to project out what our capital allocation

would be over a period of time to be able to pay back the debt service and to pay that back. So while we’ve had success in Chicago,

we need to have adequate and consistent funding in order to be

able to continue the momentum that we’ve had.

Mr. CLAY. I thank the panel for your response. I appreciate it

very much. Thank you, Mr. Chairman. I yield back.

Mr. TURNER. Thank you. I, unfortunately, have an 11:30. I have

a series of questions I want to ask each of you, and then I want

to leave some time for you to be able to put on the record the

thoughts that we’ve missed because, one, this has just been absolutely incredible. Your written testimony is phenomenal. The

things you’ve raised today are great. They’ll give us a tremendous

amount of things to pursue further.

This is only our second hearing in oversight on the issue of public housing. There’s a number of things that we need to pursue

both in your testimony and in your experiences that can give us

ways to hopefully effect change in this process.

So the next series of questions I’m going to ask you are somewhat short and quick. If there’s one that you disagree with, and we

need to embellish it, great, please do; but if it’s one that you agree

with, a yes would be sufficient.

I’m aware that some housing authorities are having difficulty

with their senior housing, having the eligibility for disabled in senior housing; and the issue of drug dependency and alcohol dependency being declared a disability, affecting the tranquility, if you

will, of senior housing. Let’s go down the line and start with Greg.

Are you having that difficulty?

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Mr. JOHNSON. Thank you, Mr. Chairman. I definitely agree with

that. I know in Dayton, very quickly, we get a lot of inquiries on,

how did this young 25 or 35-year-old get in? My mom’s been living

here. She’s 65, 75. Having parties on the weekends and things like

that. So it’s increasing the cost of maintaining and running senior

housing, I know, in the Dayton market.

Mr. PETERSON. Mr. Chairman, it is also part of the testimony

that I submitted in Chicago. One of the challenges that we have

is that we finally got senior housing designated for seniors only, 62

or older; but it’s only for 5 years; and then we’ve got to come back

to HUD and reapply for it to become senior housing again. And we

think it should be permanently put in place for individuals 62 and

older.

Mr. TURNER. Your age and place comment in your testimony was

very important.

Doug.

Mr. APPLE. We have, like Terry, been designated as a senioronly. So we have 43 developments that are for seniors. We have another over 9,000 units, 5 percent of our other housing stock, we

designate specifically for the disabled. So it’s really not an issue in

that regard in New York.

Mr. TURNER. Good.

Mr. RUDMAN. Mr. Chairman, we have a mixed population in our

high rise so we do not have elderly only. It is an increasing problem for the need for services to help people be successful. We are

losing some of our elderly tenants to Section 202 and elderly only

redevelopment.

It seems to me one of the things we’re looking at is a population

that’s disabled who will become elderly, and so, more and more,

we’ll have elderly and disabled in some of our buildings.

Mr. TURNER. Betsey.

Ms. MARTENS. I was rather long-winded in my testimony. So let

me be brief: Yes, yes, yes, it is a big problem for us.

Mr. HIEBERT. Yes, Mr. Chairman, we do. In a small housing authority, we don’t have the luxury of designating a particular development and another development as elderly only. In a high rise, we

have 42 percent of the residents under 62 with disabilities, and it

is a problem. Though with the Moving to Work, what we’ve been

able to do is provide some additional alternatives for people with

disabilities, other than living with a number of elderly people,

which they don’t necessarily want to do, but it has been the only

place that they were eligible for.

Mr. TURNER. Excellent. Well, I have just been given a note from

my staff that we do have a reprieve. My vice chair will be joining

you at 11:30. So we’ll be able to continue this. I’ll be able to finish

my questions, and then we’ll be able to get your comments and any

additional questions that Mr. Clay might have also.

Economic segregation is an important issue. It’s a lesson that we

have learned that is not conducive to economic transitioning. I

liken the issue many times to the small-town experience. You always see that people of a broader economic range in a small town

tend to have greater successes, greater opportunities than those

that are concentrated in small areas of poverty; but just the interaction, the ability to understand what is possible and what is necVerDate 11-MAY-2000 11:32 Mar 05, 2007 Jkt 000000 PO 00000 Frm 00080 Fmt 6633 Sfmt 6633 D:\DOCS\32546.TXT HGOVREF1 PsN: HGOVREF1
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essary for achievement, that interaction and the sense of a community and its improvement and condition I think can have a big impact.

Terry, you had mentioned that as one of the big issues that you

were facing in looking at multi-economic housing opportunities.

The counter to that, of course, is the stigma of the issue of

gentrification, which has been incredibly frustrating for me as a

topic when the subject is raised because I have never met a gentry

in my life. And in addition to that, I know cities, being a former

mayor, for cities to be successful, you have to have a mixed economic base and that you have to have mixed economic communities.

There’s not a housing development or project we had undertaken

that resulted in displacement of the populations that actually resulted in bringing investment to communities. That is a policy discussion that we all continue to battle, economic segregation versus

the issue of gentrification.

Can you just speak from your experience for a moment about

that issue? And your thoughts. We’ll start at this end this time.

Curt.

Mr. HIEBERT. That is a very important issue, particularly in a

small community. It’s also a difficult one that either takes a week

to answer or a short answer. Our rent structure encourages a

broad range of incomes, and that used to be a policy in HUD housing and has gone by the wayside over the past number of years.

It’s helpful to have modelling within a family development, to

have families that are doing well, and others that are coming in

that are maybe at one of the lowest points in their lives, for them

to be able to see a success, rather than an entirely homogenous

population. So it really makes sense.

We have not had a problem. We’re not a HOPE VI agency. We’ve

not had to destroy property. But to give you an idea of scale in the

city of Keene, we have a development with 29 family units. My

daughter came home from school, and she said, yeah, she met

somebody that lived in the projects. This was in Keene with 29

units, and it was illuminating to me to see the way that it was labeled.

So we all struggle with this, but it comes back down to how you

administer the programs. So if you have a rent structure and a program that can allow for a progression up and graduation down, I

think it makes a difference in the long run.

Mr. TURNER. Thank you.

Betsey.

Ms. MARTENS. Thank you, Mr. Chairman. Yes, in Boulder, everything that we’re trying to do is to mix incomes. We were fortunate

from the beginning of our public housing investment where HUD

insisted that we maximize the investment in land or we minimize

the investment in land and maximize value. They insisted that our

first 150 units be built all together on one side. We pushed back

and pushed back and were able to have those reconfigured into

three sites.

So from the very beginning of the public housing days, we drew

a line in the sand and said, public housing must reflect both the

fabric and patterns of the community, and it still needs to be today.

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We don’t do a service to families who are struggling to surround

them by families who are also struggling. Public housing tends to

be high density. Neighbors live very, very, very closely together.

The problems flow out into the halls. We really need to create an

exhale in the portfolio and spread it out.

I have long had a vision of being able to lift my public housing

unit assistance and spread it out into the vast portfolio of nonHUD units that I have. So I would take a 50-unit family development and put 20 units over in my 126-unit market property, and

I’d put 20 over here. I would spread it out. I think that as we all

practiced non-HUD development, so we have quite a lot of real estate development experience. We were looking for in every setting

a mix of incomes and uses and family experience so that the community can come together and create a fabric of strength and resilience.

Mr. RUDMAN. Mixed income communities make economic and social sense. Nothing speaks better to this than the HOPE VI program and examples throughout the country. I think what Betsey

said, in many of our departments that are locally owned, our goal

is to try to find ways to put a mix, of financing public housing Section 8 in developments with other folks who are in the work force.

I think it makes good economic sense. Areas that are gentrifying,

it enables people with lower incomes to stay, and I think it just is

part of their future, mixed income.

Mr. TURNER. By the way, you can say that sentence also by saying, by those areas that are becoming more market rate.

Mr. RUDMAN. That’s correct.

Mr. TURNER. I’m sorry. The word gentrification just really is one

that I think has a stigma that diminishes some of the great hard

work everybody’s doing for economic transition. And I know it is

one that is in all our lexicon, and we all know what we mean when

we say it, but there are those who use that word, I think, to diminish the effectiveness of really what is economic capital investment

that each of you are working toward.

Mr. APPLE. In New York, obviously, as you say, Chairman, really

the same as in all cities across the country, that phenomenon is

really ever-growing and ever-changing. In fact, neighborhoods like

the South Bronx, the one that we all remember from 1977 where

Howard Cosell talked about the Bronx burning during the World

Series, you’re now seeing new forms of home ownership, new development really right across the street from some of our largest, most

dense public housing complexes in Harlem, where you’re now seeing million-dollar brownstones being bought by folks that have

lived in that community, moving into that community right next to

some of our most important public housing developments. And we

think what we’re doing is really helping that to happen.

Obviously, the real estate market has a lot to do with it, but we

have always encouraged working families in public housing in New

York for the last decade. We’ve had a preference for working families. As I said earlier, almost 45 percent of our families are working. That is the highest percentage in almost 30 years in New

York. So we think mixed income just is really organic in the way

we do what we do in New York.

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We also think that improving services and the quality of our public housing makes the community and the neighborhood more desirable. Not just services in terms of the day-to-day maintenance

and our capital work to really make our properties work better and

look better, but also the social services we provide, the job training

we provide to our residents, the community centers that we have

built and managed or managed in conjunction with communitybased partners who do a wide variety of services, not just for our

residents but for the entire community, and finally, really become

mixed-income models.

Within our campuses, we have very many large-scale campuses.

So we’re now taking land, parking lots and available land and

building new mixed-income models, using Section 8, using tax credits and even building the west side of Manhattan, in some of the

most valuable property in the world, building work force housing

within public housing complexes.

Mr. PETERSON. Mr. Chairman, as you had an opportunity to see

in Chicago, one of the sites we went to, Roosevelt Square on the

west side, on Friday where we had an opportunity to see in our

mixed-income developments. You’ve got teachers. You’ve got firemen. You have police officers. You’ve got healthcare workers living

next door to public housing residents. You’ve got children now

being able to get up in the morning and seeing individuals getting

up, are going to work.

We’ve been fortunate in Chicago that one of the biggest concerns

when we started the plan for transformation is that we would sell

off all of our land, that the community would regentrify, and there

wouldn’t be room for the poor. But we’ve entered into 99-year

leases. The private market has embraced it.

The other thing that I think is important about a mixed-income

community is how other stakeholders in Chicago have gotten involved. University of Chicago, you were at Oakwood Shores, over

in the Kenwood. Oakwood community has now started a charter

school that our residents now have access to, providing $5,000 forgivable grants to any of their employees who purchase a home at

one of our mixed-income sites; the University of IIT, providing

again $7,500 forgivable grants.

So we think, in Chicago, mixed-income communities are the way

to go; and we’ve also done it in such a way that there’s room for

public housing residents as well as the working poor.

Mr. JOHNSON. Mr. Chairman, thank you.

In Dayton, there’s the HOPE VI program. We’ve been able to

provide affordable housing, home ownership out in the county area.

Also acquiring and rehab public housing out in the county and also

through our HOPE VI in the inner city to take down 212 public

housing units and mix it in with home ownership, project-based

Section 8 and project housing.

So in Dayton, the new word in Dayton with the new schools

being built is a regional approach to making sure our community

as a whole is taking part in the housing and in the services that

we all need in our community. So we definitely champion and look

for our new construction to be mixed with market-rate public housing and project-based Section 8.

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Mr. TURNER. Excellent. Well, I’m going to reach to my vice chair,

Representative Dent from Pennsylvania who will be taking over

the remaining portions of the hearings.

I want to thank each of you for participating today and really for

your expertise in doing what you do every day in changing people’s

lives. The importance of this is not only to the host, host communities, but also to the people that live there. You clearly all have

a focus on that, and we’ll find ways to help you for making sure

that HUD is responsible, and we give you the rules and the regulations and capital funding that is necessary.

The issue of mixed income—I just want to let you know that, in

Washington, DC, I personally live next to a public housing building. I’m living in a mid-rise that is an ownership mid-rise, and behind me is a market-rate mid-rise that is rental, all of which is

doing wonderful and is helping change the community. So it certainly is a model. I know what you’re implementing in your communities and is being implemented here, and every day when I’m

in D.C., I can see it’s success. I want to thank you, and I turn it

over for additional questions to Mr. Clay.

Mr. CLAY. No questions at this time, Mr. Chairman. Perhaps

your vice chair would like to have questions.

Mr. DENT [presiding]. For all the panelists, it’s my understanding that part of the subsidy for your residence is for utilities. For

example, energy costs. Can you explain this further to the subcommittee? And what are your requirements under current law in

terms of paying for utilities? And I would just be curious to hear

your comments and thoughts on this matter. Maybe if we can start

from Mr. Johnson or whoever would like to go first.

Mr. JOHNSON. Our clients receive programs in their Section 8

and also public housing, a utility reimbursement. And the reimbursement is calculated based on your area, part of the country

and bedroom size and style of the unit. Normally for one to—a

three bedroom in Dayton, the resident receives a utility reimbursement of $149 off their rent so it’s off of their rent. So the utility

rising costs in utilities is affording housing authorities to take and

sometimes give out more dollars, especially this last year with the

rise in costs.

It’s really put a big dent, I know, in Dayton’s budget where we

have no settle up at the end of the year where we used to have

settle up on our utility costs; right now, at this time, it’s really,

really hurting our budgets.

Mr. DENT. Mr. Peterson.

Mr. PETERSON. Thank you, Mr. Chairman. I would also say, in

Chicago, similar to the Dayton Housing Authority and probably

across the board, the increase in rising utility costs, how it’s impacted our budget, again, our utility allowances, based upon the

unit size as well as the income. One of the things that we do, we

don’t give the utility allowance directly to the tenant anymore. We

make direct payments to the light and the gas company on behalf

of the tenant. And one of the reasons for that is that we discovered

a lot of times tenants would find themselves with high utility bills.

But again, I think what you’re going to hear across the board is

that with the rising cost of utility within the city of Chicago, it’s

81

starting to become a challenge for us from a budget standpoint. But

again, it’s based on the resident income as well as the unit size.

Mr. DENT. Just a quick followup question. Do you get any support from Lockheed from any of your tenants?

Mr. PETERSON. Yes, we do. In fact, we’ve been very fortunate; the city of Chicago and Mayor Daley contributed an additional $5 million to the program. Our residents were at the front of the line.

We’ve had great support from the State in terms of assisting our

residents. So we get a lot of support from the City and the State

as well in terms of assisting our residents through light, heat.

Mr. DENT. Do you do any weatherization programs on your own?

Mr. PETERSON. Yes. As a matter of fact, we’ve been able to go

out, working with LaSalle Bank in terms of being able to borrow

money for window replacement at some of our developments, paid

back over a period of time; but we also work with the Department

of Housing in terms of their weatherization programs as well.

One of the things that’s going on in Chicago, our entire portfolio

of 25,000 units are currently being rebuilt or rehabbed in the city

of Chicago. We’ve completed—of that number—we’ve completed

over 14,000 which would be 57 percent of the 25,000. So all of our

new units are coming back with new windows, new furnaces, new

heating systems and all of that.

Mr. DENT. Thank you. Mr. Apple.

Mr. APPLE. Thank you, Congressman. Yes, as similar in Dayton

and Chicago, obviously energy costs are one of our biggest challenges this year. Single fastest growing cost, up over 70 percent

this year compared to last year; 92 percent of our public housing

units are not metered. So therefore, it’s a direct cost to the housing

authority.

What we’ve done is a couple things. One thing we’ve done is entered into partnership with the State power authority in New York

to get low-cost power. So that helps to manage our costs. Also, a

series of energy conservation programs we’ve done with them. For

example, we were able to get 180,000 refrigerators, one for every

apartment; and those refrigerators are energy efficient. We paid for

them through energy savings of the discount program to the power

authority, and we’ve been using performance energy contracts,

which is something that HUD allows. And I would encourage them

to, you know, consider expanding that to allow us to come up with

new technologies to save money and then reinvest that savings

back into the properties.

Mr. DENT. You do weatherization of your own properties as well?

Mr. APPLE. We do. We do. We do. Like Terry. Again, taking advantage of these performance contracts, allow us to put in high energy-efficient boilers and new windows and high energy-efficient

lighting, using these contracts that allow you to repay over a 20-

year period.

Mr. RUDMAN. Mr. Dent, I agree with the previous testimony. We

are also using performance contracts, looking at weatherizing our

properties. It’s definitely a cost that’s been increasing.

Ms. MARTENS. I would add that in the first quarter of our financial year, we are 94 percent over budget in gas spending. The good

news is the snow has stopped falling in Colorado. We’re out of the

heating season. So that should even out a bit.

82

Mr. DENT. Fairly mild winter where I live this year.

Ms. MARTENS. I’m not proud to share this with you, but given

100 percent loss in funding for my housing authority for resident

services, my resident services director is now the director of energy

conservation. It has become such a big issue that we really need

to direct our full-time attention to it. I think that we have to ask

ourselves whether we serve the country appropriately when we redirect talent from serving our residents to someone who has to

spend all their time now serving us.

Mr. HIEBERT. I was just going to brag that we got a $50,000

grant for weatherization for all of our units, but considering some

of the numbers that were just bandied about here, I was humbled.

But that does make quite a difference for a small housing authority, but it’s a constant concern. My predecessor in the early 1970’s

converted 200 units of our public housing to electric heat. And

many times I cursed him over the years, but I’m starting to thank

him again as times turn.

Mr. DENT. Well, that’s funny how that happens. You know, decisions you didn’t like years ago seem like pretty smart ones today

in some cases.

I’d like to talk a little about HOPE VI. And I’d like to hear your

comments on that. And my congressional district, Allentown, PA,

we were successful in receiving a $20 million HOPE VI grant to

deal with one of the oldest housing developments, public housing

developments in the Nation. And we’re going through a massive

transformation of that property to a more appropriate mix of housing. And we’re excited about.

I would be curious to hear your comments on HOPE VI, the successes and problems you may have experienced; and maybe if we

can start from right to left, maybe some of you don’t have experience with HOPE VI.

Mr. HIEBERT. No experience, Mr. Chairman.

Ms. MARTENS. Likewise.

Mr. RUDMAN. Mr. Chairman, we at Portland, OR, have two

HOPE VIs, and there’s nothing like that in our 65-year history

that’s helped us position both the housing authority but more important the perceptions of taxpayers and neighbors about what

public housing communities can be.

The notion of mixing incomes and looking at, you know, trying

to mirror communities throughout the city I think is important so

the isolation that exists socially and economically is something that

doesn’t make rational social sense.

So the HOPE VI program—maybe a HOPE VII program in my

opinion—is extremely important for this industry because it’s been

very successful, in my opinion, around the country.

Mr. APPLE. Yes. We have two HOPE VI in New York. Obviously,

given that our housing stock is really stable and we don’t have the

kind of distressed properties other cities had, it was a little different experience for us. In one case, we really used it to just modernize it and really vitalize a really aging property in a very isolated part of the city, Rockaway, Queens, which is really a peninsula where we had a very difficult time with crime issues. We had

very few working families, and with the investment through HOPE

VI, we now have moved over 600 new working families into the

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complex; and really, it’s starting to stir up broader economic development in that community entirely. So though it’s different for us,

I think that you’ll hear from maybe Terry, I think the vitality of

the program and the benefits are real.

The downside of the program I would say is the over-regulation

by HUD. The mixed finance rules are very complicated. Developers

in New York have told me that they won’t do HOPE VI because

it’s not worth the effort. So I would pose that it’s a program we

want to save, but I think, like Steve said, I think you want a

HOPE VII that really thinks more about how you make development work and how you have development partners.

Mr. DENT. Thank you, Mr. Apple.

Mr. Peterson.

Mr. PETERSON. Mr. Chairman. We’ve had great success in Chicago in terms of HOPE VI. We have about seven HOPE VIs. One

of the things that I mentioned earlier in my testimony is that we’ve

spent about $242 million and leveraged over $1 billion. We have 10

sites currently under construction either offsite or onsite in Chicago. The private market has taken to it. We’ve had great success

in terms of involvement. We’ve been able to attract developers, not

just locally but nationally to come into Chicago.

Michael’s is an east coast developer who’s doing one of our HOPE

VI sites at Wells/Madden over 3,000 units they’re going to bring

back. So we’ve had great success, big supporter of HOPE VI. Think

that it’s needed. Think that it should be reauthorized and continued really in terms of what we’re doing in Chicago.

Mr. JOHNSON. Mr. Chairman, thanks. Such a huge HOPE VI in

Dayton, but we received a grant for $18.3 million which we were

able to leverage to $50 million, and it’s working wonderfully. I do

agree that some of the regulations on it makes it a little costly, and

it makes it a little confusing, but we definitely champion to continue to—the use of it.

Mr. DENT. Are you using all your HOPE VI dollars at one particular site, or are you spreading it around the city?

Mr. JOHNSON. Actually, in Dayton, we did a wonderful thing.

We’re actually taking some dollars, using them in the city and then

some dollars, using them in the county. So, just for example, in the

city, we took down 212 units. We brought back 80 units of public

housing; 50 of the 80 units were for families, single family homes,

public housing Section 8, and then 30 units was a senior high rise

right in that same community, and then we’re also doing a market

rate, market rate housing new construction of 55 homes and just

where the 212 units were. Then we leverage dollars from the county where we were able to give up to $70,000 of down payment assistance to families to move out into the county as part of the disbursement, and 35 families took advantage of that. We didn’t have

to give that much money. So we were able to help more families.

It was started at 20. It grew to 35 families. And then we actually

went out into the county and acquired existing properties and

turned 70 of those units into public housing. It’s worked great in

Dayton, and we’re in our last phase of it, so we definitely took the

opportunity.

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Mr. DENT. I may put people from the city of Allentown in contact with you. We’re leveraging a $20 million grant and keeping it more

or less on one site that had been troubled for many years.

The final question is really for all of you, is there anything else

you’d like to establish here for the record before we adjourn the

hearing? Anybody have any final comments? Mr. Hiebert.

Mr. HIEBERT. Yes, Mr. Chairman. I wanted to make a point

about the Moving to Work and the development of it. In and of

itself, the entire theory is to reflect local community conditions and

be able to respond to them. It doesn’t simply trade one ivory tower

for another one. In other words, the MTW program in Keene was

not developed in my office without public input. It is designed to

reflect the local circumstances, what are the vacancy rates what is

the employment situation, what are the demographics of the people

you’re serving, how does it serve the people on your waiting list.

And I think that would be the point I would make that would hopefully sway some of the fears of MTW, if there’s granted excess flexibility to housing authorities that there will suddenly be a huge influx of people thrown out on the streets. That’s not our mission.

That’s not what we do. We house people; we don’t throw people out.

And I just wanted to get that on the record about the development

of an MTW program.

Mr. DENT. Thank you.

Anyone else?

Ms. Martens.

Ms. MARTENS. Thank you. In closing, I would like to say that my

view from the western States where public housing authorities

tend to be smaller is that HUD is contracting the programs to the

point where we really have to question the future economic sustainability of the system.

In my community, public housing represents a thin line between

being housed and being homeless. And from my seat on our local

homeless shelter board, I know exactly what it costs to house someone who is homeless, and I assure you that cost is much greater

than investing in the current inventory that we have.

We have a $90 billion investment in public housing in this country. We really need to consider a preservation strategy for this

asset, which is irreplaceable. I have suggested a pathway in my

own testimony about how we get there. And I think it’s quite possible if we reform rent, if we invest—allow us access to the capital

markets, if we recognize that there are very serious significant

service needs for our residents, and if we can start to restructure

the underlying finance and let the funds flow the way it needs to,

we can hang onto this asset and the deep affordability and the essential fundamental nature of housing in our communities. Thank

you.

Mr. RUDMAN. Thank you, Mr. Chairman. I guess my final comment would be, I think the industry’s really going through a sea

of change. And I don’t think most of us or any of us on this table

want to be viewed as a HUD franchise. I think we are responsible

stewards in our own local communities. We want to tailor our programs with our local marketplaces. If we’re going to become asset

managers for our community, we need to look at HUD as our major

investor, but not the only investor. And I think that’s really imporVerDate 11-MAY-2000 11:32 Mar 05, 2007 Jkt 000000 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 D:\DOCS\32546.TXT HGOVREF1 PsN: HGOVREF1
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tant that we really try to change the dynamic and policy that really

recognizes the vital roles housing authorities can play in the coming century.

Mr. DENT. Thank you.

Mr. Apple.

Mr. APPLE. Thank you, Congressman. I want to thank Chairman

Turner also for this hearing and this opportunity. I think what you

heard today really was very much the same, regardless of the size

and the type of housing we operate; that local decisionmaking

works; that in our local communities, we can best working with our

local elected officials and our congressional Representatives best

determine what’s needed in our communities. That the HUD onesize-fits-all approach doesn’t really work for anybody, but that

standards matter and accountability matters, that there does need

to be some standards, and there needs to be ways of holding us accountable, and I think that a new system, a system that MTW kind

of has started is really what’s needed to allow us to do what we

do; that funding flexibility, that regulations but not over-regulation

is where we need to go. And that we think that today was a great

opportunity to talk about that, and we hope that you and the rest

of your colleagues will really embrace that and really take that to

the level that we all think we need to make it work in our communities.

Mr. DENT. Thank you.

Mr. APPLE. Thank you.

Mr. DENT. Mr. Peterson.

Mr. PETERSON. Mr. Chairman, let me just say too, in Chicago,

and I would say debt owed to all my colleagues in Chicago, Mayor

Richard M. Daley always talks about public housing is more than

bricks and mortar. It’s also about rebuilding lives, and our hope is

to break the cycle of poverty. But in order to do it, I think local

flexibility is so important. There’s no way going into year 7 we

would be at this point, over 57 percent of the 25,000 units completed the number of community stakeholders from universities to

foundations of the private sector to civic community embracing

this; if we didn’t have local flexibility in terms of being able to design a program that breaks the cycle of poverty that allows residents to move forward, to get on their feet so that we don’t create

another generation of families trapped in public housing, isolated

from the rest of the city.

Again, I want to just thank this committee for providing us the

opportunity to talk about some of the issues that we deal with locally, and I want to say something that might be more of the exception than the norm, and that is that we’ve had a great working relationship with Secretary Jackson.

In Chicago there’s no way we would have been able to accomplish

this without his support. At the top he’s been very supportive of

Chicago and working with us and also I would be remiss if I didn’t

mention the fact that under his leadership and former Secretary,

Mayor Martinez, both were very supportive of what we were trying

to accomplish in Chicago. Thank you.

Mr. DENT. Thank you. We’ll certainly share that with the administration. Thank you.

Mr. Johnson.

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Mr. JOHNSON. Mr. Chairman, I’d like to say thank you, and

thank you to Congressman Turner for holding this subcommittee

hearing. I ditto what my colleagues have already said. I just wanted to say there are few programs that I want to just reiterate that

I think are critical to the success of public housing in the future,

which is: Jobs Plus, Moving to Work, and HOPE VI programs.

Without programs like this, housing authorities would lose their

flexibility and ability to be creative, to supply quality housing and

services to our families. Thank you.

Mr. DENT. Well, I’d like to thank all of you for your testimony.

We’ve heard from communities both large and small and mid-sized,

and I really appreciate your comments. I think this has been very

helpful. Your testimony today has been extremely helpful to the

committee, and we will certainly take this all under advisement,

and I’d also like to make clear to everyone that, should you have

any additional comments or statements for the record, the committee will keep that open for an additional 2 weeks. So I just wanted

you to be aware of that. So without any further comment from me,

I’d like to adjourn this meeting, the Government Reform Subcommittee on federalism and the Census. Meeting adjourned.

[Whereupon, at 11:52 a.m., the subcommittee was adjourned.]

[The prepared statement of Hon. Charles W. Dent follows:]

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