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37–205 PDF 2007

RURAL HOUSING PROGRAMS: REVIEW

OF FISCAL YEAR 2008 BUDGET AND

PENDING RURAL HOUSING LEGISLATION

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND COMMUNITY OPPORTUNITY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MAY 8, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–27

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

ALBIO SIRES, New Jersey 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY

MAXINE WATERS, California, Chairwoman

NYDIA M. VELA ́ ZQUEZ, New York 

JULIA CARSON, Indiana 

STEPHEN F. LYNCH, Massachusetts 

EMANUEL CLEAVER, Missouri 

AL GREEN, Texas 

WM. LACY CLAY, Missouri 

CAROLYN B. MALONEY, New York 

GWEN MOORE, Wisconsin, 

ALBIO SIRES, New Jersey 

KEITH ELLISON, Minnesota 

CHARLES A. WILSON, Ohio 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

BARNEY FRANK, Massachusetts 

JUDY BIGGERT, Illinois 

STEVAN PEARCE, New Mexico 

PETER T. KING, New York 

PAUL E. GILLMOR, Ohio 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

GEOFF DAVIS, Kentucky 

JOHN CAMPBELL, California 

THADDEUS G. McCOTTER, Michigan 

(V)

C O N T E N T S 

Page 

Hearing held on: 

May 8, 2007 ....................................................................................................... 1

Appendix: 

May 8, 2007 ....................................................................................................... 31

WITNESSES 

TUESDAY, MAY 8, 2007

Anders, Gideon, Executive Director, National Housing Law Project .................. 25

Carew, Thomas A., Director of Design and Community, Frontier Housing, 

Inc. ......................................................................................................................... 27

Carey, Peter, Executive Director, Self-Help Enterprises, on behalf of the National Rural Housing Coalition ........................................................................... 23 

Davis, Russell T., Administrator of the Rural Housing Service, U.S. Department of Agriculture .............................................................................................. 7

Loza, Moises, Executive Director, Housing Assistance Council ........................... 28

Patenaude, Hon. Pamela Hughes, Assistant Secretary for Community Planning and Development, U.S. Department of Housing and Urban Development ...................................................................................................................... 6

Rice, Robert L., Jr., President, Council for Affordable and Rural Housing ........ 29

APPENDIX 

Prepared statements: 

Anders, Gideon ................................................................................................. 32

Carew, Thomas A. ............................................................................................ 44

Carey, Peter ...................................................................................................... 56

Davis, Russell T. ............................................................................................... 64

Loza, Moises ...................................................................................................... 72

Patenaude, Hon. Pamela Hughes .................................................................... 80

Rice, Robert L., Jr. ........................................................................................... 84

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Hinojosa, Hon. Ruben: 

Written responses to questions submitted to Russell T. Davis .................... 89

Written responses to questions submitted to Moises Loza ........................... 91

Written responses to questions submitted to Hon. Pamela Hughes 

Patenaude ...................................................................................................... 93

Letter to the House Appropriations Committee signed by Members of 

Congress, requesting funding levels for fiscal year 2008 .......................... 95

Neugebauer, Hon. Randy: 

Additional information requested from Hon. Pamela Hughes Patenaude ... 100

(1)

RURAL HOUSING PROGRAMS: REVIEW 

OF FISCAL YEAR 2008 BUDGET AND 

PENDING RURAL HOUSING LEGISLATION 

Tuesday, May 8, 2007

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HOUSING AND

COMMUNITY OPPORTUNITY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:15 p.m., in room 

2128, Rayburn House Office Building, Hon. Maxine Waters [chairwoman of the subcommittee] presiding. 

Present: Representatives Waters, Cleaver, Green; Biggert, 

Pearce, Gillmor, Neugebauer, and Davis of Kentucky. 

Also present: Representatives Hinojosa and Davis of Tennessee. 

Chairwoman WATERS. The Subcommittee on Housing and Community Opportunity will come to order. Today we are focusing on 

rural housing, and we will review the fiscal year 2008 budget and 

pending rural housing legislation. Without objection, all members’ 

opening statements will be made a part of the record. 

At this time, I would like to introduce our first panel who will 

be testifying before us today. And I would like to say to the panel 

that, without objection, your written statements will be made a 

part of the record. You will be recognized for a 5-minute summary 

of your testimony. 

On panel one, we have the Honorable Pamela Patenaude, Assistant Secretary for Community Planning and Development, U.S. Department of Housing and Urban Development, and we have Mr. 

Russell T. Davis, Administrator for Rural Development Housing 

and Community Facilities Programs, U.S. Department of Agriculture. 

Before our witnesses begin, we are going to recognize our members. And with that, I would like to recognize the ranking member, 

Mrs. Biggert, for 5 minutes. 

Mrs. BIGGERT. Thank you, Madam Chairwoman, and thank you 

for holding this hearing today. I am afraid that I am going to have 

to leave, so I am going to yield my time to the gentleman from 

Kentucky, Mr. Davis, for 5 minutes. 

Mr. DAVIS OF KENTUCKY. Thank you, Ranking Member Biggert, 

and Chairwoman Waters, for holding this timely and important 

hearing today on the rural housing programs. 

As most of you know, last year I introduced H.R. 5039, the Saving America’s Rural Housing Act, with Chairman Frank and a 

2

number of my colleagues on both sides of the aisle. The bill was 

voted favorably out of the Financial Services Committee, but, unfortunately, didn’t make it to the House Floor before the 109th 

Congress ended. 

H.R. 5039 was comprised of two major initiatives aimed at the 

section 515 program. First, the repeal of the unconstitutional portions of the Emergency Low Income Housing Preservation Act of 

1987, or ELIHPA, to allow for pre-payment by certain owners, and 

second, to create a robust preservation program for the remaining 

515 portfolio. 

This bill struck the right balance in repealing unconstitutional 

and onerous restrictions on some 515 owners, and providing tenant 

protections to ensure no one is unduly affected by any owner wishing to pre-pay. 

The pre-payment section is simply a good government provision 

that will save taxpayers money and unnecessary litigation costs 

and damage awards. However, the preservation section had the 

most potential to positively impact the aging housing stock of the 

515 program. 

According to an independent study, addressing maintenance and 

rehab costs now through financial structuring would save taxpayers an estimated $2 billion. Restructuring deals would ensure 

a viable 515 portfolio for the next 20 years. 

I appreciated the constructive input in the past from many of today’s witnesses when we constructed legislation last year, and 

moved the bill through the hearing and mark-up process. I look forward to working with all of you, as we decide how H.R. 5039 

should evolve in the 110th Congress. 

Preservation of our 515 portfolio is critical to maintaining an 

adequate stock of affordable and safe rural housing. 

Chairwoman Waters, again, I truly appreciate your interest in 

affordable housing issues, and the initiative in holding this hearing 

today to discuss our pending housing legislation, as well as the 

rural housing budget. These are crucial issues to communities in 

rural areas like Kentucky’s fourth district, and I admire and share 

your passion for this issue, and look forward to the hearing from 

today’s witnesses. And with that, I yield back. 

Chairwoman WATERS. Thank you very much. Mr. Green, for 5 

minutes. 

Mr. GREEN. Thank you, Madam Chairwoman. Let me just simply 

thank you and the ranking member for hosting the meetings. I am 

eager to gain as much intelligence as possible. And in the interest 

of time, I will yield back the balance of my time. 

Chairwoman WATERS. Thank you very much. Do we have any 

others—Mr. Pearce? 

Mr. PEARCE. Thank you, Madam Chairwoman. And like the others, I thank you for holding this hearing. Rural housing issues are 

very critical in the second district of New Mexico. We have 70,000 

square miles, and the U.S. Census reports that between 0 and 14 

people live per square mile. Much of it is at the zero end. 

New Mexico’s small population forces us to face many challenges, 

including the availability of affordable housing for many residents. 

I am pleased that today we may discuss several pieces of legislation regarding USDA and HUD rural housing programs. 

3

Last Congress, I was a cosponsor of Representative Geoff Davis’s 

bill, the Saving America’s Rural Housing Act, which created a permanent revitalization program within USDA rural development, to 

allow for new financing of section 515 properties. 

It is imperative for the future of the section 515 multi-family 

housing portfolio, which depends on the preservation of existing 

properties. Preservation of existing section 515 properties will cost 

about $25,000 per property, compared to around $100,000 for 

newly constructed property. It’s a dramatic comparison, and one 

that means a lot in southern New Mexico. 

I look forward to further consideration of Mr. Davis’s bill, which 

will help families have access to affordable rental housing, and 

save taxpayers thousands of dollars. I also look forward to your 

comments regarding a section 502 direct single-family loan program, and whether shifting this program to the self-supporting section 502 guarantee program is viable. 

I understand the Administration is proposing to increase the section 502 guarantees from 2 percent to 3 percent, making this mortgage product more expensive for low-income and middle-income 

rural families. And the median income in New Mexico is below the 

poverty level, so these small increases begin to mean a lot. 

I look forward to your comments on whether or not this fee could 

force would-be borrowers into other, more risky products, such as 

subprime loans, which are now a very hot topic before this committee. I believe we should be working together to give low-income 

people more opportunities for loans, not reducing their choices. 

I am pleased that the Housing Assistance Council (HAC) is here 

today, as it’s the only national housing and community development intermediary, devoting all of its resources to the housing 

needs of rural America. 

New Mexico is one of HAC’s largest volume States, and has received over $6.9 million in loans, self-help loans, and grants, and 

capacity grants, to support the work of 32 organizations. 

Tierra del Sol in Silver City, New Mexico, has received a wide 

range of grants through HAC, helping them to build over 1,000 single and multi-family affordable homes in southern New Mexico. 

I look forward to discussing Mr. Hinojosa’s proposal to make 

HAC an authorized program through HUD. This would create yet 

another housing program funded by the Federal Government. 

Therefore, we must proceed cautiously, and ensure that this is necessary. HAC has a tremendous track record of success, and I fear 

that turning it into just another government program will instill 

the usual inefficiencies in bureaucracy we historically see in government-run programs. 

Again, I thank both the panels and the chairwoman for this 

hearing. I yield back the balance of my time. 

Chairwoman WATERS. Thank you very much. Mr. Neugebauer, 

then Mr. Hinojosa for 5 minutes. 

Mr. NEUGEBAUER. I don’t have an opening statement. 

Chairwoman WATERS. Then Mr. Hinojosa. 

Mr. HINOJOSA. Thank you, Chairwoman Waters. I want to express my sincere appreciation to you, for holding this important 

and timely hearing on rural housing. I look forward to working 

4

with you and Ranking Member Biggert on rural housing issues 

today, and throughout the 110th Congress. 

Those of us who live in rural areas have long known that rural 

residents face significant challenges in finding available, affordable, 

and quality housing, but the extent of the problem is surprising. 

According to the Economic Research Service, 4 million rural families live in housing poverty, 1.7 million of the 25 million rural 

housing units in the United States are considered sub-standard, 

and 17 percent of minority renters in rural areas live in sub-standard units. 

These figures are compounded by the Administration’s budget 

proposal for fiscal year 2008, which zeroes out several critical rural 

housing entities and programs. The budget eliminates the section 

515 rural rental housing program, which benefits very low-income 

and elderly residents in many of our rural communities, and section 502, direct homeownership loan program, which is the only 

Federal program targeting mortgage lending opportunities to the 

low- and very low-income rural households. 

The budget also makes sharp reductions in self-help housing, and 

farm worker housing. Additionally, the Administration’s budget 

zero funds many other critical rural housing entities and programs, 

including the Housing Assistance Council, better known as HAC, 

and the rural housing and economic development program. 

Both of these are funded through HUD. Furthermore, the budget 

reduces the funding for the construction and preservation of affordable housing in rural communities. 

So, to address the affordability, availability, and quality of rural 

housing, I co-founded and currently chair the Congressional Rural 

Housing Caucus. It continues to grow in numbers. Recently, the 

caucus collaborated with the National Rural Housing Coalition on 

a breakfast briefing, and is coordinating on a briefing by the Council for Affordable and Rural Housing on June 11th of this year. 

I look forward to coordinating with other groups on similar 

events. To counter all the Administration’s proposals that would 

harm rural America, several other Members of Congress joined me 

in sending a letter to the Appropriations Committee, requesting the 

following funding levels for fiscal year 2008. 

Number one, $1.25 billion for section 502 direct homeownership 

loans; number two, $100 million for section 515 rental housing 

loans; number three, $60 million for section 523 self-help housing; 

and, number four, the last one, we asked for $50 million each for 

sections 514 and 516, farm labor housing. 

I want to thank you, Chairwoman Waters, for co-signing the letter, and for helping to improve housing in rural America. I ask 

unanimous consent that the letter be entered into today’s hearing 

record. I have it with me. 

Chairwoman WATERS. Without objection, it is so ordered. 

Mr. HINOJOSA. May I continue? 

Chairwoman WATERS. Yes, you may. 

Mr. HINOJOSA. To further improve the rural housing situation, I 

have introduced H.R. 1980, the Housing Assistance Council Authorization Act of 2007, and H.R. 1982, the Rural Housing and Economic Development Improvement Act of 2007. 

5

These two bills will help improve rural areas by providing them 

the resources they need to address the problems of substandard 

housing. By authorizing this funding, more American families will 

be able to access decent housing that will improve their overall 

quality of life. 

Specifically, H.R. 1980, the Housing Assistance Council Authorization Act of 2007, authorizes $10 million for HAC in fiscal year 

2008, and $15 million in fiscal years 2009 to 2014. These funds will 

go towards providing technical assistance, as well as training and 

support, to better develop the capacities of rural community-based 

housing development organizations. It will supply loans and grants, 

or other financial assistance to these organizations, so that they 

can widen affordable housing options for low- and moderate-income 

families. The funding will also allow HAC to continue to offer financial and other aid to its national network. 

Madam Chairwoman, may I ask unanimous consent that two 

other documents be put into the record? One is the letter from 260 

groups in support of funding HAC. 

Chairwoman WATERS. Without objection, it is so ordered. 

Mr. HINOJOSA. And the last one, I ask unanimous consent that 

the statement of The National Association of Realtors to this Subcommittee on Housing and Community Opportunity be included in 

the record. 

Chairwoman WATERS. Without objection, it is so ordered. 

Mr. HINOJOSA. With that, I yield back. 

Chairwoman WATERS. Thank you very much. And just so that 

we’re following the rules of the committee, I would ask unanimous 

consent that Mr. Hinojosa be allowed to fully participate in this 

hearing, and to submit all of the letters for the record. Hearing no 

objection, it is so ordered. Thank you very much. 

The purpose of today’s hearing, rural housing review, fiscal year 

2008 budget requests, and pending rural housing legislation, is to 

examine the Administration’s budget request for rural housing programs for fiscal year 2008, and various legislative proposals that 

have been introduced in the 100th Congress, such as: H.R. 1980, 

the Housing Assistance Authorization Act of 2009, to provide $10 

million in funding for fiscal year 2008, and $15 million annually 

through fiscal year 2014 for the Housing Assistance Council; and 

H.R. 1982, the Rural Housing and Economic Development Improvement Act of 2007, to provide $30 million in funding for fiscal year 

2008, and $40 million annually, through fiscal year 2014 for competitive grants for rural housing and economic development programs. 

Both of these programs are viewed as extremely flexible tools in 

the rural communities where they are utilized. This hearing is one 

of the most important hearings that this subcommittee will hold, 

because it provides an opportunity for us to address rural housing 

issues that have been put on hold since the 109th Congress. 

As many of you know, the Committee on Financial Services 

passed a rural housing bill—H.R. 5039—last year, but it was not 

considered by the House. We know that there is a shortage of affordable housing in the Nation’s rural areas. In many parts of rural 

America, not only is there an inadequate supply of affordable housVerDate 0ct 09 2002 15:50 Aug 16, 2007 Jkt 037205 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\37205.TXT HFIN PsN: TERRIE
6

ing, but the housing is aging; the average age of the section 515 

units is 28 years old. 

Many rural communities rely on Federal grants and loan guarantees to finance single and multi-family housing. However, the Administration has proposed to eliminate the section 515 multi-family 

direct loan program, and the section 502 single family direct loan 

program, funded at $100 million, and $125 million, in fiscal year 

2007, respectively. 

The section 515 program is best known because it has assisted 

approximately 500,000 people, most of whom are poor. In rural 

America, there is a real need for housing, one that mirrors the 

housing needs elsewhere in the country. One important policy issue 

is the tenant contribution in rural areas. 

I support maintaining the tenant rent contribution at 30 percent 

of income. This threshold has proven critical to sustaining the economic well-being of tenants in our rural rental housing programs. 

In the absence of reform and revitalization measures to our rural 

housing programs, we stand to miss a golden opportunity to address rural housing needs. We must remain committed to the 

pressing rural housing needs in this Nation, so that the quality of 

life for Americans living in these communities is improved. 

We have an opportunity today to let rural America know that 

there is a legitimate interest in this Congress to address their 

housing needs. I am sure that no one thought that the Administration would propose to eliminate the section 515 and 502 programs, 

but that is exactly what has been proposed. 

I believe that, if we want to address the housing needs of rural 

Americans, many of whom are disabled and elderly, we can start 

today by determining which programs work. I thank you. 

And with that, we will call on our very first witness whom I introduced a moment ago, the Honorable Pamela Patenaude, Assistant Secretary for Community Planning and Development, U.S. Department of Housing and Urban Development. Thank you. 

STATEMENT OF THE HONORABLE PAMELA HUGHES 

PATENAUDE, ASSISTANT SECRETARY FOR COMMUNITY 

PLANNING AND DEVELOPMENT, U.S. DEPARTMENT OF 

HOUSING AND URBAN DEVELOPMENT 

Ms. PATENAUDE. Thank you, Chairwoman Waters, and distinguished members. On behalf of Secretary Alphonso Jackson, I am 

pleased to appear before your committee today. 

As the Assistant Secretary for HUD’s Office of Community Planning and Development, I am responsible for the administration of 

the Rural Housing and Economic Development Program. 

In 1998, Congress established the office of rural housing and economic development at HUD. The program was designed to address 

the problems of rural poverty, inadequate housing, and the lack of 

economic opportunity. Since its inception, the rural housing and 

economic development program has awarded $189 million in grants 

that have produced 7,600 new housing units, and rehabilitated 

12,000 units. 

This program has also created 12,000 new jobs, provided job 

training for 34,000 individuals, and created 2,000 new businesses, 

as well as provided critical financing for 7,000 existing businesses. 

7

Specific focus is given to federally recognized Indian tribes and 

seasonal farm workers, as well as certain geographic areas, like the 

Mississippi Delta region, Appalachia’s distressed counties, and the 

Colonias, located in the States of Arizona, California, New Mexico, 

and Texas. 

Capacity building and innovative grants are awarded on a competitive basis to local rural nonprofits, community development corporations, State housing finance agencies, and community development organizations. Capacity building grants help support and 

strengthen local nonprofits. 

Innovative housing and economic development grants are awarded for strategic and creative ideas, such as energy efficient techniques and the straw and adobe house concept, which are models 

for world communities to build upon. 

HUD’s Community Development Block Grant Program also 

meets the needs of rural America by providing funding for affordable housing, public facilities, and economic development in nonmetropolitan and rural areas. The CDBG program also addresses 

critical housing needs in the Colonias and Appalachian region. 

Another example of HUD helping rural communities is the Selfhelp Homeownership Opportunity Program, commonly referred to 

as SHOP. The SHOP program funds national and regional nonprofit organizations, such as Habitat for Humanity International, 

and the Housing Assistance Council, organizations that facilitate 

small, local, sweat equity homeownership programs in rural America. 

The President’s fiscal year 2008 budget request includes $40 million for the SHOP program, a 100 percent increase in funding levels over fiscal year 2007. 

I appreciate the opportunity to appear before your committee 

today. HUD continues its commitment to serving our Nation’s rural 

communities. I welcome any questions the committee may have. 

Thank you. 

[The prepared statement of Ms. Patenaude can be found on page 

80 of the appendix.] 

Chairwoman WATERS. Thank you very much. 

Mr. Davis. 

STATEMENT OF RUSSELL T. DAVIS, ADMINISTRATOR OF THE 

RURAL HOUSING SERVICE, U.S. DEPARTMENT OF AGRICULTURE 

Mr. DAVIS. Thank you, Chairwoman Waters, and Congressman 

Davis. Thank you for this opportunity to present the Administration’s 2008 budget. I would like to make some general comments 

about the context for this budget, and also say a few words about 

the multi-family housing revitalization legislation, which is something that we care very much about. I have submitted written remarks for the record. 

This budget for 2008 is a very important one. We have three very 

important stories that run throughout this budget. The first one is 

that this is the year which we have been preparing for, for 5 or 6 

years. This is the year that the large rental assistance contracts 

start coming due, the long-term contracts that have been building 

up over the last couple of years. I am happy to say that we are 

8

funding every single contract for renewal, and every single one of 

those will be funded at their full levels. 

The second big story in this budget is that we have pressures because of a flat discretionary budget environment that is forcing us 

to look at how we can provide the most housing. 

It happens that we have multiple programs that can accomplish 

the same things. Where we have three or four programs that can 

do the same thing, we want to concentrate our resources where 

they can produce the most housing, and produce the most housing 

across the income spectrum, from very low-income to low-income, 

and throughout the different types of rural America. We have highcost areas, low-cost areas, etc. 

The third thing that you will see in our budget is that we have 

a number of new programs that are addressing the problems for 

the future. 

A lot of our housing programs were built in the 1930’s and 

1940’s, and address problems that are secondary to other problems 

in housing people in America today. And I think that this is really 

an exciting area where we can house a lot more people for less commitment of Federal resources. 

Finally, on the multi-family legislation, I will say that the Administration is pleased to be supporting the multi-family revitalization legislation that we have proposed last year, and look forward 

to working with this committee and with Congress to build a bill 

that can address the needs of our multi-family portfolio. 

With that, I look forward to discussing these issues with you. 

Thank you. 

[The prepared statement of Mr. Davis can be found on page 64 

of the appendix.] 

Chairwoman WATERS. Thank you very much. At this time, I 

would like to open this panel to questions, and I will give to myself 

5 minutes. 

My first question is concerning the section 502 program, which 

is the USDA’s main housing loan program, and is designed to help 

low-income persons purchase homes in rural areas of the country. 

Funds also can be used to build, repair, or renovate a home, including providing water and sewage facilities. The program provides 

fixed interest mortgage financing to low-income families who are 

unable to obtain credit in the private market. 

As you know, there is a shortage of affordable housing for homeownership opportunities in rural areas, and minorities are less 

likely to own their homes than others. 

Why did the Administration propose to eliminate the section 502 

direct loan program, while embracing the goal of increased homeownership opportunities for all Americans? Does the section 502 direct loan program provide homeownership opportunities for persons 

living in rural America? And what is the demographic make-up of 

the loan pool? 

I have some more questions about 502, but let me—who would 

like to take that? 

Mr. DAVIS. I would like to— 

Chairwoman WATERS. Okay, Mr. Davis. 

Mr. DAVIS.—take that. And this was the hardest decision that we 

had to make in our budget—how to address the pressure that is 

9

being put on the single family programs by the multi-family programs. 

And, I would go back to the fact that we faced what we have 

been working toward and building toward for a number of years; 

that is an increase in our rental assistance needs. This is USDA’s 

version of section 8. 

We faced an increase of $230 million above the previous year. That $230 million extra put pressure on programs throughout the 

Department of Agriculture, and forced us to look at our programs 

and say, ‘‘Are there other ways we could help the same people do 

the same things, accomplish the same objectives, but allow those 

resources to be used to protect our most vulnerable?’’ And that is 

our number one— 

Chairwoman WATERS. If I may, for a moment? 

Mr. DAVIS. Yes. 

Chairwoman WATERS. We understand the money constraints. 

But when you have this kind of a need, why don’t you ask for more 

money, and just talk about the crisis that available, that is going 

on in rural America? Why didn’t you ask for an increase? 

Mr. DAVIS. Our first priority was meeting the needs of those 

rental— 

Chairwoman WATERS. I know what your priorities are, but— 

Mr. DAVIS. And— 

Chairwoman WATERS.—in the supplemental, you have lots of Agriculture money for a lot of other things. Why didn’t you get some 

of that money? 

Mr. DAVIS. Well— 

Chairwoman WATERS. Money for rural housing. 

Mr. DAVIS. Well, we have limited resources for discretionary programs. And if we can accomplish the same thing with the programs—and let me address how we’re doing that with 502. 

Section 502 has two ways of providing mortgages for home buyers, direct loans and guaranteed loans. 

Chairwoman WATERS. What about the loan guarantee program? 

Mr. DAVIS. Yes. The guaranteed loan program has been a success. And, by the way, we really support both programs. We believe 

that the guaranteed program is at a point where it can start shouldering more of the burden for very low-income borrowers, and we 

would like to grow that area. 

A lot of it comes down to numbers. I know it’s dry, to talk about 

numbers. But in the guaranteed program, we can make 40 loans 

for every 1 loan we make in the direct program. It is a matter of 

where can we provide the most funding for rural America, where 

can we provide the most funding for new home buyers. 

Already these programs overlap quite a bit. We see that about 

half of the direct program is going to people making more than 

very low-incomes, and a large portion of the guaranteed programs 

is going to people making very low-incomes and low-incomes, so 

there is a lot of overlap. 

What we have proposed in the budget is to pick up the very lowincome in the guaranteed program. We increased the guaranteed 

program by $1.7 billion in mortgages. And to the extent we wanted 

to pick up the lower—the very lowest incomes that had been done 

in the direct program, we are proposing a subsidized guaranteed 

10

loan program. It would essentially use the guaranteed platform, 

which has much better leverage and more efficiency, and provide 

the subsidies necessary to pick up the very low-incomes that were 

in the direct program. 

Chairwoman WATERS. Thank you very much. Mr. Davis? Five 

minutes. 

Mr. DAVIS OF KENTUCKY. Thank you, Madam Chairwoman. One 

of the things I think that’s very important to note is, oftentimes, 

urban poverty housing issues are much easier to see, because it’s 

massed together. We drive through the parts of Appalachia, eastern Kentucky, parts of my district, where organizations like Frontier Housing do such an incredibly good job with both taxpayer dollars and private funds, that poverty is very rarely seen by the folks 

traveling through the areas. 

And I would like to take a few minutes to talk with you both 

about some issues, first with Mr. Davis. You know, last year, we—

Chairman Frank and I—introduced H.R. 5039. And one of the 

things I would like you to do is describe for the committee for a 

moment how the courts have ruled on restrictive 515 pre-payment 

provisions, and the current status. 

And corollary with that, would you make any changes to 

ELIHPA, the ELIHPA repeal section of H.R. 5039, to ensure it alleviated this problem? 

Mr. DAVIS. Okay. I have to be careful about what I say about ongoing litigation. We have experienced two set-backs in the courts 

over the last 2 years—the Franconia decision and the Kimberly decision—which made it clear that the owners have an argument to 

make, regarding their ability to pre-pay the loan. 

Our concern, at this point, is protecting the tenants. And that is 

why the legislation provides for vouchers to protect the tenants. I 

am pleased to say that program is up and running, and for the last 

year, we have been protecting every tenant facing a pre-payment 

in their property. 

The revitalization legislation that you have proposed also protects the properties by offering a rehabilitation deal for the owners 

to stay in the program for another 20 years, and preserve the— 

Mr. DAVIS OF KENTUCKY. Would you—just for the record, would you say where that $2 billion in litigation cost comes from? 

Mr. DAVIS. Well, the precedent set by the early court cases, the 

Franconia case, established a certain dollar figure for the losses. If 

we can shorten the formula, instead of paying for the next 50 years’ 

worth of damages, essentially cut the damages off now, that reduces the cost of any damages to the owners and allows them to 

get on with life. It’s simply a matter of chopping off a big part of 

the formula. 

Mr. DAVIS OF KENTUCKY. I think both the chairman and I could 

find many places to invest $2 billion that wasn’t being paid to trial 

lawyers in affordable housing. 

You know, just speaking of the vouchers—I know this was an 

issue that we all talked on both sides of the aisle, working through 

some solutions last year, but how was the prototype program 

worked out, with the initial funding that you were able to secure? 

Mr. DAVIS. This has been just an absolute success story. I would 

like to thank the committee, and Congressman Frank, who had 

11

worked with the appropriators, to make sure that we could test 

this with demo programs in a small way in the fiscal year 2007 

budget in two areas: the vouchers and the rehabilitations. 

On the voucher side, we were able to create a voucher program. 

Within 3 months of the signing of the appropriations bill, we handed out the first vouchers to a property in Georgia. We have now 

given out over 1,000 vouchers over the past year, protecting tenants in 35 States whose properties have been pre-paid and taken 

out of the program. That is an unqualified success. We are very 

proud of it, and we thank you for your help on that. 

The second thing—and it’s great to be able to say that a bill is 

doing things even before it’s been passed—the restructuring we 

tried in a demo program also. We went out with a notice of funds 

availability last April for 100 properties. We received 4,000 properties’ applications. It’s a very popular program for the tenants, 

who look forward to 20 years of stability, and knowing that their 

properties are going to be rehabilitated. 

Because we had so many properties, we were able to, essentially, 

run an auction, and say, ‘‘We will take properties who are putting 

up the most outside cash.’’ So we were able to draw cash into the 

properties, thousands of dollars a unit, to rehabilitate these properties. It’s been a great success, all the way around. We look forward to expanding that with a permanent authorizing bill. 

Mr. DAVIS OF KENTUCKY. I am sure we will discuss that more. 

Just one quick question for Secretary Patenaude. Regarding the repeated Administration budget proposals, basically HUD wants to 

consolidate the program into CDBG. 

My one concern of HUD’s dominance with urban programs, I 

want to make sure that rural programs don’t get left behind, or 

take a back seat. And I was wondering how you were going to take 

into account these differences for our rural communities. 

Ms. PATENAUDE. Thank you, Congressman Davis. Madam Chairwoman, if could just ask your permission to submit my written testimony for the committee’s record? 

Chairwoman WATERS. Absolutely. 

Ms. PATENAUDE. Thank you. 

Chairwoman WATERS. Without objection. 

Ms. PATENAUDE. Congressman Davis, the CDBG program, as you 

know, funds entitlements in the State program, and a significant 

amount of CDBG dollars that are allocated to the States are spent 

in rural communities. We feel that is the most effective way to 

reach those in the rural communities. 

The home program and the SHOP program also work towards 

housing and economic development in those communities. 

Mr. DAVIS OF KENTUCKY. Okay, thank you. I yield back, Madam 

Chairwoman. 

Chairwoman WATERS. Thank you very much. Mr. Cleaver, for 5 

minutes. 

Mr. CLEAVER. Thank you, Madam Chairwoman. I appreciate this 

committee hearing. 

I would like to try to get some clarification, and I also realize 

that, you know, you may have some reluctance to want to do this, 

and so I don’t want to—I mean, I would like to get an answer, but 

12

I would understand if you would say, ‘‘I would prefer not to answer 

that.’’ 

The RH budget has been reduced by almost $200 million. That’s 

a one-third cut in the entire RH budget over the last 6 years. And 

my concern is that the cuts end up doing more damage to the very 

poor, because of the direct loan programs. And is there a strategy 

at play in the Department that I’m just unable to see, or that I 

need some clarity on, that would explain how we can do this, make 

these cuts, and it ends up hurting the least of these? 

Mr. DAVIS. I thank you for your concern, and I, too, wish there 

was enough discretionary money to handle all of our problems in 

rural America. I have visited 45 States in the last 2 years. I see 

what the problems are in rural America, and I would like to help. 

And to that end, in an era where we have limited money, I would 

like to see the most housing and the most families helped, per 

given dollar. 

I would say one thing, however, that our budget is not proposing 

a cut. What the difference is, that I believe you were referring to, 

is the difference between the actual spending in 2007, and the 

budget for— 

Mr. CLEAVER. Yes. 

Mr. DAVIS. The President’s budget that I have to work with is 

actually increasing from 2007 to 2008 by a small amount. It is— 

Mr. CLEAVER. Well, let me—can I— 

Mr. DAVIS. It’s a matter of actual versus budget. I’m sorry, go 

ahead. 

Mr. CLEAVER. I’m trying to see this increase you’re talking about. 

And I have it here, and I’m trying to—I don’t see the increase. I 

mean, what— 

Mr. DAVIS. The— 

Mr. CLEAVER. Let me—here is what I see. I see that the program 

that was designed to save the poorest of our citizens in the rural 

areas, the direct loan program being cut, and the program designed 

to help moderate-income rural people, which would be the guaranteed loan program, increases. So, the poor get less, and the moderate-income rural residents get more. 

Mr. DAVIS. Okay— 

Mr. CLEAVER. And then, I—so you’re saying that there is no cut, 

but that you’re actually getting more money on— 

Mr. DAVIS. I was just making the point that, from budget to 

budget, the money that I have to work with is not being cut by 

$200 million. 

But I do want to say that there is an increase in the rental assistance program that puts pressure on everything else. Rental assistance helps the poorest of the poor. Our rental assistance residents make an average of $8,000 a year. They are 60 percent elderly, 30 percent severely disabled. That’s our very high-needs population. And the increase that we are absorbing this year covers 

63,000 families. This would fill RFK Stadium almost twice, when 

you add the children and others. This is our high-needs population 

and that’s who we were focusing on. 

To keep helping the same number of families in the single family 

programs, we had to get more efficient with the dollars that we 

were given. And, we are looking to pick up more of the very lowVerDate 0ct 09 2002 15:50 Aug 16, 2007 Jkt 037205 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\37205.TXT HFIN PsN: TERRIE
13

income borrowing in our guaranteed program, teaching the private 

sector lenders to make lower income loans. 

Mr. CLEAVER. So, you are satisfied that the request was sufficient, the budget request was sufficient? 

Mr. DAVIS. Well, we stand by our budget, but our budget is based 

on the overall availability of funds in the government. 

Mr. CLEAVER. I know. Okay. The relevant word is ‘‘sufficient.’’ 

Was the request sufficient— 

Mr. DAVIS. All of our programs are discretionary, and we recognize that there is need in rural America, and we would like to meet 

as much of that need as possible with the resources we can, and 

that means doing more with what we have. That’s why we are focusing more on our most efficient programs. 

Mr. CLEAVER. Okay. Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. Mr. Neugebauer? 

Mr. NEUGEBAUER. Thank you, Madam Chairwoman. Ms. 

Patenaude, you were talking about the shift from—to the CDBG 

program. And in recent years we have been able to have some very 

successful programs in the urban areas using Community Development Block Grant money. 

But can you point to where you have done this in the rural areas, 

and how much money actually is getting to our rural communities? 

Because in my district, I don’t know that they’re getting that 

money. 

Ms. PATENAUDE. Thank you, Congressman. Approximately $1.1 

billion is allocated to the State CDBG program. And I do have an 

example here in the State of Texas. If I may, Congressman, use 

your State as an example, $73 million was allocated to the State 

CDBG program, $53 million out of the $73 million was allocated to 

towns with less than 25,000 in population. And of that, $48 million 

was allocated to towns with less than 10,000 in population. 

So, over the years, there has been over $110 billion allocated in 

CDBG, and the States determine where to allocate the dollars, so 

that’s local decisionmaking. 

Mr. NEUGEBAUER. And I am a great proponent of local decisionmaking. What I am hearing from some of those communities, 

though, is that, for example, a little suburb next to Fort Worth or 

Dallas or Houston may have a small population—5,000, 8,000, 

10,000 people—but it may be right next to 3.4 million people, and 

the center, the distribution of some of those funds has tended to 

be more in smaller communities adjacent to major metropolitan 

areas. 

Would you have any information for me, to give me a breakdown 

of, for example, counties in my district that—and how much money, 

the CDBG money, that they have actually received? 

Ms. PATENAUDE. Yes. May I ask your permission to submit that 

to you in writing? 

Mr. NEUGEBAUER. Absolutely. 

Ms. PATENAUDE. We do have that information. 

Mr. NEUGEBAUER. That would be good, because I think that is—

I mean, we hear that, and that is a very impressive statistic, out 

of $73 million, you know, 53 million went to rural areas, but, you 

know, sometimes it’s—definitions of what’s rural are different, parVerDate 0ct 09 2002 15:50 Aug 16, 2007 Jkt 037205 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\37205.TXT HFIN PsN: TERRIE
14

ticularly when these small communities that are surrounding these 

major metropolitan areas. 

And so, in those areas, quite honestly, while I certainly don’t 

want to diminish their need, are important. But I’m not hearing 

that the money is, you know, getting out into a more evenly distributed basis. So I would like to see that. 

Mr. Davis, you’re going to—I understand the Administration is 

proposing this subsidized loan guarantee hybrid product that will 

kind of just strike a balance between direct and guaranteed section 

502 loans. When should we see some language on how we can help 

you accomplish that provision? 

Mr. DAVIS. We will have a proposal up within a very few weeks 

here, although I will say it’s fairly simple. We just need authority 

to add subsidies to our guaranteed loan program. 

There are basically two ways we can do that. We can either buy 

down the interest rate, which we already did in a demonstration 

program in the 1990’s, so we’ve been through this, and know what 

the issues are, or we can buy down the principal amount, and that 

has a different dynamic in that we can actually help different types 

of borrowers in high-cost areas. 

One of the shortcomings of the 502 direct program is that it 

doesn’t work well in high-cost areas, such as California, or near 

metropolitan areas. We would like to be able to experiment with 

guaranteed structures that would be more useful in those types of 

areas. 

Don’t get me wrong, we love the 502 direct program, but we believe that we can produce a better version, and we would like to 

work with the committee on understanding what the issues are, 

and how we can do that. 

Mr. NEUGEBAUER. Would that, the hybrid products, be an option? 

Or how would you determine—if you’re going to make it a program 

that fits, you know—and one thing we know, the Federal Government cannot make a program that fits all. So, how do you build the 

flexibility into that? 

Mr. DAVIS. Well, that’s a very good question, because, actually, 

we have that same issue right now. When somebody walks into one 

of our offices and says, ‘‘I would like a home loan,’’ we show them 

the direct loans and the guaranteed loans. 

About a quarter of the people who start out going down the direct path end up going into the guaranteed loan program. They realize there may be advantages or disadvantages—for one thing, the 

direct program has a recapture provision. When they sell the 

house, we take up to half of the equity to repay the subsidies. And 

the borrowers will say, ‘‘Well, no, I would maybe go for this.’’ There 

is a shorter line with a guaranteed program, a private sector lender 

can move things very quickly, whereas you may have to wait for 

funds in the direct program. 

There are all kinds of decisions that are being made right now 

between the two programs. What we would like is to let the potential home buyer make their decision about what is the best structure for them, and we believe that will lead to market forces creating more efficiencies and producing more housing for the same 

amount of money. 

Mr. NEUGEBAUER. Thank you. My time is expired. 

15

Chairwoman WATERS. Thank you. Mr. Hinojosa? 

Mr. HINOJOSA. Mr. Green. 

Chairwoman WATERS. Oh, I’m sorry, Mr. Green. 

Mr. GREEN. Thank you, Madam Chairwoman, and I thank you 

and the ranking member for hosting these most important hearings. 

Mr. Davis, let’s start with an indication that 19 percent of all 

rural children are poor. Is this a factoid? 

Mr. DAVIS. I’m not aware of the exact statistic. 

Mr. GREEN. Okay. That’s what my intelligence reveals. And 

given that we now have CDBG monies being used by cities, and cities are saying they’re not getting enough, and we are now going to 

eliminate certain rural programs and continue to have the cities 

compete for the CDBG dollars, as well as the rural areas, are we 

expanding the amount of money that will go into CDBG? 

Ms. PATENAUDE. Thank you, Congressman Green. In our fiscal 

year 2008 budget, there is a reduction in the CDBG program. And, 

historically, 70 percent of the dollars go to the entitlements, 30 percent to the States. 

Mr. GREEN. So, if we are cutting back on CDBG, eliminating programs in rural areas, it is fair to conclude that rural and urban 

areas will be competing for less money. 

Ms. PATENAUDE. The fiscal year 2008 budget also includes the reform package, and we are hopeful that, by targeting resources— 

Mr. GREEN. Sometimes, when people finish, I don’t know whether they have said yes or no. I don’t mean to be disruptive and 

interruptive, but can you say yes or no? 

Ms. PATENAUDE. Fewer dollars are being allocated, or fewer— 

Mr. GREEN. Am I to take that as a yes? 

Ms. PATENAUDE. Fewer dollars for the CDBG program would— 

Mr. GREEN. Am I to take that as a yes? 

Ms. PATENAUDE. Yes. 

Mr. GREEN. Okay. Now, if this is the case, Mr. Davis, if you had 

more money, could you use it in a judicious and prudent fashion? 

Mr. DAVIS. Yes. 

[Laughter] 

Mr. GREEN. If we allocated more money, would it create a bad 

day for you, or would this make your day a little better? 

Mr. DAVIS. We are advocates for rural America, and we will take 

all the money that we can get. 

Mr. GREEN. And then, the final question along this line of questioning is why won’t you ask for more money, given that you would 

use it in a judicious and prudent fashion, given that you are advocates for rural citizens, given that 19 percent of these citizens are 

children, and given that CDBG monies are now smaller, the 

amount is smaller, less, and you’ve got urban and rural areas competing for dollars when the coffer is diminishing. Why won’t you 

ask for more money? 

Mr. DAVIS. We are asking for as much money as we can get, 

given the budget constraints that we live under. We have many different programs that have needs. In Rural Development alone, we 

have water and sewer projects which benefit rural areas, we have 

electrification, and we have business development. We have over 40 

programs in Rural Development, and we— 

16

Mr. GREEN. Mr. Davis, one final comment on this, and then I will 

go on. Mr. Davis— 

Mr. DAVIS OF KENTUCKY. Would the gentleman yield for just one 

second, just to clarify? 

Mr. DAVIS. I— 

Mr. GREEN. The gentleman will gladly yield to the ranking member, yes, sir. 

Mr. DAVIS OF KENTUCKY. Perhaps a way to clarify the answer on 

this question would be—to Congressman Green, ‘‘Did you get less 

than what you originally asked for when the budget numbers were 

being worked out by those in the higher pay grades in rural development, or in the Ag Department?’’ 

Mr. DAVIS. I think there might be a misapprehension about how 

the process works. While I may say— 

Mr. DAVIS OF KENTUCKY. Normally I always ask for more than 

I get. 

Mr. DAVIS. Yes, thank you. 

Mr. DAVIS OF KENTUCKY. So I will give you a face-saving— 

Mr. DAVIS. Well— 

Mr. DAVIS OF KENTUCKY. I yield back. 

Mr. DAVIS. If I could just describe the process—there is not only, 

‘‘Here is what the need is in rural America,’’ but, within the budget 

discussions, we are told, ‘‘Here is how much money we have. How 

can you’’— 

Mr. GREEN. Let me do this. I greatly appreciate the assistance, 

but I try to narrow my questions down to yes or no. So, would you 

answer ‘‘yes’’ or ‘‘no?’’ Did you ask for, at some point, more than 

you are currently calling to our attention? Could you give a yes or 

no answer to that. That would help me, immensely. 

Mr. DAVIS. Yes, and I have to live within a process— 

Mr. GREEN. So you did request—let me just focus on the yes part 

of it. The rest I can deal with at a later time. Your answer is yes, 

you did ask for more, but apparently, you did not receive the answer that you sought. Is this true? 

Mr. DAVIS. Well, I think that pretty much— 

Mr. GREEN. Sometimes I don’t know whether people have said 

yes or no when they finish. Could you say yes or no, please, sir? 

Mr. DAVIS. Could you repeat the question? 

Mr. GREEN. Yes, sir. Did you, at some point, request more, receive less, and you’re bringing the less to us today? 

Mr. DAVIS. Yes, I did, with probably every other government 

agency, receive the same answer, which is, ‘‘We have a constraint 

to live within.’’ 

Mr. GREEN. I understand. And is it possible for us to become 

privy to the original request that you made, because it might help 

us to help you? 

Mr. DAVIS. That’s an internal discussion, and there were a number of— 

Mr. GREEN. I yield back. Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. Mr. Hinojosa? 

Mr. HINOJOSA. Thank you, Madam Chairwoman. My first question is to Mr. Davis. 

Russell, isn’t the proposed budget a vast retreat from 57 years 

of commitment to housing the rural poor? 

17

Mr. DAVIS. Not at all. We view this as a step forward from the 

way things have been going. The trend, which has been that programs designed for problems of the 1930’s and 1940’s have been 

getting less and less traction. And I would like to address that. 

Our goal is to house more people. Our budget proposal in single 

family, for example, projects that we will be housing several thousand more people in 2008 than 2007, in spite of house price increases. We do that by using the budget dollars that we’re given 

in the most efficient way possible. 

But if you are a person trying to buy a home for the first time 

in America, the interest rate is less and less likely to be the barrier. The 502 direct program is an interest rate buy-down program, 

but it has little applicability to what we see as the real troubles, 

which are families who have credit troubles, health care payments, 

who have seasonal jobs and economic volatility in their local towns. 

We are trying to develop a flexible single family loan program 

that can meet those needs, and that can teach the private sector 

to meet those needs, so that we aren’t just doing a few very highly 

subsidized loans for a few lucky recipients. We want to change the 

culture of borrowing, and show the private sector that these can be 

good loans, and that these can be good borrowers. 

We want to do tens of thousands more loans. We are not looking 

to retreat at all. We are very proud of our programs, sir. 

Mr. HINOJOSA. I just can’t seem to buy in to your long explanation, because you said you stand by your budget. You pointed out 

that not having—you pointed out that you didn’t have as much discretionary money to help those low-income rural families. And as 

Congressman Green pointed out a moment ago, you all aren’t coming up here fighting for increases in money. It seems like you just 

take the orders from somebody much higher than you, and just go 

and make all these cuts, including the CDBG, because the Administration has made such big, big percentage cuts on CDBG. 

So, I have a very difficult time with both of the representatives 

of HUD who come speak to us not actually wanting to fight for an 

increase in appropriations. 

Mr. DAVIS. I appreciate that. I will say that our concern is with 

the budget here, and a budget is an exercise in meeting and getting 

as much as you can out of limited resources. The enumeration of 

what the needs are in rural America is a different exercise, and 

we’re very aware of the needs. 

If I could just give you an example that I think is illuminating, 

we have whole States that are taking 20 to 30 times more applicants for single-family mortgages than we can make, and it’s not 

funding, it’s that we have 1 person who qualifies out of 30 people 

who apply. The problems that we are facing are not the problems 

the direct program was designed to address. 

So, we are trying to develop a budget—and we think it can actually be done fairly efficiently—that meets those needs. 

Mr. HINOJOSA. Well, let me just tell you. I have 90 communities 

in my 15th Congressional District down in Texas; at least 80 percent are rural communities. 

And in going out there and listening to what was happening, 

they wanted me, as a Member of Congress, to explain to them how 

why all these cuts were being made, no help was being offered. And 

18

yet, we were making these $1.5 trillion tax cuts, which would benefit the richest in America. How could we explain that? 

And the truth is, I blamed it on the Republican Administration, 

and rightfully so, because we do not have the amount of money 

that is necessary to help the housing needs of those out there in 

rural America. 

I wish I could have a little bit more time, so I will ask this one 

quick question. I understand that many minority families served by 

section 502 come into the program through self-help housing. The 

budget proposes to cut self-help by 75 percent. So how does the Administration propose to increase homeownership, when self-help 

technical assistance grants are being cut? 

Mr. DAVIS. I thank you for that. And I would like to say that the 

self-help program, section 523 technical assistance grants, and the 

loans that go with it, is one of our great success stories. 

Over the last 5 years, we have taken a program that had fewer 

applicants than there was money, to where there are now more applicants—we have built an industry. The number of grantees has 

grown from— 

Mr. HINOJOSA. My time has run out. But just know that you 

have fallen from the five-star program that you used to run to a 

program that barely has 1 star. Thank you. I yield back. 

Chairwoman WATERS. Mr. Lincoln Davis? 

Mr. DAVIS OF TENNESSEE. Madam Chairwoman, thanks very 

much for allowing me to participate in the hearing today. It’s been 

a wonderful opportunity to serve on the Financial Services Committee. And when I notice the engagement that we have on issues 

that impact all Americans, and certainly rural America, I am 

pleased that I was allowed and asked to serve on this committee. 

It is good to be here today at this hearing, and I thank you for letting me participate. 

I have had a very good life; it has been a wonderfully blessed life. 

I represent the fourth most rural congressional district in America, 

population-wise. I have the third highest number of blue collar 

workers, which means, generally, lower wage earners. 

I went to college at Tennessee Tech, a university, one of the 

State colleges. It was close enough to home that I could either walk 

or hitchhike in 1962, and finish in 1966. I chose my degree—I really prepared myself to be an electrical engineer, because I really 

felt, when we first got electricity in our homes in the mid-1950’s, 

that it was one of the most marvelous inventions of mankind, because lighting up the wick on a kerosene lamp was something that 

would light up the room, but not completely, and then we got electricity, where you just pulled the switch. 

I realized that there was a great future in that, so I decided that 

I might want to become an engineer, and I studied the courses in 

high school to do that. But I changed my mind when I became involved in vocational agriculture with Future Farmers of America, 

and I majored in agriculture at Tennessee Tech. I wanted to be a 

solar scientist, and I served for a while as that. 

But I noticed within USDA, there was a group called the Farmers Home Administration, and I saw in the mid-1960’s the hurt in 

rural America, where I lived in Appalachia, and the Cumberland 

19

Mountains, and I transferred from the soil conservation and went 

to work with Farmers Home, where I worked for several years. 

When I moved to Pickett County, in Byrdstown, Tennessee, I had 

to literally work with the public health department to establish 

some type of a code dealing with how you would install a subsurface facility, other than a 50-gallon barrel and run it down the 

streams. 

From my experience working with rural America, and serving 

rural America today, and from my experience with Farmers Home, 

to see, for the first time, a bathroom going into someone’s home, 

and then to see a new home built—and one of those years that I 

was there, as county supervisor, where I appraised, as well as 

made loans, well over 100 loans in the county that had less than 

4,000 population in the entire county. 

So, I saw the positive benefits of the 502 interest credit, down 

to as low as 1 percent. And when you travel my district today, you 

can pick out those thousands of 24x40, 26x42 homes—that may 

still be occupied by a son or a daughter, or a grandson or a granddaughter—that were built in the mid-1960’s through the early 

1980’s. 

Then I saw a serious flip at USDA during the Clinton Administration, under the auspices of then-Vice President Gore, who did 

considerable downsizing. 

Now, what I see in the area that I represent—and I’m not critical 

of modular housing, because I think that there is a place for housing with modular homes—but today, unfortunately, because of the 

lack in rural areas—and the banks will tell you this is not the case, 

but I know better—but due to the lack of funding in rural areas, 

the ability of a young couple today to be able to access affordable 

housing is almost non-existent in small counties in rural Appalachia, and in the district that I represent. 

And as a result of that, we have denied them an opportunity that 

over 60 years ago we decided should be afforded to every American 

who lives in this country. If they want to achieve something in life, 

there is an option for you. 

I notice here that this Administration has proposed zeroing the 

515 program, which is multi-family housing; it provides housing for 

elderly and the handicapped, in multi-units all across this country 

in rural America. I notice that 502, the single family direct loan 

program, has been zeroed out. I just can’t imagine anyone who is 

a champion for rural America, and who works with at least the 

parts of those agencies that meant so much to rural America, could 

sit there and say, ‘‘Mr. President,’’ or, ‘‘Mr. Whomever, this just 

isn’t right.’’ 

So, what my hope is, is that you and others will champion what 

I believe is a dire need in rural America for at least an avenue to 

access funding for that 24x40 homes that so many people have 

moved into. I can remember a young high school girl that I spoke 

to when I was—is my time up? 

Chairwoman WATERS. Yes. 

Mr. DAVIS OF TENNESSEE. I remember speaking to a high school, 

and talking to these young children about what was available for 

them in that county. And this young girl said, ‘‘You mean my 

20

mama doesn’t get a house?’’ They lived in a small, substandard 

house, with what we would call tar paper on the outside of it. 

And she had a great deal of pride, because she was academically 

inclined, and later went on to college. And I went through the process there. She brought her mom and dad in, and helped walk them 

through the process of getting a house. 

For the first time in their life, they had a bathroom, running 

water, and were able to live out the rest of their lives in a good 

house. She, then, went on to college, and now has a a pretty prominent position in one of the major companies in Tennessee. 

We helped a lot of people in those days. I am seeing now an Administration, and champions like you of this Agency—and I don’t 

mean to be harsh—not fighting for those people. And it really bothers me. 

Chairwoman WATERS. Mr. Davis, if you like, you may respond. 

Mr. DAVIS. I would like to respond, both on the rental side and 

502. I appreciate your history and experience, and I thank you. 

We are really proud of that history. I wish we could go back to 

the day when we could build 1,000 section 515 properties in a year. 

Multi-family was a real production machine then. But it was also 

before the 1986 Tax Act, when much of that housing benefitted 

from tax benefits we don’t have today. That is outside money gone. 

It was before the Credit Reform Act of 1992. 

If you look at the big drops in production, it came with those two 

Acts, because they effectively put the cost on budget. And right 

now, it costs us $100,000 a unit to build a 515 property. I can 

rehab 5 units at $20,000 each, for the same amount of money. Or, 

we could house 25 people with vouchers. We have to make choices 

about where we put our money, and how we help the most families. 

And so, on the rental side, we believe that we have— 

Mr. DAVIS OF TENNESSEE. And I hate to interrupt you, but you 

are saying if you’re zeroing out 515, you don’t have the 25 per unit 

that you can rehab, if you’re zeroing out in the— 

Mr. DAVIS. We have moved the money down to section 538, and 

to our revitalization programs and elsewhere, the idea being that 

515 had simply become too expensive— 

Mr. DAVIS OF TENNESSEE. Then—I’m sorry. Are you increasing 538 by the $100 million, or are you just— 

Mr. DAVIS. We’re increasing 538 by more than the number of 

units than we would have increased in 515, far more. 

Chairwoman WATERS. Thank you very much. First of all, I need 

unanimous consent to have Mr. Lincoln Davis’s participation in the 

committee today. Without objection, it is so ordered. 

[Laughter] 

Chairwoman WATERS. And, also, unanimous consent to extend to 

Mr. Davis, on behalf of our ranking member, an additional 5 minutes, relative to the CDBG program. 

Mr. DAVIS OF KENTUCKY. I thank you, Chairwoman Waters. Just 

one question of clarification to Secretary Patenaude. I noted Mr. 

Davis and I have had discussions about best practices. I have had 

these discussions with Secretary Jackson, as well, at various times. 

And consolidating and streamlining processes to get a better return on investments and reduce overhead is a good thing to do, on 

the one hand. But the question that I have, and I think some other 

21

members on the panel have, as well, regarding the segmenting of 

those monies, if money were to be moved, for example, out of the 

program which is specifically earmarked, or designated, to meet 

rural housing needs, and were moved into CDBG, would that 

money be set aside, segmented, or earmarked specifically to be only 

used for granting in rural housing programs, or would it be—just 

go into the pool, and then the rural communities have to compete 

with the larger communities? 

The reason I’m asking is we have a rather gross difference between the amount of CDBG money that goes into our rural communities versus our urban areas. And I am a big CDBG fan, in terms 

of how it has helped our communities, but definitely there is a disparity of some magnitude. 

Ms. PATENAUDE. Thank you, Congressman. In the CDBG program, the dollars are allocated based on a formula. And we are requesting that Congress consider a formula revision with our CDBG 

reform package. 

The Administration does not support earmarks, and the funding 

for rural housing— 

Mr. DAVIS OF KENTUCKY. Just as a point of clarification, I am not 

speaking of a legislative appropriation as an earmark—that was 

probably a poor choice of words, in the current political climate—

but money that would only be used for the task at hand here today. 

Go ahead. 

Ms. PATENAUDE. If the appropriation was increased, it would still 

have to be allocated, based on the formula. 

Chairwoman WATERS. That’s not the question. 

Mr. DAVIS OF KENTUCKY. Yes, the question is would that—if that 

money were brought into CDBG, would that be protected, so that 

it could only be used for rural housing? 

Ms. PATENAUDE. If I may consult with the Director of CDBG? 

Congressman, if I could just re-state, maybe I wasn’t clear. The 

CDBG program, all the dollars are allocated based on a formula. 

So if the money—if CDBG was increased by the $16.8 million, it 

would have to go into the pot, and then it would be distributed, 

based on the formula. And it’s a 70/30 split, 70 percent goes to entitlement communities, 30 percent to States. 

So, without language in the appropriation, it would not, perhaps— 

Mr. DAVIS OF KENTUCKY. So, for example, if it came—let’s take 

Kentucky, for example, and some of our areas, and let’s say that 

there is a change in administration at the—both at the Federal and 

at the State level, and perhaps there is more of an urban-centered 

focus than a rural focus on balancing that. 

So, hypothetically, if it went in there, it could be allocated to 

whatever—it wouldn’t necessarily maintain that same ration on 

the funding, correct? 

Ms. PATENAUDE. The CDBG formula reform that we’re proposing, 

it still is about a 70/30 split, and the States can determine how to 

spend their State allocation. 

Mr. DAVIS OF KENTUCKY. Okay. And of that 70/30, I guess what 

I am coming back to is—maybe I should steal a line from Mr. 

Green for a moment, just for clarification on a yes or a no. 

22

I will yield to the gentleman, if he would like to take over this 

line of questioning for me, since he did it with much more eloquence than I am, at the moment. 

Perhaps, I guess, the question again is you say it’s allocated by 

formula. Well, we all, not working in the Agency, I guess the formula of yes or no would be most appreciated. 

If you could just simply say that the money is, in fact, protected, 

that if we put—another organization’s rural housing money were to 

be brought over into CDBG, and dropped in there, that that, in 

fact, could be protected, and would go only to rural housing, or it 

just goes for all of the competitors for those grants. 

Ms. PATENAUDE. The short answer is no. But if there was— 

Mr. DAVIS OF KENTUCKY. Thank you. 

Ms. PATENAUDE.—specific language in the appropriations, that 

would be a possibility. But we would consider that an earmark. 

Mr. DAVIS OF KENTUCKY. I yield to the chairwoman. 

Chairwoman WATERS. Thank you very much. I think what the 

gentleman is saying is that if, in fact, funding for rural housing is 

thrown into—from HUD—is thrown into CDBG, that they would 

have to compete with the cities and everybody else, to try and get 

that money directed to housing, for rural housing. 

And that’s what he was trying to ask you, and I think you attempted to answer that by saying unless there was some kind of 

special language, that that, perhaps, could not happen. 

But let me just say this, as I thank you for having been here. 

One of the things that we’re going to say in this message that 

needs to go back is that urban and rural Members of Congress are 

going to team up. We, in the urban areas, understand what a housing crisis is, and many of the rural areas in America are worse off 

than some of the urban areas. 

We’re going to team up, and we’re going to get our CDBG money. 

We don’t intend for it to be cut. And we don’t intend for the rural 

housing to have to compete for their money in CDBG. 

So, we really do thank you for being here today, and I think it 

helps for me to give this message, because everyone should be 

alerted to that. We appreciate whatever you can do, as advocates 

for the poor, for housing, for rural housing. But we are determined 

that we are going to do what’s right, and what’s fair. Thank you 

for being here today. 

Ms. PATENAUDE. Thank you. 

Chairwoman WATERS. Thank you. Okay, let me just say that the 

Chair notes that some members may have additional questions for 

this panel, which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days, for members to submit written questions to these witnesses, and to place 

their responses in the record. 

Thank you, and we will call on our second panel. Okay, let’s see. 

Mr. Davis, you have someone you would like to introduce on the 

second panel? Which Davis, Mr. Lincoln Davis? Mr. Davis? Thank 

you. Would you like to introduce one of our panelists? 

Mr. DAVIS OF KENTUCKY. Yes, Madam Chairwoman. 

Chairwoman WATERS. Okay. 

Mr. DAVIS OF KENTUCKY. I just wanted to take one moment. It’s 

always great when we can have somebody from back home who is 

23

in town to testify, especially when it’s for a good cause, and a good 

reason. 

Frontier Housing is one of the organizations in the United States 

that makes a great difference in providing affordable housing, creative public/private partnerships, a great stewardship of money, 

and I think, most of all, at the end of the day, does two things 

that’s both compassionate and conservative. It gives people opportunity and hope to have a dramatic change in their quality of life, 

while at the same time provides them a connection into a community, and to move, in many cases, folks into value-adding positions, 

becoming taxpayers, and really advancing our interests. 

And I just want to recognize Dr. Tom Carew, who is the director 

of design and community at Frontier Housing, and we are grateful 

to have you with us today. 

Chairwoman WATERS. Thank you very much. Also serving on the 

panel today we have: Mr. Gideon Anders, executive director, National Housing Law Project; Mr. Moises Loza, executive director, 

Housing Assistance Council; Mr. Robert Rice, Jr., Council for Affordable and Rural Housing; and the Honorable Peter Carey, executive director, Self-Help Enterprises. 

I understand, Mr. Carey, you have to leave pretty soon, so we are 

going to call on you first. And let me just say that, without objection, your written statements will be made a part of the record. 

You will each be recognized for a 5-minute summary of your testimony. 

With that, I will call on Mr. Peter Carey. 

STATEMENT OF PETER CAREY, EXECUTIVE DIRECTOR OF 

SELF–HELP ENTERPRISES, ON BEHALF OF THE NATIONAL 

RURAL HOUSING COALITION 

Mr. CAREY. Thank you, Chairwoman Waters, and members of the 

committee. It is an honor to be here. My name is Peter Carey, and 

I am executive director of Self-Help Enterprises. I am here today 

as a board member and past president of the National Rural Housing Coalition, NRHC, a national membership organization that advocates for Federal policies which improve housing in rural America. Thank you for this opportunity. 

As a long-time member of NRHC, Self-Help Enterprises is a nonprofit housing and community development organization located in 

California’s San Joaquin Valley. Home to as many as half of California’s farm workers, the valley is characterized by the same problems facing much of rural America: low incomes; high poverty 

rates; substandard housing; and unsafe drinking water. 

In the past 42 years, Self-Help Enterprises has built thousands 

of affordable homes for farm workers and other low-income households, and brought safe drinking water to 10,000 households. These 

achievements are mirrored in the work of NRHC members across 

the country in rural America. 

While these efforts tap local initiative and resources, in the majority of cases it’s the U.S. Department of Agriculture which supplies the critically needed and locally responsive funding that 

makes these achievements possible. 

America’s rural communities continue to suffer with elevated 

poverty rates and substandard housing. Rural households are poor, 

24

on average, when compared to urban households, and they pay 

more of their income for housing. Congress and the Administration 

have already made substantial cuts in rural development spending, 

reducing Federal spending for rural housing and community development programs by more than 20 percent in the last 6 years. 

Now, this Administration’s fiscal year 2008 budget takes square 

aim at the programs that are so critical to the future of rural 

America. It proposes to replace the current effective mix of housing 

loans, grants, and related assistance with guaranteed loans, which 

do not hit the same target. This configuration will devastate our efforts, and those of other organizations across the country to improve rural housing. 

The President’s budget proposes the elimination of section 515, 

the fourth consecutive year that USDA has not requested funds. 

NRHC supports section 515 at a level of at least $100 million. 

The budget slashes farm labor housing loans and grants authorized under sections 514 and 516, the only two Federal housing programs directed towards farm workers. The NRHC supports funding 

each of these two, 514 and 516, for at least $50 million. 

The fiscal year 2008 budget eliminates the section 502 direct program in favor of guaranteed loans for homeownership. There is 

substantial evidence that this approach will not provide the assistance for low and very low-income homeowners, who are now helped 

by the direct program. The average annual income of borrowers 

under 502 direct is $18,500. The average annual income of guaranteed loans is $40,000. NRHC proposes funding for section 502 at 

$1.2 billion. 

One of the most successful rural housing programs is mutual 

self-help housing program, which combines the section 502 direct 

with the section 503—523 technical assistance funding. This proposal in the budget proposes a reduction of 70 percent in the selfhelp housing program. Self-help housing makes homes affordable, 

by enabling homeowners to join together, pool their labor, and 

build homes for themselves and their neighbors, together. 

The grant funds are used to assist in applying for 502 direct 

loans, provide pre-purchase homeownership education, and most 

importantly, to supervise the construction of homes. The average 

number of homes built in recent years is approximately 1,500 a 

year. Driven by a desire for homeownership, these families perform 

65 percent of the construction labor, working evenings and weekends, through winter cold and summer heat. These home builders 

know what it takes to make a home in a way that no home buyer 

ever can, and they understand what sweat equity means. 

And it works, despite the fact that self-help families have lower 

incomes than others receiving section 502 loans. Default and delinquency rates for these families are lower. And some 68 percent of 

the participants in self-help housing are minority households. This 

success in serving minority households led USDA to commit to a 

doubling of self-help housing as one of the elements of its five-star 

commitment to increasing homeownership. Paradoxically, this 

budget proposes a 70 percent reduction, a strange reaction to success. 

The proven success of the self-help model, and the momentum 

built in recent years, made it difficult for RHS to keep track of the 

25

funding. Only $34 million is available to refund grants expiring in 

2007, and there is a need for $60 million. NRHC is supporting a 

funding level of $60 million for fiscal year 2008. 

We acknowledge the leadership role that Congressman Hinojosa, 

Chairwoman Waters, Chairman Frank, and other in the Financial 

Services Committee have taken in opposing these budget cuts. 

These programs have a proven track record of success. 

I would like to mention that we also support two bills introduced 

by Congressman Hinojosa: H.R. 1982, the Rural Housing Economic 

Development Improvement Act of 2007; and H.R. 1980, the Housing Assistance Council Act of 2007. These represent significant and 

important resources to rural America, and I appreciate his support. 

Thank you for the opportunity to be here today. 

[The prepared statement of Mr. Carey can be found on page 56 

of the appendix.] 

Chairwoman WATERS. Thank you very much for your testimony. 

Next, I am going to call on Mr. Gideon Anders, from the National 

Housing Law Project. 

STATEMENT OF GIDEON ANDERS, EXECUTIVE DIRECTOR, 

NATIONAL HOUSING LAW PROJECT 

Mr. ANDERS. Thank you, Chairwoman Waters, and members of 

the committee, for inviting me to testify. I am Gideon Anders, executive director of the National Housing Law Project, the 39-year-old 

nonprofit corporation that seeks to advance housing justice for lowincome persons by, among other things, preserving and increasing 

the supply of decent and affordable housing. 

We testified before this committee last year on H.R. 5039, and 

we appreciate the opportunity to testify again. Our testimony today 

focuses primarily on the preservation of rural housing service, 

rural rental housing stock, and the protection of residents of that 

housing. Our views and comments are shaped by the fact that the 

section 515 housing stock effectively serves the neediest rural 

households, including seniors, persons with disabilities, and persons of color. 

Frequently, the section 515 stock is the only available affordable 

rental housing that is decent, safe, and sanitary. As we testified 

last year, the National Housing Law Project strenuously opposes 

the Administration’s efforts to lift the ELIHPA pre-payment restrictions, because it would allow the conversion of section 515 

housing units in communities that have the greatest need for such 

housing, and will cause a displacement of at least 73,000 persons, 

and will have a severe and adverse impact on minority housing opportunities. 

Rural communities in which real estate prices and rents have escalated simply do not have other decent, safe, and affordable housing. California, my home State, and yours, Congresswoman Waters, 

is a good example. We and other housing advocates in the State expect that, typically, or that, practically, the entire 18,000 units of 

section 515 housing stock in the State will be pre-paid, if the prepayment restrictions are lifted. 

While the impact of lifting the pre-payment restrictions may be 

the greatest in California, we believe that other States, such as 

26

North Carolina, Florida, and Georgia, to name a few, will also be 

adversely impacted. 

If I may digress for a minute, let me just point out—and this is 

to point out that not a single court in the 20 years that the legislation has been in effect, not a single court, has held the ELIHPA 

pre-payment restrictions unconstitutional. In fact, the case that 

Russ Davis earlier mentioned, Kimberly v. the United States, has, 

in fact, been restricted by the ninth circuit last November in a case 

that we are involved with out of Oregon. 

So, the calamities that are being threatened are really not, in 

fact, turning out to be true. Moreover, what is very important, the 

Administration is about to settle a large damage case brought by 

the owners of the RHS 515 housing stock. What the Administration 

is not telling you is that, in fact, by settling this litigation, it is also 

preserving the units. Every owner who is getting damages out of 

that litigation is committed to remaining in the program for an additional 20 years. So the damages are, in fact, preserving those 

units, and it is not simply money that is going down the drain to 

pay the owners for the preservation. 

Let me go on for a minute to deal with the voucher program. The 

demonstration voucher program, in some respects, has not worked. 

And the way the Administration is, in fact, promoting the program, 

it is because it has been cutting the cost of the voucher program 

at every opportunity that it can. It is not operating like the HUDenhanced voucher program, the vouchers are not remaining in the 

communities in which the residents—in which the housing is being 

pre-paid. 

The residents of the 515 stock are not being given a clear right 

to remain in their homes with vouchers, and there are other shortcomings in the voucher programs. They should be fully portable; 

they are not currently fully portable. The voucher must be adjusted 

annually, to accommodate rent and utility cost increases imposed 

by utilities companies, and the residents should be eligible for 

vouchers no later than the date that their landlord refuses incentives to remain in the program, and at least 90 days before the 

scheduled pre-payment date. 

We also ask that the committee consider including in the preservation legislation something to deal with RHS troubled projects. 

The Agency currently has no mechanism for dealing with troubled 

projects, other than foreclosing on them, and seeing that the residents are displaced. They are not even eligible for vouchers. 

We support a strong program for revitalization and restructuring, and believe that it is critical to ensuring the section 515 

housing stock will continue to serve the needs of long-term housing 

and communities in the future. 

However, we are concerned whether the Agency has a capacity 

to run a restructuring program, whether it has the staffing. Moreover, we are concerned that, in many respects, the proposal of the 

restructuring and the revitalization program are simply too expensive. There are ways in which the costs of that program can and 

should be reduced. Similarly, we urge the maintenance of the 30 

percent of income requirement with respect to rents in the projects. 

If I may conclude, I want to simply endorse Congressman 

Hinojosa’s bill—H.R. 1980—which supports the funding for the 

27

Housing Assistance Council, and I also endorse the continued funding of the Rural Housing Economic Development Program. 

And I think, if I may later on discuss the RHS budget, frankly, 

I think in many respect it is a disaster. It does not take into consideration a lot of historical programs that have been in effect, in 

which this Administration is trying to replicate, even though they 

have not worked in the past. 

[The prepared statement of Mr. Anders can be found on page 32 

of the appendix.] 

Chairwoman WATERS. Thank you very much. I am going to call 

on the other members of this panel. There are three votes that are 

being called on the House Floor. If you can summarize your testimony, we may have time for a question or so, if you can do it 

quickly. And that way, we won’t have to ask the members to come 

back, because 9 times out of 10, they won’t get back here after 

those votes. 

So, let me quickly go to Mr. Tom Carew. 

STATEMENT OF THOMAS A. CAREW, DIRECTOR OF DESIGN 

AND COMMUNITY, FRONTIER HOUSING, INC. 

Mr. CAREW. Madam Chairwoman, Congressman Davis, and 

members of the committee, thank you for this opportunity. 

Quickly, since we are compressed for time here, I want to talk 

specifically about the 502 direct program. I have included, as part 

of my testimony, some charts. There is an excel spreadsheet in 

there, which clearly indicates that, for the area that I work, in 

northeastern Kentucky—9 counties, 3 of those counties in the top 

100 poorest counties in America, there is no way that the guaranteed program can work. 

A family at 50 percent of median in those counties can afford 

$476 a month for housing. In a guaranteed loan, it’s going to cost 

them $823 a month, so we’re not quite a $400 difference. We really 

need the direct program. It works. You can see, from another chart 

in my testimony, listing the amount of USDA 502 money that has 

been spent in 9 counties of my service area, how important this 

program is. You’re going to take the backbone away of what it is 

we do, and who it is we serve, without 502. 

I also want to support the HAC bill. HAC is crucial to who we 

are, and where we’ve come from. They have been a key player, as 

one of the national intermediaries, and I hope that you will consider funding the HAC bill. 

On the 515 program, there are many provisions of the bill that 

Mr. Davis introduced last year, with Congressman Frank, that 

have a positive approach to restructuring 515. We certainly support 

that side of it. We want to make sure that we protect the tenants, 

and I think that those are the key points. 

[The prepared statement of Mr. Carew can be found on page 44 

of the appendix.] 

Chairwoman WATERS. Thank you so very much for summarizing 

your testimony. 

Mr. Loza. 

28

STATEMENT OF MOISES LOZA, EXECUTIVE DIRECTOR, 

HOUSING ASSISTANCE COUNCIL 

Mr. LOZA. Thank you, Madam Chairwoman. We are very happy 

to appear before this committee, and we thank you for the opportunity. My name is Moises Loza, and I am the executive director 

of the Housing Assistance Council, a national nonprofit organization whose mission is to improve housing conditions for low-income 

rural Americans. 

We were established over 35 years ago to provide financing, information, and technical services to non-profit, public, local governments, and other providers of rural, low-income housing. 

Let me begin with a brief overview of the condition of housing 

in rural America. In some respects, the quality and condition of 

rural housing has improved greatly over the last few decades. Substandard housing rates have declined dramatically since the 1970’s, 

and mortgage credit is more readily available. 

Despite these improvements, other housing problems persist. 

There is a growing affordability concern, particularly among rural 

renters. Rural areas are becoming increasingly diverse, with immigration and other population shifts, causing us to look at how we 

do rural development differently. 

Currently, less than 16 percent of the rural population are minority; however, 37 percent of the cost burdened and substandard 

housing are occupied by minorities. There are several rural housing 

programs that tackle these issues and conditions, and the Administration is proposing to either cut them or reduce them drastically. 

Other witnesses have talked about the direct 502 program. I 

think what’s important to say is that it has made it possible for 

over 2 million low-income and very low-income Americans, rural 

Americans, to become homeowners because of this program. Others 

have also talked about the 523 program. About 68 percent of the 

participants in the self-help housing program are minorities. And 

of the self-help housing participants, their default and delinquency 

rates are lower than the non-self-help housing participants. Very, 

very important information, Madam Chairwoman. 

The Administration proposes no funding for section 515. The 515 program serves families whose incomes average less than $10,000 

a year; nearly 60 percent of them are elderly or disabled, so preservation of this housing stock is very important. 

The Housing Assistance Council is collaborating with the Council 

on Affordable and Rural Housing, the National Housing Law 

Project, the National Rural Housing Coalition, and others, because 

we want to devise and find a way to preserve these 515 units. 

Now, I want to talk briefly about the rural housing and economic 

development program in HUD. Assistant Secretary Patenaude, I 

think, shared with us some of the figures that show that this is a 

program that serves the poorest of the poor. Rather than statistics, 

let me give you three examples of how this money is being used. 

The Ogalala Sioux Tribe Partnership for Housing used its grants 

on the Pine Ridge Reservation in Shannon County, Dakota. This is 

one of the poorest counties in the Nation. Its grants have been used 

to provide critically needed housing counseling, and to capitalize a 

loan fund for mortgage financing and economic development. The 

Azteca Community Loan Fund, which operates in Hidalgo County, 

29

Texas, used its grants to develop and deliver financial literacy 

training, specific to the families in Colonias. These are families 

whose incomes go as low as $6,000 a year. 

And with an RHED grant, Kentucky Mountain Housing, which 

serves rural Appalachia, was able to purchase acres of land, a 

truck for hauling materials, and update its training curricula and 

material. 

Chairwoman WATERS. I’m sorry, I am going to have to ask you 

to cut it short. I want to hear from Mr. Rice also, who has been 

waiting, before these members leave us. 

Thank you very much, Mr. Loza. We have your examples. 

Mr. LOZA. Yes, thank you very much, Madam Chairwoman. 

[The prepared statement of Mr. Loza can be found on page 72 of 

the appendix.] 

Chairwoman WATERS. Please, Mr. Rice. 

STATEMENT OF ROBERT L. RICE, JR., PRESIDENT, COUNCIL 

FOR AFFORDABLE AND RURAL HOUSING 

Mr. RICE. Thank you, Chairwoman Waters, and members of the 

committee. You have my written statement, so I will be brief and 

just highlight how we feel. 

I am the president of the Council for Affordable Rural Housing, 

and the Council supports H.R. 1980 and 1982, as the rest of the 

panel does. We also would support at least the funding that section 

515 and section 502 had last year. 

We are very concerned about rental assistance going to one year, 

because we have been told the numbers show that in the next couple of years that number, when we’re renewing every year, will be 

over $1 billion, and we’re not certain where that money is going to 

come from. 

We are in favor of the revitalization bill that was proposed last 

year, and we would certainly be in favor of it again. But we feel 

that all of the apartments, at some time, will be able to use this 

program; that’s 17,000 units. And we don’t think that rural development has the staff to handle that, and we would like them to 

have the ability to subcontract, for people to help with that processing. 

We are very happy with the demo program. We think that’s 

working very well, and it just shows that the revitalization bill 

would work. 

Also, one other thing that we’re concerned about that is not actually before this committee, but we think it would help preservation 

a lot, if exit tax relief was passed. Thank you. 

[The prepared statement of Mr. Rice can be found on page 84 of 

the appendix.] 

Chairwoman WATERS. Thank you so very much for honoring our 

request to be concise with your testimony. 

Mr. Davis—both Mr. Davises—I think there was some question 

about the voucher program. Somebody thought it worked, somebody thinks it does not work. Do you have a question about the 

voucher program that you wanted to share? Did you have a question about the voucher program? 

Mr. DAVIS OF KENTUCKY. I think we can pick this up in additional correspondence with the agencies. 

30

Chairwoman WATERS. Yes, Mr. Davis? 

Mr. DAVIS OF TENNESSEE. Each of you who are providing advice, 

counsel, assistance, directing many low-income individuals toward 

affordable housing, without the direct lending program, nothing exists, and that has to be fixed. 

Mr. ANDERS. I fully agree. 

Chairwoman WATERS. Well, I would like to thank all of you for 

coming to this hearing, and I am sorry that we had to shorten our 

hearing a bit. But your testimony has been very, very important, 

and I think it’s important for me to say to you, so that at least you 

can go home knowing, that there are a lot of people here fighting 

for you on both sides of the aisle. We understand exactly what you 

have said today. 

It’s clear to us what the Administration has done. And we believe 

that people in rural America should have the opportunity for better 

housing. And those of us from the urban areas are going to fight 

just as hard for rural America as we fight for urban America. 

Thank you all for being here today. This meeting is adjourned. 

[Whereupon, at 3:53 p.m., the hearing was adjourned.] 

(31)

A P P E N D I X

May 8, 2007

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