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50–393 2010

S. HRG. 110–973 

OVERSIGHT OF HUD AND ITS FISCAL YEAR 

2009 BUDGET 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

ON 

THE ADMINISTRATION’S BUDGET REQUEST FOR HOUSING AND 

COMMUNITY DEVELOPMENT PROGRAMS 

WEDNESDAY, MARCH 12, 2008 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html 


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(II) 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

CHRISTOPHER J. DODD, Connecticut, Chairman 

TIM JOHNSON, South Dakota 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

ROBERT MENENDEZ, New Jersey 

DANIEL K. AKAKA, Hawaii 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Pennsylvania 

JON TESTER, Montana 

RICHARD C. SHELBY, Alabama 

ROBERT F. BENNETT, Utah 

WAYNE ALLARD, Colorado 

MICHAEL B. ENZI, Wyoming 

CHUCK HAGEL, Nebraska 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

ELIZABETH DOLE, North Carolina 

MEL MARTINEZ, Florida 

BOB CORKER, Tennessee 

SHAWN MAHER, Staff Director 

WILLIAM D. DUHNKE, Republican Staff Director and Counsel 

DAWN RATLIFF, Chief Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 


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C O N T E N T S 

WEDNESDAY, MARCH 12, 2008 

Page 

Opening statement of Chairman Dodd .................................................................. 1 

Opening statements, comments, or prepared statements of: 

Senator Shelby .................................................................................................. 3 

Senator Casey ................................................................................................... 4 

Senator Allard ................................................................................................... 4 

Senator Brown .................................................................................................. 5 

Senator Martinez .............................................................................................. 7 

Senator Menendez ............................................................................................ 8 

Senator Carper ................................................................................................. 9 

Senator Reed ..................................................................................................... 11 

WITNESSES 

Alphonso R. Jackson, Secretary, Department of Housing and Urban Development ...................................................................................................................... 12 

Prepared statement .......................................................................................... 47 

Response to written questions of: 

Senator Akaka ........................................................................................... 158 

Senator Reed .............................................................................................. 159 

Michael Kelly, Executive Director, District of Columbia Housing Authority ..... 33 

Prepared statement .......................................................................................... 56 

Response to written questions of: 

Senator Reed .............................................................................................. 169 

Hector Pinero, Senior Vice President, Related Management Company, LLC, 

representing the National Multi Housing Council and the National Leased 

Housing Association ............................................................................................. 35 

Prepared statement .......................................................................................... 64 

Diane Randall, Director, Partnership for Strong Communities .......................... 37 

Prepared statement .......................................................................................... 76 

Response to written questions of: 

Senator Reed .............................................................................................. 169 

Edgar O. Olsen, Professor, Department of Economics, University of Virginia .. 38 

Prepared statement .......................................................................................... 81 

Barbara Sard, Director of Housing Policy, Center on Budget and Policy Priorities ........................................................................................................................ 40 

Prepared statement .......................................................................................... 129 

Response to written questions of: 

Senator Reed .............................................................................................. 170 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Chart of requested HUD FY 2009 Appropriations ................................................ 173 


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(1) 

OVERSIGHT OF HUD AND ITS FISCAL YEAR 

2009 BUDGET 

WEDNESDAY, MARCH 12, 2008 

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. 

The Committee met at 10:04 a.m., in room SD–538, Dirksen Senate Office Building, Senator Christopher J. Dodd (Chairman of the 

Committee) presiding. 

OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD 

Chairman DODD. The Committee will come to order. 

I want to welcome everyone here this morning to a very important hearing to conduct oversight of the U.S. Department of Housing and Urban Development and examine the administration’s proposed budget for fiscal year 2009. The Department of Housing and 

Urban Development, or HUD, plays a vital role, as all of us know, 

in the lives of millions of Americans around the country, both 

through direct housing assistance and initiatives which strengthen 

entire communities. 

Unfortunately, the administration’s budget once again contains 

significant cuts to our investments in working families, their housing, and their communities. This budget, in my view, fails to recognize the realities confronting many of our citizens across the country. Our Nation is confronting a dual housing crisis. 

One is the crisis of foreclosures, falling home prices, and the deterioration of the overall housing market. Obviously, we are working quickly, or trying to, to stop the rising tide of foreclosures and 

to restore confidence in the housing market. 

The other housing crisis, what I call a ‘‘silent crisis,’’ if you will, 

has been affecting low-income families for years. As rents and 

home prices have significantly risen over the last decade, millions 

of low-income families have been priced out and are unable to afford rising housing costs. The gap between the wages of working 

Americans and their housing costs continues to widen. 

The Joint Center for Housing Studies found in their report, ‘‘The 

State of the Nation’s Housing 2007,’’ that in just 1 year, the number of severely cost-burdened households, those that pay more than 

half of their income toward rent, jumped by 1.2 million, to a total 

of 17 million. This is one in seven U.S. households. These families 

struggle to pay rent while also paying for food, medications, transportation, child care, and other family necessities. 

In my view, the administration has failed to address this silent 

housing crisis in its budget for fiscal year 2009. This budget conVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\A393.XXX A393

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tains serious and harmful cuts, in my view. Investment in public 

housing capital needs is cut by $415 million. That is a 17-percent 

reduction. HOPE VI is eliminated. That program has been a huge 

benefit to millions of people across the country, including in my 

own State of Connecticut. Housing for people with disabilities is cut 

by $77 million, or 32 percent. Housing for senior citizens is cut by 

$195 million; that is a 27-percent reduction. Community development block grants are cut by $659 million, an 18-percent reduction. 

I might point out that, given the first crisis I have mentioned of 

falling house prices and foreclosures, that community development 

block grant money can be a great assistance to mayors and county 

supervisors and their support teams in trying to provide some relief in rehabilitating homes that have been foreclosed and causing 

further deterioration in their communities. 

In addition, vouchers and project-based rental housing are both 

significantly underfunded. According to HUD, project-based housing, which provides 1.3 million affordable housing units, is short by 

$2.8 billion. Tenant-based vouchers are also underfunded. According to analysis of recent HUD data, the Center on Budget and Policy Priorities estimates that 100,000 families, including thousands 

of children and seniors, could lose their voucher assistance and possibly their homes under this budget proposal. 

We must reaffirm our commitment to investing in housing for all 

Americans. I am old enough to remember when this issue did not 

have any partisan overtones to it. In fact, some of the strongest advocates for housing were some of the most ideologically conservative people who sat on this panel long before my colleague from 

Alabama and I were here. In fact, a predecessor from his very 

State was ‘‘Mr. Housing’’ in many ways, and it is tragic in a sense 

to watch this subject matter move into partisan politics and make 

it difficult for people who have the most fundamental of needs—decent shelter—to be met. 

Stable housing is the bedrock of families and communities. Without stable housing, children do less well in school and are more 

likely to have serious health problems, including asthma and lead 

poisoning. Parents need stable housing to access schools, employment, and health care. Whole communities suffer when residents 

are poorly housed. At a time when homeowners and renters are 

being forced out of their homes, our housing safety net should be 

strengthened. Unfortunately, the budget proposed by the administration significantly undermines, in my view, the ability of millions 

of low-income families to live in safe, decent housing and strong, 

stable communities. 

In addition to looking at the HUD budget, this hearing presents 

an opportunity to conduct needed oversight, and I want to suggest 

right at the outset that I am deeply troubled by reports over the 

past couple of years of impropriety at the Department at the highest levels. These allegations are serious and undermine the ability 

of the Department to effectively address the needs of people in communities around the country. We have a duty on this Committee 

to ensure that taxpayer dollars are being used properly, and we 

take these allegations very, very seriously and await the results of 

independent investigations into these matters. 


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I want to serve notice, Mr. Secretary, that this Committee’s oversight of you and the Department will be ongoing and rigorous. I 

watched the HUD scandals of the late 1980s, and I am not going 

to allow them to be repeated under my watch. 

In addition, I have been deeply disappointed by the responsiveness from the Department to Committee concerns. We have not received responses to a letter on the shortfall in Section 8 ProjectBased rental assistance, sent in September of last year, nor have 

we received a response to a letter I sent with Senator Menendez 

on HUD’s limited English proficiency policy that was sent last 

March, almost a year ago. These responses are just unacceptable 

and show a lack of respect for the oversight function of this Committee—a responsibility all of us here take very, very seriously. 

The investments made by the Federal Government as well as 

State and local governments in housing and community development not only assist families in need, these investments benefit all 

of us as a Nation. Safe, decent, affordable housing is critical to 

strong communities and a productive citizenry. These investments 

are investments in our parents as well as our children. And I look 

forward to hearing from the Secretary and from our very distinguished panelists on the second panel of witnesses on these important issues. 

Let me just say at the outset here—and I am going to stay as 

long as I can, but my sister-in-law’s mother passed away 2 days 

ago, and I am going to attend the funeral this morning. So I am 

going to stay as long as I can, but I will be going across town to 

a funeral service, and so I will not be able to stay as long as I 

would like to. And I have asked Senator Reed and Senator Menendez, who will be here shortly, to help chair this hearing, and obviously, Senator Shelby will be here, who has chaired this Committee 

and does so very effectively. 

And though I am not going to be able to stay, I also want to take 

a second, if I can, to welcome Diane Randall, who will be testifying. 

Diane Randall is the President of the Connecticut Partnership for 

Strong Communities. She has done impressive work in bringing 

people in my home State together to find affordable housing resources and to end homelessness. In addition to her work with the 

Partnership for Strong Communities, Diane is on the board of the 

Connecticut Housing Finance Agency, the Federal Home Loan 

Bank, Boston Affordable Housing Advisory Committee, and the 

United Way of Connecticut Board of Directors. She is a very significant citizen in our State and has made a significant contribution, 

and I apologize again if I am not here to listen to her testimony. 

With that, let me turn to Senator Shelby. 

STATEMENT OF SENATOR RICHARD C. SHELBY 

Senator SHELBY. Thank you, Mr. Chairman. I want to also welcome to the Committee all of today’s witnesses, particularly Secretary Jackson. 

While mortgage delinquencies have been largely concentrated in 

the private subprime market, FHA has not been immune from a 

similar increase in its own delinquencies. For the second year, 

OMB is estimating that FHA’s single family program costs on a 


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present value basis will exceed revenues, requiring either an appropriation or an increase in insurance premiums. 

According to a recent actuarial analysis, FHA’s single family pro- gram has a present value of future cash-flows of negative $3.9 billion. Secretary Jackson, I am greatly concerned that if FHA continues on its current path, the American taxpayer will be presented 

with a rather large bill here. I am also concerned that some of 

FHA’s financial problems are as a result of its lax attitude toward 

addressing fraud in its single family program. 

In January, HUD’s Inspector General reported that staff in the 

homeownership centers did not consistently refer potentially fraudulent loans to the Office of Inspector General or require indemnification from the lenders when appropriate. Mr. Secretary, I hope 

this is an issue you will address in today’s hearing, as Chairman 

Dodd has alluded to. 

Earlier this year, the Congress passed and the President signed 

into law a so-called economic stimulus package, intended to jumpstart lagging economic growth. I have said before that the size of 

the stimulus package was not sufficient in my judgment to make 

any meaningful difference in a multi-trillion-dollar economy. I hope 

I am wrong. Whether it has the desired effect remains to be seen. 

Some Members of the Senate, however, already have expressed 

a desire, Mr. Secretary, to pass a second stimulus package aimed 

directly at housing. As we have the administration’s expert—you, 

Mr. Secretary—on housing here today, I look forward to hearing 

your views on the need for a housing stimulus package, if any. 

In addition, I look forward to hearing your thoughts on the recent increase in both the FHA’s and the GSEs’ loan limits. We welcome you again to the Committee, where you have spent a lot of 

time. 

Chairman DODD. Thank you, Senator Shelby. 

Senator Casey. 

STATEMENT OF SENATOR ROBERT P. CASEY 

Senator CASEY. Mr. Chairman, thank you very much for calling 

this hearing, and I will leave most of my time for questions, and 

a lot of us will be reviewing budget oversight matters in terms of 

the budget for your Department, Mr. Secretary. But I will have 

some questions that will pertain to other matters, and I will submit 

questions as to the budget oversight functions later. But I will 

leave my time for questions. 

Thank you. 

Chairman DODD. Senator Allard. 

STATEMENT OF SENATOR WAYNE ALLARD 

Senator ALLARD. Mr. Chairman, I would like to thank you and 

also Ranking Member Shelby for holding this hearing to review the 

fiscal year 2009 budget of the Department of Housing and Urban 

Development. I would also like to welcome Secretary Jackson to the 

Committee. And, Secretary Jackson, we appreciate you making 

time in your busy schedule to be here. 

HUD has a long history of problems. For years, it was the only 

Cabinet-level agency on GAO’s high-risk list. However, I want to 

take this opportunity to publicly commend Secretary Jackson and 


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Secretary, now Senator, Martinez before him for their progress on 

this point. Last year, the remaining HUD programs were removed 

from GAO’s high-risk list. This is a tremendous accomplishment 

and represents a great deal of work. I would encourage Secretary 

Jackson and all the dedicated staff at HUD to remain focused on 

maintaining this positive direction. 

Certainly one of the biggest challenges HUD faces is the tight fiscal scenario. This is a constraint shared by all agencies. No one denies that the budget for HUD—or any other agency, for that matter—is insufficient to meet every single perceived need in this 

country. Increasingly, the definition of need seems to be a bottomless well. I believe, though, that this budget strikes a reasonable 

balance at meeting the most pressing needs while still being responsible. I support the administration’s decision to pursue fiscal 

responsibility in these times. It would be irresponsible to continue 

to overspend and leave American debt for future generations. 

It is easy to look at the proposed HUD budget and complain that 

it lacks money. Certainly needs are great, and in a perfect world, 

we would have the money to meet all needs. However, the administration has had to make some very difficult choices, and the choices 

at HUD were, I am sure, no exception in their difficulty. The budget is evidence of those difficult choices, and I commend the administration for facing reality and not simply taking the easy way out. 

I want to reiterate a position that I put forward at many previous hearings. HUD’s success as an agency is not defined by a 

budget number. More money does not necessarily mean more programs, as determined—more money does not necessarily mean 

more people are served or that people are served any better. This 

would seem to be especially true when reviewing the effectiveness 

of HUD’s programs as determined under the PART analysis. Fortyfive percent of HUD’s funding is spent on programs that we either 

know that are failing to produce results or we have no way to tell 

whether they are producing any results. Why do we talk at such 

length about dollars going to HUD but fail to look at what is coming out the other side? I for one intend to keep looking at both 

sides of the equation. 

I appreciate the opportunity to do so at this hearing. Mr. Secretary, your testimony will be helpful to this Committee, and thank 

you. 

Chairman DODD. Thank you very much, Senator. 

Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Chairman Dodd, and I was intrigued by your comments that in your early days and your father’s 

time in the Senate that housing was a bipartisan, non-ideological 

issue. One of my predecessors, ‘‘Mr. Republican,’’ Bob Taft, perhaps 

the most conservative Member of the Senate in the 1930s, 1940s, 

and into the 1950s, was one of this Committee’s and this Senate’s 

best advocates on housing issues. So I think your comments were 

very well taken that way. 

Secretary Jackson, thank you for coming to Cleveland last 

month. Thank you for answering questions and working with us locally. 


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I have had some 85 roundtables around table in 55 of the 88 

counties, asking 20, 25 people to sit around a table with me, and 

I asked them questions about all kinds of issues that affect them. 

And in almost every community, whether it is a community the 

size of Delaware or the size of Columbus, a medium-sized city like 

Lima or Canton, virtually everywhere people talk about housing 

and talk about foreclosures and all the problems that we face. And 

we all know that housing problems do not end with the problems, 

with the travesty and tragedy inflicted on those who actually have 

foreclosure thrust upon them, but the neighborhood and the community and the city government and the city service and police and 

fire and all that. 

Our responsibility is twofold: we must act to prevent future foreclosures, and we must help the people who have lost their homes. 

Last year, I worked with my colleague Senator Casey and also with Chairman Dodd and Senator Schumer to secure $180 million 

in funding for foreclosure prevention counseling so fewer households would lose their homes. It would be irresponsible to cut this 

funding this year when the need for counseling is as great as ever. 

Neighborhoods continue to lose their value at a rapid rate. Without 

upkeep, or in some cases without knocking these homes down, we 

face further problems in that community. And the counseling services are so important, as are community development block grants. 

We have asked in this new legislation that Senator Shelby talks 

about, for an additional $4 billion for community development block 

grants, yet the President’s budget cut CDBG by 22 percent. 

There are roughly 14 million households in our country paying 

more than 50 percent of their income toward housing, yet because 

of budget shortfalls at HUD, owners of project-based Section 8 

properties are being granted short-term contracts rather than the 

year-long contracts they previously received. This coupled with late 

payments from HUD this summer, which forced many property 

owners to dip into personal saving or go further into debt to meet 

their monthly financial obligations, has discouraged property owners from renewing, as you know, those HUD contracts. Just last 

week, my office received notice of a project-based Section 8 property 

that would not be renewing its contract with HUD. By September, 

all residents in this Elyria property—a city of 50,000, 30 miles west 

of Cleveland, all residents in this Elyria property will be paying 

fair market rent. This will have a devastating effect on the 192 tenants at a time when waiting lists for Section 8 housing are up to 

2 to 3 years long in Ohio. The end result is that at a time when 

the demand for affordable housing is rising, property owners are 

losing confidence in HUD’s ability to pay its share of low-income 

rents, and now property owners want to opt out, not because they 

don’t want to provide affordable housing but simply because they 

can no longer afford to. Now is clearly the time to invest in affordable housing, not to cut the programs that serve Americans most 

in need. 

The Federal budget, as many have said, is a document that reflects the needs and priorities of this Nation. We are paying $3 billion a week in the war in Iraq, much of that going to subcontractors like Halliburton instead of spending that money in local business—or having local businesses rebuild Steubenville and Lima 


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and Mansfield and Marion. With a growing elderly population, how 

can we afford to cut senior housing programs? How can we cut 

housing programs that assist disabled individuals? How can we 

turn our backs on families who, with counseling, could save their 

homes? 

Our needs are clear. I hope that you will reconsider as this process goes forward some of the President’s, I believe, unfortunate cutbacks on programs that really matter and priorities that I think 

the majority of the people in this country hold dear. 

Thank you. 

Chairman DODD. Thank you very much, Senator. 

Senator Martinez. 

STATEMENT OF SENATOR MEL MARTINEZ 

Senator MARTINEZ. Thank you, Mr. Chairman, Senator Shelby. 

I welcome my colleague and good friend, Secretary Jackson. I am 

delighted to see you this morning, and I remember sitting where 

you sit today and hearing also about all the draconian and horrible 

things that we were doing at HUD, and actually I also know of the 

very many good things that you continue to do at HUD. I am particularly impressed with the efforts that are continuing to end 

homelessness in America. I want to begin with that because it is 

something that I thought was terribly important during the time 

that I was at HUD and the tremendous gains that have been made 

under the leadership of Philip Mangano and the great work that 

he has been doing, igniting across the country the passion for ending chronic homelessness. Many communities, and an increasing 

number of communities across the State of Florida, are each and 

every day moving forward to try to also within a local plan develop 

a way in which they can tackle the issue of chronic homelessness. 

That is only one of the many, many areas in which I know a lot 

of progress has been made. 

I also know we worked greatly to try to increase the homeownership of many, many American families, and as we did, we were 

doing that with a great passion for the American dream that it 

opens to many families to be able for the first time ever to own a 

home, also understanding that we were doing so for families that 

were moving out of a lifetime of renting into homeownership, sometimes with downpayment assistance, sometimes on a very fragile 

basis. And, unfortunately, through the work sometimes of people 

who would prey on the least informed, these folks are falling into 

bad loans, loans that they could never have sustained. As ARMs 

reset, adjustable rate mortgages that they never should have been 

given for increasing rates that they could not afford, we obviously 

are going to see some foreclosures. For some foreclosures there is 

no answer but foreclosure. But increasingly we know that there are 

many things which I know you have tackled to try to help families. 

Nothing we could do would be important to help struggling families to keep their home. I think far more important, frankly, than 

counseling money—I mean, because counseling is only going to 

bring people to the table to sit down and figure a way. But the 

most helpful way we could do it is to pass an FHA modernization 

so they might be able to refinance into an FHA loan. FHA modVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 E:\HR\OC\A393.XXX A393

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ernization I think would help tremendously distressed families to 

be able to stay in their homes. 

We do face serious problems, and we have—in Florida, I know 

many families have great concern about the price of their homes 

and their mortgages; the high cost of casualty insurance after a 

spate of hurricanes some years ago, this has been a real problem; 

the high cost of property taxes; and, obviously, the slowdown in the 

Florida economy as a result of the subprime problem. We all know 

that the high record rates of foreclosures are hurting more than 

just families. They devastate a whole community and send shock 

waves through our financial institutions and markets. 

With the fiscal year 2009 HUD budget, we have the opportunity 

to advance proposals that will preserve and promote homeownership, respond to the troubled mortgage market, foster healthy and 

sustainable communities and end chronic homelessness, and give 

HUD the resources it needs to manage effective and efficient programs. 

I am pleased that the administration’s budget continues to place 

a great emphasis on affordable rental housing, homelessness assistance, public housing operations, and promoting homeownership. 

There are areas where this budget does not go far enough to provide organizations in Florida and across the country with the resources they need to help build and maintain strong communities. 

I have been disappointed for some time that OMB has chosen to 

zero out funding for HOPE VI, and there is still a substantial need 

for this program. Senator Mikulski and I have introduced legislation to reauthorize and reform HOPE VI so that it can continue to 

revitalize neighborhoods and cities across the country. 

So, Mr. Secretary, I welcome you back to the Committee. I thank 

you for the great work that you are doing, and I look forward to 

hearing your testimony and how you intend to manage HUD for 

the next year. 

Chairman DODD. Thank you, Senator Martinez, and my hope is 

that FHA modernization will also move along, and I probably need 

to chat with you a little bit about that at some point as well. 

Senator Menendez. 

STATEMENT OF SENATOR ROBERT MENENDEZ 

Senator MENENDEZ. Thank you, Mr. Chairman. Let me thank 

you for holding a very important hearing. And, Mr. Secretary, 

thank you for your willingness to talk about our Nation’s housing 

priorities here. 

Let me be quite frank. Based on this budget, I think we share 

a different set of priorities. While at first glance your budget seems 

to increase funding at HUD, this is one of those cases in which the 

devil is truly in the details. This administration cut some of the 

most critical and important housing programs, and at the end of 

the day, it seems to me that our seniors, our disabled, and our lowincome families bear the brunt of those budget cuts. 

The public housing capital fund, which is our Nation’s housing 

authorities’ dependency, is cut by over $400 million. HOPE VI, as 

Senator Martinez said, which is essential—I have seen it in my 

home State of New Jersey, how it is not just changed public housVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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ing but transformed lives—is completely eliminated. Disabled and 

senior housing is cut by $77 million and $195 million, respectively. 

And these are just the national numbers. When you take a closer 

look at my home State of New Jersey, the cuts really become crystal clear to us. Under this administration’s plan, New Jersey would 

lose almost $24 million in funding for the community development 

block grant programs, including over $1 million individual cuts to 

Jersey City, Newark, Essex, and Union Counties. Furthermore, 

New Jersey would lose over 3,000 Section 8 vouchers, and that is 

in addition to the fact that HUD is not paying present obligated 

payments to project-specific—we keep hearing from representatives 

of NAMA who tell me that, ‘‘I have got to pay my mortgage, I have 

got to pay my utilities, but I am not getting my payments that are 

already obligated—that are already obligated.’’ And we would lose 

$14 million in public housing capital funding. 

So the details of the budget are where the real damage is done, 

and those details are a difference between a place to call home and 

a place on the street. 

Now, I look forward to hearing what you have to say, but I simply do not understand how in this current housing crisis, the administration can defend these types of cuts to these types of programs. People are losing their homes all over this country, and this 

budget just seems to push more families out their front doors. As 

far as I am concerned, it is an embarrassment, and it is an insult 

to the American people. We are in a crisis, and the American people are looking to their Government to help save their homes, not 

to take more keys out of their hands. I think this budget does that. 

Finally, Mr. Secretary, I have to be honest with you. This is my 

36th year of public service. If I waited a year to get an answer to 

a letter—this letter was sent March 15th, with the Chairman, of 

last year. Today is March 12th. March 12, 2008. This was March 

2007. I certainly would not be here today if that is the way I responded. I think we deserve a response. Whatever your response is, 

I think we deserve a response. When our Nation is facing a true 

housing subprime crisis, I expected far more in this budget, and I 

am looking forward to see how you can justify it. 

Chairman DODD. Thank you, Senator Menendez. 

Senator Carper. 

STATEMENT OF SENATOR THOMAS R. CARPER 

Senator CARPER. Thank you. Thanks, Mr. Chairman. Thanks for 

pulling this together, and, Mr. Secretary, thanks for joining us. 

Who was your predecessor as HUD Secretary? 

Secretary JACKSON. Senator Martinez. 

Senator CARPER. Senator Martinez. As I walked in, I watched 

him questioning you, one generation questioning another generation. He really left you a mess over there at HUD, didn’t he? 

[Laughter.] 

Senator MARTINEZ. Wait a moment. 

Senator CARPER. You are trying still to clean it up, I know, but 

we are glad that you are here. Thank you for joining us. 

Let’s talk a little bit about the present situation that we face, 

and your folks have been very much involved in it. But the economic downturn that we are dealing with is many respects a direct 


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result of years of predatory lending practices, of weak credit ratings in an ever rising market. The credit quality of customers was 

consistently swept under the rug by a lot of unscrupulous lenders. 

Loans were given to customers without a whole lot of regard to 

their ability to repay in many instances. These loans were bundled 

into securities and given a AAA credit rating and sold around the 

world. And investors around the world bought those magical securities that kept providing above-market returns. This all has led us 

to, for a lot of families, the end of the dream of homeownership. 

It has either ended it, or for a bunch of folks it has been indefinitely postponed. 

I want to turn to some new initiatives, and I want to acknowledge the work that you and some of your folks are doing, and others in the administration. FHASecure and Hope Now are steps in 

the right direction. Obviously, we have got to be creative, and we 

have to think of new ways to help homeowners that are in distress 

or those that are going to be in distress. 

Project Hope Now is, I think, a very good idea and well intentioned. It was moving slowly, and I realize it is moving faster, we 

are getting a little more pick-up on it. But still it is not moving fast 

enough. 

We are all trying very hard to put together some programs here 

in the Congress that communities can use to mitigate the foreclosure crisis. 

Secretary Paulson was before us about 3 weeks ago, along with 

Chairman Bernanke, and I asked Secretary Paulson, I said, What 

are your top three priorities, what are the administration’s top 

three priorities for housing recovery? And this is what he mentioned. First, he said, a strong independent regulator for GSEs— 

Fannie and Freddie and the home loan banks; but, second, modernization of FHA, bring FHA into the 21st century. And he mentioned the idea of making it possible for housing authorities to 

issue—to actually give revenue bonds that could be used to help in 

some cases to refinance homes. 

I am glad that in your own testimony you have mentioned FHA, 

but I was disappointed that you made no reference to GSE regulatory reform. As HUD Secretary, part of the answer is there are 

sort of two masters, but you are clearly one of them, and the major 

one. But I read with alarm that the sales of GSE mortgage-backed 

securities are starting to slow down. We need to do everything possible to maintain a liquid market, and I applaud the Federal Reserve for their recent efforts on the monetary front. 

I encourage you to use your position to do more to strengthen the 

regulatory structure of the GSEs and protect the secondary market. 

Hopefully we will soon have an FHA bill, a consensus between the 

House and Senate. I know our Chairman and Senator Shelby have 

been working with counterparts in the House to get us there. And 

I look forward to working certainly with our Chairman and with 

my colleagues, but also with you and others in the administration 

on GSE regulatory reform and to make sure that they have a 

strong, independent regulator. 

The last thing I want to say is we had a wonderful public event 

at the University of Delaware earlier this week to announce, along 

with the Federal Home Loan Bank of Pittsburgh, the creation of— 


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and funding—recognition of eight or nine blueprint communities, 

and the Home Loan Bank of Pittsburgh provided, I think, about 

$200,000 to nine communities in Delaware to help them to prepare 

their development and revitalization plans. It is a program that 

they call the blueprint community program. And I applaud the 

work of the Pittsburgh Home Loan Bank in funding the program. 

This funding is not from their affordable housing program, but it 

is a separate program that is funded solely from their profits, and 

each community team is made up of at least one resident, the 

banker and a nonprofit representative. 

I just want to encourage you, as a member of the Federal Housing Finance Board—and I think that is the regulator for the Federal home loan banks today—to encourage other Federal home loan 

banks to adopt similar programs, to model really what Pittsburgh 

has done. 

And, last, I want to say that one community in Wilmington 

called Riverside received a blueprint community grant to prepare 

a development plan. Across the street from Riverside was a blighted and crime-ridden neighborhood known as East Lake, about 2 

miles from where I live in Wilmington, Delaware. And thanks to 

a $29 million HOPE VI grant, it is now a thriving and vibrant community, really a beautiful community. The folks at Riverside are 

going to need every penny of their $25,000 grant to come up with 

a program to do what HOPE VI did. And I was disappointed—I 

mentioned this as well, but I was disappointed, really disappointed 

to see the program was eliminated entirely from the HUD budget. 

I think we are going to need more HOPE VI programs than less. 

Thanks very much for being here. We look forward to hearing 

from you today. 

Thanks, Mr. Chairman. 

Chairman DODD. Thank you, Senator Carper. 

Senator Reed, any opening comments? 

STATEMENT OF SENATOR JACK REED 

Senator REED. Mr. Chairman, thank you. Mr. Secretary, let me, 

if I can—as I mentioned earlier, I am going to be departing, but 

let me, if I can, before you get to your statement, ask you a question. Senator Martinez raised the issue of FHA modernization, and 

as you know, the stimulus package raised the FHA loan limits for 

1 year throughout the Nation. On December 31st, of course, they 

will go back to where they were. And I wonder if you would agree 

that it is important for FHA to be a significant long-term presence 

even in high-cost communities around the country. What is the reaction? 

Secretary JACKSON. First of all, Mr. Chairman, let me, before I 

answer that question, apologize to you and to Senator Menendez. 

I am not aware of the letter, but I take full responsibility, and I 

am extremely sorry that we have not gotten back to you on that 

process. And I will make sure that you get an answer very quickly. 

And I think each one of you really has the right to be very disturbed if it has been a year since we responded to you. That is not 

proper, nor is it correct, and I accept the full responsibility. 

Chairman DODD. There is another letter, too, that is not as ancient as that one, but there is another letter we—— 


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Secretary JACKSON. I will look at those. 

Chairman DODD. Did you want to respond to the FHA issue? Because we are wrestling with these issues up here, and Senator 

Martinez raised it, and I would just like to, before I have to depart, 

get a quick answer. 

Secretary JACKSON. I really think that as long as it is an acceptable level that can address the issues, especially in these high-cost 

markets—and we are talking about Virginia all the way back to 

Maine, we are talking about Utah all the way back to California. 

I think, yes, we should do everything in our power, because right 

now we are priced out of the market. And when I made the announcement last week while in California with the Governor talking about the new level for the next 10 months in 729, it was received extremely positively in Los Angeles County, Orange County, 

where for the first time they knew we would be able to make loans 

to people under FHA, and they were extremely pleased. 

Chairman DODD. I thank you for that, and it is helpful. Again, 

we are all conscious of these things, but obviously these programs 

are designed to work nationwide, and there are disparities, obviously. 

Secretary JACKSON. That is correct. 

Chairman DODD. And where you have higher costs, clearly to deprive the ability of FHA to make a difference there is certainly not 

what we ever intended with that. So I appreciate your answer to 

that question. 

And, Mr. Secretary, let me just also mention—I am not going to 

get into it here. Others may raise some questions. But I am going 

to submit a letter to you, if I can, involving Mr. William Hairston, 

regarding Columbia Residential and Michael Hollis, and I would 

like you to respond to inquiries about that. I will submit in the 

form of a letter rather than a question here this morning to the 

Committee at the appropriate time. 

With that, why don’t we take your opening statement. 

STATEMENT OF ALPHONSO R. JACKSON, SECRETARY, 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Secretary JACKSON. Thank you. Thank you very much, Chairman 

Dodd, and I want to thank the Ranking Member, Richard Shelby, 

and 

Chairman DODD. I apologize for him. He has either a markup or 

the Defense Appropriations Subcommittee and he asked politely to 

be excused, and he will try to come back if he can. But that is a 

very important matter for him he has to attend to this morning. 

Secretary JACKSON. Thank you. And the Members of the Committee for the opportunity to appear here before you today. 

Mr. Chairman, I am here to present the fiscal year 2009 HUD 

budget, but before I do that, Mr. Chairman, I want to thank you 

and the entire Committee for the priority given to the FHA modernization. We need this legislation right away. As you know, as 

you and your colleagues finish work on this important legislation, 

I should mention the administration’s remaining priorities with respect to what the final bill looks like: 

First, the legislation must allow HUD to address the recent explosion in loans where sellers provide buyers downpayment assistVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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ance and then add the price to the homes. These loans have a foreclosure rate 2 to 3 times the norm. They are costing hard-working 

Americans their homes, and these types of loans have pushed FHA 

to the brink of insolvency. 

Second, Congress should allow FHA to proceed later this year 

with some flexibility in setting premiums. I assure you we would 

have no intentions of increasing premiums on our bread-and-butter 

customers. But a few modest changes will strengthen FHA’s ability 

to offer safe alternates to homeownership who want to refinance 

from the high-cost subprime loans. It will actually allow us to reduce the premiums for potential homeowners with low incomes. 

Such legislation would fit well with the general direction of the 

President’s budget. 

The proposed budget is fiscally sound and represents a historical investment of $38.5 billion for programs at HUD. This is an increase of more than $3 billion, or 9 percent over last year. The 

budget is almost $1 billion more than our current budget authority. 

This funding will be timely and on target for the people who are 

served by the Department. We need this budget to maintain the 

current homeownership and stimulate new purchases. It will help 

us expand our current efforts. 

Let me put the budget in context. Last year, President Bush and 

I introduced FHASecure to help more Americans facing foreclosure 

refinance into a safer, more secure FHA loan. We did this using the 

current regulatory authority, and we have been able to make FHA 

available to more qualified families. There has been a noticeable increase in the number of closings. We believe that FHASecure will 

help about 300,000 families refinance into affordable FHA-insured 

mortgages. FHASecure has proven to be extremely valuable. 

Mr. Chairman, you should also know that in only 5 months, from 

September 2007 through January 2008, FHA has pumped more 

than $37.5 billion of much needed mortgage activity into the housing market, and more than $14.7 billion of that investment came 

through FHASecure. FHA modernization would greatly assist our 

efforts. 

As you know, the economic stimulus package provided a temporary 10-month window. We announced the new loan limits last 

week when I was in California. This will help hundreds of thousands of people nationwide, perhaps as many as 250,000. But this 

is no substitute, in my mind, for FHA modernization, which would 

waive the appropriate loan limits permanently and also provide 

other important changes that would benefit American homeowners. 

In addition to these actions, we are also taking steps to ensure 

it is easy for homeowners to understand the fine print when they 

do sign on the dotted line. That is why we are committed to RESPA 

reform. We are in the process now of publishing the Real Estate 

Settlement Procedures Act rules and hope it will bring much needed transparency to the homebuying process. Now the budget will 

work in concert with all other actions. For instance, the proposed 

budget appropriately increased the funding for housing counseling. 

America needs the President’s request for $65 million in the budget 

for housing counseling. Those funds, in addition to NeighborWorks 

$180 million, provide great services to those who want to own a 

home. Many Americans facing foreclosures would have greatly benVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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efited from housing counseling. We know it works. Last year, 96 

percent of the households that saw HUD-approved housing counselors and completed the program avoided foreclosure. This fund 

will help partially address today’s crisis and prevent such a situation from happening in the future. 

We also need to continue Government efforts to partner with the 

private sector to help build back the housing market. The Hope 

Now Alliance is a good example. Hope Now is a private sector volunteer industry effort to address foreclosure through freezing mortgage interest rates and working directly with financially troubled 

homeowners. I also commend the recent effort by the Hope Now Alliance members to provide temporary pause for homeownership in 

the foreclosure process. These actions provide direct assistance to 

those in need right now. They are the sort of responses that provide quick help for homeowners in need. 

As in the past, Mr. Chairman, the largest part of our budget is 

for affordable rental housing. Combined, this budget seeks more 

than $29 billion for our Rental Assistance Program, which we expect will be able to help more than 4.8 million households. We are 

mindful of the continuing need for more affordable rental housing, 

especially as low- and middle-income workers still find themselves 

priced out of the real estate market. We need to maintain the units 

currently available and expand the numbers. This budget will help 

us do that. 

Finally, Mr. Chairman, the homeless must not be forgotten. We 

are making strides and cutting the number of chronic homeless 

with our ‘‘continuum of care’’ approach. For the first time ever, we 

saw a decrease in the number of chronic homeless last year, a drop 

of 12 percent. We must continue the progress. Our budget once 

again seeks an increase for homeless programs to continue this 

good work. 

Mr. Chairman, I know that you are mindful of the need to help 

our Nation’s homeless veterans. Americans are deeply, profoundly 

grateful for the service and sacrifice of our Nation’s veterans. In 

the proposed budget, there is a request for $75 million for our Veterans Affairs Supportive Housing Program. Prior to 2008, this program had not been funded since 1993. With the Veterans Administration, we will create an additional 9,800 vouchers for fiscal year 

2009. This will bring the total to approximately 20,000 homeless 

veterans being served through housing and social services, double 

the number of available housing vouchers. 

Overall, this is a good budget for the Department—balanced, reasonable, appropriate, and workable. It allows us to operate within 

a framework of cooperation and partnership with related Federal 

agencies, other levels of government, and the nonprofits. 

Mr. Chairman, as we proceed through the budget process, I look 

forward to working with you and Members of this Committee. 

Thank you so very much. 

Senator REED [presiding]. Thank you, Mr. Secretary. 

I will first recognize Senator Casey, and then I will recognize 

Senator Allard. Senator Casey. 

Senator CASEY. Mr. Chairman, thank you very much. 

Mr. Secretary, I listened to your opening statement, and I was 

looking at the text of it as well. And in the course of your opening, 


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you covered a lot of important subject areas. You talked about 

FHA. You talked about your appropriation. You talked about the 

foreclosure crisis that has gripped the country and so many of our 

families. You talked about the Hope Now Alliance. You talked 

about homelessness. All of that and so much more of what is in 

your statement is critically important to the country, and it is important to the work that you do. 

But I was struck by one thing that was not—or one area, I 

should say, that was not in your statement, and that was about the 

controversy that has been swirling around your stewardship of this 

Department for too long. Among other publications, I am just reading from the National Journal, November of 2007, and that is a 

couple months back, but I think most of this is still relevant. It 

says, and I quote—I am looking at the third paragraph of this 

story, November 21, 2007. It says here, ‘‘For several months, a Federal grand jury, Justice Department prosecutors, the FBI, and the 

HUD Inspector General’s Office have been exploring’’—and they 

refer to you—‘‘Mr. Jackson’s role in contracting decisions at the 

Housing Department.’’ 

I want to say two things about that. No. 1 is that even when 

there are allegations of that type, I think it would have been better 

for you to at least address that in your statement somehow, to inspire some confidence that even though these are ongoing investigations, that you take them very seriously and that you are going 

to try to deal with them and manage the Department in that context. But I am not going to ask you about that because my job 

here—I am not a prosecutor. I am not an investigator. I am a 

United States Senator who was elected by the people of Pennsylvania. I am an elected official. You are a public official appointed 

by another elected official. We have obligations every day to earn 

the public trust, and I mean that, every day. That is what I have 

to do, and that is what you have to do. And that is why not just 

because of my obligation as a Senator but my obligation as a public 

official who is very concerned about what is happening in Philadelphia right now. And we pick up the Washington Post today, on 

page A3, and it reads, ‘‘HUD E–Mails Refer to Retaliation.’’ I think 

you know what we are talking about here. 

I wanted to ask you specifically about those e-mails, in particular, e-mails that were sent between two Assistant Secretaries, 

Mr. Cabrera and Ms. Kendrick, both Assistant Secretaries, not lowranking people in HUD. I will refer to three and then ask you 

about them. 

E-mail number 1 dated, dated January 12, 2007 at 4:52 p.m. 

from Mr. Cabrera to Kim Kendrick. It says, and I quote, ‘‘Would 

you like me to make his life less happy?’’ That is the first question, 

the ‘‘his’’ referring to the chairman of the Philadelphia Housing Authority, Mr. Carl Greene. So question No. 1 is, ‘‘Would you like me 

to make his life less happy?’’ And then there is a following question: ‘‘If so, how?’’ 

One minute later, Kendrick responds to Cabrera, and I quote, another question: ‘‘Take away all of his Federal dollars?’’ 

Then Cabrera responds to Kendrick at 5:04 p.m., some 11 minutes later. Mr. Cabrera says, ‘‘Let me look into that possibility.’’ 


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Now, I was the Auditor General of Pennsylvania for 8 years. We 

did a lot of audits and investigations, and we were very, very tough 

on public officials and public agencies. I have never seen anything 

like that, at least at the level of State government, and I know how 

hard it is to run a department. You have got to balance budgets 

and all of that. I did that. But I want to know a couple of things 

about this. 

I want to know, first of all, when you were made aware of the 

content of these e-mails. 

Secretary JACKSON. Senator, the PHA has now sued HUD regarding the accessibility obligations. The judge hearing this case 

has requested that the parties not attempt to try this case in the 

media. Since that time, despite the publication of additional stories 

in the media, we have complied with the judge’s request. We regret 

that the PHA appears prepared to invoke legislative assistance, as 

well as the media, rather than simply pursuing the litigation that 

it has begun, or better yet, simply reach an agreement with HUD 

to meet the accessibility obligations. I will simply say that through 

the process, HUD’s objective has always been to ensure that the 

PHA complied with the obligation to provide accessible units for 

persons with disabilities. 

And I would just say, Senator, I understand your concern, but I 

really would like to honor the request of the judge not to discuss 

this in the media or the press. 

Senator CASEY. Well, Mr. Secretary, this is not a question that 

is coming from a reporter. This is a question coming from a United 

States Senator on the Banking Committee. I am not a member of 

the media. I have an obligation to ask questions like this, and I 

think it is incumbent upon you to answer a question like this not 

just in front of this Committee, but in the context of the people 

that you are supposed to serve and I am supposed to serve, some 

84,000 clients, people who depend upon the housing programs that 

we have for the country—in Philadelphia in this case, 84,000. 

So I would ask you again: When did you become aware of the exchange of this e-mail? 

Secretary JACKSON. I will say again, Senator, I truly respect your 

question, but at the—— 

Senator CASEY. Are you telling me you are not going to—I know 

you read a statement from—— 

Secretary JACKSON. At the request of the judge—— 

Senator CASEY. A statement that the lawyers give you to read, 

but are you telling me you are not going to answer this question? 

Secretary JACKSON. I am saying to you that at the request of the 

judge and at the request of our General Counsel—— 

Senator CASEY. You are not going to answer the question. 

Secretary JACKSON [continuing]. I am not going to—— 

Senator CASEY. Let me move on. I am almost out of time—in 

fact, over time. Let me ask you a second question. Once you became aware of this—you are obviously aware of it. Everyone is 

now. Once you became aware of this, did you take any action with 

regard to these two employees about what the content of this email is about? Did you take any action at all? Or did anyone in the 

Department take action with regard to these e-mails? 


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Secretary JACKSON. Senator, I just do not feel at ease discussing 

this based on what the judge has asked us and—— 

Senator CASEY. It is not a question of being at ease. It is a question of whether you are going to answer the question or not. And 

I think you are telling me—are you telling me you are not going 

to answer this question either? 

Secretary JACKSON. Senator, I just don’t believe that I am in a 

position to answer that question. 

Senator CASEY. Well, I cannot compel you to answer the question 

sitting here today. But I will say this, and I am out of time, and 

I will try to come back. But let’s assume that none of these allegations in these investigations are happening. Let’s assume they 

never happened or they are all resolved and there is no problem 

here. Let’s assume these never commenced at all. Let’s assume that 

all of these things that you talked about today are not only funded 

at the level they should be funded but are working well. Let’s assume all that. Let’s assume that the Department is running perfectly. 

Despite all of that, it is this kind of stuff that undermines public 

confidence in public officials, and you cannot allow this to happen. 

You have to tear this out by the roots when it happens. And I 

would hope—I would hope—that someone in your position would 

take decisive action. In fact, I would hope that even before it happened, you would have policies in place and a culture in an agency 

like this which would be so strong against something like this that 

these employees would never even dream of putting this kind of information in an e-mail or threaten to threaten another player in 

the world of public housing with retaliation based upon—and using 

funding to use that retaliation. And I want to know more also 

about the Code of Conduct at HUD, who is in charge of it, whether 

it is being enforced. But I am minutes over my time. 

Thank you. 

Senator REED. Thank you, Senator Casey. 

Senator Allard. 

Senator ALLARD. Thank you, Mr. Chairman. 

I compliment you for paying attention to the judge. I think the 

thing that needs to be pointed out is that to answer a question related to a subject he asked you not to talk about can hold you in 

contempt of court. And I am not an attorney, but I certainly—if I 

was in your position, I would certainly respect that. And I think 

the Senator from Pennsylvania knows that. And so, you know, you 

are in a tough position when you have to answer a question like 

that, and I think your priorities are in the right place. 

Secretary JACKSON. Thank you. 

Senator ALLARD. I do have a question for you, Mr. Secretary. In 

your February 11, 2008, letter to Chairmen Frank and Dodd regarding our Committees’ respective FHA bills, you stated the following, and I quote: ‘‘HUD strongly supports the provision in Senate bill 2338 expressly prohibiting downpayment assistance from 

the seller or from any other person or entity that financially benefits from the transaction.’’ 

Is this still your position? 

Secretary JACKSON. It is still our position. 


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Senator ALLARD. OK. One other question. You also stated, ‘‘HUD 

supports the provisions of Senate bill 2338 that authorize a permanent increase in FHA loan limits from $364,790 to $417,000, or 100 

percent of the Federal Home Loan Mortgage Corporation conforming loan limit in high-cost areas and from $200,160 to 

$271,050 in lower-cost areas. And then you go on to say, ‘‘HUD 

does not support the provisions of H.R. 1852 that authorize FHA 

to permanently guarantee loans greater than the conforming loan 

limit because FHA’s single family program should remain targeted 

to traditionally underserved homebuyers.’’ 

Is this still your position? 

Secretary JACKSON. Yes, it is, Senator. 

Senator ALLARD. Thank you. Mr. Secretary, as you know, I am 

a strong proponent of the PART program. I have warned you frequently that I will have some questions for you, likely, on PART. 

And I am certainly pleased with, you know, how you have progressed along, and I think that, you know, dollars into a program 

is not everything. I mean, there are Members on this Committee 

and in the Congress and in the administration that brag about the 

dollars. But to me, it is more than just dollars. It is whether that 

program is effective or not. And if it is not an effective program, 

you can put all the money in the world in it, and nothing is going 

to happen. 

And so I encourage you to clearly incorporate the PART assessment into your budget materials, and I have a booklet here put out 

by the Transportation Committee, Mary Peters, Cabinet member 

there, your colleague on the Cabinet. And she has actually put 

right at the very front of the book, ‘‘Policy Performance and Program Outlook.’’ And she has explained what each one of the ratings 

means, and that page here where she is taking each one of the 

agencies under control, and then also, you know, makes some suggestions on how they manage those results. And I noticed in yours 

that you had not put that in your budget, and I want to strongly 

suggest that you go ahead and do that. I think it helps you in your 

presentation, puts it right out front. I think it reflects in a positive 

way on your agency. 

Unfortunately, there are a number of programs that you have to 

deal with that still receive ineffective or results not demonstrated, 

and I think we just need to put them out there in the public and 

make them readily available to policymakers so that—you know, 

you cannot do this by yourself, and I think everybody on this Committee is interested in seeing results to the programs, you know, 

particularly if they are their favorite ones and ones that they support. 

So my question to you: How current are the PART ratings? For 

example, I would note that the ineffective rating assigned to the 

HOPE VI program came from an assessment conducted 5 years 

ago. As you just noted, though, the Department has ongoing efforts 

to improve programs, especially the sub-par programs. What is the 

schedule to update the assessments? If you would answer the first 

two questions, I would appreciate it. 

Secretary JACKSON. We are continually assessing the PART program. To give you an example—you just used the HOPE program. 

Of the 270 grants that we have given out in the HOPE VI program, 


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only 75 have been completed in the last 12 to 14 years. We are still 

looking at $1.4 billion outstanding, and clearly, one of the reasons 

that I have said that I really do not think HOPE VI should be 

funded at the level it has been is because of the outstanding 

money. 

What I would like to do—and I have discussed this with both 

sides of the aisle, both the House and the Senate, and I will get 

John Cox—is that let us recapture some of that money that is 5, 

8, 9 years old and reallocate it. 

Senator Menendez said something that I thought was important. 

He has had a number of great HOPE VIs. So has Philadelphia. I 

think that where people have performed on it, we should recapture 

the money, give them the opportunity to do much better, and I still 

feel the same way. But we consistently make assessment. 

And the last thing I would say, Senator, is this: For almost 18 

years, we were on the high-risk list. This is the first time that 

HUD has been off the high-risk list, because we are doing—and I 

do not take full responsibility because I have my colleague, my 

friend and my colleague, Senator Martinez, who started this process. So I think we are running the agency more efficient, more effective, and we are addressing many of the issues. 

When we walked in there, as the Senator can tell you, we had 

400 different computer systems. Today we have about 109. So we 

have cut down tremendously, and we are consistently evaluating 

how we can best manage the program. 

John. 

Mr. COX. Thank you, Mr. Secretary. 

Senator, just a quick answer to your question specifically for 

2008, our Housing for Persons with Disabilities, our Housing for 

the Elderly, our Housing for Persons with AIDS, and our RAS Program, which is the Resident Assistance Program, are all scheduled 

to be PART’d. Three of those four are in the category of results not 

demonstrated. So we continue to work on PART-ing those programs. 

Senator ALLARD. Well, it is good to have that information. 

The next question I have, and I want to take a little extra time 

here because Senator Casey did, but I will not take a lot. I will not 

abuse the privilege. I just have one question here. Do you believe 

all the programs should be reassessed on the same schedule, or 

should deficient or key programs be evaluated more frequently? 

Secretary JACKSON. I really think that we should have a continuum system where we go as we are using now, where we evaluate certain programs. This year, as John has said, we will evaluate 

those, and next year we will evaluate others. And we have tried to 

do that since we have been here at the minimum every 3 years. We 

have not been totally successful, but I would say that we are probably 80, 85 percent successful. 

Senator ALLARD. Yes, and I notice here on the Department of 

Transportation, some of them have been to 2002, so it has been 

longer than they have. I mean, the fact is that you are doing it, 

and that is the important first step, and then I think later on perhaps we can require—and people get more comfortable with it, we 

can perhaps maybe push for more frequency in most cases. But the 


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fact that you are doing it is very appreciated, at least from this 

Senator. 

Secretary JACKSON. I will tell you, Senator, that I did it when I 

was running the utility company, and as you know, I am probably 

in a very unique position because I am the only HUD Secretary 

that has ever run a housing authority, and I ran three of them. 

And I did it while I ran housing authorities. In fact, Senator Casey, 

I am the first person who had Carl Greene to be my information 

technology person when I was in Washington, D.C. And so I have 

a great relationship with him, at least I hope so. 

Senator ALLARD. Mr. Chairman, thank you for your patience, and 

sorry I ran over a little bit. Thank you. 

Senator REED. That is quite all right. 

Mr. Secretary, you do not want to litigate this case in the press, 

and you just did a little litigation there. You have got to be consistent, at least. 

One comment before I recognize Senator Menendez. One of the 

major responsibilities of the Secretary is to be able to respond accurately and completely to the U.S. Senate. 

Secretary JACKSON. Yes, sir. 

Senator REED. And to the extent you cannot do that, I think you 

have to seriously ask how effective you can be in your role. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Secretary Jackson, first, just so you know, my name is Menendez. 

Secretary JACKSON. Menendez. 

Senator MENENDEZ. Second, I appreciate your response to the 

question in the letter, and we look forward to the answer. 

Third, I have to say I had no intention of speaking on Senator 

Casey’s points, but if a Member of the U.S. Senate in an official 

hearing cannot get an answer from a Secretary on a critical issue 

such as Senator Casey has raised, there is a difference between a 

judge saying do not play it out in the press—that is about issuing 

press releases and fighting it out there. But at an official hearing 

of the U.S. Senate, if a Senator cannot expect that a member of the 

President’s Cabinet, regardless of whose President that is, is not 

going to be responsive because they want to hide under the guise 

of something that is not a legal impediment, then we have a serious problem, because we have a fiduciary responsibility to the people who we represent, and we cannot pursue that responsibility if 

we cannot get answers. So I think Senator Casey has every right 

in the world to get an answer, and I do not see anything that, Mr. 

Secretary, you said that impedes it. There is a difference about 

having press releases and news conferences and fighting it out in 

the press. That is different than answering a Member of the U.S. 

Senate. And I would hope you would reconsider if Senator Casey 

has a second chance. 

Let me go to two specific issues, and I raised it in my opening 

statement: Project-Based Section 8. In a budget briefing a few 

weeks ago as well as in staff-level meetings, HUD has now admitted to what we have been saying for some time, that the Section 

8 Project-Based Rental Assistance Program is short by $2.8 billion. 

Now, I am concerned that HUD’s solution of signing short-term 


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contracts with owners will lead to the loss of thousands of affordable housing units. In fact, 50 organizations, including investors, 

lenders, housing finance agencies, local governments, and housing 

developers have registered similar concerns. They believe that investors and lenders will be unwilling to provide long-term financing 

for these properties and owners will opt out of the program as soon 

as possible, putting up to 500,000 affordable housing units at risk. 

I know there is one in my home State in Jersey City, a condominium developed right next door, getting fantastic rates, same 

type of building, next to it is Project-Based Section 8. There is no 

reason in the world, as these people are not getting paid, that they 

should ultimately not pursue a market-based approach, and we will 

lose all of those people’s ability to find a place to call home. So the administration’s request of $400 million in advance appropriations, according to the HUD staff, will only cover an additional 

month or so of funding, will not allow HUD to sign long-term contracts. The Chairman and a group of us have sent—23 of us, as a 

matter of fact, to the Budget Committee, of which I am a member, 

requesting $2.8 billion, and we have that in the budget that we are 

debating on the floor. 

Wouldn’t that help ensure that these 1.3 million units continue 

to remain affordable? 

Secretary JACKSON. You are absolutely correct, and we have assured the owners of those properties that they will be covered all 

the way into 2009. And we agree with you, Senator, that that has 

been a problem, that we have been short-funded. But we are correcting that problem, and we are working with both the Senate and 

the House to make sure that that is done. 

Senator MENENDEZ. Let me ask you this: Owners in the projectbased program have gone through periods where payments from 

HUD were late. Last summer, owners went unpaid for up to 3 

months. 

Secretary JACKSON. And, again, you are correct, and I cannot debate that with you—— 

Senator MENENDEZ. Without any official notification from HUD. 

Now, GAO has documented HUD’s challenges in making timely 

payments to owners, and they offer three recommendations: 

streamlining automatic contract renewal process, developing systemic means to better estimate the amounts that should be allocated, go on and on, notifying owners if their payments are going 

to be late. 

It is my understanding these recommendations have not been 

implemented, and, in fact, when payments were late last year, 

owners were not told when to expect payments. 

Have you implemented the recommendations? 

Secretary JACKSON. Senator, that is not true. The owners knew 

when the payments—and, second, we are implementing those. 

Senator MENENDEZ. You are implementing. You have not implemented them. 

Secretary JACKSON. We have implemented it to the point that the 

owners know now that they are going to be paid all the way into 

2009. 

Senator MENENDEZ. Can you send me in writing how you have 

implemented the three recommendations of the GAO? 


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Secretary JACKSON. I will. 

Senator MENENDEZ. In the Fiscal Year 2008 Consolidated Appropriations Act, Section 235 of the HUD bill requires the Department 

within 60 days of enactment to submit various things, complete 

and accurate accounting of the actual project-based renewal costs 

for 2007 and 2008, revised estimates of the funding needed to fully 

fund all 12 months of all project-based contracts under Section 8— 

it goes on—for those dates, identification of all sources. Have you 

submitted this report to Congress? 

Secretary JACKSON. We have submitted it. 

Senator MENENDEZ. OK. So we can get a copy of that. I have not 

seen it yet. If we need a copy, I am sure we can get it from you. 

Secretary JACKSON. And if not, we will make sure that—we will 

send it to you. 

Senator MENENDEZ. That would be very helpful. 

Finally, Mr. Chairman, if I just may, one last question. You 

know, I visit with the public housing authorities across my State, 

and I have to be honest with you. These are exceptional people 

doing exceptional jobs with enormous challenges. And at 81 percent 

funding of your public housing operating fund, that just simply— 

this is the lowest operating proration in history. Now, it is really 

even lower when the fact that some expenses, such as utilities, cannot be pro rated since agencies have to pay utility companies 100 

percent of their bills, and we have seen the rising costs of that on 

both electricity as well as heating. This is the equivalent of saying 

that some housing authorities have got to shut down 19 percent of 

your operations. 

I mean, how is it that we continue to take this view that you 

have a streamlined operating process because HUD has worked 

very hard at getting these entities, some of them have the highest 

ratings that you give. And yet you take—and you say, you know 

what? Nineteen percent of your operating capacity, we are just not 

going to fund it. How do you expect these people to make ends 

meet? 

Secretary JACKSON. Senator, I truly believe that at the funding 

level that we are operating at, that many have reserves. They can 

make the ends meet. As I said a few minutes ago, I think that 

the—I cannot remember distinctly, but the last housing authority 

that I ran was in Dallas, Texas, and I think at that point in time 

we were 86 or 88 percent of our budget. And I realized that I has 

to look at this from a position where asset management—many of 

these housing authorities have units that they want to be paid on 

that are not being used. And I will say this about the person that 

I had an opportunity to talk with, Mayor Booker and his housing 

authority director. I think the person that they have hired in Newark is doing, in my mind, a very phenomenal job. And I think he 

is using his reserves well. He is using many other aspects of his 

budget well. 

Senator MENENDEZ. Well, Mr. Secretary, he would be—and I will 

stop, Mr. Chairman. He would be the first one. I say to you, hey, 

I am doing everything I can—— 

Secretary JACKSON. And you are absolutely—— 

Senator MENENDEZ [continuing]. I am using all my assets, I am 

doing asset management, but you keep chopping 19, 20 percent off 


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of me, and I have only got so many assets to move around at the 

end of the day. As a matter of fact, here is the history. Here is the 

decline. And you talk about using money in reserves. Those reserves are getting depleted. 

So we need to revisit this, but I will not prolong it, Mr. Chairman. I appreciate the Chair’s courtesy. 

Senator REED. Thank you, Senator Menendez. 

As you have noticed, Senator Martinez, we have been somewhat 

lenient on the time, and that lenience will also be extended to you. 

Senator Martinez. 

Senator MARTINEZ. Thank you, Senator Reed. Thank you very 

much. 

Well, let me begin, because I really am loath to delve into some 

of these issues, but I cannot help but sit here and reminisce about 

the day that I first met Alphonso Jackson. I was looking for good 

people to help me run the Department of Housing and Urban Development. I had been appointed by the President. We were in the 

midst of a transition. When you get to a place where there are 

10,000 employees, a budget of $30 billion, and the resources of a 

transition require you to move immediately to try to find good people, I remember meeting Alphonso Jackson and having had experience in running a couple of housing authorities, was not looking for 

a job in the Government, was, in fact, not interested, and—but I 

heard he was a good man, and I heard that he had a lot of experience. And I felt it was important to bring someone into the Department to be my Deputy Secretary who had actually hands-on experience. 

He not only had experience in public housing, but he also had 

private sector experience, and he was good enough to accept my 

offer to him. He left a lucrative, well-paying job in the private sector to come and serve our Nation and serve the public. 

And while I know that all of us humans have frailties and none 

of us are perfect, and from time to time mistakes can be made, I 

know Alphonso Jackson to be an honest man. I also know him to 

be a good man, I know a caring man, and I think a person that 

is diligently trying to manage a Department of Government that 

has a history of being very difficult to manage, with many demands 

and not always all of the resources available. 

With all of that, I also believe that it is important when someone 

sits in that chair to be very mindful not only of responding to Congress and responding to questions that might come from Congress, 

but also to be very mindful to respond and answer and the dictates 

of your General Counsel because that is one way you can avoid getting in trouble. 

And so Secretary Jackson is in an untenable position here where 

he is being told by his General Counsel that he should not answer 

these questions because there is a judge’s order suggesting that 

this ought to not be discussed outside the courtroom. I do not think 

the judge’s orders typically, in my experience as an attorney, talk 

about whether you can hold a press conference or not, but talk 

about whether matters should be kept within the confines of the 

judicial proceeding. And so, on the other hand, he has an obligation 

to answer questions from a Senator. 


dcolon on DSK2BSOYB1PROD with HEARING
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So what is a man to do? He cannot satisfy both bosses. He cannot 

follow the dictates and the suggestions of his General Counsel, nor 

can he answer the question from a Senator. And those are the 

kinds of situations that those of us who choose to serve the public 

interest and serve the public in Government sometimes find ourselves in. And, Mr. Secretary, I am sorry you are in this position, 

and I wish you the best. And I know you are good man, and I know 

you are trying hard to do a difficult job. 

Let me talk to you about some of the issues relating to HUD and 

how we are going to help the American people through this housing 

crisis. It is not going to be about discussing one piece of litigation 

of the many pieces of litigation that HUD may face, but also to talk 

about the issues that face the American people today. 

When we talk about the FHA modernization bill that I am very 

committed to—and I am so delighted that the Chairman is also so 

committed to seeing this become a reality—I want to continue to 

work with HUD to hear what will help you in this instance. You 

mentioned that seller-provided downpayment assistance has had a 

foreclosure rate of 25 percent. Now, the typical foreclosure rate on 

FHA lending is approximately what? Three percent? 

Secretary JACKSON. About 3 percent. 

Senator MARTINEZ. Mr. Montgomery, Housing Commissioner? 

Mr. MONTGOMERY. Thank you, sir. Our actual foreclosure rate 

right now is 2.16 percent. 

Senator MARTINEZ. So instead of 2.16 percent, these types of 

loans have a 25-percent foreclosures rate. 

Mr. MONTGOMERY. Slight correction. They have a cumulative 

claim rate of 25 percent over the life of their loans. 

Senator MARTINEZ. So the point is—— 

Mr. MONTGOMERY. They are 21⁄2 times more likely to fail than 

loans that do not have that type of—— 

Senator MARTINEZ. So 2 1⁄2 times, which for a firm like the FHA, 

which is actuarially to be kept sound, you charge a premium, you 

cannot really put on the backs of the regulate premium payer the 

kinds of risks that these types of loans are bringing about to HUD. 

Mr. MONTGOMERY. That is correct. 

Senator MARTINEZ. So it would be helpful, you think, in an FHA 

modernization if we eliminated from the FHA lending these types 

of downpayment-assisted—seller-downpayment-assisted type loans. 

Mr. MONTGOMERY. Absolutely, and that is why I appreciate the 

courage of this Committee to take this issue head on, and it has 

included language to that effect in the bill they passed in December. 

Senator MARTINEZ. The other issue I would ask on the FHA bill, 

on the FHA issue, is about downpayments and whether we should 

have a small downpayment contribution in FHA lending, and what 

is your position or HUD’s position on that? 

Mr. MONTGOMERY. We currently support the provisions in the 

Senate bill that have the 1.5 percent minimum cash investment. 

The current is 3 percent. And we feel, given what has been going 

on in the market—this is a departure from the bill in 2006, by the 

way, that borrowers should have some skin in the game, so to 

speak, and have a cash investment. 


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Secretary JACKSON. And we truly believe that because it was 

raised by an issue with Senator Bond, and we assured him that we 

would do everything in our power to make sure that a person made 

a cash investment in this process. 

Senator MARTINEZ. On the FHA, is there anything else, Commissioner Montgomery, that you would like to—— 

Mr. MONTGOMERY. That is it, sir. 

Senator MARTINEZ. OK. I was going to say, I think overall it 

sounds to me like the Senate bill is more in keeping with what you 

believe you need in order to have the FHA play a significant role 

in the current mortgage crisis that our country is facing. 

Mr. MONTGOMERY. Yes, and I just would want to add something 

to what the Secretary said earlier on the loan limits. We are obviously very mindful that the stimulus package raised those. Certainly today we feel the 417 is a good number. But we have to say 

given what the stimulus does, we will continue to consult with 

Members of this Committee to see what that number is. 

Senator MARTINEZ. And it is too soon to see any experience with 

it? 

Mr. MONTGOMERY. It is probably too soon. Let me point out there 

are 3,300 counties in the country; 75 of them are at the highest 

limit; 600 are somewhere between $271,000 and $729,000; 2,500 

counties are at the 271. So the vast majority of America is capped 

at $271,000. But as I have said before—I am a Texan, but I have 

been trying to look out for the State of California in that I think 

they need to have the opportunity to use the Nation’s flagship 

homebuying program. So I just want to continue—— 

Senator MARTINEZ. So if you do not have a higher loan limit, you 

are really leaving out certain marketplaces from participating in 

FHA housing. 

Secretary JACKSON. Actually, yes. If we look from Utah all the 

way back to the West Coast, we are going to leave out quite a bit. 

And if we look at Virginia all the way back to Maine and New 

Hampshire, we are going to leave out quite a number of people. 

Senator MARTINEZ. But with that geography, you are forgetting 

Miami, also a high-cost area. 

Secretary JACKSON. Miami. 

[Laughter.] 

Senator MARTINEZ. Mr. Secretary, I want to commend you for 

tackling the issue of RESPA reform. You know how much I bled 

over this issue while I was at HUD, and I appreciate the fact that 

you have continued to struggle with that, because as we look at 

the—and I know, I am mindful of my time, Mr. Chairman. We really have an issue when it comes to the mortgage problem relating 

to how people get into the mortgages in the first place. And I think 

part of it is the information, part of it is the amount of paperwork, 

part of it is the fees they get charged, not always clearly delineated. 

Secretary JACKSON. That is correct 

Senator MARTINEZ. And I commend you for that, and I wanted 

to ask you where you are on a rule, on a RESPA rule, and what 

you anticipate coming that—— 

Secretary JACKSON. The rule is coming out I think very soon, and 

comments—when are we having it by? Is it coming out? 


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Immediately it is going to be out. 

Senator MARTINEZ. The rule will be out immediately? 

Secretary JACKSON. The proposed rule. 

Senator MARTINEZ. The proposed rule. For comment? 

Secretary JACKSON. Yes. 

Senator MARTINEZ. Very good. Well, I commend you and congratulate you for that. I know it is a major achievement, and it was 

a promise you made me when I left, actually, that you would see 

through RESPA reform. So I thank you for persevering on something that I know is very, very difficult and very controversial and 

contentious. 

Secretary JACKSON. Thank you. 

Senator MARTINEZ. Thank you, Senator Menendez. 

Senator MENENDEZ [presiding]. Thank you, Senator Martinez. 

Senator MARTINEZ. Senator, I should tell you that I tried to teach 

Secretary Jackson a lot, but pronouncing Spanish was not one of 

them. 

Senator MENENDEZ. And if I did not say anything, he would not 

know, so I—— 

Senator MARTINEZ. He called me ‘‘MAR-ti-nez’’ a time or two. 

Secretary JACKSON. I appreciate that. 

Senator MENENDEZ. If he called me Martinez, I would get better 

answers. 

[Laughter.] 

Secretary JACKSON. I am not sure. 

Senator MENENDEZ. Let me just tell the Committee, I know that 

Secretary Jackson has told Chairman Dodd that he has to leave by 

11:45. I still think we will accommodate everybody. There is plenty 

of time. But I just want everybody to know. And before I turn to 

Senator Carper, Mr. Secretary, I assume that court order that you 

referred to with reference to Senator Casey is a public court order, 

is it not? That court order is not public? 

Secretary JACKSON. I have to ask—I know that—— 

Senator MENENDEZ. Well, I assume if the judge said—if you are 

telling us that the order is that you cannot speak or have the public—that the order somehow is not public to tell you—— 

Secretary JACKSON. This is our General Counsel, Rob Couch. 

Mr. COUCH. No, sir, it is not an order—an issued written order. 

It was the request by the judge in the case. The case is—— 

Senator MENENDEZ. It was an oral request? 

Mr. COUCH. Yes, sir. 

Senator MENENDEZ. In open court? 

Mr. COUCH. I cannot answer that, sir. I was not there. 

Senator MENENDEZ. If you would look at it, if it is an oral request in open court, would you get a copy of the transcript to the 

Committee of that? 

Mr. COUCH. Yes, sir. 

Senator MENENDEZ. So we can see what the language of that was 

all about. 

Mr. COUCH. Yes. 

Senator MENENDEZ. Senator Carper. 

Senator CARPER. Before Senator Martinez leaves the room, I just 

want to ask, having sat in this seat you now hold and in the seat 

where Secretary Jackson is sitting, which seat do you prefer? 


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Senator MARTINEZ. Sir, this seat over here is much more comfortable. 

[Laughter.] 

I remember the first time I sat here, I thought it was a whole 

lot easier to ask the questions than it is to answer them. 

Senator CARPER. Thank you for your candor. 

One of the things that Senator Martinez and I have been working on, along with others on the Committee, the Chairman and 

Senator Reed and Senator Bennett, is the matter of trying to make 

sure we have got a strong, independent regulator for Governmentsponsored enterprises—Fannie Mae, Freddie Mac, and the home 

loan banks. 

When Secretary Paulson sat before us 3 weeks ago, in the seat 

that you now hold, I asked him to tell us what his priorities and 

maybe the priorities of the administration might be as we attempt 

to craft a housing recovery package, a legislative housing recovery 

package. What would be your priorities? In the package that we 

have been putting together—well, I will just hold off saying what 

are the proposals that our leadership put together. We have not 

had a chance yet to debate them fully on the floor, but my hope 

is that we will soon. 

But Secretary Paulson said three priorities: No. 1, we need a 

strong, independent regulator for our GSEs, for Fannie Mae, 

Freddie Mac, and our Federal home loan banks; No. 2, we need to 

take FHA and bring it into the 21st century, modernize it, make 

it relevant for today’s needs and marketplace; and, No. 3, he said 

he would like to see the housing authorities for our State and local 

governments be able to issue tax-exempt revenue bonds, not just 

for first-time homebuyers, not just for multi-family rental housing, 

but also to be of help with respect to refinancing homes and homes 

that are in foreclosure or threatening to go to foreclosure. Those 

are what his top three priorities would be. 

Let me just ask of you the same question. What would be your 

top priorities as we take up—and I think when we come back from 

our recess later this month, one of the first items that we will take 

up in the Senate will be a housing recovery package. And it would 

be nice to have the input of the administration, and we are already 

getting that from our Republican and Democratic colleagues as 

well. 

Secretary JACKSON. Thank you, Senator. The first thing I would 

say is to have the Senate and the House reconcile the FHA modernization legislation. That is critical to what Senator Martinez 

just said. I think we will be able to reach markets today we cannot 

reach, and I think that is very critical. 

Second—— 

Senator CARPER. Let me just ask, there has been, as you probably know, some negotiations that have been going on behind the 

scenes involving our Chairman and Ranking Member, along with 

the Chairman and Ranking Member from the House sister committee over there. Has HUD been a part of those discussions? And 

if so, where do you see the sticking point? I am told there is maybe 

one sticking point. Where do you see that sticking point? 

Secretary JACKSON. We have not been, and yesterday at the 

hearing with Chairman Frank, he said that they were pretty close 


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to resolving the situation, he and Chairman Dodd. So I will—that 

is all I know about that. 

Senator CARPER. Well, knowing how high a priority this is for 

HUD, for you, you may want to invite yourself into a conversation 

with some of those principals and see what kind of encouragement 

of guidance or counsel you can impart to them. 

Secretary JACKSON. Thanks. 

Senator CARPER. I would urge you to do that. 

Secretary JACKSON. OK. And the second one I would say is 

RESPA reform, because I think that it should be transparent. 

What people do, when they enter into a contract as to what they 

are going to pay for a home, it should not change drastically from 

what the initial cost was. I think that is very important. 

And, last, I agree with my colleague Secretary Paulson. The only 

difference is it is not only housing authorities issue bonds. I would 

like to see the counties and cities issue bonds based on their creditworthiness to help people buy homes. And we have said that before. 

I think it is very important. We are facing a major crisis. I think 

we can do so much, and then we have to look to the private sector, 

and that is why we created the Hope Now Alliance, is to try to address that issue. 

I want to say this, though, because this is very important to understand, that 80 percent of the subprime loans in this country are 

going to be OK. But we are looking at 20 percent, which is about 

2.1 million. And I think we can address this if we all work together. I have been in different cities, Mr. Chairman, in Newark, 

where I have seen blocks of homes which I detest. And I think that 

between the two Senators and Mayor Booker, I think we have an 

opportunity to bring Newark back. And I want to do everything in 

my power to help them do it. 

Senator CARPER. Give us some advice on GSE regulatory reform, 

please. 

Secretary JACKSON. I think we must have a strong regulator, and 

it is clear that they want the regulator to be independent, not out 

of HUD, not out of any other agency, but similar in many ways to 

the Federal Reserve. And I have no objections to that at all. 

Senator CARPER. Beyond that, what advice would you have for 

us? 

Secretary JACKSON. I wish I could answer some of the questions 

that were asked of me this morning. 

Senator CARPER. OK. How are we doing with respect to Hope 

Now? And how—— 

Secretary JACKSON. We are doing very well, but between Secretary Paulson and I, we have had to, in essence, use a lot more 

moral courage to entice people to do what they should be doing. It 

is one thing to say what you are going to do. It is another thing 

to do it. And we are consistently pushing, pushing, to make sure 

that they carry out their responsibility. 

Senator CARPER. One of the elements that is in the housing recovery package that our leadership attempted to bring to the floor 

earlier this month was some additional money for housing counselors and some additional money for CDBG. Would you just comment on both of those elements? 


dcolon on DSK2BSOYB1PROD with HEARING
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Secretary JACKSON. Let me say that housing counseling is so important. Ninety-six percent of the people that receive counseling 

did not go into foreclosure. We have increased housing counseling 

from $10 million in 2001 to the 2009 budget of about $65 million. 

We have also funded NeighborWorks at $180 million. We are seeing the results. 

Let me tell you, I was in Cleveland and Detroit, and I was just 

in Santa Ana, California, last week, where more than 1,000 people 

who were facing foreclosure came in, and each case we were able 

to save 80, 85 percent of those people, only because their housing 

counselors were looking at everything. We are asking banks to renegotiate, refinance. We are asking banks to cut the amount of the 

loan because a lot of the homes now are underwater, and when we 

say underwater, Senator, that means they are—with the mortgage 

note that they have, it is not worth that much. And so we are 

working with them. 

The same thing in Cleveland. When I was in Cleveland and Detroit, we had more than 600 people there, and we helped more than 

85 percent of those people stay in their homes. 

Senator CARPER. Let me interrupt you. I think the dollar amount 

that was put in our housing recovery package for additional counselors was, I think, $200 million, in addition to the $180 million 

that you have mentioned. And I would like to know if some additional funds could be helpful. 

Secretary JACKSON. I think that we are doing very well, and I 

think that whatever the Senate makes—the House and Senate 

makes a decision, we will use the money judiciously. I mean, I 

think that now we have 2,300 counseling centers where when we 

came in, we had about 500 all around the country. And 

NeighborWorks is all around the country at this point in time. 

I think that we see the importance of this crisis that we are facing, and it is important, in my mind, to help people stay in their 

homes. And we are not talking about wealthy people. We are talking about policemen, nurses, teachers, fire people. I mean, these 

are regular people who have invested every penny they have into 

their homes. And I think it is cynical to let them lose their homes. 

I had one person when we were in Cleveland that had been in a 

home for about 15 years and was losing it. 

Senator CARPER. Let me just conclude by saying this: Our Leader, the Majority Leader, Senator Reid, said yesterday that when we 

return to session following the 2-week recess, one of the first items 

that we are going to take up is a housing recovery package. It will 

include some of the elements that both you and Secretary Paulson 

seem to embrace. It will include a number of proposals that we embrace. I would urge you to be an active participant in working with 

both the Senate and the House and the relevant Committees and 

leaders of the Committees to help fashion that package to make 

sure that it meets the needs that you think are there. 

Secretary JACKSON. I will only say to you, Senator Carper, that 

I believe if we pass FHA modernization, we will address that issue 

head on. We will be able to help a lot more people. 

Senator CARPER. All right. Thanks very much. 

Senator MENENDEZ. Senator Schumer. 


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Senator SCHUMER. Thank you, Mr. Chairman, and thank you, 

Mr. Secretary. First, I want to thank you for the good work. Your 

office and you personally have worked closely with my office on 

saving a whole lot of affordable housing in New York: Castleton 

Park in Staten Island, a recent example; Starrett City, where we 

are moving along. I know that HUD has gone along with the plan 

that everybody has put together. We still have to get OMB to go 

along, but your commitment has been great. 

Secretary JACKSON. Thank you. 

Senator SCHUMER. You have put your money where your mouth 

is in terms of affordable housing and saving housing in New York, 

and we very much appreciate that. 

I would like to discuss briefly with you the way that HUD handles the disposition of properties that it controls. I wrote you last 

month urging you to re-examine HUD’s policies of allowing contractors to sell homes to speculators and absentee landlords. After only 

15 days, these landlords, the speculators, they buy these homes— 

we have this problem in Buffalo and in Rochester and in Syracuse 

and in many of our upstate cities. There is a large number of vacant homes, and what happens is, yes, for the first 5 days, somebody can buy it at a discount, then for 10 more days, a policeman, 

a fireman, somebody can buy it, and then after 15 days—only 15 

days after it goes on the rolls—anyone can buy it for just about any 

price, and it almost always ends up being speculators who are just 

holding it in hopes that they can flip it and make a couple hundred 

dollars. 

Now, in your response letter—I just received this yesterday—you 

make no mention of this policy, let alone—even though we wrote 

you about this, let alone a decision to re-examine it. The letter goes 

through what else you are doing, and that is great. But you recognize the success of the asset control area program in redeveloping 

properties in Buffalo and Rochester—in Rochester. Note that Buffalo has an application. 

First, can we get some action on changing this policy to give 

those who will live in the homes a discount for a longer period of 

time—5 days is too much—and those who are policemen, firemen, 

and others the same? In other words, I think they should stay on 

the rolls for that program for, say, 6 months so somebody can buy 

them. We are finding in parts of Rochester, parts of Buffalo, people 

do want to buy them. But quickly they are sold and the speculators 

come in. Would you seriously—— 

Secretary JACKSON. I would be happy to look into that because 

I am in agreement with you. I think that they should be owneroccupied, not speculation. 

Senator SCHUMER. The policy you have is a good one. It is just 

so quick. 

Secretary JACKSON. OK. 

Senator SCHUMER. So without giving me a certain answer, you 

will agree, looking at the top of it, it should be a longer period? 

Secretary JACKSON. I agree, and I want to say that I will have 

Commissioner Montgomery talk to you personally. We have been 

working with him. 

Senator SCHUMER. OK. Second, I hope you will seriously consider 

the asset control area for Buffalo. Rochester, you have done it. It 


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has done a good job. Everyone is getting plaudits on it. Could you 

please consider that for Buffalo as well? 

Secretary JACKSON. Surely. 

Senator SCHUMER. Very, very important. OK. Good. Those are 

two helpful things. 

HOPE VI, which you gave a grant to Niagara Falls nearby, is 

working already and working well. I do not have any complaints 

about HUD in terms of—well, I always have complaints, but I 

think HUD has done a good job overall in focusing on some of the 

toughest parts of my State in terms of housing and in terms of upstate New York. 

Second, I want to just follow up briefly on Senator Carper’s question. Would the administration—I know you do not support the 

whole package that we have offered, and we are willing to work 

with Senator McConnell and other Republicans to come up with 

some kind of compromise, and Senator Carper has been a leader 

on that. Actually, so have Senator Casey and Senator Menendez, 

sitting here with me. Would you consider at least supporting the 

$200 million—you know, the $180 million that we allocated, that 

you and Secretary Paulson agreed was a good idea, was an amendment originally offered by myself, Senator Casey, and Senator 

Brown; 130 or 140 of that has been used up already. It is working, 

you are right. 

Secretary JACKSON. That is correct. 

Senator SCHUMER. Would you consider supporting an additional 

$200 million? As you have said, the statistic I had never heard, but 

it is astounding if it is true: 96 percent of those who have counseling do not go into foreclosure. 

Secretary JACKSON. That is correct. 

Senator SCHUMER. So wouldn’t that be logical that now that this 

180 is almost used up that the administration support an additional allocation? I wanted 500—we wanted $500 million. We put 

in the bill $200 million to help win you guys over. 

Secretary JACKSON. May I get back to you on that? 

Senator SCHUMER. Yes. Thank you. Would you? I hope you will 

privately recommend that. 

Secretary JACKSON. OK. 

Senator SCHUMER. My time has expired, and I very much appreciate your time, Mr. Chairman. 

Secretary JACKSON. Chairman, may I address an issue that you 

and Chairman Dodd addressed? I got a notice back that the 

project-based Section 8 letter that Chairman Dodd referred to from 

September 2007 was responded to you all on December 8, 2007. 

And I will make sure you get a copy of the letter. 

Senator MENENDEZ. That was a letter that Senator Dodd—that 

was the second letter that he referred to. 

Secretary JACKSON. OK. 

Senator MENENDEZ. The letter on LEP that I was referring to, 

I do not have an answer. 

Secretary JACKSON. OK. Then I will get it for you. 

Senator MENENDEZ. But I am sure that his staff is here and 

will—— 

Secretary JACKSON. And, again, accept my apology. 


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Senator MENENDEZ. I appreciate that, and as long as we get an 

answer. I know for 1 minute Senator Casey has a personal request, 

Mr. Secretary, and I will acknowledge him for that purpose. 

Senator CASEY. Thank you, Mr. Chairman. I know we are out of 

time. Two things. One is I will be sending a set of questions to you, 

Mr. Secretary, to respond to for the record. And we are out of time 

to pursue this further today, but I would just say to my colleague 

from Colorado, Senator Allard, that I think it would be helpful in 

a setting like this that you do not make public statements about 

what I know or do not know. You said, ‘‘Senator Casey knows what 

the judge’s order says.’’ We do not have that on the record here. 

What I do know is that the Washington Post refers to a press 

statement from HUD where they say, and I quote, ‘‘The judge presiding in the lawsuit has asked the parties not to speak to the 

news media.’’ That is the only public written version of what the 

judge may have said or not said. I just ask the Senator from Colorado to speak to things that he knows, not what he presumes others to know. 

Senator ALLARD. Mr. Chairman, if I can respond, my intent was 

not to question your knowledge as far as the subject matter. I 

meant to refer to you as a very competent attorney, and so I 

thought—I am not an attorney. I thought as a very competent attorney you understood the importance of a court order, and so I 

just made that point. And it was not directed at you personally. I 

just was—in a way, I was trying to compliment you. 

Senator CASEY. Well, I appreciate that. I think it is important, 

though, in light of what Senator Menendez said earlier, that we 

have on the record the testimony—or the transcript, I should say, 

from the judge to complete the record. 

Thank you very much. 

Senator MENENDEZ. Thank you. Thank you, Mr. Secretary. 

Secretary JACKSON. Thank you. 

Senator MENENDEZ. We look forward to some of your answers to 

the questions. 

Secretary JACKSON. Thank you. 

Senator MENENDEZ. With that, let me welcome the next panel, 

and we thank them for their forbearing. Mr. Michael Kelly, the Executive Director of the District of Columbia Housing Authority, and 

the President of the Council of Large Public Housing Agencies; Mr. 

Hector Pinero, Senior Vice President of the Related Management 

Company, representing the National Multi Housing Council and 

the National Leased Housing Association; Ms. Diane Randall, who 

is the President of the Connecticut Partnership for Strong Communities—and if you would come up as we are introducing you. Ms. 

Randall served as the first Executive Director of the Connecticut 

AIDS Residence Coalition and is a member of the Connecticut 

Housing Finance Authority Board of Directors. 

Mr. Edgar Olsen, who is a professor in the Department of Economics at the University of Virginia. And if we could have—those 

who want to engage, if you could engage outside, we would appreciate it. 

Mr. Edgar Olsen, as I was saying, professor in the Department 

of Economics at the University of Virginia, who has conducted reVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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search on low-income housing programs for many years and has 

served as a consultant to HUD in six administrations. 

And Ms. Barbara Sard, who is Director of Housing Policy at the 

Center on Budget and Policy Priorities, and prior to that, she was 

a senior managing attorney of the Housing Unit in the Greater 

Boston Legal Services, where she has worked for more than 19 

years. 

Let me welcome all of you today. Because of the extended nature 

of the Secretary’s visit with us, and because Senator Dodd had to 

go to a funeral and has asked me to chair until we get all of your 

testimony in, but I have to preside at 12:30, so we are going to ask 

you to try to limit your comments. We will include all of your testimony for the record. In order to engage in some questions that may 

be had by members who are here and who may come, I am going 

to ask you to try to summarize in about 4 minutes or so, if you can. 

And, with that, let me thank you all and recognize Mr. Kelly. 

STATEMENT OF MICHAEL KELLY, EXECUTIVE DIRECTOR, DISTRICT OF COLUMBIA HOUSING AUTHORITY AND PRESIDENT, COUNCIL OF LARGE PUBLIC HOUSING AUTHORITIES 

Mr. KELLY. Mr. Chairman, Ranking Member, and members of 

the Committee, my name is Michael Kelly. I am the Executive Director of the District of Columbia Housing Authority here in the 

Nation’s capital. And I am also President of the Council of Large 

Public Housing Authorities. 

Thank you for your invitation to testify today on the fiscal year 

2009 budget request by the Department of Housing and Urban Development. 

The D.C. Housing Authority owns and manages 8,000 public 

housing units and we provide vouchers to over 10,000 families. 

With six awards, the DCHA is the fourth largest recipient of the 

HOPE VI awards across the country. 

CLPHA’s 60 members represent most major metropolitan areas 

of the country, and on any given day CLPHA members serve more 

than 1 million households. Together, they manage almost half the 

Nation’s multi-billion dollar public housing stock and administer 30 

percent of the Section 8 voucher program. 

Regrettably, the Administration’s proposed budget is a continuation of a now 8 year effort to cripple, dismantle, devalue, and 

defund public housing. From cruel budget cuts to the evisceration 

and elimination of programs, this budget, in Congressman John 

Olver’s words, is an ‘‘assault on public housing.’’ Allow me to elaborate. 

The Administration’s proposal of $4.3 billion for the operating 

fund reflects only 81 percent of need. HUD’s own budget justifications indicate that $5.3 billion is needed, $1 billion more than what 

they are asking. Coupled with underfunding, the transition to 

HUD’s asset management has dramatically increased the administrative burden on housing authorities. 

We thank Congress for reaffirming in legislation that housing 

authorities may use a portion of their capital fund to pay for some 

central office costs. However, we are concerned that the continued 

funding shortfalls will make the transition to asset management 


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needlessly difficult, resulting in negative consequences for resident 

services. 

When viewed in this context, the Administration’s request for 

only 81 percent of need is both inadequate and indefensible, given 

the monumental need for affordable housing in this country, and 

most certainly here in the Nation’s capital. 

If I can, Senators, you know more than I the need. But if I can 

share with you for the record a letter that I received very recently. 

‘‘Mr. Kelly, my name is Ms. Sota and I am writing to you for help. 

I have four kids who have motivated me on my journey. I have 

been working full-time as a dental assistant for 4 years. The only 

thing that is missing is a safe place for our own.’’ 

‘‘My kids and I have been living from house to house for threeand-a-half years. I hate the fact that my kids are asking where 

housing we are staying over tonight. My kids hate leaving school 

because they have learned that after school there is no home. I cannot really buy food because I am never at one place for too long.’’ 

‘‘I want to give my babies comfort, stability, and security but I 

need help. Please, Mr. Kelly, help us find a place that is safe to 

call home.’’ 

Again, you know more than I what the need is, Senators, and I 

want to thank you for your continued efforts in this. 

In short, CLPHA and the D.C. Housing Authority recommend 

funding the operating fund for the industry recommended level of 

$5.3 billion for fiscal year 2009. 

For the capital fund, in recent testimony before a House Appropriations Subcommittee, HUD Secretary Jackson claimed housing 

authorities have sufficient capital fund reserves. As a housing authority director, I am baffled by the Secretary’s remarks but can 

say that we do not have capital fund reserves and are, in fact, prohibited from maintaining reserves. And under this budget, we will 

not have sufficient capital funds. 

At the D.C. Housing Authority, we have a backlog of modernization needs totaling $150 million. In light of decreased capital funding, the DCHA sought assistance from the private sector and 

collateralized future capital resources to receive $80 million bond 

funding. This fund was used to repair and replace major systems. 

Despite this, we still have 14 developments that require major 

physical improvements. 

With reduced capital funding, our ability to return to the private 

sector to secure additional funds to treat these sites is greatly restricted. Underfunding the capital fund will cause private lenders 

to shy away from future investment in public housing neighborhoods. 

For these reasons, DCHA and CLPHA recommend funding the 

capital fund at the industry requested level of $3.5 billion. 

Also, last year HUD said it would conduct a national modernization needs study to develop a modernization assessment protocol. 

A year has now passed. This year, once again, HUD says it will 

conduct a capital needs study of public housing. And DCHA and 

CLPHA urge HUD to complete this study so we can have a more 

complete understanding of the state of capital needs, including the 

current number of severely distressed units. 


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HOPE VI, as was noted earlier, is one of the most significant 

neighborhood revitalization strategies that we have. At the housing 

authority, we assume the role of real estate developer and community builder. With our six HOPE VI sites and our revitalization efforts, along with our partners, we have generated over $2 billion 

in economic development here in the District. We have been able 

to increase the net number of affordable housing to over 1,500. 

In fact, the DCHA was recently named the fourth most active developer in the District of Columbia by the Washington Economic 

Development Partnership. 

In 1993, when the program was first authorized, the stated goal 

was to demolish severely distressed public housing, estimated at 

that time to be 100,000 units. Today, 15 years later, we are still 

faced with a substantial number of severely distressed public housing units. And as I mentioned earlier, the DCHA has 14 such public housing communities that need these vital revitalization dollars. 

Senator MENENDEZ. Mr. Kelly, if I could ask you to summarize 

for us. 

Mr. KELLY. Again, on the Federal voucher side, we expect that 

vouchers are greatly needed. We support the passage of Senate Bill 

2523, the National Affordable Housing Trust Fund Act. It is an important fund for resources to continue development of public housing. 

And to summarize, it is past time for this Administration to stop 

the assault on public housing and low-income families through 

these budget decisions. 

I thank you for this opportunity. 

Senator MENENDEZ. Thank you. 

Mr. Pinero. 

STATEMENT OF HECTOR PINERO, SENIOR VICE PRESIDENT, 

RELATED MANAGEMENT COMPANY, REPRESENTING THE 

NATIONAL MULTI HOUSING COUNCIL AND THE NATIONAL 

LEASED HOUSING ASSOCIATION 

Mr. PINERO. Mr. Chairman, members of the Committee, my 

name is Hector Pinero. I am Senior Vice President of Related Management Company. We have our headquarters in New York City 

and own and manage approximately 26,000 units of multifamily 

housing in 13 States from New York to California. 

I appear here today on behalf of the National Leased Housing 

Association, the National Multi Housing Council, and the National 

Apartment Association. I will use my few minutes to focus on 

HUD’s budget as it relates to the Section 8 project-based assistance 

program and the recent funding shortfalls that have raised serious 

concerns about the ability of the Federal Government to honor its 

contracts. 

In our opinion, the Section 8 subsidy mechanism is the most effective housing subsidy ever devised by Congress. It is an elastic 

subsidy that can reach the very poorest families and keep their 

rent burden proportional to the same as the rent burden of families 

with higher income. 

Related Management’s Section 8 project-based portfolio inventory 

totals 12,000 units in 69 developments. For Section 8 to continue 

to be an effective program, HUD must comply with its contractual 


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promises to owners to make timely monthly assistance payments. 

In recent months, these payments have been as many as 2 to 9 

months in arrears. 

While HUD has been late sporadically in making payments over 

the past several years, it was not until the summer of 2007 that 

a major disruption occurred. From June through September, late 

payments were widespread over most parts of the country. In case 

of our portfolio, we billed HUD in June of 2007 $9.8 million in assistance payments for the month of July. Almost one-third of our 

bill, or $3.1 million, was not paid by July 31st. And about 20 percent, or $2 million, remained unpaid until November. 

Owners do what they can to cope during these periods of nonpayment, such as drawing funds from reserves, if they exist, borrowing funds, delaying payments to vendors, and making personal 

contributions. However, not all properties have the ability to make 

ends meet when HUD fails to make timely payments, resulting in 

notices of default, inability to pay operating expenses, and deferred 

maintenance. 

Late HUD payments not only affect the operations of a property, 

but also make difficult the preservation of these aging projects 

through sales and rehabilitation. Purchasers, lenders, and tax credit investors have now been put on alert that the Government may 

not perform under its contracts. And they will act accordingly to 

protect their interest, assuming they continue to participate at all. 

We have attached to our testimony a list of 19 adverse consequences of delayed or insufficient HUD funding. 

HUD has responded to the budget shortfall in the later part of 

fiscal year 2007 and fiscal year 2008 by entering into renewal contracts that no longer even purport to make a commitment for 1 

year of funding, but rather obligate HUD only for a period of a few 

months with a promise to extend the short period for an indeterminate amount of time, when and if sufficient appropriations become 

available. 

Our review of the HUD fiscal year 2009 budget proposal indicates that HUD plans to continue this short-term or incremental 

funding approach, which does not assuage the concerns of the industry. 

What can this Committee to do help rectify the damage to the 

Section 8 portfolio? First, it can exercise closer oversight over the 

process HUD uses to make Section 8 assistance payments, as well 

as how budgetary needs are calculated. The Secretary should be directed to use a portion of the appropriated working capital funds 

for this purpose. 

Second, legislation is being enacted to impose a penalty on HUD 

when its payments are more than 30 days late, remove requirements that owners receive HUD permission in advance to use 

project reserves to pay mortgages and/or employers, require HUD 

to notify owners when the late payments are anticipated. 

Third, the Committee should urge that sufficient appropriations 

be provided for fiscal year 2009 to avert the succession of shortterm funding obligations by HUD, including supporting any emergency funding of fiscal year 2008 to achieve that goal. 


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The industry stands ready to work with this Committee on these 

and other important housing issues and we appreciate your support. 

Thank you for allowing me to air our views. 

Senator MENENDEZ. Thank you, Mr. Pinero. 

Ms. Randall. 

STATEMENT OF DIANE RANDALL, DIRECTOR, PARTNERSHIP 

FOR STRONG COMMUNITIES 

Ms. RANDALL. Thank you, very much. I am Diane Randall. I am 

Director of the Partnership for Strong Communities, which is a 

Hartford, Connecticut-based housing policy and advocacy organization. We promote solutions to chronic homelessness, affordable 

housing, and the development of vibrant communities. 

We are a program arm of the Melville Charitable Trust, which 

is a Connecticut-based foundation investing in solutions to homelessness and community development. 

I want to talk just briefly today about the impact of the Federal 

budget, the HUD budget, on a single State and how that money 

that the Federal Government grants to communities across the 

State of Connecticut intersects with the kinds of investments that 

our own State and philanthropic leaders are making in the State. 

And why it is so vital that we have continued stability of the kinds 

of programs that my colleagues here have talked about, the stability of the project-based Section 8 program, as well as the significant funding for the tenant-based Section 8. 

We have worked extensively on solutions to homelessness, and I 

appreciate Senator Martinez’s remarks about the leadership of Mr. 

Bognanno, and really, what we have seen across the country where 

citizens from local communities have engaged in creating plans to 

end chronic homelessness. These are very exciting and they are a 

sense of restoration of hope, of really addressing an intransigent 

problem in our country. 

And yet there is a real belief that we can make a difference. But 

I am here to tell you, that difference will not be made unless this 

HUD budget is fully funded. And that includes significantly the 

funding for Section 8. This is one of the mainstream programs that 

we use to address chronic homelessness and that we use to prevent 

homelessness in our country. And it is just a critical need. 

Likewise, the investment in public housing is a critical need. 

This is really one of the mainstays for how people who are very low 

income have housing. And if that budget continues to be shortfunded at 81 percent, we will see increasing homelessness. 

As Senator Dodd mentioned in his opening remarks, we have a 

dual housing crisis right now in this country. It is the subprime crisis, but it is the continuing crisis that very low income families 

have faced really for decades. And yet, there are signs of hope in 

the ability to address that. But the Federal budget is so critical. 

I want to say just one thing about—I do sit on our State quasipublic housing finance authority board of directors. We administer 

the Federal Low-Income Housing Tax Credit Program in our State. 

We get a little bit over $6 million a year. That really has been the 

work horse for the production of multifamily housing across the 

country. 


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Increasingly, the demands from our public housing authorities to 

revitalize both our State and Federal public housing using these 

dollars is extraordinary. We cannot continue to have a production 

pipeline for creation of new affordable housing to address elderly 

needs or people with disabilities without the continued infusion of 

public dollars. 

Another issue I just want to touch on, and I will leave the rest 

of them in my written remarks. But I want to touch on the role 

of philanthropic investments, because I work closely with a foundation. Philanthropy stands ready to look at best practices and try to 

stimulate change. But obviously, philanthropy alone cannot address this, nor can State governments. 

In our State, we had bipartisan support from our State treasurer and our Governor to create a State housing trust fund of $110 million to be spent over a 5-year period. Again, this barely begins to 

really address the true need. And yet, this is a substantial investment. So without increased Federal investments, we cannot make 

headway that we know is vital to address the needs of thousands 

of citizens across the country. 

The other issue I want to just say something about is the bipartisan nature, because there has been some reference in this committee about—particularly how housing has been a bipartisan 

issue. I am happy to say that in our State we see bipartisan support for solutions to homelessness in the production of affordable 

housing. What we would like is to see it ranked a little bit higher 

on the priority list. And I would say the same here, that it is critical that these issues get addressed because they affect so many 

people throughout the country. 

Senator MENENDEZ. Thank you very much. 

Mr. Olsen. 

STATEMENT OF EDGAR OLSEN, PROFESSOR, DEPARTMENT OF 

ECONOMICS, UNIVERSITY OF VIRGINIA 

Mr. OLSEN. Thank you, Mr. Chairman. 

I welcome this opportunity to talk with you and the members of 

your Committee about the HUD budget. I speak from the perspective of a taxpayer who wants to help low-income families, albeit a 

taxpayer who has spent the last 40 years studying the effects of 

low-income housing programs. The views that I express should not 

be attributed to any of the organizations with which I am affiliated. 

My testimony will focus on the HUD budget for low-income housing assistance. 

Given the current economic slowdown and the added expense of 

fighting international terrorism, it is clear that little additional 

money will be available for low-income housing programs over the 

next few years. 

The question is how can we continue to serve equally well the 

families who currently receive housing assistance and serve more 

of the poorest families who have not been offered assistance? 

The answer is that we must use the money available more wisely. Research on the effects of housing programs provides clear guidance on this matter. It shows that tenant-based housing vouchers 

have a much lower total cost than any type of project-based assistance when they provide equally desirable housing. My written tesVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00042 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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timony contains references to these studies and a brief description 

of them. 

The results imply that we can serve current recipients equally 

well, that is provide them with equally good housing for the same 

rent, and serve many additional families, without any increase in 

the budget by shifting resources from project-based to tenant-based 

assistance. 

The magnitude of the gain from this shift would be substantial. 

Jeff Tebbs and I have estimated that a total shift from projectbased to tenant-based assistance would ultimately enable HUD to 

serve 2 million additional families with no additional budget. The 

results are in line with the results of the best previous studies of 

the excessive costs of project-based assistance. 

The key to achieving these large gains is a transition to the new 

system that hurts few, if any, current recipients of housing assistance. My written testimony contains a number of proposals along 

these lines. I will focus my oral testimony on a proposal for public 

housing reform that would significantly improve upon the HOPE 

VI approach, would greatly expand on the vouchering out provisions of the 1998 Housing Act, and would benefit many current 

public housing tenants. 

My proposal requires no additional Federal funds. It is a proposal to better use the funds and assets currently available to 

housing authorities. 

The proposal would allocate to each housing agency the same 

amount of Federal money as it would have received in operating 

and modernization subsidies under the current system, so that no 

housing authority could argue against the proposal on the grounds 

that it would have less to serve its clients. 

With one exception it would require every housing agency to offer 

each current public housing tenant the option of a portable housing 

voucher or remaining in its current unit on the previous terms. The 

latter provision ensures that no public housing tenant would be 

harmed by the legislation. Families that accept the voucher would 

benefit from it. They would move to housing that they prefer to 

their public housing units. 

These vouchers would be funded from the current budget for 

public housing and they would not necessarily be as generous as 

the current Section 8 vouchers. Housing agencies would be allowed 

to charge whatever rent the market would bear for units vacated 

by families that accept the voucher offer and sell any of their 

projects to the highest bidder. This would generate the maximum 

amount of money to operate and modernize their remaining 

projects or offer vouchers to additional families. It would also avoid 

scandals associated with sweetheart deals. 

When a project is sold, the remaining tenants in that project 

would be offered the choice between vacant units in other public 

housing projects or housing vouchers. 

When a former public housing tenant that had accepted a voucher gives it up, the housing agency would be required to offer a 

housing voucher to a family from its waiting list. This ensures that 

the housing agency would continue to provide housing assistance to 

at least as many families and, indeed, the same types of families. 


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If the preceding proposal is adopted, the public housing program 

in its current form would wither, but public housing agencies 

would do a much better job in helping low-income families with 

their housing. 

I appreciate the willingness of the members of the Committee to 

listen to the views of a taxpayer whose only interest in the matters 

under consideration is to see that tax revenues are used effectively 

and efficiently to help low-income families. 

Senator MENENDEZ. Thank you, Mr. Olsen. 

Ms. Sard. 

STATEMENT OF BARBARA SARD, DIRECTOR OF HOUSING 

POLICY, CENTER ON BUDGET AND POLICY PRIORITIES 

Ms. SARD. Thank you, Senator Menendez. And thank the Committee for holding the hearing today, and for the Committee to conduct this important oversight. 

Appropriators can decide how much to spend on each program. 

They are good at that. But what this Committee really needs to do 

is to analyze the impact that the substantial shortfalls in this 

budget would have on HUD programs and whether, in future 

years, the harm would be so great that we could not just easily recover. 

Unfortunately, I think this is such a budget. The Center estimates that the magnitude of the shortfall this year is approximately $6.5 billion less than the amount needed to maintain current programs. And that is without doing a thing to touch the 

unmet and growing need for housing assistance, as the Chairman 

addressed in his opening remarks. 

Why? Why is the shortfall so big this year? No one has mentioned this yet, and this is very important. This is the first year 

in more than a decade that the HUD budget is no longer padded 

by a cushion of approximately $2 billion in rescissions from the 

project-based or tenant-based Section 8 programs. The Administration did not propose such a rescission this year because those funds 

are no longer available. 

There are complicated reasons, which we can get into it in questions, if you like. But the fact is that this year we need $2 billion 

just as an accounting adjustment to get to zero, before we even 

make up for the shortfalls in the particular programs. And you 

have heard a great deal already about the shortfalls in a number 

of the programs. 

I beg to differ with Mr. Olsen, for whom I have a lot of respect 

and appreciate his backing of the tenant-based Section 8 program, 

but I doubt very much that this proposal would meet the needs of 

the public housing program, or that his voucher idea would work. 

I want to focus for a few minutes on the needs of the housing 

voucher program. The Center estimates that we need $868 million 

more than in 2008, or $1.3 billion more than the Administration requested, to maintain the vouchers in use in 2008 into 2009. There 

are two main reasons why we need this increase. The first is simple, inflation. Housing costs are going up at more than the ordinary 

rate of inflation. And just HUD’s inflation adjustment alone in the 

voucher program requires an increase of about $600 million. 


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The additional funds are needed because there are more vouchers to renew in 2009 than in 2008, because Congress expanded the 

program in 2008 but funded the new vouchers only for a year. So 

those vouchers have to be renewed. And because the changes in the 

renewal funding policy, which Congress has finally done in the last 

2 years’ appropriations acts, are beginning to show progress and 

more vouchers are getting used, that will increase the number of 

vouchers in need of renewal. 

As Chairman Dodd said, without this increase, we estimate that 

there would be about 100,000 vouchers in use that would be cut 

next year. There is a table at the end of my testimony that shows 

the estimated cuts in every State. Unfortunately, however, even 

that figure is probably low because it depends on the availability 

of $600 million in reserves from agencies’ funds. If Congress chooses not to use those reserves, as it well might not do, then the shortfall could be as much as one in 10 vouchers in use not being funded 

next year. 

My time has run out, so I just want to emphasize that the voucher program has been subject to enormous volatility in the last several years, which has caused the loss of over $150,000 vouchers. 

The reason for that is the key policies, such as the annual renewal 

formula and the proper amount of reserves have not been incorporated in the authorizing law. It is critical that the Section 8 

Voucher Reform Act, of which you are a cosponsor, is acted on by 

this Committee as soon as possible, so that these policy changes 

can be made this year. 

Thank you very much. 

Senator MENENDEZ. Thank you very much. Thank you all. We 

appreciate your testimony. 

I have some questions. I am also tempted to ask, with no one 

else here to ask, for a series of unanimous consent requests. But 

I will not do that. The Chairman will never let me back. 

[Laughter.] 

Just kidding. Just kidding. 

But I do have a series of questions. I want to take advantage of 

your expertise for the time we have left here. 

Mr. Kelly, you are representing the large public housing authorities. You heard our interchange, my interchange as well as others, 

with Secretary Jackson. I appreciate his, you know, he is here on 

behalf of the Administration and basically, I guess, pursuing their 

standards. 

But for my purposes of this hearing to draw facts, the Administration makes a couple of arguments. You heard some of them here 

today. They say—and I would like to hear your responses here. 

One is that they say that many distressed housing units have 

been demolished so the capital needs in the program have decreased. Two, that access to private capital has also decreased the 

need for Federal funds for capital improvements. Third, that you 

heard in my interchange about the 81 percent of the cost of actual 

operations being funded, which is all-time low. That in fact, asset 

management, reserves, all of this is going to take care of that challenge. 

Do you want to—I would love to hear from you, maybe Ms. Sard, 

if you could respond to it, as well. What are your responses? BeVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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cause that is what we are being told as Members of Congress, this 

is not a problem. 

Mr. KELLY. Senator, thank you so much for allowing me to respond. 

At the District of Columbia, which I run the program here, as I 

testified, we have been as creative as we possibly can be. We have 

been the most successful, or as successful in the HOPE VI award 

process as any housing authority across the country. We have redeveloped six neighborhoods dramatically through that means. 

We have gone to the bond market with what capital dollars that 

have been available and have stretched that. Wall Street has given 

us $80 million of that, leaving very little money left after loan payments available for the remainder of the program to modernize 

major systems. 

And we are, at this point, tapped out. We have 14 sites that desperately need modernization work or major revitalization with no 

avenue. We turn to the city as best we can. Within our own resources we are then required to look at our maintenance and modernization budgets, our maintenance budgets, to keep these places 

up. 

With the shortfall at almost 20 percent now, we are continuing 

to lose that battle. We are, in many cases across the Nation—not 

just myself but my able colleagues across the country—we are 

given a very tough choice. One, to ensure that our public housing 

stock meets housing quality standards and are livable. At the same 

time, with decreased resources, what we are doing is stretching 

things out. Garbage does not get picked up as quick as possible. 

Work orders do not get responded to as quick as we would like 

them to be. And incrementally, we were losing that battle with the 

deferred maintenance. 

At some point, I think if there is not an infusion of modernization development funds to counteract that, we will be in a position 

of actually losing hard units of public housing and increasing the 

stress between need and resources. 

Senator MENENDEZ. Ms. Sard. 

Ms. SARD. There has been a very serious loss of public housing 

over the last decade. We estimate that there has been a reduction 

of 177,000 units from 1995 to 2007. So that is true. 

But on the operating side, HUD’s own budget documents say 

that the operating subsidy need for these remaining units, after 

that loss is taken into account, is over $5 billion and substantially 

more than the Administration has requested. 

So it is their own formula that says this is the need. And my colleague has already explained why arguing that PHAS can rely on 

reserves is foolish. 

On the capital side, endnote 12 of my testimony explains that we 

adjusted the last capital needs study that HUD had published for 

the reduction in units since that time. And it analyzes further the 

shortfall that nonetheless remains. 

Senator MENENDEZ. Thank you. 

Mr. Pinero, let me ask you, I am concerned—as I raised in my 

opening statement with the Secretary, but then I heard you echo 

it, about the possibility of owners being less willing to stay in 

project-based programs and continue to provide housing to low-inVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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come families as a result of the shortfall and HUD’s insistence in 

signing short-term contracts. 

How real do you think is that concern, if we were to continue on 

the same course that we are on? 

Mr. PINERO. Owners want to be able to—— 

Senator MENENDEZ. If you could put your microphone on, first. 

Mr. PINERO. Owners want to be able to service their residents. 

And they also want to be able to meet their financial responsibilities. So if there is uncertainty on the monies and the funds that 

are going to be available, then investors, owners will be reluctant 

to participate in these programs. 

And if they are able to go to market to achieve the same goals 

without having to rely on the subsidy, they will choose that option. 

They will choose that option. 

Related is committed to affordable housing, but if we cannot rely 

on the funding when we are going to see—we may have to seek 

other options. We do not want to do that. And I believe that is the 

most owners that are in the affordable housing business want to 

stay in the program. But we need some certainty. And three and 

4 months does not provide anyone reassurance. 

We have contracts for 1 year but we are only funded for three 

or 4 months, and that creates that problem. 

Senator MENENDEZ. I heard from someone in your field—not 

your company, but in your field—who tell me well, we were told before, don’t take from the reserve of one entity to, in essence, crosssubsidize another. That was definitely a no-no. And now we are 

told, because they do not have the money, by all means, go ahead 

and take the money and cross-subsidize. 

Is that happening? 

Mr. PINERO. We are not doing that. We are not taking from one 

pot to another pot. But we are finding ourselves during that shortfall, when we were not receiving funds, having to put our own 

money in to make sure that we are properly servicing residents 

while we waited to get the funds for many months. In one case, we 

did not receive $875,000, which was for a period of July and November, on a property in San Diego. 

Senator MENENDEZ. Is the letter that Chairman Dodd and about 

24 of us sent, asking for $2.8 billion in fiscal year 2008, would that 

go a long way toward solving this problem? 

Mr. PINERO. Absolutely. We believe that if it is funded in the fiscal year 2009 budget, it will bring everybody whole and they will 

be able to fund the 12-month contracts, which is what the industry 

will have some comfort with. 

Senator MENENDEZ. Thank you. 

Ms. Randall, I am impressed by your work in Connecticut. One 

of my questions certainly, while the Administration continues to request small increases in homeless assistance, we want to move 

from homelessness to the different part of the—through the fulfillment of the spectrum, which is moving toward a place to call home. 

And I am wondering, most homeless resources are not used for 

permanent housing. Your work, in terms of trying to create the 

connections with opportunities for housing in the long-term so that 

people will move from homeless to a place to call home, how do you 


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see some of these programs interacting? What are some of the challenges? 

Ms. RANDALL. I think some of your questions really speak to 

that, because we believe that it is critical to have both opportunities to combine tenant-based vouchers with supportive services that 

could be funded through HRSA, could be funded through State 

grants, could be funded through a variety of Medicaid resources. 

But we really promote the permanent supportive housing as a solution of chronic homelessness. 

So the availability of an adequate supply of tenant-based vouchers is critical. In Connecticut, when our State Department of Social 

Services, which is the largest public housing authority administering housing-based vouchers opened its waiting list last summer, we had nearly 50,000 households apply for those vouchers and 

for rental assistance, State-based rental assistance. A waiting list 

of about 12,000 was established. We have nowhere near that number to serve the population. 

The other need, though, is absolutely the funding of project-based 

vouchers, because we have an inadequate supply, as I think you 

probably are familiar with in your own State. There is an absolute 

need for production, because tenant-based vouchers alone are not 

feasible in very high markets like Fairfield County, for example. A 

very wealthy county but an individual who is living at $20,000 income or an individual living on disability or an elderly person on 

a fixed income, simply cannot afford often to use a tenant-based 

voucher. 

So the stability of the project-based voucher program is incredibly important. 

I want to say one more thing, the 8–11 program, which I know 

has a lot of criticism, is a program that we think could be better 

utilized. I know that Congressman Murphy from Connecticut is 

looking at proposals to try to restructure that program slightly to 

make it more amenable so that people with disabilities would have 

access to permanent supportive housing. 

Senator MENENDEZ. Thank you very much. 

Mr. Olsen, I know you advocate giving vouchers to many families, including current residents of public housing. And I certainly 

agree with you that vouchers can be an effective tool. But there is 

one point that I think we gloss over in the voucher context, and I 

would like to hear what you think about it. 

While agencies are able to use most of their vouchers, they over 

issue vouchers, planning on having many families who will be unable to find housing. This is similar to what airlines do, for example, in over booking flights. 

While this is effective in getting most vouchers used, it is clearly 

not a strategy that works for the families who are unable to find 

housing. Unlike stranded passengers, there is no next flight, so to 

speak. And so if they cannot find housing in a given time, their 

vouchers are taken away from them. 

So under your plan, some of the hardest to house people would 

get left out, would they not? If there is no other public housing or 

other public housing or project-based housing assistance? 

Mr. OLSEN. For the public housing reform that I just talked 

about a few minutes ago, no, because I offer them the option. EvVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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eryone in public housing is offered the option, the voucher or stay 

in your current unit on the current terms. And so if there are some 

areas of the country where it is hard to use vouchers, then relatively few will use them. In other areas, more will use them. So 

I think that solves that problem. 

Senator MENENDEZ. So then you continue to support the existing 

public housing—— 

Mr. OLSEN. What I would like to see is when a person moves out 

of public housing with a voucher, that unit would be occupied by 

someone at market rent. We are continuing to serve the same number of people. It is just the mix between how many get their assistance in a public housing project versus getting it with vouchers. 

So part of my proposal is to make sure that we continue to serve 

at least as many people. And actually, there will be savings involved here, so that the housing authority could serve more people 

if they wanted to. 

Senator MENENDEZ. Although, certainly, if you are offering it at 

market rent, if someone could pay market rent they might look at 

a different venue to pursue their market rent than a—— 

Mr. OLSEN. There is a market rent. There is a highest rent the 

housing authority can get for every unit. 

Senator MENENDEZ. Ms. Sard, you had made a comment earlier 

about Mr. Olsen’s views. On this point, do you have a different 

view? 

Ms. SARD. Two points that I would like to make. I think that 

some of what Mr. Olsen is talking about could be done right. But 

two things would be needed that would make it probably more expensive than the current set of programs. The first is you would 

have to fix up the public housing so that there would be a viable 

rent that a person would be willing to pay, who was not getting 

any rental assistance. And it would have to be an amount that was 

adequate to maintain the unit. Otherwise they are simply leading 

to the further deterioration of the project. 

The second is I do not believe there is any evidence to support 

the assertion that much less costly vouchers would actually work. 

As you just said, we already have the problem with voucher subsidies pegged to fair market rents, that everyone is not able to find 

housing. The idea that you can find housing that meets quality 

standards at hundreds of dollars less per month simply has no evidence to support it. 

I think that the—particularly since you are on the Budget Committee, Senator, I think the important takeaway from this panel 

has got to be that the budget that the Senate, and then the House 

and Senate, agree on has got to be at the highest possible level. 

We are seriously concerned that neither the House nor the Senate budget actually has enough room under it for the kind of discretionary funding increase that is needed, compared to 2008 or 

compared to the Administration’s budget for these key programs. 

We need roughly triple the boost to the HUD budget this year, 

compared to the increase the Congress provided in 2008. We are 

very concerned that the steps taken in the next few weeks in resolving the budget will basically tie the hands of the Congress in 

coming up with the adequate funding levels that we have expressed the need for. 


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Mr. OLSEN. Could I add to what Ms. Sard said? 

Senator MENENDEZ. Surely. 

Mr. OLSEN. We do have some experience with offering vouchers 

to people in the worst public housing. We have the Moving to Opportunity experiment that has been going on for a long time. And 

it gives compelling evidence that people you give vouchers to end 

up in better housing, safer neighborhoods, and their mental health 

is better. 

We have a similar experience with the HOPE VI program where 

we offer people the option: voucher or public housing. And there is 

a big difference in the outcome. The people who use the vouchers 

end up in much better housing, safer neighborhoods and so on. 

So we have some experience in doing this. 

Senator MENENDEZ. Well, I appreciate those views. I will take 

your takeaway point to Senator Conrad, as the Chairman of the 

Budget Committee. 

Let me thank you all for your testimony. 

Let me make two statements for the record before we adjourn. 

Secretary Jackson told us this morning that HUD has submitted 

the required reports on Section 8. Last year’s appropriations bill required them within 60 days. We have yet, as we understand it, according to Appropriations staff, confirmed that that report has been 

received. So we hope it will be today. I thought the answer was 

that it had already been done. We hope it will be today. If not, we 

will pursue it. 

Let me also inform our witnesses that the record will remain 

open for 1 week so that other members who may not have been 

able to be here because they had conflicting hearings may ask 

questions in writing. If, in fact, you should get one of those questions, we would ask you to respond within 7 days. 

With our thanks, on behalf of the Chairman, this hearing is adjourned. Thank you. 

[Whereupon, at 12:25 p.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 


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RESPONSE TO WRITTEN QUESTIONS OF SENATOR AKAKA 

FROM ALPHONSO R. JACKSON 

Foreclosure Prevention 

Q.1. Foreclosure and financial hardship can result in shame that, 

in turn, can prevent families from seeking the help and information 

they need to maintain ownership. Families are most likely to contact organizations they know and trust. These organizations may 

have specialized knowledge or abilities that can more effectively 

meet the needs of their communities. For example, there are social 

justice and housing development organizations within Asian American and Pacific Islander communities that effectively reach working families in their communities. How are HUD and its funding 

recipient, NeighborWorks, reaching out to these community organizations to ensure that effective financial assistance is available? 

What will be done to ensure that culturally and linguistically isolated populations will receive necessary foreclosure mitigation assistance? 

A.1. HUD recognizes that families facing default and foreclosure 

are more likely to reach out to community-based organizations they 

know and trust. Several organizations with specialized knowledge, 

ability and experience serving the Asian American and Pacific Islander communities participate in HUD’s Housing Counseling Program. For example, Asian Americans for Equality in New York, the 

Center for Pan Asian Community Services, Inc., in Georgia, and 

the Union of Pan Asian Communities in California, all provide critical default counseling, supported by HUD housing counseling 

grant funding and/or counselor training assistance. These organizations and others ensure that default counseling is available in multiple languages, including Cantonese, Mandarin, Korean, Vietnamese, and Hmong. 

In order to more effectively reach out to and serve these culturally and linguistically isolated communities, in February 2008, 

HUD met with Lisa Hasegawa, the Executive Director of the National Coalition for Asian Pacific American Community Development (CAPACD), to discuss how CAPACD could become approved 

by HUD as a housing counseling intermediary and how organizations serving the Asian American and Pacific Islander communities 

could more effectively access HUD Housing Counseling Program resources. Also attending the meeting were Michelle Kauhane, the 

Executive Director of Hawaiian Community Assets, Susan Taoka, 

Executive Director of the Seattle Chinatown International District, 

and Robin Puanani Danner, President and CEO of the Council for 

Native Hawaiian Advancement. The meeting was an important 

step in building more effective partnerships between HUD and 

each of these organizations, and providing them access to the financial assistance they need to provide effective foreclosure mitigation assistance and other housing counseling services. 

Moreover, the meeting with CAPACD in February was also attended by Jenifer Iba, a Senior Advisor at NeighborWorks America. 

NeighborWorks is a HUD-approved Housing Counseling Intermediary that received a HUD housing counseling grant of approximately $1.5 million for fiscal year 2008, and a housing counseling 

training grant for approximately $2.5 million. NeighborWorks uses 


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these funds to provide various housing counseling services, including default counseling, and supports several affiliate organizations 

that serve Asian American and Pacific Islander communities. For 

example, with their HUD housing counseling grant, 

NeighborWorks makes sub-grants to three organizations that provide services in Hmong, NeighborWorks Greenbay (WI), Community Neighborhood Housing Services (MN), and Dayton’s Bluff 

Neighborhood Housing Services (MN). NHS of the Silicon Valley 

(CA), which offers services in Vietnamese, and the Hawaii Homeownership Center, also receive HUD sub-grant funding from 

NeighborWorks. In fiscal year 2007, NeighborWorks reported providing housing counseling services to approximately 3,000 Asian 

Americans and Pacific Islanders. 

At the February meeting, Ms. Iba discussed with CAPACD and 

the other attendees the $180 million the Congress appropriated directly to NeighborWorks through the Neighborhood Reinvestment 

Corporation, for the purpose of foreclosure prevention counseling. 

Because these funds were not appropriated to HUD, the Department was only able to play a minor, advisory, role in the awarding 

of those funds. Consequently, HUD is unaware of the steps 

NeighborWorks is taking to reach out to and fund organizations 

serving the Asian American and Pacific Islander communities with 

non-HUD funding. Questions regarding NeighborWorks, their National Foreclosure Mitigation Program, and how they are administering the $180 million appropriated directly to them, should be 

directed to NeighborWorks. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM 

ALPHONSO R. JACKSON 

Unfair Processes 

Q.1. Whether they prove to be true or not, the fact remains that 

recent allegations about the allocation of HUD contracts have given 

many Americans the impression that HUD’s selection processes for 

public housing are not fair. What is HUD doing to make sure that 

unfair processes are not taking place now, and will not take place 

in the future? 

A.1. Contract support for Public Housing Agencies (PHA) can occur 

in two ways. 

The most common services are provided by the PHAs themselves, 

wherein they solicit and obtain bids and proposals and award contracts in compliance with Federal requirements (including 24 CFR 

85.36) and state and local laws and regulations. In general, PHAs 

are required to obtain the contract support in a competitive environment. The Office of Public and Indian Housing oversees the 

compliance of PHAs with the requirements in their contracting. If 

requested, the Office of the Chief Procurement Officer (OCPO) staff 

also assists in providing procurement training and, occasionally, 

the reviews of PHA procurements. 

The secondary way of providing contract support to PHAs is 

through direct contracts awarded by HUD. We have a variety of 

methods that can be used to provide contract support, all of which 


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are stated in the Federal Acquisition Regulation (FAR), and which 

are closely adhered to by Contracting Officers (COs) within HUD. 

The determination of the acquisition strategy is highly dependent 

on a number of variables in every acquisition. This would include 

the type of support needed, the time available to procure the necessary support, and the availability of sources to perform the requirements. Advance acquisition planning is important to ensure 

the proper methods are utilized. However, it is also understood 

that long lead times are not always available in urgent situations. 

The acquisition methods available to the CO include full and 

open competitive contracts, competition after exclusion of sources 

(such as for set-aside programs), competition utilizing GSA schedules, sole source contracts authorized by statute (such as the 8(a) 

program), multiple award indefinite delivery, indefinite quantity 

(IDIQ) contracts, and simplified acquisitions. All of these methods 

are clearly defined in the FAR. As a last resort, a CO could also 

award a sole source contract to a firm based on very specific circumstances that must be well documented. HUD COs have effectively utilized all of the available procurement methods in full compliance with the FAR. 

To ensure full compliance, a number of oversight and internal 

control processes are in place. In order to obtain a CO warrant, 

staff must meet certain requirements to ensure they are adequately 

trained and are knowledgeable in their field. Whereas this authority and responsibility had once resided in the various field offices, 

within the past 2 years, OCPO has centralized the function for 

overseeing the issuance of CO warrants to ensure continuity and 

compliance with necessary requirements. 

There are also various thresholds in place for multiple levels of 

reviews, depending on the dollar value of the procurement action. 

Most actions are also required to be reviewed by HUD’s Office of 

General Counsel (OGC) for legal sufficiency. OCPO has also instituted an oversight process of reviewing a sampling of actions in 

each of our procurement offices through annual program management reviews (PMR). Through these reviews, we identify areas of 

weakness in operational contracting and focus on improving these 

areas through training and, if necessary, additional oversight. One 

additional tool for ensuring compliance with regulatory requirements is reviews conducted by the Office of the Inspector General 

(OIG). While prior OIG reviews have found weaknesses in various 

areas, most recently in areas of contract administration after the 

awarding of the contracts, OCPO has worked diligently to improve 

those areas. We are proud to point out that, despite consistent severe staffing shortages, OIG reviews have not identified any area 

where OCPO staff has violated any statutory or regulatory requirements. 

OCPO personnel are very careful to ensure full compliance with 

regulatory requirements. While there may be individual contractors 

that do not believe they have an opportunity to compete for contracts, HUD has mechanisms in place to provide widespread dissemination of information, including the annual Forecast of Opportunities issued by our Office of Small and Disadvantaged Business 

Utilization (OSDBU) and the use of FedBizOpps by COs when appropriate. Contractors also routinely market themselves for opporVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00164 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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tunities that are noted on the forecast, especially for opportunities 

for sole source 8(a) awards. For any sole source award, whether 

under the 8(a) program or other reasons, actions are fully documented as to why the source was selected. If appropriate, the CO 

will also obtain OGC review. 

Violence Against Women Act 

Q.2. The Violence Against Women Act (VAWA) creates obligations 

for Public Housing Authorities and landlords and owners who accept Section 8 subsidies to refrain from discriminating against victims of domestic violence, dating violence and stalking in admission, and prohibits evictions of victims based on domestic violence, 

dating violence or stalking. It also requires Public Housing Authorities to include statements about VAWA implementation and 

services provided to victims of domestic violence, dating violence, 

sexual assault, or stalking in their Annual and Five-Year Plans. In 

spite of these legal requirements, HUD has approved plans without 

these statements, has distributed information through at least one 

of its regional offices stating that VAWA does not apply to ProjectBased Section 8, and has failed to issue regulations to ensure consistent application of the law. Why has HUD failed to request 

funds to oversee the implementation of this law by the Housing Authorities, landlords, and owners that accept Section 8 that it oversees? 

A.2. HUD–PIH guidance issued several notices to Public Housing 

Authorities (PHAs) to inform them of VAWA requirements. The Office of General Counsel has drafted VAWA regulations which 

should be published in the Federal Register by fiscal year ending 

September 30, 2008. HUD will issue additional guidance to reinforce the requirement to include VAWA protections and services in 

PHA plans; and provide technical assistance to HUD field offices 

that have the responsibility of approving PHA plans. The Department will determine in the near future any financial and human 

resources necessary to monitor PHA implementation and review of 

modified PHA plans. 

Energy Efficient Housing 

Q.3. ‘‘Energy efficient’’ housing is not necessarily synonymous with 

‘‘healthy’’ housing. What will, and is HUD doing to ensure that the 

move to more energy efficient manufactured, public and assisted 

housing does not compromise indoor environmental quality, 

A.3. Within Public and Indian (PIH), we are reformatting and 

broadening our and Public Housing Website from Public Housing 

Energy conservation Clearinghouse to the Public Housing Environmental and Conservation Clearinghouse (PHECC) to address and 

integrate healthy and energy efficient housing solutions. For example, PLR is working closely with the Department’s Office of 

Healthy Homes and Lead Hazard Control on a PIH Notice—Renewable Energy and Green Construction Practices in Public Housing to coordinate renewable energy and health issues. Also, PIH 

NOTICE 2007–12 focuses on integrated pest management; the goal 

is to manage pest damage by the most economical means, with the 

least possible hazard to people, property, and the environment. In 

addition, in the Green Issue of our monthly PHECC newsletter, we 


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speak on topics such as the use of formaldehyde-free plywood, as 

well as paints and adhesives with fewer Volatile Organic Compounds (VOCs), in order to reduce atmospheric pollution. 

Historically, residential buildings did not have specific requirements for ventilation, because leakage in envelope components and 

natural ventilation were considered adequate. HUD agrees that envelope construction practice has improved, and with greater emphasis on air sealing as a central component of energy efficient construction or housing rehabilitation, the need to control air quality 

in the home has also increased, and greater attention needs to be 

paid to selection of materials that are healthy for building occupants. 

Indoor Air Quality and the International Energy Conservation 

Code: HUD is in the process of implementing the new requirement 

set by Congress in the Energy Independence and Security Act of 

2007 to establish the 2006 International Energy Conservation Code 

(IECC) as the standard for new construction of HUD-assisted and 

HUD-insured properties. With the exception of Section 402.4.2 

(Fenestration Air Leakage), the 2006 International Energy Conservation Code does not provide specific direction on air infiltration 

and leakage rates, nor has HUD adopted or established specific 

ventilation requirements beyond those referenced in locally adopted 

codes. Most localities have adopted more advanced versions of the 

IECC than the 1992 Model Energy Code that remains HUD’s current minimum standard for energy efficiency in public, assisted 

and insured housing (with the exception of HOPE VI, which is currently set at the 2003 IECC). 

Indoor Air Quality and Energy Star for New Homes. HUD’s Energy Action Plan, as reported to Congress in August 2006, sets Energy Star for New Homes as the preferred (but voluntary) standard 

for new construction and gut rehabilitation financed through 

HUD’s programs (15 percent more efficient than the 2004 International Residential Code). The Energy Star for New Homes label 

requires an extensive by-pass sealing procedure to minimize air 

leakage in the home. 

The standard for Energy Star for New Homes requires mechanical ventilation to be provided if the home tests at lower than .35 

ACH (air changes per hour), in compliance with ANSVASHRAE 

62.2, Ventilation and Acceptable Indoor Air Quality in Low-Rise 

Residential Buildings. ASHRAE 62.2 provides a higher standard 

for ventilation and indoor air quality than the current requirements for the International Residential Code. The standard requires source-control measures that exhaust pollutants from specific rooms before the pollutants enter the rest of the household. In 

addition, whole-house ventilation brings fresh air into the house, 

diluting that are difficult to control at the source. 

Other HUD Actions Related to Indoor Air Quality and Healthy 

Housing: In addition to ensuring adequate ventilation, if the building envelope is tightened in order to minimize heat loss or gain, 

greater attention needs to be paid to selection of materials that 

limit out-gassing of formaldehydes and other potentially harmful 

substances, including mold, that could be harmful to building occupants. Several HUD programs are encouraging the use of ‘‘green’’ 


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building measures that that contribute to improved indoor air quality. 

These include: 

• The Office of Native American Programs (ONAP) is offering extensive training on indoor air quality, moisture and mold control and other green building practices to Indian tribes. Workshops on ‘‘Creating Energy Efficient, Comfortable and Healthy 

Tribal Homes’’ have been held as follows: 

Santa Fe, NM ................................ December 11–12, 2007 

Denver, CO .................................... February 27–28, 2008 

Seattle, WA .................................... March 18–19, 2008 

Portsmouth NH ............................. April 15–16, 2008 

Anchorage, AK .............................. May 5–6, 2008 

A national conference on this subject is scheduled for June 17– 

19 in Reno, NV. 

• The PATH (Partnership for Advancing Technology in Housing) 

Mold Safe House in Chesterfield, New Hampshire is a demonstration of the use of paperless drywall, drainage and other 

construction techniques that eliminate the potential for mold 

and moisture buildup in the home (see www.oathnet.org). In 

addition, the PATH Concept Home in Omaha, NE includes several sustainability features, including mold-resistant gypsum 

wall board and a whole house mechanical ventilation that includes Energy Star qualified ‘‘smart’’ exhaust fans. 

• The HOME program has developed a new efficiency and green 

building training curriculum that addresses indoor air quality 

and selection of healthy materials. The curriculum is expected 

to be introduced later this year. 

• A National Healthy Homes conference sponsored by the Office 

of Healthy Homes and Lead Paint Control (OHHLC) to be held 

this fall will include a track on ‘‘Mainstreaming Healthy Housing,’’ which will address the issue of bringing healthy homes 

criteria to HUD-assisted housing. 

• The Mark-to-Market green remodeling initiative 

(www.oaho.net) provides an incentive for property owners to 

‘‘go green’’ as part of Mark-to-Market debt restructuring in existing multifamily properties. The program does not specify 

ventilation requirements. As outlined in its November 2007 

Green Guide, in addition to a mandatory Integrated Pest Management Program the program provides for a number of discretionary air quality measures that include the following: 

• Green Variable Significant Additions: OAHP requires the 

PAE use the following guidelines to consider such other 

Green rehabilitation items as may be appropriate for the 

property: 

• Kitchen and bath exhaust, using ENERGY STAR-rated 

exhaust fans, vented to the outside (or ENERGY STAR 

exhaust fan that runs continuously or on a timer)—generally recommended if feasible at reasonable cost. 


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• Carbon monoxide alarm on each occupied floor of the 

property, near the bedroom—generally recommended if 

feasible at reasonable cost. 

• Low or no VOC materials for any rehabilitation involving paint, primers, adhesives, caulk, and sealants—generally recommended. 

• Replacement of carpet with a smooth and cleanable surface—generally recommended only if: (i) the owner concurs and either (ii) the carpet to be replaced has reached 

the end of its useful life or (iii) there is a sound economic 

or health justification for early replacement of carpet 

that has not reached the end of its useful life. 

• Low VOC carpet—if the carpet is being replaced with 

new carpet, generally recommended if the increased cost 

is less than 10 percent. 

(PAE = Participating Administrative Entity) 

• The Office of Public and Indian Housing (PIH)is reformatting 

and broadening its Public Housing Energy Conservation Clearinghouse to the Public Housing Environmental and Conservation Clearing house (PHECC), to address and integrate healthy 

and energy efficient housing solutions. A recent Green Issue of 

the monthly PHECC newsletter speaks to topics such as ‘‘Engineers and architects agreed on foam building insulation instead of the more common batt insulation. Builders also used 

formaldehyde-free plywood, as well as paints and adhesives 

with fewer VOCs, in order to reduce atmospheric pollution.’’ 

PIH is also working closely with the Department’s Office of 

Healthy Homes and Lead Hazard Control on a PIH Notice— 

Renewable Energy and Green Construction Practices in Public 

Housing, to coordinate renewable energy and health issues. 

PIH has also issued Notice on Integrated Pest management 

2007–12. 

Energy Independence and Security Act of 2007 

Q.4. The recently enacted Energy Independence and Security Act 

of 2007 has numerous HUD-related provisions, including energy 

code improvements applicable to manufactured housing, the application of the International Energy Conservation Code to public and 

assisted housing, and training federal contracting officers to negotiate energy efficiency contracts. These energy provisions do not 

seem to be accounted for in your FY 2009 Budget Request. What 

steps is HUD taking and what resources is HUD mobilizing to ensure that these required energy improvements are met in a timely 

manner? 

A.4. The Energy Independence and Security Act of 2000 (the Act) 

moves the responsibility for setting energy standards for manufactured homes from HUD to the Department of Energy (DOE). The 

Act specifically requires DOE to establish (by 2012) energy standards for manufactured housing that are based on the most recent 

version of the International Energy Conservation Code. Though 

this responsibility has now been given to DOE, HUD’s Office of 

Manufactured Housing Programs has met with DOE to discuss 

ways in which HUD can assist in this effort and how the two agenVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00168 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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cies can cooperate on the implementation and enforcement when 

the DOE standards are published. 

Also, HUD is in the process of drafting a revised 24 CFR 965. 

The draft regulation is intended to implement the International 

Energy Conservation Code (IECC) contained in the Energy Independence and Security Act of 2007. HUD does not negotiate energy 

efficiency contracts, but training on energy performance contracting 

is provided to public housing agencies. The President’s 2009 Budget 

is sufficient to cover these staff and training costs. 

Actions taken by HUD related to specific sections are below: 

• Section 413, Energy Code Improvements Applicable to Manufactured Housing. This section establishes the most recent 

International Energy Conservation Code as the standard for 

HUD-Code manufactured housing. It requires the Department 

of Energy (DOE), in consultation with HUD to establish the 

standard by regulation, within 4 years from the date of enactment of the Act. HUD is coordinating with DOE to facilitate 

timely action and consultation with the Manufactured Housing 

Consensus Committee. 

• Section 481, Application of the 2006 International Energy Conservation Code to Public and Assisted Housing. 

Section 481 of the Act amends and updates Section 109 of the 

Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 

12709) to require that HUD assisted and insured properties ‘‘meet 

or exceed’’ the 2006 International Energy Conservation Code. HUD 

is planning to publish an Advance Notice of Proposed Rulemaking 

to solicit public comment on the changes required by Section 481. 

HUD anticipates that comments on the Advanced Notice will provide guidance on the appropriate standard for each program area. 

In addition, the Office of Public and Indian Housing (PIH) has 

in draft a revision to 24 CFR 965. This regulation is in clearance 

within PIH. The draft regulation is intended to implement the 

IECC code provision contained in Section 481. 

• Section 517. Training Federal Contracting Officers to Negotiate 

Energy Efficiency Contracts. 

Section 517 requires HUD personnel to receive training under 

the Federal Energy Management Program, designed to educate 

Federal contract negotiation and contract management personnel 

so that contract officers are prepared to: (1) negotiate energy savings performance contracts; (2) conclude effective and timely contracts for energy efficiency services with all companies offering energy efficiency services; and (3) review Federal contracts for all 

products and services for the potential energy efficiency opportunities and implications of the contracts. 

HUD is in the final stages of successfully negotiating an energy 

performance contract with an energy services company (ESCO) 

that will reduce HUD’s annual energy bill and provide guaranteed 

payback for its investments. The Scope of Work includes energy efficient lighting throughout, water conservation measures, a rooftop 

photovoltaic and solar thermal system, green roof, replacement of 

all windows with double-glazed windows, and various other Energy 

Conservation Measures (ECM’s). Section 517 directs DOE to create, 


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and administer, a training program to educate Federal contract 

personnel. Section 517 provides that DOE will perform this action 

not later than 1 year after the date of enactment of EISA of 2007. 

EISA of 2007 was signed into law on December 19, 2007, making 

the schedule date for establishment of a DOE training program December 19, 2008. 

HUD will seek and provide training to contract officers and contract management personnel as necessary to implement and administer the current ESPC project. As the DOE program becomes 

available, HUD will select and send personnel for training. 

• Sec. 494 Green Building Advisory Committee 

HUD shall serve as a representative to the Green Building Advisory Committee, which shall provide advice and expertise concerning the management of Federal building efficiency, leasing, and 

Federal green building performance. 

EISA of 2007 (H.R. 6, Sec. 494) requires the Federal Director 

(The Office of Federal High Performance Green Buildings {H.R. 6, 

Sec. 436 A}), in coordination with the Commercial Director (H.R. 6, 

Sec. 421), to establish the Green Building Advisory Committee 

comprised of the agencies referred to in H.R. 6, Sec. 421(e). 

Upon establishment of the committee, or notification of first 

scheduled meeting, HUD will participate as a member of the committee. 

Cuts to Section 811 

Q.5. All of the proposed $77 million cut to Section 811 funds for 

housing for the disabled would come from the capital advanceproject-based side of the program that produces new units of permanent supportive housing a cut of more than 70%. What justification does HUD have for such a radical shift of funding within 811 

away from: a) production of new accessible units that provide a direct link to supportive services such as medical care, transportation, employment, etc.? b) individuals with more severe disabilities who have higher support needs and face an enormous struggle 

in trying to find housing using only tenant-based A assistance? 

A.5. The Department is aware of the need for additional supportive 

housing for persons with disabilities. However, limiting the cut to 

new production ensures that those persons with disabilities currently receiving the benefits of assistance, including those with 

mainstream vouchers and others in housing developed under the 

Section 811 program, will not be at risk of losing their affordable 

housing. The limited funds will be used to renew mainstream 

vouchers and for renewal of project rental assistance contracts in 

existing Section 811 developments. 

Low-Income Housing Tax Credit 

Q.6. The Administration’s request for FY 2009 for Section 811 includes a proposed $10 million demonstration program that would 

allow funding from the Low-Income Housing Tax Credit (LIHTC) 

program to be layered into 811 developments. Last year, HUD 

made a similar proposal as part of its FY 2008, but never formally 

submitted it to either this Subcommittee or the authorizing committee. When do you anticipate having this demonstration proposal 


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ready for Congress? How many permanent supportive housing 

units do you anticipate this demonstration proposal producing in 

FY 2009? 

A.6. The Department provided information on the proposed demonstration in its fiscal year 2009 budget submittal so that all interested parties, including Congress, can review and comment on. 

Based on our experience and consultation with the industry, we estimate that a $10 million demonstration could fund the cost of affordable housing for 150 to 300 persons with disabilities. The 150 

would represent 100 percent of the funds utilized in the traditional 

method of developing Section 811 housing units and leveraging additional units through the tax credit program. The 300 represents 

the case where 100 percent of the funds are utilized to fund 5-year 

subsidy contracts that would be awarded to low-income housing tax 

credit projects to ensure that the projects were affordable to person 

with disabilities. 

Incremental Voucher Targeted To Non-Elderly People With 

Disabilities 

Q.7. For FY 2008, Congress appropriated $30 million for incremental vouchers targeted to non-elderly people with disabilities. As 

you know, these funds were not requested by the President. Can 

you update the Subcommittee on the progress in developing the 

funding announcement for these vouchers? What is HUD planning 

to do to ensure that applicant housing agencies target these vouchers to people with severe disabilities who are not on Section 8 waiting lists, e.g., individuals in nursing homes and institutional settings, adults living with aging parents, etc.? 

A.7. HUD is in the process of preparing the Notice of Funding 

Availability (NOFA) for the target disabled population. It is anticipated that the clearance process will begin in mid-to-late May 

2008; however, final NOFA publications are not anticipated until 

the fall. HUD is currently evaluating the various criteria used to 

ensure that vouchers will be targeted to non-elderly persons with 

disabilities, and this will take into account individuals in nursing 

homes and institutional settings, as well as adults living with 

aging parents. 

Tenant-Based Rental Assistance For Non-Elderly 

Q.8. Between FY 1997 and FY 2002, Congress annually appropriated funding for tenant-based rental assistance for non-elderly 

people with disabilities adversely impacted by the designation of 

public and assisted housing as ‘‘elderly only.’’ There are approximately 62,000 of these non-elderly disabled vouchers—also known 

as Frelinghuysen vouchers—in use. Unfortunately, HUD was slow 

to develop a tracking system to ensure that they continue to be targeted to the population for which Congress intended. In February 

2005, the Office of Public and Indian Housing (PIH) issued Notice 

2005–5 relating to issuance and preservation of these vouchers. 

This PIH Guidance also covers ‘‘mainstream’’ tenant-based rental 

assistance for non-elderly people with disabilities funded under the 

Section 811 program. 

However, due to the lack of guidance until 2005, there is considerable uncertainty as to how many of these vouchers remain tarVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00171 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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geted to non-elderly people with disabilities as Congress originally 

intended. 

Can you please provide the Subcommittee with estimates of how 

both the Frelinghuysen vouchers and Section 811 ‘‘mainstream’’ 

tenant-based assistance have been targeted—and remain targeted 

towards the intended population? 

A.8. PIH Notice 2005–5 issued implementation guidance to enable 

Public Housing Authorities (PHAs) and HUD field staff on initiatives to assist non-elderly people with disabilities in their search 

for housing under the Housing Choice Voucher Program. In addition, this notice clarifies issues related to issuance and preservation 

of certain types of special purpose vouchers, i.e. Frelinghuysen and 

811 Mainstream Vouchers. By requiring PHAs to electronically report using the Form HUD–50058, HUD monitors these vouchers to 

ensure they are targeted to the intended population. The Department continues to work with these agencies to ensure that all special purpose vouchers are used for their intended purpose. 

Q.9. Can you please update the Subcommittee on steps that PIH 

has taken to ensure housing agencies that have these non-elderly 

disabled vouchers are meeting their obligations under PIH Notice 

2005–5? 

A.9. To ensure that non-elderly vouchers are meeting their obligations under the PIN Notice 2005–5, HUD is tracking monthly 

usage of these non-elderly vouchers though its Voucher Management System (VMS). The Department is also working with the 

PHAs to ensure that all special purpose vouchers are used for their 

intended purpose. Failure to serve disabled families as required 

will result in forfeiture of the vouchers. 

Project-Based Units For The Disabled 

Q.10. Do you anticipate being able to make an allocation of $143.2 

million available for new capital advance/project-based units for the 

disabled in FY 2008? When can we expect the FY2008 NOFA to be 

issued? 

A.10. We anticipate making approximately $100 million available 

for new capital advance/project-based units for persons with disabilities. We note that in addition to funding amendments and renewals for tenant based assistance (mainstream vouchers) funded 

prior to fiscal year 2005, the appropriated funds must cover capital 

advance and project rental assistance contract amendments for 

projects currently being developed and project rental assistance 

contract renewals. The fiscal year 2008 NOFA is available at 

GRANTS.GOV and was published in the Federal Register on May 

12, 2008. 

Modernization of FHA 

Q.11. In light of the pending modernization of FHA, is HUD ready 

to implement all the proposed aspects of the bill? Specifically, does 

FHA have enough staff, with the right skill-sets, and adequate IT 

funding to upgrade your aging FHA systems? If not, what if anything, does Congress need to do to help? 

A.11. From a staffing perspective, we are in good shape because 

the FHA business process is so automated that we can accommoVerDate Nov 24 2008 01:58 Mar 12, 2010 Jkt 050393 PO 00000 Frm 00172 Fmt 6633 Sfmt 6602 E:\HR\OC\A393.XXX A393

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date substantial increases in program volume. It should be noted, 

however, that upgrades to FHA’s systems and staffing are an ongoing process, and we continue to make improvements in both. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM 

MICHAEL KELLY 

Q.1. Mr. Kelly, as you are aware, D.C. hosts the 4th largest HOPE 

VI program in the country, having received $140.9 million. How do 

you anticipate the HOPE VI cut proposed in this budget request 

will affect D.C.’s progress towards neighborhood revitalization? 

Other large public housing authorities? 

A.1. The administration’s proposed cuts to the HOPE VI program 

would seriously undermine the ability of large urban housing authorities, like the District of Columbia Housing Authority 

(‘‘DCHA’’), to revitalize distressed public housing and improve the 

quality of life for residents. There is simply no other means for 

public housing authorities to make the significant up-front investment needed in these severely distressed projects. 

Without an up-front commitment of HOPE VI funds, public housing authorities are unable to leverage the private and local investment necessary to reverse the decline in their most distressed properties. In Washington, DC, for example, the loss of DCHA’s previous HOPE VI grants, totaling $140.9 million in federal dollars, 

would translate to a loss of $800 million in total direct investment 

in our most disadvantaged communities. 

A major contributing factor to the most severe public housing 

challenges is HUD’s chronic underfunding of the Capital Fund. 

This underfunding has placed further demand for HOPE VI in 

communities across the country. As I noted in my testimony on 

March 12, 2008, the Administration’s Capital Fund budget request 

would actually underfund current accrual needs nationwide by 

more than $700 million in FY09. It is this ongoing, annual disinvestment by the federal government over time that has caused 

continued severe distress in public housing. 

A 2005 study by the Urban Institute estimated that up to 82,000 

severely distressed public housing units still exist nationally— 

many of them having become severely distressed since the creation 

of the HOPE VI program in 1993. It is important to remember that 

this distress is not simply in one or two physical properties, but 

has typically gripped the surrounding neighborhood as well. Without the HOPE VI program, public housing authorities have no 

other tools that are adequate to reverse this distress and achieve 

sustainable neighborhood revitalization. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM 

DIANE RANDALL 

Q.1. On the surface, it appears that the FY 2009 budget proposal 

calls for a $50 million increase in funding for homeless assistance 

programs. Your organization has estimated, however, that this 

funding level is still inadequate, since permanent housing renewals 

alone will increase by at least $75 million. Should we be concerned 


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about homeless program funding in this year’s budget request? 

Please explain why or why not. 

A.1. Yes, you should be concerned about this year’s budget request. 

The Department of Housing and Urban Development (HUD) estimates that the cost of renewals alone will be approximately $1.5 

billion. A funding level of $2 billion is needed to renew existing 

projects while providing new resources for communities to address 

the unmet housing and service needs of millions. Therefore, little 

of the President’s request would be available for new projects, and 

the thousands of Americans experiencing homelessness will not 

have the opportunity to receive critical shelter or services. In order 

to meet the national goal of establishing 150,000 new units of permanent housing by 2012, Congress and the Administration will 

need to allocate significant additional funding. 

In the United States, on any given night, 744,000 people experience homelessness, and approximately 3.5 million people will experience homelessness at some point during the year. Alarmingly, approximately 44 percent of homeless individuals are unsheltered— 

literally living in parks, cars and campsites. The homeless population is made up of families with children, veterans, individuals 

with disabilities, survivors of domestic violence, unaccompanied 

youth and working poor single adults. And without housing assistance, these individuals and families will cycle in and out of emergency rooms, be unable to hold steady employment, their children 

will not be able to regularly attend school, and most importantly, 

they will not have safe and affordable housing. 

Service providers who receive and rely on HUD homeless assistance funds work to create a safety net and also permanent, independent and affordable housing for families and individuals experiencing homelessness and provide homelessness prevention. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED FROM 

BARBARA SARD 

Q.1. Some would argue that the drastic cuts to housing programs 

proposed under the FY 2009 budget request are justified, citing an 

increase in domestic discretionary spending in recent years. I am 

afraid that it is this line of reasoning, in fact, that has cost the 

CDBG program $659 million in this year’s request. What would be 

your response to the suggestion that domestic spending has increased dramatically in recent years? 

A.1. After accounting for inflation and population growth, we see 

that appropriations for the non-security portion of the budget hardly rose at all from 2001 through 2008. Specifically, this category of 

funding rose only 1.6%, from $399 to $405 billion. (The non-security portion of the budget consists of appropriations for all programs except National Defense (function 050), International Affairs 

(function 150), Veterans Benefits and Services (function 700), and 

homeland security amounts outside those three functions.) Every 

other set of programs in the budget grew more and faster, as the 

following table shows. 


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Programs Dollar growth 

(in billions) 

Percent 

growth 

Non-security appropriations .......... $6 1.6 

Security appropriations ................. 340 72 

Medicaid .......................................... 41 25 

Social Security ................................ 55 11 

Medicare .......................................... 109 40 

Entitlements other than ‘‘Big 3’’ ... 45 15 

I would add that non-security appropriations are the only category of the budget that shrank as a share of the economy during 

this period. Thus, aiming at housing programs, or any other nonsecurity programs, on the grounds of excessive growth seems wildly 

off-target. 

Q.2. We are often inclined to simply compare this year’s budget request to last year’s—but maybe we are missing some larger patterns. What longer term funding level trends have you identified 

for housing programs? 

A.2. HUD budget trends must be understood within the context of 

the unique funding needs of HUD programs. In particular, because 

of the nature of HUD’s affordable housing and community development programs and the manner by which Congress has chosen to 

fund some of these programs historically, the amount of funding 

needed to maintain current levels of assistance increases year-toyear at rates that generally exceed the overall rate of inflation. 

This is true for three reasons: 

First, in each of the last several years, Congress has used roughly $2 billion in recaptured Section 8 funds from earlier years to 

help finance HUD programs. For a variety of reasons, such funds 

will not be available in 2009 (or future years), which means that 

funding for HUD will have to increase by $2 billion (or 5.3 percent) 

in 2009 simply to sustain HUD affordable housing and community 

development programs at 2008 funding levels, unadjusted for inflation. 

Second, nearly 300,000 low-income families receive rental assistance under long-term project-based Section 8 contracts between 

HUD and private property owners. These contracts are currently 

funded with budget authority approved decades ago by Congress. 

Yet every year, contracts governing 20,000 to 40,000 of these Section 8 apartments expire and are converted to contracts that require new annual appropriations by Congress. The cost of these 

conversions, which is in addition to the appropriations needed to 

renew the 1 million Section 8 apartments that are already funded 

annually, ranges from $100 million to $300 million annually in new 

budget authority. (Outlays are not affected by the shift from longterm contracts to annual renewals.) 

Finally, HUD funding needs are closely tied to the costs of rental 

housing and utilities. In recent years, rents and utility costs have 

risen at rates that exceed the general inflation rate (and the CBO 

baseline inflation rates) by a significant amount. 

With this budgetary context in mind, budget data show that 

overall funding for HUD programs has risen modestly in recent 


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years, once funding levels are adjusted for inflation and population 

growth, yet has fallen as a share of the overall economy. Even more 

troubling, some core HUD programs have experienced deep cuts. 

After accounting for inflation and population growth, appropriations for the Dept. of Housing and Urban Development rose by 6.4 

percent from 2001 to 2008, less than 1 percent per year. This rate 

of growth is much lower than the growth rates of defense, other security programs, and entitlement programs. From 2004 to 2008, 

funding for HUD actually fell slightly, after adjusting for inflation 

and population growth. Appropriations for HUD also fell by 4.5 

percent as a share of the overall economy from 2001 to 2008. 

These general trends mask deep cuts in some core housing and 

community development programs over the long term. Funding for 

public housing in 2008 is $1.8 billion (or 21.3 percent) below the 

2001 level, adjusted for inflation only. Indeed, 2008 is the 7th 

straight year that funding for the Public Housing Capital Fund has 

been frozen or cut, and the 6th straight year that the Public Housing Operating Fund has been funded at a level below the amount 

required according to HUD’s operating cost formula. These cuts 

would continue under the President’s budget request for 2009: 

housing agencies would receive only 84 percent of the operating 

funding required according to the HUD formula, while the Capital 

Fund would be cut for the 8th straight year. 

In 2008, funding for formula grants under the Community Devel- opment Block Grant program will be $2 billion (or 35.8 percent) 

below the 2001 level, adjusted for inflation and population growth. 

Block grant funding under the HOME program will be $609 million 

(or 27.2 percent) below the adjusted 2001 level. The President’s 

budget has proposed deep cuts for CDBG again in 2009. 

Funding for supportive housing for the elderly and people with 

disabilities has also experienced deep cuts. The 2008 funding level 

for Section 202 elderly housing is $253 million (or 25.6 percent) 

below funding in 2001, adjusted for inflation and population 

growth, while that for Section 811 supportive housing for people 

with disabilities is $39 million, or 14.1 percent, below the 2001 

level. 


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