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89–501 PDF 2003

S. HRG. 108–175

$5.2 BILLION FOR LOW-INCOME SENIOR HOUSING

NOT REACHING THE ELDERLY: WHY?

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

WASHINGTON, DC

JUNE 17, 2003

Serial No. 108–13

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

LARRY CRAIG, Idaho, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MIKE ENZI, Wyoming 

GORDON SMITH, Oregon 

JAMES M. TALENT, Missouri 

PETER G. FITZGERALD, Illinois 

ORRIN G. HATCH, Utah 

ELIZABETH DOLE, North Carolina 

TED STEVENS, Alaska 

RICK SANTORUM, Pennsylvania 

JOHN B. BREAUX, Louisiana, Ranking 

Member 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RUSSELL D. FEINGOLD, Wisconsin 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

LUPE WISSEL, Staff Director 

MICHELLE EASTON, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Larry E. Craig ..................................................... 1

Statement of Senator James Talent ....................................................................... 45

Prepared Statement of Senator John Breaux ....................................................... 63

PANEL I 

John C. Weicher, Assistant Secretary, Housing/Federal Housing Commission, 

U.S. Department of Housing and Urban Development, Washington, DC ....... 2

PANEL II 

David G. Wood, Director, Financial Markets and Community Investment, 

General Accounting Office, Washington, DC ..................................................... 13

Cynthia Robin Keller, Vice President, Affordable Housing and Development, 

Volunteers of America, Alexandria, VA ............................................................. 28

Tom Herlihy, Development Specialist, National Church Residences, 

Columbus, OH ...................................................................................................... 37

Lee Ann Hubanks, Executive Director, Plano Community Homes, Inc., 

Plano, TX .............................................................................................................. 45

APPENDIX 

Testimony of Paul Hazen, President and CEO, National Cooperative Business 

Association and Douglas Kleine, Executive Director, National Association 

of Housing Cooperatives ...................................................................................... 64

(III) 

(1)

$5.2 BILLION FOR LOW-INCOME SENIOR 

HOUSING NOT REACHING THE ELDERLY: 

WHY? 

TUESDAY, JUNE 17, 2003 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

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

SD–608, Dirksen Senate Office Building, Hon. Larry E. Craig, 

(chairman of the committee) presiding. 

Present: Senators Craig and Talent. 

OPENING STATEMENT OF SENATOR LARRY E. CRAIG, 

CHAIRMAN 

The CHAIRMAN. Good morning, everyone. We thank you for attending this Senate Special Committee on Aging hearing. In our 

daily legislative discourse, it is our fiduciary legislative duty to address a variety of issues. On this committee, we have oversight responsibility over all issues affecting our aging citizens. One such 

issue is housing. Both the ranking member, Senator Breaux, and 

I are always keenly interested in this. The Senator would be here 

this morning, but he is on the floor managing another important 

issue for seniors, and that is the Medicare prescription drug legislation that is currently on the floor of the Senate. So he will not 

be able to be in attendance this morning. 

In meeting our oversight obligation, we are charged to exercise 

constructive reviews and critiques of the Federal programs we have 

created. Today we exercise that constitutional responsibility and 

examine the bureaucratic administration by the Department of 

Housing and Urban Development and the meritorious and needed 

Section 202, Supportive Housing for the Elderly program. 

The most widespread and urgent housing problem facing elderly 

households today is affordability. About 3.3 million elderly rental 

households in the United States have very low incomes, which 

HUD defines as 50 percent or less of the area median income. The 

Section 202 program provides two types of financial support. The 

first type of funding provides capital advances grants to nonprofit 

organizations to purchase land and construct affordable rental 

housing exclusively for these households. The second type of funding, which interplays with the first type, is monthly support in the 

form of rental assistance payments that defray some of the operating expenses. 

2

However, due to a myriad of HUD requirements in the application process, coupled with chronic and oftentimes insensitive bureaucratic delays by HUD in the processing of grant applications 

and monetary commitments, the nonprofits are placed in untenable 

economic positions. Today we will listen to their litany of concerns. 

We will examine what I call the bureaucratic treatment of nonprofit organizations in the application process conducted by the 

Department of Housing and Urban Development which has caused 

the Section 202 program’s overall balance of unexpended appro- priations by the end of fiscal year 2002 to total $5.2 billion. These 

unexpended funds in the only Federal program devoted exclusively 

to providing the type of most needed affordable housing for the elderly represent nearly 86,339 housing units in 1,936 projects affecting needy seniors. 

We will also focus on the findings of the General Accounting 

Office report on elderly housing provided by the Department of 

Housing and Urban Development through the Section 202 program. These findings will detail the administrative and planning 

problems encountered by the nonprofit associations who utilize the 

funding of these programs and GAO’s recommendations for improvements. 

We will hear testimony today from two panels of witnesses. Our 

first witness is John C. Weicher, Assistant Secretary, Housing/Federal Housing Commission, Department of Housing and Urban Development. 

On our second panel of witnesses, we will be joined by David 

Wood, Director, Financial Markets and Community Investment, 

General Accounting Office; as well as Ms. Cynthia Robin Keller of 

Volunteers of America; Mr. Tom Herlihy of the National Church 

Residences; and Ms. Lee Ann Hubanks of Plano Community Housing, representing the umbrella association of American Association 

of Homes and Services for the Aging. 

I want to thank all of our witnesses beforehand for being here 

today. This is a most important inquiry, and I look forward to hearing your respective testimonies and exploring ways to provide better, affordable, more timely access to this money that ultimately 

produces the kind of housing that so many of our seniors need. 

So, with that, I turn to our first panelist, Dr. John C. Weicher, 

Assistant Secretary, Housing/Federal Housing Commission, 

Department of Housing and Urban Development. Doctor, welcome 

to the committee this morning. We look forward to your testimony. 

STATEMENT OF JOHN C. WEICHER, ASSISTANT SECRETARY, 

HOUSING/FEDERAL HOUSING COMMISSION, U.S. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, 

WASHINGTON, DC 

Mr. WEICHER. Thank you, Mr. Chairman, and thank you on behalf of Secretary Martinez for inviting the Department to testify on 

the subject of the Section 202 Supportive Housing Services program. We are happy to discuss the program in the context of the 

findings and recommendations in the recent GAO report. 

I would like to start with the issue of timely processing, the pipeline problem. Section 202 has been frequently criticized because it 

takes too long to close projects after they are funded. Secretary 

3

Martinez has made it a priority to clear out the pipeline. Shortly 

after I became Assistant Secretary for Housing in the summer of 

2001, the Office of Housing compiled a list of projects that had 

been in the pipeline for at least four years, double the processing 

period permitted under our regulations. These projects had been 

approved in fiscal year 1997 or earlier. I asked our staff to determine the status of each one. We learned that many had already 

been processed through initial closing and many others had been 

canceled. Having determined which projects really were in the 

pipeline, we then made it a priority to bring those projects to closing. 

I am pleased to say that we have cut the aged pipeline from 48 

projects to just 7, and we expect to close 6 of them during the remaining quarter of this fiscal year. Those are certainly the hardest 

projects to close. They have site problems or litigation, and as time 

goes by, the costs rise. 

We have funded 977 projects that were approved between fiscal 

years 1992 and 1997. More than 99 percent of those projects have 

been completed. 

For the period from 1998 to 2000, the years that were the focus 

of the GAO report, we have closed 84 percent of those projects, 409 

out of 489. At the time of the GAO report, in December, we had 

only closed out 74 percent. We have cut the number that had not 

been closed from 127 last December to 80 at the end of last month. 

While cleaning out the pipeline, we have not neglected the timely 

closing of recently funded projects. In the past, HUD typically 

closed between 50 and 55 percent of projects within two years. For 

projects funded in fiscal year 2000, we closed 60 percent. I am 

pleased to be able to say that two weeks ago I attended the grand 

opening of a Section 202 project that was funded in fiscal year 

2001, Denali View in Chugiak, AK. This project was funded in September 2001 and is open and fully occupied in June 2003. It is a 

beautiful project, and you can indeed see Denali, see Mount McKinley, from their front door. 

The GAO report discusses the unexpended balances in this program, and the committee is focused on that issue. GAO observed 

that only a small part of the unexpended funds, about 14 percent, 

about $700 million, are associated with pipeline projects that have 

exceeded HUD’s processing time guideline. This is an indication of 

the progress we have made in clearing out the pipeline. 

As GAO reports, almost half of the $5.2 billion in unexpended 

balances consists of PRAC balances for projects that have been 

completed and are now occupied. That money is being spent year 

by year as Congress intended. For those projects awarded between 

1991 and 1994, the unexpended balances are the remaining years 

of the original 20-year PRAC. For those projects awarded in later 

years, the unexpended balances are the remaining years on the 

original 5-year PRAC. These PRACs amount to $2.5 billion. 

Another quarter of the unexpended balances, $1.3 billion, consists of the funds Congress appropriated in fiscal years 2001 and 

2002. These projects are still within the original schedule for reaching timely initial closing. We anticipate that most of them will 

come to initial closing on a timely basis. The remainder is money 

4

for projects which have started construction but have not yet been 

completed. That category amounts to about $700 million. 

We will continue to work to bring projects to closing and to occupancy and in the process to further reduce our unexpended balances on projects that have not yet been completed. 

In its report, GAO made recommendations to the Department to 

improve the administration of the program. Overall, the Department concurs with the recommendations, and we have taken steps 

to implement them. 

GAO recommended that we evaluate the effectiveness of the current methods for calculating capital advances. We have begun to 

examine how Section 202 development cost limits compare with 

other objective indicators of local construction costs, and we anticipate this evaluation will be completed next year. 

GAO recommended that we make the necessary changes to our 

cost calculation methods based on this evaluation so that capital 

advances adequately cover the development costs. The Department 

will be discussing this recommendation with Section 202 program 

stakeholders this summer, and we will complete the evaluation 

prior to making any changes in the current methods. 

GAO recommended that we provide regular training to ensure 

that all field office staff are knowledgeable and are held accountable for adhering to current processing procedures. During fiscal 

year 2002, the Department provided training to field staff for the 

first time in 10 years. Subject only to resource limitations, we are 

committed to continuing to implement an effective training program. Our next training will include technical processing training 

for field staff to assure that there is consistent processing nationwide. 

GAO recommended that we update our handbook to reflect current processing procedures. We have initiated the process of consolidating and updating the Section 202 program handbooks. We 

hope to complete this process by the end of fiscal year 2004, and 

that will allow the Department to incorporate any changes to the 

program that are a result of the meeting with the 202 stakeholders 

and the completion of the cost limits study. 

GAO recommended that we improve the accuracy and completeness of information entered in the Development Application Processing system by field office staff and expand the system’s capabilities to track key processing stages. During fiscal year 2002, there 

was an intensive effort to verify the accuracy of the information in 

the system, and the Department is committed to expanding its capabilities. 

In addition, the Department has taken other steps to improve 

our program delivery. We have strengthened the structure of the 

program by tightening the selection criteria for new projects. I describe these changes in detail in my prepared statement. We have 

drafted regulations to implement the mixed finance provisions of 

the American Homeownership and Economic Opportunity Act of 

2000. These regulations are now being reviewed at OMB. 

We have issued a notice to implement other provisions of the 

American Homeownership and Economic Opportunity Act of 2000, 

permitting existing Section 202 loan projects to refinance their 

5

mortgages, a priority for both the Department and the stakeholders. These procedures were announced last summer. 

Of course, we have established a management plan goal focusing 

on the reduction and elimination of the aged pipeline. 

I want to assure the committee, I want to assure you, Mr. Chairman, that the Administration and the Department are committed 

to the ongoing viability of the Section 202 program, and we are 

committed to working with you, with the nonprofit organizations 

that sponsor these projects, and with the elderly persons who need 

these apartments to make sure that Section 202 remains a successful program and a viable housing resource for the elderly. 

Thank you, and I will be glad to answer your questions. 

[The prepared statement of Mr. Weicher follows:]

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The CHAIRMAN. John, does your time allow you this morning to 

stay until the next panel testifies? What I would like to do is have 

you all at the table because I would like to have you respond possibly to some of their testimony. Does your schedule allow that? 

That would probably take another 20 minutes, 30 minutes. 

Mr. WEICHER. I can make myself available for that, Mr. Chairman. 

The CHAIRMAN. I would appreciate that if you could. 

So, with that, I will withhold questions until the next panel, and 

then we will bring you all to the table, and I will ask questions of 

all of you, because I would like to have you hear their testimony 

if you would, please. John, thank you very much. 

Now let me call our second panel: Mr. David Wood, Director of 

Financial Markets and Community Investment, General Accounting Office; Cynthia Robin Keller, Vice President of Affordable 

Housing and Development, Volunteers of America; Tom Herlihy, 

development assistant, National Church Residences, Columbus, 

OH; and Lee Ann Hubanks, Executive Director, Plano Community 

Homes. 

We are going to ask that you adhere to the 5-minute rule, and 

your full statements will become a part of the record. 

Mr. Wood, we will start with you. Thank you. 

STATEMENT OF DAVID G. WOOD, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, GENERAL ACCOUNTING OFFICE, WASHINGTON, DC 

Mr. WOOD. Thank you, Mr. Chairman. I appreciate the opportunity to be here today. 

My statement addresses the two principal topics covered in our 

report to you and Ranking Member Breaux: first, the relative importance of the Section 202 program in meeting the housing needs 

of the low-income elderly, and, second, the timeliness with which 

projects move through the planning and approval process. 

According to the 2001 American Housing Survey, nationwide 

there were about 3.3 million elderly renter households with very 

low incomes. About 1.3 million of the households received some 

type of Government housing assistance. We estimate that the 202 

program was responsible for assisting about 20 percent of those 

households. 

However, despite its exclusive focus on very low-income elderly 

renters, the 202 program serves only about 8 percent of target 

households. More than half of the very low-income elderly renter 

households did not receive any form of Government housing assistance. HUD considers the large majority to be rent burdened because they pay more than 30 percent of their incomes for rent. Accordingly, it is important that Section 202 projects are developed 

in a timely manner. 

HUD’s development approval process is directed at completing 

specific plans needed to start construction. Among other things, 

project sponsors must prepare and HUD field offices must review 

architectural plans and detailed cost estimates. The agency’s goal 

is generally to complete these steps within 18 months of selecting 

the projects for funding. However, HUD’s field offices may extend 

14

this period by up to six months. HUD headquarters has to approve 

any further extensions. 

We specifically looked at all 494 projects that were selected for 

funding in fiscal years 1998 through 2000. We found that more 

often than not, the projects took longer than HUD’s 18-month 

guideline. Specifically, we found that as of December 2002, 132 

projects, or about 27 percent of the total, had met the 18-month 

guideline. Another 140 projects, about 28 percent, had been processed within 24 months. One hundred twenty-seven projects were 

still pending, including 11 that were funded in 1998 and 34 that 

were funded in 1999. All together, 73 percent of the projects did not 

meet HUD’s 18-month guideline. 

To explore the potential reasons for this, we surveyed HUD field 

office staff as well as selected program sponsors and consultants. 

We also looked at HUD headquarters’ oversight of the program. We 

identified a number of factors that can affect project timeliness. 

The first concerns the amount of funds that HUD makes available for each project called the capital advance. HUD’s policy is for 

capital advances to fund the total development cost of modestly designed projects that meet minimum property standards and applicable codes. However, about 90 percent of sponsors and consultants 

and nearly two-thirds of HUD’s field offices reported that capital 

advances were often or even always insufficient. In such cases, 

sponsors must either seek additional funding from other sources, 

redesign their projects to lower costs, or both. These activities take 

time. 

A second factor was variation in the procedures that HUD’s field 

offices used to approve projects for construction. At the time of our 

review, HUD’s field office staff was relying on out-of-date program 

handbooks that did not reflect streamlining steps the agency adopted in 1996. Further, most field office staff had not received any formal training on Section 202 projects. Last year, HUD offered the 

first formal training on the program in at least 10 years. 

Third, we found that to monitor projects, HUD headquarters relies on an automated system with limited ability to track projects 

through each stage of development. 

Finally, our survey identified some factors outside of HUD’s control, such as inexperienced project sponsors and local government 

permitting and zoning requirements, that can prolong project development. 

As a result of our work, we made the recommendations that Dr. 

Weicher just discussed, and HUD outlined its plans for acting on 

them. As in all such cases, we will be tracking the agency’s actions 

as part of our normal follow-up procedures. 

That concludes my prepared statement. I will be happy to take 

any questions. 

[The prepared statement of Mr. Wood follows:]

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The CHAIRMAN. David, thank you very much for that testimony. 

Now let me turn to Cynthia Keller, Volunteers of America. Cynthia, welcome to the committee. 

STATEMENT OF CYNTHIA ROBIN KELLER, VICE PRESIDENT, 

AFFORDABLE HOUSING AND DEVELOPMENT, VOLUNTEERS 

OF AMERICA, ALEXANDRIA, VA 

Ms. KELLER. Thank you. Mr. Chairman, I have been involved in 

the 202 program for approximately 20 years. On behalf of our organization, I want to express our sincere appreciation for your interest and concern for the Section 202 elderly program and for inviting us to be here today. 

Volunteers of America is one of the Nation’s largest and most 

comprehensive nonprofit, faith-based service organizations and is of 

the Nation’s leading nonprofit providers of affordable housing. We 

currently have 151 Section 202 and Section 811 programs in operation, and we have an additional 24 facilities in various stages of 

development. 

The problems we face as a nonprofit human organization and as 

a Nation in attempting to provide more and better facilities to 

house and serve America’s seniors will be severely compounded by 

the expected rapid growth in the Nation’s aging population in the 

coming decades and by the lack of adequate public policy and resources to meet that growth. 

Clearly, as a Nation we have a problem of extraordinary scale 

and urgency as the housing and social services programs and funding we have in place today will not keep pace with the situation. 

Therefore, it is so important that programs that we have in place 

like the Section 202 Elderly Housing operate in an efficient and expeditious manner. 

We are concerned, as our members of this committee, about the 

amount of pipeline time it takes from receiving notification from 

HUD that the Section 202 funds have been awarded to the actual 

time of construction start. On average, our experience shows that 

the process takes between 2 and 2–1/2 years. 

In 1996, HUD issued Notice 96–102. The purpose of the notice 

was to make significant changes in the way that the 202 development processing was administered. Although one of the specific 

goals was to decrease the processing time, one of the changes in 

the notice actually had the effect of increasing processing time and 

increasing the cost to build the project. This change was the requirement that owners could not apply for additional funding from 

HUD for the project. As David said, our experience is the same. Approximately 90 percent of the facilities that we develop require additional money due to insufficient funding allocated at the time of 

the award. HUD will grant waivers to the requirement but only if 

the sponsor first demonstrates they have attempted to get funding 

from other sources prior to requesting additional monies from 

HUD. 

Typically, the most common source of the additional funds is 

CDBG or HOME funds obtained either from the local municipality, 

the State, or both. State and local municipalities receive their 

CDBG and HOME funds from HUD. If sufficient funds are not 

available from those sources, the sponsor can try to obtain funds 

29

from the Federal Home Loan Bank or private foundations. Funding 

from the latter sources are quite difficult to obtain, and many private foundation grants are incompatible with the 202 program requirements. 

All of the barriers to capital availability are intensified in the 

case of affordable housing development for the elderly due to the 

fact that the 202 program doesn’t permit repayment of secondary 

financing until after the 40-year term of the HUD grant. This creates a barrier to obtaining supplemental funding when it is needed. 

After the sponsor has tried the additional sources and still has 

insufficient funds to build the facility, the sponsor can request a 

waiver of HUD Notice 96–102 from the local office. In most instances, the local office will then request amendment money from 

HUD headquarters. The added processing time creates increases in 

the cost of the facility because of the financing search. 

During this time, the sponsor is often forced to purchase the site 

out of their own resources, due to the fact that the sellers are normally not willing to continue to extent the option on the property. 

When a site has to be purchased, we incur costs such as insurance, 

property taxes, and interest on the funds used to purchase the site. 

Unfortunately, these costs are not reimbursable from HUD funds 

and can amount to several thousands of dollars. Therefore, for nonprofit sponsors, this understandably is a huge incentive to close on 

the loan as quickly as possible. 

We at Volunteers of America encourage this committee to consider the following issues and suggested courses of action that will 

greatly assist in reducing processing time. 

Recommendation 1, which you have also heard today, is in the 

future provide adequately funding to build the project at the time 

of the award. This can be done by ensuring that the high cost factors used in calculating the award are realistic. Currently, in our 

experience, only the North Carolina and Minnesota HUD offices 

have sufficient funds at the time of the grant to build the facility. 

Perhaps these offices could be consulted on their methods of determining the high cost factor. We believe the outcome would decrease 

the processing time by 6 to 12 months. 

Recommendation 2, which we believe could happen almost immediately, would be to eliminate the requirement to seek funds from 

outside sources for the shortfall. You could allow local HUD offices 

to grant waivers to the 96–102, which would allow sponsors to receive amendment funds without first applying to outside agencies 

who receive their funds in most cases from HUD. The processing 

time, in our opinion, would decrease by 3 to 6 months. 

Also, another recommendation which you have heard today is to 

provide additional HUD staff and training for the local staff. HUD 

headquarters offered training for the first time in August 2002. Approximately one person from each office was trained. While there 

has been some improvement in the uniform interpretation of the 

regulations, many offices are in need of additional training and 

staffing. With adequate staff, the HUD in-hour grant processing 

could decrease from 11.8 months, which is what the average of our 

portfolio is, to 2 months from the time it reaches HUD. This is the 

amount of time that HUD Notice 96–102 recommends, thereby 

clearing up most of the perceived pipeline issues. 

30

We believe the HUD Section 202 program is one of the finest affordable housing programs that Congress has created. The program 

is fair, it is managed well once it is developed, and reaches those 

low-income elderly age 62 and over in an effective way. 

We appreciate the opportunity to bring you our ideas and perspectives and want to assure you and all members of the committee 

that we are strongly committed to helping resolve the issues before 

the growing demand for elderly housing and supportive services 

spirals out of control. Mr. Chairman, we are confident that sound 

solutions can be found and implemented in a way that is fiscally 

responsible and fair to all parties. 

We appreciate your commitment to the cause and look forward 

to working with you throughout the process. Thank you. 

[The prepared statement of Ms. Keller follows:]

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The CHAIRMAN. Thank you very much, Cynthia. 

Now let us turn to Tom Herlihy, National Church Residences. 

STATEMENT OF TOM HERLIHY, DEVELOPMENT SPECIALIST, 

NATIONAL CHURCH RESIDENCES, COLUMBUS, OH 

Mr. HERLIHY. Senator Craig and committee members, thank you 

for the opportunity to be here this morning. National Church Residences has approximately 225 properties in 25 States. Approximately 150 of those are 202 facilities, and the remainder for the 

most part are low-income housing tax credit facilities. I would just 

like to echo that it is a very good program, but I would like to go 

into a few items that do cause delays in the developing process. 

First of all, I would like to refer over to the board at Steps 6, 

7, and 8. One of the initial delays coming right out of the block is 

the application and review period from when we apply for funds to 

the time that we receive the funds. We have just recently submitted 12 applications just on last Friday for funding in this program. This is one application of which we submitted 12 in 10 different States. I believe one of the things that could be done to improve the program would be to decrease the review period. Right 

now it is approximately six to seven months. If you took a review 

of the different State-run tax credit programs, they typically review 

those and award funds within a three to four-month period. Also, 

approximately a third to 50 percent of this application covers information that is basic information on the sponsor and so on, and it 

is not necessarily site-specific. When these applications are turned 

in to the individual field office for their review, I believe they are 

somewhat burdened by having to review these, just as we are 

somewhat boggled by the amount of information that we have to 

provide. 

Perhaps if we split the application process into possibly two steps 

where you had basic information that is sponsor-provided that 

would be provided to HUD, and that could be done at once at one 

field office, or perhaps once you attained a certain score, then that 

score would be held for a number of times. So in the application 

process, all we would be submitting would be site-specific information. That would facilitate their ability to review in a quicker process. 

Second of all, something that could cause a delay is just the nature of the zoning process, and that really has nothing to do with 

whether the project is funded through HUD or whether it is a private development process. The local zoning process is often very 

cumbersome. It is typically a two-step process where we go before 

the planning commission first, and then after their approval and 

review, then we go to city council. Even if property is properly 

zoned, it is not uncommon that elderly housing is sometimes what 

they refer to as a conditional use. That means that you just can’t 

apply for a building permit; you still have to go through the planning commission and city council review process. 

It is not uncommon that the zoning process takes approximately 

four months. It is also very difficult for us to begin that process 

prior to the time when we are awarded the funds. It is typical that 

we have to have the property surveyed, and we would have to have 

engineering plans for some of the site plan review type stuff, and 

38

so that would preclude us from being able to initiate that process 

prior to the award of funds. So part of it is just the sequence of 

activities that we have to go through, and we have to take those 

in the proper order. 

There have also been times, since it is a conditional use, where 

we are in essence kind of burdened by having to do some type of 

development that otherwise we wouldn’t count on. A good example 

is a recent facility that I am working on right now. I had to install 

450 feet of 6-foot-wide concrete sidewalk all the way across my 

property, and there are no sidewalks at either end that it adjoins 

to. It is just an example of a local requirement that we could be 

forced to do. 

I have also encountered delays in part due to the Davis-Bacon 

wage rates. If you would refer to Steps 9, 10, and 11, what the 

delay is, what is caused there is at times I have submitted a firm 

application and had the project in for final review. This is after we 

have building plans and everything complete at the point where we 

are ready to pull a building permit. At that point, we have a budget that we have worked on based on what the current Davis-Bacon 

wage rates are, and then once we have submitted the application 

for review, if there is a new wage decision which increases the 

labor rates significantly, then automatically our project is over 

budget. If we were right at the point where we basically can’t pull 

anything else out of the building, we are forced to request for additional funds at that point. If that happens right prior to our initial 

closing, it can cause a substantial delay. It would be very beneficial 

if somehow we could lock in a wage rate at the time that the 

project is awarded perhaps for a 2-year period or something like 

that within the timeframe that we could reasonably expect to develop the project. 

Last of all, I would just like to go into purchasing the land. That 

is a burden sometimes. Somewhat it is made more difficult by the 

process of these do take some time, and when we negotiate an option to purchase and control the site that is for an anticipated closing that is approximately a year and a half off, it puts us in a very 

poor bargaining position to attempt to negotiate land to purchase 

for that far off. 

That is all I have at this time. Thank you. 

[The prepared statement of Mr. Herlihy follows:]

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The CHAIRMAN. Well, Tom, thank you. 

Ms. Hubanks, before I turn to you, let me turn to my fellow Senator from Missouri, Jim Talent, who has just joined us, for any 

opening comments he would like to make. 

STATEMENT OF SENATOR JAMES M. TALENT 

Senator TALENT. Well, Mr. Chairman, I want to thank you for 

holding yet another extremely relevant hearing. This is an issue 

that I encounter all the time in Missouri. It is one of the reasons 

I am so interested in what you all have to say. I am going to ask 

some questions, Mr. Chairman, related to something that I think 

we are all learning about how we should best provide services to 

people who need services, and that is, to the extent that the Government can push control down to some kind of integrated and 

local boards or local control mechanisms and have standards of accountability that measure performances rather than trying to 

measure so much the kinds of inputs that you have been talking 

about Mr. Herlihy, you know, in other words, what is the overall 

performance of boards or providers or developers in this case, how 

can we measure that and fund based on that rather than up front 

try and regulate everything people put into projects would—in 

other areas of social service, for example, that really speeds up and 

energizes this kind of work. So I will probably be asking questions 

along those lines. 

But I am mostly here to listen, Mr. Chairman, and, again, thank 

you for holding this hearing. 

The CHAIRMAN. Well, thank you very much for joining us. 

Now let us turn to our last witness on this second panel, Lee 

Ann Hubanks, Executive Director, Plano Community Homes. 

Welcome. 

STATEMENT OF LEE ANN HUBANKS, EXECUTIVE DIRECTOR, 

PLANO COMMUNITY HOMES, INC., PLANO, TX 

Ms. HUBANKS. Thank you. Thank you for the opportunity to testify today. My name is Lee Ann Hubanks. I am the Executive Director of Plano Community Homes in Plano, TX. We currently operate 299 HUD Section 202 units and have another 60 in development. I am also here representing the American Association of 

Homes and Services for the Aging. AAHSA represents more than 

5,600 mission-driven, nonprofits serving more than 1 million seniors each and every day, including the majority of HUD Section 202 

sponsors. 

Plano Community Homes has been building HUD Section 202 

housing since it was established in 1983. We have also applied for 

additional grant monies to make the development process viable 

due to inadequate capital advances. We have full-time service coordinators and transportation on each of our housing campuses. We 

have over 300 seniors on our waiting list and have been working 

with the city of Plano, the Collin County Committee on Aging, and 

the Plano Housing Authority, which has about 1,500 households on 

its waiting list, to reach creative solutions in our own communities 

for our community’s housing needs. 

On behalf of AAHSA, I would like to share with the committee 

some specific recommendations for making the Section 202 developVerDate 0ct 09 2002 14:11 Nov 05, 2003 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 C:\DOCS\89501.TXT SAGING1 PsN: JOYCE
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ment process more efficient. We concur that we need to increase 

the number and training of HUD staff so the development processes can move as efficiently as possible. Whenever there is a slowdown during the initial stages of the development process, it affects 

the cost and/or availability of the land. If HUD staffing or training 

levels are insufficient, the property is at risk. This in turn can put 

the entire project at risk. If land needs to be renegotiated because 

we miss opportunities, we must start back a square one and make 

our way through zoning issues and possible local opposition to affordable housing. 

Second, we feel that we need to set adequate total development 

cost limits. These were increased substantially years ago but have 

remained static these last years. Given the strength of the real estate market, HUD needs to pay better attention to real-world development costs. Inadequate development costs inevitably lead to 

the time-consuming necessity to secure other resources. HUD’s 

total development cost limits should be routinely reviewed and appropriately amended. 

To implement the optional ability to leverage mixed financing 

sources like low-income housing tax credits and private activity 

bonds and use them in conjunction with Section 202 funds to build 

projects that are both larger and house a mixed-income population. 

In addition, to provide technical assistance funds for site control 

and pre-development costs. Today, we are desperately looking to secure a piece of land to build 60 more Section 202 units. The current 

market rate for land in Plano is conservatively $4 to $6 per square 

foot. Under our cost constraints, the Section 202 program cannot 

afford land valued at greater than approximately $2.50 per square 

foot. Grants providing for up-front land purchase or land options 

would be a tremendous help. 

Last, HUD should publish sample seed money costs as part of 

the annual Notice of Funds Availability. The NOFA could then act 

as a real-world guidance to nonprofits, especially those new to the 

Section 202 development program, on what resources are actually 

needed by successful applicants before any funds from HUD will be 

available. For example, AAHSA members report a wide range of 

up-front costs, ranging anywhere from $50,000 to $100,000. The 

range is often attributable to local zoning and permit fees, land 

purchase options, environmental reviews, the Minimum Capital Investment required in the NOFA, and traffic impact studies. Depending on the locale, there may be numerous other up-front costs 

associated with a Section 202 development. 

We are committed to the 202 program. I have been doing this for 

almost 20 years, and it is a fabulous program. On behalf of all of 

the members of the American Association of Homes and Services 

for the Aging, I would like to thank you again for the opportunity 

to testify today, and I would be happy to answer any questions that 

I could. 

[The prepared statement of Ms. Hubanks follows:]

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The CHAIRMAN. Thank you very much. We appreciate your testimony. 

Tom, if we could get you to move a little this direction, Cynthia, 

move a little this direction, we are going to get a chair and ask Dr. 

Weicher to come and be seated then, and we will proceed with our 

questioning. Again, Doctor, we appreciate your willingness to stay. 

Actually, there is another chair coming there that will probably— it might seat you a bit higher. 

Again, let me thank all of you for your testimony and your involvement in this program, and as we analyze it based on the work 

that GAO did and obviously the testimony already of Dr. Weicher 

and the work that is underway as a result of the audit and their 

review of programs and their commitment to them. 

Doctor, let me first ask you this question: I have here the application book. I find that in itself daunting. Is it really necessary 

that we ultimately require that much information? This is not a 

staged involvement here, but Tom brought an application that is a 

product of this book’s requirements. Let’s put the chart back up, if 

we could, the 18-month process chart. Obviously, when Congress 

appropriates money for these programs, recognizing the need that 

we believe is out there, and, of course, a backlog that was clearly 

demonstrated that you have already spoken to that you have come 

a long way toward reducing in a significant way. In fact, let’s just 

put all the charts back up because that backlog is demonstrated 

there. 

Let’s talk about the 18-month process and the application itself 

and the adequate funding necessary to do that. Could you respond 

to those questions? Are you examining them, looking at them, reviewing them? Is 18 months a reasonable time to assume? I know 

that you are dealing with issues that were 4 and 5 years in pipelines. That is totally unacceptable as far as I am concerned. But 

18 months appears to be a long period of time when we deal with 

properties and money values and obvious needs. 

Mr. WEICHER. Well, Mr. Chairman, first, if I may say that four 

and five years is totally unacceptable to the Secretary and to the 

Department and to the Administration as well, and that is why we 

have made it a priority and have, I think, largely succeeded in 

eliminating the backlog of the aged pipeline, as I referred to it. 

With respect to the application process, we intend—I mentioned 

in my statement that we plan to meet with stakeholders during 

this summer to talk about the GAO recommendations and their 

other concerns, and we intend to take a look at the concerns that 

they raise, and that would certainly include the application process 

in the handbook. 

May I say that these projects are complicated, and we recognize 

that it can be daunting when you first begin to try to apply for a 

Section 202 project. We do have a demand for funds by prospective 

project sponsors that is well in excess of the funds that are appropriated annually by Congress. We try to make sure that we select 

projects which meet needs and which are a good prospect to be 

completed within the 18 or the 24-month period, including the 6-

month extension allowable in the field. 

The CHAIRMAN. Let me understand again. In the GAO study released in May, obviously we all focused on the $5.2 billion in unexVerDate 0ct 09 2002 14:11 Nov 05, 2003 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 C:\DOCS\89501.TXT SAGING1 PsN: JOYCE
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pended funding. It is my understanding that it breaks approximately this way: about 48 percent is tied to units that are already 

occupied, and that is rental assistance money. Is that correct? 

Mr. WEICHER. Yes, that is correct, Mr. Chairman. As I mentioned, from 1991 to 1994, Congress appropriated project rental assistance on a 20-year basis, and so those projects have a good half 

and more of the original 20-year contract money still unexpended. 

Beginning in 1995, Congress established the project rental assistance contract on a 5-year basis. Those projects since then have 1, 

2, 3, 4, and for the newest projects 5 years of rental assistance. 

Those balances also—all of those balances for both groups of 

projects spend out year by year as the project is occupied and as 

Congress intended. 

The CHAIRMAN. That money is obviously appropriated, it is in the 

treasury, you draw on it to meet these commitments. Is that the 

process that works? 

Mr. WEICHER. That is correct, Mr. Chairman. That is correct. 

The CHAIRMAN. The balance, 52 percent, then would be money 

appropriated for the purpose of the actual construction itself, I 

mean the development of the facility. 

Mr. WEICHER. The rental assistance contracts associated with 

those projects which have not yet been completed and occupied. 

The CHAIRMAN. So it is a combination of both. 

Mr. WEICHER. It is a combination of both. 

The CHAIRMAN. How does that break out? 

Mr. WEICHER. It breaks down about 80 percent capital advance 

and 20 percent project rental assistance contract. I might say that 

a substantial share, half of the remaining money, a quarter of the 

total, $1.3 billion, are the funds that Congress appropriated in fiscal year 2001 and 2002 and which, by the time of the GAO study, 

were still within the HUD guidelines, the HUD processing guidelines. That money is not yet late. Those projects are not yet in the 

pipeline in that sense. We expect to complete, as we have been 

doing, we expect to complete more than half of those projects within the 2-year period as we did for the year 2000 projects and as 

we have done in earlier years as well and then bring most of the 

remainder to closing within a third year. That is the track record, 

and that is the record we have established and we are building on. 

The CHAIRMAN. OK. With that, let me turn to my colleague, Senator Talent. Jim? 

Senator TALENT. Yes, let me follow up the discussion that I had 

and maybe ask some—the point I raised before and then maybe 

ask some specific questions. 

There are people sitting at this panel probably collectively with 

decades and decades and decades of experience in providing this 

housing to elderly people. Now, think outside the box a little bit. 

Would it be possible to short-cut some of this by establishing in 

communities some type of boards or control organizations that represent the various stakeholders, the nonprofits that had been doing 

this, to develop a procedure—maybe we could do this on a pilot 

basis—where you knew up front that certain funds were going to 

be available. You all know basically what the guidelines are, and 

knowing that those funds were going to be available, one of the 

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age dollars. If we sort of lifted some of the regulations and some 

of the oversight regarding the specifics of these projects, and instead you knew that certain pools of funds were going to be available, you could go ahead with more discretion on your own and 

then periodically you would have audits and the HUD people would 

come by and check on how you are doing. I mean, how different 

would that be from what you are now doing? Is that model, in your 

judgment, at all workable in this context? Are there too many local 

regulations? Is there a danger that somebody might use money unwisely? I mean, would it be possible to sort of transcend these problems a little bit by changing the way that we do this so you don’t 

have to have specific applications for every project? 

Does anybody want to comment on that? 

Ms. HUBANKS. I would like to answer that. We are a very small 

organization. NCR and VOA are wonderful programs, and they are 

much larger. They have different resources than we do. We don’t 

have a foundation behind us. Something like that would be wonderful for us to be able to do as a small organization. We have got experience because we have done this before. We are not coming into 

it brand new. Somebody coming into it brand new may have some 

difficulties. It may work different in other communities. 

We work very closely with our city and with our Committee on 

Aging in the county. So for us that would be a very workable solution. 

Senator TALENT. Mr. Herlihy, you mentioned you built a sidewalk that basically didn’t connect anything up. Now, I don’t imagine this happens a lot. I have seen this process from when I have 

nonprofits in my area contact me and they want help with an application, or I go out and visit a project and there is an awful lot 

of great work being done out there. I think we all feel that. 

Is there some way of expediting this in part by changing the way 

in which we apportion this money so that once we certify or once 

we have a set of providers who we trust that have a proven record, 

we simply allow them to make these decisions without having to 

have it overseen so much by the Government? Then what the Government does is check periodically to make sure everything is going 

well, and then check on the final outcomes? Would that speed the 

process up? Could we do that effectively? 

Mr. HERLIHY. We, in essence, do that in part right now in that 

we a lot of times target a community. We go in and work with 

them ahead of time prior to our application and get things set up 

essentially in the local community in preparation of an application. 

But still quite often in doing that you still have to go through the 

zoning process. 

Senator TALENT. I know that zoning is a problem no matter what 

you are trying to build anywhere. 

Mr. HERLIHY. I guess I would be a little leery of that. I would 

hate to see any significant amount of funds being expended ahead 

of time without the absolute commitment in set-up that it is going 

to be a facility, would be one of my great concerns. 

Senator TALENT. OK. Ms. Keller, you mentioned in your statement that funding from the latter sources, that is, private foundations, et cetera, are often quite difficult to obtain and many private 

54

foundation grants are incompatible with Section 202 program requirements. What did you mean by that, ‘‘incompatible’’? 

Ms. KELLER. Well, we have on occasion received funding from the 

Weinberg Foundation, but HUD has indicated to us that we can’t 

use it, that it is not compatible with the 202 program, so we have 

had to turn it back. Like Tom was saying, when we are having to 

do sidewalk/street improvements, HUD doesn’t permit you to use 

HUD funds for anything outside the perimeters of the site. So we 

will have to go to the city to try to get grants, foundation funds, 

for anything outside the perimeters, and it is not unusual for sidewalks, walking paths, widen the roads, put in street lights. Generally what will happen with us is maybe there are $400,000 or 

$500,000 in outside funding we get. The city will give it to us, and 

then we turn right back around and hand it back to them for the 

improvements that we have to do in that city. 

Senator TALENT. That probably all takes time, too, doesn’t it? 

Ms. KELLER. A lot of time, and it is a competition. You submit 

applications, usually a lot of excerpts from what you have, your 

plans, your specs, to the city. You are competing with everybody 

else in that city for those same funds. 

Senator TALENT. My sense usually——

The CHAIRMAN. let’s——

Senator TALENT. Go ahead. 

The CHAIRMAN. You know, let’s pursue this together because 

there is a common thread here that obviously what I have found 

interesting is that the right hand is 202 and the other hand is 

CDBG monies, and it is all HUD money. That tranche of time 

when you have found out that the project is inadequately funded, 

to go out and find other sources of money to package it all together 

to get a final product is apparently quite substantial in 95 percent 

of the cases. Is that what you said, Tom? 

Mr. HERLIHY. No, I didn’t throw that number out. 

The CHAIRMAN. OK, but one of you used the figure——

Ms. KELLER. I said 90. 

The CHAIRMAN. You used the figure of 95 percent of the cases require additional monies to complete a project, and some of that 

money is HUD money. 

John, maybe you could speak to that or we all could collectively. 

I find it fascinating that we cannot do one-stop shopping if, in fact, 

we have a qualified project that meets all of the requirements of 

HUD, why HUD can’t fund it completely. Or is there an intent or 

a purpose to find leverage? I can understand the value of 

leveraging private dollars or finding dollars outside of the Federal 

trough. But when it is going to different locations at the trough and 

it takes 5 or 6 months or more and that 18-month period becomes 

a reality, that doesn’t make a lot of sense. 

Mr. WEICHER. Mr. Chairman, let me say with respect to CDBG 

money that that money is given by the Department, by the Federal 

Government, to municipalities and States to be spent as they see 

fit on the purposes of community development. Once we provide 

them with the funds, it is their choice as to whether those funds 

should be just to support——

The CHAIRMAN. Yes, I know that. I mean——

55

Mr. WEICHER [continuing.] A Section 202 project or something 

else. In that sense, I don’t think it is really going to HUD twice. 

It is going to HUD for the 202 money, and it is going to the local 

government for local government sources, some of which come from 

the Federal Government. 

With respect to the question of how we—of the level of funding 

for an individual project, our choice essentially, Mr. Chairman, is: 

Do we provide full funding for a smaller number of projects or do 

we provide partial funding and try to use it as leverage, as you said 

a moment ago, try to use it as leverage for a larger number of 

projects? 

There is no perfect way to answer that question. The way we 

have chosen to answer it is to try to stretch the resources which 

we have, $780 million a year in the 202 program, stretch those resources to provide help in more places than we could if we went 

on a 100-percent basis, but not to stretch it so far that we simply 

can’t get projects built. That is always a judgment. It is always a 

balancing call, and I am sure that in some cases the balance we 

strike is not the balance we would strike once we have been 

through the process. 

The CHAIRMAN. Yes, Tom. 

Mr. HERLIHY. I would just like to add to that that does make a 

certain amount of sense also the way that it is done. For example, 

a project that I recently developed in Denver, in the city of Aurora, 

they had unusually high, what I will call impact or development 

fees, local fees. Their local fees were approaching $300,000 for a 

202 that I was developing. We went to the city of Aurora for CDBG 

funds basically to pay for their impact fees. 

Many of the other development costs, cost of construction and so 

on, were fairly close online, but it was those local impact fees that 

really pushed it over the budget. 

The CHAIRMAN. Well, I guess the question that I would ask of 

you, John, and then maybe those of you who are out there in the 

field have had this experience, of the eligible applications—‘‘eligible’’ meaning, obviously, they have demonstrated the need, they 

have come a long way—how many are denied because they cannot 

put the final or complete funding package together? Are there a 

number of denials out there where there is clearly the need, everybody qualifies, except they can’t come up with all of these other 

monies and, arguably, therefore, HUD had inadequately funded 

and, therefore, denied? Do you know that? 

Mr. WEICHER. Mr. Chairman, I don’t know that because we 

don’t—that is not an aspect of the application which we report on. 

I do know that the competition is fierce, and the scores, the winning scores in individual multi-family hub areas, the 51 areas 

around the country through which we provide funds, the field office 

we have scores, in many places winning scores in the 90’s and 

scores that do not quite qualify only a point or two lower. We see 

very many well-qualified applications, and we try to select the best 

of them from those applications. 

It is also quite typically true that applications which fall short 

in this year, just barely fall short in this year, are, in fact, successful applicants the next year with the same, essentially the same 

application. 

56

The CHAIRMAN. I ate into your time. 

Senator TALENT. No, that is OK, unless you are watching the 

clock very carefully, Mr. Chairman. 

Ms. Keller, why couldn’t you use those foundation funds that 

didn’t meet HUD program requirements, do you know in what respect it didn’t? 

Ms. KELLER. At this point in time they were sent to the local 

HUD attorneys, and we have had this happen in three offices, that 

the repayment schedules or the terms of the grants weren’t compatible with the laws regarding the 202 financing program. There 

was something in that language that did not coincide with the language of the HUD deed, mortgage, HEP requirements, contracts. 

Specifically, I cannot tell you. 

Senator TALENT. Those of you who are doing this in your communities, are there a lot of instances in this process where you can’t 

use certain funds or you have to use money for something or there 

is a delay while you are waiting for an approval where you are 

looking at it and you are saying, you know, I have been doing this 

for an awful long time, I would not be going through this exercise 

if I had the discretion to do this the way I wanted, this isn’t adding 

any value, this isn’t helping us provide better housing. Is this a 

constant experience that you have in this process? 

Ms. KELLER. For me it is not. I can’t speak for everyone else. 

But, you know, when you go to a grand opening and some elderly 

person comes up and puts their arm around you and tells you they 

didn’t have heat until they moved in or they were living in their 

car, then it is worth what——

Senator TALENT. It makes it all worthwhile. What I am getting 

at is that we are moving—there is a trend in the country which I 

think is very good to vest more discretion in the people who are actually providing the service to the seniors. To the extent that we 

can do that, it allows you all to do what you think makes sense in 

terms of the vocation and the mission that you have which works 

better for the seniors. If I can get the process to move in that direction, it reduces delays, allows money to be used more efficiently, allows you more flexibility in drawing dollars from other areas. That 

is what I am suggesting here, but I don’t hear you all saying that 

you feel like we need any kind of a systemic change in that sense. 

[No response.] 

No. 

Ms. Hubanks, would you tell us some of the specific things you 

have done with the Fort Worth office? I mean, evidently you are 

having great success dealing with them. What are some of the 

things they are doing to shorten the time? 

Ms. HUBANKS. Well, one of the things that we have done is we 

have worked with the architectural specialist in advance so that by 

the time we get ready to submit our documentation, we have pretty 

well been through it together so that it is much easier for him to 

look at and approve. We have kind of done that step by step as we 

have gone through the process to make it so that we are kind of 

all working together. 

If I turn it in as is and they have not seen it, it takes a great 

deal longer for them to process. So we have tried to work together. 

57

Senator TALENT. To just try and do as much as you can to get 

it approved before the actual process starts. 

Ms. HUBANKS. Right, so that when we turn it in, they know exactly what is coming, we know exactly what they are looking for, 

and we have been able to work out the little bugs in the system. 

Senator TALENT. I wonder, John, if HUD, when you get reports 

that an office like this is really working in an unusually good fashion to expedite this process, whether there is some process you 

have within the agency to bring other people in for training or 

demonstrations or replicate that kind of model in other places. Is 

there something internally you all do to try and take a successful 

model and replicate it? 

Mr. WEICHER. Well, as we said, and as all of the participants 

have said, we began to train staff in how to implement 202s, how 

to process 202s, last summer, in 2002, for the first time in 10 

years. We have additional training scheduled this year on the technical implementation issues. Certainly part of that training is 

learning—some people who have done well telling other people, 

and, of course, part of it also is that when you have somebody from 

every part of the country together there, they do a lot of talking 

on the side, after hours, between sessions, over dinner. We think 

that is important, and we intend to continue it. 

Senator TALENT. Thank you, Mr. Chairman. 

The CHAIRMAN. Well, thank you. 

You have just answered a follow-up question I was going to have, 

John. Are you institutionalizing this on an annual basis or every 

two years or whatever? 

Mr. WEICHER. Well, we hope to do it annually. It really will depend on the availability of training funds. But we are trying to do 

it this year and we hope to continue. 

The CHAIRMAN. Well, I think private America has found that an 

extremely valuable thing to do, especially in large companies, for 

the right hand and the left hand to sit down together and compare. 

Oftentimes, you are right, it is the conversation at the evening 

meal where one says, you know, in Texas we are doing it this way, 

and somebody in Pennsylvania says, well, I will be darned, that 

makes sense, we hadn’t thought of that. That does help in these 

ways, and much of that, of course, can be done inside existing regulations. 

David, you mentioned that you are continuing to track the 

progress HUD is making in light of the audit, the recommendations 

of that audit, and Dr. Weicher spoke to several of those. Will GAO 

consider doing a follow-up analysis of work in progress a year out 

from the study? I think that would be extremely valuable for this 

committee to revisit the dollars and cents, the applications, the 

timeliness. Obviously, Dr. Weicher is having successes of the kind 

that are respectable and appropriate, and that pipeline appears to 

be getting drained out. I think it would be extremely important for 

all to do such. 

Mr. WOOD. Yes. In terms of the specific work we do, we obviously 

respond to requests from committee chairmen. We do have a process for routinely following up on recommendations from any of our 

reports. We also, of course, every two years do the performance and 

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ment management problems that we see across the department, 

and a couple are very relevant to this 202 program at HUD. For 

example, we designated human capital management as a department-wide issue which gets into the adequacy of staff training and 

skills and so forth. But, yes, we would be happy to consider that. 

I just wanted to add also, on this issue of differences among offices, we do have data—it is in an appendix to our report—where 

we looked at the performance of each of HUD’s 45 field offices that 

deal with 202 projects and there are data in there. So that would 

be a good starting point for HUD to find out why some did so well 

and others did not. 

The CHAIRMAN. Thank you. That would be extremely valuable. 

Dr. Weicher, what is HUD doing to document—I guess I am trying to understand. I thought I did understand, maybe not as clearly 

as I should have. You talk about scoring projects. Do you look at 

or is there an effort to determine—you didn’t choose to use the 

word ‘‘leverage.’’ I used it. Is there a way to look at how monies 

are put together beyond what HUD is willing to participate that 

in? In other words, is there an examination of additional costs incurred by the nonprofits? 

Mr. WEICHER. Well, there is an assessment of whether the 

project can be covered by the funds that are available, and it is always a factor to look at the ability of the sponsor, the track record 

of the sponsor in successfully completing 202 projects, either entirely within the funding for the project as allocated by us or by 

bringing in additional outside sources. 

I certainly recognize that it is sometimes a complication to have 

to bring additional funding sources to the table, and as I said, ‘‘We 

try to strike a balance to make the funds go effectively as far as 

we can.’’ The CHAIRMAN. How much additional cost in time—and I used 

to sell, broker real estate, so I understand that when you have got 

a piece of property out there that is valuable but you can’t get the 

money for 12 months for it, sometimes owners just say the heck 

with you, we have got another buyer down the road. In hot economies, that oftentimes happens, and, therefore, it is money lost and, 

therefore, property becomes more valuable. But has there ever been 

an assessment of the additional costs incurred by the time it is required of the nonprofits to go out and secure the additional monies 

to make a project, to complete, and, therefore, a certifiable project? 

Mr. WEICHER. Not to my knowledge. Certainly not in the two 

years in which I have been Assistant Secretary for Housing. This 

is an issue that we would expect to discuss with the stakeholders 

when we get together with them later. 

The CHAIRMAN. Something else concerns me, and maybe Tom 

and Cynthia wouldn’t like to hear this. But when I see an application of that size and an application instruction book of that size, 

I react to it by saying, now, if I have got a skilled professional staff 

and I am in the business, and I have been there a while and I am 

good at it, I can make this happen. But if I am not good at it, if 

I am new to the business, if I am small, if I am struggling, and 

the needs are still out there, I probably am not going to make it. 

I can’t wade through—I am quite Tom’s and Cynthia’s organizations have systems and talent that produces these things on their 

59

computers and grinds them out and probably has a software package that does it for them in large part once they have fed the information in. They are sophisticated, big organizations. Are we creating an application process that clearly leans toward them? Therefore, are we eliminating others that should be eligible and capable 

of acquiring these as nonprofits for their communities and the seniors? Has there been any evaluation of that? 

There is no allocation of small business in this instance, is there? 

Mr. WEICHER. No. These are all nonprofits to begin with. It is not 

a small business——

The CHAIRMAN. Well, nonprofits is not a definition of size. 

Mr. WEICHER. I know that, but it is not a small business issue. 

I can tell you this, Mr. Chairman: I look at the list of winning applications and I look at the list of those which do not win each 

year. We have a range of successful applicants, including the local 

affiliates of the organizations that are here at the table, and also 

including purely local organizations. This is an important program 

to faith-based organizations. About half of our projects, successful 

applicants, are, in fact, religious organizations. 

The CHAIRMAN. That is my understanding, yes. 

Mr. WEICHER. Some of them are individual congregations. We 

fund applications from this particular church or this particular synagogue or this particular temple as well as applications from Volunteers of America in Ohio and so on. We certainly expect that as 

you are more used to the program, you will find it easier to work 

with, but we do have this broad range of successful applicants. 

The CHAIRMAN. OK. Cynthia, you provided us with a list in your 

testimony of valuable suggestions. If you could change one thing in 

the current 202 program, what would it be? 

Ms. KELLER. Eliminate the requirement to seek outside funding. 

The CHAIRMAN. OK. Tom, what would be the one thing you 

would eliminate or your organization would? 

Mr. HERLIHY. I would like to see the application process simplified and, consequently, the review and award time could be reduced, I believe. 

The CHAIRMAN. Have you ever done an analysis of those items 

that you would want to take out of it that could bring that and condense that down, let’s say, from 18 months to 12 months? Because 

my guess is you go to 18 and well beyond. 

Mr. HERLIHY. I could do that fairly easily, yes. I have got a number of items here marked out where that could be done. 

Senator TALENT. Mr. Chairman, would you yield for just a second? 

The CHAIRMAN. I would be happy to. 

Senator TALENT. An addendum to that, Mr. Chairman. What 

about a program where, if you have done this successfully a number of times, you get some kind of a status? Like the SBA has a 

preferred lender program. They can do low-documentation type applications. So at least if you have a record of success and HUD 

knows they can trust you, then you can file less of an application, 

something like that. Is there any reason we couldn’t do that? 

Mr. HERLIHY. That is what I am alluding to or that is what I am 

suggesting, basically. 

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Senator TALENT. Yes, for somebody who has a record, and then 

the new nonprofits, Mr. Chairman, could maybe partner with those 

who are already in and learn that way. You could mentor them. 

Mr. HERLIHY. Which is also what we do when we cosponsor an 

application with a local organization Senator Talent. One more 

thing to Ms. Keller? 

The CHAIRMAN. Please. 

Senator TALENT. You talk about eliminating that requirement, 

which—in my observation is where nonprofits can use Federal 

money to leverage other dollars, they do it. They don’t have to be 

told to do it. If we did eliminate the requirement, it doesn’t mean 

you wouldn’t be out trying to get additional funds, does it, Ms. Keller? 

Ms. KELLER. Correct. Basically what happens during the time we 

are trying to get those funds, though, it is the processing time 

itself. Labor costs are going up. Materials are going up. We are 

forced to build a facility with bare minimum materials, which, in 

the long run cost HUD more money in the way of subsidy to cover 

maintenance costs, because we are having to buy inexpensive materials that have to be replaced maybe in 5 years rather than 9 or 

10 if we had bought quality materials in the first place. 

Senator TALENT. What you are saying is if we had a system that 

was flexible enough to leave it up to the nonprofit and maybe provide some incentives to leverage more dollars, you could use it for 

some way that you wanted to, then you would do it where you 

could. But if you needed to make a judgment that in order to hold 

down the cost of the project, you had to go ahead entirely with the 

Federal dollars, you would. That is the kind of flexibility you are 

aiming for, right? 

Ms. KELLER. It is, and sometimes we will go ahead and submit 

the application to HUD saying we have grants pending, but if they 

don’t—if we are not approved, could you go ahead and ask for the 

amendment money? But in most instances, HUD is going to wait 

and see if we got the outside funding first. Or sometimes they will 

ask us, try this fund, this fund, this funding source before you 

come back to us, which delays the process. 

We did just partner with Hopewell Baptist Church in Missouri, 

and we are funded. It is going to construction soon, and partnered 

with a local housing authority in St. Louis. So we have done a 

lot——

Senator TALENT. I am just aiming for a system, Mr. Chairman, 

where we really trust the people who are doing this because they 

have the heart to do it. Nobody is doing this here. They are nonprofits, and if we adjust the system more in that direction, you end 

up reducing delays. Money goes further. You are able to make a 

good program even better. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The thing that concerns me is what Cynthia just 

said. When you put out a bid to construct something and 12 

months later you break ground and your costs of construction have 

gone up 10 percent but you are locked into a fixed amount and you 

have got to start scaling down quality, you are scaling down longterm viability of that unit, usually, or ultimately that happens. 

61

Lee Ann, let me ask you the question that I have asked both 

Tom and Cynthia. In your experiences, what would be the one 

thing you would like to have changed? 

Ms. HUBANKS. We are a very small organization, and we were 

funded in 1993, 1995, and 1996, and in each case I did those applications myself. I had packets that looked very comparable to this. 

For us, the biggest problem that we have got is the up-front expense. We are very small. We don’t have a foundation behind us. 

So we are always out looking for additional funds. We have used 

the community development block grant on multiple occasions to 

purchase land because we can’t get the process that takes so long, 

we can’t get people to wait on us for 6 months on a contingency 

while we wait to find out if we are funded, and then another, you 

know, 12 months before we close. 

So once we are funded, we use the community development—the 

project rental assistance contract and the fact that we were funded 

for building the building as the collateral then to go get the funding to pay for the land and then we turn it in to HUD and run the 

process. So we add an extra step in there that we may not normally have to do or some of the larger organizations might not 

have to do. 

So for an organization the size of mine, having some pre-development costs for fixed costs, for hard costs, would be tremendously 

helpful. But separating the 202 from the project rental assistance 

would be devastating for an organization like mine. 

The CHAIRMAN. OK. Well, I thank you all. I think we have covered the area quite well. John, I must tell you that the work that 

is underway is good to hear about, pleasing to hear about. The 

workshops, the training are critical. Working with the nonprofits, 

questioning them, quizzing them about what they would see different I think is also important. We expect accountability. It is your 

responsibility. 

At the same time, we don’t expect a bureaucracy that isn’t viable 

and flexible and demonstrates the reality of the marketplace. If we 

are running up costs in construction abnormally and, therefore, depleting the value of the appropriation for the purpose of getting 

housing out, that is something that I think concerns us all. I am 

not suggesting we are doing that, but if we extend time out there 

in an active real estate market and in an active market, then we 

may be in part doing some of that. 

There is no question about need, and that is what this committee 

is concerned about. Most communities across this country find a 

need for this kind of housing and a good number of our seniors in 

that kind of situation where this kind of housing can dramatically 

improve their lives. So we are concerned about it. We will wish you 

the best and revisit you in a year. 

Mr. WEICHER. Thank you, Mr. Chairman. 

The CHAIRMAN. We will look forward to having you back to review and, David, we will look at where we might track with you 

so that we see work in progress that is sustainable and institutionalized. I think that is what is increasingly important, that we 

not find ourselves in the situation you found yourself in, and that 

is, years and years out there of applications stacked up and 

progress uncertain. We are glad you have tackled that, and we are 

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glad the President and the Secretary laid that charge down. It was 

critically important that we do so. 

So, again, let me thank you all, and, John, let me especially 

thank you for taking the time to stay, to listen, and to respond to 

questions, and we appreciate all of your testimony. 

The committee will stand adjourned. 

[Whereupon, at 11:23 a.m., the committee was adjourned.] 

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A P P E N D I X 

PREPARED STATEMENT OF SENATOR JOHN BREAUX

I would first like to thank Chairman Craig for holding this vital hearing on housing for the elderly. I would also like to take this opportunity to thank all of the witnesses who have come before us to testify today. Your testimony will be of great 

value as the Committee works to address some of the critical challenges that exist 

in providing housing to our nation’s seniors. 

The need for affordable housing for the elderly is great. It has been estimated that 

nearly 3.3 million elderly households have what is defined as ‘‘very low incomes.’’

To address this need, the Department of Housing and Urban Development’s Section 

202 Supportive Housing for the Elderly Program was developed. This program 

serves as a resource for developing housing for low income elderly households and 

is the only federal program devoted exclusively to providing this type of housing. 

Due to the population it serves and its very important mission, it is imperative that 

HUD’s Section 202 program run efficiently and effectively. 

Today we will hear from witnesses who will discuss some of the problems associated with applying for and receiving funding to develop Section 202 housing 

projects. We will also hear from the General Accounting Office, which today released 

a report today Chairman Craig and I requested. Unfortunately, it appears that the 

Section 202 housing program is currently neither efficient nor effective. I hope that 

this hearing is the first step towards fixing these problems. Those seniors who have 

the greatest needs, should not be left waiting for an affordable place to live. 

Thank you once again Mr. Chairman for holding this important hearing. I look 

forward to hearing from our witnesses.

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