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LIVING IN AMERICA: IS OUR PUBLIC HOUSING

SYSTEM UP TO THE CHALLENGES OF THE 21ST

CENTURY?

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERALISM

AND THE CENSUS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

FEBRUARY 15, 2006

Serial No. 109–136

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON FEDERALISM AND THE CENSUS

MICHAEL R. TURNER, Ohio, Chairman

CHARLES W. DENT, Pennsylvania

CHRISTOPHER SHAYS, Connecticut

VIRGINIA FOXX, North Carolina

——— ———

WM. LACY CLAY, Missouri

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

JOHN CUADERES, Staff Director

JOHN HEROUX, Counsel

JULIANA FRENCH, Clerk

ADAM BORDES, Minority Professional Staff Member

C O N T E N T S

Page

Hearing held on February 15, 2006 ....................................................................... 1

Statement of:

Lazio, Rick A., executive vice president, Global Government Relations

and Public Policy, JPMorgan Chase Bank; Henry Cisneros, chairman,

Cityview, former Secretary of HUD; David G. Wood, Director, Financial

Markets and Community Investments, Government Accountability Office; and Renee Lewis Glover, former commissioner, Millennial Housing

Commission, chief executive officer, Atlanta Housing Authority ............. 10

Cisneros, Henry ......................................................................................... 19

Glover, Renee Lewis .................................................................................. 44

Lazio, Rick A. ............................................................................................. 10

Wood, David G. .......................................................................................... 21

Solomon, Rod, counsel, Hawkins Delafield & Wood, LLP, former HUD

Deputy Assistant Secretary for Policy; Conrad Egan, president, National Housing Conference, former executive director of the Millennial

Housing Commission; Alexander von Hoffman, senior fellow, Joint Center for Housing Studies, Harvard University; Edgar O. Olsen, professor

of economics, University of Virginia; and Michael A. Stegman, Macrae

professor of public policy, planning and business, and director, Center

for Community Capitalism, Kenan Institute of Private Enterprise, adjunct professor of entrepreneurship, University of North Carolina at

Chapel Hill .................................................................................................... 65

Egan, Conrad ............................................................................................. 83

Olsen, Edgar O. ......................................................................................... 100

Solomon, Rod ............................................................................................. 65

Stegman, Michael A. ................................................................................. 113

von Hoffman, Alexander ........................................................................... 90

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

Clay, Hon. Wm. Lacy, a Representative in Congress from the State of

Missouri, prepared statement of .................................................................. 8

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

of Pennsylvania, prepared statement of ...................................................... 132

Egan, Conrad, president, National Housing Conference, former executive

director of the Millennial Housing Commission, prepared statement

of ..................................................................................................................... 85

Glover, Renee Lewis, former commissioner, Millennial Housing Commission, chief executive officer, Atlanta Housing Authority, prepared statement of ........................................................................................................... 46

Lazio, Rick A., executive vice president, Global Government Relations

and Public Policy, JPMorgan Chase Bank, prepared statement of .......... 14

Olsen, Edgar O., professor of economics, University of Virginia, prepared

statement of ................................................................................................... 102

Solomon, Rod, counsel, Hawkins Delafield & Wood, LLP, former HUD

Deputy Assistant Secretary for Policy, prepared statement of ................. 68

Stegman, Michael A., Macrae professor of public policy, planning and

business, and director, Center for Community Capitalism, Kenan Institute of Private Enterprise, adjunct professor of entrepreneurship, University of North Carolina at Chapel Hill, prepared statement of ............. 116

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

of Ohio, prepared statement of .................................................................... 4

von Hoffman, Alexander, senior fellow, Joint Center for Housing Studies,

Harvard University, prepared statement of ............................................... 92

Wood, David G., Director, Financial Markets and Community Investments, Government Accountability Office, prepared statement of ........... 23

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LIVING IN AMERICA: IS OUR PUBLIC HOUSING SYSTEM UP TO THE CHALLENGES OF

THE 21ST CENTURY?

WEDNESDAY, FEBRUARY 15, 2006

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON FEDERALISM AND THE CENSUS,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:05 p.m., in room

2247, Rayburn House Office Building, Hon. Michael R. Turner

(chairman of the subcommittee) presiding.

Present: Representatives Turner, Dent, Foxx and Clay.

Staff present: John Cuaderes, staff director; Jon Heroux, counsel;

Juliana French, clerk; Adam Bordes, minority professional staff

member; and Jean Gosa, minority assistant clerk.

Mr. TURNER. A quorum being present, this hearing of the Subcommittee on federalism and the Census will come to order.

We want to welcome you to the subcommittee’s oversight hearing

entitled, ‘‘Living in America: Is our Public Housing System up to

the Challenges of the 21st Century?’’ This will be the first in a series of hearings designed to examine the state of public housing

system in the United States.

Congress first authorized public housing in 1937 as part of

Franklin D. Roosevelt’s Depression-era public works legislative

package. Over the years the program has evolved from a public

works program designed to serve predominantly working families

on a temporary basis before moving on to permanent market-rate

housing after a few years, to one serving poorer families who are

more likely to become long-term residents, with fewer options for

securing permanent unsubsidized housing.

In my hometown of Dayton, OH, the Dayton Metropolitan Housing Authority serves close to 15,000 families through its public

housing communities or Section 8 vouchers. While we have made

significant progress in the housing arena over the last 10 years, addressing the housing needs of the city’s poorest families remains a

significant challenge as we seek to create quality affordable housing for all families.

Despite several minor attempts to reform our public housing system, by the mid-1990’s, there were still far too many cases where

public housing did not provide quality, affordable housing to the

Nation’s neediest families. In 1998, Congress passed the Quality

Housing and Work Responsibility Act to address the many problems within the public housing system. This landmark legislation

2

was the largest overhaul of the public housing system in its long

history.

Today, public housing programs serve more than 3 million fami- lies at a price of more than $20 billion annually in Federal funding.

Public housing programs consume nearly 60 percent of HUD’s entire annual budget.

In recent years, public housing programs and housing assistance

have taken a back seat in the national debate. But with a combined Federal, State and local government investment of more than

$50 billion, it is time we begin looking to see if these funds are

being well spent. In this hearing, we will look at our public housing

system from a broad view. Later, we will narrow the subject matter

of any follow-on hearings based on what we learn in part from our

witnesses today.

This hearing will examine the factors that led up to Congress’ decision to reform the Nation’s public housing programs in 1998, as

well as the recommendations made by the Millennial Housing Commission in its 2002 report entitled, ‘‘Meeting our Nation’s Housing

Challenges.’’ We will examine the present state of public housing

and take a broad look at how effective reform legislation has been

in creating better, safer and more affordable housing for the Nation’s low and moderate-income families.

We have on our first panel the Hon. Rick Lazio of JPMorgan

Chase. Representative Lazio is the former chairman of the House

Financial Services Subcommittee on Housing and Community Opportunity, and the author of the Quality Housing and Work Responsibility Act of 1998.

Next we have the Hon. Henry Cisneros, who was the Secretary

of Housing and Urban Development from 1993 to 1997, and is currently chairman of CityView.

Next we have David Wood, Director of Financial Markets and

Community Development at the Government Accountability Office.

Last, we have Renee Glover, a former Commissioner on the Millennial Housing Commission and currently the CEO and president

of the Atlanta Public Housing Authority.

On our second panel we have five distinguished witnesses. First

is Rod Solomon, who is counsel with the law firm of Hawkins

Delafield & Wood, and was the Deputy Assistant Secretary for Policy at HUD.

Next we have Conrad Egan. Mr. Egan is currently president of

the National Housing Conference, and the former executive director

of the Millennial Housing Commission.

Following Mr. Egan, we will hear from Dr. Alexander von Hoffman, a historian and senior research fellow at Harvard University’s Joint Center for Housing Studies.

Next we have Dr. Edgar Olsen, professor of economics at the

University of Virginia.

Last, we have Dr. Michael Stegman, who is the director of the

Center for Community Capitalism at the Kenan Institute of Private

Enterprise, and an adjunct professor of entrepreneurship at the

University of North Carolina.

I look forward to the expert testimony our distinguished panel of

leaders will provide to the subcommittee. I thank you for all your

time.

3

I recognize Mr. Clay, our ranking member.

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

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6

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Mr. CLAY. Thank you, Mr. Chairman. Let me first begin by

thanking you for starting this legislative session with a review of

our Nation’s public housing program. This topic is of significant importance to all of our constituents, from Dayton to St. Louis, and

everywhere in between.

Since its origins dating back to the Great Depression, public

housing programs have served as a bedrock of support for millions

of families, elderly and disabled individuals. At the same time,

however, these programs have struggled to mitigate significant economic and social ills that have prevented our capital investments

and programmatic goals from achieving their intended outcomes.

Public housing, nevertheless, is in more demand than ever, as economic disparities and escalating housing costs have forced an overwhelming number of individuals to seek assistance.

Being from an urban center like St. Louis, I know firsthand the

value of public housing to my constituents. Our local PHA, the St.

Louis Housing Authority, has a budget of approximately $60 million that is derived entirely from HUD. Its public housing program

has a budget of $33 million to support approximately 3,800 units

located in 33 developments throughout the city. Unfortunately,

however, approximately 700 of these units are not suitable for use

because of modernization or demolition activities, and the average

age of a public housing building is 38-years-old. Complicating matters is the strain on its Section 8 Housing Voucher program, which

provides roughly 4,900 vouchers annually, yet has nearly 3,200 applicants on its Housing Choice Voucher waiting list.

While I approach today’s hearing with an open heart and mind,

I believe any long-term approach to public housing reform needs to

be undertaken with care and consideration for all program beneficiaries. To meet this requirement, I believe a hold harmless mechanism that would protect families from cuts in the future ought to

be considered as part of any future authorizing legislation.

Mr. Chairman, I thank you very much. I yield back the balance

of my time.

[The prepared statement of Hon. Wm. Lacy Clay follows:]

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Mr. TURNER. Thank you, Mr. Clay.

We will now start with the witnesses. Several witnesses have

kindly prepared written testimony which will be included in the

record of this hearing. The witnesses will notice that there is a timing light at the witness table. The green light indicates that you

should begin your prepared remarks, and the red light indicates

that your time has expired. The yellow light will indicate when you

have 1 minute left in which to conclude your remarks.

It is the policy of this committee that all witnesses be sworn in

before they testify. If the witnesses would please rise and raise

their right hands.

[Witnesses sworn.]

Mr. TURNER. Please let the record show that all witnesses have

responded in the affirmative.

I want to thank each of you again for the time that you are taking to be here, both in the preparation that it took and the time

that you are taking out of your schedules.

This committee is just beginning its process of looking at the

issues of public housing. Last year we focused on CDBG and

brownfields and brownfield redevelopment, holding over 5 hearings,

both in Washington, DC, and field hearings on the issue of CDBG

and prospects for its reform and to preserve that program, and

then also brownfields, how we might be able to assist communities,

making sure that they have more effective tools for the redevelopment of abandoned factory sites.

This is a beginning process so it is very important that we begin

with each of you because you come to the table with significant

knowledge in what has occurred in the past and where we have

fallen short in the past, and a vision of what we might need to do

in the future. So I appreciate you coming and sharing that with us.

As I was telling Rick Lazio, that each of you have come to contribute to our to-do list, and we greatly appreciate the skill and knowledge that you are going to bring to the table to permit us to do

that.

With that, I would like to begin with Rick Lazio.

STATEMENTS OF RICK A. LAZIO, EXECUTIVE VICE PRESIDENT,

GLOBAL GOVERNMENT RELATIONS AND PUBLIC POLICY,

JPMORGAN CHASE BANK; HENRY CISNEROS, CHAIRMAN,

CITYVIEW, FORMER SECRETARY OF HUD; DAVID G. WOOD,

DIRECTOR, FINANCIAL MARKETS AND COMMUNITY INVESTMENTS, GOVERNMENT ACCOUNTABILITY OFFICE; AND

RENEE LEWIS GLOVER, FORMER COMMISSIONER, MILLENNIAL HOUSING COMMISSION, CHIEF EXECUTIVE OFFICER,

ATLANTA HOUSING AUTHORITY

STATEMENT OF RICK A. LAZIO

Mr. LAZIO. Thank you, Mr. Chairman. I am delighted to be here.

I want to congratulate you for assembling two wonderful panels,

people that I have had the pleasure of working with before, and I

am sure they are going to be able to provide great insight into the

current state of housing policy in America. I also want to acknowledge Congressman Clay. It’s wonderful to see you again, and I

11

thank you for the opportunity and the respect you show for showing up for this.

I thought I would, as I said, dispense with the written testimony.

My pal here, Henry Cisneros, is kidding me a bit, because he is

pushing this timer in my face. I said, ‘‘Was this always this uncomfortable?’’ He said, ‘‘Yeah.’’ Did we saw off the legs or—[laughter]—

I have great respect for the people who have testified in the past

in front of my committee, and I want to begin by acknowledging

a really terrific, ideal partner, and that was Henry Cisneros. It

seems almost quaint in this era to have a Republican chairman

and a member of the Democratic administration really bond the

way I would like to think that we did. But it’s been a great relationship. I have tremendous respect for him, and I’m sure would

not have been able to accomplish what we did accomplish without

his strong support and leadership. So it’s been a loss for the country not to have him in public service.

When I was elected we were in the minority, and having been

in the minority and the majority, I would say that being in the majority is more fun, but 2 years later the Republicans did sweep into

the majority, and one of the great advantages of getting the gavel

as housing chairman was not to really have any history, any partisan history. There was nobody’s mess to clean up for. There was

no doctrinaire, paradigm to try to fit into, per se, which was an advantage in terms of having a clean slate from which to work.

The second major advantage was that there was a sense of urgency and a general sense of consensus, I think, that there were

fundamental problems and challenges affecting public and assisted

housing. That created the imperative to work to try and have a

more fundamental reform, which is in fact what we did.

The last advantage that I had was to be given the gift of time.

At the time I took the gavel, there were calls on both sides of the

aisle for either a dismantling of HUD or dismantling of public

housing and a vouchering out of public housing, and I was given

time by the then-Speaker Newt Gingrich, to learn and listen and

go out in the field which is exactly what I did, and I would strongly

recommend to this committee, to be a good listener, to go out into

the field and listen to the tenants, listen to the people who were

struggling with these issues every single day. We’d airlift in and

presume to know the answers, and in fact, we really didn’t know

the answers, hardly knew what questions were the right questions

to ask to being with, but we got there. Places like Desire and New

Orleans, or Robert Taylor Homes and Cabrini Green, and places

from Brownsville and New York, to St. Louis and parts west, and

that informed us greatly.

I was committed to take time to listen, and what I saw and

heard was that tenants wanted clean, safe, healthy housing. They

wanted a place where if they had children they could raise them

and have the confidence that they had in the environment where

those children could have the opportunities that perhaps they did

not have. Seniors wanted to live without being harassed. The people expected to have the light bulbs work, the doors on hinges, and

the windows intact. Public housing officials wanted more flexibility.

They wanted to be trusted to do their job. They wanted to spend

less time hassling with trying to fit into programs, that while well

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intentioned, had grown to be so prevalent that their very local

needs were not always met.

So there were two thrusts to the reform that we came back with.

One was really what I call more of a group of management reforms,

beginning with consolidating literally dozens of programs, again,

that were well-intentioned programs, but which didn’t fit the needs

of every single housing authority, and to consolidate them into two

major grants, one a capital, and one an operating grant program

for the Federal Government to fund, in that sense providing more

flexibility again for housing authorities to address those needs.

Then there were other things, for example, like repealing the

one-for-one replacement rule, which again, while well intentioned,

had the perverse impact of keeping dysfunctional units, debilitated

units online, still costing housing authorities to maintain them because they didn’t really have the money to replace them, or the

site-based waiting list for public housing, so that a senior who

wanted to stay in the same neighborhood that they had lived their

whole life could go on a waiting list for just that one building as

opposed to having to take the first unit that came up. And these

operational management reforms, I think, were generally and fairly

widely supported at the time.

A second group of reforms had to do with creating a more dynamic atmosphere, an atmosphere where people who had the capacity to have a job and to earn an income could do so without having disincentives. So we provided more flexibility in terms of the

income targeting to create more mixed income to provide more sustainable development, but also provide the opportunity for there to

be more role models for people in these buildings, so that when a

job became available that you could hear from word of mouth, so

that children could see that a parent gets up in the morning and

goes to work, that we thought that was intrinsically positive, that

we modified the Brooke amendment, which again, while well intentioned, setting rent at 30 percent of income, had the perverse impact of effectively having a marginal tax on anybody who wanted

to work overtime or get a better job or get married to somebody

who had a job. They would do the rational thing, which was either

to work off the books, not an ideal situation, or to choose either not

to get married or not to take that work opportunity. So we created

a tenant choice so that tenants would either have a flat rent or

they’d be able to rely on that same guarantee of having no more

than 30 percent of their rent, their income as rent.

The goal was to empower tenant groups to allow them to be entrepreneurial. I remember, for example, in one of my visits at the

Cabrini Green there was a tenant leader who talked about the fact

that the basement had been dominated by drug dealers, that the

tenants had been kicked out, and if they just had the authority,

that they could come back, and they were going to do what they

needed to do to help inform the law enforcement officials to kick

out the criminals. But they wanted to put new lights in there. They

wanted to clean the basement. They wanted to put washers and

dryers in the area to service not just that building, but other buildings. But there was no incentive to do that because if they actually

earned money because of that, that money would go back out of the

building, and so we sought to change the law so that they could

13

do that, that we could empower again local tenant groups to have

more decisionmaking.

If I think about it thematically, a lot of this had to do with devolving decisionmaking back to local communities, with a sense

that communities each had distinct needs, and that housing, while

we focused on it from a policy standpoint, was not all that there

was, that for different groups, the disabled, people with AIDS, the

seniors, they needed supportive services and they needed it onsite.

We need to provide the flexibility for housing authorities and tenant groups to do that, that we needed to provide for a mixed income, and leveraging and private sector, public-private partnerships, because it wasn’t just about housing, it was just as much

about making sure that people could live in a place where they

could have access to a good education for their children, where they

can get to transportation and get a job, where they can live in a

safe place without fear of being harassed or being victims of crime,

where they could go and get decent banking services and decent

prices for groceries, and not have to pay more than more affluent

people in the suburbs were paying.

And so we came to understand that we need to provide the flexibility. I look at the 1998 act and its predecessor, the 1996 bill, and

I think we perhaps started our work, but we certainly haven’t finished it. The need to continue to marry resources and leverage up

and use HUD and private sector resources to focus on bricks and

mortar and to get other agencies within the Federal Government

to address some of the softer needs, but just as important, needs

of supportive services, should be a high priority I think for this

committee and for this Congress.

I will sort of wrap up by saying that I believe that our debate

on the floor was a contentious debate. It was one of the longest debates I think that we had during that Congress, but in the end,

over 100 Democrats supported the bill, and they supported the

1996 bill. As I was saying to Secretary Cisneros, it seems almost

quaint now to have that level of bipartisanship where Republicans

and Democrats were able to address a problem and look at a solution that reflected the values of the two great parties, of compassion and understanding, or addressing needs of the poor, of responsibility and work and family, and both parties could walk away and

think that they had done something important for the community.

My hope is, with appropriate levels of funding and with continued

tweaking, that we will get there. And I hope that this was a modest but important step forward to achieve that goal.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Lazio follows:]

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Mr. TURNER. Mr. Secretary.

STATEMENT OF HENRY CISNEROS

Mr. CISNEROS. Thank you, Mr. Chairman. Let me begin by

thanking you and Congressman Clay for your diligence in digging

into a subject that’s frequently not studied because it doesn’t generate headlines and it requires a lot of digging into difficult things,

but your work as a former mayor of a great midwestern city, and

Congressman Clay’s representation of a city in which some of the

breakthrough moments for public housing have occurred, Pruitt-Igo

on the negative side, and yet some of the Hope VI developments

in St. Louis that are models for the entire country.

I also want to thank Congressman Lazio. What you saw here in

his statement is the same passion and conviction he brought to the

debate in the 1990’s, and literally millions of lives have been

touched by Rick Lazio’s work and leadership.

Rick, thank you for just being a great public servant and a great

guy.

I also want you to know, Mr. Chairman, that you have in Renee

Glover, the best public housing administrator in the country today,

doing the best job for her city. Atlanta, not only has public housing

has been transformed, but the city has been transformed by the

work that Renee has begun there.

As Congressman Lazio mentioned—and I am going to call him

Congressman Lazio for the rest of his life, no matter what else he’s

doing—this is a time of reform for public housing. We tried to build

on the reforms of my predecessor, Jack Kemp, our own work and

that of Secretary Cuomo and the Clinton administration, and now

Secretary Jackson, who brings the unique perspective of the only

HUD Secretary who’s ever been the director of a public housing

agency, and in fact, he’s been the director of several. We’re at a

point of convergence in which ideas and experiences and lessons

are coming together from the experience of the 1990’s and the early

years of this decade.

Among the reform lessons of the last decade, witnessed by four

HUD Secretaries, are the following. First, we know that reforms in

physical design matter, the scale of buildings, the trading off of the

high rises for townhomes, the creation of a sense of defensible

space and privacy for families instead of having to walk the hallways of those buildings to have their own entrances. The new urbanists have made a contribution in walkability and bringing the

street grid back to the developments. And the use of the physical

redesign in conjunction with Section 8, so that we have less dense

density in families who live in Section 8 settings, that’s one set of

reforms that’s been very powerful.

Another set of reforms have been the roles of private investment

in public housing, the kind of efforts that Hope VI ushered in,

where market mechanisms were introduced, not just on the

projects that are Hope VI, but into the thinking of the authorities

themselves. And as Congressman Lazio mentioned, the importance

of mixed income in the resident base has been very important to

the residents and to the communities.

And perhaps the most important reforms have been the way public housing authorities think of themselves. Most now think of

20

themselves as among the biggest real estate entities in a city. They

have more land, more apartments or units, more management responsibility than almost any other real estate entity in town. The

best of them, like Renee in Atlanta, or in Seattle, where the Seattle

Housing Authority, one of the highest graded in the country, owns

4,500 unsubsidized apartments that they have acquired, apartments in private apartment buildings, that function like large

multi-family units. And they make those work for the families that

have to be subsidized, by cross-subsidizing and creating really attractive settings. The really sophisticated housing authorities now

use low-income housing tax credits, new market tax credits, State

and local bonds, capital grants, private investment, foundation support, local trust funds, State programs and generated revenue

streams of their own from their private market activities.

So it is a whole new ball game. It really is a time of reform. It’s

appropriate that we would be before the Committee on Government

Reform. We have better physical settings, mixed income opportunities for residents, more market type mechanisms and incentives at

play, and yet, all at the service of trying to put people who make

less than 30 percent of area median income into housing. As I say,

a whole new ball game.

I believe we’re going in the right direction, and that a lot of important ideas are converging. The asset-based focus is correct to

provide project-based accounting and budgeting. Communities that

can function more like private multi-family properties is the right

thing to do.

It will also require—and this is important that the committee

note—greater flexibility, because we cannot micromanage to the

project level as some HUD guidance continues to do. There’s an inherent contradiction in saying we’re going to a project-based system, and yet continuing the holdover command and control regulations that the bureaucracy wants to impose. The right approach is

to set standards and hold authorities to standards, but give them

the flexibility to work.

Finally, and most importantly, I think, it requires the continuing

provision of adequacy of resources. It is a fundamental reality, even

in a project-based world, that housing authorities cannot raise

rents above the 30 percent of adjusted family incomes, so they need

adequate operating subsidy, because even going to a different

structure, they can’t take care of the poorest without adequacy of

operating subsidies.

Again, even in a project-based framework, they can’t take money

from projects to fund central office operations if there’s not excess

cash coming off of the projects. So for a period of time, the Federal

Government will continue to provide significant operating subsidy

resources. It’s my understanding that the estimate for what it

takes to make this transition is about $4 billion this year, and the

2007 budget allows for about $31⁄2 billion, so about half a billion

off.

Similarly, on the capital front, with the elimination of Hope VI,

it means inadequate production of new affordable units, maybe the

end of some of the physical reforms that I’ve been describing, if the

capital subsidies are not adequate. We made tremendous progress,

meaningful reforms. I think we can see that we’re headed down a

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path that, frankly, could not have been foreseen. Not even Jack

Kemp, my predecessor, who’s a great friend, in his most exalted visions of what public housing could be, could see where we’re headed, very positive directions. We’ve learned some important lessons,

but we must stay the course of reform, and that includes a recognition of flexibility and the recognition of adequacy of resources in

this time.

Millions of American families will live better lives because of

these reforms, and their children will have a platform for the selfreliant lives that we want for them. That’s what public housing traditionally has meant, and it can mean that again for families.

Thank you.

Mr. TURNER. Thank you, Mr. Secretary.

Mr. Wood.

STATEMENT OF DAVID G. WOOD

Mr. WOOD. Thank you, Mr. Chairman. GAO is often asked or

mandated by the Congress to examine specific aspects of the public

housing program. My statement today is based on a number of reports that we’ve issued in the last few years. Generally, our work

involves examining how well HUD administers the program, including its oversight of local housing agencies. In carrying out our

work, we sometimes survey local agency officials or visit public

housing developments for firsthand observations.

In doing so we’ve identified challenges faced by both HUD and

local agencies in fulfilling program requirements.

In keeping with the theme of your hearing, I’m going to use my

time to briefly highlight our work on the Hope VI program for revitalizing severely distressed public housing. As Secretary Cisneros

noted, in several ways this program represents an alternative to

traditional public housing projects. It’s designed to allow Federal

and private funding to be combined to produce mixtures of public,

other subsidized and/or market rate housing units. The program

may also involve local nonprofit and community groups, particularly in the provision of supportive services such as job training. In

the year beginning in November 2002, we issued three reports examining various aspects of this program.

For the first report we examined the extent to which public housing agencies had leveraged their Hope VI grants with other funds.

We found that the extent of leveraging had generally increased

over the life of the program, from about 58 cents for every Hope

VI dollar in 1993, to about $2.63 for every Hope VI dollar in 2001.

The average over the period was about $1.85. Of that amount, 79

percent, however, was leveraged from other Federal sources, including equity provided to the low-income housing tax credit program. Of the non-Federal portion, 9 percent was from State or local

governments, and 12 percent was from the private sector. We also

found that housing authorities had leveraged funds to provide community and supportive services, a total of about $295 million between 1993 and 2001. This leveraging had also increased over the

life of the program and represented about 41 percent of all funds

allocated for supportive services.

Our second report examined HUD’s oversight and management

of the program. Among other things, we found that the majority of

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local housing agencies had not met deadlines in their grant agreements. For example, of 42 grants for which the time for construction had expired, only 3 had actually completed construction. We

recommended that HUD ensure that its field offices perform required annual project reviews and that the agency develop meaningful enforcement policies. HUD agreed with those recommendations and took corrective action.

Our third report in November 2003 examined program impacts

on existing residents of project sites and on surrounding neighborhoods. We found that of the 49,000 residents displaced from sites

that had received Hope VI grants through 2001, about half relocated to other public housing, about one-third used vouchers to

rent private housing, and the rest had moved without giving notice

or had been evicted.

Overall grantees expected about 46 percent of original residents

to return to the revitalized sites, but that percentage varied greatly

among sites. Because of the lead time required, and other factors,

we limited our examination of potential neighborhood impacts to

the 20 sites that had received grants in 1996. We found that neighborhoods near those sites had generally experienced improvements,

according to changes and measures such as education, income,

housing values and crime. In four locations we also compared

changes in these measures to those in similar nearby neighborhoods with public housing, but without a Hope VI project. With

some exceptions, we generally found greater positive changes in the

neighborhoods with Hope VI projects. However, because many

other factors can affect the measures we were using, we could not

determine the extent to which Hope VI alone contributed to the

changes.

We noted that several studies conducted by universities and others also showed that the neighborhoods in which Hope VI sites are

located, had experienced improvements in key indicators.

Mr. Chairman, that concludes my prepared statement. I’ll be

glad to answer any questions that you or other Members may have.

[The prepared statement of Mr. Wood follows:]

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Mr. TURNER. Thank you.

Ms. Glover.

STATEMENT OF RENEE LEWIS GLOVER

Ms. GLOVER. Good afternoon. I want to thank the chairman and

the ranking member for this opportunity to provide testimony.

I also want to take a minute to recognize Secretary Cisneros,

who, without question, was one of the finest Secretaries ever, and

interestingly enough, he is really the genius behind so many of the

reforms growing out of the Hope VI program, because by providing

greater flexibility, it really allowed the private sector and other

market forces to really do what they could do to empower the program. And in so many ways he’s not given credit for it, but I wanted to acknowledge him because that took courage of conviction.

I also want to thank Congressman Lazio for his forward thinking

because he is absolutely right, with all the regulatory entanglement nothing can really move forward, and the courage of the 1998

law really has made a big difference. So, thank you.

I believe that we all agree that reform is needed, but what is

often overlooked is the real revolutionary change that is occurring

today, and there are two causes for this: the Hope VI program and

the deregulation through primarily the Moving to Work Demonstration Program. When I say revolutionary change, I mean a

sheer sea change, because, quite frankly, what the Hope VI program has allowed is to truly step back and come up with local solutions to what are really local problems. The problem that is probably the biggest challenge with the public housing program is the

concentration of families in poverty.

And so the question is: is there a thoughtful way, through resources, to deconcentrate families so they in fact can have an opportunity to achieve the American dream. What the Hope VI program has unleashed is the power of deconcentrating poverty, public-private partnerships, leveraging private resources, market

forces, new partnerships, partnerships with the local school systems, with mayors and others, and, quite frankly, human development. I think if we look back at the terrible tragedy in New Orleans, what we see in terms of the families coming out of those conditions is the product of concentrating families in poverty.

In Atlanta alone, during this past 10 years, which, quite frankly,

in the total scheme of things is a short period, we have developed

using private sector development partners over 11 mixed-income

communities, and having an economic impact of about $3 billion.

That has also unleashed the power of about 1,070 acres of land. In

addition, the families who have been impacted by the program

have moved on to the work force, who have moved on to purchase

homes and what-have-you, and they are in fact realizing the power

of being in the mainstream of America.

The second, I think, most important benefit of the Hope VI program is that the private sector cares about these issues, and before,

the private sector did not care about these issues. So now the private sector development community and private investors are now

coming up with ideas of how can we continue this revolution without Hope VI dollars.

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I still believe, however, that, notwithstanding all of this progress,

there is much to be done. And so Senator Mikulski and Senator

Bond from the Missouri area, have cosponsored a new and refreshed and reformed Hope VI program based on the learnings and

best practices from the Hope VI program, and I believe that Congress should in fact embrace it and move it forward, because even

though there are criticisms about the program, no one, not a single

person, understood the great power that this program was going to

unleash, not only just in Atlanta, but throughout the country.

The second very positive change is deregulation, and the Moving

to Work Program has been going on since 1996, which has in effect

allowed housing authorities, in a demonstration manner, to look at

different ways of doing local problem solving, serving families without all of the regulations and I think that we are seeing really outstanding results growing out of that as well.

So I would say in order to keep the revolution moving forward,

the Congress should in fact adopt and implement the Hope VI program and fund it, most importantly, so that we can continue this

great revolution, because the families are in fact critically important, and I believe that if we can figure out how to deconcentrate

families from terrible outcomes of poverty, we should have the

courage to do it.

Deregulation, I believe, is going to be the real power to cut down

on the costs of the program. As the Secretary commented, HUD is

now looking at powering down the resources to the individual properties, but if the micromanagement continues, that will continue to

drive costs, and I believe, the deregulation growing out of that effort won’t be successful. There are about 3,400 public housing authorities. 2,800 own less than 500 units. We could easily just deregulate those without a whole lot of difficulty, and just have a

very simple agreement with some outcomes, and that would address a huge part of the issue, and then the remaining entities

could be brought into the Moving to Work Program, and that would

be a very thoughtful way of moving toward deregulation for the entire industry.

And last but not least, money makes everything happen, and if

in fact we have the mission of serving families who earn less than

30 percent of area median income, which is very little money, then

there must be funding to support the programs.

Thank you.

[The prepared statement of Ms. Glover follows:]

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Mr. TURNER. Thank you.

Mr. Secretary, I know that you are under a time constraint, so

I wanted to check with you on your timeframe. Are you OK? Because we can focus questions in your direction if we need to.

Mr. CISNEROS. I’m fine.

Mr. TURNER. I appreciate all your testimony. As you know, from

your personal experience and background in this topic, this is a

very broad spectrum that we are looking at today, so our questions

to each of you are going to focus on just one or two aspects of what

we are looking at, and that certainly should not be interpreted as

our lack of interest in other areas. Each of you in your written testimony have given us a very broad overview of some of the things

that we need to do and some of the things that work, great policy

discussions throughout the documents that you have given us.

Most of the topics that people have raised fall in about four different categories. One, management of the facilities themselves;

two, resident-focused comments, intervention, economic mobility,

transition from public housing; three, financial, both our financial

participation on the Federal level, but also financial structures and

creativity in looking at capital structures, budgeting and the private-public partnerships that might bring additional financial resources; and then one that’s almost architecture in nature both by

buildings themselves, but also in the place where the residents live,

looking through both vouchers and mixed-use developments, and

mixed-use economic structures.

I am going to begin my questions by first telling you a story and

asking your response to that, and then my second area of focus,

which I am going to actually ask the question about first before I

tell you the story. And that is, I would like each of you, after I get

your comments on my experience that I had with public housing,

is to give your thoughts on ways that we can increase our intervention for residents even if we have the appropriate structure and

type, but even if we have very well-managed facilities, and even if

we are doing everything we can with the public dollar and trust,

the focus of being able to impact the lives of the people that live

in public housing or Section 8 voucher programs is important, and

I know each of you have thoughts and background experience in

that. So if you could also comment on that.

Now for my story. As I served as Mayor for the city of Dayton,

I did not have direct authority or control over public housing as is

usual in many communities. I had appointment of two seats out of

five on a regional board. I was very active in transitioning our

neighborhoods to market-rate housing production. We had, in our

neighborhoods, many abandoned lots, many abandoned structures.

We went into the neighborhoods. We acquired the lots, built new

housing, the abandoned housing rehabilitated, and bring the community back into a focused neighborhood to see what was possible.

One of those neighborhoods we abutted against a public housing

development, and the public housing development had been the site

of crime and drug activity and was largely viewed as a budding influence in the area, both for the residents that were there and for

the community that we were actively redeveloping with marketrate housing.

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I approached the public housing authority, and I posed the question to them as to the long-term future for that site, since, as we

were beginning to redevelop housing there was a market demand

for market-rate housing. This piece of property would be a great

addition to our efforts. And I was told that in fact this site was

scheduled to be remodeled, and there was going to be additional investment that was going to occur. And I told them perhaps we

could make a deal and you could save those funds of redevelopment. What could we do to transition this site that we might be

able to gain the land and put it into productive use.

I was very well aware that they had a significant amount of vacancy in other units, and wondered about the ability to transition

both new individuals that are moving into the facility, or perhaps

even people who live there, to other facilities. I was told that the

people who lived in this particular housing development would not

move, but that if this facility was demolished, that because they

were on borderline for economic mobility, that there was enough affordable housing available in that area, that they would most likely

leave public housing and go out into the marketplace. Of course, I

thought that was the whole idea. So my next question was, well,

why wouldn’t that be a good thing? I was told, well, that facility

contributes an administration portion of overhead costs to our larger metropolitan housing authority, and therefore, their decision

would be not to lose this facility because they didn’t want it to impact their bottom line, even though it might be better for the community, better for the residents that were there.

That is more along the lines of a management issue. At that

point I obviously got much more involved in public housing, and

that facility is transitioning to market housing today. But I would

like your thoughts first on management decisionmaking. How do

we go about the process of making certain that in management decisionmaking that we do provide incentives, and that those who

have leadership responsibilities for public housing are looking holistically at the impact for the residents, impact for the communities?

And then second, I would love your insight on things that we

might be able to do better for resident intervention.

Mr. Lazio.

Mr. LAZIO. Mr. Chairman, I think that the first thing that comes

to mind is that you have to align the incentives for creativity correctly so that the maximum amount of options are before the housing authority’s management, whether it’s a land swap, providing

for, as the bill did, a vouchering out. You have to, it seems to me,

you have to be tenant centric on this. Looking at your situation,

looking at this building or a series of buildings as a cross-subsidy

opportunity for their other areas, seems to me that they got to provide the opportunity for them to think more broadly about mixed

use in some other spot, or some other way in which some of that

revenue shortfall might be addressed. But if you’re focused on the

tenants, and you want to give them the maximum opportunity to,

as I said earlier, get to the right school district for their children

or get closer to a transportation hub so they can get to jobs, have

a better life, then it may be that in your case that a vouchering

option ought to have been explored.

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I do think that it would be a terrible mistake to presume that

all tenants in public housing want to stay there. It is also an equal

mistake, in my opinion, to suggest that the entire policy of the Federal Government ought to be to promote homeownership, because

I do think there are people that will always need and desire rental

housing, and that it is at least a responsibility of the Federal Government, has been since the 1937 act, to provide it in a safe and

healthy way, be a good partner.

Looking for creative ways in which you can leverage other government money, other local government money, other local government assets, whether it’s buildings or land, providing enough incentives so that they can consider these type of swapped arrangements, and including the possibility of tenants moving and having

a choice through a Section 8 voucher program, or by converting

that voucher to homeownership, which is also provided for in the

bill so that you could provide for the value of a Section 8 voucher

for down payment assistance or to service a mortgage. Those are

the kind of things I think that need to be laid out to a management

authority of a PHA in the situation that you have outlined.

Mr. TURNER. Mr. Secretary.

Mr. CISNEROS. Mr. Chairman, I have to take a slightly different

tack than what you did as Mayor. One of the things I felt strongly

about as Secretary was that we couldn’t, in the zeal for reform,

give up sites because we needed the hard units, and that the proper thing in a case like that would be to redevelop that site with

the housing authority still having a major role, perhaps more

mixed income, perhaps with private units in there and so forth.

Not because for administrative reasons, but because one of the

great sort of moral dilemmas for me through this whole process has

been, as much as I favor what we’ve done with Hope VI and the

use of Section 8 and the deconcentration, and the lower densities,

the critique is we gave up too many hard units and there’s too

many people who need the units.

So I guess my tack would have been a different one in that case,

trying to redevelop that piece of ground, make it compatible with

what was around it. I’ve just seen so much evidence across the

country that could be done, whether it’s Park Duvall or the site in

Newark that was at the epicenter of the riots in 1965 that now has

Hovnanian Builders building across the street from it. I mean cities

are being transformed because of what’s being done with those

sites, and still keep some hard units, some percentage of units for

the very, very poor.

So that’s a different kind of perspective, but if I may offer that.

Your second very briefly, resident intervention. I think—I’ve

often felt that what we’re missing in the key intervention is a linkage to education, and Renee has done a good job, for example, at

Centennial Homes with a magnet school built into the project, at

University Homes near the Atlanta University complex. Denver

has done some connection to the community college. I’d like to just

kind of throw out an idea that’s been a pet sort of thing of mine

for a lot of years. A couple of housing authorities picked up on it,

but maybe the Government Reform Committee would find it interesting, and that is a concept that I called ‘‘Campuses of Learners.’’

Imagine that we thought of public housing sites—keep in mind we

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want these to be temporary places for people to live before they go

on to the rest of their lives—that we thought of them more, as we

think of residential camp housing on a university campus. People

are there while they’re learning, while they’re improving their

lives, while their children are learning, while they’re enhancing

their skills. And really build in a linkage of training and community college, and even higher education, and computers onsite and

all the rest of it, but it’s designed to be there to give you the resources where you can go on with the rest of your life, just as we

think of a university campus.

That’s kind of an abstract notion, but a way to maybe accomplish

what we really want to accomplish both in the physical site and the

self-improvement for families and individuals.

Renee knows a whole lot more about this than I do.

Ms. GLOVER. I just wanted to add that it’s interesting, when you

get on the ground, there’s always, I think, the misperception that

the families are more tied to these properties than you might

think. And one of the things that Mr. Wood alluded to, is that if

you were to do an assessment of what’s going on with these sites,

particularly the large, distressed sites, you would see very high

rates of crime, very low work force participation, very, very low levels of income and so on.

So the question is, is there a way of creating a healthier environment so that you can get better outcomes for the families, and at

the same time, having more powers of incomes on the neighborhoods, because, not surprisingly, the families want what every

other American wants. So one of the things that has been so powerful with the Hope VI program is bringing in the private sector, creating a community that in fact is a community, and it is not all

about poverty and despair, but it’s really a market-rate community

with affordable units as a part of it, so that we’re actually creating

communities for workers, middle management and senior management.

And you get so many wonderful benefits from that, because what

you have is role models in terms of families working and encouraging the families to work. Working with the schools is so critically

important, and in fact, that’s one of the reforms in Senator Mikulski’s legislation, because, quite frankly, schools drive neighborhoods. Nobody picks up the paper on Sunday, when they’re looking

to locate their families and say, ‘‘I want to find the worst school

in the district so I can purchase a home.’’ So the linkage of great

schools and great communities is critical. The families really love

the Section 8 voucher because it represents choice, and the key is

administering the program well so the family’s not moving from

one bad situation to another.

So I think that if we could eliminate a lot of the myths, I think

aligning the incentives and the funding is the way that you get to

better decisionmaking. What we have seen, that $3 billion worth of

economic impact that we have had is both on the plot of ground,

and if you think about 1,078 acres of under-performing real estate

throughout a city, and that’s just 10 of the projects—there were 40

some of them—then you can see the power, empowering of that

real estate. But more importantly, tapping into the human potential because 6,000 families were living in these conditions, and I

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will tell you, we have not had any resistance, once you get on the

ground working with the families, about do you want a better opportunity, because the answer is always yes, yes, yes. What they’re

concerned about is not having the resources to relocate their family

so that they can too achieve the American dream. Not everybody

wants to achieve homeownership, but I promise you, everybody

wants a better educational opportunity for their children and a decent healthy environment, and they do not want the stigma of

being labeled poor and being institutionalized in poverty.

So I think that there’s a lot of great best practices that we can

use to approach the reform and be thoughtful about it, and also get

significantly better outcomes and better decisionmaking.

Mr. TURNER. Excellent, thank you.

I just want to say with respect to that particular development

that we were facing, it was a 7-year discussion then that the community undertook as to what to do, both with the leadership of the

housing authority and this property, all of which took in the components of—as a result of the leadership of Congressman Lazio and

Secretary Cisneros, of the options that you then gave communities

to undertake. The concern wasn’t the initial approach and the initial discussion, it was one where the authority was unmotivated as

a result of their own bottom-line view versus, as with Ms. Glover,

what we see as so many times the great things that are accomplished are accomplished because of leadership at the local level.

There has to be a way, as you provide Federal tools that are creative, and transitioning of creativity at the local level, that we encourage them to take advantage of those.

Mr. CISNEROS. Congressman, if I may, Mr. Chairman, the problem that we encountered when the Hope VI program started was

that in many cities the public housing had been built in an earlier

era at the edges of where the work and the employment was and

where the workers were needed. As the cities began to rebound and

the downtowns rebounded, this became very valuable property, so

we had a lot of people coveting, developers coveting that land, and

we took the position that this was for public housing, and that as

problematic as it was, we needed to redevelop it, but not sell it off

because the losers were going to be the poorest folks.

When you operate at the national level, you have to be sort of

gross about this and set policies because otherwise they’re violated

in the specific case, and that’s why I ended up, you know, in that

posture, that where possible, let’s redevelop them and save the

housing, rather than allow high-rise office towers on that site.

Mr. TURNER. Certainly you have to look at the core mission of

the public housing.

Mr. LAZIO. I’d add one thing, Mr. Chairman, also if I can. Increasingly you’re seeing housing authorities use the low-income

housing tax credit program, which has been an incredibly successful program for the Federal Government, to be able to access some

dollars, and in a case like this—and I don’t really know what the

facts are on the ground, but it might well have been that option

which would get you to a mixed income, provide some additional

dollars, maybe redevelop the site consistent with the community

and still have enough money to put maybe other units online or

provide vouchers would have been the win-win.

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Mr. TURNER. Thank you.

Mr. Clay.

Mr. CLAY. Thank you very much, Mr. Chairman.

First, I would like to start with Congressman Lazio. Welcome,

and it is good to see you again.

Mr. LAZIO. Thank you, great to see you too.

Mr. CLAY. Let me say that the 1998 reforms were a positive development, particularly the authorization of Hope VI and its value

to public housing authorities across the country. My concern, however, is that we are underfunding Hope VI and the voucher programs within HUD. Would you agree with the premise that policy

reforms can only work if they are adequately funded?

Mr. LAZIO. Yes.

Mr. CLAY. OK, you agree with that one. [Laughter.]

Now, this year—there is no argument about that, OK. [Laughter.]

You don’t want to expand on it, do you?

Mr. LAZIO. Congressman, there’s an old story over in Russia, and

I asked somebody about how he thought the economy—give me a

summation in one word of how he thought the economy was. He

said, ‘‘Good.’’ I said, ‘‘Well, could you expand on it?’’ He said, ‘‘Not

good.’’ [Laughter.]

Mr. CLAY. I will serve you up another softball then. How about

this one: this year the public housing capital fund program is funded at $2.4 billion, even though capital improvement needs are estimated to be nearly $20 billion across the Nation. As a representative of the banking industry, can you offer us some perspective on

the benefits and shortcomings in this program? Are PHAs able to

leverage adequate private sector financing for new development

need?

Mr. LAZIO. I’m not sure I could answer that question of whether

it would satisfy me or would satisfy you, Congressman, because I

don’t know that I’m up to speed quite enough. But I will say this,

that the public funding does matter, that it can provide flexibility,

which I think we have, and we could provide the incentives and the

option to leverage and to provide these public-private pools of capital, and to leverage off of them, and that ought to be done. But

that is not going to completely substitute for a Federal commitment, a public commitment to public housing and assisted housing.

Mr. CLAY. Thanks for that response.

Let me ask Secretary Cisneros, and good to see you again also.

Mr. CISNEROS. Yes, sir.

Mr. CLAY. Is there a model for best practices for PHAs across

this country, and do they even pay attention to them, and have you

seen any PHAs that have taken these best practices to heart and

transformed their agency?

Mr. CISNEROS. Yes, sir, I think there are some very good public

housing authorities, and some model cities. It’s not just because

she’s here, but one of them, truly, is what Renee has done in Atlanta. It’s worth a trip there to see the highlight projects and the

combination of projects and what they’ve meant for that city.

It’s relatively easy to define the high performers because HUD

has a grading system for management, for properties, for outreach,

etc., and among the highest performers traditionally have been SeVerDate 11-MAY-2000 10:22 Jun 29, 2006 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 D:\DOCS\27282.TXT HGOVREF1 PsN: HGOVREF1
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attle, Denver, for example, and I would comment you to those because they’re just good operations, just creative people. They understand their role in the real estate market of that town, of those cities. And those have been good examples.

There are other cases that are maybe not as great for the whole

authority, but some sites that are spectacular, like Park Duvall in

Louisville, for example. I think some of the Baltimore projects,

where they took down all of the high-rises, four big complexes each

with about 12 high-rises, they’re all gone, and now townhouses and

reasonable scale in their place. Another example, what McCormack

Baron has done in your city, at what was Murphy and is now a

different name, is an example of wonderful school, training right

onsite, families in the town homes. Those would be some that I

would cite for you.

Mr. CLAY. Darst-Webbe is what you were looking for. DarstWebbe.

Mr. CISNEROS. Right.

Mr. CLAY. On another front, because of your close ties to Texas

and San Antonio, I wanted to hear some of your thoughts on how

FEMA and HUD have fared in housing displaced residents of the

Gulf Coast, many whom have moved to Texas after the storm. Has

the Katrina disaster housing assistance program been an adequate

response to the roughly 75,000 citizens of New Orleans who relied

on Section 8 program housing?

Mr. CISNEROS. You really don’t want my—we were trying to keep

this on a high tone, and we’re trying to keep this positive. [Laughter.]

Mr. CLAY. I want you to try to answer that one, and we’ll move

on.

Mr. CISNEROS. Truly, there’s almost nothing about the Katrina

situation that we could cite as a model of how to help a city to recover or treat people who have been displaced. In my own city,

we’ve had tens of thousands of people who were living in an old Air

Force base hangar for the longest period of time. They’ve now

begun to filter into other housing through churches and so forth,

but I must say, very little can be attributed to the responsiveness

of the U.S. Government.

Mr. CLAY. So HUD included, the response could have been better.

Mr. CISNEROS. Yes, sir. I wish I could be more positive about it.

Mr. CLAY. Thank you for your answer. I appreciate that.

Mr. Wood, you have stated that a November 2002 review of Hope

VI budgeting by a sample PHA revealed a 60/40 split in public and

private financing of program activities. Can you describe what

types of private sources are involved in Hope VI financing, and is

there adequate capital available to the PHA community for development needs?

Mr. WOOD. The 60/40 split I believe refers to the involvement of

private capital for supportive services. The amount of private funds

involved in the capital projects that those grantees that we looked

at was actually much smaller, it was about 12 percent. But the

leveraging for community and supportive services had to do with

things like job training, providing transportation or meals and

things of that sort.

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Mr. CLAY. Thanks for that.

Ms. Glover, your testimony really piqued my interest about how

you connect education or opportunities to residents, and I was wondering, the education or opportunities, do they expand to the adults

also?

Ms. GLOVER. Well, they certainly can. But let me just expound

a little bit on the education reform, because in all of these communities there are neighborhood public schools, and so the opportunity

is to connect the education reform that’s going on in every city in

America, and certainly that is one issue that has enjoyed, I think,

consistent support regardless of Republican, Democrat. Everybody

knows that education is the great equalizer.

So what we have done is working with the public school system,

as we reform these communities, and we reform the social environment from which the children are coming to attend the public

schools, this creates the opportunity for the school system to leverage their reform efforts, because what has happened in too many

of our urban cities, is that the schools have become crisis centers

rather than great places of education, and that’s why this notion

of moving away from concentrated poverty is so important, because

you really can leverage so many opportunities because at the end

of the day, environment matters. What we needed to be looking at

is how can we create opportunities and environments for families

so that they are not harmed by the environment, but in fact, can

afford the housing, can also have a great opportunity in terms of

education and what-have-you.

I will just point out that in each case of the 42 properties, 26 of

which were serving families in Atlanta back in 1994, there was a

captive elementary school inside of each one of those communities,

and without exaggeration, those were the worst public elementary

schools in the entire system. So you have a bad social environment

and a bad school environment, we can all sit here and predict the

outcome. So this really creates the opportunity, which I believe is

so important in linking both education reform with the housing reform, and I think we’ll start seeing much greater and many more

success stories around education.

Mr. CLAY. Let me just point out to you that there is a direct link

to educational performance by students, and educational attainment of their parents. And when they come home with homework

and their parents don’t understand and cannot help children, then

it bears a direct link to those students’ performance, and I just

wanted to make you aware of it.

Ms. GLOVER. Oh, absolutely. I’m very aware of that. You’re absolutely right.

Mr. CLAY. If you have an opportunity to address it, that would

be pretty interesting.

Ms. GLOVER. OK.

Mr. CLAY. Let me ask you about your testimony. You spoke to

legislative reform, and what should be undertaken by Congress in

order to improve the Section 8 program. I guess my real concern

is that Congress can institute all of the new reforms at once, but

we will be back here in another 5 years if we don’t make a full

commitment to funding these programs. Can you offer us some

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ideas on how we can establish more significant and reliable funding mechanisms?

Ms. GLOVER. Well, I think the starting point is really an agreement among Congress about what it is that we’re trying to accomplish. If in fact we agree that we want to have families living in

healthy environments, and if we want to serve families who earn

30 percent or less than the area median income, then we have to

look at the local real estate markets to determine what the rents

are in less impacted neighborhoods, because what affords the rent

is what the family is paying based on 30 percent of their income

together with the subsidy that is provided by the voucher.

So if indeed we want families living in healthier communities

and not in very distressed communities, there is a price to be paid,

and over time—see, I believe that if we in fact can improve the environments where families in fact are raising their children, that

over time there will be less of a need for the subsidies, but there’s

going to be a transition period, and so I think it’s strictly a matter

of agreeing on what policies we want to support and then put the

funding to it. So there’s a way of getting at that number, but certainly if you make the subsidy more shallow, that is going to cut

down on the opportunities in terms of good housing opportunities

for families using that voucher.

Mr. CLAY. I thank you for your response. I thank all of the witnesses for their response. Perhaps I will take Mr. Cisneros up on

his suggestion to come and see your housing authority.

Ms. GLOVER. We’d be delighted to have you come, sir.

Mr. CLAY. And come and see Mayor Franklin. Thank you all.

Thank you, Mr. Chairman.

Mr. TURNER. OK. Mr. Dent.

Mr. DENT. Thanks, Mr. Chairman, and good afternoon.

A couple questions on Hope VI. As you know, Hope VI was created to help demolish some existing public housing units, the more

stressed housing units. That has been a success with my community. Allentown, PA has just received a $20 million grant, for which

we are very grateful, and we are going to take out one of the oldest

housing projects in the Nation and turn it into a much more appropriate housing mix than had been the case.

My question to the panelists, would you conclude that the program has accomplished its goal and its purpose? The goal was, I

guess, to demolish about 86,000 units, and we are approaching that

number. Do you believe it has accomplished its purpose, I guess is

the question I would have. Maybe we should direct it to former Secretary Cisneros.

Mr. CISNEROS. I will be happy to begin, sir. I believe it has accomplished its purpose and that it is one of the great untold bipartisan successes of the last decade or so. The origins of it are in the

Jack Kemp period at HUD, where he had Hope I, II, III, IV, V, and

VI, which came about as a result of a commission on the emergency

status of the most distressed public housing in the country. In the

fall of 1992 they finished their work, so before we came into office.

Then it fell to us to write the regs and implement Hope VI, and

I chose to build on what Jack had done, despite, you know, the

kind of the pressure to sort of separate from the previous administration and start something completely fresh. It didn’t make sense

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to start over, so we sort of continued the genetics of it, if you will.

So I see it as a bipartisan program.

And when folks like Rick Lazio weighed in and the Speaker in

that era, to tweak the program and improve it, it truly has been

a major contribution.

One, there are multiple reports. This report that Mr. Wood made

today from the Government Accountability Office, but also the

Urban Institute and the Brookings Institution and others, which

have basically documented that cities are different, central cities

are different where Hope VI has succeeded, because now investment is possible. Where there were sinkholes for just no energy, no

investment, today they’re magnets for investment. And I could cite

city after city, Chicago, Newark, Pittsburgh, all kinds of places that

were hopeless in these neighborhoods that today are thriving.

Now, the down side—and I’ll be very brief—is I think we have

to be careful not to lose track of the number of people we were

serving before, and that’s what the critics come after us on, and I

accept the critique. In downsizing, in making it less dense, we use

Section 8 to send people other places. Don’t know exactly where all

those folks went and don’t know what happened in their lives, and

we ended up with fewer hard units to serve. That was the right

thing to do for all the reasons that I’ve cited. But for me there will

always be a sense of obligation to make sure we keep the numbers

strong, so that we actually didn’t end up cutting people off, you

know, and sending people to homelessness or other bad conditions.

But I do believe the program accomplished its purpose.

Mr. DENT. I guess then the next question would be what remains

to be done, I guess, where do we go from here?

Mr. CISNEROS. I would say more of the same. There’s yet a lot

of cities and a lot of sites that are as bad as what we fixed. We

fixed the worst I think. Renee could speak to that, you know, because she’s in the field every day. But I would say another decade

of this, and we will have turned public housing around. It will be

a different creature than it was in 1992.

Mr. DENT. And another issue that I’ve noticed in the urban areas

where I live is not simply public housing, but what we would call

row homes in a place like Allentown. Many of your eastern cities

have them. We have row homes that were once owner occupied,

were since converted to apartment units or a home that one family—maybe a three-story home—converted to three apartment

units. You mentioned density, increasing the density in town, more

garbage, more kids at school, more cars in the streets. And I have

noticed one thing that we have been very successful in our area,

at least a slow process, but trying to deconvert these apartments

back to owner-occupied settings. Many people paying those rents

they are paying could easily afford a mortgage. Many don’t realize

that, but that is a reality.

I guess my question is: what role should the Federal Government

play in deconversion of those types of housing units that are not

publicly owned? What can we do to help that, because that would

do a great deal to empower people and their neighborhoods.

Mr. CISNEROS. I think the Federal Government does have a role

through CDBG, through the proposed Homeownership Tax Credits,

for example, through other programs that give more resources to

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local government to enact programs like that. I don’t think it warrants a Federal program for that end, but I do think that Federal

resources are needed. Local governments just don’t have the

money.

Mr. DENT. Correct. In my view, that would probably do more to

help restore neighborhoods to their former luster than anything

else we could possibly do, must simply because you are lowering

debts and you are creating ownership opportunities. Does anybody

else have any thoughts on that?

Mr. LAZIO. The only thing I would add to that, two things if I

can, Congressman. One is that there is actually authority in the

bill to use the value of a rental voucher for homeownership, either

for down payment assistance or to help service the mortgage. And

you are absolutely right, we saw this in places like Long Island

where I was from, where people were in basement apartments, but

the voucher that they were being given to pay the rent was more

valuable than the cost of servicing a mortgage for them. They could

own their own place and build some equity and have the stability

of homeownership, so for some people that’s really going to work,

and it’s a matter of bringing this to the attention, in part, of the

local housing authorities.

The second part of it is vouchers, especially rental vouchers, only

really work when you have some slack in the market, so you have

places for people to go to. That’s why when people talked about a

vouchering out model, I thought, well, that’s a one-size-fits-all for

all communities. There’s going to be situations where actually giving someone a voucher will be meaningless because the market is

so tight they have nowhere to go.

So incentivizing the construction of market rate units that are

still at the same time affordable is important, and I would say, politically, if I could add this last point, in my experience, to talk

about housing, affordable housing in terms of providing opportunities for entry-level workers, no company in your back yard is going

to be able to grow if there is not decent housing for people who are

moving up the ladder, who are starting in entry level and middle

management, and that does resonate with a whole different group

of constituents.

Mr. CISNEROS. Very good point.

Mr. DENT. My observation has been the programs have been

enormously successful where tried, but there is not enough funding

to facilitate the deconversion process fast enough. You know, we

get some very good examples of success, but we just can’t do it

quick enough. It is much easier, apparently, to convert these

owner-occupied residences to apartments than going back the other

way, and so I am just trying to accelerate that process. Any

thoughts you have as to how we can do that with our Federal dollars is appreciated.

Mr. CISNEROS. Your nonprofits in your community can play a

role.

Mr. DENT. Correct, and our nonprofits are doing that. Again, it

is about funding, but they have done a terrific job and we have

used them very effectively actually.

Ms. GLOVER. I just want to speak very quickly to whether Hope

VI has met its mission. I think it met its initial mission, but I

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think Secretary Cisneros was absolutely right, another 10 years

would be very, very important.

And I wanted to inform the process just a little bit on what the

Hope VI money does because I think that there’s a sense that it’s

really not leveraging and meeting its goal. Basically, it pays for the

cost of relocating the families, the cost of demolition, the cost of the

human services programs that are critically important so that the

families, who in fact are using vouchers and entering the mainstream for the first time, can be successful in community.

And last, but not least, buying down the cost in a mixed-income

community of that affordable unit so that the rents can be affordable to the families who need it, thereby leveraging private resources for housing for middle management and senior management.

So that if you leverage it correctly, you really can have a very

important impact, and certainly, I think if you drive around urban

America, you know, based on your own observations, that more is

needed.

And I wanted to mention that another area are these very old

project-based Section 8 properties that are coming to the end of the

life of the voucher, and that too will need some repositioning because if not, it will opt out, and the private sector will in fact take

over those resources that had indeed provided affordable housing

for cities. So I think that there needs to be some attention paid to

those older properties because they are opting out, not because people are not committed to affordable housing, but because there are

no resources to help in preserving the stock and doing the same

type of treatment that we’ve seen with Hope VI.

Mr. DENT. Thank you.

Mr. TURNER. I want to thank all of our panelists, but first off,

let me thank Mr. Wood and Ms. Glover for your participation, the

technical expertise that you bring to the table. This is our first

hearing and it is an overview, and we are going to now take up

issues that are more specifically targeted, and I am certain that we

are going to be in touch with you, not only as we continue this

process to get your insight, but as we begin to pick those issues

and ideas, to get your input on how we might focus and topics that

we might be able to make an impact on.

And for Congressman and Mr. Secretary, if you look at all the

testimony that is going to follow in panel two, almost all of the policy discussions, when they talk about what has happened in the

most recent past and then what things that we need to look forward to, most of those policy issues come from the discussion that

you two gentleman had and the initiatives that you have given,

and opportunities that you have given to communities. So let me

thank you for your contribution to the intellectual focus of when everyone takes up the issue of how do you undertake reform for public housing, and also how do you function, and how do you make

certain that it serves our communities. Your willingness to spend

your time to come speak to us and talk about those topics of which

you both have, obviously, a great deal of love, and a great deal of

expertise, is very much appreciated. I am certain that we will be

in touch with both of you also as we take up issues and ideas.

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We want to, from this testimony, see what areas need additional

focus and oversight, so that we can then look to see some of the

things that you two undertook that have not been implemented correctly, or that now have done their job and need to be tweaked so

that they can serve more effectively.

Before we close completely, I wanted to give the two of you any

opportunity for closing remarks that you might have.

Mr. LAZIO. Mr. Secretary.

Mr. CISNEROS. Thank you, Rick.

Mr. Chairman, let me just thank you again, and Congressman

Clay and Congressman Dent, and the rest of your committee, because I know that the mandate of the Government Reform Committee is broad, and you could take on any number of subjects. This

is an important subject.

First of all, there is a real opportunity here to build on some reforms. Second, it is an unsexy subject, so it’s just not taken up frequently, but this is an opportunity to really transform public housing in America. We’ll end up with something completely different

if we build on the themes that we’ve learned the last years. So your

voice of leadership, bipartisanly, could make a huge difference, and

I just want to encourage you to take that theme of reform and

march on. Thank you.

Mr. TURNER. Thank you.

Mr. LAZIO. The only thing I would add to that in associating myself with the Secretary’s comments is, is that there is no lack of

hunger or need for more creativity by members of this committee

or of this body. And if you would look at this as if Henry and I

were never here and you want to create something from scratch,

I guarantee you’re going to find some great ideas that will be able

to be leveraged by some of the great housing advocates that are in

this room.

And just to make this last point, as you consider how you’re

going to evaluate our housing policies, you’ll be doing the right

thing by listening, and I would really encourage you to get out in

the field also and hold some field hearings and speak to the people

and tenants whose lives are impacted every day by this.

Thank you.

Mr. TURNER. Excellent.

I am going to recognize Mr. Clay for closing comments.

Mr. CLAY. Thank you, Mr. Chairman.

Just very briefly, I would like to take this opportunity to recognize a young man that is with me today, who is serving as my

shadow today. He is an 8th grader from Oneness-Family School in

Bethesda, MD. I wanted to introduce him and insert in the record

his name, Remington Williams, who is with us today, and thank

him for being here.

Mr. TURNER. It is wonderful to have him with us.

Mr. CLAY. Thank you. Thank you all.

Mr. TURNER. Panel one, thank you so much. We will turn to

panel two then. We appreciate you attending.

Panel Two includes Mr. Rod Solomon, Mr. Conrad Egan, Dr. Alexander von Hoffman, Dr. Edgar Olsen, and Dr. Michael Stegman.

We will take a few minutes recess as we change panels.

[Recess.]

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Mr. TURNER. Gentlemen, thank you for joining us. We will now

hear from our second panel. Today we have Rod Solomon, counsel

with the law firm of Hawkins Delafield & Wood; Conrad Egan,

president of the National Housing Conference; Dr. Alexander von

Hoffman of Harvard University Joint Center for Housing Studies;

Dr. Edgar Olsen of the University of Virginia; and Dr. Michael

Stegman of the University of North Carolina.

I thank each of you and welcome you, appreciate the time that

you have taken to participate and the time that you are spending

with us here.

Before we begin, I would like to remind our witnesses that oral

testimony would be limited to 5 minutes. We do have your written

testimony, and we appreciate the information you provide to us

there. You will notice that there is a timer on the witness table.

The green light indicates that you should begin your prepared remarks, and the red light indicates that your time has expired. The

yellow light indicates that you have 1 minute in which to conclude

your remarks.

It is the policy of this committee that all witnesses be sworn in

before they testify, so will the panel members please rise and raise

your right hands?

[Witnesses sworn.]

Mr. TURNER. Let the record show that all witnesses have responded in the affirmative, and we will begin with Mr. Solomon.

STATEMENTS OF ROD SOLOMON, COUNSEL, HAWKINS

DELAFIELD & WOOD, LLP, FORMER HUD DEPUTY ASSISTANT

SECRETARY FOR POLICY; CONRAD EGAN, PRESIDENT, NATIONAL HOUSING CONFERENCE, FORMER EXECUTIVE DIRECTOR OF THE MILLENNIAL HOUSING COMMISSION; ALEXANDER VON HOFFMAN, SENIOR FELLOW, JOINT CENTER

FOR HOUSING STUDIES, HARVARD UNIVERSITY; EDGAR O.

OLSEN, PROFESSOR OF ECONOMICS, UNIVERSITY OF VIRGINIA; AND MICHAEL A. STEGMAN, MACRAE PROFESSOR OF

PUBLIC POLICY, PLANNING AND BUSINESS, AND DIRECTOR,

CENTER FOR COMMUNITY CAPITALISM, KENAN INSTITUTE

OF PRIVATE ENTERPRISE, ADJUNCT PROFESSOR OF ENTREPRENEURSHIP, UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL

STATEMENT OF ROD SOLOMON

Mr. SOLOMON. Thank you, Mr. Chairman, Congressman Clay,

Congressman Dent. I’m Rod Solomon now with the law firm here

and formerly a HUD official with the honor of helping Congress develop the public housing reform law, and then coordinating implementation at HUD for 5 years.

Last year the Brookings Institution published my report, which

reviews progress under the 1998 law, and I’d ask permission to

have the report included in the hearing record. Thank you.

The law contained many initiatives. My report tracks progress on

54 provisions, each with its own story. But more generally, I reviewed progress regarding four broader objectives: one, improving

or replacing the public housing stock; two, increasing tenant selfsufficiency and promoting public poverty deconcentration; three,

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improving or replacing public housing management; and four, improving the voucher program.

Overall we should recognize the enormous change that’s occurred

in these programs and many of the PHAs. We successfully eliminated the vast majority of notorious bad public housing projects, replaced them with mixed income or lower density public housing,

and substantially with vouchers, and greatly upgraded management in many large cities. Voucher reform supported expansion in

the number of families assisted by half a million between 1997 and

2003.

With respect to public housing improvement and replacement, in

addition to replacing the worst projects, HUD eventually implemented the ability for housing authorities to borrow against receipt

of future capital money. About $2.2 billion has been approved after

an extensive HUD process, of which about $1.3 billion was for

three transactions.

With respect to self-sufficiency and deconcentration of poverty,

the replacement of those large distress projects helped. Further,

the percentage of families with children in both programs, where

their largest source of income was earnings, increased from about

a third to about half between 1995 and 2001, and remained significantly higher than before that period. Those changes though almost

certainly result more from economic trends and welfare reform

than from the act. The percentage of extremely low-income families

we serve in the programs increased somewhat in both programs.

With respect to public housing management, we’ve seen vast improvement in a number of large cities such as Washington here,

Chicago and Philadelphia. The improvements mostly were brought

about by local or HUD initiatives rather than the act. Some of the

act’s basic provisions to bolster management were delayed for years

in implementation or otherwise did not have the expected impact.

The act and related HUD actions did encourage improvements in

physical conditions in public housing, and expedited obligation of

capital funds.

For vouchers, cost has been the dominant issue lately. The increase in pre-unit costs relates partly to measures taken in the act

or by HUD to address concerns that some families who receive

vouchers were not successfully finding units, still were paying unreasonable percentages of their incomes for rent, or finding units

only in areas with high-poverty concentrations.

I have some general recommendations for your to-do list, as the

chairman called it. First, your work generally should emphasize

the importance of these programs and their need for adequate

funding.

Second, the subcommittee should examine additional steps HUD

could take to collect, analyze and release critical data that will help

us monitor the progress in these programs.

Third, the subcommittee should examine further opportunities

for HUD to expedite reform. Regulations still are not in place with

respect to significant aspects of the act. These include, among others, rules to allow aspects of leveraging capital for public housing

and for housing authorities’ voluntary conversion of public housing

to vouchers. HUD needs to finish the guidance job in a manner

that supports the reforms. The subcommittee also should examine

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how HUD could simplify requirements further. For example, the

approval process for borrowing against future capital funds needs

to be streamlined and the new regulatory emphasis on management of individual properties, rather than the entire PHAs, must

be implemented with substantial flexibility.

Fourth, with respect to potential legislative issues, the committee

should review whether initiatives such as loan programs can reasonably be expected to replace the Hope VI grant program. The

subcommittee also should consider the need for further initiatives

to sustain and increase leveraging of private capital funds. The administration, several years ago, proposed a mechanism for property-based financing along the same lines other affordable housing

improvements are financed, and that approach should be reviewed

again.

Finally, the subcommittee should review areas where experience

indicates that statutory simplification is critical. This will include,

I think, public housing rent requirements, which are very complex.

More generally, Congress should aim to require local performance

and retain in the measures protecting fundamental program elements, continued availability of units, income targeting of families

to receive assistance, and affordability of Government assisted

housing, and otherwise leave plenty of room for local innovation.

Mr. Chairman, thank you again, and I’ll be pleased to respond

to any questions.

[The prepared statement of Mr. Solomon follows:]

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Mr. TURNER. Mr. Egan.

STATEMENT OF CONRAD EGAN

Mr. EGAN. Thank you, Mr. Chairman, and Mr. Clay and Mr.

Dent, for the opportunity to present today principally as to former

executive director of the congressionally chartered Millennial Housing Commission. With your permission, I would like to place the

Commission’s report into the official record of this hearing. Thank

you, sir.

In the report the Commission presented to Congress in May

2002, there are two recommendations to improve public housing

and the Housing Choice Voucher Programs. At this point I would

also like to particularly acknowledge the leadership of Ophelia

Basgal and Renee Glover, who were two public housing authority

directors present as commissioners on the Millennial Housing Commission, and particularly Renee Glover, who was the chair of our

Public Housing Committee. Of course, you heard her earlier today

and you know what kind of contribution she’s made, not only to the

national housing scene, but also particularly in Atlanta.

First, the Commission recommends a gradual transition from the

current agency-based system to a property-based system with subsidies falling to specific properties based on the rents they would

command after any needed renovation in the conventional real estate market. This transformation would enable public housing authorities to rehabilitate properties using funds raised in the private

capital markets.

Second, the Commission recommends principally for the Housing

Choice Voucher Program, measures to match voucher holders with

services that complement efforts to support employment and other

opportunities, and this challenge, of course, came up earlier today

in this hearing. Most importantly, though, the Commission asserts

that the Housing Choice Voucher Program is distinctly worthy of

additional funding in substantial annual increments.

In the remainder of my statement let me focus on the first recommendation where the Commission specifically recommends the

application of private real estate principles. First, a comprehensive

approach is recommended for severely distressed properties. Some

public housing properties are in such poor condition or so poorly located that they do not warrant additional involvement. These properties are good candidates for demolition and replacement with

vouchers of hard units. The Hope VI program must be maintained

principally because the private sector is typically unable to provide

the first-in capital necessary to attract additional significantly

greater investments for these properties, and I also would like to

acknowledge, as Renee Glover did earlier today, the recently introduced legislation by Senators Bond and Mikulski to significantly

improve and reform the Hope VI program.

Second, much of the remaining public housing inventory would

shift over time to the property-based financing model by converting

operating and capital funding to long-term contracts linked to each

public housing property. These contracts would provide reliable

funding to cover operating costs, debt service on loans for capital

costs and replacement reserves. Subsidy levels would be based on

each property’s market rent. Capital improvements would be fiVerDate 11-MAY-2000 10:22 Jun 29, 2006 Jkt 000000 PO 00000 Frm 00087 Fmt 6633 Sfmt 6633 D:\DOCS\27282.TXT HGOVREF1 PsN: HGOVREF1
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nanced through loans secured by a mortgage, which could be

backed by FHA mortgage insurance. No additional support would

be necessary for the majority of public housing properties.

Property-based financing is not, however, appropriate in all

cases. For small properties and for those whose capital needs required rent substantially above market-based rent levels, the alternatives include using the Hope VI program, agency-based financing, and additional housing development vehicles, including the

long-term housing tax credit and housing grant programs. Public

housing authorities should therefore continue to be able to leverage

some of their subsidy funds by using various agency-based mechanisms. A property-based financing strategy would be appropriate

for most properties and has several merits.

The long-term costs of this capital improvement approach would

likely be lower than the current approach. Improvements can occur

quickly before properties deteriorate further, and finally, propertybased financing provides another level of operational oversight

from lenders and investors, thus substituting standard real estate

practice for HUD oversight.

I would also like to emphasize the point that Secretary Cisneros

made earlier, that it is important to keep the units that are going

to be moved from some of these sites, and I would glad to comment

further on that during the question and answer period.

The Millennial Housing Commission’s basic recommendation in

this area is that the public housing authorities must be permitted

and encouraged to utilize the private sector’s financial resources by

converting their developments to a property-based model like the

rest of the world of real estate.

Thank you, Mr. Chairman, for the opportunity to make this presentation.

[The prepared statement of Mr. Egan follows:]

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Mr. TURNER. Dr. von Hoffman.

STATEMENT OF ALEXANDER VON HOFFMAN

Mr. VON HOFFMAN. Thank you, Mr. Chairman, and members of

the subcommittee for this opportunity. As a historian I am delighted, not to say even surprised, that our elected representatives

are crafting policies by trying to understand how we got here. The

history of public housing is long and complicated, but I would pull

from three major lessons, which I hope will guide future policies.

These are just broad strokes as it were.

The first lesson would be that the intentions of the original public housing advocates offer inspiration for today’s programs. The

program we have today is not necessarily what its creators intended. The original advocates, in the 1930’s, conceived of public

housing as varied, as flexible, as democratic, and locally controlled,

more bottom-up than top-down. Instead of a monolithic agency they

envisioned an assortment of entities, local governments, unions and

nonprofits developing and managing public housing. The residents

were to have a large say in what went on in their developments

because they were to be represented in the organizations that actually developed the public housing.

There were to be a variety of types of housing, rentals, cooperatives and homeownership, and the originators of public housing

wanted to replicate the vital community life of America’s neighborhoods and small towns. Early prototypes, for example, contained

kindergartens, playgrounds, community centers and stores, which

was intended to create a sense of community and function as communities.

So the public housers certainly did not get everything right, but

I think some of their core ideas are worth incorporating today. So

thinking of that, if we think how to implement their idea of variety,

public housing authorities should form partnerships with nonprofit

and for-profit housing developers. It’s very interesting how in sync

some of these ideas are with what happened with Hope VI and the

1998 reforms. To implement the idea of flexibility, housing authorities should become entrepreneurial, try many approaches, as Renee

Glover had done in Atlanta, perhaps developing mixed income

housing in which market-rate units subsidize low-income units. Authorities could sell old properties and use the profits from that to

develop new hard units, or they could be like the Cambridge Housing Authority in my hometown, and create low and moderate-income assisted living facilities. They’re all new horizons that could

be reached.

To implement the idea of democracy, I would hope we continue

to encourage as much resident participation as feasible, as was

originally envisioned. Just some examples, a number of cities have

preserved the Expiring Use Housing recently by assisting tenants

to buy their buildings and run them as cooperatives, cooperatives,

which were an important element in the original public housing

ideal.

And then to implement this idea of community existing in new

housing developments would continue and expand on incorporating

community facilities and services, even going so far as stores and

work places.

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The second major lesson in policy history is that circumstances

change and we should be prepared to adjust when they do. For example, the clientele for public housing has changed dramatically

over the years. The assimilated immigrants and middle-class African Americans, who were the first tenants, were gradually replaced

by low and extremely low-income households, often single mothers

with nowhere else to go. Today circumstances are changing again.

Low-income people, like everyone else, are moving to the suburbs,

and these communities may not be prepared. We should encourage

housing authorities to form regional alliances to help solve the new

emerging regional housing problems.

At the same time, immigration has raised the number of foreignborn low-income residents, who often are unaware of their housing

choices. We should make every effort to incorporate poor immigrants into appropriate housing programs.

And the third lesson I would draw from history is that a single

policy, even a good one, is not a panacea. For much of its history,

public housing adhered to a kind of environmental determinism

that held that modernist style high-rise slabs or low-rise barracks

would solve all their residence problems. But people thrive in a variety of housing types, and one should avoid, even if it’s new urbanist, a single formula for architecture. Recently, many embraced the

idea that mixed-income housing will cure concentrations of poverty.

This will do some good, but mixing extremes of incomes will not

cure the complex problems of people, who for reasons of health or

family situations, are chronically unemployed.

Another popular cure-all is homeownership. Again, some low-income families will benefit from buying houses, but others may find

it too burdensome to keep up mortgage payments and maintain a

property. In short, it will take not one, but an array of approaches

to solve low-income housing needs of people who may have multiple

problems.

There’s much more to be learned from the history of housing, but

I hope that these observations are helpful to the committee as it

goes about its task of planning for the future.

Thank you.

[The prepared statement of Mr. von Hoffman follows:]

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Mr. TURNER. Thank you.

Dr. Olsen.

STATEMENT OF EDGAR O. OLSEN

Mr. OLSEN. Thank you, Mr. Chairman. I welcome this opportunity to talk with you and the members of your committee about

the future of the public housing program. I speak from the perspective of a taxpayer who wants to help low-income families, albeit, a

taxpayer who has spent more than 30 years studying the performance of housing programs.

My testimony is right up the alley of this committee. It concerns

how to get more for the money spent on current programs. In the

case of public housing it’s possible to get much more. The evidence

on program performance indicates that the housing voucher program has outperformed the Public Housing Program in every respect. My written testimony mentions some of this evidence and

contains references to the papers and reports that provide the details.

The largest difference between housing vouchers and public

housing is in their cost for providing equally good housing. The evidence is unanimous that it costs much less to provide equally good

housing with housing vouchers than with public housing projects.

Therefore, shifting the budget for public housing to housing vouchers will allow us to serve all of the families served by public housing equally well, that is, provide them with equally good housing

for the same rent, and serve hundreds of thousands of additional

families. Alternatively, it would allow us to serve current recipients

much better without spending any more money, or equally well at

a much lower taxpayer cost.

The 1998 Housing Act made a small step in that direction. My

testimony describes a much more significant initiative that would

gradually lead to the elimination of the public housing program in

its current form. It’s important to realize that the poor performance

of the Public Housing Program relative to the Housing Voucher

Program is not due to differences in administrative competence.

Both are administered by the same local public housing agencies.

At HUD, the Secretary for Indian and Public Housing oversees

both programs.

The difference in performance is due to fundamental differences

in the design of the programs. The voucher program relies on the

incentives of recipients to get the best housing possible for the

money spent on it. Public Housing Program relies on civil servants,

who have weak incentives for good decisions and who do not even

know whether they have made bad decisions unless their decisions

are extraordinarily bad.

My proposal requires no additional Federal funds. It’s a proposal

to better use the funds and assets currently available to public

housing agencies. New legislation is needed to realize the large

gains that would result from a major shift of resources from public

housing to housing vouchers. The following proposal will achieve

these large gains in an orderly fashion.

First, Congress should require every local housing agency to offer

each current public housing tenant the option of a portable housing

voucher or remaining in its current unit on the previous terms. The

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latter option ensures that no public housing tenant will be harmed

by this legislation. Families that accept a voucher would benefit because they would move to housing, neighborhoods, and/or locations

that they prefer to their public housing units. Housing agencies

should be required to pay for the vouchers from their current operating and modernization subsidies. This ensures that each housing

agency receives the same amount of Federal money as it would

have received under the current system.

My proposal would not require housing agencies to sell their

projects beyond the current requirements. However, it would allow

them to sell any of their projects to the highest bidder. Requiring

sale to the highest bidder will produce the most money to operate

and modernize the housing agency’s remaining projects.

Many housing agencies would surely choose to sell their worst

projects. These are the projects that would be abandoned to the

greatest extent by public housing families that are offered vouchers, and they are the projects that will be the most expensive to

renovate. When a project is sold, the remaining tenants in that

project should be offered the choice between vacant units and other

public housing projects of a housing voucher.

When public housing units are vacated for whatever reason, the

housing agency should be allowed to charge whatever the market

will bear for them. This will provide additional revenue to housing

agencies without additional Federal subsidies. More importantly, it

will make their revenues depend in part on the desirability of the

housing that they provide. The absence of this connection is the

primary source of the excessive cost of the Public Housing Program.

When a current public housing tenant either gives up its voucher

or leaves its unit without a voucher, the housing agency should be

required to offer a housing voucher to a family from its public

housing waiting list, using its existing preference system. This ensures that the housing agency will continue to provide housing assistance to the same number of families, and indeed, the same

types of families.

If the preceding proposal is adopted, the Public Housing Program

in its current form will wither, but public housing agencies will do

a much better job helping low-income families with their housing.

I appreciate the willingness of the members of this committee to

listen to the views of a taxpayer whose only interest in matters

under consideration is to see that tax revenues are used effectively

and efficiently to help low-income families.

[The prepared statement of Mr. Olsen follows:]

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Mr. TURNER. Dr. Stegman.

STATEMENT OF MICHAEL A. STEGMAN

Mr. STEGMAN. Thank you, Mr. Chairman. The views I express

today are informed by almost 40 years of academic and professional

activities in affordable housing and community development policy

and practice, and by service in the administrations of both Presidents Carter and Clinton at the U.S. Department of Housing and

Urban Development.

After addressing the issues of public housing’s continuing role in

the affordable system, I will respond to the specific questions you

put to our panel. I refer you to my written testimony for more complete responses.

The public housing inventory peaked around 1991 at 1.4 million

units. Over the following 10 years it declined by nearly 160,000

units, which was the size of the national public housing stock in

1983. Today the inventory is smaller still. Given its modest size,

one might think that it would be hard to make a case for public

housing’s continuing importance. After all, 5 years ago, public

housing accounted for less than 1 out of every 25 rental housing

units in the country. But looked at another way, even at 4 percent

of the national rental inventory, public housing accounted for nearly half of all rental units in the country renting for under $250 a

month or less in 2001. And notwithstanding ongoing demolition

and transformation campaigns, its value as an essential housing

resource is likely to be even greater in the future because private

rents are rising much faster than inflation, and much faster than

the incomes of families who are on the lower reaches or rungs of

the income ladder.

HUD’s own latest figures for 2003 underscore this point. There

were only 78 affordable units for every 100 extremely low-income

households in the country, while the ratio of available and standard units is much less, 33 units per 100 households.

The 1990’s saw a series of fundamental changes in law and policy, including the creation of Hope VI, the introduction of mixed income and mixed financing opportunities and enactment of QHWRA

in 1998. Taken together, I think these reforms have the potential

to dramatically improve the lives of public housing residents and

reconnect them with economic opportunity and reverse the fortunes

of the very neighborhoods and communities that have been blighted by obsolete and dangerous projects.

As a result of these developments, in my view, public housing is

more innovative and dynamic today than at any time in its 69-year

history. So in partial answer to the question posed in the title to

the hearing, while public housing is not yet fully up to the challenges of the 21st century, it has come back a long way in a relatively short period and continues to have a significant amount of

untapped housing and neighborhood development potential. But it

will only be able to fulfill that potential through deep, trusting, stable and adequately funded partnerships with residents, their communities, governments at all levels, and the private sector.

While each of these partnerships may be fraught with tensions,

the public housing system can only be as strong as the weakest

link in this chain of critical relationships.

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And so, Mr. Chairman, as we look to the future, the greatest

challenge public housing authorities face is living up to their obligations to become outstanding asset managers, so that by example

they can demonstrate their worthiness of the large and long-term

commitments it is so essential for their partners and would-be

partners to make, because one of the most important roles of State

and local government and community service organizations in the

public housing system revolves around the provision of essential

services. To public housing residents, it is important that this subcommittee grasp the depth of resident needs as it contemplates the

importance of the partnerships that I alluded to.

Here is what a recent set of Urban Institute surveys found about

the needs of families living in five representative Hope VI sites.

There’s no reason to believe that these families are much worse off

or much better off than other families living in public housing and

communities across the country. The mostly African-American

women residents are very poor; 35 percent had incomes of less than

$5,000 a year. Less than half were employed. And like their nonpublic housing counterparts, many cycled in and out of employment. Overall, their health was significantly worse than the average American adult; 41 percent reported their overall health was

fair or poor, a rate over three times greater than self reports of a

fair or poor health for all adults in the country nationally, and

about twice that of Black women nationally.

Obesity, hypertension, diabetes, arthritis, asthma rates, were all

higher than national prevalence rates. Almost half were diagnosed

as obese. More than a third had been diagnosed with hypertension.

The prevalence more than 30 percent higher than for Black women

nationally. And one in eight Hope VI adults reported having an

asthma attack in the past year, about three times the share of

asthma attacks reported by a national sample of adults.

Mr. Chairman, public housing authorities alone cannot be expected to meet these urgent needs of their residents, but as PHAs

transition out of the service business into the asset management

business, because of staff shortages, budget constraints and lack of

ongoing engagements, many existing local, public and private social

service organizations are finding it hard to incorporate the needs

of public housing communities into their priority work plans, and

the impacts of budget cuts and community services, block grants,

CDBG and other social services, eventually and inevitably come

home to roost in public housing.

Mr. Chairman, 11 percent of CDBG goes into services, not bricks

and mortar. The elimination of that program last year in the administration’s proposal would have wiped out over $300 million of

services that go to low-income people in low-income communities.

Finally, in terms of the role of capital markets in public housing,

I’d say things are progressing nicely. I would take one exception to

Mr. Wood’s testimony about not counting private equity generated

by the sale of low-income tax credits as part of private equity leveraged by public housing funds. When companies take the research

and development tax credit, we don’t count that as a Federal investment. We count that as private capital investment, and the

same should be true with respect to the low-income housing tax

credit. When you factor that into the Hope VI leveraging, we find

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that only 53 percent, in one study only 53 percent of total project

costs were Federal costs on Hope VI projects; 28 housing authorities, 49 Hope VI grants, only 53 percent of Federal capital, the rest

private, including significant amounts of private mortgage capital.

Thank you very much.

[The prepared statement of Mr. Stegman follows:]

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Mr. TURNER. Thank you.

I want to return to the property discussion of the example that

I laid out for a public housing development that was in my community, the issue of attempting to transition it, the public housing

authority’s view being that it is a contributor overall to the administration overhead of the umbrella organization, and the threat of

losing those funds. I am going to overly simplify the characterization of Congressman Lazio’s and Secretary Cisneros’ response, but

Congressman Lazio advocating for voucher opportunities for the

residents, Secretary Cisneros stating a policy which I would describe as—again, oversimplifying; I know he would have had much

more to contribute overall to the discussion if we had continued

down the line—but to characterize the initial comments as a ‘‘once

public housing, always public housing’’ land view of this is an asset

as a specific site.

I wonder if—many of you have used the term ‘‘property-based

management’’ and many of you have used the term ‘‘asset-based

management,’’ and as asset-based management for real estate,

while public housing that has an opportunity to transition doesn’t

necessarily mean that a decision that was made 40 years ago to locate public project housing X on this spot X, means that this spot

X should remain either in the hands of public housing or

transitioning to a use that accommodates public housing. And we

see all over the country communities that are making that transition of looking at public housing opportunities at a different location versus a specific location, and working in partnership.

I would like, if you would, for each of you to talk about the issue.

And we all raised the issue of if you have a project that is obsolete

and needs to be removed, and providing economic diversity to a

community and for the residents that live there. Let’s focus our

comments, if you will, on the issue of the opportunities of redevelopment for these sites. Mr. Solomon.

Mr. SOLOMON. Mr. Chairman, I think you’re right that it’s being

looked at all over the country and it’s very site specific and inventory specific, and I think that’s what asset-based management is in

part. I would like to point out that to a substantial extent, this is

happening, meaning that public housing is being disposed or demolished in those situations about 135,000 units since all of this

activity started. Nevertheless, the way the system is set up now,

it does have the local management actors that have to decide

whether this right.

And I agree with something Congressman Lazio said, which is,

we have to try to get the incentives right so that the housing authorities looking at this, the cities are going to come out OK in

terms of both money and hopefully will see a bigger picture that

will realize that when it’s a better interest for the residents and future residents and families they’re trying to serve, to convert, that

will also be in their self-interest and they’ll be commended for it.

And I think we have some work to do there.

We also have some work to get the tools in place that were even

in the 1998 act so that this can fully occur where it should.

Mr. TURNER. Mr. Egan.

Mr. EGAN. Mr. Chairman, I think that the approach needs to be

tailored to the individual circumstances. I think our goals should

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be, as many of us have said here today, to do what’s best for the

community, to do what’s best for the residents and also, I agree,

to do what’s best for the taxpayers.

Therefore, public housing authorities and their counterparts and

partners in the public and private sectors should have the maximum amount of flexibility and the broadest range of options to

achieve the best solutions for those communities. The solution will

vary from market to market. In a soft market situation where

there are plenty of additional vacant units available, the best option may very well be a voucher type approach. Where the market

is very tight like the Washington, DC market, for example, the

strategy might be to hang on more to a property-based approach.

But I think regardless, the goal should be to try to create to the

maximum extent possible, opportunities for the residents to rejoin

the rest of the world of society.

I think the statistics that Mike Stegman just gave us here today

are very telling, and I think are a demonstration that what we

need to do is to give those residents an option to kind of rejoin the

rest of society and to reconnect, as the case may be, with the kind

of services and institutions that the rest of society is able to enjoy.

Let me give you just one quick example, if I could, which I think

demonstrates a particular solution in a particular place. One of my

additional responsibilities is to chair the Fairfax County Redevelopment and Housing Authority. I’m in my 5th year as the chair of

that venerable institution. And we are, I think, a very entrepreneurial agency. One of the things that we did recently was to

look at one of our older properties which needed rehabilitation, and

we made a decision to take half of the public housing authority

funding and move it to other units in the county which we purchased on a scattered-site basis through the county’s inclusionary

zoning ordinance, and to convert those units in that property to a

low-income housing tax credit.

So on the one hand we created a mixed-income community onsite

and we gave the residents who were able to move to these property-based units elsewhere in the county an opportunity to connect

into, as I said, the rest of the world of society, but I think it’s going

to vary from place to place, and that’s why the PHAs need flexibility and options.

Mr. VON HOFFMAN. I would just say everybody’s job would be a

lot simpler if Americans would just stay still and stop moving

around, and that is a kind of larger context. And again, times

change. You know, the old neighborhoods are not inhabited by the

same people they used to, and it’s in that context that I think you

encountered this situation in Dayton. You have changes go on, and

I’m concerned with the nonprofits who do low-income housing with

the public housing authorities, that they listen to people like

Conrad and Renee Glover, and think beyond what’s happening just

this moment or what they used to do, and think about the change

in the population, because poor people are moving out. So we might

think about producing hard units as well as vouchers and creating

communities that will help integrate people.

That said, I have to endorse the idea of situation by situation because a lot of people are going to fear when this happens a real

estate grab, quite frankly, that has happened on occasion in the

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Urban Renewal Program over time. Local government people made

deals with important entrepreneurs that basically move an area

out of poor people’s hands into wealthy people’s hands for that. So

I would say that I embrace the spirit of change and flexibility, but

probably will need to have some safeguards to make sure it’s done

right.

Mr. OLSEN. No competent economist would agree with a proposition that the fact that a piece of land was once used for public

housing it should always be used to house subsidized families. I

mean, as you mention, the location of jobs has changed vastly over

the years, and so the best place for low-income people to live has

obviously changed vastly.

Beyond that I would say the evidence indicates that all forms of

unit-based assistance, all types of housing projects, have excessive

costs for the housing provided. So I think as a general matter we

should be moving away from designating specific properties for lowincome people, and giving them vouchers and letting them live

where they want to live.

Mr. STEGMAN. I don’t think all of our programs ought to be run

by economists. [Laughter.]

And there are other values that go into this. But if you go back

to Congressman Lazio, aligning incentives is absolutely critical.

Even in the public-private partnerships we don’t want the public

partner taking all the risks and the private partner getting all the

gain. That’s not a market-driven strategy.

Rod Solomon will remember this. The public housing folks came

to the Secretary—I was his Assistant Secretary for Policy—with

the proposition to encourage demolition, we ought to give housing

authorities 3 years—correct me if I’m wrong, Rod—3 years of operating subsidies for units that don’t exist anymore. Phantom operating subsidies to really align the incentives that you, Mr. Chairman,

were talking about. They couldn’t afford to lose the operating subsidies, and so we were seeing housing authorities not doing probably what they ought to have been doing. Can you imagine GAO

finding 3 years of operating subsidies for units that don’t exist?

You know, you’ve got to have a way of kind of couching that, but

the alignment of incentives is absolutely critical.

If we go to project-based budgeting and project-based asset management in the context that you’re talking about or in the context

that Ed Olsen is talking about, if that development can’t be occupied by rent-paying people, it will drain the resources of the authority so that they can’t manage their portfolio, and they will find

it in their interest to do something about it, not just keep it up as

kind of an archaeological kind of—anyway. [Laughter.]

Mr. TURNER. I appreciate the discussion because you have all

identified, and wonderfully, the broad range of issues that need to

be taken up when a decision like that is made, and they are many,

and what a great description each of you have contributed to that.

I appreciate it.

Mr. Clay.

Mr. CLAY. Thank you, Mr. Chairman.

I will be quite brief in the interest of time. Just for a panel-wide

question—and perhaps you can help me understand it better—one

concern I continue to have is that new reform efforts to place indiVerDate 11-MAY-2000 10:22 Jun 29, 2006 Jkt 000000 PO 00000 Frm 00129 Fmt 6633 Sfmt 6633 D:\DOCS\27282.TXT HGOVREF1 PsN: HGOVREF1
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viduals into privately owned multi-family structures will result in

unit shortages due to budget limitation and market rental costs

that continue to rise. How does a fixed budget program like Section

8 adjust in this environment? And I would love to hear from all of

you on that, or anyone who wants to take a stab at it. Mr. Solomon?

Mr. SOLOMON. If the answer is how do they adjust to a flat budget, they don’t, if rents are going up in the locality. So I heard the

question you asked in the last panel, and I think part of this is how

do we have a system for the voucher program that tries to be responsive to the cost changes and is still a responsible system in

terms of cost. I think we have to start with, as one of the panelists

said, defining what we’re trying to do in the program. If we’re still

going to serve people who are paying 30 percent of their median—

I’m sorry—of their income as rent, and we’re still going to target

to serve the very poorest families, who our studies have shown are

the ones with the most need in terms of needing to be served, then

per unit that’s going to cost a certain amount.

And when Congress sets these budgets, Congress has to be or

should be very clear about, OK, these are the kinds of parameters,

this is what we’re aiming to do, and this is how many families we

can serve with these budgets. We, taxpayers have to leave it to all

of you, knowing those facts, to evaluate the importance of staying

at 2 to 2.1 million families assisted.

Mr. CLAY. Thank you.

Mr. EGAN. Mr. Clay, let me respond to your question by going

back to the example I cited, which I cited for a reason. Because I

think what, the basic points I want to make is that the answer to

your question varies significantly from market to market, and I

agree generally that Congress has the burden of trying to fund the

Section 8 Housing Choice Voucher Program in as predictable and

sustainable a manner as possible. Increasingly, the investment

community is relying on that Section 8 subsidy to make major decisions about debt and equity investments.

But in a very tight market like Cambridge, MA and Fairfax

County, I would suggest, just kind of off the top of my head—I’ve

been trying to run some quick numbers here—that we can probably

provide to a family, housing assistance at half the price in a property-based solution than in a voucher-based solution. Specifically,

the units that we were able to purchase with the public housing

authority we moved out of the one development and used to buy

on a scattered-site basis townhomes in other parts of the county.

That’s probably costing us about $1,000 a month, all in, because we

were able to purchase the units at a significantly lower price

through our inclusion rezoning ordinance.

Give a Housing Choice Voucher to a family in Fairfax County,

they’re going to end up having to pay probably double that to find

a comparable unit.

Mr. CLAY. OK. Thank you for that response.

Mr. VON HOFFMAN. I would just speak to this briefly. In Cambridge, since Conrad brought it up, which is an extremely high

housing market, the housing authority there, as in other places,

ended up having to purchase apartment buildings in order for

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there to be properties to use the vouchers. It becomes so tight that

you really need some creative solutions.

Mr. CLAY. Let me ask you about that, doctor. In an ideal situation, do you foresee there always being a need for public housing

and available units, or do you think we could transition people and

families to homeownership, to mortgage rate rental units or will

there always be a need?

Mr. VON HOFFMAN. I think there will always be a need, and I

think Americans generally will feel there’s a need. And I think you

can look at what’s happened in the nonprofit and community development movement over the last 30 or 40 years to see that given

the opportunity, people have used the low-income housing tax credit to create communities. I think, again—that was my point about

the panaceas—to think that one thing will transform someone’s life

is just naive. And you can look at history or you can look around

you and see that. I think that well-done public housing projects, as

they were conceived and have been very effective at different points

in time, or nonprofit developments, or even for-profit, commercial

developments that are done with this in mind, are a very good way

of bringing people along, integrating—Renee Glover’s example is

wonderful—integrating education, job training, or just stability.

Mr. CLAY. And mixed use is included in there, mixed-use unit.

Anybody else? Yes, sir.

Mr. OLSEN. Well, first, I mean we haven’t had a fixed budget for

the voucher program. The voucher program budget has risen rapidly in recent years, and I don’t favor a fixed budget, because if we

had a fixed budget, with inflation it would mean we would have to

serve fewer people or we would serve the people served not as well.

So I certainly don’t favor a fixed budget for the voucher program.

On the contrary, I favor a rapidly rising budget for the voucher

program to serve more people, funded by vouchering out projectbased assistance, so just transferring the total budget toward the

vouchers. So I favor an entitlement housing voucher program for

the poorest people.

Mr. CLAY. Entitlement.

Mr. OLSEN. Yes.

Mr. CLAY. Thank you.

How about you, Dr. Stegman?

Mr. STEGMAN. Mr. Clay, the budget-based Section 8 kind of policies, if continued, would have either one of three effects or a combination of them. As rents go up and you keep the budget as it was

based on the number of people being helped the previous year, either you assist fewer households, you raise tenant contributions to

rent, or you use your program for higher-income households so that

they really have a need for lower subsidies.

I think a bigger problem is that only a quarter of eligible households receive housing assistance. That’s really the bigger kind of

issue. We’re not in an entitlement situation, but when we look at

Section 8, it’s the only safety net program that I’m aware of where

the market kind of sets the subsidy level. It’s a market-based,

that’s what housing costs in an area that is not concentrated poverty, and so on. And when we look at market-based programs, it

seems to me those who support them need to support the kind of

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market principle, which is paying the market rents. When you fix

the budget you don’t pay the market rents.

Mr. CLAY. All right. Thank you all. Did you want to answer?

Mr. OLSEN. I’ll followup on that. There have been studies of the

adequacy of fair market rents that indicate that these rents and

the maximum subsidies in the voucher program greatly exceed

what is necessary to occupy units meeting HUD’s minimum housing standards. So we could take the money from the voucher program right now—we want to phase this in and grandfather people—we could take that money, offer less generous subsidies to a

lot more people. That’s what I think we should do.

Mr. CLAY. OK. But then what do you do with the current——

Mr. OLSEN. Grandfather them, allow them to continue on the

current system, and just as there’s turnover—every year there’s

about a 12 percent turnover rate—phase them into a less generous

voucher program where you’re serving more people though.

Mr. CLAY. OK. But there were probably incentives for them being

involved in the program to begin with, don’t you think?

Mr. OLSEN. Well, that provides significant benefits to them, absolutely. But I think we need to grandfather to make it politically

feasible to do something like that.

Mr. CLAY. I thank you for that, and I thank all the witnesses for

their response.

Thank you, Mr. Chairman. I yield back.

Mr. TURNER. I also serve on the Armed Services Committee, and

there is a hearing that is ongoing for which I might need to leave

in the middle of—so we might have to cut short the answers to this

question, and if we do, what I’m going to ask is that we adjourn,

and then if you are unable to—if we don’t get to you, which I do

believe we will, if you would submit your answer in writing.

One of the issues that I think is most important that we focus

on, besides financial issues and impact on budget, besides the housing structure and environment and quality housing and affordability, is the issue that most of the residents that we have in public housing that have opportunity for economic transition, in other

words, non-elderly, non-disabled, most likely have some other issue

that is complicating the expression of poverty that requires intervention through some social services, through education, through

skill sets. What comments or thoughts might you have as to how

we might better improve our ability to go beyond just the four

walls of looking at providing a place for families to live, but opportunity for skills and transitional? Start with Mr. Solomon.

Mr. SOLOMON. First of all, Mr. Chairman, I’m glad you mentioned non-elderly, non-disabled, because we sometimes forget that

in public housing half of our occupancy is elderly and disabled. So

focusing on the other group, the families, I think, given the way

the budgets have been in recent years and what might be reasonable to expect, and the expertise that agencies have in our communities, we’re really talking about how to get help from outside the

public housing system and outside public housing authorities to

focus on these residents, and really bring some both case work and

figure out the help they need and try to get it to them.

The act that was passed in 1998 did say that housing authorities

are to use their best efforts to get cooperation agreements with

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local agencies, that will kind of offer services like employment assistance, other types of assistance. Housing authorities say that

they’re doing that, but I think the committee could see a little bit

more what’s happening with that. It’s also something where HUD,

with all of its regional offices, could use the presence of those field

people to help join that effort locally and help engage the housing

authorities where they are not doing it themselves or having trouble doing it with some of those other public and private sector

agencies and entities that can help these residents.

Mr. TURNER. Thank you.

Mr. Egan.

Mr. EGAN. I think the general principle is that the relationship

between the public housing authority and the residents should not

cease at the point where the resident moves to additional opportunities, but there should be an ongoing relationship, presumably

using private sector community-based services to help that family

make that transition. Very specifically, I would recommend looking

at some of the lessons that have come out of the Hope VI program

in that regard. You talked about, at least Mr. Clay talked about

visiting Atlanta. I’m sure that an onsite review of their experience

would be very, very useful. Also, I think particularly the experience

in Chicago with the transformation of the massive units of housing,

and specifically the effect of the Gautreaux decision, which preceded the transformation. Literally as we speak, this moment at

the Urban Institute, Alex Polikoff is releasing his book on the history and analysis of the Katrow decision. So I would recommend

that counsel may wish to speak with Dr. Polikoff about the experiences of that program.

Mr. TURNER. Thank you.

Mr. VON HOFFMAN. I, just briefly, take a sort of historical view

and say the reason we have this problem is because in the 1950’s

housing authorities and housing people generally were kind of

blind-sided by the fact that they were going to need social services

for their residents, and so we’re kind of playing catch-up. I agree

completely, Hope VI points the way and it’s the enlightened housing authorities. I would also say there are many nonprofit, and

there are some for-profit community development groups that have

housing developments where they have job training, they have case

workers. Here in D.C., Jubilee Housing, and you can go on to some

of this faith-based work as well, that provide examples.

And then finally, I would just say I think in general in this case,

as well, it would be great to lower the barrier between something

called public housing and those entities, and the community, meaning that there are other low-income people or other people who

have these problems and needs, and there is no reason to say that

we’re going to target only the people inside the walls of housing development, and that way we might have efficiencies of scale too, because we’re serving a wider number of people.

Mr. TURNER. Dr. Olsen.

Mr. OLSEN. I think we shouldn’t expect housing programs to

solve all problems. For example, many children in public housing

projects get a lousy education, and that’s because they’re in a lousy

public school. There are just many problems, many important problems that housing authorities should not attempt to address.

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So I would really prefer a more minimalist approach. The thing

that they should do is make sure that low-income people live in

adequate housing, and they should do it in a cost-effective way.

Now, if they can do that first, then we can go on to other things.

But the one other specific thing I’ll mention is there has been a

lot of discussion about the work disincentive effects of housing assistance. The estimates that are available suggest that indeed all

forms of housing assistance have work disincentive effects. People

earn less than they would have earned in the absence of it. The

magnitude is on the order of 13 percent. And this has to do with

the subsidy schedule which basically says, under the basic subsidy,

is the more you earn, you know, the more you pay in rent for your

public housing unit, the less of a subsidy you get.

So I think the QHWRA provisions that allowed housing authorities to experiment with the rent schedule, I think is trying to address that, and may well be able to address it, but I don’t think

we have any systematic evidence on this, and I think we should.

I think we should try to learn something from the experiences of

different housing authorities in a very systematic way because I

think that is an important issue and that is something that housing authorities can do something about.

Mr. TURNER. Dr. Stegman.

Mr. STEGMAN. I mean I would agree with Ed that housing agencies don’t have either the capacity, the skills, or ought not necessarily have the responsibility of meeting all of the other needs of

families, but there is a moral obligation, once the housing authority

gets involved in the lives of families, particularly if we’re talking

about moving them in order to transform a neighborhood. It is absolutely incumbent upon us to make sure that these residents who

have all of these multiple problems, get as good services as they

can to put them on the path to a better life.

The problem that we have here with Hope VI is the physical improvements are generational. I mean they’re going to be around

forever, but the short-run costs are being borne by families who are

being relocated to—some cases we don’t know exactly how well

they’re doing. We know there are a lot of needs that aren’t being

met, and a lot of this dates back to the time that every housing

authority had a police force, every housing authority was expected

to do all the social services. They were not connected to the community, and we’re trying to change that. That’s why I said if they

become outstanding asset managers, and really, experts in what

they’re supposed to be doing, they will be better partners if we can

support the funding of the social service networks adequately in

the community. These folks are part of the community. That’s the

only way it’s going to ultimately be done.

Just one idea. I mean, the Chicago Housing Authority uses connectors. They don’t provide the services, but part of their transformation is actually—I mean you could call them coordinators.

You could call them case managers. But essentially they are trying

to connect the residents in these transformed communities, those

who are being relocated and so on, with social services. They’re not

providing the services themselves, but they are providing some resources to connect them.

Mr. TURNER. Excellent.

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I want to thank each of you for participating, not only, again, for

the written testimony that you have provided to us and the wonderful research that you have included with it, but your preparation for today and the answers of your questions today.

This is, as I stated, our beginning overview of the issue of public

housing. I hope that each of you will be available to us as we look

to becoming more focused on specific topics, and will be free to contact us as you have ideas of things that you think that we should

be looking at. This is a broad topic, but one that your research and

insight proves is certainly important to us from our community

standpoint and from the lives of the people that live in public housing.

With that, I will close the hearing, and thank you so much for

attending.

[Whereupon, at 4:33 p.m., the subcommittee was adjourned.]

[The prepared statement of Hon. Charles W. Dent and additional

information submitted for the hearing record follow:]

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