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THE ADMINISTRATION’S PROPOSAL 

TO PRESERVE AND TRANSFORM 

PUBLIC AND ASSISTED HOUSING: 

THE TRANSFORMING RENTAL 

ASSISTANCE INITIATIVE 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MAY 25, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–140 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

May 25, 2010 ..................................................................................................... 1 

Appendix: 

May 25, 2010 ..................................................................................................... 45 

WITNESSES 

TUESDAY, MAY 25, 2010 

Donovan, Hon. Shaun, Secretary, U.S. Department of Housing and Urban 

Development ......................................................................................................... 2 

Gleason, Thomas, Executive Director, MassHousing, on behalf of the National 

Council of State Housing Agencies (NCSHA) .................................................... 21 

Graziano, Paul T., Executive Director and Housing Commissioner, Housing 

Authority of Baltimore City, on behalf of the Council of Large Public 

Housing Authorities (CLPHA) ............................................................................ 23 

Martens, Betsey, Senior Vice President, National Association of Housing and 

Redevelopment Officials (NAHRO) ..................................................................... 26 

Montanez, Judy, Board Member, National Alliance of HUD Tenants (NAHT) . 28 

Preston-Koenig, Terri, President, National Leased Housing Association ........... 24 

Reyes, Damaris, Executive Director, Good Old Lower East Side, on behalf 

of National People’s Action .................................................................................. 29 

Rhea, John B., Chairman, New York City Housing Authority (NYCHA) ........... 31 

Taylor, Mark, Executive Director, Charleston-Kanawha Housing Authority, 

Charleston, West Virginia ................................................................................... 34 

APPENDIX 

Prepared statements: 

Donovan, Hon. Shaun ...................................................................................... 46 

Gleason, Thomas .............................................................................................. 69 

Graziano, Paul T. .............................................................................................. 77 

Martens, Betsey ................................................................................................ 90 

Montanez, Judy ................................................................................................ 111 

Preston-Koenig, Terri ....................................................................................... 124 

Reyes, Damaris ................................................................................................. 134 

Rhea, John B. .................................................................................................... 140 

Taylor, Mark ..................................................................................................... 146 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: 

Letter to Secretary Donovan from the Housing Justice Network, dated 

May 3, 2010 ................................................................................................... 154 

Letter from 19 urban academics scholars in opposition to the legislation .. 172 

Written statement of Chicago housing and human rights organizations 

in opposition to the legislation ..................................................................... 178 

Responses of the New York City Housing Authority to questions posed 

by the Financial Services Committee .......................................................... 182 

Written statement of Los Angeles housing and human rights organizations in opposition to the legislation ........................................................... 186 

‘‘HUD Is Trying to Privatize and Mortgage Off All of America’s Public 

Housing,’’ by George Lakoff ......................................................................... 190 

Written statement of the Massachusetts Union of Public Housing Tenants ................................................................................................................ 192 

Page

IV 

Frank, Hon. Barney—Continued 

Written statement of New Orleans housing and human rights organizations in opposition to the legislation ........................................................... 196 

Written statement of the National Low Income Housing Coalition ............. 200 

Written statement of John Derek Norvell, Concerned Citizens of Greater 

Harlem ........................................................................................................... 206 

Written statement of Erik Crawford, President, Davidson/Site 166 Resident Association, Inc. .................................................................................... 209 

Written statement of the Public Housing Authorities Directors Association ................................................................................................................. 210 

Written statement of Rod Solomon ................................................................. 220 

Written statement of the Right to the City Alliance ..................................... 223 

Written statement from various fair housing advocates ............................... 229 

Marchant, Hon. Kenny: 

Letter to Chairman Frank from various housing groups .............................. 231 

Letter to Secretary Donovan from various housing groups .......................... 233 

(1) 

THE ADMINISTRATION’S PROPOSAL 

TO PRESERVE AND TRANSFORM 

PUBLIC AND ASSISTED HOUSING: 

THE TRANSFORMING RENTAL 

ASSISTANCE INITIATIVE 

Tuesday, May 25, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10 a.m., in room 2128, 

Rayburn House Office Building, Hon. Barney Frank [chairman of 

the committee] presiding. 

Members present: Representatives Frank, Waters, Velazquez, 

Watt, Moore of Kansas, Clay, McCarthy of New York, Baca, Scott, 

Green, Cleaver, Donnelly, Carson, Driehaus, Kosmas, Himes, 

Peters; Capito, Hensarling, Neugebauer, Marchant, Jenkins, Paulsen, and Lance. 

The CHAIRMAN. The hearing will come to order. 

Our witness today, a regular witness and a very welcome one, is 

the Secretary of HUD, who is doing a very good job. We are talking 

now about a very important subject, which is public housing. Let 

me say when you deal with public housing, you are dealing with 

some of the poorest people in America. And as I look at the record 

on public policy, one where we have the most to apologize for and, 

more importantly, the greatest need to improve, is in the way in 

which we treat the poorest people in America. 

We have done far too much to push lower-income people into 

homeownership for which they were not prepared or financially 

able and not nearly enough to provide decent living quarters for 

them. There are a large number of children in this country who are 

living in inadequate housing that is run by the Federal Government and in some cases by States as well. 

To me there is no greater priority for this committee, so I welcome the Secretary, and we will get right to his testimony. If there 

are no further requests for statements, we will begin the testimony 

with the Secretary. If the ranking member wants 5 minutes at the 

appropriate time, we will interrupt the proceeding. After the Secretary has concluded his testimony, in addition to the 5 minutes for 

questions, I will certainly recognize any one member on the Minority who wants to make a 5-minute statement. 

On the other hand, I don’t have subpoena power. If they want 

to stay away, I can live with that. The Secretary will proceed. 

2 

STATEMENT OF THE HONORABLE SHAUN DONOVAN, SECRETARY, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Secretary DONOVAN. Thank you, Mr. Chairman, and members of 

the committee. I want to thank you for giving me the opportunity 

to testify on the Administration’s proposed legislation to preserve 

rental housing for generations to come. I believe the single most 

important thing we do at HUD is to provide rental assistance to 

America’s most vulnerable families. And I know that you, Mr. 

Chairman, and so many members of this committee share that 

view and have worked tirelessly to ensure that we meet that commitment. 

The current housing has underscored the broad impact HUD has 

on people’s lives. In all, HUD provides deep rental assistance to 

more than 41⁄2 million households, helping families and also giving 

communities the tools they need to tackle their development challenges. As anyone who has ever worked on housing preservation 

knows, the engine that drives capital investment at the scale needed in a mixed-finance environment is a reliable, long-term, marketbased stream of Federal rental assistance. No other mechanism or 

no other source of government funding has ever proved as powerful 

in unlocking a broad range of public and private resources to meet 

the capital requirements of affordable housing that serves those 

with the greatest housing needs. 

HUD’s rental assistance programs are absolutely irreplaceable, 

but it does not take a housing expert to see that they are also in 

desperate need of simplification and that the status quo is no 

longer an option. 

HUD currently administers 13 different rental assistance programs, each with its own rules, managed by three operating divisions with separate field staff. This proliferation of programs and 

delivery systems doesn’t make housing more accessible but less, because families have to fill out dozens of applications, processed by 

scores of administrators, simply to have a decent chance of receiving assistance. At the same time, our public housing program alone 

has a backlog of unmet capital needs estimated at $20 billion to 

$30 billion. And in the last 15 years, the absence of a viable preservation strategy has led to the loss of 150,000 units through demolition or sale. 

But as great as capital needs are they don’t compare to the depth 

of human need. Countless public housing residents remain in 

neighborhoods of concentrated poverty because moving means giving up their subsidy. To the Obama Administration, failing to preserve these resources for the next generations is simply unacceptable. But it is just as clear that we need to do a better job for those 

generations, and that the Federal Government can’t do it alone. 

So at this moment, we face a choice. We can approach these challenges piecemeal or we can try to solve the problem in a comprehensive way. In so doing, we can not only put these programs 

on firmer ground, but can put an end to the parallel system that 

exists today in which most families live in housing that is financed, 

developed, and managed through mechanisms that can be integrated with the communities around them, while the 21⁄2 million 

poor families served by HUD’s oldest programs live in another. 

3 

That is why we have proposed the Preservation Enhancement 

and Transformation of Rental Assistance Act, Mr. Chairman. This 

legislation not only reflects our best thinking at HUD but, perhaps 

more importantly, our best listening, incorporating the lessons we 

have learned from Congress and other stakeholders about what it 

takes to build strong neighborhoods and help families make the 

housing choices they need. This legislation would authorize public 

and assisted housing owners to convert to long-term, propertybased rental assistance under Section 8 on a voluntary basis. 

For the sake of brevity, I will focus on three fundamental principles that guide this legislation: First, that the complexity of our 

programs is part of the problem. We have seen how smaller legacy 

programs like Section 8 mod rehab, contracts administered by 

PHAs, and properties assisted under the rent supplement or rental 

assistance programs have become orphans at HUD as new housing 

programs have evolved. Along with our Fiscal Year 2011 budget 

proposal, this will allow us to merge these programs with our core 

Section 8 program, creating new opportunities for long-term, property-based projects to preserve these units. And by creating a more 

coherent set of tenant organization and procedural rights and nondiscrimination of fair housing requirements, this legislation will ensure that our programs are fairer, easier for families to access, less 

costly to operate, and more efficiently administered. 

Second, this bill would change the funding structure of public 

housing to leverage public and private capital and open public 

housing to retail, schools, and other community anchors. I want to 

be completely clear, this bill will not privatize public housing. Neither President Obama nor I have any interest in risking such an 

important resource or opening the door for others to do so. To the 

contrary, this proposal doesn’t change who owns this housing or 

who is served by it, but rather how this housing is financed. By allowing public housing properties to tap their inherent value to 

meet their capital needs like owners of other affordable housing are 

able to do, this legislation levels the playing field, making it more 

likely, not less, that properties will remain publicly owned and affordable to the lowest-income households. And by maintaining the 

targeting and affordability requirements of the U.S. Housing Act, 

the legislation ensures this assistance continues to be targeted to 

the neediest families. 

To make sure that leveraging its value does not put this housing 

in jeopardy, we also have included strong protections in this bill 

that ensure long-term affordability and quality. This unprecedented combination of policies will protect tenants and prevent the 

loss of assisted housing units in the unlikely event of foreclosure. 

The third principle of this legislation is to encourage resident 

choice. President Obama and I believe that residents should be 

able to choose where they live without fear of losing their rental 

assistance. This isn’t a new idea. In the last decade, Federal policies like the project-based voucher program have overcome the old 

division between place-based and people-based assistance by allowing an owner the security and capital leveraging of a long-term, 

property-based contract while assuring that residents can choose to 

move with available tenant-based vouchers. So new project-based 

developments already use this tool. Our legislation ensures that 

4 

families who live in properties developed under one of our older 

programs have the opportunity to benefit from a similar policy as 

well. 

And so, Mr. Chairman, I hope you can see that the goal of this 

legislation is to set up a system that meets today’s housing needs, 

preserves these resources for future generations and ensures they 

better serve those generations. And by allowing these programs to 

truly integrate this housing to bring in a mix of uses and incomes 

and link this housing to surrounding neighborhoods, I hope you can 

see that we are committed to ensuring that all families can live in 

sustainable, vibrant communities of opportunity and choice wherever they live or whatever their circumstances. That is what this 

legislation is about, that is what this Administration is committed 

to, and that is what we look forward to realizing with you in the 

weeks to come. 

Thank you. 

[The prepared statement of Secretary Donovan can be found on 

page 46 of the appendix.] 

The CHAIRMAN. I will now recognize for a 5-minute opening 

statement the ranking member, the gentlewoman from West Virginia. Then we will go to questions. 

Mrs. CAPITO. Thank you, Mr. Chairman. Thank you, Mr. Secretary. Just briefly, I won’t give my entire opening statement, but 

I would like to thank you again for joining us, Secretary Donovan, 

and I will just make a few comments. 

Certainly, knowing that making government programs in all of 

the different rental assistance programs in HUD more efficient is 

a great goal. But at this time, as we know, in this fiscal year, the 

President’s budget provides for $350 million in funding for phase 

one, just phase one of this program. And at a time when our Nation is facing record deficits, providing this level of funding to fundamentally change Federal programs might not be the best plan, 

especially when project-based assistance has been a more costly 

way to go in many instances. 

Further, we have had a back-and-forth discussion in this committee on one-for-one replacement. This legislation calls for one-forone replacement, meaning that local authorities must replace the 

existing units with the same number of new units regardless of 

need. In areas that have abundant affordable housing units, this 

may not be the most efficient or appropriate use of our government 

resources, and that is a debate I am certain we will have as we 

move forward. 

As I said, I do support the Secretary’s goal of making rental assistance programs more efficient. I do have some concerns that the 

proposal could make the market a bit more confusing. The absence 

of mandatory compliance could lead to a situation where some programs are replaced while others still exist, and how does this lead 

to streamlining if we have some areas that are complying and some 

that are not? 

And lastly, my favorite part of the day, of this morning, not to 

disparage the Secretary, is I have a friend who will be testifying 

on the second panel. I look forward to hearing from my friend 

Mark Taylor from the Charleston-Kanawha Housing Authority. 

Mark has been an excellent resource for me as we continue to disVerDate Nov 24 2008 14:02 Oct 08, 2010 Jkt 058050 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\58050.TXT TERRIE
5 

cuss ways to make our housing programs more efficient. He is a 

tireless advocate for those seeking affordable housing in Kanawha 

County. I am pleased he is able to join us today, and I look forward 

to hearing his thoughts. 

I want to thank the chairman again for allowing me to give my 

statement, and I want to thank the Secretary for joining us today. 

The CHAIRMAN. And I appreciate the gentlewoman doing it very 

directly. Mr. Secretary, you have addressed some of the concerns, 

and that is what we are going to be dealing with. 

I guess I would separate out two questions. Going to a projectbased Section 8 is one thing. The ability to finance and put ownership at risk is another. You say in your opening statement that 

ownership won’t change, but it might if there is a financing and a 

foreclosure. How necessary is that? Is there some way to try to get 

financing without that? And if you have a foreclosure, would you 

then have a—you could have use restrictions, but you then have a 

private entity, it is almost like contract prisons. Is there then a private entity standing in the shoes of government, and what are the 

constitutional and other implications of that? 

So that is what concerns me, is the—you anticipate under this, 

you could wind up with a foreclosure and a private ownership of 

public housing. Are they then required to maintain this public 

housing in perpetuity? Does a tenant or anyone else have the same 

constitutional rights vis-a-vis that owner in the municipalities? For 

instance, in many municipalities, public housing is a big part of the 

population. Does that diminish the right of the elected officials who 

have previously appointed them or in some cases they are elected? 

Would you address that? What is the status of a potential private 

owner of public housing? 

Secretary DONOVAN. Just to be clear, broadly on this subject, this 

is intended to level the playing field. 

The CHAIRMAN. Mr. Secretary, we only have 5 minutes. I understand that, but that is not my question. You will accept the fact 

that there may be foreclosures, and I need to know what happens 

in that case. 

Secretary DONOVAN. Specifically, every other kind of housing 

today can access not only private— 

The CHAIRMAN. Mr. Secretary, we have had a good working relationship. Don’t jeopardize it by not answering the question. That is 

not what I asked you. You had a chance to talk about that. What 

happens with a privately-owned—public housing is now publicly 

owned. What happens, what is the status of a private owner who 

takes it over? 

Secretary DONOVAN. There is a required, for any public housing 

building, there is a required 30-year minimum term with a use 

agreement initially with renewals of any property-based contract at 

the unilateral discretion of HUD. And so there is no way for an opt 

out to happen on those properties. 

The CHAIRMAN. What is the status—stop, please. What is the 

legal position you have now with a private owner of what had been 

public housing, what is the constitutional relationship with the 

city, what are all those implications? 

Secretary DONOVAN. I am sorry. I am trying to answer the question. 

6 

The CHAIRMAN. No, you are not. Please answer the question. 

Secretary DONOVAN. The use agreement survives foreclosure. 

The CHAIRMAN. Stop, please. I didn’t ask about the opt out. People have—if you are living in a place owned by a government entity, you have one set of rules. Then, a private entity takes over. 

What does that do to your constitutional rights, to the relationships 

with the city? The mayor can’t fire you anymore. That is a very important set of questions. 

Secretary DONOVAN. And I thought you were asking about in 

foreclosure the risk of that happening. 

The CHAIRMAN. Yes. Because then it becomes a private owner. 

Secretary DONOVAN. And so all of those current requirements 

about the public ownership continue. And the fact that there is private financing does not change that ownership in any way. 

The CHAIRMAN. Doesn’t foreclosure transfer the ownership from 

the public entity to the private entity? 

Secretary DONOVAN. The foreclosure, first of all, all of the requirements of affordability continue and— 

The CHAIRMAN. I didn’t ask you that, and you know it. 

Secretary DONOVAN. And the transfer, any transfer of the property would be subject to the ability of HUD to have a right of first 

refusal on that transfer. 

The CHAIRMAN. That is not the question. The question is, if in 

fact there is a private owner, what is the legal status of that private owner vis-a-vis the tenants, the rest of the city, etc.? That is 

pretty clear-cut. 

Secretary DONOVAN. In terms of if there is a private owner of 

that housing, it would still operate under all of the requirements 

both for affordability, the housing authority itself would continue 

to be subject to all of the same appointment of commissioners, 

other current requirements of public ownership of that land. 

So again, if I am missing the question, if you want to clarify it? 

The CHAIRMAN. My time has expired. The gentlewoman from 

West Virginia. 

Mrs. CAPITO. Thank you, Mr. Secretary. Certainly one of the 

questions, and we were discussing this earlier today, is the cost, 

the $350 million of the phase one. I mentioned that in my opening 

remarks. And the proposal proposes to convert rental assistance to 

a project-based voucher system which has traditionally been more 

expensive. 

So I wonder, can you address that issue, the added expense of 

project-based vouchers? But also, it seems to me that any time you 

hear ‘‘streamline,’’ there should be a cost savings. And there is 

$290 million of the $350 million which is used to convert. If you 

could address the cost issues with this and the project-based voucher assistance being more expensive and how that is going to play 

into this? 

Secretary DONOVAN. There are three specific things I would say 

about that. First of all, the operating costs will increase, but there 

will be an offsetting savings on the need for capital investment in 

the properties at the same time. And so because the operating will 

be used to leverage additional capital to help to renovate the properties, there will not be the same need going forward for direct capital infusions in the property through appropriations. 

7 

Mrs. CAPITO. So, is there a decrease in the capital appropriations 

asked at HUD? 

Secretary DONOVAN. We are proposing a decrease in the capital 

appropriations in the budget this year. It is not fully offsetting, but 

it is a—there will be— 

Mrs. CAPITO. What is that, do you recall? 

Secretary DONOVAN. Excuse me? 

Mrs. CAPITO. What is the number of the capital offset? 

Secretary DONOVAN. The reduction that we are proposing this year is $300 million, I believe. We are just checking on that right 

now. 

Second of all, going forward there would be savings in terms of 

soft costs. Because of the complexity of the programs, the need for 

costs and operating them, as well as any transactions to bring in 

new capital into the property would be offset as well. Those are not 

incorporated into the budget for 2011. We are working on estimates 

of what those savings would be going forward. I would be happy 

to share those with you, but there are offsetting savings there as 

well. 

And then the last thing I would say is there are substantial costs 

that we are incurring today because public housing is failing in the 

long term. An ounce of prevention today can avoid substantial longterm costs going forward. We already have a $20- to $30 billion 

backlog, and I believe strongly that if we don’t act now to preserve 

this resource, the costs in the long term of failing to preserve public 

housing will be far larger. 

Mrs. CAPITO. Let me ask a question. I was reading through Mr. 

Taylor’s remarks, and accepting myself for not understanding every 

detail of what he was saying is that they are already committed 

to a capital reinvestment on their projects for 40 years, I think, for 

the next 40 years, is that correct—20 years. 

What consideration in this program would go for one of the housing authorities which has already made the commitment to improve their properties, and done a very nice job. What kind of considerations and how would that influence what we are seeing here 

in this bill to the ongoing programs of the housing authorities? 

Secretary DONOVAN. Certainly, if there is investment that is already slated for those properties, they are in good condition, that 

I think would be a benefit in terms of what would be offered by 

this legislation. It would give housing authorities that are in good 

condition more flexibility going forward in terms of the sources that 

they could bring to bear, but also would allow them because of the 

operating contracts more flexibility to use funding for services, to 

benefit their residents, to incorporate, for example, to bring in retail, to bring in other uses into their properties that could benefit 

the residents and better integrate them with the neighborhood and 

help them be sustainable for the long term. 

So it is not just about the capital that is going into renovations, 

it is also about bringing in other uses, mixing incomes, a range of 

other things that could benefit those properties in the long term. 

So I think there would be opportunities for those housing authorities that are in good condition currently to be able to improve 

the properties in the very long term. 

Mrs. CAPITO. I see my time is about up. Thank you. 

8 

Secretary DONOVAN. Thank you. 

The CHAIRMAN. The gentlewoman from California. 

Ms. WATERS. Thank you very much, Mr. Chairman. Thank you, 

Mr. Secretary, for being here today. I am going to try and continue 

some of the discussion that was raised by the chairman in relationship to foreclosed properties. And I am going to go through this exercise because I think it is important for us to engage you on these 

very, very important issues. But I am starting out with a negative 

feeling about TRA. 

Page 11 of your draft discusses properties in foreclosure or bankruptcy. It is my understanding that your proposal will provide that 

in the event of a foreclosure or bankruptcy, a use restriction would 

remain on the property. Okay, use restriction meaning that this 

property has to be utilized in the same manner. However, you have 

language on page 12, lines 1 through 5, stating that the Secretary 

can modify this requirement if the units are not physically viable, 

financially sustainable or if necessary to generate sufficient lender 

participation. The section goes on to require the Secretary to transfer the contract for assistance to other properties if he makes such 

a finding. 

And I have a few questions about this. First, why would a property not be physically viable? Isn’t it the point of TRA to allow 

housing authorities to assess the private market so they could rehabilitate their properties? 

Second, by financially unsustainable, I assume that you mean 

that the debt on the property exceeds the net operating income 

needed to make the property run in the black. How would a property get to be in this position in the first place? Also, if the property is in foreclosure, isn’t it by definition financially 

unsustainable? If the housing authority was unable to service the 

debt because let’s assume the risks were insufficient, wouldn’t the 

investor have the same problem? 

Third, it seems that you want to be able to waive the use restriction entirely if you find that it presents an impediment to lenders 

making loans to housing authorities. Knowing that you could waive 

the use restriction, it seems to me that lenders would make 

waiving the restriction a condition of their participation. I think 

this provision essentially renders the use restriction meaningless. 

Can you explain under what conditions you would grant such 

waivers? 

And fourth, if the use restriction is waived, what happens to the 

tenants of that property? Do they have to move or do they receive 

enhanced vouchers? When a contract is transferred, what kind of 

property is it transferred to? Is it transferred to a property across 

town, next door, in the suburbs, on and on and on? 

I know that I threw a lot of questions at you, but there are hundreds more about this TRA. Do you want to take a stab at some 

of those, Mr. Secretary? 

Secretary DONOVAN. I would be happy to do that. First of all, we 

currently have—any new affordable housing that is developed is 

developed in this way. So we have long experience in how to protect properties in foreclosure from losing that housing. TRA would 

actually enhance our ability to do that in a number of ways. First 

of all, there would be a required use agreement that would survive 

9 

the foreclosure, as you said. In addition to that, however, we also 

would have a right of first refusal in order to ensure that if the current housing authority, the owner, is not able to keep up that property, if we don’t believe they have the capacity to do that, that we 

could direct the property to a different public owner or to an owner 

that we are sure is going to be able to preserve it. So that is a very 

important tool to be able to ensure that the property is preserved 

in the long term. 

The specific provision that you asked about, about transferring 

assistance, the truth is that we do have properties that are currently under severe distress that we will not be able to preserve 

even today. We have already, as I said in my testimony, lost about 

150,000 units of public housing because of the inability to preserve 

them. 

Ms. WATERS. Mr. Secretary, my time is just about up, and I will 

talk with you some more about this, but I just want you to know 

that I consider this experiment to be very dangerous. And as I have 

said over and over again, I am not about to be a part of privatizing 

public housing. I think that there are a lot of problems with this 

experiment, and I would like you to just really think about some 

of the questions that you are going to hear today. And if you are 

still interested in pursuing it, map out a time over the next 2 years 

where you can meet with residents, you can talk with advocates, 

you can have more hearings, you can flush all of this out rather 

than try to move with something this tremendous, this big. 

Thank you. I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Texas. 

Mr. MARCHANT. Mr. Secretary, I would like to follow up a little 

bit on the chairman’s previous question. If the lender even for foreclosure is bound by a previous set of circumstances and has a very 

limited amount of discretion what the lender can do with the property once the foreclosure takes place, doesn’t that significantly reduce the number of potential buyers for the property, and doesn’t 

it potentially restrict the pool, the borrowing, to where the lenders 

with the prospect of not having the freedom once they get the property back to dispose of it in the way they normally would, won’t 

that limit the borrowers, or am I misunderstanding? 

Secretary DONOVAN. I think it is very important that we are 

clear with any lenders or any other investors in the property. There 

would be tax credit equity that would come into these properties. 

We have long experience now with affordable housing, and lenders 

do as well, with those types of restrictions. So to be very clear, I 

think it is, there is a large market for lending on these properties 

that is developed already. And lenders are, well understand the restrictions as they go into these deals, and there are a pool of buyers 

that would be available, but they will be required to preserve this 

housing as affordable going forward should we get to that foreclosure situation. 

So would it restrict the buyer somewhat? Yes, but that is a restriction that we believe is important to ensure that the property 

continues as affordable housing. And there is a broad market for 

lending for these types of properties already that could be tapped 

given those restrictions. 

10 

Mr. MARCHANT. Well, in most of the syndicated programs that I 

have seen, most of the tax benefits are stripped out of the units in 

the early years, and the tax credits are separated away from the 

unit, and then usually there are investors that take the benefits of 

those tax credits so that when you get into the mid to later stages 

of the finance and the repayment and you get the property back, 

would you then propose that when it was resold by the lender that 

you would—tax credits would be reconstituted? 

Secretary DONOVAN. There are a number of ways to handle a situation like that where it is late in the compliance period. Typically, 

States are requiring at least 30 years, but typically much longer, 

use restrictions already. And so we see those situations come up 

where those properties can be recapitalized. Sometimes new tax 

credits may be necessary for the next generation of repairs to the 

property, but in many cases, other types of financing debt or other 

forms of assistance, whether it be home or CDBG funding from 

HUD or other sources, are available. So that is one option that you 

describe, but it is not the only option available. And again, this is 

something that we see happening with all new affordable housing 

that is developed through the low-income housing tax credit already. 

Mr. MARCHANT. And my second question: If this program is mandatory and you have a significant number of people who choose not 

to convert, you will then be required to continue to operate two separate programs. And so whatever consolidation savings you 

thought you were going to get, are you going to really be able to 

realize them with having to operate now instead of one program, 

another program. 

Secretary DONOVAN. We believe that there will be significant 

savings even from the first year in terms of—I talked earlier about 

many of our orphan programs that are quite small programs today 

that don’t have any option for preservation today. We believe there 

will be very strong participation even on a voluntary basis that will 

allow us to streamline a number of the programs very quickly. In 

the longer run, we believe that we need to demonstrate the effectiveness of this conversion process we are proposing a first year, 

and that we should come back to Congress to discuss whether other 

properties in future years would be required to convert rather than 

making a decision today on that. But in the long run, we believe 

there is a potential if we get this right to bring all the programs 

together and achieve the full benefits of that consolidation. We believe there will be the benefits in the early years, but the full benefits would come in later years with further legislation from Congress. 

Mr. MARCHANT. Thank you. 

The CHAIRMAN. The gentlewoman from New York. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Mr. Secretary, this 

TRA is quite an ambitious proposal, and if adopted it will transform the way housing assistance is provided in the United States. 

As proposed, it gives you flexibility to include additional rental programs. Can you explain to us what will be the process for adding 

those, and are you planning to include additional housing programs 

like HOPWA if this is an open-ended flexibility? 

11 

Secretary DONOVAN. Our initial focus will be on public housing, 

but also on assisted housing that is funded through rent supplement and the rental assistance program and the Section 8 moderate rehabilitation. 

The other piece I would mention is that there are about 40,000 

units of assisted housing that are owned by public housing agencies 

that now operate under different rules. 

Ms. VELAZQUEZ. So it will give that authority, that is what I 

wanted to know. 

Secretary DONOVAN. We do not propose whether it is HOPWA or 

any of the other programs currently. 

Ms. VELAZQUEZ. I know. But it says here, and this is the legislative language, other Federal affordable housing programs as identified by the Secretary by notice. 

Secretary DONOVAN. We do believe that if this is successful, we 

will see interest from housing authorities in converting some of 

their other programs. HOPWA is not at this point one of those programs that we are interested in. 

Ms. VELAZQUEZ. As you know, hundreds of thousands of New 

Yorkers are on the waiting list for public housing in Section 8, and 

in your testimony you suggest that in certain cases, waiting lists 

may be affected as a result of TRA. In what instances would that 

take place? 

Secretary DONOVAN. I am sorry, Congresswoman, just to be very 

clear, HOPWA actually is not one of those programs that each legislatively would be allowed under the current legislation. So it is 

not included in one of those programs. We could give you more detail on which programs would be possible, but HOPWA is not one 

of them. 

Ms. VELAZQUEZ. I am just reading your language. It says here, 

‘‘other Federal affordable housing programs as identified by the 

Secretary by notice.’’ So it is open-ended and could include HOPLA 

if you deem. 

Secretary DONOVAN. I think the place that the language would 

modify in the statute does not include HOPWA, and so it is a limited number of programs. We could get you specifics of which exactly would be allowed by that. 

Ms. VELAZQUEZ. Okay. So in what instances would that take 

place? Your testimony suggests that in certain cases, waiting lists 

may be affected. 

Secretary DONOVAN. Yes. Currently, there is the ability for 

project-based voucher recipients to move to the front of the line for 

waiting lists. 

Ms. VELAZQUEZ. Okay. So my next question is—you answered my 

question—how is HUD balancing the needs of applicants currently 

on waiting lists with tenants who may be newly eligible under TRA 

for Section 8 assistance? Would that happen at the expense of people in the waiting list, Section 8? 

Secretary DONOVAN. That is a very good question. We have had 

a lot of comments and input about this from stakeholders that we 

have met with. What we would do in order to ensure fairness for 

those on the waiting list is have a minimum 2-year residency within the development before you could get access to a voucher, and 

a requirement that no more than one-third of vouchers that are 

12 

freed up would have to go to residents who want to exercise that 

mobility right. So that we believe would institute a fair process to 

ensure those on the waiting list already would have access to 

vouchers. 

Ms. VELAZQUEZ. One out of three, right? 

Secretary DONOVAN. One out of three. We believe that the current limitation that for a resident of public housing the only way 

that they can continue to receive assistance is to remain in their 

unit, that if they want to move to take a job or because their family 

is moving or if a relative is sick they have no ability to keep their 

assistance. So we do believe that this is an important benefit to 

residents of public housing and other forms of assisted housing for 

them. 

Ms. VELAZQUEZ. But it will be at the expense of those who have 

been for so long on a waiting list for Section 8. 

Secretary DONOVAN. I believe we balance that. I would also say 

that it would free up units within public housing. The unit that 

they were leaving would continue to be project-based and would be 

open then to somebody off the waiting list there. So there continues 

to be housing opportunities available for those on waiting lists. 

Ms. VELAZQUEZ. Thank you. 

The CHAIRMAN. The gentleman from North Carolina. 

Mr. WATT. Thank you, Mr. Chairman. Mr. Secretary, thank you 

for being here. 

I don’t want to belabor the point that the Chair and several other 

members have made, but I do have some concerns about your ability to bind folks after there is a foreclosure or a bankruptcy. And 

I also have a concern about the flexibility that would be given to 

the Secretary to waive the requirements. 

I am reading the summary of the bill and it says, this clause provides that the terms of new rental assistance contracts or use 

agreements remain in effect in the event of foreclosure or bankruptcy. That is fine. But the Secretary would be authorized to modify this requirement if the units were not viable or ‘‘if necessary to 

generate sufficient lender participation.’’ 

So you have two concerns that are raised here. One is the legal 

situation that is created and your ability to bind somebody, both 

a lender who is making a loan and a purchaser who is buying in 

at a foreclosure, which is questionable. But the other side of that 

is the amount of discretion that is given to Secretaries of HUD to 

waive those requirements under certain circumstances. I want to 

say publicly that I have eminently good confidence in you in this 

Administration making those decisions, but I tell you I wouldn’t 

have had a hill of beans worth of confidence in the last Secretary 

of HUD in the last Administration making those same decisions. So 

I think that would be a real concern to me. 

Second, but I am not going to beat that horse anymore, several 

people have elaborated on that. A concern that I have expressed 

about this proposal and about the choice proposal is, and I have 

had this discussion in my office with several people from your Department, actually, it is a great way to generate more capital to be 

more entrepreneurial, but I am not sure that you all appreciate the 

variation in the entrepreneurial ability of housing authorities 

around the country out there. 

13 

There is a great deal of variation of entrepreneurial expertise in 

these housing authorities, and I see it in the variation in the housing authorities in my own congressional district. Some of them are 

very business savvy, others are very good at administering public 

housing and keeping it up and collecting the rent and, you know, 

doing what HUD requires them to do, but I don’t see any level of 

entrepreneurial expertise out there. 

So this variation that takes place, unless you are going to put in 

place some kind of very strong support system, which coincidentally hadn’t necessarily been in place from HUD administration to 

HUD administration either, there is not the confidence, again—I 

don’t want to beat the last Administration’s HUD Secretary to 

death, he is a good friend of mine personally, but we never could 

get any answers out of him for this committee when we would ask 

him anything, and I am not sure I would want him to be putting 

in place the support mechanisms for housing authorities that vary. 

So if you could comment on that quickly, my time is about to run 

out, and I have taken too much of it asking the question. 

Secretary DONOVAN. Three specific things I would say: First of 

all, that for those housing authorities, particularly smaller housing 

authorities, we already impose on them what I would say are too 

complex and burdensome rules and requirements for their operation. We frankly treat them kind of one-size-fits-all like they were 

larger housing authorities. And one of the things that moving to 

TRA would allow us to do, I believe, is simplify the requirements 

for particularly those smaller housing authorities or housing authorities with less capacity that would actually make it easier for 

them to operate rather than harder, first. 

Second, we see with property-based contracts many, many small 

nonprofits or other small for-profits that are able to work successfully with us under the kind of proposal that we are putting forward. And I believe, I would be happy to spend more time with you 

to give you some of the specifics about the way those benefits 

would flow to them, that we could effectively operate with them 

with the support that they would need. 

The third thing I would say is we have had a lot of discussion 

with FHA about the ability to offer debt for those properties where 

there might be some initial difficulties in figuring out how to access 

capital along with other forms of technical assistance. 

So I do believe, through FHA and through other forms of technical assistance, we could help those housing authorities. 

The CHAIRMAN. The gentleman from Kansas. 

Mr. MOORE OF KANSAS. Thank you, Mr. Chairman. Mr. Secretary, I held an Oversight Subcommittee hearing a few weeks ago 

on the issue of debt and leverage and how we need to reverse our 

overdependence on both. If there is one thing I hope we have 

learned from the recent financial crisis, it is that we need to get 

back to living within our means like our parents and grandparents 

did and learned to do after the Great Depression. Part of that lesson I think must include the understanding that not everyone can 

be a homeowner. And that is okay as long as there is affordable 

housing available. 

14 

In that spirit, how would this transforming rental assistance initially meet the objective to affordable housing options for individuals and families who are not homeowners? 

Secretary DONOVAN. This would do that by ensuring that these 

precious resources, public housing and other affordable housing 

that we provide, is preserved for the next generation who can’t be 

homeowners. The fact that we have a $20 billion to $30 billion 

backlog of unmet capital needs in this housing, that this, particularly public housing today, has no ability to access low-income 

housing tax credits or other sources of capital that every other form 

of affordable housing in the country has ability to access. I believe 

that if we stay on the path that we are on, the status quo, we will 

continue to lose critical rental resources year after year because we 

don’t have the capital available to them to be able to keep that 

housing up. 

So I think this is a very important step in preserving that rental 

housing for those who can’t become homeowners. 

Mr. MOORE OF KANSAS. Thank you. Does the Administration’s 

proposal include oversight enhancements or fraud mitigation provisions to ensure that taxpayer dollars are used efficiently and properly? If so, would you describe those? And if not, could they be 

added to the proposal to ensure we fully expose and minimize 

waste, fraud, and abuse? 

Secretary DONOVAN. We do have provisions to ensure strong 

oversight of the properties. If there are others that you would be 

interested in discussing with us, I would be happy to talk about 

them. 

What I would say is it does give us, the legislation, the ability 

to pursue civil money penalties that are enhanced for violations of 

provisions under the contracts or the requirements of the use 

agreements. 

Mr. MOORE OF KANSAS. And has HUD performed any cost-benefit 

analysis on this proposal to see if taxpayer dollars will be used 

more effectively compared to current programs? And if not, would 

your Department be able to do a cost-benefit analysis and provide 

that in writing to members of this committee? 

Secretary DONOVAN. We would be happy to do that. We have 

begun that analysis. We have looked obviously at the 2011 costs 

and benefits of it. But we are analyzing the longer-term cost and 

benefits today. I would be happy to provide that to the committee. 

Mr. MOORE OF KANSAS. Thank you very much. Mr. Chairman, I 

yield back my time. 

The CHAIRMAN. The gentleman from Missouri. 

Mr. CLAY. Thank you, Mr. Chairman. And thank you, Mr. Secretary, especially for your visit yesterday to my hometown, St. 

Louis, Missouri, and your tour of the Northside Regeneration 

Project. Hopefully, we can establish a strong working relationship 

to see that project through. 

Let me start off by asking you, can you give us examples of the 

use of the $4 billion in ARRA funding that went to capital improvements of public housing units. Can you point out what that money 

was used for by those local housing authorities and do you think 

it was an effective use of the funds? 

15 

Secretary DONOVAN. I do believe that the ARRA funds have been 

very effective, that they have gotten out quickly. And to date, we 

already have about 180,000 units of public housing that have completed renovations thanks to the ARRA funds. A lot of that is longstanding work, basic work of replacing roofs, providing better, 

whether it is plumbing fixtures or kitchens or other basic amenities 

in those apartments. They have also been used very effectively, and 

St. Louis is a good example, to introduce energy efficiency into public housing. Solar is a particular focus that the St. Louis Housing 

Authority is pursuing with their competitive funds from ARRA. 

And what is important about those is that they both improve the 

living conditions for residents, they lower the costs for residents, 

but they also lower the cost to the taxpayer. Typically, those investments are paying back the initial investment in 3 to 5 years. 

Mr. CLAY. And I guess certain units get to the point where you 

have to make a decision of whether we demolish those units or we 

try to make improvements to it. How do you see that? 

Secretary DONOVAN. This is the fundamental challenge that we are trying to address with this bill, is despite being able to get $4 

billion of desperately needed capital in the Recovery Act, there continues to be $20 billion to $30 billion of capital needs in public 

housing alone. And given the current fiscal challenges that we 

have, I just don’t think there is a way that we are going to get to 

that full capital need through direct appropriations. And so what 

we are trying to do with this bill is to ensure that we make those 

investments today so that we can avoid at the point that the roof 

actually caves in and the property can no longer be saved or that 

it can only be saved at a far higher cost, much better to prevent 

that from happening today with investments in keeping up those 

properties than to have to suffer the loss of housing and the much 

higher cost of saving those properties down the line. We believe the 

time to invest in these properties is now, and that is really what 

TRA is trying to achieve. 

Mr. CLAY. In an ideal world, how do you envision streamlining 

some of HUD’s housing programs? 

Secretary DONOVAN. Well, first of all, we don’t see a need to have 

so many of them. We have 13 deep rental assistance programs 

today. Many of them really operate like orphans. They are earlier 

programs that are no longer actively used for new housing, but 

whether it is the alphabet soup of rent supp and RAP and mod 

rehab, all of those programs today continue and we have a very 

hard time preserving those properties for future generations. By 

being able to simplify our programs, bring those into our Section 

8 umbrella we could both preserve them, continue to have good 

housing going forward, while at the same time not having so many 

different rules and regulations for the different housing that we operate, and making it simpler for tenants to be able to understand 

the rules, not have to fill out as many different applications with 

different rules that they currently have to do in order to get access 

to decent housing. 

Mr. CLAY. It sounds like something we need to modernize, public 

housing and assistance in this country. 

Mr. Chairman, I yield back. Thank you. 

The CHAIRMAN. The gentlewoman from New York. 

16 

Mrs. MCCARTHY OF NEW YORK. Thank you, Mr. Chairman, and 

thank you, Mr. Secretary. Listening to the questions and answers, 

I guess I will follow through with that, because I still think there 

is a little bit of concern on the consolidation. My concern on two 

fronts would be on how we are going to work with the—how do you 

envision a consolidation taking place that doesn’t interrupt the current services to the various sectors of people who serve, for example, the disabled and the elderly? And just out of curiosity, between 

the public housing and the private housing of Section 8, and you 

might not have this answer at this time, and I will take it down 

the road, but on safety issues for the residents, I can speak for 

some in the public housing and the private housing on Long Island, 

safety issues are a big concern. People are afraid to go out of their 

apartments in the evening time, and that is in the suburban area. 

Certainly reading the papers and looking at some of the things that 

happen in public housing, how do we make the public housing safer 

for those residents who are in there? 

Secretary DONOVAN. I think you ask a really important question, 

particularly about the elderly and the disabled, because we have almost 11⁄2 million households who are either elderly or disabled or 

both living in units that would be covered by TRA. And one of the 

fundamental barriers to making them safe for the residents that 

you are talking about, whether it is accessibility and being able to 

continue to live in those units with the kind of features that are 

necessary, as well as just overall safety in terms of protection for 

the residents, whether it is installing security measures or having 

funding for resident programs and other things that enhance safety, all of that is hurt by the lack of capital to be able to keep these 

properties up. And so that $20 billion to $30 billion capital gap that 

I talked about is a fundamental barrier to making public housing 

more safe and accessible to elderly and disabled families. What we 

are proposing is a way to be able to bring that capital, $25 billion 

in total is our estimate, that we could access to be able to improve 

public housing for access to those residents and their safety. 

Mrs. MCCARTHY OF NEW YORK. Because one of the concerns I 

have is that being into some public housing, especially for the elderly and the disabled, what some people would consider that it 

has been fitted for a disabled person or an elderly person. I hope 

that you have better architects out there. A handrail here and a 

handrail there doesn’t cut it. We are talking about whether it is a 

sit-in shower, whether it is an open tub, I know those things are 

expensive but those are the qualities of life to give, so that we can 

keep them out of nursing homes, to be very honest with you. It 

comes down to a point that if they can’t take care of themselves 

or with an aide, they are going to end up in a nursing home and 

it is going to cost a lot more money. And of course down the road 

I guess we are going to see some disagreement on allowing guns 

into public housing, something I will try to fight, and hopefully I 

can work with you on language that we can work with together so 

those undesirables in public housing don’t have guns to threaten 

other residents who are actually just trying to have a peaceful life. 

Secretary DONOVAN. I would just recommend to you, I saw a remarkable example in your colleague’s district yesterday of a universally designed, fully accessible development there with a mix of inVerDate Nov 24 2008 14:02 Oct 08, 2010 Jkt 058050 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\58050.TXT TERRIE
17 

comes, disabled, nondisabled, and really a remarkable example, I 

think, of the work that can be done to make housing more accessible. 

Mrs. MCCARTHY OF NEW YORK. Thank you. 

The CHAIRMAN. The gentleman from California. 

Mr. BACA. Thank you very much, Mr. Chairman. And thank you 

very much, Mr. Secretary, for being here. Reading your statement, 

and I just want to quote on what you stated here, on page 2, you 

said HUD currently administers 13 different rental programs, each 

with its own rules, managed by three operative divisions with separate field staff. 

What do you propose in streamlining this process in making it 

more effective in providing assistance? 

Secretary DONOVAN. Our initial proposal under the 2011 budget 

and the legislation—supported by the legislation that we proposed 

would focus on four of those programs primarily: public housing; 

the rental assistance program; the rent supplement program; and 

Section 8 mod rehabilitation. Those are particularly smaller programs that don’t have preservation options that we believe need to 

be given those options and could be consolidated into Section 8. 

Public housing is the other main focus. And there the biggest 

issue really is the access to capital that I have talked about earlier. 

In terms of the streamlining that would exist, what it would allow 

us to do is just, for example, not have different rules in terms of 

incomes for those who could be admitted to the property the way 

that those calculations are done, different rules if you want to be 

able to refinance those properties. 

Mr. BACA. They would all be separate rules? Because, right now, 

you are complaining and saying that everyone operates on their 

own and are managed by a different set of rules. These would be 

the same set of rules that would be applied to these— 

Secretary DONOVAN. Exactly. The goal will be to harmonize and 

standardize those rules on income and a range of other criteria. 

Mr. BACA. In doing so, I am also very concerned that as you 

move in that direction, that diversity will also be there in terms of 

the hiring of individuals who would implement these kinds of programs, and hopefully you will take that into consideration as well. 

Secretary DONOVAN. Absolutely. And, in fact, the legislation 

specifies that what we call Section 3—those are the requirements 

for hiring residents both of public housing and the local communities—would continue for housing authorities moving forward 

under the legislation. 

Mr. BACA. Thank you. 

Then, on page 3, you said, given the size of the Federal deficit 

and the challenge we inherited, it is clear that the Federal Government alone will not be able to provide funds needed to bring properties up-to-date and preserve them for the next generation. How 

do we achieve this? And how do we become more cost-effective in 

providing public housing? 

Secretary DONOVAN. The major barrier for public housing today 

is that, unlike every other kind of affordable housing, they are unable, except with extreme efforts that are very, very difficult, to access low-income housing tax credits, loans from any other source; 

and so the fundamental way that we would be able to preserve parVerDate Nov 24 2008 14:02 Oct 08, 2010 Jkt 058050 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\58050.TXT TERRIE
18 

ticularly public housing through this proposal is to open up the 

ability to get access to funding and other support both from other 

public-sector sources and private-sector sources. 

But the other thing that I think is critical that I don’t want to 

lose focus on as well, today, it is almost impossible for the typical 

public housing development to bring in retail development or bring 

in other types of uses and services because of the way it is financed 

and structured in terms of the ownership of the land. And so providing more flexibility to bring in those other uses we believe is an 

equally important part of the long-term preservation. It will allow 

public housing to be integrated with the communities around it 

with other types of uses, rather than just the single use of residential that has been effectively required of public housing in the past. 

Mr. BACA. Would that help in reference to what was said earlier 

with the Section 8? There are many people on the waiting list, but 

it takes almost 2 years. And the problem is is that people are without jobs, without housing, and yet need to get into affordable housing. Yet there is a waiting list, you know, that is there that could 

go up to 2 years. Would this expedite that process? What would be 

done to reduce that? Because people are in need right now to get 

into this housing. 

Secretary DONOVAN. One of the reasons that we have more people on the waiting list than we would like is that we have many 

public housing apartments that don’t have funding to be renovated 

and made available for rental. We have lost about 150,000 units of 

public housing over the last decade or so through abandonment— 

The CHAIRMAN. The gentleman’s time has expired. 

Secretary DONOVAN. —because there hasn’t been the capital 

available to keep them in good condition, and this TRA would allow 

us to access that capital. 

The CHAIRMAN. The gentleman from Georgia. 

Mr. SCOTT. Thank you, Mr. Chairman. Welcome, Secretary Donovan. 

Secretary Donovan, one of the most heartbreaking situations 

that our homeowners are facing now is the fact that since we have 

been in this real depression, we have lost about $9 trillion in home 

values. I wanted to, first of all, before I get into these questions on 

the rental assistance, what are your thoughts about that? How are 

we dealing with this? What is available to the homeowner who may 

be watching this hearing as to what they can do to restore the values of their homes? What is the Administration doing to address 

this terrible issue of the loss of home values to the tune of $9 trillion? What are we doing to recapture that? 

Secretary DONOVAN. There is no single answer to what we can 

do. What it has required over the last year is a broad range of efforts that go to stabilizing the economy and the job picture more 

broadly. Obviously, the Recovery Act was critical to that. And then 

more specifically, keeping interest rates low, encouraging refinancing, modifying the mortgages of over 1.2 million families to 

date across the country and providing more financing options particularly for underwater borrowers. FHA has been a very effective 

tool for doing that, and we are expanding this summer even further 

the options for underwater borrowers to refinance. 

19 

All of that has led to the housing market stabilizing and beginning to turn around. Since April of last year, we have actually 

added $1 trillion in equity for homeowners in this country. You 

compare that to the $9 trillion that you talked about, 30 straight 

months of declines in housing values when we came into office. We 

are not out of the woods, by any means. We still have a ways to 

go, but we have been able to stabilize that and begin to help homeowners build equity again, a total of $1 trillion, according to the 

Federal Reserve. 

Mr. SCOTT. But does a homeowner have anything at his disposal? 

He gets in the mail this form that says that his home has lost this 

much in value, and they want to maybe appeal that. Is there anything moving where they have some access to address that and appeal that amount? 

Secretary DONOVAN. The most direct way that we can help underwater homeowners is through refinancing of those properties 

and getting a write-down of their existing loan to a level that is 

sustainable. That is what our FHA program is intended to do. 

What I would suggest to homeowners is that they reach out to 

a HUD-approved housing counselor in their community. You can 

find that on our HUD Web site. We have counselors available in 

every community, and they can help with the specific needs of a 

homeowner to help connect them to options. 

Mr. SCOTT. In Georgia, I represent counties like Clayton County 

and Cobb County and Douglas County all around Atlanta. We have 

had one of the highest foreclosure rates in abandoned homes. What 

is the relationship that HUD has to the Neighborhood Stabilization 

Act? And how would you rate that in terms of impacting on the 

issue of continuing to raise that value, and how successful has that 

been? 

Secretary DONOVAN. We believe the Neighborhood Stabilization 

Program has been very successful. To date, about 17,000 homes 

have been completed, and we believe with the $6 billion that has 

been allocated in total that we should reach a total of about 80,000 

homes. In fact, I was in the Philadelphia neighborhood in your area 

near your district just on Friday and witnessed an entire street 

that has been stabilized thanks to the investments of neighborhood 

stabilization. 

We believe that, actually, we ought to invest more money in 

neighborhood stabilization. We announced last week Administration support for doing that. 

Mr. SCOTT. Before the chairman brings his hammer down, this 

question on the TRA, in units converted on the TRA, residents 

would have the right to move out of their homes and maintain 

rental assistance with a housing choice voucher. How many people 

in the converted units are expected to use their mobility rights 

under this initiative? 

Secretary DONOVAN. Currently, what we see is that about 11 percent of residents move out each year; and with the 300,000 units 

that we propose for TRA in the first year we believe that we could 

certainly balance vouchers through turnover, natural turnover in 

the voucher program for those folks who want to move out without 

disadvantaging those who are in the waiting list or having any risk 

to those properties that are in the program. 

20 

Mr. SCOTT. Thank you, Mr. Secretary. 

The CHAIRMAN. I can’t resist noting that the Neighborhood Stabilization Program was written here with the gentlewoman from 

California in the lead and was the product of this committee under 

her leadership, and we appreciate the seriousness with which it 

has been taken. 

The gentleman from Indiana. 

Mr. CARSON. Thank you, Mr. Chairman. 

Mr. Secretary, as you are aware, our most vulnerable families 

are facing an unprecedented crisis today. TRA will give low-income 

families greater flexibility to rent housing in a wide range of neighborhoods. I am interested in understanding how HUD will determine which voucher holders are ready to move into better neighborhoods. I also want to ensure that this plan will not conflict with 

the overall goal of improving existing rental housing. 

And, secondly, generally speaking, I would like to also understand, sir, what HUD is doing to ensure rental units meet minimum standards of health and safety. 

Secretary DONOVAN. So, first of all, what I would say is I think 

the most important thing that TRA would achieve is to ensure that 

we do preserve existing housing for future generations. Quite simply, a capital backlog of $20 billion to $30 billion will not allow 

these properties to serve future generations. We are at risk of losing tens of thousands more units of public housing if we don’t act 

quickly to try to bring resources to the table to preserve that housing. So that is really the primary goal of TRA, is the preservation 

of public housing and other assisted housing. So I think that is key. 

Second of all, what I would say is we do believe that with the 

feature of choice that we are proposing to add that it is a critical 

thing and an important statement to say low-income people should 

have opportunities to move without the risk and the fear of losing 

their rental assistance. And today, we provide that in project-based 

vouchers, but we don’t provide it in the large majority of our programs. 

But we do recognize that it isn’t just enough to say there is a 

voucher. TRA, we are actually proposing to provide some of the 

first-year funding towards counseling and other forms of assistance 

that would help families using vouchers to access neighborhoods of 

opportunity. Those have been shown to be successful in many 

places around the country, and we want to support that kind of assistance to ensure that families have a real choice, not just a theoretical choice about where they live. 

Mr. CARSON. Thank you, Mr. Secretary. 

Madam Chairwoman, I yield back my time. 

Ms. WATERS. [presiding] Mr. Donnelly. 

Mr. DONNELLY. No questions, Madam Chairwoman. 

Ms. WATERS. If there are no more questions, the Chair notes that 

some members may have additional questions for the Secretary 

which they may submit in writing. Without objection, the hearing 

record will remain open for 30 days for members to submit written 

questions to the Secretary and to place his responses in the record. 

We would like to thank you, Mr. Secretary, for being here today. 

Your testimony has been very, very helpful to us. 

21 

We have over 1,000 petitions that have been signed by individuals concerned about TRA. Without objection, I would like to submit them for the record. 

[The petitions referenced above are contained in committee files.] 

Ms. WATERS. And, with that, we will call on our second panel. 

Thank you. 

I am pleased to welcome our distinguished second panel. 

Our first witness will be Mr. Thomas Gleason, executive director, 

MassHousing, on behalf of the National Council of State Housing 

Agencies. Our second witness will be Mr. Paul T. Graziano, executive director and housing commissioner, Housing Authority of Baltimore City, on behalf of the Council of Large Public Housing Authorities. Our third witness will be Ms. Terri Preston-Koenig, president, National Leased Housing Association. Our fourth witness will 

be Ms. Betsey Martens, senior vice president, National Association 

of Housing and Redevelopment Officials. Our fifth witness will be 

Ms. Judy Montanez, board member, National Alliance of HUD Tenants. Our sixth witness will be Ms. Damaris Reyes, executive director, Good Old Lower East Side, on behalf of National People’s Action. Our seventh witness will be Mr. John Rhea, chairman, New 

York City Housing Authority. And our final witness will be Mr. 

Mark Taylor, executive director, Charleston-Kanawha Housing Authority, Charleston, West Virginia. 

Without objection, your written statements will be made a part 

of the record. 

I will now begin with our first witness to be recognized for 5 minutes, Mr. Gleason. Thank you very much. 

STATEMENT OF THOMAS GLEASON, EXECUTIVE DIRECTOR, 

MASSHOUSING, ON BEHALF OF THE NATIONAL COUNCIL OF 

STATE HOUSING AGENCIES (NCSHA) 

Mr. GLEASON. Thank you, Madam Chairwoman, and committee 

members, for the opportunity to testify on HUD’s Transforming 

Rental Assistance Initiative. 

My name is Tom Gleason, and I am the executive director of 

MassHousing. 

Ms. WATERS. I am sorry. You cannot be heard up here. Is your 

microphone on? 

Mr. GLEASON. Technology eludes me, Madam Chairwoman. 

I am testifying today on behalf of the National Council of State 

Housing Agencies. NCSHA supports HUD key goals for the TRA 

initiative: preservation; simplification; and mobility. 

While we are still analyzing this proposal, we want to raise five 

preliminary concerns for the committee: 

First, we believe that the property recapitalization demands that 

the TRA initiative will place on the housing credit and other Federal housing resources have not been adequately assessed. These 

programs are already oversubscribed in many States, and the TRA 

initiative will only cause further strain on these limited resources. 

We ask that you work with the leadership of the Ways and Means 

Committee to ensure that additional credit is provided to States to 

meet this increased demand. Otherwise, States will have to make 

difficult choices, choices between preserving TRA developments, 

22 

producing new rental housing, or preserving existing privately financed, affordable housing developments. 

Second, we are pleased that the latest TRA proposal provides for 

project-based Section 8 for most of the developments that undergo 

conversion. Years of experience have shown us that project-based 

Section 8 is the best tool available for ensuring long-term affordability and attracting private capital. We believe that HUD’s proposal provides the Secretary with the discretion allowed for converted TRA developments to utilize market rents and, in some 

cases, budget-based rents that exceed market rents, where necessary, to support appropriate rehabilitation and higher operating 

costs. 

This rent-setting flexibility is critical to ensure successful TRA 

conversions in high-cost but low-rent areas. In fact, we believe the 

chairman’s preservation bill is a better vehicle to accomplish this 

for several existing project-based rental assistance programs. It will 

provide not only more options but increased certainty in how particular projects will be financed. 

Third, NCSHA strongly supports mobility as a means for creating opportunity for residents to improve the quality of their lives. 

However, it must be achieved without reducing the resources available to help other families. It is troubling that residents of converted TRA developments will be able to have a priority over many 

needy, unassisted individuals and families who have been waiting 

for voucher assistance for years. We believe that this cannot be 

treated as a zero-sum game. In order to accommodate the TRA mobility feature without impacting on existing waiting lists, additional rental vouchers are needed. Furthermore, tenant mobility 

will have the unintended consequence of creating higher vacancies 

at these developments, leading to lower operating income, which 

will, in turn, reduce the amount of debt that can be leveraged in 

the future for property rehabilitation. 

Fourth, NCSHA is pleased that HUD’s TRA proposal relies exclusively on voluntary participation by PHAs and private owners. We 

urge the committee not to make participation mandatory. We also 

urge the committee to limit HUD’s authority to expand the TRA 

program to additional programs too quickly. We recommend that 

the committee fully review the outcomes of the TRA initiative before allowing HUD to extend the program simply by notice. One 

way to do this would be by authorizing this effort as a PILOT program only. 

Fifth, and finally, HUD needs to define the kinds of entities it 

will seek to administer rental assistance contracts on TRA properties and to elaborate on the scope of their expected activities. 

Many HFAs would be interested in expanding their responsibilities 

to include TRA properties. This would be especially true for those 

like MassHousing that have successfully participated for more than 

a decade in HUD Section 8 project-based contract Administration 

program. 

However, we are concerned that the opportunity for HUD to take 

advantage of HFA experience and capacity may be lost if HUD 

stays on its current course toward rebidding PBCA contracts without recognizing the unique strengths that HFAs bring to their role 

as contract administrator. 

23 

Thank you, Madam Chairwoman, and members of the committee, 

for the opportunity to testify; and please let me know if NCSHA 

can provide any further information to help you. 

[The prepared statement of Mr. Gleason can be found on page 69 

of the appendix.] 

Ms. WATERS. Thank you very much. 

Mr. Graziano. 

STATEMENT OF PAUL T. GRAZIANO, EXECUTIVE DIRECTOR 

AND HOUSING COMMISSIONER, HOUSING AUTHORITY OF 

BALTIMORE CITY, ON BEHALF OF THE COUNCIL OF LARGE 

PUBLIC HOUSING AUTHORITIES (CLPHA) 

Mr. GRAZIANO. Thank you, Madam Chairwoman, and members of 

the committee. My name is Paul Graziano. I am the executive director of the Housing Authority of Baltimore City, housing commissioner for the City of Baltimore, and a board member of the Council of Large Public Housing Authorities. I am pleased to be here 

representing CLPHA for today’s hearing on the PETRA legislation. 

CLPHA has been actively engaged in discussions with public 

housing stakeholders to develop a preservation strategy through reform of the funding and regulatory system. Such reform was a primary focus of the Summit on the Future of Public Housing convened by CLPHA in 2008 and the policy framework produced by 

the Summit participants. 

The criteria for preservation is straightforward. As the Summit 

Framework called for, we seek a long-term funding structure that 

addresses reasonable operating costs, adequate replacement reserves, and recapitalizes the portfolio by converting public housing 

to more adequate, reliable, and flexible subsidy models. 

We commend Secretary Donovan for his vision and commitment 

to preserve and expand affordable housing. To hear the Secretary 

say that public housing is an irreplaceable public asset that must 

be preserved represents a turning point in this most important 

public policy debate. We are dedicated to the mission to serve the 

needs of low-income people. We do not want to put the properties 

or the people we serve at risk. 

There are many competing demands in determining how to reform and transform affordable housing programs, including HUD’s 

own internal administrative streamlining objectives and other social policy mandates. But, for us, the most immediate and compelling objective is the preservation and improvement of public housing stock. We are very concerned that this urgent goal may be lost 

in the maelstrom of transformation for the Department and other 

housing programs. 

PETRA creates an overly complex approach to preservation, with 

a complicated financial and rent-setting framework, sweeping and 

untested social policy mandates, and burdensome administrative 

and regulatory requirements, some of which undermine the very 

goal of preservation. More to the point, we favor a slimmed-down 

bill that focuses on preservation, not on transforming HUD. 

In general, the bill tries to do too much, too soon, with too few 

resources. Rental assistance conversion should be the core focus 

purpose and entirety of the bill. 

24 

Our concerns with the authority to convert are centered around 

the options and opportunities for PHAs to use more reliable subsidy models to leverage private capital and, in particular, the restrictions on the use of project-based vouchers as a viable conversion option. Project-based vouchers have significant market acceptance as an effective redevelopment tool for PHAs and their private 

partners. Converting public housing to the PBV program is simply 

a way to address the capital backlog once and for all over the next 

several years, thereby establishing a more sustainable and administratively efficient program for the future. 

We are particularly heartened by the financial leveraging tools 

embodied in other proposed legislation which would pledge the full 

faith and credit of the United States in the public housing loan 

guarantee and also authorizes housing tax credit exchange for rehabilitation of qualified public housing units. These tools are integral and critical elements to ensure the success of public housing 

preservation strategy. 

At the core of the effective preservation strategy, there must be 

a rent-setting policy that ensures long-term sustainability of the 

housing. HUD estimates 300,000 units can be preserved through 

PETRA. We have done a study at CLPHA, and we believe that the 

$290 million will actually preserve approximately 60,000 to 65,000 

units, funding at an average level of approximately $80,000 per 

unit in rehab. 

Furthermore, according to our estimates, about 58 percent of the 

national portfolio would be able to raise sufficient debt using FMRs 

to preserve the properties and cash flow. The remaining 42 percent 

of the properties would need exceptions above the FMR to cover 

this cost. 

I have attached to our written testimony a couple of appendices. 

Appendix B, which I will just refer to very briefly, shows a range 

of developments in the City of Baltimore, and you will see that the 

rents vary by neighborhood. And so that is a real issue. The level 

of rehab is the same, but comparable rents are lower, so we need 

to address that issue. With respect to resident choice and mobility, 

we are very concerned about the impact here on our waiting list 

and whether it is an equitable decision. 

In closing, I would just like to say that we think the program 

needs to focus on those core principles of public housing preservation. We applaud HUD and we thank the committee for the opportunity to speak today. 

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

77 of the appendix.] 

Ms. WATERS. Thank you. 

Our next witness will be Ms. Terri Preston-Koenig. 

STATEMENT OF TERRI PRESTON-KOENIG, PRESIDENT, 

NATIONAL LEASED HOUSING ASSOCIATION 

Ms. PRESTON-KOENIG. Thank you. 

My name is Terri Preston-Koenig, and I am the director of community development and affordable housing services for Baker 

Tilly Virchow Krause, a consulting services firm. I am here representing the National Leased Housing Association as the incoming 

president. I am very happy to be able to present testimony today. 

25 

Madam Chairwoman and members of the committee, thank you 

for the opportunity to testify on the Administration’s proposal to 

radically overhaul our assisted housing programs. This is far-reaching and complex legislation. It can impact the viability and preservation of 2.6 million units in HUD-assisted projects, affect the tenant-based voucher program that assists 2.2 million poor households, and adversely impact millions of poor persons who may be 

in dire circumstances because they do not have affordable housing 

and are seeking to obtain Federal housing assistance that is, indeed, in limited supply. 

We have the utmost respect for Secretary Donovan, but we believe the transformation initiative to be ill-conceived and unrealistic. HUD seeks to justify its sweeping proposal by asserting that 

it has too many separate rental housing programs. It designates 13 

within its own rules and that these should be consolidated into 

fewer programs. Among the 13 programs that HUD has actually 

identified that should be eliminated include programs such as 

Housing Opportunities for People With AIDS, Shelter Plus Care for 

homeless persons, Section 202 assistance for elderly persons, and 

Section 811 assistance for disabled persons. These programs serve 

people with distinctive needs. We are unsure what consolidation 

will do for the nonprofit sponsors or, more importantly, for those 

people that they serve. 

Also included in this list of 13 is a Section 8 project-based program. This program assists families in about 1.4 million units. This 

program is an extremely valuable long-term resource for providing 

affordable rents for poor families and is functioning well. 

It is beyond our understanding why HUD would propose to convert any established program into a new program with new rules. 

HUD says, don’t worry, conversion to the program would be voluntary. No owner would be required to convert. But if some owners 

convert and others do not, how can streamlining occur if two programs replace one? 

Any perceived streamlining could only be achieved if HUD does 

induce conversion. Indeed, Secretary Donovan noted in his testimony that full benefits could only be achieved if all programs converted. 

If this proposal is enacted, it could immediately destabilize the 

preservation of the Section 8 project-based inventory. The reason 

lenders and investors put their funds into preservation in Section 

8 projects is based because they have confidence in the predictability and stability of the Section 8 project-based rules. Why 

should a lender make a long-term loan on good terms to a property 

with a current project-based Section 8 HAP contract when there is 

a chance that this project could be converted to another program 

with more restricted rents and more undesirable rules? And why 

should a Section 8 owner renew its contract if HUD makes it disadvantageous to remain under the Section 8 program, even if the 

owner chooses not to convert? 

We urge the committee to reduce the scope of this proposal to 

areas of recognized need where some good might be accomplished. 

This program aimed at preserving public housing could actually 

provide an additional tool. We believe that instead of promoting a 

large-scale transformation, we should look at requesting a program 

26 

to preserve public housing. This would aid programs such as public 

housing to look towards residents, investors, and communities and 

develop a workable framework that might support preservation. 

When you look at rent sup and RAP conversions, this is an area 

where rental subsidy contracts could actually be helped. However, 

there is no need to create a new program to preserve these units. 

We have attached language which could accomplish the objective. 

The same holds true for the Section 8 mod rehab program. A 

pending provision in the preservation bill before this committee 

could provide adequate solutions to the preservation of the 27,000 

units that are outstanding on the moderate rehabilitation programs. 

Finally, regarding mobility, this is simply not great policy. Resident choice doesn’t mean that residents can wait their turn for a 

voucher. This means that they can jump to the top of the voucher 

waiting list. It is inequitable and unsound housing policy to extend 

the time a poor person must wait on this list, for example, from 

2 to 3 years, or roughly 50 percent longer. Thank you. 

[The prepared statement of Ms. Preston-Koenig can be found on 

page 124 of the appendix.] 

Ms. WATERS. Thank you. 

Our next witness will be Ms. Betsey Martens. 

STATEMENT OF BETSEY MARTENS, SENIOR VICE PRESIDENT, 

NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS (NAHRO) 

Ms. MARTENS. Chairwoman Waters, and members of the committee, good morning. My name is Betsey Martens, and I am the 

executive director of Boulder Housing Partners, the housing authority serving the City of Boulder, Colorado. I am here today in 

my capacity as the senior vice president of the National Association 

of Housing and Redevelopment Officials. On behalf of NAHRO’s 

more than 23,000 agency and individual members, I thank the 

committee and the Administration for engaging NAHRO in this important dialogue. 

The fundamental premise of TRA is strong. It recognizes what 

NAHRO and others have suggested as the future of public housing. 

Nevertheless, NAHRO has serious concerns regarding the PETRA 

discussion draft. 

As my colleague from CLPHA underscored, the preservation of 

public housing’s physical assets should be the first and overriding 

priority of any conversion proposal. Conversion should be entirely 

voluntary and based on existing programs. To that end, NAHRO’s 

conversion proposal relies upon Section 8 project-based rental assistance program. 

Beyond conversion options, PHAs must also have continued access to a fully funded public housing program supported by robust 

implementation of the Section 30 programs and featuring a streamlined regulatory environment, particularly for small public housing 

agencies. On this last point, NAHRO is proudly working side-byside with the Public Housing Authorities Directors Association to 

advance a small PHA reform proposal designed to free small agencies and residents from burdensome regulatory requirements. 

27 

Turning to PETRA, instead of emphasizing preservation over 

other priorities, the proposal includes several collateral policy initiatives that would likely inhibit the financial repositioning of public housing. The preservation of converted public housing developments depends upon adequate stable funding in combination with 

a rational approach to setting rents. The Administration has not 

made the case regarding PETRA’s ability to provide a sustainable 

funding environment. 

Because it creates the potential for rents to be adjusted, including decreases, at any time and because HUD has the unilateral 

power to force contract extensions, PETRA includes too many disincentives for participation by owners and lenders. Although mobility is desirable and important, PETRA’s resident choice option will 

significantly distort housing choice voucher waiting lists and complicate preservation efforts. This feature risks transforming converted developments into way stations for households seeking tenant-based vouchers. 

PETRA also allows for the extension of its mobility feature to the 

entire federally-assisted inventory, private and public, converted 

and unconverted. This overreach could ultimately lead to reductions within the affordable housing inventory. 

While the consolidation of voucher programs in consortia would 

not be required under PETRA, regional configurations could still be 

given a priority by HUD in evaluating applications. Regionalization 

could become a de facto requirement for participation, a troubling 

outcome that we should avoid. 

PETRA leaves too many questions unanswered, making it impossible to evaluate the adequacy of the Administration’s Fiscal Year 

2011 budget request for TRA. Of primary concern to NAHRO is the 

lack of information on financing. NAHRO is concerned that HUD’s 

leveraging assumptions may be too optimistic and that the proposed amount for year one incremental funding may prove insufficient. 

Given the concerns NAHRO and others have raised, including 

my colleagues on this panel, we would suggest that our conversion 

proposal represents a more prudent way forward. Under NAHRO’s 

proposal, PHAs would have the option to voluntarily convert public 

housing to the existing PBRA program, with oversight transferred 

to HUD’s Office of Housing. Given the Office of Housing’s less administratively burdensome regulatory environment and lenders’ familiarity with the existing PBRA program, conversion under 

NAHRO’s proposal would provide for a sustainable operating environment and a proven approach to leveraging assets to meet capital needs. 

Keeping in mind fiscal constraints and an eye on the legislative 

calendar, NAHRO suggests initiating the preservation of public 

housing through voluntary conversion by providing for a PILOT 

program based on our proposal. NAHRO estimates that a PILOT 

to convert 50,000 public housing units to units assisted through 

PBRA would require an appropriation of approximately $100 million for Fiscal Year 2011. NAHRO has developed legislative language to authorize such a PILOT which we would be pleased to 

share with you. It is our hope that you will support this approach 

and communicate that support. 

28 

Thank you for providing NAHRO with the opportunity to testify 

today. 

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

90 of the appendix.] 

The CHAIRMAN. Thank you, Ms. Martens. 

Next, we have Ms. Judy Montanez, who is a board member of the 

National Alliance of HUD Tenants. 

STATEMENT OF JUDY MONTANEZ, BOARD MEMBER, 

NATIONAL ALLIANCE OF HUD TENANTS (NAHT) 

Ms. MONTANEZ. Good morning, Chairman Frank, and members 

of the committee. Thank you for inviting the National Alliance of 

HUD Tenants, NAHT, to testify. 

Since 1992, NAHT has represented the 1.3 million families who 

receive project-based Section 8 in privately owned HUD multifamily housing. NAHT is the only national multifamily tenants 

union in the United States today, with membership in 25 States. 

Although PETRA will mainly target public housing in this first 

year, HUD intends to expand it to all HUD-assisted housing, starting with 30,000 privately owned apartments next year. So our 

membership is directly affected. 

NAHT supports the principles of rent simplification, tenant empowerment, and extension of grievance rights to HUD’s multifamily 

tenants and can support the mobility proposal in PETRA with increases in voucher funding. We can offer support in principle the 

consolidation of 13 disparate programs into one new funding 

stream and rental assistance program, provided this is done in the 

most cost-effective manner, as outlined in our written testimony. 

But the Administration’s bill falls short of promises to preserve 

public housing under public ownership with maximum affordability, one-to-one replacement, and guarantee repairs. Instead, the 

bill could result in a permanent privatization and loss of the Nation’s system of publicly owned housing by imposing a 30-year use 

restriction with no requirement to renew and bring in powerful investors and banks into the ownership of these buildings. 

Unless these problems are corrected, NAHT must oppose the 

PETRA proposal. In effect, HUD’s bill would bring the whole nightmare of expiring use housing into the Nation’s system of public 

housing. For 40 years, HUD’s multifamily tenants have waged 

countless struggles building by building against the rent increases, 

decline in services, substandard conditions, and expiring use restriction. 

I have lived this nightmare firsthand, as a tenant in expiring use 

housing. The Castleton Park Tenants Association in Staten Island, 

which I co-chair, had to rally 454 families to fight a predatory equity investor who planned to destroy our community for profit. 

After an accident left me unemployed and disabled, I would have 

been homeless many times over had I not lived in a subsidized 

complex. We found ourselves rallying against HUD to enforce the 

law and begging tenants for donations to pay for the fight to keep 

our homes. 

Beyond Castleton, this struggle has been a nightmare for the 

400,000 families who have lost their affordable housing because 

HUD and Congress 40 years ago tried to build low-income housing 

29 

on the more costly dealt bargain with private investors. The Nation’s investment in those affordable homes has been squandered. 

Another 200,000 more face expiring mortgages today, an issue 

which the committee is addressing through H.R. 4868. We urge 

Congress to not make the same mistake twice. Do not impose the 

same crisis and struggle of our sisters and brothers in public housing. 

Any proposal to invest in public housing should require owners 

and HUD to commit to the longest-term use restriction legally allowed. All PETRA owners should be required to accept and renew 

Section 8 subsidy contracts as long as Congress provides funds 

with no discretion to the future Secretary. 

NAHT proposes a budget-based subsidy principle like the original project-based Section 8 program which based subsidy levels on 

actual operating costs, plus capital grants or minimal debt service 

for required repairs and limited fee for owners. This will achieve 

transparency and simplification. 

PETRA should also require HUD and owners to maximize capital 

grant sources to meet these needs, including an increase in public 

housing modernization grant to preserve housing at the least longterm costs of the Federal Government. 

HUD has justified PETRA as a means to simplify 13 diverse programs and reduce complexity and confusion. But bringing complexity of multi-housing into public housing will do the opposite. 

We urge Congress to conduct an independent cost comparison of 

three funding models outlined in our written testimony to meet 

public housing repair backlogs for embarking on PETRA. With 

these changes, NAHT stands ready to work with HUD, Congress, 

and our tenant leaders for public and voucher housing to realize 

the positive aspects of PETRA to save our homes. 

Thank you. 

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

111 of the appendix.] 

The CHAIRMAN. Next, we have Ms. Damaris Reyes, who is the executive director of the Good Old Lower East Side, and she is here 

on behalf of National People’s Action. 

STATEMENT OF DAMARIS REYES, EXECUTIVE DIRECTOR, 

GOOD OLD LOWER EAST SIDE, ON BEHALF OF NATIONAL 

PEOPLE’S ACTION 

Ms. REYES. Good morning. Thank you, Chairman Frank, Congresswoman Waters, Congresswoman Velazquez, and members of 

the committee, for inviting me here today to speak about PETRA. 

My name is Damaris Reyes, and I am a public housing resident 

and the executive director of Good Old Lower East Side in New 

York City. I speak to you today on behalf of National People’s Action, a network of community organizations from across the country 

that works to unite everyday people in cities, towns, and rural communities throughout the United States, including thousands of 

public housing residents and subsidized housing residents who demand a voice in their housing and a voice in decisions that will affect them. 

The stated goal of PETRA is to streamline funding and policies 

for all social housing in America. The main advantage of the proVerDate Nov 24 2008 14:02 Oct 08, 2010 Jkt 058050 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\58050.TXT TERRIE
30 

posal, we are told, is to turn our public housing assets into leveraged properties eligible for mortgage to banks. According to HUD, 

this is necessary because of tens of billions of capital needed to 

make the needed repairs to our public housing stock. 

We are here today discussing this bill because this country has 

starved public housing of necessary resources. It is because previous Administrations, Congress, and Congresses as a whole have 

failed to act. As a country, we have turned our backs on families, 

the elderly, and the disabled who live in HUD-assisted housing. 

So now we are looking to the private market to save our public 

assets. Let us not forget that this is the same private market that 

just crashed our economy, took billions in taxpayer-funded bailouts, 

and aren’t fixing the mess they created. 

We cannot put ourselves at the mercy of the market, and it is 

imperative that if we propose solutions for filling the gap in capital 

needs, we do it right. If we go down this road, we won’t easily be 

able to go back. 

National People’s Action does not support PETRA in its current 

form. There are several areas in PETRA we feel must be changed 

and strengthened in order to for us to support this bill. 

We have to ensure that the affordable housing units we have 

now, a number that is, frankly, far below the number needed, stay 

affordable in perpetuity, that the human rights and dignity of all 

public and subsidized housing residents are enshrined into law, 

and that protections are in place to retain hard housing units and 

keep units from reverting to the private market via foreclosure or 

bankruptcy. 

It would seem that we have not learned anything from the current subsidized housing crisis. Thousands of units are currently 

bleeding out of the system as landlords, who were given subsidized 

mortgages and tax credit financing, reach the end of the contract 

term that kept the units affordable. 

As PETRA is currently written, converting units would be subject 

to a 30-year use restriction with a 20-year renewable subsidy contract. We have an opportunity now not to repeat the same mistakes 

of the past or to literally mortgage our futures. 

Permanent use restrictions must be included for any conversion 

plan for public housing. Permanent land use restrictions or land 

trust arrangements can be written into the law that would maintain the affordability and perpetuity while enabling leverage on the 

structures themselves. Maintaining hard housing units, Section 8 

tenant-based vouchers are not a replacement for hard affordable 

units of housing. 

Tenant-based vouchers can be a good option for some families as 

a way to enable mobility and choice, but they should always be in 

addition to brick-and-mortar units. In the majority of cities and 

States, it is perfectly legal for landlords to discriminate and refuse 

to rent an apartment to a family holding a voucher. 

Vouchers come with hard dollar limits. In some markets, vouchers are extremely difficult to use, for example, in the Lower East 

Side in New York City. 

In addition, this proposal should not cause families already on 

the waiting list to wait any longer. 

31 

PETRA proposed to allow landlords to voucher up to 50 percent 

of the hard units that were before conversion publicly owned and 

permanently affordable units. Under this plan, half the units could 

disappear likely forever; and once the units are gone, our experience is that they don’t come back. 

Section 5(D) of the PETRA draft is particularly disturbing. Properties that convert public housing buildings to project-based vouchers will only be allowed to retain subsidy on 40 percent of the 

units. What is the plan for the other 60 percent of the tenants who 

were, until conversion, living in stable, affordable housing? 

We need more clarity on this issue. We would never consider 

mortgaging our national monuments, our park systems, but this 

proposal seeks to mortgage our Nation’s homes. 

The current economic crisis should stand as a sharp reminder of 

what can happen when the private market is given free reign. It 

is essential that we put every possible safeguard in place to ensure 

that these assets are not forfeited to the private ownership through 

foreclosure or bankruptcy. 

In the case of bankruptcy or foreclosure, HUD is not compelled 

to buy the properties back, and there is no guarantee that even if 

HUD wanted to buy them back, the money would be available to 

do so. 

This is not enough. We must require that all mortgages taken 

out against converted properties have FHA multifamily insurance 

on the first lien. Beyond that, strictures must be put in place so 

that FHA cannot privately market these REOs. HUD must retain 

its right to own the properties or sell them only to tenants who 

have organized to purchase their homes. 

In conclusion, over the last several months, I have been part of 

a series of convenings hosted by HUD with public and subsidized 

residents from around the country. We were told, when you go to 

sleep at night, it will be public housing. When you wake up in the 

morning, it will be public housing. It seems what was meant to be 

said was that while you may go to sleep in public housing, there 

is a nightmare coming. 

We can do better, and we call on Congress to work with us to 

make this proposal one that actually can work to increase capital 

without decreasing opportunity. Thank you. 

[The prepared statement of Ms. Reyes can be found on page 134 

of the appendix.] 

The CHAIRMAN. Next is John Rhea, who is the chairman of the 

New York City Housing Authority. 

STATEMENT OF JOHN B. RHEA, CHAIRMAN, NEW YORK CITY 

HOUSING AUTHORITY (NYCHA) 

Mr. RHEA. Chairman Frank, Ranking Member Capito, Congresswoman Velazquez, and other distinguished members of the committee, I appreciate being given the opportunity to testify today. 

I am John B. Rhea, chairman of the New York City Housing Authority. NYCHA is the country’s first and largest housing authority. In May of 1935, 75 years ago, Eleanor Roosevelt opened First 

Houses; and I am proud to report that First Houses still provides 

decent, affordable public housing for 126 low-income families. 

32 

Today, NYCHA operates more than 178,000 units of public housing in 334 developments and provides assistance through Section 

8 to more than an additional 250,000 New Yorkers in cooperation 

with private landlords. If NYCHA was a city, it would rank as the 

20th largest in the United States, with more than 650,000 New 

York City residents served by NYCHA public housing and Section 

8 programs. 

Nearly half of the community that NYCHA serves is made up of 

working families. Another 42 percent receive assistance from Social 

Security Supplemental Security Income, veterans benefits, or a 

pension; and this population is growing, aging, and diversifying. 

There is a strong need for additional affordable housing stock in 

New York. We must build new housing, and we must preserve our 

existing housing. There is a waiting list in New York City for public housing that includes nearly 131,000 families; and the Section 

8 waiting list is currently closed, with an additional 128,000 families waiting for a voucher. 

So I speak today in support of HUD’s Transforming Rental Assistance initiative. I support PETRA’s goal of preserving the Nation’s public housing stock. There is a national backlog of unmet 

capital needs between $20 billion to $30 billion, an enormous obstacle to overcome that continues to grow. NYCHA alone has a backlog that is estimated as exceeding $6 

billion. Unfortunately, I do not anticipate Congress will provide 

grant outlays that would address such a large requirement. Although this is a very large amount, it translates into a little more 

than $35,000 per unit, which is a relatively modest amount, especially compared to replacement costs. 

Therefore, the best resource to address these capital needs is to 

use our assets and long-term financial assistance agreements to leverage private market funding. Only by engaging the private markets and using all of our assets will housing authorities be able to 

preserve the national investment that has been made to public 

housing. 

Transforming Rental Assistance mirrors New York City Mayor 

Michael R. Bloomberg’s new housing marketplace plan to create or 

preserve 165,000 affordable housing units by 2014. The City is well 

on its way to achieving the mayor’s target, with 100,000 units already created or preserved. 

With HUD assistance, NYCHA has converted 2,200 apartments 

from public housing to Section 8 voucher assistance and plans to 

convert up to an additional 6,200 more. We also federalized 20,000 

public housing units by leveraging Federal stimulus funding to access $400 million in public and private market funding. 

Residents will continue to pay 30 percent of their rent income 

under PETRA. The contract rent must cover reasonable operating 

costs, including a management fee, debt service on previous capital 

borrowings, the costs of newly accrued capital needs as identified 

in each agency’s 5-year capital plan, and an initial reserve for replacement. 

I am concerned that, under PETRA, HUD appears to have the 

sole authority to increase or decrease contract rent. My suggestion 

is to refer to data submitted by the local housing authorities, including independent studies of the local rental markets, and let 

33 

that data play a significant role when determining the levels of 

contract rent. 

Any private market capital financing should be insured by the 

Federal Housing Administration or should be subject to a government guarantee. 

I support Chairman Frank’s draft of the Public Housing Preservation and Rehabilitation Act that includes a full faith and credit 

guarantee. 

I also support the preservation bill’s proposed provision of grants 

in lieu of tax credits for the rehabilitation of qualifying public housing. 

I support the basic concept of one-for-one replacement. PETRA 

provides greater flexibility than we have seen in other measures on 

the same issue. 

I support the bill’s provision on allowing replacement units offsite within the neighborhood or within the metropolitan area. It is 

important that this should be done in consideration of fair housing 

standards and the need to deconcentrate poverty. There may be situations when one-for-one replacement is not appropriate. 

I support the bill’s provision on using tenant-based vouchers in 

narrow circumstances. 

I support allowing portability after 24 months of residence. 

However, I am concerned about the one out of three provision 

that would allow one-third of turnover vouchers to be held and reserved for families who may one day opt to move. This would be 

unfair to all households on the waiting list for Section 8. My suggestion is to draw portability from an annual appropriation of incremental vouchers or from the Tenant Protection Account. 

PETRA incorporates Section 3, and I support passage of Representative Velazquez’s Earnings and Living Opportunities Act to 

reform Section 3. Resident Opportunities and Self Sufficiency, 

known as ROSS, authorizes a full range of job training and employment opportunities. If we are serious about resident employment, 

it is time for ROSS to be funded separately at $1 billion, with the 

vast majority going to job training and resident employment initiatives. 

The Transforming Rental Assistance initiative is a multi-year 

program. The current public housing and Section 8 programs will 

continue for years to come. I urge Congress to provide housing authorities with the flexibility to administer their current portfolios, 

including full fungibility between their capital funding, operating 

funding, and Section 8 funding, allowing housing authorities with 

this excess cash flow to use these funds to cover debt and addresses 

capital needs. 

I have prepared formal responses to your earlier questions and 

would like to submit them for the record as well. Thank you. 

[The prepared statement of Mr. Rhea can be found on page 140 

of the appendix.] 

The CHAIRMAN. And Mr. Mark Taylor, who has already been introduced by the ranking member of the subcommittee. 

Mr. Taylor. 

34 

STATEMENT OF MARK TAYLOR, EXECUTIVE DIRECTOR, 

CHARLESTON-KANAWHA HOUSING AUTHORITY, CHARLESTON, WEST VIRGINIA 

Mr. TAYLOR. Thank you, Chairman Frank. 

Chairman Frank, Ranking Member Capito, and members of the 

committee, my name is Mark Taylor. I am the executive director 

of the Charleston-Kanawha Housing Authority located in Charleston, West Virginia. I am honored to present our views regarding 

the Administration’s TRA proposal. I want to thank my Representative, Congresswoman Shelley Moore Capito, for the invitation to 

testify on this important and ambitious proposal. 

TRA, if authorized, will have a profound impact for housing authorities like mine. I want to acknowledge the commendable effort 

made by the Department to gather comments on this proposal from 

stakeholders. There remain, however, a number of unanswered 

questions. 

Charleston-Kanawha Housing Authority is the largest assistance 

agency in West Virginia. We provide housing assistance to more 

than 4,400 families. We manage 12 public housing communities, 

serving more than 2,000 residents; and we manage over 2,900 rental assistance vouchers, serving nearly 7,000 residents. 

We are changing the face of public housing in our area by redeveloping our 3 oldest communities, all of which are more than 50 

years old. This is being done using private and public financial resources, including utilizing low-income housing tax credits, 

leveraging one-third of our capital funds, and accessing private 

loans. This effort will result in 500 public housing and projectbased units. 

We estimate our modernization needs for preserving our 9 remaining housing communities to be as much as $84 million over 

the next 20 years. With this in mind, we will need a variety of tools 

to enable us to preserve our remaining stock of affordable housing 

and produce desperately needed new units. I believe the conversion 

of public housing to a known and reliable form of assistance like 

project-based rental assistance, assuming it remains voluntary, 

moves us in the right direction. 

At my housing authority, the conversion to project-based assistance would likely succeed for smaller developments 50 to 100 units 

which are less than 30 years old and have more modern design features. Securing modest financing for modernization upgrades would 

be relatively simple. Larger 100-plus unit developments that are 

more than 40 years old without outdated designs would not be viable for conversion without either major redevelopment or modernization funding as provided through the capital fund. 

We have been very fortunate in the timing of resources available to us to redevelop our aging developments, including $4 million in 

NST funds and $6 million in TCAP funds. 

While I only have limited information regarding the proposed 

aging program, I am concerned about the acceptance of the marketplace, especially to the lending community, given the number of 

secondary policy objectives aging would impose. The imposition of 

Section 3 requirements, community service, fair hearings upon converted developments are all examples of well-intended policy goals 

not required in the private sector, all of which will add cost. 

35 

With regard to the ‘‘Resident Choice’’ feature in the current proposal, my immediate concern is that it essentially allows clients 

who are already receiving rental assistance to jump the voucher 

waiting list and receive one out of every three vouchers that becomes available, which in our housing authority’s case would be approximately 150 vouchers annually. We currently have over 2,000 

families on the voucher waiting list, with our average wait approximately 12 to 18 months. Unfortunately, 150 fewer of these unassisted families per year would receive assistance under this proposal. 

Public housing residents in my housing authority clearly have 

choice. Approximately 25 percent of our residents choose to leave 

their units annually. In this past year, about 66 of those residents 

were provided the opportunity to receive a voucher. They also had 

the opportunity to transfer to other public housing sites. Therefore, 

public housing residents are no more constrained in their housing 

choices than any of the low-income families. 

With respect to regionalization, while the voluntary consolidation 

of housing choice voucher programs or the adoption of multi-agency 

portability agreements would not be required in the current proposal, I believe using this as grounds for qualification will lead to 

regionalization becoming a requirement for participation. 

The decision to enter into a regional agreement should be left to 

local authorities. I think PHAs, including my own, would be far 

more likely to enter into cooperative agreements if the Department 

implemented statutory language that increased flexibility through 

regulatory administrative measures. 

Mr. Chairman, I believe at this point there are far too many unanswered questions concerning TRA. For example, it is my understanding that the Department’s proposal will be phased in over the 

next several years. Assuming this remains a voluntary program, 

what can those who do not convert expect? Would the Department 

continue to request capital funding resources sufficient to address 

the ongoing modernization needs for those who do not convert? 

There also seems to be no consideration for the authorities that 

have currently obligated their capital funds for preservation efforts 

under the current Capital Fund Financing Program. Would they be 

able to access replacement housing factor funds? 

In conclusion, who would administer the set-aside poor Resident 

Choice vouchers? Where will housing authorities that do not administer housing choice vouchers that are required to exercise rent 

choice obtain exit vouchers? The revised TRA proposal presently 

does not provide details on key elements that authorities like mine 

need to know. Should you choose to advance conversion legislation 

this year, I would strongly suggest first implementing a PILOT to 

assess its merits in a variety of markets. 

Thank you for this opportunity to testify, and I am happy to answer any questions that you may have. 

[The prepared statement of Mr. Taylor can be found on page 146 

of the appendix.] 

The CHAIRMAN. Thank you. This has been very useful, and this 

is obviously a very major step. We have the Choice Neighborhoods 

bill before us, and we have already voted out of this committee the 

separate bill, the reform of vouchers. As a practical matter, I think 

36 

it is unlikely that we will also in the remaining time this year, 

given this committee has spent so much time on financial reform, 

be able to finalize any action on this, but we want to get it started. 

And I appreciate the Secretary’s fundamental impulse here, which 

is to get more money into public housing because it is a shame that 

we have done so little for the poorest people. 

But I have my fundamental question, and I will ask you all to 

think about this: I worry about a situation in which units that are 

now owned publicly are foreclosed upon and become privately 

owned. I think that raises serious issues constitutionally of the 

diminution of rights you have against a public entity versus a private entity. 

I think mayors might feel somewhat different about this. There 

are mayors who now have large numbers of public housing units 

in their city. The mayors in my experience have some influence 

over who is head of the public housing authority. These would now 

be purely privately owned. There is the question about how long it 

stays there. And part of the dilemma here is, what my colleague 

from Texas, who is sitting in the ranking member’s chair, has now 

mentioned. To the extent that you write safeguards in for the tenants, you would to some extent diminish the incentive to lend. 

So what I want to ask people to work on is this: I appreciate the 

importance of getting more money in. I certainly agree with the 

witness who suggested that we should not have to do this, but we 

do. But is there a way to access the private market that 

incentivizes loans but does not put public ownership of this asset 

at risk? I would be very reluctant to do that. The public hasn’t been 

a great trustee, but I think abandoning the whole notion that the 

public has some role here would be a mistake and is unlikely in 

the long term to work. So let me ask preliminarily, are there things 

we could do that could incentivize private lending? Going to 

project-based Section 8 is not a problem to me. The problem—and 

getting, accessing private capital is obviously an advantage. The 

concern that I have is that if the price of accessing private capital 

is to put public ownership at risk, that may be too high a price. 

Do any of the witnesses have any ideas about how we might access private capital in this way with alternative forms of security 

other than taking over a public housing authority, which I must 

say to many lenders probably wouldn’t be their first choice how to 

spend their time anyway. The notion that you get to be the housing 

authority isn’t one that is necessarily going to unlock great pools 

of capital. But does anyone have any ideas about that? 

Mr. RHEA. Chairman Frank, my view on this is the biggest risk 

to foreclosure is too much leverage on these properties. One way 

to approach this with not dealing with your immediate issue about 

not having a risk of foreclosure and the private market having 

ownership in public housing is to ensure that the underwriting 

standards in which private investors and banks would participate 

in don’t. 

The CHAIRMAN. And I agree with that. But, as you said, that 

wasn’t my question. I don’t mean to be rude but I would rather talk 

about my question. That is a dilemma. Now, again, there may be 

other ways to do this that may involve alternative guarantees. But 

I do want to be clear that is my approach. 

37 

Mr. Gleason? 

Mr. GLEASON. Mr. Chairman, I think your questions to the Secretary and your comments hit this issue right on point. I don’t 

think as they currently— 

The CHAIRMAN. Well, I am glad someone does. 

Mr. GLEASON. I don’t think there is a perfect solution as the market currently works. I think your suggestion just now about alternative guarantees is probably the only way that you can ensure 

that will take place. It would seem that those guarantees to ensure 

that there is public ownership after the fact would have to come 

from a public entity guaranteeing that. 

The CHAIRMAN. Again, my colleaguefrom Texas’ question started 

out, I am afraid of falling between two schools of writing in so 

many protections for the tenants which I support, but nobody 

wants to lend them the money, or incentivize lending the money at 

the price of not having the protection of the tenants. And that leads 

me to think of a third way. 

The gentleman from Texas. 

Mr. MARCHANT. Thank you, Mr. Chairman. I would like to ask 

unanimous consent to submit a letter signed by nine multi-family 

housing providers. 

The CHAIRMAN. Without objection, it is so ordered. I have a list 

here: Public Housing Authority’s Director, Mr. Rod Solomon; Massachusetts Public Housing Tenants; 19 urban academics; the MultiFamily Housing Institute of Los Angeles Housing and Human 

Rights; the Los Angeles Coalition on Hunger and Homeless; Chicago Housing and Human Rights; and others, a list which will be 

made public. I ask unanimous consent to insert their submissions 

in the record. Without objection, it is so ordered. And whoever gave 

me this, thoughtfully added at the end for me an instruction that 

says, to close the hearing, say this hearing is adjourned and bang 

gavel. I appreciate being so instructed, but whoever wrote that 

should say, but don’t do it too soon, stupid. And the gentleman 

from Texas is now recognized. 

Mr. MARCHANT. Mr. Taylor, you have also raised concerns about 

how lenders would respond to a new and untested program. Have 

you had any opportunity to visit with lenders about this and what 

effect it would have? 

Mr. TAYLOR. No, I have not visited with lenders at this point. In 

other transactions we have done thus far they are more familiar 

with the project-based voucher. I can tell you when we closed those 

deals, at the onset they were very interested in getting those contracts in hand that are signed that commit those funds to those 

units for the first 20 years with that renewal. I am not sure what 

their response would be to this. And my concern in Charleston is 

that it would slow our process down. We are in the middle of redeveloping these housing authorities or these housing properties, and 

I am concerned changing to this new type voucher they may kind 

of back off some. 

Mr. MARCHANT. You have expressed some concerns about the mobility in a clause in TRA. What would you suggest as an alternative to the Administration’s proposal to address the matter? 

Mr. TAYLOR. I am not really fond of the choice component. I understand it. A person with a tenant-based voucher already has the 

38 

right after a year to move and report their voucher to other States. 

That program is working. And also in a project-based unit, after a 

year, that tenant can choose to get a tenant-based voucher and relocate as well, and that seems to be working fine. 

Mr. MARCHANT. Okay. Thank you. Ms., is it ‘‘Koenig?’’ 

Ms. PRESTON-KOENIG. Yes. 

Mr. MARCHANT. You indicated and you signed a letter that says 

that your industry group characterizes the changes by the Administration as being an undefined hybrid of the project-based voucher 

system. Can you explain to the committee what you meant by that? 

Ms. PRESTON-KOENIG. Essentially, they really haven’t given a 

great deal of detail on exactly how they expect all of this to take 

place. We have the sort of framework for how they anticipate some 

of these attributes of the conversion of the program will take place, 

but they haven’t really told us all of the attributes of how they anticipate it will shape up. For instance, they really don’t explain 

where they will get forward funding from for the capital, where 

they will get other funding from, and they really don’t explain all 

of the rules and regulations they intend to modify and change 

going forward. It is not transparent. 

Mr. MARCHANT. Do you believe that it places too much discretion 

in the hands of the HUD Secretary? 

Ms. PRESTON-KOENIG. Absolutely. 

Mr. MARCHANT. And do you believe that will have a chilling effect on any syndication or any group of people who traditionally 

put together these housing deals? 

Ms. PRESTON-KOENIG. Yes, I do. 

Mr. MARCHANT. Is that your major client? 

Ms. PRESTON-KOENIG. Yes, it is. 

Mr. MARCHANT. And do your clients have any ideas about how 

this capital could be put into the public system to their satisfaction 

that would create this battle that the chairman has talked about? 

Ms. PRESTON-KOENIG. Well, right now, the system that they are 

working with, my public housing clients, they are working with the 

replacement housing factor and their capital funds and they are 

blending that with the existing programs that are available. So 

they are utilizing things like tax credits, green community funding, 

and other opportunities to do preservation and create opportunities 

that are available to them. So there are existing tools that they are 

using to preserve their stock. 

Mr. MARCHANT. Do they access the tax exempt financing credits? 

Ms. PRESTON-KOENIG. Yes, they use the tax exempt bond financing. 

Mr. MARCHANT. To the State housing? 

Ms. PRESTON-KOENIG. To the State housing finance program. 

Mr. MARCHANT. So they are using that in addition to the tax 

credits? 

Ms. PRESTON-KOENIG. Yes. They get the 4 percent tax credits 

back into the bond program, and then they balance that with the 

additional funds they have access to. 

Mr. MARCHANT. The last question would be, if you convert public 

to private, do you have any property tax issues that would raise 

the expenses on the project whereas a project now might have a tax 

exempt status and have no property tax liability, whereas if you 

39 

put it into private hands you would have an immediate, the expense would go up immediately and that would be a big burden on 

the system? 

Ms. PRESTON-KOENIG. First, I would say in many cases, public 

housing authorities pay a PILOT (payment in lieu of taxes) to their 

community so they have some tax requirements, real estate tax requirements. When you modify and include a tax credit to it, there 

are a lot of States that have some sort of element written into their 

tax code that have a modified structure, so that there is a tax component that does apply to the property itself. Most of the time public housing authority is the sponsor, so it is not technically 

privatizing because they have brought in their private entity as a 

minor member and they hold ownership and retain ownership and 

it converts to them after the 15-year compliance period. 

Mr. MARCHANT. With some of these school districts, States being 

strapped right now, I would suggest that if there is a major change 

to this program, that State legislatures may begin to look at and 

use this as an opportunity to kind of come back in and redefine 

their exempt status on some of these projects. 

Ms. PRESTON-KOENIG. I would agree. 

The CHAIRMAN. The gentlewoman from New York. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. And I would like to 

take this opportunity to welcome my constituent from New York, 

Damaris Reyes. Damaris, if I may, I would like to address my first 

question to you, and I would like Ms. Martens to comment on it, 

as well. According to Secretary Donovan, PETRA will strengthen 

tenants’ rights and those of tenants’ organizations in all properties, 

not just those at greatest risk of losing project-based assistance. 

Do you agree with the Secretary’s assertion, and if not, what 

should we do to strengthen tenant rights going forward? 

Ms. REYES. We worked with HUD and we do feel that there was 

a considerable amount of work that was done to include some of 

our suggestions regarding resident and tenant rights. There were 

a few minor issues around organizing, for example, like there is no 

clarity around the tenant participation funds which are essential in 

helping folks to organize, and so there is not a dollar amount. And 

the program itself is at the discretion of the Secretary, and with 

all due respect, Secretaries change and so does political will, right? 

And so in those areas, we are a little concerned. I think there were 

some places where we missed opportunities, for example, where 

folks who have been involved in activities on or off properties who 

become ineligible for public housing can be evicted, and those we 

should have commented or tried to address those issues for those 

families and we didn’t address that, or like community services, 

things like that. So there were some good things, but you know, 

there are still some questions, in particular around the grievance 

procedures. 

Ms. VELAZQUEZ. Do you have anything else to add? 

Ms. MONTANEZ. I think both public housing and multi-family 

housing have a very strong presence. I would like to organize regulations like 245 and 964, and I think they should stay strongly in 

place—most of us agreed that we have. Many of the aspects of 

those regulations can be coordinated together as one. The $25 funding, it should be in place but it has to be very clear that it needs 

40 

to be completely independent of owners and public housing employees and management agents so that there would be no interference 

and no conflict of interest, as well as the resources for organizers 

and tenants to be also independent of the organizers, and that 

would strengthen the right to organize. 

Ms. VELAZQUEZ. Thank you. Mr. Rhea and Mr. Taylor, PETRA 

applies the current requirements of the Section 3 program to convert the properties. What kind of changes do you suggest to a Section 3 program under this new subsidy scenario to maximize economic opportunities for low-income tenants? 

Mr. TAYLOR. My reference to Section 3 wasn’t so much a better 

way of implementation of it, and we actually have a Section 3 plan 

with our redevelopment. We do our best and our utmost to encourage folks in our community to apply for these jobs and make sure 

they are aware of them and monitor contractors. My point I bring 

up in my testimony, which is to say that while we do these programs in public housing and we are required to do these programs 

and we do them, there is an added cost to that. If we are to be 

funded like a private sector, I think it is something the private sector doesn’t face that we do. 

Mr. RHEA. A couple of things, obviously, as we have discussed 

this before, there is no current funding in place for implementing 

Section 3 on the part of public housing authority, so it is an unfunded mandate that requires a substantial amount of investment. 

Ms. VELAZQUEZ. But it will have a greater economic impact for 

the local housing authorities in the sense that if you have a person 

who is unemployed and is in public housing get training and then 

employed will make their income, will have better revenues, generate better revenues for housing authorities. 

Mr. RHEA. Well, I feel strongly, and I am sure all my colleagues 

strongly support, the ideals of Section 3, and we have done a lot 

at the New York City Housing Authority to implement it. We 

spend $5 million a year on implementing Section 3 with no actual 

funding from HUD or from Congress to implement the program. 

This is not an issue of do we have the will or the commitment to 

it; it is how can you support and sustain it in light of the other 

constraints. 

The other piece is that when we look at job training and the 

things that will move people to work and take them from underemployment to better jobs and better wages, that has a substantial 

cost beyond what the housing authority on its own can do, and so 

we have worked on developing partnerships with not-for-profits 

and with the private sector that is focused on training residents 

and low-income Americans to put them to work. So we think partnerships and ways to encourage partnerships could be an important piece of this. 

And lastly, as I mentioned in my formal testimony, we believe 

funding of ROS is the best direct way to do it. That program was 

set up to ensure that there is support for residents economically, 

and we would suggest that is the place. 

Ms. VELAZQUEZ. Thank you. 

The CHAIRMAN. The gentlewoman from West Virginia. 

Mrs. CAPITO. Thank you, Mr. Chairman. 

41 

Mr. Taylor, you heard me ask the question of the Secretary, a 

point that you raised in your written testimony, about the extension of 20 years of obligations that you put forth in the very good 

replacement and regeneration of public housing, and I commend 

you, you are doing a great job. 

The way I heard his remark was that this will free up more for 

development in a commercial, maybe some commercial availabilities within the housing units or near and around. How did you interpret what he said, and does it ease your mind a little bit about 

some of the concerns that you raised in your written testimony? 

Mr. TAYLOR. Actually, it doesn’t, because my concern is, and in 

my testimony what I am saying is we leverage one-third of our future capital funds over a 20-year period. Currently, our houses will 

receive about $2.1 million annually in capital funds. Over the next 

20 years, right now, we will be paying $600,000 of those funds. And 

those funds kind of come in what we call clumped together; they 

are not assigned to any one development. So if the capital fund decreases, we get whatever is allotted to us minus that $600,000, 

which I will have to have those funds to maintain the rest of the 

housing developments. 

Mrs. CAPITO. So your concern is on, as he said, decreasing the capital fund by $300 million, that would decrease your, whatever 

your, yes, and are you going to be able to meet the mortgage payments that you have extended or the payments that you have extended over the last 20 years? Am I understanding that? 

Mr. TAYLOR. You are. And I am not sure that we would actually 

have an option to convert in this, because when we signed that 

loan, we agreed Fannie Mae actually was our lender in this case. 

Mrs. CAPITO. Oh, that is good. 

Mr. TAYLOR. But we agreed not to decrease our public housing 

units because it is a form of the program for the capital fund. 

Mrs. CAPITO. Okay. Thank you for that. 

Also on the one-to-one replacement, we have kind of gone back 

and forth in this in a very small way. I can’t imagine, Mr. Rhea, 

what you go through in your units, your numbers are so much 

greater than ours. How do you feel about one-to-one replacement, 

and do you have the flexibility now and in this bill to be able to 

either make the decisions to move in different regions, different 

areas, different income groups; how do you see that? 

Mr. TAYLOR. Well, my concern about the one-for-one replacement 

is we are piecemealing our developments to get them done. And 

typically in West Virginia, because a lot of them are tax credits, the 

9 percent will allow us only to do about 44 units at a time. When 

we close those deals, I just don’t know that I can commit to, if I 

am tearing some units down at that time or demolishing units, that 

I can actually commit to replace those units at that point given in 

time. It is the board’s goal to replace the maximum units that we 

can back to our original configuration. But when we close a deal 

with a lender, and all the parties at the table, I just can’t confirm 

on that date by a given specific time in the future that I can replace those units one-for-one. And we don’t want to replace back 

onsite because our oldest developments that we are redeveloping, 

it is too dense, and it is better and safer for our residents if we dedensify somewhat. 

42 

Mrs. CAPITO. Does anybody else have a comment on the one-forone replacement? Do you have a comment? 

Mr. RHEA. Yes. Obviously, many of us are faced with legacy communities that have strong concentrations of low-income and poverty. We believe that the flexibility that is written in the proposal 

is prudent in that it allows for one-for-one replacement at the site 

but also to have one-for-one replacement in other locations, which 

allows you to bring in other families that would have the effect of 

deconcentrating poverty in our existing housing authority locations 

as well as allow you to build new housing in locations where acquisition of land costs and other things are less prohibitive, ultimately 

allowing you to bring new units on cheaper and to work with some 

of the other objectives of economic deconcentration. So we think 

that this is actually a move forward. 

Mrs. CAPITO. Okay. Thank you. 

Ms. Martens, this is a big question for not much time. You have 

commented in your testimony about what you feel are misaligned 

priorities of the Administration concerning preservation and conversion. Can you help us understand why you question that and 

how you would like to see those changes? 

Ms. MARTENS. Yes. Our understanding of PETRA is that the 

goals are noble and good and very broad. And, we understand that 

in this society, there are always competing values, and we always 

try to have it all, and having it all often gives us consequences that 

are unintended. So our overarching statement is that preservation 

must come first. 

PETRA talks about goals of preservation, streamlining programs, 

consolidating programs, creating opportunities for residents. And 

our point is that we really need to make an incremental step, because as the committee members have expressed today the risk of 

loss is too great to make a mistake. So what we are talking about 

is, first, the overriding priority of migrating public housing to a 

real estate platform, getting it stabilized, and from there addressing the rest of the concerns that are the right ones, creating efficiencies, creating opportunities for residents. 

The CHAIRMAN. The gentleman from Missouri. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Ms. Koenig, I was intrigued by your statement earlier about PILOTs. In places where that occurs, who would be responsible for 

the PILOTs? 

Ms. PRESTON-KOENIG. Could you repeat the question? I am not 

sure I heard it. 

Mr. CLEAVER. You mentioned in some communities, they pay PILOTs, payments in lieu of taxes. 

Ms. PRESTON-KOENIG. Payments in lieu of taxes. Particularly a 

number of the housing authorities that I work with in Wisconsin, 

their agreement with our communities is that they will pay a 

PILOT. 

Mr. CLEAVER. For the school district? 

Ms. PRESTON-KOENIG. They pay to support the basic infrastructure where they hold housing. So they do not pay the normal assessment that they would pay for any other entity. If they were a 

for-profit entity, they would pay a payment in lieu that supports 

43 

the basic school district and water and utility, fire fighting elements. 

Mr. CLEAVER. I am a former mayor, and we just generally did 

that for, you know, tax abatements, tax income financing, that kind 

of thing. 

Ms. PRESTON-KOENIG. It is fairly common for your public entities 

to have an agreement with their local governments to pay the basic 

levels to support that infrastructure. 

Mr. CLEAVER. Ms. Martens? 

Ms. MARTENS. Could I add to that, because we have done something similar in Boulder, where we have an agreement with our 

local government to essentially parse the PILOT so that schools 

and fire safety and the essential services are paid and then the rest 

of it is not. Because the margins of managing affordable housing 

are so thin that we are looking for every increment. 

Mr. CLEAVER. That is why I was surprised at it because— 

Ms. MARTENS. The parsing of PILOTs, I think, is not uncommon. 

Mr. CLEAVER. To those of you who operate housing authorities, 

do you think that this issue of mobility, the mobility option, is a 

way for us to finally achieve scattered site housing? 

Mr. Graziano? 

Mr. GRAZIANO. I think the mobility question is really one of fairness. There are thousands of people on the waiting list for Section 

8 and they, too, want to have mobility, they, too, want to have affordable and decent housing. So I would make a modest proposal 

to modify this currently written bill to say that if people are in developments that are converted from public housing to this new 

model, that they certainly can apply for Section 8 and be put on 

the waiting list like everybody else. And then that way, their name 

would come to the top of the list in the same timeframe that somebody else’s would. The notion that somebody after 2 years would 

trump other people who have been on the list for several years, I 

think is problematic. 

We certainly embrace the notion of choice, but it should be equitably delivered. So I think we just say if your development is converted you simply apply, which you can do anyway, for the Section 

8 program, your name will move up the list naturally. 

The other point I would say about that is if it is within a public 

housing inventory and some portion of the portfolio has been converted and some has not, there could be provisions to allow people 

to move from a converted site to a nonconverted site within the 

public housing authority’s portfolio, assuming there were vacant 

units. Because currently you can apply to transfer from one development to another, there is no reason why we couldn’t modify that 

to say you can go from a former public housing site that was converted to another site that is still public housing. So there are ways 

to deal with this that are equitable. 

Mr. CLEAVER. But do we have a challenge? One of the problems, 

at least when we have tried scattered site housing in the past, is 

that when we go to the private market, the Section 8 voucher is 

not sufficient to live anywhere except another low-income neighborhood. 

Mr. GRAZIANO. We have had very good success actually with people using their vouchers to move not only throughout the City, but 

44 

the metropolitan area of Baltimore. You do have to pay a higher 

rent in those areas, so therefore you have to have that flexibility 

on the rent standard. 

Mr. CLEAVER. All right. Ms. Koenig? 

Ms. PRESTON-KOENIG. I think when you asked the question about 

mobility, this mobility, this choice that they are offering doesn’t actually open up changes to how someone will access housing in the 

greater nation. All it does is move people up, jump them up in front 

of people who are waiting. It doesn’t change their access to housing 

around the Nation, it just allows them to say, I no longer want to 

be here and now I get one out of the next three available, so now 

the people who have been waiting have to wait longer. It doesn’t 

change their ability to find other housing choices. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

The CHAIRMAN. I am going to go one more round. Mr. Taylor, you 

intrigued me. You said you have a loan from Fannie Mae. What 

kind of loan? 

Mr. TAYLOR. Fannie Mae has a product called Modernization Express. 

The CHAIRMAN. Called what? 

Mr. TAYLOR. Modernization Express. It is just a product name. 

But in HUD now, there is a Capital Fund Financing Program, we 

call CFFP, and again it is where you leverage one-third of your 

capital funds. And when we put that out for bid, and it may speak 

to lenders interested in this, I am not sure, but when we put that 

out for bid, we had two responses: one from Fannie Mae; and I 

think the other one was from Bank of America. 

The CHAIRMAN. And which one did you take? 

Mr. TAYLOR. We took the Fannie Mae. 

The CHAIRMAN. Why? 

Mr. TAYLOR. They had a product that was more readily approved. 

The CHAIRMAN. When was this? 

Mr. TAYLOR. We closed it actually last summer, but it has been 

in process since 2004. We have been working on the deal that long. 

The CHAIRMAN. Is that a useful product, do you think, that 

Fannie Mae has? 

Mr. TAYLOR. Very useful. 

The CHAIRMAN. Do you think we should abolish that product before we come up with a replacement? 

Mr. TAYLOR. Excuse me? 

The CHAIRMAN. Should we abolish their ability to offer that product without coming up with a replacement? 

Mr. TAYLOR. I don’t think so. I like that product. 

The CHAIRMAN. Thank you. I hope you inspired some others. 

The hearing is adjourned. 

[Whereupon, at 12:30 p.m., the hearing was adjourned.] 

(45) 

A P P E N D I X 

May 25, 2010 

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