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THE OBAMA ADMINISTRATION’S RENTAL 

ASSISTANCE DEMONSTRATION PROPOSAL 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INSURANCE, HOUSING AND 

COMMUNITY OPPORTUNITY 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

NOVEMBER 3, 2011 

Printed for the use of the Committee on Financial Services 

Serial No. 112–83 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

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 

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 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

LARRY C. LAVENDER, Chief of Staff 

(III) 

SUBCOMMITTEE ON INSURANCE, HOUSING AND COMMUNITY OPPORTUNITY

JUDY BIGGERT, Illinois, Chairman 

ROBERT HURT, Virginia, Vice Chairman 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

PATRICK T. MCHENRY, North Carolina 

LYNN A. WESTMORELAND, Georgia 

SEAN P. DUFFY, Wisconsin 

ROBERT J. DOLD, Illinois 

STEVE STIVERS, Ohio 

LUIS V. GUTIERREZ, Illinois, Ranking 

Member 

MAXINE WATERS, California 

NYDIA M. VELA ́ ZQUEZ, New York 

EMANUEL CLEAVER, Missouri 

WM. LACY CLAY, Missouri 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

MICHAEL E. CAPUANO, Massachusetts 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

November 3, 2011 ............................................................................................. 1 

Appendix: 

November 3, 2011 ............................................................................................. 25 

WITNESSES 

THURSDAY, NOVEMBER 3, 2011 

Elsesser, Charles, attorney, Community Justice Project of Florida Legal Services, on behalf of the National Low Income Housing Coalition ........................ 9 

Guerrero, Ismael, Executive Director, Housing Authority of the City and 

County of Denver, Colorado ................................................................................ 6 

Henriquez, Hon. Sandra B., Assistant Secretary, Public and Indian Housing, 

U.S. Department of Housing and Urban Development ..................................... 4 

Hydinger, Steven C., Managing Director, BREC Development, LLC ................. 8 

APPENDIX 

Prepared statements: 

Elsesser, Charles .............................................................................................. 26 

Guerrero, Ismael ............................................................................................... 33 

Henriquez, Hon. Sandra B. .............................................................................. 40 

Hydinger, Steven C. ......................................................................................... 51 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Biggert, Hon. Judy: 

Letter from a coalition of housing industries ................................................. 55 

Letter from the Housing Assistance Council .................................................. 57 

Letter from Secretary Shaun Donovan, U.S. Department of Housing and 

Urban Development ...................................................................................... 58 

Letter from the National Association of Housing and Redevelopment Officials ................................................................................................................ 60 

(1) 

THE OBAMA ADMINISTRATION’S RENTAL 

ASSISTANCE DEMONSTRATION PROPOSAL 

Thursday, November 3, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON INSURANCE, HOUSING

AND COMMUNITY OPPORTUNITY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:57 p.m., in room 

2128, Rayburn House Office Building, Hon. Judy Biggert [chairwoman of the subcommittee] presiding. 

Members present: Representatives Biggert, Hurt; Gutierrez, 

Cleaver, and Clay. 

Also present: Representative Ellison. 

Chairwoman BIGGERT. The Subcommittee on Insurance, Housing 

and Community Opportunity will come to order. 

We will start with opening statements, and I will recognize myself for such time as I may consume. 

Good afternoon. I want to welcome everyone. I am sorry about 

those pesky votes again. That seems to happen around 2 p.m. all 

the time. So I apologize, and I thank you for your patience. 

This is the third hearing in a series on reforms to the Section 8 

Program. During today’s hearing, the subcommittee will examine 

the Obama Administration’s Rental Assistance Demonstration proposal, or what is called ‘‘RAD.’’ 

I am supportive of this creative proposal because it would allow 

for mixed financing and leveraging of private capital with existing 

Federal funds. This is a concept that I actually have worked on for 

many years, and was realized through recent reforms to the Section 811 Program, which provides affordable housing for people 

with disabilities, and reforms to the Section 202 program, which 

provides affordable housing for seniors. 

Given very scarce Federal resources, it is important that we 

maximize the impact of every taxpayer dollar, especially funds that 

go toward affordable housing. And given the demand for affordable 

rental housing, projected rehabilitation costs to preserve aging 

housing stock, and capital needs for housing development, new initiatives for private sector participation must be considered. So I 

thank many of the Members whose staffs have already offered 

input into the Section 8 reform package. 

And, with that, I recognize the ranking member from Illinois, 

Mr. Gutierrez, who is busy talking. 

Mr. GUTIERREZ. Thank you, Madam Chairwoman. 

2 

And thank you to all of our witnesses for joining us today to discuss HUD’s proposal for a Rental Assistance Demonstration. 

Let me start by saying that I understand how hard it can be for 

our Nation’s public housing agencies to meet the demand for safe, 

affordable housing that they can see in our communities right now. 

This Congress has watched unemployment and homelessness approach historic highs. And how has it responded? Unfortunately, by 

cutting the programs that serve our most vulnerable constituents. 

Appropriators are threatening to shut down housing counseling 

agencies, strip funding from housing programs for the elderly, and 

cut the Public Housing Capital Fund by hundreds of millions of 

dollars. 

So I understand the logic behind the RAD proposal. It is a potential solution to the capital infrastructure challenges that our public 

housing agencies are constantly facing. These agencies know they 

cannot depend on Congress to appropriate the funding they need, 

so they have worked with HUD and have come to us with an alternative that they hope will work. In short, HUD and public housing 

groups are willing to try a conversion, on a limited scale, of traditional public housing units to the project-based Section 8 Program, 

making it more likely that they will be able to leverage financing 

from private sources to meet their capital needs. 

But a conversion like this doesn’t come without risks. That is 

why I want to highlight certain provisions in the RAD proposal 

that reinforce tenant protections, promote resident choice, ensure 

long-term affordability for converted units, and prioritize continued 

public ownership of housing units after conversion. 

I would ask that our witnesses address these provisions in detail 

today. I want to make sure that they truly will provide adequate 

protections and insurance so that our public housing dollars continue to reach the lowest-income families in a fair and equitable 

way. That is the only way a demonstration like this will work for 

everyone. 

Thank you again, Madam Chairwoman. I look forward to the testimony of the witnesses and I welcome this opportunity to learn 

more about the RAD proposal. I yield back the balance of my time. 

Chairwoman BIGGERT. Thank you. 

Mr. GUTIERREZ. I ask unanimous consent that our colleague Mr. 

Ellison from Minnesota can join us for 5 minutes. 

Chairwoman BIGGERT. Do you have an opening statement? 

Mr. ELLISON. Yes, ma’am. 

Chairwoman BIGGERT. You are recognized for 5 minutes. 

Mr. ELLISON. Thank you, ma’am. 

Chairwoman Biggert and Ranking Member Gutierrez, thank you 

for holding this hearing today. Revitalizing public housing is an important topic for this committee to address, especially when the 

poverty rate continues to rise and families struggle with unrelenting unemployment. 

In 2010, 46 million Americans lived in poverty. That is over 15 

percent of our population. And the availability of affordable housing for many of these families is scarce. This is exactly the wrong 

time to turn away from affordable housing programs that support 

low-income families. Instead, it is time for creative solutions to revitalize the affordable housing we already have invested in. 

3 

As I am sure today’s witnesses are going to mention, the existing 

public housing buildings across the country have a combined capital need of about $26 billion. That is a lot of money. These capital 

needs come from years of underfunding of public housing programs. 

These capital needs mean that many buildings and individual 

apartments are in need of serious repair. Even worse, over the last 

decade, public housing authorities have already lost over 100,000 

public housing units because buildings fell into disrepair. Considering this level of capital needs, creative solutions are necessary to 

protect public housing and ensure that these buildings remain affordable. 

Now, at the high-water mark when Congress stepped up to the 

plate and really did something for public housing during the ARRA 

funding, we gave about $4 billion. So public housing residents cannot realistically expect Congress to appropriate adequate money to 

fund public housing. It simply isn’t realistic to believe that. So 

something else needs to be done. 

I would like to applaud Secretary Donovan, Assistant Secretary 

Henriquez, and the Administration on their commitment to this 

issue. The Rental Assistance Demonstration language is a thoughtful and innovative approach for revitalizing public housing and 

other affordable housing programs overseen by HUD. 

Let me say very quickly, if I have any more time left, last Congress I introduced the Rental Housing Revitalization Act. There 

were a lot of people who were fearful about what this might mean, 

but we worked with the community and we listened and we incorporated ideas. This bill shared the same goal of helping public 

housing to access capital and financing in order to make needed repairs and renovations, given the gap I already identified. 

I welcome the support of the Administration’s work on advancing 

and refining these ideas. And I would like, again, to thank Chairwoman Biggert and Ranking Member Gutierrez for holding this 

hearing today. I look forward to working with members of this committee on strategies to preserve public housing. And I look forward 

to hearing from today’s witnesses about their thoughts on the Rental Assistance Demonstration language. 

And if I have any more time left, I just want to quickly say that 

a few years ago, I was lucky to have then-Chairman Barney Frank 

come to Minneapolis, and he spoke very eloquently about public 

housing affordability. One gentleman came forward who needed the 

assistance of a Spanish language interpreter to tell his story. And 

what he told us is that he and his five children and his spouse 

were looking for a place to rent but they couldn’t find anywhere. 

But somebody came to him and told him that he could buy a house 

for no money down and that it would be really great and really 

easy on him and his family. He bought that house, but what they 

didn’t tell him was that in 2 years, his mortgage was going to explode. He ended up not being able to make those payments and losing that house. 

What if we had had good, decent, productive public housing that 

was in good repair available for that family? It could have saved 

a financial tragedy. And so, I hope we can step forward and do the 

right thing. 

Chairwoman BIGGERT. I thank the gentleman. 

4 

We will now proceed to introduction of the witnesses. We are 

very fortunate today to have with us the Honorable Sandra 

Henriquez, Assistant Secretary, Public and Indian Housing, U.S. 

Department of Housing and Urban Development; Mr. Ismael Guerrero, executive director, Housing Authority of the City and County 

of Denver, Colorado; Mr. Steve Hydinger, managing director, BREC 

Development, LLC; and Mr. Charles Elsesser, attorney for the 

Community Justice Project of Florida Legal Services. 

Without objection, all your written statements will be made a 

part of the record, and you will each be recognized for a 5-minute 

summary of your testimony. 

We will start with Ms. Henriquez. 

STATEMENT OF THE HONORABLE SANDRA B. HENRIQUEZ, ASSISTANT SECRETARY, PUBLIC AND INDIAN HOUSING, U.S. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Ms. HENRIQUEZ. Thank you very much. Good afternoon, Chairwoman Biggert, Ranking Member Gutierrez, and members of the 

subcommittee. I want to thank you for holding this hearing today 

and for giving me this opportunity. 

We meet at an important moment. Today, the need for affordable 

housing is greater than ever, with 7 million households paying 

more than half of their income for housing, living in substandard 

housing, or both. Essential to meeting the needs of very low-income 

families, the elderly, and the disabled is public and assisted housing, which provides 2.5 million quality, affordable homes in communities across this Nation. 

Over the last 75 years, the taxpayers invested significantly in 

these homes, but with a capital backlog estimated between $22 billion and $26 billion in the public housing portfolio loan, we have 

reached a breaking point. And where most forms of affordable 

housing could leverage funding from private investors and other 

nongovernment sources to make needed repairs, antiquated laws 

mean public housing and properties funded through HUD’s socalled legacy programs generally cannot. As a result, we have already lost 150,000 publicly owned homes to demolition and disposition over the past 15 years. And we see no sign that this trend will 

abate anytime soon, particularly in this fiscal environment. 

Further, some 48,000 units in our Rent Supplement, Rental Assistance Program. and our Section 8 Mod Rehab Programs are also 

at risk due to contract limitations that inhibit their ability to leverage capital. 

Madam Chairwoman, my own decades of corporate and publicsector experience managing housing tell me that we can do better, 

we must do better, and that we can build a system that harnesses 

the resources and the discipline of the private market without compromising the important mission of publicly supported housing—a 

system that does not leave America’s poorest families isolated. 

The Rental Assistance Demonstration we have proposed represents an important step in building that better system. As this 

subcommittee knows, last year we proposed a multiyear initiative 

called, ‘‘Transforming Rental Assistance,’’ which sparked an important conversation about how the public and the private sectors can 

work together to invest in the success of these properties and the 

5 

families who live in them. And the concepts and the feedback that 

emerged from that conversation culminated in the demonstration 

we are here to discuss today. 

I would like to take a moment to outline five key goals of the 

demonstration, not only to explain how it differs from our TRA proposal in the past and builds on what we know works, but also how 

it will provide more opportunity for families we serve. 

The first goal is long-term stability by helping owners preserve 

these homes and plan for the future by better managing investments the public has already made. For PHAs, this essentially 

means replacing operating and capital subsidies with 20-year, 

project-based Section 8 rental assistance contracts. For the Rent 

Sup and RAP programs, contracts would convert to Section 8 

project-based rental assistance, PBRA, with 20-year terms, while 

Mod Rehab properties would be able to convert to long-term, 20- 

year Section 8 PBRA or project-based voucher contracts. These 

tools have widespread acceptance and familiarity among owners, 

those in the lending community, and those of us at HUD. 

Indeed, the second goal is to allow these programs to access the 

same safe, proven tools that successfully support 1.4 million units 

of multifamily assisted housing and access the Low-Income Housing Tax Credit Program in particular. These tools have not only 

brought new capital to affordable housing, but also a discipline and 

rigor that extends to how these properties are managed. 

The third goal is long-term affordability, saving properties for 

generations to come by better managing the investment the public 

has already made. For this demonstration, that means long-term 

assistance contracts and use agreements that would protect affordability in the event of foreclosure or for bankruptcy, should that 

happen. 

And, indeed, the fourth goal is effective public ownership. The 

demonstration will ensure public housing properties remain under 

the ownership or control of a public housing authority or public or 

nonprofit entity or limited partnerships formed to access tax credits. 

In the unlikely event of foreclosure—and I would note that, even 

in this economy, multifamily owners have defaulted on their loans 

less than one-half of 1 percent of the time—the Secretary would be 

permitted to transfer the contract and the use agreement to capable public and non-profit entities, and only when neither of those 

options is viable, may the Secretary seek the help of a for-profit entity in preserving the property. Regardless, the owner would be required to manage the property, guarantee its affordability, and 

maintain tenant rights in accordance with the use agreement. 

The last goal of this demonstration is to provide more resident 

choice and real resident rights. Families should be able to choose 

where they live and take responsibility for their futures. Accordingly, we expect that at least 90 percent of the converted public 

housing and Mod Rehab units would provide residents with an option to move with voucher assistance. Residents will have an opportunity to comment on any conversion action, and they will not be 

subjected to rescreening, and they will be afforded strong procedural and organizing rights. 

6 

Underlying all these goals is the need for the private sector partnership, which is why we have designed this demonstration to capitalize on the capacity and the expertise the private sector can provide, particularly in the field of real estate finance and development. As we have seen in HOPE VI, many housing authorities 

have already collaborated with the private sector in a variety of 

ways, from securing FHA insurance, tax-exempt bond financing, 

private loans and tax credit investments, to legal and accounting 

assistance. And these are the kinds of collaborations that will be 

essential to the success of this demonstration. 

As you know, the Senate Appropriations Subcommittee recently 

included language that authorizes a limited, cost-neutral demonstration targeted at public housing. While we support comprehensive authorization, we also believe it is reasonable to proceed, for now, with the option that has been included in the Senate 

Appropriations bill. And we are hopeful that this subcommittee will 

join with us in supporting this strategy while continuing to explore 

the broader authorization process. 

But, Chairwoman Biggert, we believe the time has come to allow 

America’s public housing system to take advantage of 30 years of 

innovations in the affordable housing finance arena, to connect millions of families to opportunity, to turn homes too often seen as 

neighborhood problems into community assets, and to make proven 

preservation tools available to all affordable housing programs. 

This demonstration represents an important step toward that goal. 

I want to thank you again for this opportunity to testify today, 

and I would be happy to answer any questions that you may have. 

[The prepared statement of Assistant Secretary Henriquez can be 

found on page 40 of the appendix.] 

Chairwoman BIGGERT. Thank you. 

Mr. Guerrero, you are recognized for 5 minutes. 

STATEMENT OF ISMAEL GUERRERO, EXECUTIVE DIRECTOR, 

HOUSING AUTHORITY OF THE CITY AND COUNTY OF DENVER, COLORADO 

Mr. GUERRERO. Good afternoon, Chairwoman Biggert, Ranking 

Member Gutierrez, and members of the subcommittee. 

My name is Ismael Guerrero, and I am the executive director of 

the Denver Housing Authority. Prior to joining DHA, I was with 

U.S. Bank Community Development Corporation and before that, 

with Mercy Housing Corporation. So as a practitioner with over 15 

years of experience in financing and community development, I 

want to thank you for this opportunity to provide some testimony 

on the Rental Assistance Demonstration proposal. 

I am also a board member of the Council of Large Public Housing 

Authorities (CLPHA). CLPHA’s members include 70 of the largest 

public housing authorities located in most major metropolitan 

areas in the United States. CLPHA has been working with numerous stakeholders on this rental assistance proposal and is also appreciative of the hearing that is happening today. 

DHA is the largest housing authority in the Rocky Mountain region, with over 10,000 rent-subsidized housing units and Section 8 

housing choice vouchers. In the last 4 years, DHA was ranked as 

one of the top multifamily developers in the Denver region. We conVerDate Nov 24 2008 12:41 May 29, 2012 Jkt 072624 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\72624.TXT TERRIE
7 

tinue to maintain a ‘‘high performer’’ status with HUD and simultaneously, an A-plus rating on our tax-exempt revenue bonds with 

Standard & Poor’s. 

We support the Rental Assistance Demonstration proposal because as a developer, an owner, and a manager of a diverse affordable housing portfolio, we understand the challenges and opportunities that face all housing authorities in managing their assets. 

We believe the voluntary conversion option, which allows housing 

authorities the choice to convert from public housing to Section 8 

project-based rental contracts, is urgently needed as an additional 

financing tool to address the growing backlog of capital improvement needs in our aging housing portfolio. The Denver Housing 

Authority today has capital needs of over $90 million, and with the 

persistent cuts that are happening, this will only continue to grow. 

Because of the need to maintain our housing at standards that 

our residents deserve and our communities expect, DHA has become more creative and more resourceful in using all available 

Federal resources and programs. We have been awarded three 

HOPE VI Federal grants, we have utilized the Capital Fund Financing Program, and we have received multiple competitive capital grants through the American Recovery and Reinvestment Act, 

just to name a few. Through these one-time Federal grants totaling 

over $94 million, we have preserved over 1,100 public housing 

units, and, more importantly, we raised over $300 million in private debt and equity. 

However, these efforts have improved less than a third of our 

total portfolio. The reality is that we need a more comprehensive 

and structural solution to the problem of maintaining, preserving, 

and transforming our aging and obsolete public housing portfolio. 

We need market-based solutions to maximize the leverage of Federal resources with private sector debt and equity. 

We believe that the option to convert public housing operating 

and capital fund subsidies to Section 8 project-based contracts or 

vouchers is an important tool that should be made available to 

housing authorities of all sizes and in all regions. 

Converting the ACC operating and capital funding structure to 

project-based rental assistance also brings us more in line with real 

estate industry practices and asset management. It should establish fair market rent standards that are predictable and rental contracts that are more stable than at the current public housing ACC 

operating subsidy. Our banking and equity partners understand 

fair market contract rents, but they have a harder time with operating subsidies based on complicated property expense-level calculations, which have a history of being arbitrarily prorated as 

much as 15 percent below actual expenses. 

Our support of this demonstration program is based on real-time 

experience. We recently rehabbed a 190-unit public housing property. It required a $10 million Federal grant, and we were able to 

leverage $10.7 million in tax credit equity. Contrast that with a 

second example, a 224-unit DHA-owned property with a Section 8 

HAP contract in place which we will rehab with zero Federal capital funds and a financing plan that includes $8.5 first mortgage 

and $11.4 million in tax credit equity. Both properties serve exVerDate Nov 24 2008 12:41 May 29, 2012 Jkt 072624 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\72624.TXT TERRIE
8 

tremely low-income households with incomes that average approximately $10,000 a year. 

We believe that a properly designed and funded demonstration 

program will allow more units to be recapitalized with less restrictive Federal funds and greater leverage of private debt and equity. 

In addition, a demonstration program will allow specific concerns 

to be studied and resolved, such as at the end of the day that the 

demonstration program should result in a true conversion from 

public housing to Section 8. We will have failed if, in the end, the 

result is a new hybrid program that multiplies, rather than eliminates, program rules and regulations. 

Secondly, fair market rents are and continue to be the industry 

benchmark where an efficient owner-manager is able to operate. 

Trading artificial rental subsidy calculations or prorations will undermine the stated goals of the program. 

And, finally, at DHA, we have a strong commitment to resident 

empowerment and resident engagement. This demonstration program should allow maximum flexibility for local housing authorities to work with their local resident leaders and stakeholders to 

create the policies and procedures around mobility options. At 

DHA, we believe that tenant rights should be coupled with tenant 

responsibilities, including the expectation of being a good neighbor 

and working toward self-sufficiency goals. 

So, in closing, I want to reaffirm our support for the Rental Assistance Demonstration and to thank the committee for holding 

this hearing today. Thank you. 

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

33 of the appendix.] 

Chairwoman BIGGERT. Thank you so much. 

Mr. Hydinger, you are recognized for 5 minutes. 

STATEMENT OF STEVEN C. HYDINGER, MANAGING DIRECTOR, 

BREC DEVELOPMENT, LLC 

Mr. HYDINGER. Thank you very much, Chairwoman Biggert and 

members of the subcommittee. First of all, I want to thank you for 

allowing me to have the opportunity to speak to you about the 

Rental Assistance Demonstration program, known as ‘‘RAD.’’ 

My name is Steven Hydinger. I work with BREC Development 

from Birmingham, Alabama. We are a private developer, and we 

are proud to be a private developer. We have worked with many 

nonprofits in the past over many States, mostly along the east 

coast. And we are happy to work with HUD in many different 

venues, many different States. 

I am very excited to talk about the RAD program, because when 

I look at this, it has all the elements of a great transaction, number 

one. Unfortunately, there is a tremendous amount of demand. In 

a perfect world, there would not be demand for low-income housing, 

but this is an economic reality. And when one looks out over the 

future, with the aging population, we are truly going have a crisis, 

as I mentioned in my testimony. 

Number two, product. It is exciting because I have been in many 

conversations with public housing authorities where their hands 

have been tied and they have not been able to come up with the 

best solution because of what I would call regulatory handcuffs. 

9 

The RAD program certainly addresses these—namely, projectbased Section 8, which would be paramount to the success of this 

program. 

Number three, funding. It is exciting that there is no need to go 

ask for increased funding; the funding is in place in programs. This 

RAD program seems to be well thought out, and, from a private developer’s standpoint, it seems to be something that is actionable. 

There are certainly programs that come out that we all look at 

that, when one views the program, there is skepticism from the 

get-go. I believe the way the RAD program is drafted and the direction in which it appears to be headed, it could be a great success 

to the many, many thousands of units that need the assistance. 

One word of caution I would say is, much has been mentioned 

about the loss of product. Not all of that loss of product can be 

viewed as bad. Much of the product is completely outdated, functionally obsolescent, and needs to go by the wayside and needs to 

be redeveloped. My hope in this is that more and more private developers will be able to work with housing authorities and be able 

to come up with absolutely the best, most dynamic solution to this 

need that afflicts every State in the country. 

I, again, appreciate your time. Thank you. 

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

51 of the appendix.] 

Chairwoman BIGGERT. Thank you. 

Mr. Elsesser, you are recognized for 5 minutes. 

STATEMENT OF CHARLES ELSESSER, ATTORNEY, COMMUNITY 

JUSTICE PROJECT OF FLORIDA LEGAL SERVICES, ON BEHALF OF THE NATIONAL LOW INCOME HOUSING COALITION 

Mr. ELSESSER. Thank you, Madam Chairwoman. 

My name is Charles Elsesser. I am an attorney with the Community Justice Project of Florida Legal Services, and a member of the 

Board of Directors of the National Low Income Housing Coalition, 

which I am representing here today. 

We want to thank the subcommittee chairwoman, Ms. Biggert, 

and the ranking member, Mr. Gutierrez, for providing us with this 

opportunity to provide input. 

The National Low Income Housing Coalition is dedicated solely 

to achieving socially just public policy that assures that people with 

the lowest incomes have affordable and decent homes. 

Despite the specter of vacant foreclosed homes in many communities, there is a continuing and increasing need for affordable 

housing, particularly for those families with the lowest incomes. In 

most communities, there is little if any decent, safe, unsubsidized 

housing affordable to extremely low-income households. Public 

housing specifically serves this extremely low-income population. 

Currently, there are approximately 2.3 million people living in public housing in the United States, with an average household income 

of approximately $13,350. 

Unfortunately, this housing is aging, and for years, the public 

housing authorities have received less than necessary in capital replacement funding. Both the House and the Senate Fiscal Year 

2012 HUD appropriations bills include further deep cuts to public 

housing capital funding. These continuing cuts, without any new 

10 

funding, leave public housing authorities without any recourse 

other than to apply for more demolitions and dispositions. 

Tenant-based vouchers cannot replace public housing. We have 

learned from the massive demolitions and relocations that occurred 

through the HOPE VI programs and through the subsequent additional demolitions, resulting in a loss of over 150,000 units of public housing, that there is a significant percentage of the poorest 

households that are better served by public housing than by tenant-based vouchers for a number of reasons: 

Public housing is more affordable. A tenant family pays a maximum of 30 percent of their income in rent, and there is no large 

security deposit. It is more supportive. There are neighbors and 

housing managers who are knowledgeable about the programs and 

can provide support and assistance. For the elderly in particular, 

it provides a location to provide services and allows people to age 

in place. Thus, public housing provides homes for a much higher 

percentage of elderly than the voucher program. For people with 

disabilities, it provides accessible housing without the often exhausting search required to utilize a Section 8 tenant-based voucher. And it is more secure for all families. Once you have a public 

housing unit, you can remain without fear of relocation. Tenantbased voucher recipients can be forced to repeatedly search for new 

housing at the end of each year, each time having to locate a new 

unit and obtain a new security deposit. 

So public housing is vitally important, but how do we preserve 

it? The status quo is not the answer. The status quo means a continuing underfunding of capital repairs, a continuing deterioration 

of public housing, and a continuing loss of units through 

demolitions. And this is demolition of housing that can often be 

preserved but there is simply no funding source for that preservation. HOPE VI and Choice Neighborhoods initiatives, even if funded, preserve only a few neighborhoods in the entire country. 

We need additional financial tools if we are to reverse this trend. 

We believe that the Department’s Rental Assistance Demonstration 

proposal could provide that significant additional tool. The Coalition supports the RAD proposal because it meets the essential criteria which the Coalition and its members have developed to both 

provide additional resources and to protect the public housing communities and the residents. 

The RAD requires resident participation throughout, both in development of the RAD program and in the local decision to utilize 

the RAD funding for a PHA or a project. It requires that the resident protections inherent in the public housing model be continued 

in the new funding mechanism, including a right to an informal 

hearing if denied admission, to grievance procedures for residents, 

and to adequate notice and good cause for eviction. It requires a 

continuation of public ownership or control. 

Even in a foreclosure, the Secretary must continue public ownership unless it is simply not possible, and only then can the Secretary consider nonprofit or other ownership. It requires long-term 

use restrictions by mandating that the Secretary offer and the PHA 

accept renewals of the project-based contracts with all of the Federal requirements intact. And it provides an opportunity for residents to choose a Section 8 voucher and relocate outside of the 

11 

project while not jeopardizing the viability of the project-based financing itself. 

And finally, it is a demonstration from which Congress and HUD 

can assess and learn from participating PHAs. This information 

will lead to even broader and better preservation efforts. And, also, 

the Coalition supports the RAD’s attempts to provide options for 

Rental Supplement properties, Rental Assistance Program properties, and Section 8 Mod Rehab, all of which are significantly 

threatened without additional resources. 

The Coalition would strongly urge passage of the RAD proposal 

and provide this resource for both residents and local PHAs in 

their efforts to preserve valuable public housing resources. Thank 

you. 

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

26 of the appendix.] 

Chairwoman BIGGERT. Thank you so much. 

We will now recognize Members for questions for 5 minutes each, 

and I will yield myself 5 minutes. 

Ms. Henriquez, what aspects of RAD are absolutely essential for 

private lenders to view it as an investment-worthy project? 

Ms. HENRIQUEZ. Not being a private lender, but my sense is that 

they will see—we are not asking them to take on a risk or do— 

they will do their own underwriting, as they normally do; they will 

approach these properties from a good business sense. They want 

the same sort of stability and the ability for this property to be viable in the longer term, so we don’t see that there is a risk. We 

think that this is a market that will be—I wouldn’t necessarily say 

new to them, but it will be an expanded market, since, as you have 

heard through the various testimonies, these are safe, proven 

methods. 

But, more importantly, I think it will be helpful for a lender because, finally, we are moving the public housing portfolio to a tried 

and true real estate platform, as opposed to something that is just 

a little bit different, which means you have to be a bit of a contortionist to be able to understand and to do a product. 

So this will be more straightforward. It will be in the norm, in 

the mainstream. And it is not any riskier than anything else that 

is underwritten. 

Chairwoman BIGGERT. So, probably, one of the things that would 

be most essential for you is that it really is the intent of RAD to 

connect private capital with the development and rehabilitation of 

PHAs. 

Ms. HENRIQUEZ. It is absolutely essential. We need to figure out 

how to preserve for the longer term the investment the taxpayer 

has already made. We need to do it with other private capital, because, clearly, the need and the level of renovation that is required 

for the long-term preservation cannot simply be met with today’s 

dollars and annual allocations and appropriations. 

Chairwoman BIGGERT. Thank you. 

Mr. Guerrero, you talked about already having private sources 

for doing the Section 8. In your experience, is maintaining and administering public housing more or less expensive than Section 8 

voucher programs that you also administer? 

12 

Mr. GUERRERO. Thank you for the question, Madam Chairwoman. 

I think that, over time, there is an equalization that happens in 

terms of the cost of the two. There is certainly—the challenge with 

the public housing portfolio is that the capital funding tends to 

come in large, one-time grants. The annual appropriation is often 

minimally sufficient to maintain the properties but not to recapitalize them. Whereas, with a Section 8 contract, the contract rents, 

when set at fair market rents, have been sufficient to cover the operations, the upkeep, and the debt service that we need, when 

needed, to recapitalize a property. 

So it is certainly more predictable funding with the Section 8 

contracts than with the public housing. 

Chairwoman BIGGERT. Is there a difference in size? In the past, 

in Chicago, we have had the Cabrini-Green and the Robert Taylor 

Homes, which were huge. And that has all changed now, to a lot 

smaller public housing. Is there a difference in using voucher 8 or 

the public housing, is there a difference in just what they look like? 

Mr. GUERRERO. No. I think, certainly from the Denver Housing 

Authority’s experience, our portfolio is very diverse. We have everything from single-family homes that are public housing units, 

fourplexes, duplexes, to 100-unit mid-rises, and, sort of, everything 

in between. 

And so, I think that is why this demonstration program is important, because it creates another option. It is not going to be the solution for every housing authority; it is not going to be the solution 

for every property. 

Chairwoman BIGGERT. Great. Thank you. 

Mr. Hydinger, as a private developer, and others as well as your 

organization, do you have a real desire to engage in the activities 

detailed under the RAD proposal? 

Mr. HYDINGER. Thank you for the question. 

Yes, I think when the plan is finalized, I would imagine it would 

mirror many of the attributes of the Low-Income Housing Tax 

Credit program. As long as project-based Section 8 is in the plan 

in the final analysis, I think that is paramount to its success, and 

without that, you will not be able to get these projects underwritten in the private sector. And not only that, it will have to be 

a long-term project-based Section 8 contract. These are two things 

that run together. A 3-year commitment will not do it. It is going 

to need to be more in line with a 20-year committee. 

Chairwoman BIGGERT. 20 years? 

Mr. HYDINGER. And then just the regular real estate is going to 

have to be underwritten in a classic real estate sense. 

So, yes, I am. I think, as was just mentioned with Mr. Guerrero, 

that there are certain properties this will work very well with, and 

I think those are the properties in some of the smaller PHAs that 

a lot of private developers would be able to assist greatly. 

Chairwoman BIGGERT. Thank you. 

And my time has expired. Mr. Gutierrez, you are recognized for 

5 minutes. 

Mr. GUTIERREZ. Thank you very much. 

I want to ask you a couple of questions just in relationship because—I thank the gentlelady for raising Cabrini-Green and Robert 

13 

Taylor Homes, because one of the arguments was that there were 

too many people concentrated in too small an area. When CabriniGreen became a very exclusive part of the City of Chicago, they 

had replacement housing. Now, when I travel through what was 

once Cabrini-Green, I don’t see the same number of tenants or the 

same number of housing units that it replaced. That is to say, 

there were hundreds, if not thousands, of units that have not been 

replaced. People have been given Section 8 vouchers, or other 

kinds. And so, if we end the Section 8 voucher system—which there 

always seems to be problems in terms of funding and expanding 

and where people are going to get housing. 

As I look at that—and you can go by, what is it, the house that 

Michael Jordan built on the west side of the City of Chicago. Nobody really thought of that as land that people would want and a 

community where people would want to create a community, right? 

But people were creating a community there and living there, so 

they tore it down. I just don’t see the replacement housing for the 

people who once lived there. 

Given that, Ms. Henriquez, what do you think? Is this program 

going to lead us to less responsibility on the part of government to 

provide housing and just a transition from public housing to no 

housing? 

Ms. HENRIQUEZ. First, I would say it is not a transition from 

public housing to no housing. The whole point is to preserve the 

existing housing, and we think eventually we will be given the ability to create more housing. The demand has not lessened, and I 

don’t think our responsibility has lessened either. 

It is important to know that one of the things this—one of the 

lessons we hope to learn in this demonstration is what works. 

What works in Chicago does not work in Boston where I am from, 

and does not work in Denver where Ismael is from. And so, it is 

local strategies, it is to figure out what works in the community, 

and to reconnect that public housing into the landscape and the 

portfolio and the life of that neighborhood to make it a community 

asset. It is to stabilize for the longer term how that property performs, because if we don’t have that property performing, it can’t 

serve its mission to house low-income people. And these are tools— 

Mr. GUTIERREZ. Then I guess I will look forward to seeing how 

the demonstration project—I believe you, and I don’t question your 

authenticity and that you are coming to tell us exactly that those 

are your goals. You can almost take the words that you have just 

spoken and add them to programs where the housing has disappeared. As they said, the goal was to improve it. 

In Chicago, even the consent decree, the Gautreaux consent decree, took poor black families and moved them into poor Latino 

neighborhoods, concentrating poverty once again, and taking a 25- 

by-125, 25-foot-wide-by-100, and putting 6 units into it, with the 

goal of, ‘‘We are going to build scattered-site housing.’’ So I can 

take you to scattered-site housing that replaced it, and I assure you 

that in many instances, unfortunately, the quality of life of the people that the goal was for just didn’t happen. 

I hope that we can work really hard to figure out—because I 

know that is your goal and that is your mission and that is your 

14 

passion, to get there. I am just sharing with you, as a person who 

shares your goals and passion. 

Ms. HENRIQUEZ. If I might, again, it is important, that is why we 

have proposed this as a demonstration: to see what does work; how 

it works; if there are lessons that send us back to the drawing 

table, to see exactly what we are doing before we suggest taking 

it to scale. 

Mr. GUTIERREZ. So, Mr. Guerrero, what do you think the longterm impact, positive impact of this, what we are doing as a test 

program today, could possibly benefit in Denver? 

Mr. GUERRERO. Certainly, as Ms. Henriquez said, local markets 

are different. I am from Chicago originally, so I am certainly familiar with what has happened there, and I can tell you that in Denver, it is certainly a different situation and a different solution. 

Our interest and our support for the program is that we see this 

primarily as a preservation initiative, where this would allow us to 

convert one unit from one type of subsidy to another type of subsidy, with the goal of preserving that unit in perpetuity, as long as 

we are in the ownership structure, as an affordable housing unit. 

And we have been successful in Denver in our HOPE VI development to do one-for-one on-site replacement through the HOPE VI 

effort. Again, we have a local—a different situation there, where we 

started with lower-density housing and were able to increase the 

density of what was there before, but always with the goal of preservation. So we certainly see that as a benefit here. 

We do think there will be needs, and we have seen examples and 

have examples in Denver where we might want to reposition some 

units. As Mr. Hydinger said, not all units as they exist today are 

necessarily the most efficient place to have the affordable housing. 

So we certainly would look, in some parts of our portfolio, still to 

replace the units but not necessarily on-site; try to find more efficient ways to create the housing, both more sustainable, better designs, better able to serve the needs of the residents. 

Mr. GUTIERREZ. Thank you so much. 

Thank you, witnesses. 

Chairwoman BIGGERT. Thank you. 

Okay. The vice chair of the subcommittee, Mr. Hurt from Virginia, is recognized for 5 minutes. 

Mr. HURT. Thank you, Madam Chairwoman, and thank you for 

holding this hearing. 

Obviously, we are facing—and I want to thank each of you for 

being here today and providing information to this committee about 

this proposal. 

Obviously, here in Washington, we face unprecedented challenges in balancing our budget. Obviously, the greatest concern I 

think that we have is, how do we do more with less? We are borrowing 40 cents on every dollar that we spend. So, obviously, 

things like this, what I would call market-oriented proposals like 

this, I think are the order of the day. And so I appreciate what you 

all have provided to us in explaining it. 

I guess what I would like to know—Ms. Henriquez, maybe I 

could start with you? It seems to me that anytime you have a demonstration, anytime you have something that is sort of a test, you 

want to be able to measure its success. And I was wondering if you 

15 

could talk a little bit about how you see us benchmarking this. 

How do you measure the success of the program? 

Obviously, I understand that we have capital needs that are significant. You have monetary needs that are significant. And I guess 

if we could just write a check for whatever we wanted to, we could 

solve all these problems, but that is not what we can do. 

So I was wondering if you could talk about exactly what it is that 

will be a measure of success for this program, in as much as it is 

a demonstration. 

Ms. HENRIQUEZ. First and foremost, I think one perspective is 

that the success is that the housing is stabilized and preserved so 

that it serves the people that we care the most about and so that 

residents are not harmed, residents are not having to leave their 

homes and their communities because of difficult conditions in 

their housing. So that is what undergirds all of this. 

I would say another test of success is the willingness of the private sector to invest. And we have seen in the past 30 years that 

they have been quite willing to invest in these kinds of properties. 

And I think the other test is, once that investment is made and 

housing authorities really have stepped up and improved the physical plant, the capital plant, how that property performs. Because, 

as I said earlier, the underlining remains the same. The property 

has to perform in that financial market arena the way any other 

property would have to perform, and yet continue on, also, to serve 

the people it is meant to serve. 

I think those are tests. I think we see what the appetite is in the 

free market as we put more and more of these deals together. And 

as housing authorities decide what works for themselves, we are 

asking them then also to be very judicious and to evaluate and 

monitor what they have done, how they work with their residents, 

to make sure this demonstration rolls out well and smoothly and 

what are the benchmarks. 

So we are asking the financial community to look to make sure 

it performs and they are okay. We are asking residents to look at 

how they feel this process is going. And everyone who touches that 

process will have to help inform how well this demonstration has 

performed. 

Mr. HURT. I appreciate that. And I also appreciate, obviously, 

your commitment, the commitment, it seems, of each of you who 

are in this business, to providing good housing for people who need 

assistance. 

But I guess what I didn’t hear there and wonder if you could 

elaborate on is, do you think that we end up saving money doing 

this? If you are looking out for the taxpayer, if you are trying to 

look at it from that standpoint, it seems to me that would be a— 

Ms. HENRIQUEZ. Undoubtedly. 

Mr. HURT. —worthy goal, right? 

Ms. HENRIQUEZ. It is. As I said earlier in my testimony, we really want to preserve the taxpayers’ 75-year investment moving forward. It needs to be preserved, but it is a pace and a need, a level 

of funding that can’t be matched and is not being matched year 

after year. And so, yes— 

Mr. HURT. Here in Washington? 

Ms. HENRIQUEZ. Here in Washington. 

16 

Mr. HURT. Right. 

Ms. HENRIQUEZ. So, therefore, having investment income, private 

equity coming into these properties really does save, overall, the 

Federal Government. It helps partner public and private money together. With the bulk of that, you have heard—in the HOPE VI 

program, for example, we are leveraging not just dollar for dollar, 

generally $2 of private equity for every dollar of Federal money. In 

some instances, in some communities, that leverage may be three, 

four, sometimes as much as eight to one. And as those economics 

bear out, the savings are generally there. They are front and foremost. 

Mr. HURT. Thank you very much. That answered my question. 

That is my time. Thank you. 

Chairwoman BIGGERT. The gentleman from Missouri, Mr. Clay, 

is recognized for 5 minutes. 

Mr. CLAY. Thank you, Madam Chairwoman, and I thank the witnesses for being here today. 

Let me ask you just a few things about this proposal, and anyone 

on the panel can take a stab at it. 

How will the PHAs and HUD address this displacement of tenants when rehabbing of units occurs? Has anyone thought about a 

plan for that? 

Let’s start here. Mr. Elsesser? 

Mr. ELSESSER. Thank you for the question, Mr. Clay. 

I think that the temporary displacement during rehabilitation is 

a really important question. I think HUD does have in place rules 

and requirements for the counseling and the displacement of tenants. I think that is a vital part of it. 

And I think it is not a question of the necessity of putting that 

in this proposal so much as enforcing the rules that already exist. 

You want to make sure that the tenants have a place to go, that 

they receive counseling before they move, and that if they want to 

remain offsite, they can remain offsite, and that they do have a 

right to return. 

One of the important features of this proposal that has been 

missing sometimes in the past is, if the tenants do want to return, 

they have a right to return without having to go through an entire 

rescreening process. 

Mr. CLAY. And that will remain in place under this proposal? 

Mr. ELSESSER. That would allow them to come back to the units 

and not to apply as if they were, sort of, just coming in off the 

street. 

Mr. CLAY. Okay. 

Mr. Guerrero, anything to add? 

Mr. GUERRERO. If I may provide a perspective from the Housing 

Authority, we have certainly learned in Denver that for the sake 

of the families, it is much better to do phased development versus 

wholesale redevelopment, where you displace the entire community 

for a longer period of time. 

And we have been successful on two different occasions in doing 

the redevelopment in phases, where we are moving a portion of the 

community out for a shorter period of time and then rotating 

through the rehab process, so that over time families are moving 

from one unit to another, staying in their communities, staying 

17 

close to their support networks and to their other family members, 

rather than being relocated for an extended period of time, where 

they get disconnected from the community. And we have had success both in public housing and in the Section 8 rehab with that. 

Mr. CLAY. Okay. 

Ms. Henriquez—Secretary? 

Ms. HENRIQUEZ. It is absolutely essential that tenant rights 

carry over, that tenants have the ability to participate meaningfully in the conversion discussions at a housing authority before 

they even apply for a conversion, and that they are consulted in a 

meaningful way throughout the entire process, and that includes 

relocation, relocation rights, their ability to return. 

My expectation is that housing authorities, in so doing, will actually work with residents, both with a broad relocation policy and 

then tailor individual relocation plans, baskets of services, around 

each family as they transition offsite, make their decisions about 

their right to return. 

This is not about gentrification; it is about bringing people back 

to their community in a stable way. 

Mr. CLAY. Okay. 

I am going to ask you and Mr. Hydinger a separate question 

about tenant environment. Will those who live in and around these 

public housing facilities be able to participate in a meaningful way, 

especially those who are chronically unemployed and those who 

qualify under Section 3, be eligible to work on these projects? Is 

there some kind of plan that you have considered to actually create 

employment opportunities for the people? 

Ms. HENRIQUEZ. Section 3 is a requirement for all public housing 

authorities. So as they move forward in the development of their 

construction plans, hiring their contractors and so on to do the 

work, it is fully our expectation—and we will be monitoring—that 

residents both of the public housing development that is being preserved as well people who are similarly situated in the community 

have an opportunity to participate in employment moving forward 

as those properties get redeveloped. 

Mr. CLAY. Mr. Hydinger, being a developer, do you involve Section-3-eligible employees in your developments now? 

Mr. HYDINGER. What we do is we encourage the general contractors to hire from the property as much as possible. And when that 

is possible, there is a certain pride of ownership that comes with 

that. And we have been successful, seeing that occur from time to 

time. 

It is—I will not embellish it. It does not happen as often as we 

would like— 

Mr. CLAY. Sure. 

Mr. HYDINGER. —but it does happen. And I think it is a success 

every time it does occur. 

Mr. CLAY. It should occur more often, shouldn’t it? 

Mr. HYDINGER. If the person who is applying is able and willing 

to work, absolutely. 

Mr. CLAY. My time is up. Thank you. 

Chairwoman BIGGERT. The gentleman’s time has expired. 

The gentleman from Missouri is recognized. 

Mr. CLEAVER. Which one? 

18 

Chairwoman BIGGERT. Mr. Cleaver? 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Chairwoman BIGGERT. I am not calling on Mr. Clay again until 

we have— 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

The Rental Assistance Program that my colleague, our colleague 

introduced a few months ago—and I had a chance to talk with him 

for just a few moments before coming in—Mr. Ellison, is something 

that I support wholeheartedly. I am one of the cosponsors. 

But I have some questions for you, Ms. Henriquez. If public 

housing authorities are actually able to hold debt, does that not 

create the opportunity for foreclosure? 

Ms. HENRIQUEZ. Whenever any entity holds debt, there is an opportunity for foreclosure. We have 30 years, thus far, of practice 

with proven, safe tools on financing that we really on that will 

carry forward in this demonstration. And over that 30-year history, 

we have learned, for example, that on the multifamily side, the default rate, if you will, is less than half of 1 percent. Even in the 

current fiscal environment, it is very, very, very small. 

In addition, the way in which this demonstration is constructed, 

that even if there should be, by some slim chance there should be 

a foreclosure or a default, all of the use-agreement restrictions 

carry forward. Tenant protection rights are still in place. Longterm affordability is still in place. And so the purpose of the housing remains, the affordability remains, and we have the ability 

then to have that property, with the use agreements in place, 

picked up by another not-for-profit or public sector entity, another 

housing authority. The Secretary has the ability to make that 

change in ownership, always underlined by the long-term affordability and the tenant protections going forward. 

Mr. CLEAVER. I can say of this project what I used to say, and 

I will change it, modify it. I would say, McDonald’s is the only entity I have known not to go bankrupt or go into default. So we can 

now add public housing authorities. 

Ms. HENRIQUEZ. I don’t see them going into default. 

Mr. CLEAVER. Okay. I am okay with it. 

The other concern is maybe more significant—a more significant 

concern is, if you have seen the HUD appropriations markup, the 

marked-up House and Senate—you are not getting what you asked 

for. So my concern is, if you ask for $200 million and you get—I 

don’t know what—you are not getting what you asked for. So what 

does that do to the program? 

Ms. HENRIQUEZ. We think the program is important. It provides 

a direction, a blueprint for us to model, to move forward. So if we 

are not getting what we asked for, we need to then scale the program. 

Mr. CLEAVER. I know— 

Ms. HENRIQUEZ. In addition—I am sorry. In addition, what we 

have said is we have seen the Senate mark on this, asking us to 

look at a no-cost demonstration. We would support this committee 

looking at that option as well. And we are prepared still to go forward with a demonstration at a no-cost proposal because we think 

that the direction is absolutely a sound one. It is what is needed 

19 

for this portfolio. In the longer term, there are lessons for us to 

learn and then to take it to scale over time. 

Mr. CLEAVER. I want to talk to you further about that, because 

I don’t want the failure for the Senate and the House to give sufficient money for the demonstration and then end up in this subcommittee hearing again with people complaining that the demonstration was far too imperfect. 

We can talk, because I need to ask one more question, Madam 

Chairwoman, and I will do it very quickly. I am concerned with 

making sure that the demonstration project doesn’t result in a loss 

of units, that we still have the one-for-one. 

Ms. HENRIQUEZ. What we will have is in most circumstances, we 

will probably have one for one. I think I would say to you, though, 

that in limited circumstances, given market conditions, that indeed 

there may be some other ways to come at that replacement housing 

in a community. But for the most part, we are looking not to lose 

units in this preservation strategy. 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Chairwoman BIGGERT. Thank you. The gentleman from Minnesota is recognized for 5 minutes. 

Mr. ELLISON. Thank you, Madam Chairwoman. I am going to ask 

you a question, a general question about housing, low-income affordable housing. For people who make, like, 30 percent of the median income in a given area, would you say the housing options for 

them are plentiful or scarce? How would you characterize that? 

Ms. HENRIQUEZ. Are you asking me? 

Mr. ELLISON. Anybody. I am actually asking anybody. 

Ms. HENRIQUEZ. I think that it is difficult, that the demand far 

exceeds the supply, and that there are fewer and fewer options 

available unless families—when you start thinking about transportation costs and housing costs—are paying in excess of 50 percent 

of disposable income on those two commodities alone. 

Mr. ELLISON. Has the foreclosure crisis, the way it affects not 

only homeowners but also tenants—because, of course, landlords 

get foreclosed on too—has this exacerbated the pressure on low-income affordable housing or has it eased it? 

Ms. HENRIQUEZ. It has exacerbated it in a number of ways. One, 

we are finding that the normal turnover time, the people come in, 

stay, and then move out through their own choice—the people are 

staying longer. We are finding that people are poorer as they come 

into the program, and we find that both on the voucher program 

and on the public housing program that people are, I think, eager 

for more and more economic self-sufficiency and want to get themselves prepared, but it is tough fiscal times for the very poor. 

Mr. ELLISON. Based on the history of Congress appropriating 

money for maintenance of assets of public housing, do you think 

that we have a realistic chance of ever getting the $26 billion in 

maintenance needs that exist right now as an appropriation? 

Ms. HENRIQUEZ. I want to put my former hat on when I answer 

this question. For 13 years, I ran the Boston Housing Authority. 

As a former executive director, I would say if there is the political 

will to do that in this country, we can do anything that we put our 

minds to. 

Mr. ELLISON. Based on history, do you see it coming up? 

20 

Ms. HENRIQUEZ. Given the history and the trend, I don’t see that 

happening. And that is why it is vitally important that we look to 

this rental assistance demonstration. We are being realistic about 

the current financial times we are in. We are being realistic about 

the need for us, both at HUD as an asset manager and for housing 

authorities, to be good landlords. And in part, a large part of that 

being a good landlord is providing the kind of safe, affordable, decent housing that meets code and expectations in local communities— 

Mr. ELLISON. Thank you. 

I would like to open this question up to everybody. When I introduced the bill that is similar to this one—this is a demonstration 

bill; I had a bill that was more broad-based. I am a hardcore believer in public housing. I think it is a very important program. 

But some of my friends say, are you trying to help folks privatize 

public housing? And I said, absolutely not. This is a way to get 

some lights on and some fixtures, and this place to be a better 

place. But how do you respond to that criticism that this could end 

up being a provision of public housing? How do you react to that 

particular criticism? And I would invite anyone to respond. 

Mr. ELSESSER. Mr. Ellison, if I might. I have worked with many 

people around your bill on a continuing discussion—the coalition— 

the continuing discussion since that time about that very subject. 

And I can agree with you that there is a lot of concern among residents who saw a major loss of housing through HOPE VI and other 

events like that. And we are very fearful of anything. 

And I think the Secretary and the Assistant Secretary, to their 

credit, reached out, and through your bill in addition, reached out 

and worked very hard with people. And I think this bill is a result 

of that working to both try to incorporate protections to the greatest extent possible, from the public housing side to allay those 

fears. And at the same time, a realization amongst the residents 

that the status quo is not working; that the status quo does not 

mean we are not losing housing; we are losing housing. So we have 

to do something. And I think both of those things have come together, and I think that is why there is such support for this proposal. 

Mr. ELLISON. I think we have it—if we are not done— 

Mr. GUERRERO. I would like to add something. 

Chairwoman BIGGERT. One more. 

Mr. ELLISON. Thank you. 

Mr. GUERRERO. I think—two points, I guess I would make to 

your question. One is that when you only think about serving families through subsidized housing, we should look at it not exclusively through whether it is public housing or Section 8 or so forth, 

but are we serving the most families at the lowest incomes for the 

longest period of time in whatever form that may take. I don’t see 

a shift from public housing to project-based Section 8 subsidies as 

a loss of units in any way, because recently our experience is that 

we are serving the same number of families with the same incomes 

for the same periods of time, if not more. 

The other thought I would put out there for consideration is that 

it is not necessarily a cost-savings strategy, but maybe a better return-on-investment strategy, where today $1 of capital fund gets 

21 

you, just for example, $1 of improvement. But our experience I 

think is a dollar of Section 8 half rent might get us $2 of capital 

improvements because we are able to leverage that more effectively 

in the private sector through loans and through equity. 

Mr. ELLISON. Thank you, sir. Thank you, Madam Chairwoman. 

Chairwoman BIGGERT. Thank you. And I would have just a couple of questions with hopefully short answers. 

But first of all, Mr. Guerrero, you talk about the local decision 

making. And it seems like you have been doing Moving to Work. 

Are you part of that? 

Mr. GUERRERO. We are not a Moving to Work—we would like to 

be a Moving to Work agency. 

Chairwoman BIGGERT. Do you think Moving to Work would provide the flexibility and local decision-making and innovative financial methods you have described in the public housing authorities 

in order to develop the local solutions? Do you think this is really 

part of what we are talking about? 

Mr. GUERRERO. Absolutely. I think the flexibility, the ability to 

craft solutions locally with not only our residents but our local 

elected officials, local community stakeholders, is invaluable in that 

the option should be there for more housing authorities than currently have the designation. I think there are a lot of lessons 

learned already and best practices for Moving to Work that can be 

mainstreamed and regulatory relief that can be implemented now 

to give us more flexibility than we have, yes. 

Chairwoman BIGGERT. Okay. And then, Ms. Henriquez, how 

were participants in the multifamily and affordable housing developer community consulted during the development of RAD? 

Ms. HENRIQUEZ. Much like we did in the public housing side. My 

colleagues on the multifamily side, we had stakeholder convenings, 

we have had some with housing authorities, we had some with 

multifamily owners. There was a lot of outreach through State 

housing finance agencies. There was a working committee that was 

put together so that the issues that they would raise that might 

be particular to a multifamily owner were addressed and talked 

about, and how did those line up with where public housing authorities might be. So we really put people together in lots of different ways to have this conversation. 

Chairwoman BIGGERT. How did you find out about this, Mr. 

Hydinger? 

Mr. HYDINGER. I was called and asked some questions, and, 

through a series of conversations, asked for my input. Would private capital, private investors, developers, etc., be welcomed to the 

program? And, frankly, I said no, not the way it was written right 

now. I hope that it will be. And I would like to just say that private 

is not bad. It really isn’t. Lots of people own affordable housing 

that are private developers and private owners, and they do quite 

well and they are governed by HUD. So Halloween is over, the bogeyman about the private sector is not all bad. I just want to be 

sure that we keep that in mind. But I do appreciate the input. 

Chairwoman BIGGERT. Thank you. 

And then, Ms. Henriquez, how does HUD intend to analyze the 

outcomes of the demonstration? What are the next steps that HUD 

is contemplating once you are able to observe the outcomes of 

22 

RAD? And how long will it take for the demonstration to provide 

adequate data for an analysis? 

Ms. HENRIQUEZ. I think we are probably talking as a demonstration for several years because we really do want both housing authorities and their residents to be thoughtful about what they are 

proposing, which properties they are thinking about bringing in 

and how they are going to do that, number one. They also have to 

put together physical plans about how they are going to use the 

capital dollars, how they are going to get into the marketplace, 

whether they are going to use commercial financing, whether they 

are going to use tax credits. All of that is a local decision that housing authorities, their communities, and their residents need to talk 

about. 

Once that happens and there is an application and people voluntarily decide what this program means and what it is going to look 

like for them at the local level, by the time we think that they get 

the plans in place, they get the funding in place and their financing 

straightened out and actually begin the work—relocation of residents, actually doing the physical work, moving people back in— 

that is a multiyear process. We want to look at along the way what 

is going on, what those impacts are both on residents and on the 

housing authority and on the financial community. 

So I think we are looking at several years before we really get 

a body of work to assess and then make some judgments about 

growing the program and the lessons learned, and coming back to 

have conversations with all of you as well about those lessons 

learned before we take the next step. 

Chairwoman BIGGERT. Thank you. Do any of you recommend any 

improvements or modifications or further considerations considering RAD at this time? I guess not. So it sounds like you are all 

willing and able to do that. 

Ms. Henriquez, were you in charge of bringing all of these shareholders, stakeholders I should say, together to come up with RAD? 

Ms. HENRIQUEZ. In charge of. So, working with— 

Chairwoman BIGGERT. I am just wondering where this idea all 

came from. 

Ms. HENRIQUEZ. We have had several iterations of a bill in the 

past 18 months or so. We heard lots of conversations, and so a lot 

of times as we talked about this—there is a group at HUD, it is 

collaborative. It is in the multifamily side as well as the public 

housing side, and we jointly sort of ran this program and these 

ideas. And so Carol Galante and I were co-conveners. We have staff 

who worked with each other as well. And we have just been running this to ground. We have people actually doing lots of—and 

some of them are here behind me—actually running numbers, looking at permutations, trying to figure out strategies, looking at the 

environment, just everything. And then listening to residents and 

housing authorities, from lenders about this works, this might not, 

and really running to ground. And then we really had a group of 

people come and say, we think it could work this way; what do you 

think, HUD? We have talked about that. And so, what you see is 

where we are with this demonstration now. 

Chairwoman BIGGERT. Thank you. And thank you for initiating 

such a deliberative process. That is what we are working to do 

23 

with—to develop Section 8 as well. I really appreciate all of your 

work. Are there any other questions? Mr. Hurt? 

Thank you. And I would ask unanimous consent to insert the following material into the record: an October 11, 2011, letter from 

the U.S. Department of Housing and Urban Development; an October 31, 2011, letter from the Housing Assistance Council; a September 14, 2011, letter from the Coalition of Housing Industries; 

and a November 2, 2011, letter from the National Association of 

Housing and Redevelopment Officials. 

And without objection, all Members’ opening statements will be 

made a part of the record. The Chair notes that some Members 

may have additional questions for this panel which they may wish 

to submit in writing. Without objection, the hearing record will remain open for 30 days for Members to submit written questions to 

these witnesses and to place their responses in the record. 

And I would like to thank you all. I think this has been a great 

hearing and it has given us a lot of information. And I hope that 

we really can move ahead with this. This is such an important 

issue. And thank you all for being here. With that, this hearing is 

adjourned. 

[Whereupon, at 4:12 p.m., the hearing was adjourned.] 

(25) 

A P P E N D I X 

November 3, 2011 

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