Statement of HUD Secretary Andrew M. Cuomo before the
April 9, 1997
Senate Subcommittee on Housing and Community Opportunity
Mr. Chairman and Members of the Committee: Thank you for
inviting me to testify on S. 462, the Public Housing Reform and
Responsibility Act of 1997, and more generally on the very
important matter of public housing reform legislation. I
appreciate the opportunity to return to the committee that held
my confirmation hearing. I request that my entire statement be
included in the record, as well as a summary, to be provided for
the record, of HUD's "Public Housing Reform Act of 1997".
If we work together, we can enact historic legislation this year.
As I told the House Housing Subcommittee last month, I will work
day and night with the Committees, others in Congress and other
interested groups -- including those who are served by the
programs and those who administer them -- to obtain passage of a
constructive, and definitive, public housing reform bill. In
that spirit, I have directed HUD to draft a bill -- the Public
Housing Reform Act of 1997 -- that presents HUD's positions in
specific language for your consideration.
We need a strong bill to improve the quality of life for families
who live in public housing. We're determined to create new
opportunities for the children who grow up there, to build
communities of hope and optimism.
Public housing should be supported
The majority of public housing is a success. It works, and it's
a valuable resource. It's well-run, a good place for families to
live. In fact, out of 3400 housing authorities, fewer than 65
are designated troubled by HUD.
But we have made mistakes with public housing. In the past,
public housing has been purposefully racially segregated.
Sometimes the original site plan and architecture of the
development was flawed; other times, the buildings just wore out,
outlived their useful lives. Sometimes seriously flawed
management contributed to the deterioration of the housing ... or
neighborhoods changed from residential settings to locations for
manufacturing, for warehouses -- sites where nobody wants to
live, or should have to live. Sites where the children see that
virtually nobody goes to work in the morning.
None of us would justify allowing our children to live in these
conditions: segregated, dangerous, dense, isolated. Literally a
Where public housing is not working, we must face up to it and
fix it -- make it work for the families and communities it serves
or, if it is not fixable, replace it with other housing
Public housing is a vital part of many communities, the only
affordable housing alternative for a great many people.
Although it's a small part of our national housing resource, more
than one million public housing units represent more than one-
third (34%) of the housing that is affordable to extremely low-
income families. Families at about the minimum wage level.
In Dade County, Florida, public housing accounts for more than
one-fifth (21%) of rental housing affordable to extremely low-
In Baltimore, it represents nearly one-quarter (23.4%) of the
rental housing affordable to these families.
In Boston, public housing accounts for almost half (43%) of the
rental housing affordable to extremely low-income families.
Hartford's public housing makes up 36% of the rental housing
affordable to these families.
And New York's nearly 160,000 (157,229) public housing units
account for 65% of the rental housing affordable to extremely
Nationally, public housing serves only about 25% of the people
eligible for assistance. And more than 5.3 million households
pay 50% or more of their income for rental housing.
All across America, people -- and communities -- need public
housing. It's a resource we dare not waste.
Public housing must not be a world apart. It can be, must be, a
proud and productive part of the community. It must become a
place of promise, a place to nurture and grow the seeds of
citizenship, a place to build opportunity for a better life and
commitment to a better country.
We have to look at public housing in the overall context of
community development -- public housing and jobs, public housing
and transportation, public housing and services. We must break
down the walls between public housing and the rest of the
community. For that to happen, public housing must work for the
people who live there -- and for the entire community.
Context for a bill
We need a public housing bill to continue and strengthen the
transformation of public housing that is not working for the
people who live there, public housing that is a blight on the
community. We will support the best public housing and improve
or replace the worst.
Mr. Chairman, over the past two years, a consensus has developed
regarding the basic strategy for transforming public housing.
That consensus is due primarily to the leadership of former HUD
Secretary Henry Cisneros and the Congress. Thanks to that
leadership, we have made a substantial start on public housing
transformation. We have begun to demolish the worst public
housing and replace it with a mix of lower-density development
and portable vouchers, replace the worst management and work in
partnership with other PHAs, support communities with more
working families and get together on crime. Working together,
our efforts have included:
I think we all agree that the various public housing programs
need to be consolidated and the tenant-based certificate and
voucher programs merged; that additional deregulation is needed
for well-performing PHAs; and that actions to address failing
PHAs need to become more predictable and more effective.
- suspension of the "one for one" replacement rule that is
allowing PHAs to demolish the worst of their stock. To
date, 23,000 units have been brought down nationwide; and
about twice that number have been approved for demolition;
- implementation of the Hope VI program, not only to rebuild
dilapidated public housing, but to revitalize whole
communities and provide portable subsidies that expand
- vigorous HUD intervention to turn around several large
troubled PHAs, including the most difficult PHA, Chicago;
- suspension of so-called federal preferences to enable PHAs
to admit more working families and build bridges to the
- enactment of ceiling rents and optional earned income
disregards to attract, retain and support working families;
- adoption of "One Strike" efforts to clean up crime and drugs
in public housing, based on Congressional action, HUD
guidelines and the President's personal intervention.
We have a solid foundation of agreement. But, we have been
unable to enact many of these initiatives on more than an annual
basis in Appropriations Acts. Year-to-year legislative action is
not enough to support the fundamental reform that is needed.
These are not political issues, they are not partisan issues.
They are issues we must resolve for the benefit of the people and
communities we serve.
I believe that we can not only resolve the remaining issues this
year, but improve upon last year's efforts. We can go further to
provide the responsible deregulation needed by HUD and PHAs as
they cope with more limited resources. Even with limited
resources, we can more effectively demand results from PHA
management by focusing on what counts, particularly the condition
of the housing. Most importantly, we can and must make these
reforms and bring about more viable public housing communities,
without compromising the basic principle that our precious
housing subsidy resources must effectively serve those with
substantial housing needs.
HUD's Public Housing Reform Act of 1997 would accomplish these
goals. It would build upon the work of both Houses, so that a
constructive bill can be promptly passed. Mr. Chairman, I would
like to describe HUD's proposal by focusing first on management
reforms: responsible deregulation, program streamlining, and
Responsible deregulation and program streamlining are
essential for PHAs' performance and HUD's managemen
In a world where projected PHA resources are flat and HUD
staffing is projected to drop from 11,000 to 7500 persons,
substantial deregulation and streamlining is essential. HUD'S
legislation would accomplish this by scaling back both the HUD
approvals and the submissions required of PHAs under both current
law and the Senate and House proposals; substantially
deregulating small PHAs; combining and consolidating programs and
converting programs from competitive to formula funding systems.
First, the PHA plan requirements can be scaled back responsibly.
HUD's bill essentially would limit HUD approval to the areas of
greatest funding or program risk -- capital plans, demolition or
disposition including disposition for homeownership, designation
of housing for use by particular populations such as the elderly,
and certifications that citizen participation and other processes
were followed. Additional basic information -- notably
admissions policies including local admissions preferences,
cooperation efforts with welfare and employment agencies and
security plans -- would be included and subject to the citizen
participation process, but reviewed by HUD only for completeness
in the event of a challenge. Drug Elimination planning
requirements would be consolidated with the other plan
requirements. Of course, HUD would retain authority for audits,
collecting essential information, enforcing of legal requirements
such as rent rules and consistency of admissions preferences with
local needs, and intervening to correct severe management
failure. With respect to reporting, various annual reports could
be consolidated into one performance report.
A five-year strategic plan and annual performance reports would
be required. Numerous performance reports currently required by
HUD would be consolidated. High-performing PHAs would receive
additional points in funding competitions.
HUD'S bill would substantially deregulate small PHAs with 250 or
fewer units. These PHAs number about 2500, or over two thirds of
all PHAs, but manage only about 200,000, or 15 percent, of the
public housing units. For these PHAs, capital and operating
funds could be made fully fungible. A less complicated Public
Housing Management Assessment Program (PHMAP) evaluation system
with no more than five factors would apply. These PHAs would
remain subject to basic laws and approvals, such as rent
limitations, income targeting and demolition/disposition
approvals, and of course to audit requirements.
HUD's bill would make additional changes to assure that PHA and
HUD staff time can be devoted more to improved conditions and
less to paperwork. The Comprehensive Improvement Assistance
program (CIAP) and the Drug Elimination Program (DEP) would be
converted from competitive programs to formula programs, thus
making the funding process much easier. The supportive services
program funded in each of the past two years would be
consolidated with the tenant opportunity program, with both PHAs
and resident groups eligible to apply.
S. 462 shares with HUD's bill numerous important deregulation and
streamlining steps, such as permanent adoption of the reforms in
the appropriations acts, adoption of one capital fund and
operating fund in place of multiple programs, merger of the
certificate and voucher programs and allocation of modernization
funds for small PHAs (CIAP) by formula rather than by staff-
intensive competition processes. The reduced plan requirements in
S. 462 are a significant improvement from last year's bill. The
bill does not go as far, however, as several steps HUD is
proposing. For example, PHA plan requirements remain more
demanding than HUD would require, and the Drug Elimination
program would remain a competitive rather than a formula program.
In addition, S. 462 adds requirements which may sound desirable
but add administrative burden. For example, the requirement that
over the next two years PHAs conduct detailed cost comparisons
between the cost of continuing each development as public housing
or converting it to tenant-based assistance is well-intentioned,
but the requirement to carry this out for every site is more
sweeping than necessary to assure the efficient use of subsidy
There are other areas related to local flexibility where S. 462
is silent or problematic and HUD is proposing additions. First,
while I fully support the repeal of the one-for-one replacement
requirement, there needs to be some means of giving communities
undertaking demolition a way to rebuild or acquire some
replacement housing. Sometimes, not all of these needs can be
met by vouchers or the Hope VI grant process. HUD's bill would
allow PHAs demolishing housing to retain limited amounts of
modernization funds to be used for either replacement housing or
for other capital needs. Second, HUD's bill specifically allows
PHAs to undertake site-based waiting lists, subject to applicable
civil rights and other laws. This could help PHAs attract
tenants with more varied incomes to some sites, and thus
contribute to the viable communities we all seek. Third, HUD's
bill would provide the additional flexibility needed so that
Section 8 certificates finally can become an effective tool to
promote homeownership. Fourth, HUD's bill does not contain S.
462's prohibition on any additional formula funding for
incremental new public housing units, which HUD views as too
Responsible enforcement must accompany responsible
deregulation: more accurate identification of management
problems, more timely preventative action, insistence on
improved conditions, and more certain and effective use of
The current Public Housing Management Assessment Program (PHMAP)
has been a major advance in the identification of problem PHA
management over the prior system that was based upon subjective
HUD judgments. Recent studies have confirmed, however, that the
PHMAP evaluation system of simple indicators regarding PHA
management needs redirection.
Recently proposed administrative changes to PHMAP will increase
the usefulness of the indicators. In addition, I feel strongly
that we must find a greater role in that system for physical
inspections of the properties. Improvement in PHA management
indicators means nothing to the families we serve unless
conditions actually improve, and PHMAP's relatively light
treatment of physical conditions compromises its credibility.
PHAs ideally should not be given passing grades, without further
explanation, while a substantial portion of their occupied units
fail to meet basic housing standards.
To address this matter, HUD intends to undertake baseline
inspections for the entire PHA system, undertake inspections at
troubled authorities annually, and institute inspections at other
authorities on a regular basis. HUD also will initiate a
national financial auditing system and increase the scope of
independent audits, so that they more regularly provide
information supportive of PHAs' PHMAP certifications of
management progress. HUD is evaluating additional steps such as
requirements for minimum compliance with housing codes, or at
least progress toward compliance, to escape troubled status.
These steps will be reflected in an evaluation system that
replaces the current PHMAP system.
The HUD bill also proposes an advisory Performance Evaluation
Board. The Board would consider further improvements to the
evaluation system. The improvements to be considered would
include any possible role for peer review, accreditation and
placement of more emphasis on the actual condition of the
The evaluation system only is meaningful if enforcement is
effective. Under Secretary Cisneros, HUD finally actively
intervened to turn around various troubled authorities. Those
PHAs subject to HUD takeovers in various forms have included
Chicago, New Orleans, San Francisco, Springfield, Illinois and
some smaller PHAs. HUD has also assisted court receiverships in
Kansas City, Missouri, Chester, Pennsylvania and Washington, D.C.
We have learned some lessons from these efforts. Although
intervention is essential, the substantial involvement of HUD
itself in the staffing and operations of troubled PHAs has had
mixed results. In any event, that kind of approach will not be
possible with reduced HUD staff in the future.
Therefore, while I support the intent of S.462's provisions
regarding takeovers and receiverships, HUD's bill would go
further. With respect to large PHAs with more than 1,250 units,
HUD would be required to petition for judicial receivership where
a troubled PHA remains troubled after one year. With respect to
smaller PHAs, where problems sometimes can be remedied fairly
easily by an alternative manager, HUD could choose after the year
between petitioning for a judicial receiver and imposing an
HUD's oversight should be particularly stringent where there are
the greatest risks regarding effective use of large sums of
money. Because of the funds involved, the large scale of
construction and the importance to the program of difficult
negotiations with private developers and investors, oversight of
the Hope VI program is critical. With that in mind, HUD will
insist upon private sector contract representatives who will help
to ensure that the expenditure of Hope VI funds is cost-
Moreover, the inability of some PHAs to use precious resources in
a timely fashion can no longer be tolerated. HUD's bill also
requires withdrawal of Hope VI funds if construction does not
start in 18 months and activities are not completed in four
years, and withholding of modernization funds where funds are not
obligated within eighteen months of their initial availability.
The bill must make the needed reforms to bring about more
viable public housing communities, while retaining the
programs' focus on assisting the least fortunate at
All of these management reforms will be irrelevant if we cannot
also create public housing communities that are safer, less
isolated, more supportive places to live. Virtually everyone
agrees that this means communities with more of a mix of working
households. The bill must perform a balancing act to allow this
goal to be accomplished, while retaining the programs' core
mission of serving those with substantial housing needs.
The question of who will be served by housing subsidies is
addressed by the bills' income targeting provisions. For public
housing, HUD's bill retains the current law eligibility ceiling
of 80% of median, with requirements that forty percent of new
admissions have incomes below thirty percent of median and ninety
percent have incomes below sixty percent of median. With respect
to each development, as a minimum protection against economic
segregation, the bill requires that forty percent of the
development's occupants have incomes under thirty percent of
median. The requirements are consistent with, and somewhat more
protective than, those of S.462. They are much more protective
than the provisions in the House bill, which would result in
effectively no targeting for very low income families.
Congress has recognized that because tenant-based Section 8
consists of rental of private apartments throughout communities,
the program does not raise as severely the concern of over-
concentration of the very poor. Thus, it can be more targeted to
the neediest families than public housing. For that reason, the
federal preferences that targeted admissions to those most
desperately in need previously applied to 90% of new admissions
to tenant-based Section 8, but only 50% of new admissions to
This distinction between the public housing and tenant-based
Section 8 programs should be continued, particularly since the
incomes of those admitted to public housing must be broadened.
HUD's bill proposes that Congress retain the current law
eligibility limits for the tenant-based Section 8 program of 50%
of median with exceptions for previously assisted tenants, rather
than adopting S.462's proposed increase to 80% of median. It
also requires that 75% of new admissions to a PHA's tenant based
program have incomes under 30% of median. This proposal is less
restrictive than the targeting of tenant-based Section 8 that
existed under the federal preferences, but still assures that
this assistance largely is directed to those with the greatest
unmet basic housing needs.
With respect to rent rules, both HUD's bill and S.462 agree that
the Brooke amendment should remain and that for public housing
PHAs should be able to change "up to" thirty percent of adjusted
income. Our proposals also are similar on minimum rents. HUD's
bill sets minimum rents at twenty-five dollars per month, with
both HUD and PHAs able to require classes of hardship exemptions,
while S.462 allows PHAs to set minimum rents up to $25.
HUD's bill also would expand the authorized ceiling rent levels
that would be paid for under the federal operating subsidy
formula. The current law provides for ceiling rents at the
greater of market or rental value operating cost of the property.
Its effectiveness is compromised, however, because the operating
cost floors are sometimes higher than market rental values for
the developments. These floors also are too high for the ceiling
rents to help working families with incomes near the minimum
wage. HUD's bill would address this problem, by allowing ceiling
rents at the greater of market or 75% of operating costs in
family developments rather than the greater of market or 100% of
operating costs as in current law. Such a change could boost the
effectiveness of ceiling rents, while maintaining adequate fiscal
Both the House bill and the Senate bill contain provisions to
make work pay, through an eighteen-month disregard of income
earned by previously unemployed workers followed by a three-year
phase-in. HUD's bill now contains the Senate provision. While
HUD supports provisions to help move public housing residents
into the work force, it is mindful of the administrative burdens,
the costs and the uncertain impacts of this yet untested work
incentive. I will work with the Committee and others to
eliminate or reduce disincentives to work in our housing
assistance programs and to devise the most cost-effective
incentives we possibly can.
Other substantial concerns: welfare reform, crime reduction
When the Senate passed its bill last year, welfare reform had not
been enacted. Now, many public housing residents are subject to
new and critical welfare program requirements.
Both HUD's bill and S.462 recognize that the principal job of
housing authorities is to manage housing, not to undertake
welfare reform. Thus, both bills require PHAs to seek
cooperation agreements with other agencies that would target
services to help public housing residents become self-sufficient,
provide that rents will not go down if a household's income drops
because of non-compliance with welfare rules and require eight
hours monthly of community work for families not already subject
to welfare program work requirements or in school or training;
but would not require the housing system to duplicate the welfare
system's self-sufficiency efforts. HUD will work with the
committee to resolve the remaining differences in our common
approach. These include HUD's proposal that rents drop if a
family's income drops solely because time limits have expired and
the household has not found a job.
The residents of public and assisted housing generally are the
biggest supporters of efforts to get tough on crime in their
communities -- they have to live with the crime. The President,
Congress, and HUD commenced the promising "One Strike" initiative
last year. HUD's bill consolidates the relevant legal authority
and extends this authority to assisted housing other than public
housing, and continues the Drug Elimination Program as a separate
It is time to work together to pass a bill
The HUD bill and S.462 are in many respects very close; but,
clearly, substantial work remains for us to produce a successful
Let us make a commitment to resolve the remaining issues. With
bipartisan effort, we can pass a bill that will put the public
housing and tenant-based Section 8 programs on a much sounder
basis for the difficult years ahead. I invite you to work with
me to achieve that goal.
Content Archived: January 20, 2009