Testimony of Secretary Andrew Cuomo
March 10, 1999
Subcommittee on VA, HUD and Independent Agencies
House Appropriations Committee
Chairman Walsh, Ranking Member Mollohan, Members of the Subcommittee. Thank you for inviting me here today to discuss HUD's FY 2000 Budget.
Mr. Chairman, it is a special privilege to be here today as you take on the leadership of this Committee. You have the good fortune to both come from a great state and to now chair a great Committee. Last year, HUD and this Committee were able to accomplish a great deal together and I look forward to another year of cooperation and results under your leadership.
To that end, Mr. Chairman, I want to personally pledge my entire Department's full cooperation as we move forward. I believe that HUD's is the most important mission of any agency in the federal government bar none - empowering communities to aid those most in need, those who do not yet enjoy the full fruits of what this great country has to offer. And our ability to work together will be the key to making that mission a reality.
HUD's $28 billion budget -- a $2.5 billion increase over last year -- offers opportunity and security for millions of Americans. It builds on the strong foundation that we have built at the Department over the past two years - both on the budget side and the management side.
This budget also builds on last year's strong bipartisan budget. Last year was truly a milestone for HUD: the first incremental vouchers in five years, expanded FHA loan limits, increases in virtually every major HUD program, and a historic public housing bill.
This budget continues that momentum. This is both the last budget of this century and the first budget of the next century. It represents a renewed vote of confidence by the President that HUD is on the right track, and that HUD is better positioned than ever to help communities take on these new challenges. With this budget, the Department of Housing and Urban Development will be able to help lead communities into the new century.
Mr. Chairman, a budget is about more than dollars and cents. It's about the agency's ability to manage its funds. And on that front HUD has made extraordinary progress.
This budget is a direct result of the management reforms we have put in place over the past two years. As a result of Management 2020, begun two years ago, HUD is in a stronger position than ever to manage and implement this budget.
HUD is now on the front lines of government reinvention. We are increasingly recognized as a new model for government in the 21st century: a government that does more with less, a government that empowers communities through less regulation, fewer mandates, and better customer service.
Mr. Chairman, let me briefly cite some of the things we've accomplished in the past year alone.
By the end of this month, we will have hired and trained the first 400 Community Builders. That means that our Public Trust Officers are now freed up to exclusively focus on ensuring that HUD funds are used in compliance with federal laws and regulations.
Some 200 properties have been referred to our new, independent Enforcement Center which has opened five satellite offices that are now open and fully operational.
The new Real Estate Assessment Center has completed over 7,500 inspections. We're on track towards meeting our goal of inspecting all 45,000 apartment complexes in HUD's inventory by the end of the year 2000.
Through our Super Notice of Funds Availability (SuperNOFA) , we have consolidated 40 separate competitive grant applications into one application -- two months ahead of schedule. This is a first in HUD's history.
We have opened the first two HUD storefront offices - here in Washington and in Albuquerque -- with another nine storefronts slated to open this fiscal year. The most visible evidence of management reform, the storefronts are easily accessible consumer-friendly service centers in downtown business districts, where people can walk in to get information about HUD programs and activities. We also opened HUD's new Section 8 Financial Management Center in Kansas City. The new center will consolidate the management of the Department's largest program -- Section 8 rental assistance. Previously, this function had been dispersed among dozens of field offices.
These and many other changes are transforming the face of HUD. By any measure, these are extraordinary accomplishments. You don't have to take my word for it -- there is growing, independent evidence that our management reforms are taking hold, and making a difference. Let me cite some of these opinions:
In May, 1998, the Public Strategies Group with Booz-Allen & Hamilton found that "already, less than one year after the publication of its reform plan, HUD is making marked progress in reforming itself -- in fact, quite significant progress for an agency that has been troubled for so long."
Last month, the latest report on Y2K compliance was released by the House Committee on Government Oversight and Reform -- and HUD scored an A-minus, ahead of 18 other Federal agencies.
An independent survey taken last December found that 70 percent of HUD employees said that the Department had made reinvention an important priority - the highest percentage of any of 22 federal agencies surveyed.
A December, 1998 report from PriceWaterhouseCoopers LLC found that "implementation of the Community builders, Enforcement Center, Procurement reform, Real Estate Assessment Center, Storefronts and Troubled Agency Recovery Center is well under way. Each project met all or substantially all of the critical milestones that HUD established for completion as of September 1."
Even the General Accounting Office, in its January, 1999 report, despite its continued finding of high risk, said, "HUD is making significant changes and has made credible progress since 1997 in laying the framework for improving the way the Department is managed. HUD's Secretary and leadership team have given top priority to addressing the Department's management deficiencies."
Two years ago, when I announced our reform plan, there was a great deal of skepticism - much of it justified, given HUD's history. The argument I heard was that HUD had never done anything right before - and there was no reason to believe that we could get it right this time.
But today Management 2020 is a reality. HUD today is in a stronger position than ever to take on the challenges of our communities in the 21st century.
With that as background, Mr. Chairman, let me describe the key elements of our budget. The budget addresses five major challenges: (1) ensuring that our communities remain economically competitive; (2) tackling the continuing crisis of affordable housing; (3) moving closer to One America; (4) finding regional solutions and creating sustainable communities; and (5) addressing the aging of America.
COMPETING IN THE NEW ECONOMY
HUD's economic development mission has become more important than ever in the rapidly-changing global economy. By any measure, the nation is doing well. The numbers are compelling: eighteen million new jobs, the lowest peacetime unemployment in more than 40 years, a stock market that is off-the charts, the lowest inflation since the 1950s.
But the rising tide of opportunity has not yet lifted all communities. There are still too many places - in both our inner cities and rural areas - where jobs are scarce and poverty persists at levels well above the national average.
The good news is that, as the President said in the State of the Union Address: "Our greatest untapped markets are not overseas - they are right here at home. And we should go after them."
Several HUD programs will help communities tap these markets, and, at the same time, help spread our prosperity to all corners of our nation. The goal of these programs is to ensure economic competitiveness of all communities by uncovering new markets, ensuring strong regional economies, tapping new sources of private capital, helping businesses grow and prosper in underserved communities, and expanding our effort to move people from welfare to work.
Our proposed Community Empowerment Fund will boost capital for business investment and job creation in underserved inner city and rural areas. The CEF combines and streamlines two existing HUD programs: our Economic Development Initiative (EDI) grants and our Section 108 guaranteed loans. We are requesting $125 million in competitive EDI grants, which will leverage an estimated $625 million in guaranteed private loans and support an estimated 100,000 new jobs. Overall, our budget seeks $1.3 billion in loan guarantee authority under Section 108 of the Housing and Community Development Act.
We have established two priorities this year for these grants: Welfare-to-Work job creation and city-suburb business connections that help central city firms tap into regional economies. Under a pilot to be launched later this year, we will also use the CEF to nurture a badly-needed secondary market for economic development loans.
We are also requesting $37 million to subsidize and secure $1 billion in privately issued, federally-guaranteed loans, along with $500 million in private equity commitments, to create for-profit venture capital funds known as America's Private Investment Companies (APICs). APICs will make much-needed private capital available to larger businesses that are expanding, relocating, or joint venturing in inner cities and rural areas. APICs will be jointly administered by HUD and the Small Business Administration.
Empowerment Zones and Enterprise Communities have successfully combined tax credits with federal grants and loans, along with local resources to attract billions in private sector investment. Our FY 2000 budget requests $150 million for Empowerment Zones -- $105 million that will go to 15 recently-selected Round II urban Empowerment Zones, and another $45 million for Strategic Planning Communities that placed 16th through 30th in the Round II competition. Our budget also requests funds for three related programs: to support additional, non-designated communities, to establish technical assistance partnerships, and to emphasize strategies that tie the zones to their regional economies and employ urban youth.
Contributing to vital community infrastructure, housing, and economic development, this year's request for the CDBG program is up $25 million to $4.775 billion. This is the most flexible federal aid to both cities and smaller rural communities.
Finally, we are requesting an increase in the highly successful Youthbuild program. In 1999, Youthbuild will serve between 5,000 and 6,000 disadvantaged youth, who - literally - will help rebuild their communities as they learn vital job skills. We are requesting an increase from $43 million to $75 million.
THE CONTINUING CRISIS OF AFFORDABLE HOUSING
At the core of HUD's mission is the charge to provide housing that is decent, safe and, affordable to all. Despite the longest peacetime economic expansion in the nation's history, rents have soared in many regions with strong economies. In fact, an all-time high of 5.3 million households - 12.5 million people -- face the high rent burden known as "worst case" housing need. And worst case needs have grown especially fast among working families.
What's more, persistent gaps in homeownership remain for low- and moderate-income families and other under-served groups. With the nation's homeownership rate running at a record high of 66.3%, large gaps remain -- cities lag behind suburbs, and underserved groups need increased access to mortgage credit. Special housing needs persist for homeless people, disabled people, and people living with HIV/AIDS. And as many as 600,000 individuals have no home at all on any given night.
To meet this challenge, our budget opens doors to affordable housing in three ways: First, by expanding affordable rental housing. Second, by expanding homeownership opportunities. And third, by meeting special housing needs.
To expand rental housing, HUD is requesting $10.6 billion in new budget authority to renew existing Section 8 contracts -- covering 2.4 million rental units. We are also requesting 100,000 new vouchers to help address the tremendous need that remains.
A number of the proposed new vouchers have designated purposes: 25,000 will expand the pool of Welfare-to-Work vouchers; 18,000 will be for homeless persons, to ensure the availability of permanent housing solutions at the end of the Continuum of Care; and 15,000 will be targeted to elderly persons. Another 42,000 will be unencumbered and will be distributed to Public Housing Authorities to help the many families on the Section 8 waiting lists throughout the country.
We must continue our efforts to transform public housing. Last year the Congress enacted a historic public housing bill. This year, our budget requests a significant increase in public housing operating funds, from $2.81 billion to $3 billion. We also are proposing $2.55 billion for the Capital Fund, a slight increase over last year's request. We also are requesting continued funding for HOPE VI, which allows communities to replace obsolete high rises with new, mixed-income, mixed-use livable communities. We also are seeking continued funding for the Drug Elimination Grant Program (DEG) to reduce crime and restore safety in public housing.
The HOME program is a proven housing rehabilitation and production tool in both urban and rural America. We are requesting $1.61 billion, a small increase over last year's level. This will provide more than 85,000 units of affordable housing for both owners and renters through a combination of new construction, rehabilitation, acquisition and tenant based-assistance.
We must redouble our efforts to expand homeownership. This year's State of the Cities report again identified homeownership gaps between whites and other groups -- African-Americans, Hispanics and other minorities -- as well as between cities and suburbs. As a result of the FHA loan limit increase approved last year by Congress, we are projecting expanded demand for FHA and therefore are requesting a $10 billion boost in the FHA loan volume cap and a $50 billion increase in the Ginnie Mae guarantee limitation. Additional proposals to boost homeownership include continued funding for Housing Counseling and another round of Homeownership Zones.
Native American housing needs will be served through the Indian Housing Block Grant Program, and the Indian Housing Loan Program. And, per Congress direction in last year's budget, we propose to address rural housing needs through the Rural Housing and Economic Development program. There we will focus on innovations that complement USDA's important work in rural housing.
We are also proposing a modest initiative - at $5 million -- to mobilize a corps of citizens through a new Citizens Volunteer Housing Corps to help reclaim and to rebuild abandoned and dilapidated housing in cities across the country. The Corps will tap into the spirit of civic pride and expand the stock of affordable housing, doing for existing housing what Habitat for Humanity and other groups now do in the arena of new home building.
Reducing homelessness is one of this Department's top priorities. In 1993, HUD initiated the Continuum of Care to provide a coordinated community approach to homeless assistance, with the goal of moving homeless persons from homelessness into jobs and permanent housing.
The Continuum of Care is working, leveraging many times the investment of Federal resources. For FY 2000, we propose an increase of $150 million, to $1.12 billion. This increase, plus 18,000 new rental vouchers to create permanent housing solutions, will address the housing needs of the most vulnerable Americans -- those making a transition from the streets back into homes and community life.
HUD is also proposing an increase of in the Housing Opportunities for People with Aids program (HOPWA), to $240 million. This increase is solely dictated by the increase in the number of cases and in the number of jurisdictions eligible for funding.
Our special needs programs also serve the elderly and disabled. We are proposing $194 million for the Section 811 program serving persons with disabilities, matching last year's enacted level. We also propose to increase the number of disabled persons served by increasing the portion of funds that may be used for vouchers from 25% to 50%. We are also proposing a total of $747 million to fund programs that serve the nation's rapidly expanding elderly population. These elderly programs are discussed in more detail below.
MOVING CLOSER TO ONE AMERICA
For more than 30 years, discrimination in housing has been prohibited under law. Yet audits of the rental and sales market show that an estimated 2.5 million instances of discrimination still occur annually nationwide. Today's discrimination is often more subtle than it was in the past, but it is no less real and no less damaging to our social contract as a nation that values equality of opportunity for all. We will only reach "One America," in the President's words, when we all have equal housing opportunities.
Last year, President Clinton announced his commitment to doubling the number of fair housing enforcement actions by the year 2000. To help complete this effort, we propose to increase the Fair Housing Enforcement budget by 18 percent -- to a total of $47 million.
Our budget request provides for increased funding of both the Fair Housing Assistance Program (FHAP) and the Fair Housing Initiatives Program (FHIP). This request includes monies for innovative partnerships between public and nonprofit fair housing groups, as well as the second year of FHIP funding for a national audit of discrimination in housing rental and sales. This audit will create the first ever report card at both the national and local levels of the extent of discrimination against each of the nation's major racial and ethnic groups.
REGIONAL SOLUTIONS AND SUSTAINABLE COMMUNITIES
Our communities face a number of threats to sustainable development, from uncontrolled growth to crime and drug abuse, from environmental hazards and a lack of energy efficiency in housing to blight and under-investment in vital community infrastructure. Many of these challenges call for cooperative regional solutions that span jurisdictional lines.
To address these challenges, the Administration has proposed a comprehensive Livable Communities initiative. This provides communities with new tools and resources to preserve green space, ease traffic congestion and pursue regional smart growth strategies.
Many HUD programs already support these goals - such as CDBG grants, that can be used to support an array of activities to create safe and livable communities; HUD's Community 2020 mapping software, which allows communities to quickly match government resources with community needs, using state-of-the art geographic information system technology; and HOPE VI, which helps create sustainable, mixed used communities.
In addition, we are proposing $50 million in competitive grants under the Regional Connections initiative. These funds may be used by states, partnerships of local governments, businesses and civic groups to develop and pursue smarter growth strategies across traditional municipal lines. Without in any way mandating solutions or telling local communities what to choose, Regional Connections will define "smarter growth" to mean two things, broadly speaking: first, more compact development in new growth areas, and, second, coordinated reinvestment in already built-up and infrastructure-rich areas (usually cities and older suburbs). Smarter growth is not slow growth or no growth-but different growth, growth back in, growth in support of livable communities.
The Department is proposing to double the funding for the Brownfields Initiative to $50 million per year for the next three years. This will accelerate and expand upon the Administration's previous commitment to a four-year, $100 million program.
Our Abandoned Buildings Initiative will turn "Brown Yards into Backyards" by addressing some of the primary sources of blight in our urban neighborhoods: abandoned apartment houses, single family homes, warehouses, and even office buildings. As part of the Administration's Better Quality of Life initiative, we are requesting $50 million in competitive grants that will go to local governments to demolish blighted abandoned buildings as part of a comprehensive plan to redevelop properties for commercial or for residential use, while safeguarding historic buildings.
We are also proposing continued funding for Lead-Based Paint Reduction and the Partnership for Advancing Technology in Housing (PATH), at the same levels as the FY 1999 appropriation.
THE AGING OF AMERICA
The final challenge addressed by the HUD budget is the "Aging of America". Just as we are committed as a nation to saving Social Security, we must also ensure housing security for older Americans. HUD is proposing a total of $747 million in fiscal year 2000 - an increase of $87 million -- as well as changes in existing programs. These are aimed at both increasing the supply of housing for America's elderly, and improving the housing of those already receiving assistance.
We propose a comprehensive approach - a Continuum of Care - that will enable our seniors to both obtain decent housing and access the supportive services they need.
This Continuum begins with helping seniors stay in their own homes. Elderly residents are often house-rich and cash-poor. To help them get the money they need to stay in their homes, HUD will expand and focus its Healthy Homes for Healthy Seniors Initiative on the needs of the elderly. Healthy Homes will allow seniors to convert the equity in their homes into rehabilitation and property improvement loans through HUD's reverse mortgage program.
Because caring for our elders starts with the family, the Administration has proposed a $1,000 long-term care tax credit to help families meet the costs of long-term care for their relatives. HUD will build on this proposal by allowing families who own apartments to rent them to family members under the Section 8 program while retaining appropriate safeguards against abuse.
Finally, HUD will continue its commitment to the successful and popular Section 202 Housing for the Elderly program with $660 million in FY 2000. The funds in FY 2000 will expand non-profit senior housing by an estimated 5,790 new rental units. We propose that $100 million of the 202 funds will be used to convert elderly housing to assisted living facilities to meet the growing need for additional services. We are also requesting an additional $87 million for 15,000 new vouchers for the poor elderly, to be used in projects using the Low Income Housing Tax Credit.
Mr. Chairman, I believe that this is a reasonable, responsible and critically needed budget request that will serve America's communities well as they take on the challenges of the next century.
It addresses the needs of millions of Americans who, despite our great national prosperity, do not yet have the affordable housing they need or the economic opportunity to live in safety and security. Our budget brings together HUD's programs in innovative, integrated ways that will truly make a difference in their lives and in the places they live.
With this budget, along with our management reform efforts, I look forward to working with you and the Members of your Committee to make the goal of decent housing and a suitable living environment a reality for all Americans.
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