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Testimony of Secretary Andrew Cuomo
to the
Senate Appropriations Committee
Subcommittee on VA, HUD and Independent Agencies

April 22, 1999

Chairman Bond, Ranking Member Mikulski, Members of the Subcommittee. Thank you for inviting me here today to discuss HUD's FY 2000 Budget. If it pleases the Committee, I would like to enter my testimony for the record.

Mr. Chairman, last year when I presented HUD's budget to you, I told you that it represented the second step in a process that we had initiated to restore HUD's ability to fulfill our mission of empowering communities across America. Step One was to restore competence through reform, reinvention and renewal. Step Two was to expand opportunity, by creating jobs and new housing opportunities for low- and moderate income families.

Since then, working together with this Committee, we have made a great deal of progress in both of these areas. The FY 2000 budget continues our efforts to restore the public's trust in this Department, and to open new doors of opportunity for people who are not yet benefiting from the current wave of national prosperity. I am convinced that HUD has the most important mission of any agency in the federal government - empowering communities to aid those most in need, to assist those who do not yet enjoy the full fruits of what this great country has to offer.

This year, HUD's budget request is $28 billion. That represents a $2.5 billion increase over the FY 99 level. It 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.

We could not have passed that budget without this Committee's support and commitment, Mr.Chairman. You were instrumental in making this happen, and we look forward to continued cooperation this year.

As both the last budget of this century and the first budget of the next century, this is an important budget for our nation's cities and rural communities. 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 the new challenges of the 21st 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 - restoring competence at HUD. As a result of Management 2020, begun two years ago, HUD is in a stronger position than ever to manage and implement this budget.

While the job is not yet done, HUD is 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.

We have now hired and trained our first two classes of more than 400 Community Builders. That means that our Public Trust Officers are now freed up to focus on ensuring that HUD funds are used effectively and in compliance with federal laws and regulations.

Some 335 properties have been referred to our new, independent Enforcement Center, under Ed Kraus, who came to us from the FBI. We have five satellite Enforcement Center offices that are now open and fully operational.

The new Real Estate Assessment Center, run by D.J. Lavoy, has completed over 13,500 inspections, averaging 150 a day. 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, New Mexico -- 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 opened HUD's new Section 8 Financial Management Center in Kansas City. The new Center consolidates the management of the Department's largest program -- Section 8 rental assistance. Previously, this function had been dispersed among dozens of field offices.

There is clearly more work to do. It will take time to fully implement all of our reforms, to turn around all of the problems that built up over time. But there is growing, independent evidence that these management reforms are making a difference.

Even the recent (January, 1999) General Accounting Office Report supports the work we are doing to reform the Department. While we were of course disappointed by GAO's continued finding of high risk, the GAO found that "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."

That is a vote of confidence in our efforts to reform HUD. Even more of an endorsement is the clean, or unqualified, audit that we just received from HUD's Office of the Inspector General - the first in HUD's history. The Inspector General stated that "the unqualified opinion represents a considerable achievement for HUD, and it further reflects continuing improvements in HUD's commitment and ability to properly account for funds entrusted to the department".

Since audited financial statements were first required by the 1990 Chief Financial Officers Act, HUD had received no opinion or, more recently, only qualified opinions. While we still have work to do, this new opinion is a validation of the work that has been done so far.

Another important measure of progress is our Y2K preparedness. In January, the House Committee on Government Oversight and Reform gave HUD an A-minus on this front - ahead of 18 other Federal agencies. I am also encouraged by this week's new report from the National Academy for Public Administration that concluded that HUD has substantially improved its contracting and procurement operations. And just yesterday we announced the results of the first comprehensive physical inspections of public housing around the nation.

Management 2020 is on track. 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."


HUD's management reforms are being translated into real, tangible benefits for the American people. Look at some of the results we're achieving in some of our key programs:

CDBG. Each year, Community Development Block Grant funds go to 847 cities, 137 counties and another 3,000 small cities and counties. An Urban Institute Study found that CDBG is one of the largest sources of non-tax Federal assistance for the construction or rehabilitation of privately owned housing. The largest single use of CDBG money (30%) is housing rehabilitation, leveraging $2.31 for every CDBG dollar. In our latest Report to Congress, we reported that for the three-year period 1994-1996, 641,000 housing units were developed or rehabilitated through CDBG.

During the same period three-year, CDBG economic development funds created approximately 445,000 jobs. We have also boosted the economic development impact of CDBG through the Section 108 Loan guarantee program - with some $3.5 billion in commitments to 652 projects over the past six years, creating thousands of additional jobs. Most CDBG economic development goes to small businesses - more than half of all businesses assisted employ five or fewer persons. And jobs created with CDBG assistance meet basic tests of job quality: 89% of the jobs remain after four years; 96% are full-time jobs; 90% pay more than the minimum wage. And 32% are held by local residents.

HOPE VI. HOPE VI is the most visible of our efforts to transform public housing, replacing obsolete high rises or outdated projects with new, livable communities. Over the seven-year history of the HOPE VI program, we have distributed a total of $3.1 billion -- $540 million each year -- for 104 projects in 28 states plus the District of Columbia and Puerto Rico. These funds have leveraged $3.4 billion in additional funds.

But more than the overall numbers, we are making more effective use of these funds. In 1993, the average cost per unit was $94,345. That dropped in 1998 to only $74,700 per unit. The number of non-HOPE VI dollars leveraged has increased - from only 32 cents for every HOPE VI dollar in 1993 to $2.28 per HOPE VI dollar in 1998.

Brownfields. One of our newer initiatives, our Brownfields Redevelopment Initiative, is beginning to have an extraordinary impact in cities by returning contaminated land to good use. Last year we committed just $25 million in direct grants to 23 communities. In addition to leveraging $141 million in guaranteed loans, this initial outlay will generate another $811 million in additional investments, creating an estimated 9,500 jobs.

Elderly housing. We are proud of the track record of our elderly housing programs. Over the past two years our Section 202 program has funded 320 projects, for approximately $900 million - creating some 12,500 new elderly housing units. Overall, the program has about 7,600 projects and serves 350,000 people. Also, over the past two years, through our Section 232 mortgage insurance program we have insured 334 nursing homes or assisted living facilities for $2.4 billion. Another 440,000 elderly people live in public housing, approximately 400,000 receive housing vouchers or certificates, and another 100,000 elderly live in project-based Section 8 facilities.

Mr. Chairman, with these kinds of initiatives already in place and our management reforms underway, we are better positioned than ever to take on the new challenges of the 21st century - challenges addressed by this budget.


HUDS's FY 2000 budget addresses five major challenges facing America: (1) ensuring that our communities remain economically competitive in the new global economy; (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.


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.


CDBG is the most flexible federal aid to both cities and smaller rural communities. 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. And formula funding that goes directly to entitlement communities and states will increase by $130 million over 1999 enacted levels.

Community Empowerment Fund

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 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.

American Private Investment Companies (APICs)

The President has proposed a comprehensive New Markets initiative to bring business investment to underserved inner city and rural communities. HUD is 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

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.


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.


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.

Section 8 renewals and incremental vouchers

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 extremely low-income 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.

Transforming Public Housing

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 and housing vouchers. 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 assistance

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.

Homelessness and Special Needs

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 $15 million 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.

Elderly and the disabled

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.

Citizens Volunteer Housing Corps

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.


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.


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. CDBG grants can be - and are being -- used to support an array of activities to create safe and livable communities; HUD's Community 2020 mapping software allows communities to quickly match government resources with community needs, using state-of-the art geographic information system technology; and HOPE VI helps create sustainable, mixed used communities.

Regional Connections

In addition, we are proposing $50 million in competitive Regional Connections grants as a key part of the Administration's livability 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 in FY 2000. This will accelerate the Administration's previous commitment to a four-year, $100 million program.

Abandoned Buildings

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.

Lead Paint and PATH

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 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.

Healthy Homes for Seniors

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.

Administrative changes

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.

Section 202

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 some existing elderly housing to assisted living facilities, with additional services to help low-income frail elderly live as independently as possible.

Elderly housing vouchers

We are also requesting an additional $87 million for 15,000 new vouchers for extremely low-income elderly, to be used in projects using the Low Income Housing Tax Credit. The Administration will shortly submit legislation to authorize these additional subsidies.


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 people's lives and in the places they live.

Mr. Chairman, with this budget, along with our management reform efforts, I look forward to working with you and the Members of this Committee to make the goal of decent housing and a suitable living environment a reality for all Americans.

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