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Testimony of Deputy Secretary Saul Ramirez
to the Subcommittee on Housing
and Community Opportunity
House Committee on Banking and Financial Services

March 3, 1999

Chairman Lazio, Ranking Member Frank, Members of the Subcommittee. Thank you for inviting me here today to discuss HUD's FY 2000 Budget. If it pleases the subcommittee, I would like my testimony entered in the record. Thank you.

HUD's FY 2000 budget offers opportunity and security for those who are left behind, in both urban and rural communities across America. The budget addresses five major challenges that these communities must face if they are to remain competitive in the 21st century: ensuring that communities are economically competitive; making housing affordable; finding regional solutions and building sustainable communities; moving closer to One America; and providing security for older Americans.

This budget builds on last year's budget, which many believe was the best HUD budget in a decade. Last year was truly a milestone for HUD: the first new vouchers in five years, expanded FHA loan limits, increases in virtually every major HUD program, and the historic public housing bill that will transform the face of public housing in the next century.

The FY 2000 budget continues this momentum. It is both the last budget of this century and the first budget of the next century. Today, cities and rural communities face a very different future than they did one hundred years ago. They have a new set of challenges: the shift to a new, global high-tech economy; the emergence of regions as the building blocks of the new economy; the growing diversity of our nation; successful implementation of welfare reform; and the aging of America, where by the year 2050 one in five Americans will be over the age of 65.

This budget 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 is poised to help lead communities into the 21st century.

Management Reforms Making a Difference

A budget is about more than dollars and cents. It's about the agency's ability to manage its funds. And on that front, Mr. Chairman, HUD has made extraordinary progress. Over the past year, we have taken significant steps to implement HUD's Management 2020 reform plan.

HUD is now on the front lines of government reinvention, increasingly recognized as a new model for government in the 21st century: a government that both does more with less and empowers communities through less regulation, fewer top-down mandates, and user-friendly customer service.

Two years ago, Secretary Cuomo announced our Management 2020 reform plan - a plan that is aimed at doing what many saw as impossible: to fulfill what we believe is the most important mission of any agency in the federal government, with a smaller, downsized work force.

There was a great deal of skepticism when we announced our plan. The argument was that HUD had never done anything right before - and there was no reason to believe that we could get it right this time. Others argued that we had a workforce of thousands, many of whom had been with HUD for some time and were quite set in their ways - and we would not be able win them over and convince them to do things differently.

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. Some of our key accomplishments over the past year include the following:

  • By the end of this month, we will have hired and trained the first 460 Community Builders. That means our Public Trust Officers are now freed up to ensure that federal funds are used in compliance with all laws and regulations.

  • Some 200 properties have been referred to our new, independent Enforcement Center - headed by an FBI detailee -for possible enforcement action. Five satellite offices are now open and fully operational.

  • The new Real Estate Assessment Center (REAC) has completed over 7,500 inspections -- on track towards our goal of inspecting all 45,000 apartment complexes in HUD's inventory by the end of the year 2000.

  • We completed the first year of HUD's first Super Notice of Funding Availability (SuperNOFA). This year we went a step further: we published a single SuperNOFA for 40 separate competitive grants, and did so two months ahead of schedule - the earliest publication schedule ever.

  • We have opened the first two HUD storefront offices, with another nine storefront slated to open this fiscal year. In addition, 30 state-of-the-art "HUD Next Door" kiosks are now in libraries, federal buildings, city halls and shopping centers across the country, with another 50 ready to go.

  • We opened HUD's new Section 8 Financial Management Center in Kansas City. The new center will consolidate, standardize, and streamline the processing and financial management of the Department's Section 8 rental assistance program. Previously, this function had been dispersed among dozens of PIH, Multifamily Housing and field accounting offices.

  • We just celebrated the first year of the Santa Ana Homeownership Center, one of four Homeownership Centers set up to consolidate FHA insurance and property disposition. In its first year, the Santa Ana HOC endorsed 300,000 loans, and sold almost 22,000 properties.

These and many other changes are transforming the face of HUD. Don't just take my word for it, Mr. Chairman. 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, and HUD scored an A-minus.

    � 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.

  • 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."

  • 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."

But the goal of management reform is not to get a favorable audit or report. The goal of our management reform is to show that HUD can, in fact, work. Because when HUD works, the American people benefit - with better housing opportunities, with economic development activities that bring jobs to their communities, and with safer neighborhoods.

With this as backdrop, let me highlight the key programs in our budget.

  1. Opening doors to new markets by ensuring economic competitiveness.

    We have enjoyed unprecedented prosperity as a nation over the past six years. Jobs are up, poverty is down, minorities are gaining ground, homeownership is at its highest level ever and the crime rate continues to fall. But the rising tide of opportunity and assets has not yet lifted all communities. The following initiatives will help communities bring the national prosperity to all corners of our nation.

    Community Development Block Grants. The mainstay of HUD's responsibility to help communities remain competitive and to create economic opportunity, especially jobs, is the Community Development Block Grant program (CDBG). The CDBG program is HUD's most flexible tool for assisting cities, towns and States to meet community development objectives. The FY 2000 Budget requests an increase in CDBG funding of $25 million over the 1999 enacted level to $4.775 billion. HUD's budget request also seeks $1.3 billion in loan guarantees administered under Section 108 of the Housing and Community Development Act.

    Community Empowerment Fund/EDI. The Community Empowerment Fund, will substantially increase capital for business investment and job creation in underserved inner city and rural areas, by combining under one umbrella our existing Economic Development Initiative (EDI) grants program with Section 108 guaranteed loans. Our budget requests $125 million in Economic Development Initiative (EDI) grants, that will leverage $625 million in Section 108 guaranteed private loans, and support an estimated 100,000 new jobs. In FY 2000, the CEF will emphasize two priorities: ensuring the success of welfare reform and connecting distressed areas to regional economic growth.

    America's Private Investment Companies (APIC). These existing programs will be complemented by a new vehicle for expanding investment capital for urban and rural distressed areas. For FY 2000, HUD is requesting $37 million to subsidize and secure $1 billion in privately issued loans that the Federal Government will guarantee to go with $500 million in private equity commitments for new investment partnerships-for-profit venture capital funds known as America's Private Investment Companies (APICs). APICs will, in turn, make equity investments in larger businesses that are expanding or relocating in inner cities and rural areas. The $37 million Federal credit subsidy will leverage $1.5 billion in private funds, and will create jobs in distressed areas.

    Empowerment Zones. We propose funding that will total $100 million for each of 15 new urban Empowerment Zones over the next 10 years. In FY 2000, $105 million will be divided equally among the 15 new EZs. Another $45 million will be targeted to Strategic Planning Communities, the communities that placed 16 through 30 in this year's Round II competition. The FY 2000 proposed Budget will also provide funding for three related programs which will support non-designated communities, establish technical assistance partnerships, and emphasize regional strategies that employ urban youth.

    Youthbuild and the President's Youth Initiative. As part of the broader Administration-wide Youth Initiative, HUD proposes to increase the Youthbuild program from $43 million in 1999 to $75 million in 2000. The HUD-administered Youthbuild program has a proven history of success and, in 1999 alone, will serve between 5,000 and 6,000 disadvantaged youth. The FY 2000 proposal will provide approximately 9,000 youth with skills to obtain jobs and will provide approximately 1,300 families in distressed communities with homes

    Metropolitan Job Links will encourage housing complexes to participate in place-based, regionally-oriented workforce development. The $10 million requested will support technology costs and staff at housing organizations who act both as job developers, creating ties to employers metro areawide, and as outreach specialists who organize the housing complex to support the pursuit of employment by residents.

  2. Opening Doors to Affordable Housing

    At the core of HUD's mission is the charge to provide housing that is decent, safe, sanitary and, affordable to all neighborhood residents. 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 face the high rent burdens known as "worst case" housing needs. And persistent gaps in homeownership remain for low- and moderate-income families and other under-served groups.

    HUD's proposed FY 2000 Budget opens doors to affordable housing in three ways. First, by expanding affordable rental housing. Second, HUD's proposed budget will open doors to affordable housing by expanding homeownership opportunities. And third, by meeting special housing needs.

    To expand affordable rental housing, we are proposing the following:

    Section 8 Rental Assistance for Needy Families. HUD has steadfastly maintained a policy that all contracts will be renewed every year. The FY 2000 HUD budget requests $10.6 billion in new budget authority to renew existing contracts covering 2.4 million rental units. We are also requesting 100,000 incremental vouchers to help address the tremendous need that remains. A number of vouchers have designated purposes, including 15,000 for the elderly, 18,000 for the homeless and 25,000 for welfare-to-work assistance, but 42,000 will be unencumbered ("fair share") and will be distributed to Public Housing Authorities to help the many families on the Section 8 waiting lists throughout the country.

    Regional Opportunity Counseling. HUD is committed to funding innovative counseling programs that enable Section 8 families to secure housing opportunities across metro areas-often to move away from high concentrations of poverty to neighborhoods that offer high quality education and better job opportunities. HUD seeks $20 million for this program in FY 2000.

    Transforming Public Housing. The FY 2000 Budget proposes an appropriation of $625 million for the HOPE VI program, the same as enacted in FY 1999. We are also requesting a significant increase in public housing operating funds, from $2.818 billion in 1999 to $3.003 billion in 2000. We are also proposing $2.555 billion for the Capital Fund, a slight increase over the amount requested in 1999. The public housing reform bill of 1998 rewards non-troubled PHAs with greater flexibility and fungibility in the use of capital and operating funds.

    HOME Program. In FY 2000, HUD is requesting that the HOME program be funded at $1.610 billion, an increase of $10 million over the 1999 enacted level. This Program level will provide 85,400 additional units of decent, safe and affordable housing for both owners and renters through the combination of new construction (34%), rehabilitation (48%) and acquisition (15%). About 3% will be used for tenant based-assistance.

    Drug Elimination Grants and the Youth Anti-Drug Diversion Program. The Drug Elimination Grant Program (DEG) is a competitive grant program aimed at improving the living conditions of residents in public housing. Overall, HUD is proposing $310 million for FY 2000, the same level as enacted for 1999. The program was authorized in 1988 to reduce crime in public housing, restore safety and build better surrounding communities. In FY 2000, we propose $100 million to help divert the Nation's most vulnerable youth away from drugs and crime. This initiative, part of the Administration's broader initiative for youth, will complement HUD's own Youthbuild initiative. Youth Anti-Drug Diversion will focus resources on three objectives-mentoring, after school programs and family strengthening.

    To expand homeownership, our Budget includes the following initiatives:

    Housing Counseling. HUD requests $20 million for the Housing Counseling program, a set- aside within HOME designed to provide pre and post-purchase counseling assistance on homeownership issues. Homeownership Zones. To complement the Redevelopment of Abandoned Buildings Initiative, HUD is also requesting $25 million in FY 2000 as a set-aside in the CDBG program to fund large-scale homeownership projects in targeted areas. The request of $25 million will support 5 to 7 Homeownership Zones, based on the average grant of $3 million to $5 million. These funds will create an estimated 1,500 new homeowners. (In 1997, HUD was able to fund just 6 of the 70 applications received.)

    Rural Housing and Economic Development. The FY 2000 budget proposes $20 million to encourage new and innovative approaches to addressing the housing and economic development needs of the Nation's rural populations.

    Indian Housing Block Grant Program (IHBG). The FY 2000 Budget for HUD proposes an $620 million for the IHBG program, the same as enacted in 1999.Funds can be used for either modernization or operation and maintenance expenses or the development of new housing units to meet tribal needs.

    Indian Housing Loan Guarantee Program. In addition to the Indian Housing Block Grant program, HUD has been implementing a significant program dedicated to increasing the supply of housing and the number of owners on tribal lands. Again in 2000, HUD is proposing $6 million to fund a loan guarantee program that would guarantee up to $72 million in new home mortgages.

    Citizens Volunteer Housing Corps. This initiative will help increase the supply of affordable housing by mobilizing a corps of citizens to help reclaim and to rebuild abandoned and dilapidated housing in cities across the country. Supported by a $5 million set-aside in CDBG, the Corps will tap into the spirit of civic pride and expand the stock of affordable housing.

    Federal Housing Administration Loan Limits and Loan Volume. To ensure that each and every qualifying FHA loan can be insured and to meet the significant increase in anticipated loan applications nationwide thanks to the loan limit increase, HUD is requesting a $10 billion increase in the cap on loan volume. By raising this limit from $110 billion to $120 billion, HUD will enable FHA to insure all qualifying loans in FY 2000. Likewise, the HUD-owned Government National Mortgage Association (Ginnie Mae), which acts as the secondary market for all FHA and VA loans, is requesting a guarantee limitation of $200 billion, a $50 billion increase over FY 1999.

    To meet special needs, our budget includes the following initiatives:

    Homeless Assistance. In total, HUD requests that the Continuum of Care program be supported with $1.129 billion in funding in 2000. This includes a record level of $1.02 billion in grants, a $5 million Multi-Agency Demonstration and $104 million in funding for the 18,000 incremental vouchers for the homeless discussed above.

    Housing Opportunities for Persons with AIDS (HOPWA). HUD is proposing an increase of $15 million to a level of $240 million for the HOPWA program in 2000. This increase is solely dictated by the increase in the number of cases (and the commensurate increased demand for services) and the increase in the number of jurisdictions eligible for funding.

  3. Opening Doors to One America

    HUD's Office of Fair Housing and Equal Opportunity administers and enforces the Fair Housing Act and other legislation that ensures equal access to housing and provides equal opportunity and fair housing in all HUD programs. HUD is requesting that total funding for Fair Housing Programs in 2000 be increased to $47 million, an increase over 1999 enacted levels of $7 million or 18%. This increase will provide $3.5 million each in higher funding to the Fair Housing Assistance Program (FHAP) and the Fair Housing Initiative Program (FHIP).

  4. Opening Doors to a Better Quality of Life

    Our communities face a number of inter-related threats to sustainable development, from uncontrolled growth (the congestion and urban disinvestment that come with sprawl) 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 regional solutions that span jurisdictional lines.

    Regional Connections. We are proposing $50 million in competitive funds for states, or consortia of local governments, businesses, non profits, and community groups-acting together to pursue smarter growth strategies across jurisdictional lines. Eligible activities will include planning, institution building and implementation of inter-jurisdictional projects.

    Brownfields Initiative. The Department is proposing a doubling of funding for the Brownfields Initiative, from $25 million to $50 million per year for the next 3 years, beginning in FY2000. This will accelerate and expand upon the Administration's previous commitment to a 4-year $100 million program.

    Abandoned Buildings Initiative. Beginning in FY 2000, the Administration is proposing a 3-year innovative program for the redevelopment of abandoned buildings. Through this initiative, HUD will provide $50 million in competitive grants to local Governments to support the demolition of blighted abandoned buildings as part of a comprehensive plan to redevelop properties for commercial or for residential use.

    Lead Reduction Programs. The FY 2000 Budget requests $80 million for the lead hazard program, the same as the FY 1999 Appropriation.

    Partnership for Advancing Technology in Housing (PATH). The PATH Initiative, a public-private partnership announced by the President last year, aims to dramatically improve the quality, cost effectiveness, durability, safety and disaster resistance of the next generation of housing. PATH will do this by speeding the identification and adoption of building technologies. In 2000, HUD is again requesting $10 million for this initiative.

  5. Opening Doors to Lifelong Security

Recent decades have seen a monumental demographic shift in America's population, with our elderly citizens leading longer, healthier and more active lives. The challenge now is to meet the housing needs of this rapidly expanding population of elders. Just as we work to save Social Security, we must also work to provide housing security for our seniors. HUD is proposing a total of $747 million in FY 2000, and significant changes in existing programs, which are aimed at both increasing the supply of housing for America's low-income elderly and improving the housing of those already receiving assistance.

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.

A Family First Policy. 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 safe guards against abuse. With over one million elderly persons facing severe rent burdens, this easing of Section 8 rules will offer a family-based option for elders to get the support and services they need.

Building More Senior Housing. HUD will continue its commitment to the successful 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. In addition, HUD will increase the flexibility of the 202 program to help it work in partnership with other sources of funding, including the Low Income Housing Tax Credit.

$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. A portion of the grant funds for conversion of 202 elderly housing will be used to develop intergenerational learning centers, where the skills and experiences of the elderly can be harnessed to meet the need for affordable child care, while encouraging seniors and children to learn new skills together. In addition, we are proposing an increase in the Service Coordinator program to $50 million in FY 2000.

Integrating Housing and Health Care Funding. HUD is proposing to partner with the Department of Health and Human Services (HHS) to better integrate housing assistance and Medicaid funding for services. As part of this effort, HUD will be proposing a change in law to allow vouchers to cover the rent portion of assisted-living costs.

Mr. Chairman, we believe that this is a modest yet far-reaching Budget request that will serve America's communities well, as they take on the challenges of the next century. With this budget, along with our management reform efforts, Secretary Cuomo and 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.

Content Archived: January 20, 2009

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