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Testimony of
William Apgar
Assistant Secretary for Housing/Federal
Housing Commissioner
before the
Senate Committee on Banking, Housing
and Urban Affairs
Subcommittee on Housing and Transportation

July 18, 2000


Mr. Chairman, Ranking Member Kerry, Members of the Subcommittee, my name is William Apgar and I am the Assistant Secretary for Housing/Federal Housing Commissioner at the United States Department of Housing and Urban Development (HUD). On behalf of HUD Secretary Andrew Cuomo, I am pleased to testify today at this important hearing on S. 2733, the Affordable Housing for Seniors Act.

Working in partnership, the Administration and Congress have made significant strides in recent years to ensure affordable housing for families and older Americans. The Affordable Housing for Seniors Act builds on this progress. In fact, many provisions of this bill would either ratify policies HUD already has in place or enact policies proposed in the President's HUD budget this year. Other provisions extend current HUD initiatives or proposals to make them even more effective. Most importantly, the bill would increase the flexibility of HUD's Section 202 and 811 programs, and provide new resources for the preservation of affordable housing. We look forward to working with this Subcommittee to gain the passage of S.2733, just as we worked closely with the House last year to gain passage of H.R. 202, the companion to the bill we are discussing today.

Housing Our Elders

The United States will go through an unprecedented demographic shift over the next fifty years. By 2050, as many as one in five Americans will be elderly (65 and over), compared with one in every 25 at the turn of the last century. By 2050, the elderly population will more than double to 80 million, with the "oldest old" (85 and over) making up almost one quarter of that population. Many of this group will be alone, many will be facing multiple chronic illnesses and will need to rely upon family, friends or community for support.

Too many senior citizens are forced out of their homes because they face catastrophic healthcare costs associated with aging - costs that drain their finances and make owning a home unaffordable. This housing crisis will likely affect millions of seniors in the new century - already, HUD's latest studies show that one and a half million elderly pay more than 50% of their income in rent or live in substandard housing.

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. Last year, the Administration and Congress won a significant victory through the passage of major elements of the Housing Security Plan for Older Americans as part of HUD's FY2000 budget. The Housing Security Plan offers a full range of options for the elderly-a Continuum of Care. By combining new and existing HUD programs and improving coordination with other Federal assistance, the plan helps to create a comprehensive and cost-effective senior housing system that preserves security and independence as a senior's healthcare needs and financial resources change.

The strategy addresses five stages in the continuum: First, helping seniors stay in their own homes when appropriate; second, ensuring the availability and quality of government assisted senior housing when staying at home is no longer possible; third, providing health and other support services in existing housing to avoid the need to move to nursing homes or other medical facilities unless absolutely necessary; fourth, ensuring that our nation's elderly remain an integral part of our communities; and fifth, making assisted living a housing option for low income seniors.

(1) Helping Seniors Stay In Their Own Homes. The first priority of the Plan is to help seniors remain in their own homes whenever possible. It is not uncommon for elderly Americans to be housing "rich" but cash "poor." To ease this dilemma, HUD uses its reverse mortgage program to focus on the needs of older homeowners. This important initiative allows seniors to convert the equity in their own homes into funds for needed health and safety home improvements, or for long-term health care needs. A recently released evaluation of HUD's reverse mortgage shows the program has quadrupled over the past seven years and boasts a 75% satisfaction rate.

(2) Ensuring The Availability And Quality Of Senior Housing. The Plan expands and refines the highly successful Section 202 Supportive Housing for the Elderly program. This program works with local non-profits to create housing tailored to the unique needs of seniors, offering rental assistance to a particularly vulnerable group who cannot easily access tenant-based voucher programs because of their special needs and limited mobility. The need for senior-tailored complexes is increasing at a tremendous pace, as the number of elders and the "oldest old" rapidly increases. To meet this need, the Section 202 program provides funding for new construction and improvement of HUD elderly housing. The Plan also proposes statutory changes that would expand the impact of this program and the overall supply of affordable rental housing by permitting a wider range of private funds to leverage HUD financing, through such mechanisms as Low-Income Housing Tax Credits.

(3) Community-Based Care. Because Americans are living longer, many enter a period where they are capable of living semi-independently but still need some social services as well as specially-designed buildings that make getting around easier. The nation can save the higher costs associated with full-time elder services and health care in two ways: transforming HUD's existing senior housing and expanding current social service programs. The Plan accomplishes this through grants to convert some existing Section 202 housing to assisted living so that these facilities can better meet the changing needs of their aging population - a proposal that was enacted last year. It also dramatically expanded the successful Service Coordinator program for the elderly, which currently benefits only residents of HUD-assisted housing. By further increasing funding and allowing Service Coordinators to serve lower income elderly in private homes and apartments in the same neighborhood, seniors will not have to leave their homes to get the supportive services they need.

(4) Intergenerational Learning Centers. Throughout this continuum, we must ensure that our seniors remain connected to our communities - sharing their skills, knowledge and energy. To strengthen this connection, an eligible use of grant funding would be the physical establishment of Intergenerational Learning Centers to link two vital needs: affordable senior services and affordable child care. These Learning Centers will be located within and operated, at least in part, by residents of existing Sec. 202 and other assisted housing developments. These Centers will harness the skills of seniors to meet the country's critical need for affordable child care. And through HUD's existing Neighborhood Networks program, these Centers can also serve as a focus point for sharing Internet technology, allowing seniors and children to learn new skills together.

(5) Assisted Living. When seniors have to move from their homes into assisted living facilities to get the help they need, this Plan proposes HUD partner with HHS to better integrate housing assistance with Medicaid funding for services. In addition, a change to prior law that passed last year allows vouchers to cover the rent portion of assisted living costs. The more than 250,000 low income seniors who currently use vouchers are no longer locked out of an assisted living facility simply because a housing voucher issued by one part of the government cannot work in conjunction with Medicaid payments for assisted living services issued by another part of the same government.

After being proposed in the Administration's FY 2000 budget, many of the elements of Housing Security Plan for Older Americans were incorporated into H.R. 202 and then enacted into law as part of the FY 2000 budget. The Service Coordinator program was significantly expanded through $50 million in grant funds, another $50 million was provided to convert some existing Section 202 developments to assisted living, and assisted living was made an eligible use for Section 8 vouchers. In HUD's FY2001 budget, the Administration aimed to build on last year's success by reproposing elements of the Housing Security Plan that were not passed by Congress, including:

  • Mixed-Financing and Mixed-Use Developments. These changes would allow greater use of public and private financing sources to leverage Section 202 funding. The result would be senior housing that that better meets the needs of its residents by incorporating all income groups and a mix of commercial uses such as retail, health clinics, and other services. Mixed-financing and mixed-use developments can be achieved through legislative changes such as allowing non-profit controlled limited partnerships that are eligible for Low-Income Housing Tax Credits to apply for Section 202 funding.
  • More Flexibility for Service Coordinators. This proposal would allow Service Coordinators to serve eligible elderly families residing in HUD-assisted developments or private homes and apartments in the neighborhood surrounding the HUD-assisted development where they are located. This change will improve economies of scale in the Service Coordinator program and help more seniors "age in place" by bringing services to them in their homes.
  • Intergenerational Learning Centers. This important initiative was not included in the HUD budget passed last year. It should be allowed as an eligible use under the $50 million grant funding for the conversion of existing 202 properties to assisted living.

In addition to completing the Housing Security Plan proposed last year, however, the Administration also will continue to develop new tools in the Continuum of Care for lower income seniors. In the FY 2001 budget proposal for HUD, a major new element was added to the Plan: Assisted Living Production. Recent years have seen an explosion in assisted living as an alternative to nursing homes and other institutional forms of care. Yet lower-income seniors have been left out of this market, with the result that these seniors are often forced to live in housing that does not meet their service needs or move to more expensive alternatives that can be subsidized through Medicaid and other programs. Elements of the Housing Security Plan have begun to change this, but more is needed.

The Administration proposes to further expand access to assisted living for lower-income elderly persons by spurring the construction of new affordable assisted living facilities. With $50 million in five-year operating subsidies proposed for FY2001, over 1,500 low-income elderly households will get long-term access to affordable assisted living facilities. Because this funding will directly subsidize no more than 20 percent of the units in new mixed-income assisted living facilities, the program will create a total of 7,500 new assisted living units. As part of the program, HUD Section 232 mortgage insurance will encourage banks and developers who are currently only familiar with the higher-income assisted living market to enter the affordable market. And to ensure that States and localities will provide the needed service funding to complement HUD's funding, the $50 million in subsidies will go to States and localities that offer the most innovative proposals to combine their service funds with HUD's funding and award them both to qualified local developers.

The Affordable Housing for Seniors Act complements and builds on the efforts of the Administration and Congress to establish the Housing Security Plan for Older Americans. In particular, it would accomplish the following:

  • Encourage Mixed-Financing and Mixed-Use Developments. The bill contains a number of provisions that would encourage mixed-financing and mixed-use developments, including some proposed in the FY 2001 HUD budget or already allowed by HUD. Allowing non-profit controlled limited partnerships that are eligible for Low-Income Housing Tax Credits to apply for Section 202 funding is a particularly important step, as is expanding the types of properties eligible for acquisition under the Section 202 program.
  • Enhance the Service Coordinator Program. The bill contains the Administration's proposal that would allow Service Coordinators to serve eligible elderly families residing in HUD-assisted developments or private homes and apartments in the neighborhood surrounding the HUD-assisted development where they are located.
  • Provide Resources to Modernize and Adapt Elderly Housing. In addition to containing a provision similar to the proposal to convert existing Section 202 properties to assisted living proposed by the Administration and enacted last year, the bill would build on HUD's initiative to allow Section 202 properties to refinance and gain new resources for renovation and increased services.
  • Apply New Initiatives to Housing for People with Disabilities. The bill expands on many of the initiatives proposed by the Administration through applying them to HUD's Section 811 program, which provides affordable housing for people with disabilities. In particular, mixed-financing and other tools could be used in Section 811 to accomplish the same important goals as they would in the Section 202 program.

Preservation of Affordable Housing

While the Affordable Housing for Seniors Act focuses primarily on housing for older Americans, it also includes some important advances in the preservation of affordable housing that is not limited to seniors. These provisions also complement efforts the Administration and Congress have made in recent years.

In April of last year, Secretary Cuomo announced an emergency initiative to stop the loss of affordable housing through opt-outs from the project-based Section 8 program. This initiative convinced many owners to remain in the Section 8 program, significantly decreasing the rate of opt-outs. However, this Mark-Up-to-Market plan alone was not enough to preserve all affordable housing that was at risk of leaving HUD's affordable housing programs. Recognizing this, Secretary Cuomo proposed a series of legislative changes and joined with members of Congress in pledging to work towards a comprehensive solution to the loss of HUD-subsidized multifamily housing. Through bipartisan cooperation, historic legislation was passed as part of HUD's FY 2000 budget that built on the Administration's efforts to preserve affordable housing. Accomplishments of the legislation included:

  • Market Rents For Certain Properties. Building on HUD's emergency initiative, a longer-term program was established to raise selected properties' rents to market. This program included targeting criteria for which properties' rents are increased and specific commitments that are required from owners in return for increased rents.
  • Improved Section 8 Renewals. Earlier changes in renewal policy led to greater insecurity for residents and owners through frequent resident notifications and changing rules. Recognizing this, Congress provided authority to allow a single notification prior to the expiration of a contract of any length to encourage longer-term preservation of affordable housing while removing the fear among residents caused by misleading notices each and every year. Second, instead of requiring owners to perform a study of comparable market rents each year, the legislation allowed an operating cost adjustment to be applied for four years, with a comparability study needed only every fifth year to ensure that rents remain in line with the local market.
  • Market Returns For Other Properties. While lifting Section 8 rents to market and providing more secure renewals limits opt-outs of valuable affordable housing, these actions do not stop prepayments in properties that are important to preserve as project-based housing. As a solution, Congress reexamined limits on rents, distributions and "excess income," all of which were called for by statute at a time when subsidized rents were not linked to local markets. With the realignment of project-based Section 8 rents so they are driven by local market conditions, the legislation took the next step by realigning rents, distributions and "excess income" more closely to market in HUD's other privately-owned project-based properties.
  • More Effective Resident Protection. Even with the changes discussed above, there were still cases where owners would choose to opt out. In these cases, HUD can now better protect residents by offering "enhanced" vouchers that allow them to remain in their homes without substantial rent increases when an opt-out occurs. The legislation gave HUD the authority to offer "enhanced" vouchers in all opt-outs at up to market rent levels. In addition, Congress also clarified the permissible increases in "enhanced" rent levels over time by allowing them to track reasonable increases after the first year.

Just as it builds on the Housing Security Plan for Older Americans in the area of senior housing, the Affordable Housing for Seniors Act also builds on the efforts of the Administration and Congress in preserving HUD-subsidized affordable housing that is not limited to seniors. In particular, it would accomplish the following:

  • Protect Existing Affordable Housing Agreements. By making permanent a temporary provision passed in HUD's FY 2000 budget, the bill would allow HUD to continue to honor its agreements with properties that participated in the Preservation program even where there may be conflicts with other aspects of Section 8 renewal policy.
  • Ensure Market Returns For Certain Properties. By making permanent another temporary provision passed in HUD's FY 2000 budget, the bill would continue to allow owners of all Section 236 properties to retain "Excess Income" if the properties are well-maintained and well-managed. This measure will help to limit the number of Section 236 properties that prepay and leave the stock of affordable housing.
  • Provide New Resources to Preserve Affordable Housing. Even when owners choose to remain in HUD's multifamily subsidy programs, there are cases when new ownership or resources are needed to preserve decent affordable housing. Whether for tax or other business reasons, owners may be effectively locked into ownership despite a waning interest in running the property. Or in markets where local rents are below what is needed to pay for recapitalization later in the project's life cycle, other forms of resources may be necessary outside of current rent and interest subsidies. Any effort to stop the loss of affordable housing should take account of these cases by encouraging the transfer of properties to more motivated owners. One way HUD has already done this is through targeted increases in Section 8 rents to market for properties that would not otherwise be eligible but agree to a transfer to a tenant organization or non-profit. The bill builds on this and other Administration efforts by establishing a Preservation Matching Grant program that targets federal subsidies to States that commit there own resources to preserving affordable housing. It also provides new resources to non-profit organizations that are facilitating the transfer of affordable housing to new ownership that will ensure the long term preservation of the housing.

These and other initiatives in the Affordable Housing for Seniors Act are significant steps that extend the critical work of the Administration and Congress during recent years to ensure that all Americans have access to a decent, affordable home. HUD looks forward to continuing our work with you and the other members of this Committee on this critically important legislation.

This concludes my formal written statement, Mr. Chairman.

Content Archived: January 20, 2009

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