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Testimony of the Honorable Andrew Cuomo
Secretary of Housing and Urban Development
before the
Subcommittee on VA, HUD and Independent Agencies
Committee on Appropriations
United States House of Representatives

March 8, 2000

 

Chairman Walsh, Ranking Member Mollohan, members of the Subcommittee, thank you for inviting me here today. It's a pleasure to appear before this Committee to discuss HUD's proposed FY 2001 Budget -- HUD's strongest budget in twenty years.

Mr. Chairman, last year we were able to accomplish great things together. Under your leadership, we were able to reach bipartisan agreement on many fronts -- public housing, economic development, homeownership, and rental housing. Our ability to work together will be the key to making HUD's mission of empowering communities a reality. I look forward to another year of cooperation and results.

HUD's FY 2001 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. This year, HUD's budget request is $32 billion -- a $6 billion increase over last year. 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 three years, both on the budget side and the management side.

In many ways, this is a landmark budget proposal. It represents the President's confidence that HUD is better positioned than ever to help communities take on the new challenges of the 21st century.

This budget is a direct outcome of the management reforms we have put in place over the past three years. I am convinced that we now have the tools, the resources, and the capacity to wisely and responsibly spend the funds we have requested.

Our management reforms have succeeded in transforming HUD into an agency that puts communities first. Fighting fraud, waste, and abuse, our Public Trust Officers are cracking down on those who misuse taxpayer dollars. Renewing our commitment to first-class customer service, our Community Builders are connecting people to the full range of HUD resources. As a result, HUD today is back in business -- back in the housing business, in the economic development business, and in the community empowerment business.

This past year, especially, has been a banner year for HUD. President Clinton kicked off his New Markets Initiative with historic visits to the Pine Ridge Indian Reservation, East St. Louis, Los Angeles, the Mississippi Delta, Central Appalachia, and other inner-city and rural communities. The message? These are the emerging markets of the new century. They are the places that will provide the consumer and labor markets needed to fuel economic growth in the future.

We have also broken the gridlock on affordable housing. After a four-year break, Congress approved new housing vouchers in each of the past two years. This year's budget builds on this progress, with important advances for affordable and special needs housing, including 120,000 new housing vouchers to help meet the "worst case" housing needs of low-income families struggling with rising rents. We are seeking increased funding to continue the transformation of public housing. And increased funding for Fair Housing will help ensure that all Americans have equal access to decent and affordable housing.

The budget also proposes to expand the successful Continuum of Care program for homeless assistance and prevention -- a winner this past year of the prestigious Innovations in Government Award from Harvard University and the Ford Foundation. The national survey of homelessness in America, conducted by the Census Bureau, showed that we are on the right track with the Continuum -- but with 600,000 Americans still homeless each night, there is still much more to do.

In the past year, we launched a major commitment to address one of the key challenges facing us in the new millennium -- the graying of America. Our budget requests increased funding for HUD's new Housing Security Plan for Older Americans -- helping seniors stay in their own homes as long as possible, increasing funding for the successful Section 202 elderly housing, converting existing elderly housing to assisted living facilities, and in 200, building new assisted living facilities.

We have seen historic, across-the-board gains on the homeownership front -- more American families own their homes today than at any time in our history. With higher loan limits and through internal reforms, a revitalized FHA is now on the leading edge of the homeownership boom, serving minorities, first-time home buyers, and cities in unprecedented numbers. This year's budget request positions the FHA to do even more. And we are investing more than ever in our Native American programs to boost homeownership in Indian Country.

This year we are also proposing to tap the capacity -- and the commitment to social justice -- of the faith-based community. Through our Center for Nonprofit and Interfaith Partnerships, a new $20-million initiative, we will expand access of community and interfaith partnerships to HUD programs and help build new public-private partnerships at the local level.

Finally, we are more committed than ever to building safe, secure communities. The dramatic reduction in violent crime has been one of the great success stories of this past decade. Our budget contains several initiatives to further reduce the scourge of gun and other types of violence, both in public housing and elsewhere. Without safety there can be no prosperity.

Overall, this new budget affirms our progress. HUD, clearly, is back in business. These initiatives will allow America's communities to make the most of this unique moment in our nation's history. Together, they will put this record prosperity to work for everyone, everywhere.

HUD's FY 2001 budget addresses four major challenges: (1) economic revitalization of our nation's communities by investing in new markets; (2) increasing affordable housing and boosting homeownership; (3) ending discrimination in housing through enforcement of our Fair Housing laws; and (4) creating safe and livable communities.

ECONOMIC REVITALIZATION AND INVESTING IN NEW MARKETS

As we enter the 108th month of sustained economic expansion -- the longest our nation has ever known -- we have much to celebrate: the lowest peacetime unemployment and inflation rates in decades; the fastest and longest real wage growth in 20 years; and an all-time high homeownership rate, which reflects both economic strength and consumer confidence.

But there is another side to this success. Statistics show that the members of our society with the lowest incomes have actually grown poorer over the same time period. Though most cities are doing well, one in six still has unacceptably high levels of unemployment; in older suburbs, crime, poverty, and homelessness have become more prevalent; and in some parts of rural America, areas persist that are virtually untouched by the economic boom.

In his State of the Union message earlier this year, the President addressed these people and places when he said: `To keep our historic expansion going, we need a 21st century revolution to open new markets, start new business and hire new workers right here in America -- our inner cities, poor rural areas, and on Indian reservations."

With this FY 2001 budget, HUD is on the front lines of this 21st century revolution, building on HUD's successful track record of promoting business investment and job creation in underserved communities. Over the past seven years, we have retooled our job creation and business investment programs, creating hundreds of thousands of jobs in both urban and rural communities across the United States.

HUD's economic development initiatives will not only help spur the economic revitalization of distressed communities, they will contribute to the continued economic growth of the nation as a whole. The goal of these initiatives is straightforward: extend the national prosperity to people and places left behind.

CDBG.Last year we celebrated the 25th anniversary of the Community Development Block Program. A pioneer of devolution, CDBG has developed a proven record as the most flexible federal aid to both cities and smaller rural communities. This year's budget request builds on 25 years of success, with a request for $4.9 billion, up $119 million over last year, and $195 million over the past three years. However, the real increase for this program is larger than these totals imply. By reducing set-asides, we will increase the effective amount of formula funding that goes directly to communities by $250 million, for uses they themselves designate.

America's Private Investment Companies (APIC). Last year, Congress appropriated $20 million as an initial credit subsidy for the cornerstone of the President's New Markets Initiative -- for-profit investment funds known as America's Private Investment Companies (APIC). APIC will make sorely-needed private capital available to larger businesses that are expanding, relocating, or joint venturing in inner cities and rural areas.

As we did last year, HUD is requesting $37 million to fully fund APIC. These funds will subsidize and secure $1 billion in privately issued, federally-guaranteed loans, along with $500 million in private equity commitments, for a total of $1.5 billion in new private sector funds that will create an estimated 200,000 jobs. We have submitted authorizing legislation for this initiative, which must be authorized by June 30, 2000.

Community Empowerment Fund and EDI. The Community Empowerment Fund streamlines two existing HUD programs that are important tools for local communities to create jobs and attract business investment: our Economic Development Initiative (EDI) grants and Section 108 guaranteed loans. Overall, our budget seeks $1.2 billion in loan guarantee authority under Section 108 of the Housing and Community Development Act.

This year, HUD is requesting $100 million in EDI grant funds. The $100 million in EDI grant funds is expected to leverage $500 million of the Section 108 guaranteed loan funds, and create an estimated 73,000 jobs. These grants and guaranteed loan will leverage substantial additional private sector commitments. Together, they will be used to create revolving loan funds for small businesses, to build inner-city shopping centers, retain or expand industrial facilities, expand and modernize businesses, and to support other job creation/welfare-to-work initiatives.

Empowerment Zones. Over the past 5 years, HUD has helped create Empowerment Zones and Enterprise Communities (EZ/ECs) in more than 75 urban communities. In almost all of these places, the EZ/ECs have achieved success in leveraging private dollars and expanding job creation. We estimate that more than 40,000 people have been placed in jobs as a result of EZ/EC programs, some $10 billion in public and private sector investments have been committed to these places, and more than 30,000 businesses have received assistance.

In short, EZs and ECs have successfully combined tax credits with federal grants and loans along with local resources to attract billions of dollars private sector investments. Accordingly, we are requesting $150 million in mandatory funding for the fifteen recently selected Round II Empowerment Zones, under Title XX of the Social Services Block Grant program. We are also proposing to designate ten additional Empowerment Zones (eight urban and two rural). In addition, the President has proposed significant extensions of the wage tax credits and other tax incentives for business investment that were such an important part of the success of the first Empowerment Zones.

Other Economic Development Initiatives. HUD will participate in the fourth phase of the National Community Development Initiative (NCDI), to be funded at $24 million. This highly successful public/private partnership will help build the capacity of CDCs and other community-based organizations, allowing them to continue their impressive track record as engines of economic growth in low-income areas.

In 1998, the Rural Housing and Economic Development Program was created to fund innovative strategies for rural housing and economic growth. The FY 2001 Budget requests $27 million for this program, an increase of $2 million over last year. We will continue to work closely with other Federal departments, including Agriculture, Commerce, and the Appalachian Regional Commission, to design effective responses to the needs of our nation's rural communities.

In addition, new authorizing legislation will be submitted in support of the President's Mississippi Delta Economic Development initiative, with proposed HUD funding at $22 million. This is a government-wide effort to jumpstart the economy of a significant region of the country that has been left behind by the economic boom of the past decade. HUD will work in partnership with other Federal agencies to capitalize on our special expertise in housing and economic development to help revitalize the region's economy.

We are also requesting an increase in the highly successful Youthbuild program from $42.5 million to $75 million. Youthbuild provides help to young people with training in the building trades, as well as assistance in securing high school diplomas. We estimate that the program will help over 5,000 disadvantaged youth rebuild their communities at the same time as they learn vital job skills.

ADDRESSING THE AFFORDABLE HOUSING CRISIS

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, it is actually becoming more and more difficult for low-income American families to afford a decent place to live. Rents have soared in many regions with strong economies. In fact, worst case housing needs remain at an all-time high of 5.3 households, growing especially fast among working families. As a result, there is a greater need than ever for HUD's programs.

Our FY 2001 initiatives build on recent efforts to reform and restore public trust in HUD's housing programs. Historic legislation created the Mark-to-Market program, which preserves project-based Section 8 housing while bringing costs in line with the private market. We have cracked down on program abuses. Our Real Estate Assessment Center is on track towards meeting our goal of inspecting, for the first time, all 40,000 properties in HUD's inventory of public housing and multifamily insured or assisted housing. And more than 600 troubled properties have been referred to the new Enforcement Center, with 45% of the cases resolved and revenues from fines imposed in FY 99 up five times over the previous year.

Section 8 renewals and incremental vouchers. HUD is requesting $13.0 billion in new budget authority to renew existing Section 8 contracts -- covering 2.6 million rental units. In addition, we are requesting $690 million for 120,000 new vouchers, the largest increase since 1981. Two years ago, HUD got back into the housing business with 50,000 new vouchers focused on families moving from welfare to work. We topped that last year with 60,000. With this year's request, we are taking the next step. These new vouchers will be targeted as follows: one half, or 60,000 vouchers, will be "Fair Share" vouchers, to be used by public housing authorities to reduce their waiting lists; 32,000 will be targeted to those moving from welfare to work; 18,000 will be for homeless persons; and 10,000 will stimulate new housing production for very low-income individuals.

New housing production vouchers. Our proposal for new vouchers includes the first Section 8 housing production vouchers in 17 years. For decades, national housing policy has shifted back and forth between production-oriented programs that focus on expanding the supply of affordable housing, and income-based initiatives that provide cash assistance that enables lower-income families to afford decent rental housing. As we enter the 21st century, it is clear that both approaches are needed if America is to realize the goal of decent housing for all. We are proposing 10,000 housing production vouchers that, in tandem with the Low Income Housing Tax Credit and FHA insurance, will leverage 40,000 total units (subsidized and unsubsidized).

Transforming Public Housing. Two years ago, Congress enacted landmark, bipartisan public housing legislation, that brought working families into public housing without sacrificing our historic commitment to low income and very low income persons. Through our new physical inspections system, we have now inspected every property in public housing and the results are in: 84% of all public housing properties are in sound or excellent condition, and customer satisfaction surveys show that 75% of all public housing residents are satisfied or very satisfied with their housing. That's a customer satisfaction rating that beats the banking, the utility, and the retail industries.

HUD's FY 2001 budget continues our efforts to transform public housing. We are requesting a $54 million increase in public housing operating funds, to almost $3.2 billion, or 100% of PFS. We also are proposing $2.96 billion for the Capital Fund to help public housing authorities to modernize, rehabilitate, or build public housing units that are in need of significant repairs or replacement, an increase of $86 million over last year's request.

Finally, we are requesting $625 million for HOPE VI, which is revolutionizing public housing by replacing obsolete high rise or barracks-style buildings with new, mixed-income, mixed-use livable communities and housing vouchers. Through 2000, the program is expected to approve the demolition of 100,000 units. By 2003, our goal is to approve 145,000 units for replacement with hard units or with vouchers.

Home Investment Partnerships Program (HOME). Since it was created ten years ago, the HOME program has become a proven housing rehabilitation and production tool in both urban and rural America. We are requesting $1.65 billion, a $50 million increase over last year's level. This will provide approximately 85,000 units of affordable housing for both owners and renters through a combination of new construction, rehabilitation, acquisition and tenant-based assistance.

Homeownership. Over the past three years, we have done more than ever to bring homeownership to underserved markets. I'm proud of the record homeownership rate of 67%; but the real success is what we've done to close the gap for minorities, first time buyers, younger couples, residents of cities. We have increased affordable housing goals of the GSEs to 50%. With higher FHA loan limits enacted by Congress, in FY 1999 we boosted FHA loans to a record 1.3 million -- 40% of which were to minority buyers. Automated underwriting has reduced underwriting times for applicants. And the process for disposition of foreclosed properties has been improved dramatically.

Our FY 2001 budget builds on this record of success. In FY 2001, FHA is proposing to develop a new hybrid adjustable-rate mortgage product. In the conventional market, hybrid ARMs have proven very popular because they offer the security of a fixed-interest rate for between 3 and 10 years, while they are more affordable than 30-year fixed-rate mortgages, because they carry lower interest rates. Adding this product to FHA's lineup should help 55,000 additional families become homeowners in FY2001, and will result in an additional $114 million income for the Federal government.

Native American assistance. Native American housing needs will be served through the Indian Housing Block Grant Program, and the Indian Housing Loan Guarantee Program. Overall, HUD's request for Native American programs is the largest ever -- $730 million, an increase of $37 million, including an increase of $30 million, to $650 million, for Indian Housing Block Grants.

Homelessness and Special Needs. Over the past seven years, we have made significant progress on homelessness in America. When I first came to HUD, the federal government had been spending about the same as the state of New York on homeless assistance. Since then, we've more than doubled the amount of federal homeless assistance.

But this is more than just the dollars and cents. It is about a new, comprehensive approach, the Continuum of Care, that we've put in place a holistic approach aimed at moving people into permanent housing and self-sufficiency. According to a study by Columbia University, we are now serving 14 times more people than we were in 1993. This progress was recognized when last year the Continuum won the prestigious Innovations in Government Award from Harvard University and the Ford Foundation.

By all measures, the Continuum of Care is working. Accordingly, for FY 2001, we are proposing $1.2 billion for homeless assistance, an increase of $180 million. We also propose to shift the source of funds for Shelter Plus Care contract renewals to the Section 8 Housing Certificate Fund, creating additional savings for localities and homeless service providers. 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.

We are also proposing an increase of $28 million in the Housing Opportunities for People with Aids program (HOPWA), to $260 million. The Centers for Disease Control estimates that between 650,000 and 900,000 Americans are living with the HIV infection. In addition to renewing all existing programs, the funds requested in FY 2001 will provide for an additional 5,100 housing units for persons with AIDS, bringing the total to nearly 50,000 units nationally.

Elderly and the disabled. Our special needs programs also serve the elderly and disabled. We are proposing $210 million for the Section 811 program, which serves persons with disabilities, increasing the FY 2000 enacted level by $9 million.

Recent decades have seen a dramatic shift in America's population, with our elderly citizens leading longer, healthier, and more active lives -- a shift that will only accelerate in coming decades. 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, Congress enacted major elements of HUD's Housing Security Plan for Older Americans as part of our FY2000 budget. This year, we are proposing a total of $779 million for our elderly housing programs, an increase of $69 million. We propose to increase funding for Section 202 housing to $629 million; $50 million to convert existing Section 202 housing to assisted living, $50 million for new assisted living facilities; and another $50 million for service coordinators. Within Section 202, we are also proposing up to $5 million to fund a small number of "Intergenerational Learning Centers" that will tap the skills and energy of seniors to help meet the needs of children in daycare centers located in Section 202 housing.

JUSTICE FOR ALL ENFORCING FAIR HOUSING

The Fair Housing Act prohibits discrimination in the sale, rental, and financing of housing based on race, color, religion, sex, national origin, disability, or family status. Yet, even at the dawn of the 21st century, housing discrimination, in both blatant and subtle forms, continues to plague our country. 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.

Two years ago, 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 14 percent -- to a total of $50 million.

Our budget request provides for increased funding of both the Fair Housing Assistance Program (FHAP) and the Fair Housing Initiatives Program (FHIP). In 2001, the focus of FHIP will be on requirements for accessibility for people with disabilities, with an emphasis on education and outreach programs to housing providers.

In 2000, Fair Housing Partnerships are being created to form a formal links between private fair housing groups and State agencies. These partnerships will be used in 2001 to provide training and technical assistance to builders, developers, architects, building code officials, and others on accessibility requirements through a nationwide Project for Accessibility Training and Technical Assistance.

CREATING SAFE AND LIVABLE 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.

Promoting Livable Communities. Congestion, hours-long commutes, a decrease in the amount of open space, pollution, and other environmental issues all have a detrimental effect on the livability of American communities. HUD recently convened a two-day conference, called Bridging the Divide, to focus on how cities, suburbs, and the federal government can work together to achieve more livable, sustainable communities. More than 200 state and local government officials and civic, community, and business leaders participated. A key theme that emerged from the conference was the importance of revitalizing the core of our central city areas in order to decrease the negative effects of suburban sprawl.

We are proposing a $25 million Regional Connections initiative 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 that cut across traditional municipal lines.

We also propose to double the funding for the Brownfields Initiative, to $50 million in FY 2001. This will accelerate the Administration's previous commitment to a four-year, $100 million program.

Because of an increased effort on the part of the Federal government to reduce the exposure of children and their families to lead poison, we are requesting $120 million for HUD's Lead-Based Paint Hazard Control grant program, a 50 percent increase. As part of a new national strategy and by leveraging private funds, the goal is to eliminate childhood lead poisoning -- including eliminating lead hazards in approximately 2.3 million units of housing by the year 2010.

Promoting Safe Communities. Despite the extraordinary success we have achieved in reducing crime rates in public housing and elsewhere, crime and gun-related violence poses a major threat to HUD's obligation to help ensure "a decent home and a suitable living environment for every American family."

Funds from a variety of HUD programs including the Community Development Block Grant program have long been available to help make areas in and around communities HUD serves safer. This year, however, HUD plans a particular focus on improving the safety of America's neighborhoods.

The FY 2001 budget proposes $345 million in Public Housing Drug Elimination Grant funds to support efforts to reduce drug use and related activity and other crime in and around public housing. Of the total, HUD has requested $30 million for a Community Gun Safety and Violence Reduction Initiative, which will help address the critical issue of gun violence in and around the communities HUD serves.

Strengthening community partnerships. We have learned that a key component of strong communities is the strength and capacity of their organizations. Because of the trust they build and the strong connections they forge, community and faith-based institutions can be uniquely placed to help bring about community change. We are proposing to support the work of our Center for Interfaith and Community Partnerships with a $20-million initiative to help community and faith-based organizations expand their capacity to supply affordable housing, create economic opportunity, and increase their use of HUD programs.

We are also proposing $69 million in Section 107 technical assistance, including $37 million for colleges and universities to carry out community and economic development activities in their local communities. This will include grant funds for several successful initiatives, such as Historically Black Colleges and Universities, Hispanic Serving Institutions, Alaskan and Hawaiian Serving Institutions, Community Development Work Study, and Community Outreach Partnerships (COPC), and New Markets University Partnerships in "New Markets" areas. Another $5 million is proposed for new Tribal College Partnerships.

CONCLUSION

HUD's FY2001 budget reflects the progress that HUD has made over the past three years. It does more than add funds to programs: it's a budget that contains innovative, smart, and creative proposals for addressing the new challenges of the 21st century.

This budget gives those people and places left behind a unique opportunity to share in this Nation's overall success. Not with bigger government, but with smarter government. Not just with additional resources, but by more effective use of the resources we have. Not by top-down mandates, but through menus of opportunity. And not by displacing private markets, but by clearing the way for them to invest.

HUD today is leaner, smarter, more effective than ever. The Nation is prospering economically and at peace in the world. Our cities and rural areas, once lagging behind, are doing better than they have in a decade. This budget says one thing: let's build on this extraordinary success. Let's not stop here. Let's bring this prosperity to every corner of America. I look forward to working with Congress -- just as we did last year -- to make this vision a reality, not just for HUD, but for all Americans.

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