Statement of Alphonso Jackson
June 20, 2001
before the Committee on Financial Services
U.S. House of Representatives
Chairman Oxley, Ranking Member LaFalce, and other distinguished
members of the Financial Services Committee, thank you for this
opportunity to appear before you to discuss the President's Energy
Policy and specifically ways in which the Department of Housing
and Urban Development can support energy efficiency and conservation.
Housing policy and energy policy are inextricably linked. No one
knows this more than I do. I have served as Executive Director and
CEO of three public housing authorities and I have also served as
the President of American Electric Power-TEXAS. As the single largest
housing expense after mortgage payments, energy costs have a direct
impact on housing affordability for both renters and homeowners.
When energy costs go up, it becomes more difficult for families
to afford their housing costs. Rising energy costs also have secondary
effects that could make it harder for families to become homeowners.
Energy costs represent roughly 16 percent of the producer price
index for finished goods and 8 percent of the consumer price index.
Sharply rising energy costs can lead to higher interest rates, which
translate directly into higher costs for home purchases.
The dramatic increase in energy costs has particularly burdened
low- and moderate-income families. As the President's Energy Policy
energy burden on low-income households, as a proportion of income,
is four times greater than for other American households.... Many
working households can accommodate�[large] increases in energy by
cutting back on other needs. However, low-income households often
have more difficult choices to make�.As many as 3.6 million families
in eighteen states and the District of Columbia risk being unable
to pay their bills and having their energy cut off because of the
effects of rapidly increasing energy costs."
HUD has already taken steps to respond to rising energy costs in
HUD-assisted housing. These include making $105 million in operating
funds available to lessen the impact of higher utility rates on
public housing authorities, raising payment standards for Section
8 vouchers, and reimbursing owners for increased utility costs in
project-based Section 8 projects.
But these are only short-term solutions. In the long run, as the
President's Energy Policy recognizes, we need to become more efficient
with our use of energy in housing. Under the President's leadership,
HUD is committed to achieving this important objective.
HUD's Implementation of the President's Energy
As Vice President Cheney has stated, "conservation and energy
efficiency are crucial components of a national energy plan."
One area singled out for improvement in the Policy is housing.
As the Policy notes, "There are significant opportunities to improve
the energy efficiency of buildings and homes through technologies
and better practices."
The President's Energy Policy directs the Environmental Protection
Agency and the Department of Energy to promote the increased use
of energy efficient technologies in housing, especially through
increased promotion of the Energy Star initiative, the energy efficiency
program run by EPA and the Department of Energy.
HUD will work closely with the Environmental Protection Agency
and the Department of Energy to implement the President's objectives
of improving the energy efficiency of housing. This will not involve
the establishment of any new programs, but rather the better use
of existing programs in service of this goal.
While there have been various efforts over the years to improve
the energy efficiency of assisted housing, as well as older unsubsidized
housing, those efforts have lacked a coherent framework and focus.
With the announcement of the President's Energy Policy, we now
have the necessary framework for promoting increased energy efficiency
in housing. HUD is committed to giving this issue the priority attention
it deserves to ensure that we make significant progress in conserving
energy in housing.
HUD's efforts to increase the energy efficiency of housing will
focus on four key objectives:
1. Increasing energy efficiency in HUD-assisted
rental housing. Through information dissemination and technical
assistance for Energy Star products, HUD will promote energy conservation
in HUD-assisted housing. HUD will also review its regulations and
the subsidy system for public housing to determine what steps we
can take to promote the greater use of energy-efficient technologies
in assisted housing.
Examples of such activities include promoting the procurement
of energy-efficient refrigerators and other appliances by public
housing authorities, and publicizing examples of innovative "shared
savings" contracts in which private firms cover the costs of installing
energy-efficient technologies in public or assisted housing, in
exchange for a portion of the savings in utility costs.
2. Expanding the use of Energy Efficient Mortgages.
FHA has an existing mortgage product that allows homebuyers to borrow
up to an additional $8,000 to make energy-efficient improvements
to single-family housing.
3. Providing technical assistance to non-profit,
community- and faith-based organizations. HUD will extend
technical assistance to non-profit and faith-based housing organizations
to expand the use of energy-saving technologies in affordable new
home construction, housing rehabilitation, and existing housing.
4. Supporting the use and development of new
technologies. While the primary focus of HUD's activities
will be on promoting the increased use of existing energy-efficient
technologies, HUD will also undertake research on new products and
product applications to improve the energy-efficiency of existing
housing. An example from HUD's current research program is a joint
project with the Department of Energy to develop and test electrochromatic
windows that reduce the amount of sunlight that comes into homes,
thereby reducing cooling costs.
Comments on Proposed Legislation
I would now like to take this opportunity to comment on some of
the specific proposals put forth by this Committee concerning energy
Capacity Building for Energy-Efficient Housing
HUD currently provides $28 million for capacity building by organizations
such as the Enterprise Foundation, LISC and Habitat for Humanity.
This proposal, to include activities related to the provision of
energy efficient affordable housing, seems an appropriate measure
for this committee to take.
Increase of CDBG Public Services Cap for Energy Conservation
and Efficiency Activities
Secretary Martinez and I both support local flexibility, especially
with regard to the use of CDBG funds. Funding under the public services
cap can include childcare, crime prevention and drug abuse funding.
Funding energy-efficiency programs at the expense of these other
worthwhile programs would be a difficult decision for local communities.
Increasing the cap at the discretion of local communities to pay
for energy efficiency programs, however, is a good option and allows
local communities to make the determination of funding priorities.
FHA Mortgage Incentives for Energy Efficient Housing
This proposal would implement a new type of "Energy-Efficient Mortgage"
by authorizing the Department to reduce premiums for homes that
are particularly energy efficient. However, the Department already
has an Energy-Efficient Mortgage program. Before authorizing a new
Energy-Efficient Mortgage program, it is vital that we examine what
lessons can be learned from the current one and carefully examine
whether the administrative burden of a new program variant is justified.
As noted above, HUD's existing Energy-Efficient Mortgage program
allows homebuyers to borrow up to an additional $8,000 to make energy-efficient
improvements to single-family housing. The program is quite new,
having expanded from its pilot phase only six years ago. In addition,
FHA relaxes qualifying ratios for borrowers in houses that meet
certain energy-efficiency standards, allowing them to obtain a larger
mortgage than would otherwise be permitted.
The existing Energy-Efficient Mortgage program is an important
part of HUD's energy conservation efforts and the Department intends
to expand its use. Nevertheless, for the following reasons, HUD
cannot support the authorization of a new Energy-Efficient Mortgage
program that involves reductions in premiums:
While energy-efficiency is an important and commendable objective,
we do not know whether loans secured by homes that are particularly
energy-efficient are less risky to the lender. Our experience with
our existing energy-efficient mortgage program is that these loans
have not had lower default rates than other FHA mortgages.
have just reduced our premiums in the FHA single-family program.
To reduce them still further, without any evidence of reduced risk,
would be unwise and could potentially jeopardize the health of the
The administrative burden of this proposal would also be a challenge
for the Department. We are presently striving to focus on our core
mission and reduce the number of HUD programs. This proposal would
authorize a new program variant with significant administrative
costs, including assessments of the energy efficiency of each home
and the tailoring of loan products accordingly. In addition to presenting
a significant administrative challenge, this could increase the
cost to FHA or borrowers.
If the Committee remains interested in this proposal, we strongly
recommend that, before authorizing a new type of Energy-Efficient
Mortgage, Congress and the Administration review our experience
with the current program to examine whether loans secured by homes
that exceed a particular threshold of energy efficiency are in fact
Higher Mortgage Ceilings for Solar-Enhanced Properties
The proposed legislation would allow FHA to insure 30% higher mortgages
for both single- and multifamily mortgages for properties with solar
power. Currently FHA has the authority to insure mortgages for solar-enhanced
properties that are up to 20% higher than other mortgages. This
increase, while not necessarily one that would be widely used, could
have a positive impact on properties whose cost is significantly
higher because of the inclusion of solar technology.
Research and Development Programs
HUD's Office of Policy Development and Research (PD&R) is already
active in research on building technology and energy efficiency.
As HUD implements the President's Energy Policy, we will reform
these efforts or energy efficiency in existing housing. As PD&R
already has authority to undertake demonstrations of energy-efficient
technologies, it does not appear necessary to include new authorization
for the "large-scale experimentation in the use of new technologies�
on Federal land" included in the proposed legislation. In addition,
the precise intent of the proposal is not clear.
We would be happy to work with the Committee to determine what
demonstrations of energy-efficient technologies would be appropriate.
At that time, we can opine more specifically as to whether new legislation
is needed to authorize such demonstrations.
Solar Energy Systems in Assisted Housing
In 1978, the Housing and Community Development Act was amended
to permit the installation of solar energy in Section 312, Section
202 and Section 8 housing. Including other newly authorized programs
within this existing provision seems premature absent an assessment
of how it is working in other programs.
Energy Conserving Improvements for Assisted Housing
While including consideration of energy conservation in projects
restructured under the Multifamily Assisted Housing Reform and Affordability
Act of 1997, is appropriate, the Department is concerned that the
inclusion of this provision may require an appropriation in order
to make the energy improvements that might be necessary.
NECPA was enacted under President Carter in 1978. Section 251
authorized $25 million in grants to "those [HUD-insured multifamily]
projects which are in financial difficulty as a result of high energy
costs," and required the Secretary to establish "minimum standards
for energy conserving improvements" in these projects. However,
no funds were ever appropriated for this program.
HUD's five-year energy plan was first presented to the Congress
in 1992 and has been updated several times. We would be happy to
provide the report or other information to the Committee at any
The additional information requested by the Congress under this
proposed legislation would include, among other things, clarification
of energy issues under programs created since 1990. The further
requirement that HUD publish an immediate update is consistent with
the requirements already made by the recent Executive Order.
Again, thank you for this opportunity to address you on this important
issue and I would be happy to answer any questions you or the members
of the Committee may have.
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