Opening Statement of Secretary Mel Martinez
February 13, 2002
before the Committee on Banking, Housing,
and Urban Affairs
Chairman Sarbanes, Ranking Member Gramm, Distinguished Members
of the Committee:
Thank you for the opportunity to join you this morning to outline
the proposed Fiscal Year 2003 Budget for the Department of Housing
and Urban Development (HUD).
The $31.5 billion HUD budget represents a funding level increase
of 7 percent over FY 2002. By helping Americans reach the dream
of homeownership, ensuring affordable housing opportunities for
those who rent, strengthening and renewing communities, and preserving
a safety net for the most vulnerable, this budget will enable HUD
to make a tremendous difference in the lives of millions of Americans.
The housing market in 2001 was extremely vigorous, and we entered
the new year with homeownership at a record high. Because we know
that homeownership gives families a stake in their communities and
creates wealth, the HUD budget makes owning a home a viable option
for even more Americans. In his State of the Union Address, President
Bush acknowledged our commitment to expanding homeownership - especially
As a first step, we have quadrupled the American Dream Downpayment
Fund, to $200 million. This Presidential initiative will help an
estimated 40,000 first-time homebuyers overcome the high down payment
and closing costs that are significant obstacles to homeownership.
A Tax Credit for Developers of Single-Family Affordable Housing
will promote homeownership opportunities among low-income households
by supporting the rehabilitation or new construction of homes in
low-income urban and rural neighborhoods.
We are tripling funding for the Self-Help Homeownership Opportunity
Program (SHOP) to $65 million, as committed to by the President
last spring. That, and a lot of sweat equity, will make possible
the construction of an additional 3,800 homes for disadvantaged
Americans. SHOP is an excellent example of government maximizing
its resources by working with private-sector partners like Habitat
Another exciting homeownership initiative targeted at low-income
families will allow them to put up to a year's worth of their Section
8 rental voucher assistance toward a home down payment. And because
we consider it an invaluable tool for prospective homebuyers and
renters, we have proposed making housing counseling a separate program.
The increase in sub-prime lending has made financial literacy more
important than ever; armed with the facts, a consumer is far less
likely to be victimized by predatory lending. We are funding the
counseling program at $35 million, which represents a $15 million
increase over the previous fiscal year.
While we consider homeownership to be an important goal, we recognize
that it is not an option for everyone; therefore, our budget preserves
HUD's commitment to expanding the availability of affordable housing
for the millions of Americans who rent their homes.
The Section 8 tenant-based program today assists nearly two million
families; our budget provides an additional 34,000 housing vouchers.
The budget also dedicates $16.9 billion to protect current residents
by renewing all expiring Section 8 contracts.
To encourage the production of moderate-income rental housing in
underserved areas, we plan to reduce the mortgage insurance premium
for Federal Housing Administration (FHA) multifamily insurance.
Three times over the last eight years, HUD has been forced to shut
down our multifamily mortgage insurance programs because of lack
of credit subsidy. Last year, the shutdown stopped the construction
of some 30,000 rental units throughout the country and clouded developers
We made a commitment at HUD to a comprehensive review of the credit
subsidy program. We examined the statistical techniques that were
used to analyze loan performance. We thoroughly updated and refined
FHA's data and incorporated the major tax law changes in the 1980s
that affected the profitability of multifamily housing. Through
our review, we were able to lower premiums, create a self-sustaining
program, provide the industry with stable financing at a much lower
cost, and provide thousands of new opportunities for rental housing
across the country.
In fact, the program made firm commitments to insure $1.25 billion
worth of new rental housing in just the first four months of the
fiscal year. Reducing the premiums in FY 2003 will lower the cost
of building over 50,000 affordable rental apartments each year.
The 2003 budget gives HUD new resources to further our mission
of supporting the nation's most vulnerable. This includes low-income
families, homeless men and women, the elderly, individuals with
HIV/AIDS, victims of predatory lending practices, and families living
in housing contaminated by lead-based paint.
Let me highlight just a few of our proposals.
To better coordinate the work of the many Federal agencies that
reach out and provide a continuum of care to homeless men, women,
and families, the budget calls for doubling HUD funding for the
newly reactivated Interagency Council on the Homeless. Additionally,
converting three competitive homeless assistance programs into a
consolidated grant will eliminate the workload and expense of administering
three separate programs. More importantly, it will give local jurisdictions
new discretion in how those dollars are spent.
HUD's Lead Hazard Control program is the central element of the
President's effort to eradicate childhood lead poisoning in ten
years or less. The HUD budget will fund the program at $126 million,
a substantial increase over the previous year.
The budget also proposes spending $251 million under HUD's Section
811 program to improve access to affordable housing for persons
with disabilities. And many of the additional 34,000 Section 8 housing
vouchers will aid non-elderly, disabled individuals.
In addition to addressing the nation's critical housing needs,
programs such as the HOME Investment Partnerships Program and the
Community Development Block Grant (CDBG) program stimulate economic
development and job growth. Combined, these two programs will distribute
an additional $200 million in formula funding to State and local
governments. We have proposed changing the distribution of CDBG
formula funds by reducing the size of grants going to the wealthiest
communities. This will help bring dollars into those areas where
they can do the most good.
We are excited about a brand-new concept to address the large backlog
of repair and modernization projects in public housing. The Public
Housing Reinvestment Initiative represents a new way to leverage
the value of public housing by allowing public housing authorities
(PHAs) to borrow funds to make needed capital improvements. This
project unlocks the value of public housing assets by allowing PHAs
to convert public housing units to project-based vouchers. The PHAs
can obtain loans by borrowing against individual properties - similar
to private-sector real estate financing.
Innovative thinking like this represents a departure from the way
things were done so often in the past - but being effective does
not have to mean spending more money. Government works best when
government serves as steward and facilitator� and measures success
through results. By facilitating the involvement of new local partners,
the Public Housing Reinvestment Initiative will breathe new life
into public housing communities.
I am proud of our budget and the way it reflects HUD's renewed
commitment to efficiency, accountability, and the principles of
excellence expressed through the President's management scorecard.
When government spends efficiently, the funds go much further. We
reach more citizens. We help to change more lives.
The people of HUD know that the American Dream is not some unattainable
goal, because we see it achieved every day, so often by families
who never imagined owning their own home or reaching economic self-sufficiency.
I am confident that through our budget - and the continued commitment
of President Bush - HUD will be better able to offer citizens the
tools that they can put to work improving their lives, and strengthening
their communities and their country� as they travel the road to
achieving their own American Dream.
I would like to thank each of you for your support of my efforts,
and I welcome your guidance as we continue our work together on
behalf of the American people.
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